UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. 1)
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED
BY RULE 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
COMPUTER ASSOCIATES INTERNATIONAL, INC.
-----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction
applies:
NOT APPLICABLE
------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
NOT APPLICABLE
------------------------------------------------------------
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
NOT APPLICABLE
------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
NOT APPLICABLE
------------------------------------------------------------
5) Total fee paid:
NOT APPLICABLE
------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1) Amount previously paid:
NOT APPLICABLE
------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
NOT APPLICABLE
------------------------------------------------------------
3) Filing Party:
NOT APPLICABLE
------------------------------------------------------------
4) Date Filed:
NOT APPLICABLE
------------------------------------------------------------
COMPUTER ASSOCIATES INTERNATIONAL, INC.
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------------
To the Stockholders of Computer Associates International, Inc.:
The Annual Meeting of Stockholders of Computer Associates International,
Inc. (the "Company") will be held on Wednesday, August 29, 2001, at 10:00 a.m.
Eastern Daylight Time at the Wyndham Wind Watch Hotel, located at 1717 Motor
Parkway, Islandia, New York, for the following purposes:
1. To elect ten directors to serve for the following year and until their
successors are elected. THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE
ELECTION OF THE BOARD'S NOMINEES ON THE ENCLOSED WHITE PROXY CARD. WE
URGE YOU NOT TO VOTE FOR ANY INDIVIDUALS THAT MAY BE NOMINATED BY RANGER
GOVERNANCE, LTD., CONTROLLED BY SAM WYLY (TOGETHER WITH RANGER
GOVERNANCE, LTD., "WYLY"), AND NOT TO EXECUTE ANY PROXY CARD OTHER THAN A
WHITE CARD.
2. To approve the 2001 Stock Option Plan. THE BOARD UNANIMOUSLY RECOMMENDS
A VOTE FOR THIS PROPOSAL.
3. To ratify the appointment of KPMG LLP as the Company's independent
auditors for the fiscal year ending March 31, 2002. THE BOARD UNANIMOUSLY
RECOMMENDS A VOTE FOR THIS PROPOSAL.
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board has fixed the close of business on July 5, 2001 as the record date
for determination of those stockholders who will be entitled to notice of and to
vote at the meeting and any adjournment thereof. You may examine a list of the
stockholders of record as of the close of business on July 5, 2001 for any
purpose germane to the meeting during the ten-day period preceding the date of
the meeting at the offices of the Company, located at One Computer Associates
Plaza, Islandia, NY 11749.
THIS ANNUAL MEETING IS OF PARTICULAR IMPORTANCE TO ALL SHAREHOLDERS OF THE
COMPANY IN LIGHT OF THE ATTEMPT BY WYLY AND THE WYLY SLATE TO GAIN CONTROL OF
THE COMPANY'S BOARD. WHETHER OR NOT YOU EXPECT TO ATTEND, YOU ARE REQUESTED TO
VOTE YOUR SHARES BY FOLLOWING THE INSTRUCTIONS ON THE PROXY CARD, OR SIGNING,
DATING, AND RETURNING THE ENCLOSED WHITE FORM OF PROXY IN THE ENVELOPE PROVIDED,
WHICH IS POSTAGE PAID IF MAILED IN THE UNITED STATES.
THE BOARD ALSO URGES YOU NOT TO SIGN ANY PROXY CARDS SENT TO YOU BY WYLY.
EVEN IF YOU HAVE PREVIOUSLY SIGNED A PROXY CARD SENT TO YOU BY WYLY, YOU CAN
REVOKE IT BY SIGNING, DATING AND MAILING THE ENCLOSED WHITE PROXY CARD IN THE
ENVELOPE PROVIDED.
If you plan to attend the meeting, please bring the admission ticket on the
outside back cover of this proxy booklet. An admission ticket, which is required
for entry into the annual meeting, is attached to your WHITE proxy card. If you
plan to attend the annual meeting, please vote your WHITE proxy card but keep
the admission ticket and bring it to the annual meeting.
If you hold your shares through a broker or other nominee and fail to bring
your admission ticket, proof of ownership will be accepted by the Company only
if you bring either a copy of the voting
instruction card provided by your broker or nominee, or a copy of a brokerage
statement showing your share ownership in the Company as of July 5, 2001.
IF YOU HAVE ANY QUESTIONS, OR NEED ASSISTANCE VOTING, PLEASE CONTACT EITHER
ONE OF THE FIRMS ASSISTING US IN THE SOLICITATION OF PROXIES, MACKENZIE PARTNERS
INC., TOLL FREE AT 1-800-322-2885, OR D.F. KING & CO., INC., TOLL FREE AT
1-800-431-9642.
By Order of the Board of Directors
Michael A. McElroy
SENIOR VICE PRESIDENT AND SECRETARY
Islandia, New York
July [ ], 2001
PRELIMINARY COPIES
COMPUTER ASSOCIATES INTERNATIONAL, INC.
ONE COMPUTER ASSOCIATES PLAZA
ISLANDIA, NY 11749
------------------------
PROXY STATEMENT
---------------------
GENERAL INFORMATION
PROXY SOLICITATION
This Proxy Statement is furnished to the holders of the Common Stock, par
value $.10 per share ("Common Stock"), of the Company in connection with the
solicitation of proxies on behalf of the Board for use at the Annual Meeting of
Stockholders to be held on Wednesday, August 29, 2001, at 10:00 a.m. Eastern
Daylight Time, and at any adjournment thereof. The purposes of the meeting and
the matters expected to be acted upon are set forth in the accompanying Notice
of Annual Meeting of Stockholders. At present, the Board knows of no other
business which will come before the meeting.
The Notice of Annual Meeting, Proxy Statement, and form of proxy will be
mailed to stockholders on or about July 16, 2001. The Company will bear the cost
of its solicitation of proxies. In addition to the use of the mails, proxies may
be solicited by mail, personal interview, telephone, telegram, facsimile,
advertisements in periodicals and postings on the Company's website by the
directors, officers, and employees of the Company. Arrangements will also be
made with brokerage houses and other custodians, nominees, and fiduciaries for
the forwarding of solicitation material to the beneficial owners of stock held
by such persons, and the Company may reimburse such custodians, nominees, and
fiduciaries for reasonable out-of-pocket expenses incurred.
ISSUES IN THE PROXY CONTEST
Wyly has announced that he intends to conduct a proxy solicitation to
replace your Board of Directors with a slate of his nominees (the "Wyly Slate").
The centerpiece of the Wyly Slate's campaign to gain control of the
Company's Board is apparently a plan to break Computer Associates into "four
independent business groups" with four separate CEOs. Wyly claims that the
adoption of this plan will improve the Company's performance but in our view
offers few details about the plan. The Board of Directors believes that a
breakup of Computer Associates would be harmful to shareholders. Among other
things, we believe a breakup would decrease the Company's ability to offer
integrated software solutions and engage in cross-selling and would increase
overhead costs.
BACKGROUND AND CHRONOLOGY OF PROXY CONTEST
On June 21, 2001, Sanjay Kumar, President and Chief Executive Officer of
Computer Associates, and the members of the Company's Board of Directors,
received a letter from Sam Wyly informing Mr. Kumar that Wyly intended to
undertake a proxy solicitation of the stockholders of Computer Associates at the
2001 annual meeting for election of a slate of eight directors (later increased
to ten directors) nominated by Wyly. That same day, Wyly publicly announced that
he had initiated a proxy solicitation of the stockholders of Computer Associates
to replace Computer Associates' current Board of Directors with a slate of eight
nominees (later increased to ten nominees), including Sam Wyly as chairman.
Even before the public announcement of the proxy contest, Mr. Wyly had
apparently been seeking the support of Computer Associates' largest shareholder,
Walter Haefner, who beneficially owns
approximately 21.4% of the Company's outstanding shares. On June 1, 2001,
Mr. Wyly wrote to Mr. Haefner, soliciting his support for the Wyly Slate's
attempt to gain control of the Company. In his letter, Mr. Wyly wrote "If you do
not agree with me on this need for a change, I loose [sic] a lot of motivation
for spending the time, energy and money." Mr. Haefner briefly replied in a
letter dated June 7, 2001, stating his support for the current management of the
Company. In a facsimile correspondence dated June 20, 2001 Mr. Wyly wrote again
to Mr. Haefner seeking support, this time attaching a draft of an announcement
of the proxy contest to be publicly released the following day. Mr. Haefner's
reply, dated June 22, 2001 stated: "I have complete confidence in the existing
CA management team and intend to support them fully....I simply will not act
otherwise."
On June 25, 2001, the Company filed a lawsuit against Ranger Governance,
Ltd. and Mr. Wyly in the United States District Court for the Eastern District
of New York. The Company's complaint alleges, among other claims, that
Mr. Wyly's proxy campaign breaches a contract that Mr. Wyly entered into in
connection with the sale of Sterling Software, Inc. to the Company in 2000.
Pursuant to this contract, Mr. Wyly agreed that for a period of five years he
would not "directly or indirectly . . . participate or engage in any activities
or business developing, manufacturing, marketing or distributing any products or
services offered" by Sterling Software or its successor Computer Associates
since the Sterling lines of business are now part of Computer Associates. The
Company's complaint alleges that by seeking election as director and chairman of
the Company, Mr. Wyly violated this agreement. It further alleges that Mr. Wyly
and Ranger Governance, Ltd. have violated federal proxy rules by making false
and misleading statements and omissions in their proxy solicitations. On
July 9, 2001, Mr. Wyly and Ranger Governance Ltd. filed an answer denying that
the non-competition agreement that Mr. Wyly entered into was breached by his
actions in connection with the proxy contest and further denying that they had
violated the federal proxy rules in their proxy solicitations.
REVOCABILITY AND VOTING OF PROXY
A form of proxy for use at the meeting and a postpaid return envelope for
the proxy are enclosed. Stockholders may revoke the authority granted by their
execution of proxies at any time before their effective exercise by filing with
the Secretary of the Company a written revocation or duly executed proxy bearing
a later date or by voting in person at the meeting. Shares of Common Stock
represented by executed and unrevoked proxies will be voted in accordance with
the instructions shown on the proxy. If no instructions are given, the proxies
will be voted (1) FOR the election of management's nominees for election as
directors; (2) FOR approval of the 2001 Stock Option Plan; and (3) FOR
ratification of the appointment of KPMG LLP as the Company's independent
auditors for the fiscal year ending March 31, 2002.
RECORD DATE AND VOTING RIGHTS
Only stockholders of record at the close of business on July 5, 2001 are
entitled to notice of and to vote at the meeting or any adjournment thereof. On
July 5, 2001, the Company had outstanding 576,104,836 shares of Common Stock.
All of the outstanding shares of Common Stock are entitled to one vote per
share.
Votes cast at the meeting will be tabulated by persons appointed as
inspectors of election for the meeting. The inspectors of election will treat
shares of Common Stock represented by a properly signed and returned proxy as
present at the meeting for purposes of determining a quorum, without regard to
whether the proxy is marked as casting a vote or abstaining on any or all of the
matters. Likewise, the inspectors of election will treat shares of Common Stock
held in street name as to which brokers do not have discretionary voting
authority (so-called "broker non-votes") as present for purposes of determining
a quorum.
2
The nominees for election to the Board of Directors receiving the greatest
number of affirmative votes cast by holders of Common Stock, up to the number of
directors to be elected, will be elected as directors. Accordingly, abstentions
or broker non-votes as to the election of directors will have no effect on the
election of directors.
The affirmative vote of the holders of a majority of the shares of Common
Stock represented at the Annual Meeting in person or by proxy and entitled to
vote on the subject matter will be required to approve both the adoption of the
2001 Stock Option Plan and the ratification of the independent auditors. In
determining whether the adoption of the 2001 Stock Option Plan or the
ratification of the auditors has received the requisite number of affirmative
votes, (i) abstentions will be treated as shares entitled to vote, and therefore
will have the effect of a vote against the proposal, and (ii) broker non-votes,
if any, will be treated as shares that are not entitled to vote.
3
ANNUAL REPORT
The Annual Report of the Company for the fiscal year ended March 31, 2001 is
being mailed with this Proxy Statement.
Stockholders are referred to the Annual Report for financial and other
information about the activities of the Company. The Annual Report is not
incorporated by reference into this Proxy Statement and is not deemed to be a
part of it.
STOCK OWNERSHIP BY CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as to the beneficial
ownership of the Company's Common Stock as of July 5, 2001 by the persons, other
than members of the Board of Directors and management of the Company, known to
the Company to own beneficially 5% or more of the outstanding Common Stock:
NUMBER OF SHARES PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS (ROUNDED)
------------------------------------ ------------------ ----------------
Walter Haefner/............................................. 123,087,500(1) 21.37%
Careal Holding AG
Utoquai 49
8022 Zurich, Switzerland
FMR Corp.................................................... 62,418,109(2) 10.83%
82 Devonshire Street
Boston, MA 02109
------------------------
(1) According to a Schedule 13D/A filed on September 16, 1998, Walter Haefner,
through Careal Holding AG, a company wholly-owned by Mr. Haefner, has sole
voting power and sole dispositive power over 126,587,500 shares. According
to a Form 4 filed in February 1999 by Mr. Haefner, he disposed of 3,500,000
of such shares.
(2) According to a Schedule 13G filed on June 11, 2001 by FMR Corp. ("FMR"), FMR
and certain controlling persons of FMR, have reported sole power to dispose
or direct the disposition of 62,418,109 shares through the following
wholly-owned subsidiaries: Fidelity Management & Research Company is the
beneficial owner of 56,674,230 shares as a result of acting as investment
advisor to various investment companies registered under the Investment
Company Act of 1940; Fidelity Management Trust Company is the beneficial
owner of 3,612,545 shares as a result of serving as investment manager under
certain institutional accounts; Strategic Advisers, Inc., a provider of
investment advisory services to individuals is the beneficial owner of 1,324
shares and Fidelity International Limited is the beneficial owner of
2,130,010 shares. FMR and certain controlling persons of FMR report having
the sole power to vote or direct voting of 5,151,379 shares.
BOARD AND MANAGEMENT OWNERSHIP
The following table sets forth certain information as to the beneficial
ownership of the Company's Common Stock as of July 5, 2001 for (i) each director
and nominee, including Charles B. Wang, the Chairman, Sanjay Kumar, President
and Chief Executive Officer, and Russell M. Artzt, Executive Vice
President-Research and Development; (ii) the two most highly compensated
executive officers for the year ended March 31, 2001 (other than Messrs. Wang,
Kumar, and Artzt); and (iii) all current directors and executive officers as a
group (16 persons). Information with respect to beneficial ownership is based
upon information furnished to the Company by each security holder. Except as
otherwise noted,
4
each person has reported sole voting and sole dispositive power with respect to
the shares shown as beneficially owned.
NUMBER OF SHARES PERCENT
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED(1)(2) OF CLASS
------------------------ ------------------------ --------
Directors and Nominees:
Russell M. Artzt.......................................... 2,441,200 *
Linus W. L. Cheung........................................ -- *
Alfonse M. D'Amato........................................ 13,500 *
Willem F.P. de Vogel...................................... 71,052 *
Richard A. Grasso......................................... 62,250 *
Shirley Strum Kenny....................................... 13,000 *
Sanjay Kumar.............................................. 4,534,278(3) *
Roel Pieper............................................... 13,500 *
Lewis S. Ranieri.......................................... -- *
Charles B. Wang........................................... 34,422,542(4) 5.90%
Non-Directors:
Stephen Richards.......................................... 274,929 *
Ira H. Zar................................................ 603,760 *
All Directors and Executive Officers as a Group
(16 persons).............................................. 42,814,353 7.26%
--------------------------
* Represents less than 1% of the outstanding Common Stock.
(1) Includes shares that may be acquired within 60 days after July 5, 2001
through the exercise of stock options as follows: Mr. Artzt, 1,219,275;
Mr. D'Amato, 13,500; Mr. de Vogel, 54,000; Mr. Grasso, 47,250; Mr. Kumar,
1,201,518; Mr. Pieper, 13,500; Mr. Wang, 7,137,022; Mr. Richards, 273,423;
Mr. Zar, 586,318; and all Directors and Executive Officers as a Group,
13,777,042.
(2) Includes shares credited to the executives' accounts in the Company's
tax-qualified profit-sharing plan as follows: Mr. Artzt, 21,023; Mr. Kumar,
33,832; Mr. Wang, 1,706; Mr. Richards, 707; Mr. Zar, 2,930; and all
Directors and Executive Officers as a Group, 90,218.
(3) Includes (i) 2,025 shares held in accounts for minor children for which
Mr. Kumar serves as the custodian, (ii) 82,292 shares owned by a 501(c)(3)
foundation of which Mr. Kumar serves as the trustee, (iii) 55,867 shares
held in a trust for the benefits of descendents of Mr. Kumar of which
Mr. Kumar's wife is a co-trustee, and accordingly shares voting and
dispositive power, and (iv) an aggregate of 2,395,242 shares owned by
Mr. Kumar that are pledged or deposited as collateral for available lines of
credit and/or outstanding loans with UBS AG, which aggregate number of
shares is in excess of the minimum number of shares that must be pledged or
deposited as collateral based on the current outstanding loan balances and
the current trading price of the Common Stock. Mr. Kumar disclaims
beneficial ownership of the shares referenced in clauses (i), (ii) and (iii)
of the first sentence of this note (3).
(4) Includes (i) 180,652 shares owned directly and as trustee for a minor by
Mr. Wang's spouse, an employee of a subsidiary of the Company, 2,919,013
shares subject to employee stock options held by Mr. Wang's spouse, which
are exercisable within 60 days after July 5, 2001, and 1,355 shares credited
to the account of Mr. Wang's spouse in the Company's tax-qualified
profit-sharing plan, (ii) 4,680,465 shares owned by 501(c)(3) foundations of
which Mr. Wang serves as a director, (iii) 9,086 shares owned as trustee for
one of Mr. Wang's minor children, and (iv) an aggregate of 9,194,459 shares
owned by Mr. Wang that are pledged or deposited as collateral for available
lines of credit and/or outstanding loans with UBS AG and Bank America
Securities, which aggregate number of shares is substantially in excess of
the minimum number of shares that must be pledged or deposited as collateral
based on the current outstanding loan balances and the current trading price
of the Common Stock. Mr. Wang disclaims beneficial ownership of the shares
referenced in clauses (i), (ii) and (iii) of the first sentence of this
note (4).
5
ITEM 1--ELECTION OF DIRECTORS
NOMINEES
It is proposed that the ten persons named below will be elected as directors
at the Annual Meeting. Unless otherwise specified it is the intention of the
persons named in the accompanying form of proxy to vote all shares of Common
Stock represented by such proxy for the election of Russell M. Artzt, Linus W.
L. Cheung, Alfonse M. D'Amato, Willem F.P. de Vogel, Richard A. Grasso, Shirley
Strum Kenny, Sanjay Kumar, Roel Pieper, Lewis S. Ranieri, and Charles B. Wang,
each to serve as a directors until the next Annual Meeting of Stockholders and
until his or her successors shall have been duly elected and qualified. Each of
the nominees now serves as a director of the Company, and has consented to being
named in this Proxy Statement and to continue to serve as a director if elected.
At the time of the Annual Meeting, if any of the nominees named below is not
available to serve as director (an event which the Board of Directors does not
now have any reason to anticipate), all the proxies will be voted for the
election as directors of such other person or persons, if any, as the Board of
Directors may designate.
Set forth below are the names and ages of the nominees, the principal
occupation of each, the year in which each was first elected a director of the
Company, the business experience of each for at least the past five years and
certain other information concerning each of the nominees.
DIRECTOR
AGE SINCE
-------- --------
Russell M. Artzt(1)............... Executive Vice President-Research and 54 1980
Development of the Company since
April 1987 and the Senior Development
Officer of the Company since 1976.
Linus W. L. Cheung................ Deputy Chairman of Pacific Century 52 2001
CyberWorks, a public company listed in Hong
Kong. Since June 26, 2001, Mr. Cheung has
served as a director of the Company. From
March 1994 through August 2000, he was
Chief Executive Officer of Hongkong
Telecom, a leading telecommunications
company in Hong Kong. From January 1995 to
August 2000 he was an Executive Director of
Cable & Wireless plc and from July 1971 to
February 1994 he was Deputy Managing
Director of Cathay Pacific Airways.
Alfonse M. D'Amato(2)(3)(4)....... Partner in Park Strategies LLP, a business 63 1999
consulting firm, since January 1999. United
States Senator from January 1981 until
January 1999. During his tenure in the
Senate, he served as Chairman of the Senate
Committee on Banking, Housing and Urban
Affairs, and Chairman of the Commission on
Security and Cooperation in Europe. He is
also a director of Avis Rent-a-Car, Inc.
and NRT Incorporated.
6
DIRECTOR
AGE SINCE
-------- --------
Willem F.P. de Vogel(2)(3)........ President of Three Cities Research, Inc., a 50 1991
private investment management firm in New
York City, since 1981. From August 1981 to
August 1990, Mr. de Vogel served as a
director of the Company. He is also a
director of Morton Industrial Group.
Richard A. Grasso(3)(4)........... Chairman and Chief Executive Officer of the 54 1994
New York Stock Exchange since June 1995. He
was Executive Vice Chairman of the New York
Stock Exchange from January 1991 to May
1995, and President and Chief Operating
Officer from June 1988 to May 1995. He has
been with the Exchange since 1968.
Shirley Strum Kenny(2)(4)......... President of the State University of New 66 1994
York at Stony Brook since September 1994.
She was President of Queens College of The
City University of New York from 1989 to
August 1994. She is also a director of Toys
"R" Us, Inc.
Sanjay Kumar(1)................... President and Chief Executive Officer of 39 1994
the Company since August 2000. He was
President and Chief Operating Officer from
January 1994 to July 2000, Executive Vice
President-Operations from January 1993 to
December 1993, Senior Vice
President-Planning from April 1989 to
December 1992, Vice President-Planning from
November 1988 to March 1989. He joined the
Company with the acquisition of UCCEL in
August 1987.
Roel Pieper(3).................... Managing Partner with Favonius Insight 45 1999
Ventures, a venture capital firm, since
June 2001. General Partner with Insight
Capital Partners, a venture capital firm,
since November 1999, Executive Vice
President of Royal Philips Electronics, an
electronics company, from 1998 until May
1999. From 1997 to 1998, he was Senior Vice
President, worldwide sales and marketing,
of Compaq Computer Corporation. He was
President and Chief Executive Officer of
Tandem Computers from 1995 until its merger
with Compaq Computer Corporation in 1997.
From 1993 to 1995, he was President and
Chief Executive Officer of Tandem
Computers' UB Networks.
7
DIRECTOR
AGE SINCE
-------- --------
Lewis S. Ranieri.................. Founder and prime originator of Hyperion 54 2001
Partners L.P. and Hyperion Partners II L.P.
(collectively "Hyperion"). He is also Vice
Chairman and Director of Hyperion Capital
Management, Inc. and chairman or director
of various Hyperion entities. Since
June 26, 2001, Mr. Ranieri has served as a
director of the Company. From July 1968 to
December 1987 he was Vice Chairman of
Salomon Brothers, Inc. He also serves as
Chairman and Chief Executive Officer of
Ranieri & Co., Inc., a private investment
corporation. He is also a director of
Delphi Financial Group, Inc., Reckson
Associates Realty Corp., and Transworld
Healthcare, Inc.
Charles B. Wang(1)................ Chairman of the Board since April 1980, and 56 1976
Chief Executive Officer of the Company from
1976 to July 2000. He is also a director of
Symbol Technologies, Inc.
------------------------
(1) Member Executive Committee.
(2) Member Audit Committee.
(3) Member Stock Option and Compensation Committee.
(4) Member Nominating Committee.
The Company, Charles B. Wang, Sanjay Kumar, and Russell M. Artzt are
defendants in a number of shareholder class action lawsuits, the first of which
was filed July 23, 1998, alleging that a class consisting of all persons who
purchased the Company's stock during the period January 20, 1998 until July 22,
1998 were harmed by misleading statements, representations and omissions
regarding the Company's future financial performance. These cases, which seek
monetary damages in an unspecified amount, have been consolidated into a single
action (the "Shareholder Action") in the United States District Court for the
Eastern District of New York ("NY Federal Court"). The NY Federal Court has
denied the defendants' motion to dismiss the Shareholders Action, and the
parties currently are engaged in discovery. Although the ultimate outcome and
liability, if any, cannot be determined, management, after consultation and
review with counsel, believes that the facts in the Shareholder Action do not
support the plaintiffs' claim and that the Company and its officers and
directors have meritorious defenses.
In addition, three derivative actions, the first of which was filed on
July 30, 1998, alleging misleading statements and omissions similar to those
alleged in the Shareholder Action were brought in the NY Federal Court on behalf
of the Company against a majority of the Company's directors. An additional
derivative action on behalf of the Company, alleging that the Company issued
14.25 million more shares than were authorized under the 1995 Key Employee Stock
Ownership Plan (the "1995 Plan"), also was filed in the NY Federal Court. These
derivative actions have been consolidated into a single action (the "Derivative
Action") in the NY Federal Court. The Derivative Action has been stayed. Lastly
a derivative action on behalf of the Company was filed in the Chancery Court in
Delaware (the "Delaware Action") on September 15, 1998 alleging that 9.5 million
more shares were issued to the three 1995 Plan participants than were authorized
under the 1995 Plan. The Company
8
and its directors who are parties to the Derivative Action and the Delaware
Action have announced that an agreement has been reached to settle the Delaware
Action and the Derivative Action. Under the terms of the proposed settlement,
which is subject to dismissal of related claims by the NY Federal Court, the
1995 Plan participants returned 4.5 million shares of Computer Associates stock
to the Company. The Chancery Court in Delaware has approved the settlement and
the parties are awaiting dismissal by the NY Federal Court. In the first quarter
of fiscal year 2001, the Company recorded a $184 million gain in conjunction
with the settlement.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE NOMINEES
LISTED ABOVE.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During the Company's fiscal year ended March 31, 2001, the Board of
Directors of the Company held eight meetings. In addition to these meetings, the
Board of Directors acted by unanimous written consent on two occasions. Each
director attended more than 75% of the Board meetings and meetings of the Board
committees on which he or she served. The Company has standing Executive, Audit,
Stock Option and Compensation, and Nominating Committees. Irving Goldstein was a
member of the Board of Directors and served on the Stock Option and Compensation
Committee and the Audit Committee until his death on May 26, 2000.
The Executive Committee consists of Russell M. Artzt, Sanjay Kumar, and
Charles B. Wang. During fiscal year 2001, the Executive Committee did not meet,
but acted by unanimous written consent on one occasion.
The Stock Option and Compensation Committee of the Board (the "Compensation
Committee") consists of four non-employee directors, Alfonse M. D'Amato,
Willem F.P. de Vogel, Richard A. Grasso, and Roel Pieper. The Compensation
Committee has the power to prescribe, amend, and rescind rules relating to the
Company's 1994 Annual Incentive Compensation Plan, 1995 Key Employee Stock
Ownership Plan, 1998 Incentive Award Plan, 1991 Stock Incentive Plan, 1981
Incentive Stock Option Plan, 1987 Non-Statutory Stock Option Plan, 1993 Stock
Option Plan for Non-Employee Directors, and 2001 Stock Option Plan (the
"Plans"), to grant options and other awards under the Plans and to interpret the
Plans. The other duties of the Compensation Committee are described below under
"Stock Option and Compensation Committee Report on Executive Compensation."
During fiscal year 2001, the Compensation Committee met four times and acted by
unanimous written consent on two occasions.
The Audit Committee of the Board consists of three non-employee directors,
Alfonse M. D'Amato, Willem F.P. de Vogel, and Shirley Strum Kenny. Each member
of the Audit Committee is independent as defined by the rules of the New York
Stock Exchange. The Committee operates under a written charter adopted by the
Board of Directors, which is included in this Proxy Statement as Exhibit A. The
Committee has the responsibility of recommending the firm to be chosen as
independent auditors, overseeing and reviewing audit results, and monitoring the
effectiveness of internal audit functions. The Audit Committee met four times
during fiscal year 2001. The Audit Committee has recommended the selection of
KPMG LLP as independent auditors for the fiscal year ending March 31, 2002.
The Nominating Committee of the Board consists of three non-employee
directors, Alfonse M. D'Amato, Richard A. Grasso, and Shirley Strum Kenny. The
Committee has responsibility for suggesting nominees to the Board for election
as directors. During fiscal year 2001, the Nominating Committee did not meet. In
fiscal 2002, the Nominating Committee recommended nominating Mr. Cheung and
Mr. Ranieri for election as directors. The Nominating Committee does not
consider nominees for directors recommended by stockholders. Stockholders who
wish to nominate an individual for election as a director must follow the
procedures set forth in this Proxy Statement under the heading "Advance Notice
Procedures."
9
DIRECTOR COMPENSATION
Only non-employee directors of the Company receive compensation for their
services as directors of the Company. Under the 1996 Deferred Stock Plan for
Non-Employee Directors (the "1996 Plan"), directors receive their entire annual
retainer in Common Stock, receipt of which is deferred until retirement from the
Board, death, or disability. At its annual meeting on August 30, 2000, the Board
of Directors established its annual director fee for the succeeding 12 months at
$45,000. The retainer for 2001 will be credited to each director's Deferred
Stock Compensation Account under the 1996 Plan based on the Fair Market Value of
the Common Stock on August 28, 2001.
Under the Company's 1993 Stock Option Plan for Non-Employee Directors (the
"1993 Plan"), non-employee directors are automatically awarded options to
acquire up to 6,750 shares of Common Stock per year depending on the Company's
attainment of specific return on equity objectives. Pursuant to the 1993 Plan,
the exercise price of such options is equal to the Fair Market Value of the
shares covered by such options on the date of grant. On August 31, 2000, each
Non-Employee Director, except Dr. Kenny (and Messrs. Cheung and Ranieri who at
the time were not directors of the Company), was granted options to acquire
6,750 shares of Common Stock with an exercise price of $32.38 per share. On the
advice of the New York State Commission on Ethical Practices, Dr. Kenny has
declined to accept any options under this Plan.
Under an Amendment to the 1996 Plan, which provides that the Board of
Directors may credit the Deferred Stock Compensation Account under the 1996 Plan
of any Non-Employee Director who by force of any federal, state, or local law,
regulation, or government agency decision is precluded from accepting options
under the 1993 Plan, Dr. Kenny has received a credit to her Deferred Stock
Compensation Account with an amount representing the economic equivalent of
options foregone under the 1993 Plan.
REPORT OF COMPENSATION COMMITTEE
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might affect future filings, including
this Proxy Statement, the report of the Stock Option and Compensation Committee
of the Company's Board of Directors set forth below, and the Stock Performance
Graph set forth herein, in accordance with Securities Exchange Commission
requirements, shall not be incorporated by reference into any such filings.
STOCK OPTION AND COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
GENERAL
Decisions as to certain compensation of the Company's executive officers are
made by the Compensation Committee of the Company's Board of Directors, none of
the members of which are employees of the Company. At the Company's 2001 fiscal
year end, the members of the Compensation Committee were Alfonse M. D'Amato,
Willem F.P. de Vogel, Richard A. Grasso, and Roel Pieper.
COMPENSATION POLICIES
The Compensation Committee's executive compensation policies are designed to
attract and retain executives capable of leading the Company in a rapidly
evolving computer software marketplace and to motivate such executives to
maximize profitability and stockholder value. The Compensation Committee has
designed the Company's executive compensation program with four components to
achieve this objective--base salary; annual incentives; long-term equity
participation; and benefits. The majority of each executive's total compensation
is dependent on the attainment of predefined
10
performance objectives which are consistent with the maximization of stockholder
value. The philosophy and operation of each component is discussed herein.
BASE SALARY. Base salaries for its executive officers are designed to
attract and retain superior, high-performing individuals. As such, the Company
believes its base salaries for executive positions are, and should be, equal to
or greater than those of comparable companies.
ANNUAL INCENTIVES. The executive officers earn a significant portion of
their total annual compensation based on achievement of predetermined individual
and Company performance targets. The Company's 1994 Annual Incentive
Compensation Plan, which is administered by the Compensation Committee,
establishes a specific percentage of net income after taxes that is in excess of
a threshold based on the Company's target return on average stockholders'
equity. Different percentages of any such excess are allocated to each executive
officer at the commencement of each fiscal year. The Compensation Committee may,
at its discretion, decrease (but never increase) the calculated annual incentive
compensation payable to an executive, and/or direct that a portion of this
incentive be payable in Common Stock, subject to certain holding restrictions.
LONG-TERM EQUITY PARTICIPATION. The Compensation Committee believes
strongly that stock ownership by management and stock-based performance
compensation arrangements are beneficial in aligning management's and
stockholders' interests in the enhancement of stockholders' return. To this end,
the Compensation Committee has granted to key executives stock options which
vest (i.e., become exercisable) under the 1991 Stock Incentive Plan (the "1991
Plan") over a five-year period following the date of grant as follows: 10% on
the first anniversary; 15% on the second anniversary; 20% on the third
anniversary; 25% on the fourth anniversary; and 30% on the fifth anniversary.
Options granted at the current market price to executives under the 1991 Plan
have a term of ten years from the date of grant, and subject to the above
vesting restrictions, may be exercised at any time during such term. The 1991
Plan expired in accordance with its terms on June 24, 2001, and is intended to
be replaced by the 2001 Stock Option Plan, subject to shareholder approval. The
Company's 1995 Key Employee Stock Ownership Plan (the "1995 Plan"), which is
administered by the Compensation Committee, was approved by the stockholders at
the 1995 Annual Meeting. It provided for the award of restricted stock upon the
attainment of certain predefined stock prices. Shares awarded under the 1995
Plan are subject to significant limitations on transfer for seven years after
the shares vest.
BENEFITS. The benefits available to executive officers are the same as
those afforded to all full-time employees. In general, they are the standard
protection against financial catastrophe that can result from personal or family
illness, disability, or death. Executive officers are also eligible to
participate in the voluntary personal contribution, as well as the Company
matching and discretionary, provisions of the Computer Associates Savings
Harvest Plan (the "CASH Plan"), to the extent permitted under the CASH Plan, the
applicable Employment Retirement Income Security Act of 1974 regulations, as
amended ("ERISA") and the Internal Revenue Code of 1986, as amended (the
"Code"). The Company's medical, dental, and disability plans as well as the CASH
Plan provide all employees with the protection and peace of mind necessary to
devote their full attention to achievement of the Company's objectives.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Compensation Committee determined the components of Mr. Kumar's fiscal
year 2001 compensation as follows:
BASE SALARY. Mr. Kumar's base salary of $900,000 was not increased from
that of the two previous fiscal years. Mr. Kumar became Chief Executive Officer
in August 2000. Prior to that time, Mr. Wang was Chief Executive Officer.
Mr. Wang's compensation for fiscal 2001 is described below under "Other
Executive Officers."
11
ANNUAL INCENTIVES. The Company's fiscal year 2001 performance did not
produce a payout based upon return-on-average stockholders' equity, in excess of
the predetermined threshold under the 1994 Annual Incentive Compensation Plan
(the "1994 Plan"). Pursuant to the 1994 Plan for fiscal year 2001, Mr. Kumar's
award was calculated at a predetermined percentage of the Company's net income
for the fiscal year less a cost of equity. The cost of equity was computed based
on a "five point" quarterly average of the Company's reported stockholder's
equity. Due principally to the change in the manner in which the Company
recognized revenue resulting from the change in the Company's business model,
the Company reported a net loss for the year and thus did not produce a
return-on-average stockholders' equity. Mr. Kumar's total incentive compensation
calculated under the 1994 Plan, therefore, was zero, and Mr. Kumar's total
compensation for fiscal 2001 consisted only of his base salary and benefits. In
addition, the Compensation Committee did not grant Mr. Kumar any stock options
for fiscal 2001. For fiscal 2002, Mr. Kumar has agreed that his compensation
will be limited to base salary and benefits and any stock options that might be
awarded to him by the Compensation Committee. This means Mr. Kumar will not
receive any restricted stock or cash compensation other than base salary for
fiscal 2002.
LONG-TERM EQUITY PARTICIPATION. Under the terms of the 1995 Plan,
Mr. Kumar in 1998 received, based upon the achievement of the performance
objectives described in the 1995 Plan, 4,088,130 shares of Common Stock (after
adjustment for applicable taxes). These shares are subject to significant
limitations on transfer for seven years after vesting. Pursuant to a court
approved settlement, Mr. Kumar returned to the Company in December 2000,
1,350,000 of the shares.
BENEFITS. Mr. Kumar received matching and discretionary contributions to
the Company's benefit plans of $19,000 and a $12,000 non-reimbursed travel
allowance in fiscal year 2001. He was also provided benefits under the Company's
medical, dental, and disability plans consistent with those provided to other
full-time employees.
OTHER EXECUTIVE OFFICERS
The compensation plans for most of the Company's other executive officers,
including the persons listed in the Summary Compensation Table set forth herein,
provide for a base salary, annual incentive compensation based on either
individual fixed percentages of the Company's aggregate net income above a
predetermined return on average stockholders' equity for the fiscal year or an
absolute level of Company revenue/net margin achievement, long-term equity
grants under the 1991 Plan (intended to be replaced by the 2001 Stock Option
Plan), and access to the Company's standard employee benefit plans. Under the
1995 Plan, Mr. Wang, who was Chief Executive Officer until August 2000, and
Mr. Artzt were awarded shares of Common Stock on the same basis and same
performance objectives as described above for the Chief Executive Officer. These
shares are subject to significant limitations on transfer for seven years after
vesting. In addition, Mr. Wang is restricted from transferring 6,480,000
additional shares of Common Stock which he owns today. Such restriction will
lapse concomitantly with those for shares issued under the 1995 Plan. Pursuant
to a court approved settlement, Mr. Wang and Mr. Artzt returned to the Company
in December 2000, 2,700,000 and 450,000, respectively, of the shares. Like
Mr. Kumar, Mr. Wang's and Mr. Artzt's total compensation for fiscal 2001
consisted only of base salary and benefits. In addition, the Compensation
Committee did not grant Mr. Wang or Mr. Artzt any stock options for fiscal 2001.
For fiscal 2002, Mr. Wang and Mr. Artzt each has agreed that his compensation
will be limited to base salary and benefits and any stock options that might be
awarded to him by the Compensation Committee. This means Mr. Wang and Mr. Artzt
will not receive any restricted stock or cash compensation other than base
salary for fiscal 2002.
DEDUCTIBILITY
Beginning in 1994, Section 162(m) of the Code limits deductibility of
compensation in excess of $1 million paid to the Company's chief executive
officer and to each of the other four highest-paid
12
executive officers unless this compensation qualifies as "performance-based." In
1994, the Committee adopted, and the stockholders approved, terms under which
Annual Incentive Compensation and Long-Term Equity Participation awards should
qualify as performance-based. The Company believes that all awards under the
1995 Plan are fully deductible under current tax regulations. Additionally,
based on the applicable tax regulations, any taxable compensation derived from
the exercise of stock options, the issuance or vesting of restricted stock, or
the award of any other equity-based compensation, as applicable under the
Company's 1991 Plan, the 2001 Stock Option Plan, and any prior Plans should
qualify as performance-based. The Committee is not precluded, however, from
making compensation payments under different terms even if they would not
qualify for tax deductibility under Section 162(m).
SUBMITTED BY THE STOCK OPTION AND COMPENSATION
COMMITTEE OF THE COMPANY'S BOARD OF DIRECTORS:
Alfonse M. D'Amato
Willem F.P. de Vogel
Richard A. Grasso
Roel Pieper
AUDIT COMMITTEE REPORT
The Audit Committee monitors the Company's financial reporting process and
internal control system on behalf of the Board. In addition, the Committee
recommends to the Board, subject to stockholder ratification, the selection of
the Company's independent public accountants. Each member of the Audit Committee
is independent as defined by the rules of the New York Stock Exchange.
The Audit Committee has reviewed and discussed with the management of the
Company the audited financial statements for the year ended March 31, 2001. In
addition, the Audit Committee has discussed with the independent public
accountants, the matters required to be discussed by SAS 61. The Audit Committee
has received from its independent public accountants the written disclosures and
the letter required by the Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees) and has discussed with its
independent public accountants their independence.
The Audit Committee discussed with the Company's independent public
accountants the overall scope and plans for their audits. The Committee meets
with the independent public accountants, with and without management present, to
discuss the results of their examinations, the evaluations of the Company's
internal controls, and the overall quality of the Company's financial reporting.
Based upon the Audit Committee's discussions with management and the
independent public accountants referred to above and the Committee's review of
the representations of management and the report of the independent public
accountants to the Committee, the Committee recommended to the Board of
Directors that the audited financial statements be included in the Company's
Annual Report on Form 10-K for the year ended March 31, 2001.
SUBMITTED BY THE AUDIT COMMITTEE
Willem F.P. de Vogel
Alfonse M. D'Amato
Shirley Strum Kenny
13
COMMON STOCK PRICE PERFORMANCE GRAPH
The following graph compares cumulative total return of the Company's Common
Stock (using the closing price on the NYSE at March 31, 2001 of $27.20) with the
Standard & Poor's Computer Software and Services Index* and the Standard &
Poor's 500 Index during the fiscal years 1997 through 2001 assuming the
investment of $100 on April 1, 1996 and the reinvestment of dividends.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
(Among Computer Associates International, Inc., S&P Computer
Software and Services Index, and S&P 500 Index)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
3/31/96 3/31/97 3/31/98 3/31/99 3/31/00 3/31/01
Computer Associates international, Inc. 100 82 182 112 187 86
S&P Computer Software and Services Index 100 140 257 444 612 269
S&P 500 Index 100 120 177 210 248 194
TOTAL RETURN DATA
3/31/96 3/31/97 3/31/98 3/31/99 3/31/00 3/31/01
-------- -------- -------- -------- -------- --------
Computer Associates International, Inc.......... 100 82 182 112 187 86
S&P Computer Software and Services Index........ 100 140 257 444 612 269
S&P 500 Index................................... 100 120 177 210 248 194
------------------------
* As of March 31, 2001, the Standard & Poor's Computer Software and Services
Index was composed of the following companies:
Adobe Systems, Inc. Microsoft Corporation
Autodesk, Inc. Novell, Inc.
BMC Software, Inc. Oracle Corporation
BroadVision, Inc. Parametric Technology Corporation
Citrix Systems, Inc. PeopleSoft, Inc.
Computer Associates International, Inc. Siebel Systems, Inc.
Compuware Corporation Unisys Corporation
Intuit, Inc. Veritas Software Corporation
Mercury Interactive Corporation Yahoo! Inc.
14
COMPENSATION AND OTHER INFORMATION CONCERNING EXECUTIVE OFFICERS
The following table sets forth the cash and non-cash compensation earned for
the fiscal years ended March 31, 2001, 2000, and 1999, by the Chief Executive
Officer and each of the four next most highly compensated executive officers of
the Company.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION ----------------------------------
FISCAL ----------------------- RESTRICTED STOCK OPTION ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS ($) AWARDS(#)(4) COMPENSATION(5)
--------------------------- -------- ---------- ---------- ---------------- ------------ ---------------
Charles B. Wang(1) ....... 2001 $1,000,000 $ 0 $ 0 0 $31,000
Chairman of the Board 2000 $1,000,000 $4,783,000(2) $ 7,174,000(3) 1,000,000 $33,875
1999 $1,000,000 $3,600,000(2) $650,812,050(3) 0 $35,948
Sanjay Kumar(1) .......... 2001 $ 900,000 $ 0 $ 0 0 $31,000
President and Chief 2000 $ 900,000 $3,156,000(2) $ 4,735,000(3) 750,000 $33,875
Executive Officer 1999 $ 900,000 $2,400,000(2) $326,306,025(3) 0 $35,948
Russell M. Artzt ......... 2001 $ 750,000 $ 0 $ 0 0 $31,000
Executive Vice 2000 $ 750,000 $ 861,000(2) $ 1,291,000(3) 250,000 $33,875
President-Research And 1999 $ 750,000 $ 720,000(2) $108,648,675(3) 0 $35,948
Development
Stephen Richards ......... 2001 $ 300,000 $ 900,000 $ 0 450,000 $30,885
Executive Vice 2000 $ 200,000 $ 617,400 $ 0 150,000 $29,500
President-Sales 1999 $ 160,000 $ 375,000 $ 0 271,750 $26,669
Ira H. Zar ............... 2001 $ 500,000 $ 800,000 $ 0 900,000 $30,892
Executive Vice 2000 $ 350,000 $ 950,000 $ 0 500,000 $33,808
President-Finance and 1999 $ 247,500 $ 340,000 $ 0 152,700 $31,948
Chief Financial Officer
------------------------
(1) Mr. Wang was also Chief Executive Officer until August 2000 at which time
Mr. Kumar became Chief Executive Officer.
(2) Consists of incentive compensation for Messrs. Wang, Kumar, and Artzt made
under the 1994 Annual Incentive Compensation Plan.
(3) As applicable, consists of restricted stock awarded for fiscal year 2000 for
Messrs. Wang, Kumar, and Artzt, respectively, and includes $5,400,000,
$3,600,000, and $1,080,000 in restricted stock awarded for fiscal year 1999
for Messrs. Wang, Kumar, and Artzt, respectively, in each case under the
1994 Annual Incentive Compensation Plan. Shares awarded under the 1994 Plan
are entitled to dividends. Also reflects long-term incentive compensation
earned in fiscal year 1999 based on the achievement of stock price targets
established in connection with the 1995 Plan. Under that plan, previously
described in the 1995 Proxy and approved by the stockholders at the 1995
Annual Meeting, Messrs. Wang, Kumar, and Artzt, were awarded in the
aggregate 20,250,000 shares. Such share awards, which vested in their
entirety on May 21, 1998, were in the amounts of $645,412,050, $322,706,025,
and $107,568,675, for Messrs. Wang, Kumar, and Artzt, respectively. Shares
awarded under the 1995 Plan are entitled to dividends. In June 2000, the
Delaware Court of Chancery approved a settlement providing for the return to
the Company of 2,700,000, 1,350,000, and 450,000 shares of Common Stock by
Messrs. Wang, Kumar, and Artzt, respectively. The shares were returned to
the Company in December 2000.
(4) All options granted to such executive officers of the Company vest over a
five-year period following the date of grant: 10% on the first anniversary;
15% on the second anniversary; 20% on the third anniversary; 25% on the
fourth anniversary; and 30% on the fifth anniversary.
(5) Consists of Company contributions to the Company's benefit plans and a
non-reimbursed travel allowance of $12,000 for each of the executive
officers for each fiscal year. These benefits are consistent with those
provided to other senior executives of the Company.
15
The following tables summarize option grants to and option exercises by the
executive officers named in the Summary Compensation Table during the fiscal
year ended March 31, 2001, and the value of the options held by each such person
on March 31, 2001.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
NUMBER OF SHARES PERCENT OF
UNDERLYING TOTAL OPTIONS GRANTED EXERCISE GRANT DATE
NAME OPTIONS GRANTED TO EMPLOYEES(1) PRICE EXPIRATION DATE PRESENT VALUE(2)
---- ---------------- --------------------- -------- --------------- ----------------
C.B. Wang............. 0 -- -- -- --
S. Kumar.............. 0 -- -- -- --
R.M. Artzt............ 0 -- -- -- --
S. Richards........... 450,000 4.1% $27.00 July 20, 2010 $ 7,691,310
I.H. Zar.............. 900,000 8.1% $27.00 July 20, 2010 $15,382,620
------------------------
(1) Based on a total of 11,062,000 options granted.
(2) The Black-Scholes option pricing model was chosen to estimate the Grant Date
Present Value of the options set forth in this table. The Company's use of
this model should not be construed as an endorsement of its accuracy of
valuing options. The following assumptions were made for purposes of
calculating the Grant Date Present Value on the grants awarded on July 20,
2000: an expected option term of six years, a volatility factor of .65,
dividend yield at .30%, and a risk free interest rate of 6.15%. The actual
value of the stock option grants will depend on the future performance of
the Common Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT MARCH 31, 2001(2) AT MARCH 31, 2001(3)
SHARES ACQUIRED VALUE --------------------------- ----------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ------------ ----------- ------------- ------------ -------------
C.B. Wang............ 2,568,750 $118,085,438 6,987,022 900,000 $133,534,493 --
S. Kumar............. 567,064 $ 5,593,519 1,089,018 675,000 $ 7,977,280 --
R.M. Artzt........... 0 -- 1,205,907 225,000 $ 14,669,574 --
S. Richards.......... 3,610 $ 57,821 168,438 891,437 -- $ 90,000
I.H. Zar............. 0 -- 367,110 1,570,914 $ 1,647,043 $180,000
------------------------
(1) Options exercised were granted in prior years with exercise prices equal to
the fair market value at the time of grant. With respect to Mr. Wang and
Mr. Kumar, shares acquired upon exercise of the options have not been sold
by the executive except that in the case of Mr. Wang a portion of such
shares were surrendered to the Company in connection with tax obligations on
the exercise. Value realized was calculated based on market value of shares
purchased at exercise date less aggregated option exercise price.
(2) All option grants vest over a five-year period: 10% on the first
anniversary; 15% on the second anniversary; 20% on the third anniversary;
25% on the fourth anniversary; and 30% on the fifth anniversary.
(3) Valuation based on the March 31, 2001 closing price of the underlying shares
of $27.20, less the exercise prices of the options.
16
EMPLOYEE PROFIT SHARING PLANS
The Company maintains a profit sharing plan, the CASH Plan, for the benefit
of employees of the Company. The CASH Plan is intended to be a qualified plan
under Section 401(a) of the Code, and certain contributions made thereunder
qualify for tax deferral under Section 401(k) of the Code. The CASH Plan is
funded through the Company's and participating employees' contributions, and
generally provides that employees may contribute, through payroll deductions, a
percentage of their regular salary. The Company makes matching and discretionary
contributions for eligible participants in the CASH Plan who have one year of
service, including the Company's executive officers ("Employer Contributions").
Participants in the CASH Plan receive a 50% match of their contributions, up to
a maximum of 5% of their annual base compensation (subject to certain Code
limitations), and a portion of the Company's discretionary contribution for each
year generally in proportion to their annual compensation as allowed by the
Code. The Company's contributions under the CASH Plan vest in incremental
amounts over a period of seven years from date of hire, and are 100% vested
after seven years. The CASH Plan is administered by a committee of officers of
the Company appointed by the Board of Directors. All employees are eligible to
participate in the CASH Plan in the month following hire.
Effective April 1, 1994, the Company established an unfunded "Restoration
Plan" primarily for the purpose of providing deferred compensation for a select
group of management or highly compensated employees, within the meaning of
Sections 201(2), 301(a)(3), and 401(a)(1) of ERISA. This Restoration Plan is
solely for the purpose of benefiting participants in the CASH Plan who are
precluded from receiving a full allocation of Employer Contributions under the
CASH Plan because of the limitation on the compensation taken into account under
such CASH Plan imposed by Section 401(a)(17) of the Code as amended by the
Omnibus Budget Reconciliation Act of 1993.
The Company also established effective January 1, 1993, an unfunded "Excess
Benefit Plan" as said term is defined in Sections 3(36) and 4(b)(5) of ERISA,
solely for the purpose of benefiting participants in the CASH Plan who are
unable to receive a full allocation of Employer Contributions under the CASH
Plan limitations imposed by Section 415 of the Code.
During fiscal year 2001, the Company contributed $19,000 for each of the
accounts of Messrs. Wang, Kumar, and Artzt, $18,885 for the account of
Mr. Richards, $18,892 for the account of Mr. Zar, and approximately $35,000,000
for all participating employees under the CASH, the Excess Benefit, and the
Restoration Plans. Such contributions are included in the amount of other cash
compensation set forth opposite the five executive officers' names on the
Summary Compensation Table.
STOCK OPTION PLANS
During fiscal year 2001, the Company maintained the 1981 Incentive Stock
Option Plan (the "1981 Plan") which provides for the issuance to certain
selected employees of incentive stock options to purchase up to a maximum of
27,000,000 shares of Common Stock. Incentive stock options are stock options
which are intended to satisfy the criteria established in Section 422 of the
Code and are subject to different tax treatment than non-statutory stock
options. Under the 1981 Plan, stock options may be granted for terms of up to
ten years. The 1981 Plan terminated in accordance with its terms, on
October 23, 1991, which was the tenth anniversary of the date on which it was
first adopted. No additional options may be granted under the 1981 Plan.
The Company also maintains the 1987 Non-Statutory Stock Option Plan (the
"1987 Plan") pursuant to which non-statutory options to purchase up to
16,875,000 shares of Common Stock may be granted to selected officers and key
employees of the Company. Pursuant to the 1987 Plan, the option price of stock
options granted thereunder may not be less than the market price of the shares
of Common Stock on the date of grant. The option period may not exceed 12 years.
17
The Company's 1991 Stock Incentive Plan (the "1991 Plan") provides that up
to an aggregate of 67,500,000 shares of the Company's Common Stock may be
granted to employees (including officers of the Company) pursuant to stock
options or stock appreciation rights ("SARs"). The options may be either options
intended to qualify as "incentive stock options," as that term is defined in the
Code, or non-statutory options. The Compensation Committee has the power to
determine whether such options are intended to qualify as incentive stock
options under the Code. The 1991 Plan terminated in accordance with its terms on
June 24, 2001. No additional options may be granted under the 1991 Plan.
The 1993 Stock Option Plan for Non-Employee Directors (the "1993 Plan")
provides for non-statutory options to purchase up to 337,500 shares of Common
Stock to be available for grant to each member of the Board of Directors who is
not otherwise an employee of the Company.
The Company's 2001 Stock Option Plan that shareholders will by asked to
consider and vote upon at the Company's 2001 Annual Meeting of Stockholders is
described in this Proxy Statement under "Item 2--2001 Stock Option Plan."
The 1981 Plan, the 1987 Plan, the 1991 Plan, and the 1993 Plan are
administered by the Compensation Committee of the Board of Directors.
Outstanding options which were issued under a Plan which subsequently terminated
remain exercisable in accordance with the terms of each option. The Compensation
Committee determines the individuals to whom options and SARs are granted, the
date or dates of grant, and the number of shares covered by the options and SARs
granted. The per share exercise price of options and SARs granted may not be
less than 100% of the Fair Market Value of a share of the Company's Common Stock
on the date of grant. Shares of Common Stock acquired may be treasury shares,
including shares purchased in the open market, newly issued shares or a
combination thereof. Fair Market Value, as of any date, means the closing sales
price of a share of Common Stock on such date as reflected in the consolidated
trading of New York Stock Exchange issues (as long as the Company's Common Stock
is listed on the New York Stock Exchange).
1995 KEY EMPLOYEE STOCK OWNERSHIP PLAN
Under the 1995 Key Employee Stock Ownership Plan, a total of 20,250,000
restricted shares were granted to Messrs. Artzt, Kumar, and Wang. On May 21,
1998, the closing price of the Company's Common Stock exceeded $53.33 for 60
trading days beginning October 21, 1997, and all of the 20,250,000 shares
vested. After an adjustment for applicable taxes, a total of 14,743,266 shares
were issued to Messrs. Artzt, Kumar, and Wang on June 12, 1998. These shares
issued are subject to significant limitations on transfer during the seven years
following vesting.
On June 22, 2000, the Delaware Court of Chancery approved a settlement
providing for the return to the Company of a total of 4,500,000 shares of Common
Stock issued under the 1995 Plan. The shares were returned to the Company in
December 2000.
1998 INCENTIVE AWARD PLAN ("1998 PLAN")
Under the 1998 Plan, a total of 4,000,000 Phantom Shares, as defined in the
1998 Plan, are available for grant to certain employees from time to time
through March 31, 2008. As of March 31, 2001, there were approximately 1,100,000
Phantom Shares outstanding. Messrs. Artzt, Kumar, and Wang and the Company's
Chief Financial Officer are ineligible to receive awards under the 1998 Plan.
YEAR 2000 EMPLOYEE STOCK PURCHASE PLAN ("PURCHASE PLAN")
During fiscal year 2001, the Company maintained the Purchase Plan, which
provides for the purchase of up to 30,000,000 shares of the Company's Common
Stock by employees. Under the terms of the Purchase Plan, employees may elect to
withhold between 1% and 25% of their base pay through payroll deductions,
subject to Internal Revenue Code limitations. Shares of the Company's Common
18
Stock may be purchased at six-month intervals at 85% of the lower of the Fair
Market Value on the first or last day of each six-month period.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act"),
requires the Company's directors and executive officers, and persons who own
beneficially more than 10% of a registered class of the Company's equity
securities (a 10% stockholder), to file with the Securities and Exchange
Commission ("SEC") and the New York Stock Exchange (the "NYSE") initial reports
of beneficial ownership and reports of changes in beneficial ownership of Common
Stock and other equity securities of the Company ("Section 16(a) Forms").
Officers, directors, and 10% stockholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of such copies of Section 16(a) forms received by
it, or written representations from each reporting person for the fiscal year
ended March 31, 2001, the Company believes that each of its officers, directors,
and 10% beneficial stockholders complied with all applicable filing
requirements, except that a Statement of Changes in Beneficial Ownership on Form
4 for Mr. Wang disclosing one transaction was filed 40 days late.
CERTAIN TRANSACTIONS
During the fiscal year ended March 31, 2001, the Company retained the law
firm of Wang & Wang, in which Charles B. Wang's brother, Mr. Francis S. L. Wang,
is a member, to perform legal services for the Company. Wang & Wang, who
represented the Company in connection with a number of matters involving
protection of intellectual property rights, joint venture matters, and
litigation, received approximately $865,000 in fees and disbursements during the
fiscal year.
In fiscal 2001, the Company paid the New York Islanders Hockey Club, L.P.
the amount of $315,000. This amount represented purchase of advertising and a
corporate suite. Charles B. Wang and Sanjay Kumar are the owners of the New York
Islanders. In addition, the Company made a commitment to pay $54,000 for
advertising to the New York Dragons, an arena football team. Charles B. Wang,
Sanjay Kumar and Russell M. Artzt are the owners of the New York Dragons. These
expenditures are consistent with the Company's overall marketing plan and with
amounts charged to comparable third parties.
In the opinion of management, the aforementioned services were fair and
reasonable and as favorable to the Company as those which could have been
obtained from unaffiliated third parties.
ITEM 2--2001 STOCK OPTION PLAN
The shareholders will be asked to consider and vote on a proposal to approve
and adopt the Computer Associates International, Inc. 2001 Stock Option Plan
(the "Plan"). The Plan is intended to replace the 1991 Plan, which automatically
terminated according to its terms on June 24, 2001. The Plan reserves for
issuance Stock Option awards of 7,500,000 shares of Common Stock ("Shares") that
is equivalent to the number of Shares that were previously available for grant
under the 1991 Plan but which can no longer be awarded due to the automatic
expiration of the 1991 Plan. No additional Shares are being requested for
issuance under the Plan. On July 12, 2001, the market price (closing price) of a
Share was $32.62.
The Plan was approved by the Compensation Committee and adopted by the
Company's Board of Directors, subject to the approval of shareholders. If the
shareholders approve the Plan, it will be effective as of July 1, 2001. If
shareholders do not approve the Plan, the Plan will be rescinded, and all Awards
granted prior to such time, if any, will not have any effect. No grants have
been made under the Plan to date.
19
The purpose of the Plan is to enable the Company to achieve superior
financial performance, as reflected in the performance of its common stock and
other key financial indicators, by providing for broad-based incentives to its
Employees and Consultants in consideration of their services to the Company,
aiding in the recruitment and retention of outstanding Employees and providing
Employees and Consultants an opportunity to acquire and expand equity interests
in the Company, thus aligning their interests with those of shareholders. To
accomplish these objectives, the Plan provides for the award of Nonqualified
Stock Options and Incentive Stock Options. The Plan is intended to meet the
requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended.
The following is a summary of the material terms and provisions of the Plan
and of certain tax effects of participation in the Plan. This summary is
qualified in its entirety by reference to the complete text of the Plan, which
is attached hereto as Exhibit B. To the extent there is a conflict between this
summary and the Plan, the terms of the Plan will govern. Any capitalized terms
that are used but not defined in this summary have meaning as defined in the
Plan.
DESCRIPTION OF THE 2001 STOCK OPTION PLAN
PLAN ADMINISTRATION. The Plan will be administered by the Compensation
Committee, which will have broad discretion and authority under the Plan to (1)
interpret the Plan; (2) prescribe, amend and rescind rules and regulations
regarding the Plan, (3) select Employees and Consultants to receive Awards under
the Plan; (4) determine the form of an Award, the number of Shares subject to an
Award, and the terms, conditions, restrictions and/or limitations, of each
Award; (5) determine whether Awards will be granted singly, in combination or in
tandem; (6) waive or amend any terms, conditions, restrictions or limitations of
an Award (although the Plan's prohibition on Stock Option repricing cannot be
waived); (7) make such adjustments to the Plan (including but not limited to
adjustment of the number of Shares available under the Plan or any Award) and/or
to any Award granted under the Plan, as may be appropriate in accordance with
the Plan's adjustment provisions, see "Adjustments" below; (8) accelerate the
vesting, exercise or payment of an Award when it would be in the best interest
of the Company; (9) determine whether Nonqualified Stock Options may be
transferable to family members, a family trust or a family partnership; (10)
establish subplans in order to implement and administer the Plan in foreign
countries; and (11) take any and all other action it deems necessary or
advisable for the proper operation or administration of the Plan. The
Compensation Committee can delegate any of its duties and authority under the
Plan, except for the authority to grant and administer Awards to any Employee
who is subject to the reporting requirements of Section 16(a) of the Securities
Exchange Act of 1934, or to any Employee to whom the Compensation Committee has
delegated any of its authority under the Plan.
ELIGIBILITY. In general, each of the approximately 18,000 Employees of the
Company and its consolidated subsidiaries, except seasonal and temporary
employees, are eligible to receive Awards under the Plan. Consultants to the
Company, of which there are approximately 25, will be eligible to receive Awards
only in the form of Nonqualified Stock Options under the Plan. To be eligible to
receive an Award, a Consultant must be a natural person who has contracted
directly with the Company to provide bona fide services to the Company that are
not in connection with the offer or sale of securities in a capital-raising
transaction and do not directly or indirectly promote or maintain a market for
the Company's securities. The Compensation Committee in its discretion will
determine all questions regarding eligibility to receive Awards under the Plan,
and the selection of Participants from those individuals, who are eligible to
receive Awards.
STOCK OPTIONS. Stock Options awarded under the Plan may be in the form of
either Nonqualified Stock Options or Incentive Stock Options, or a combination
of the two, at the discretion of the Compensation Committee, except that Stock
Options may be awarded to Consultants only in the form of Nonqualified Stock
Options. Stock Options granted under the Plan are subject to the following
20
terms and conditions, although the Compensation Committee can determine, in its
discretion, that different terms and conditions will apply to a particular Stock
Option:
- EXERCISE PRICE The Exercise Price for each Share subject to a Stock Option
will be determined by the Compensation Committee at the time of grant and
may not be less than the Fair Market Value of a Share on the date of
grant.
- INCENTIVE STOCK OPTIONS The aggregate Fair Market Value on the date of
grant of the Shares with respect to which Incentive Stock Options first
become exercisable during any calendar year under the terms of the Plan
for any Participant may not exceed $100,000. For purposes of this $100,000
limit, the Participant's Incentive Stock Options under this Plan and all
Plans maintained by the Company and subsidiaries are aggregated.
- NO REPRICING The Plan contains a prohibition against decreasing the
Exercise Price of a Stock Option after grant (other than in connection
with permitted Plan adjustments, see "Adjustments" below), unless
shareholder approval of the repricing is obtained.
- VESTING The Compensation Committee will determine the vesting schedule of
a Stock Option at the time of grant, PROVIDED, HOWEVER, that no Stock
Option may vest prior to the one-year anniversary of the date of grant;
except that Stock Options will immediately vest upon the death of a
Participant and the Committee may provide in the Award Certificate that a
Stock Option will immediately vest upon a Change in Control.
- TERM Stock Options will automatically lapse 10 years after the date of
grant.
- POST-TERMINATION EXERCISE Stock Options that have not vested as of the
date of a Participant's Termination of Employment or Termination of
Consultancy will immediately terminate as of such events; and, subject to
the Special Forfeiture Provision described later in this summary, any
vested Stock Option that has not already been exercised must be exercised,
if at all, within 30 days after such event, unless the Compensation
Committee provides otherwise in an Award Certificate.
- PAYMENT OF EXERCISE PRICE Payment of the Exercise Price may be made in
cash, check, wire transfer, or money order or, if permitted by the
Compensation Committee, (i) by tendering to the Company Shares owned by
the Participant for at least six months having a Fair Market Value equal
to the Exercise Price, (ii) delivering revocable instructions to a broker
to deliver to the Company the amount of sale or loan proceeds with respect
to Shares having a Fair Market Value equal to the Exercise Price, or
(iii) any combination of the above methods.
- TRANSFER RESTRICTION Incentive Stock Options may not be transferred by a
Participant other than by will or the laws of descent and distribution and
may be exercised only by a Participant, unless the Participant is
deceased. In general, similar transfer restrictions apply to Nonqualified
Stock Options, except that, in the case of Nonqualified Stock Options, the
Compensation Committee has the discretion to permit a Participant to
transfer a Nonqualified Stock Option to a family member, a trust for the
benefit of a family member and to certain family partnerships. Any
Nonqualified Stock Option so transferred will be subject to the same terms
and conditions of the original grant and may be exercised by the
transferee only to the extent the Stock Option would have been exercisable
by the Participant had no transfer occurred.
SPECIAL FORFEITURE PROVISION. The Compensation Committee has discretion to
provide at the time of grant of a Stock Option that in the event a Participant
enters into certain employment or consulting arrangements that are competitive
with the Company or any subsidiary or affiliate without first obtaining the
Company's written consent, the Participant will forfeit all rights under any
outstanding Stock Option and return to the Company the amount of any profit
realized upon the exercise. This
21
special forfeiture provision will not apply to a particular grant unless it is
so specified at the time of the grant.
SHARES AVAILABLE FOR ISSUANCE. The maximum number of Shares that may be
issued to Participants under the Plan is 7,500,000 Shares, which number of
Shares had previously been approved by shareholders for issuance under the 1991
Plan but which, as of the June 24, 2001 automatic termination date of the 1991
Plan, have not been awarded (or have been awarded, but have been forfeited or
cancelled without the issuance of Shares) under the 1991 Plan. Shareholders are
not being asked to approve the issuance of any additional Shares under the Plan.
The 7,500,000 Shares available under this Plan will be subject to adjustment as
provided under the terms of the Plan, see "Adjustments" below. The market price
(closing price) of a Share on July 12, 2001 was $32.62.
Shares issuable under the Plan may consist of authorized but unissued Shares
or Shares held in the Company's treasury. In determining the number of Shares
that remain available under the Plan, any Shares underlying Awards that
terminate by expiration, forfeiture, cancellation or otherwise without issuance
of Shares, or is settled in cash in lieu of Shares, will be available for future
grants under the Plan. Also, if Shares are tendered or withheld in payment of
all or part of the Exercise Price of a Stock Option, or in satisfaction of tax
withholding obligations, such Shares will be available for future grants under
the Plan. The following aggregate and individual limitations on the number of
Shares issuable with respect to specific forms of Awards, which the Plan is
required under the tax law to set (in some cases to ensure deductibility) are
not indicative of the Awards that may actually be made from time to time, which
Awards cannot exceed such limitations:
- INCENTIVE STOCK OPTIONS No more than 7,500,000 Shares may be issued under
grants of Incentive Stock Options during the term of the Plan.
- ANNUAL PARTICIPANT LIMITATION No more than 1,000,000 Shares may be granted
in the form of Stock Options (in whatever form) to any one Participant
during any fiscal year of the Company.
ADJUSTMENTS. The maximum number or kind of Shares available for issuance
under the Plan, the individual and aggregate maximum that may be issued under
each form of Award, the number of Shares underlying outstanding Awards and the
Exercise Price applicable to outstanding Stock Options may be adjusted by the
Compensation Committee, in its discretion, if the Compensation Committee
determines that, because of any stock split, reverse stock split, dividend or
other distribution (whether in the form of cash, Shares, other securities or
other property), extraordinary cash dividend, recapitalization, merger,
consolidation, split-up, spin-off, reorganization, combination, repurchase or
exchange of Shares or other securities, the exercisability of stock purchase
rights received under the Rights Agreement, the issuance of warrants or other
rights to purchase Shares or other securities, or other similar corporate
transaction or event, such adjustment is required in order to prevent dilution
or enlargement of the benefits or potential benefits intended to be made
available under the Plan.
AMENDMENT AND TERMINATION. The Plan may be amended or terminated by the
Company's Board of Directors at any time without shareholder approval, except
that any amendment that either increases the aggregate number of Shares which
may be issued under to the Plan, decreases the Exercise Price at which Stock
Options may be granted or materially modifies the eligibility requirements for
participation in the Plan requires shareholder approval before it can be
effective. No amendment of the Plan will adversely affect any right of any
Participant with respect to any outstanding Award without the Participant's
written consent. If not earlier terminated by the Company's Board of Directors,
the Plan will automatically terminate on the three-year anniversary of the
Company's 2001 Annual Meeting of Stockholders. No Awards may be granted under
the Plan after it is terminated, but any previously granted Awards will remain
in effect until they expire.
22
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES OF AWARDS
The following is a brief summary of the principal United States Federal
income tax consequences of Awards and transactions under the Plan, based on
advice received from counsel to the Company regarding current United States
Federal income tax laws. This summary is not intended to be exhaustive and,
among other things, does not describe state, local or foreign tax consequences.
NONQUALIFIED STOCK OPTIONS. A Participant will not recognize any income at
the time a Nonqualified Stock Option is granted, nor will the Company be
entitled to a deduction at that time. When a Nonqualified Stock Option is
exercised, the Participant will recognize ordinary income in an amount equal to
the excess of the Fair Market Value of the Shares to which the option exercise
pertains on the date of exercise over the Exercise Price. Payroll taxes are
required to be withheld from the Participant on the amount of ordinary income
recognized by the Participant. The Company will be entitled to a tax deduction
with respect to a Nonqualified Stock Option at the same time and in the same
amount as the Participant recognizes income. The Participant's tax basis in any
Shares acquired by exercise of a Nonqualified Stock Option will be equal to the
Exercise Price paid plus the amount of ordinary income recognized.
Upon a sale of the Shares received by a Participant upon the exercise of a
Nonqualified Stock Option, any gain or loss will generally be treated as
long-term or short-term capital gain or loss, depending on the how long the
Participant held such Shares prior to sale. The Participant's holding period for
Shares acquired pursuant to the exercise of a Nonqualified Stock Option begins
on the date of exercise.
INCENTIVE STOCK OPTIONS ("ISOS"). A Participant will not recognize any
income at the time an ISO is granted. Nor will a Participant recognize any
income at the time an ISO is exercised. However, the excess of the Fair Market
Value of the Shares on the date of exercise over the Exercise Price paid will be
a preference item that could create an alternate minimum tax liability. If a
Participant disposes of the Shares acquired on exercise of an ISO after the
later of two years after the date of grant of the ISO or one year after the date
of exercise of the ISO (the "holding period"), the gain (i.e., the excess of the
proceeds received on sale over the Exercise Price paid), if any, will be
long-term capital gain eligible for favorable tax rates. If the Participant
disposes of the Shares prior to the end of the holding period, the disposition
is a "disqualifying disposition," and the Participant will recognize ordinary
income in the year of the disqualifying disposition equal to the excess of the
lesser of (i) the Fair Market Value of the Shares on the date of exercise, or
(ii) the amount received for the Shares, over the Exercise Price paid. The
balance of the gain or loss, if any, will be long-term or short-term capital
gain or loss depending on how long the Shares were held by the Participant prior
to disposition.
The Company is not entitled to a deduction as a result of the grant or
exercise of an ISO. If a Participant recognizes ordinary income as a result of a
disqualifying disposition, the Company will be entitled to a deduction at the
same time and in the same amount as the Participant recognizes ordinary income.
CODE SECTION 162(M). With certain exceptions, Section 162(m) of the
Internal Revenue Code limits the Company's deduction for compensation in excess
of $1 million paid to certain highly paid officers of the Company ("Covered
Employees"). However, compensation paid to such Covered Employees will not be
subject to such deduction limitation if it is considered "qualified performance-
based compensation" (within the meaning of Section 162(m) of the Code). If
shareholder approval of the Plan is obtained, the Company believes that all
Stock Options awarded to Covered Employees under the Plan will meet the
requirements of "qualified performance-based compensation" and, therefore, will
be deductible by the Company for Federal income tax purposes.
23
NEW PLAN BENEFITS
As of the date of this Proxy Statement, no Awards have been made under the
Plan. Therefore, the amount of Shares subject to Stock Options under the Plan
for the Company's 2002 fiscal year is not determinable.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL AND
ADOPTION OF THE 2001 STOCK OPTION PLAN.
ITEM 3--RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Although the By-laws of the Company do not require the submission of the
selection of independent auditors to the stockholders for approval, the Board of
Directors considers it desirable that its appointment of independent auditors be
ratified by the stockholders. KPMG LLP was the independent public accountant for
the Company for the 2001 and 2000 fiscal years and has been appointed to serve
in that capacity for the 2002 fiscal year. The firm of Ernst & Young LLP ("Ernst
& Young") served as independent auditors for the Company for the fiscal year
ended March 31, 1999, and was discontinued upon the Board of Directors'
appointment of KPMG LLP on June 29, 1999. The decision to change accountants was
approved by the Audit Committee.
The report of Ernst & Young on the Company's consolidated financial
statements for the fiscal year ended March 31, 1999 did not contain an adverse
opinion or a disclaimer of opinion and was not qualified or modified as to
uncertainty, audit scope or accounting principles.
In connection with audits of the Company's consolidated financial statements
for the fiscal year ended March 31, 1999, and the subsequent interim period
prior to June 29, 1999, there were no disagreements between the Company and
Ernst & Young on any matters of accounting principles or practices, financial
statement disclosure, or audit scope and procedures which, if not resolved to
the satisfaction of Ernst & Young, would have caused Ernst & Young to make
reference to the matter in their reports.
AUDIT FEES
The aggregate fees billed by KPMG LLP for professional services rendered for
the audit of the Company's annual financial statements for the fiscal year ended
March 31, 2001, including statutory audits, and for the reviews of the financial
statements included in the Company's Quarterly Reports on Form 10-Q for fiscal
year 2001, were approximately $1,700,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
The aggregate fees billed for financial information systems and
implementation services provided by KPMG LLP for the fiscal year ended
March 31, 2001 were approximately $10,000.
ALL OTHER FEES
The aggregate fees billed by KPMG LLP for professional services rendered to
the Company, other than those described above, for the fiscal year ended
March 31, 2001 were approximately $1,200,000.
The Audit Committee has considered whether the provision of the services,
other than those in connection with the audit, is compatible with maintaining
the independence of KPMG LLP and has determined that the provision of such
services is so compatible.
A representative of KPMG LLP will be present at the meeting, will have an
opportunity to make a statement if he or she desires to do so, and will be
available to respond to appropriate questions from stockholders.
24
In the event that the stockholders fail to ratify the appointment of KPMG
LLP, the Board of Directors will reconsider its selection of the firm as the
Company's independent auditors for the fiscal year ending March 31, 2002.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF KPMG LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
ADVANCE NOTICE PROCEDURES
Under the Company's By-laws, nominations for a director at the Company's
annual meeting may be made only by or at the direction of the Board of Directors
or by a stockholder entitled to vote who has delivered notice to the principal
executive offices of the Company (containing certain information specified in
the By-laws) (i) not less than 60 days nor more than 90 days prior to the
anniversary date of the preceding year's annual meeting, or (ii) if the meeting
date is changed by more than 30 days from such anniversary date, not later than
the close of business on the tenth day following the date notice of such meeting
is mailed or made public, whichever is earlier.
The By-laws also provide that no business may be brought before an annual
meeting except as specified in the notice of the meeting or as otherwise brought
before the meeting by or at the direction of the Board of Directors or by a
stockholder entitled to vote at such meeting who has delivered notice to the
principal executive offices of the Company (containing certain information
specified in the By-laws) (i) not less than 60 days nor more than 90 days prior
to the anniversary date of the preceding year's annual meeting, or (ii) if the
meeting date is changed by more than 30 days from such anniversary date, not
later than the close of business on the tenth day following the date notice of
such meeting is mailed or made public, whichever is earlier.
A copy of the full text of the By-laws provisions discussed above may be
obtained by writing to the Secretary of the Company at the Company's World
Headquarters.
STOCKHOLDER PROPOSALS
The submission deadline for stockholder proposals for consideration for
inclusion in proxy materials for the 2002 Annual Meeting is March [ ], 2002.
All such proposals must be received by the Secretary of the Company at the
Company's World Headquarters.
EXPENSES OF SOLICITATION
The Company will bear the costs of the solicitation of proxies, which may
include the cost of preparing, printing and mailing the proxy materials. In
addition, the Company will request banks, brokers and other custodians, nominees
and fiduciaries to forward proxy materials to the beneficial owners of common
stock and obtain their voting instructions. The Company will reimburse those
firms for their expenses in accordance with the rules of the SEC and the New
York Stock Exchange. Proxies may be solicited, without additional compensation,
by directors, officers and employees of the Company by mail, personal interview,
telephone, telegram, facsimile, advertisements in periodicals and postings on
the Company's website. In addition, the Company has retained MacKenzie
Partners, Inc. and D.F. King & Co., Inc. to assist in soliciting proxies, for
which services the Company will pay a fee expected not to exceed $1,500,000 in
the aggregate plus out-of-pocket expenses. MacKenzie Partners, Inc. will employ
approximately 125 persons, and D.F King & Co., Inc. will employ approximately
125 persons, in connection with their respective solicitation of proxies.
Expenses related to the solicitation of shareholders in excess of those
normally spent for an annual meeting and excluding the costs of litigation are
expected to aggregate approximately $9,200,000, of which approximately
$2,650,000 has been spent to date. EXHIBIT C SETS FORTH CERTAIN INFORMATION
RELATING TO THE COMPANY'S DIRECTORS AND CERTAIN OFFICERS AND OTHER EMPLOYEES WHO
MAY BE SOLICITING PROXIES ON THE COMPANY'S BEHALF.
25
OTHER BUSINESS
The Board of Directors knows of no other business to be acted upon at the
Annual Meeting. However, if any other business properly comes before the meeting
that as of the date of this Proxy Statement is unknown to the Board of
Directors, it is the intention of the persons named in the enclosed proxy to
vote the shares represented thereby on such matters in accordance with their
best judgment.
The prompt return of your proxy will be appreciated. Therefore, whether or
not you expect to attend the meeting, please either vote electronically or by
telephone, or sign and date your proxy and return it in the enclosed postpaid
envelope.
By Order of the Board of Directors
Michael A. McElroy
SENIOR VICE PRESIDENT AND SECRETARY
Dated: July [ ], 2001
Islandia, New York
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K WILL BE SENT WITHOUT CHARGE
TO ANY STOCKHOLDER REQUESTING IT IN WRITING. SUCH REQUESTS SHOULD BE ADDRESSED
TO:
COMPUTER ASSOCIATES INTERNATIONAL, INC.
ATTN: INVESTOR RELATIONS DEPARTMENT
ONE COMPUTER ASSOCIATES PLAZA, ISLANDIA, NEW YORK 11749
THE ANNUAL REPORT ON FORM 10-K MAY ALSO BE OBTAINED VIA THE INTERNET (CA.COM).
26
EXHIBIT A
COMPUTER ASSOCIATES INTERNATIONAL, INC.
AUDIT COMMITTEE CHARTER
The Board of Directors (the "Board") of Computer Associates International,
Inc. (the "Company") has established an Audit Committee (the "Committee") with
authority, responsibility, and specific duties as described below.
COMPOSITION
The Committee and its members shall meet the requirements of the New York
Stock Exchange (the "NYSE"). The Committee comprises three or more directors as
determined by the Board, each of whom shall be independent non-executive
directors, free from any relationship that would interfere with the exercise of
his or her independent judgment. The Board shall appoint one of the members
Committee chairperson. Such appointment will be for a one-year term and will be
ratified by the full Board. Each Committee member must be, or must become within
a reasonable period of time after appointment, "financially literate," which
qualification shall be determined by the Board. In addition, at least one
Committee member shall have accounting or related financial management
expertise.
AUTHORITY
The Committee may at its own initiative or at the request of the Board
investigate any activity of the Company. All employees are directed to cooperate
as requested by members of the Committee. The Committee is empowered to retain
persons having special competence as necessary to assist the Committee in
fulfilling its responsibility.
RESPONSIBILITY
The Committee is to serve as a focal point for communication between
non-Committee directors, the independent auditors, the Company's internal audit
department, and the Company's management as their duties relate to financial
accounting, reporting, and controls. The Committee is to assist the Board in
fulfilling its fiduciary responsibilities as to accounting policies and
reporting practices of the Company and all subsidiaries, and the sufficiency of
auditing relative thereto. The Committee is the Board's principal agent in
assuring the independence of the Company's independent auditors, the integrity
of financial management, and the adequacy of financial disclosures to
stockholders. However, the opportunity for the independent auditors to meet with
individual directors or the entire Board of Directors, as needed, is not to be
restricted.
The Company's independent auditors are ultimately accountable to the
Committee and the Board. The Committee and the Board have the ultimate authority
and responsibility to select, evaluate, and where appropriate, replace the
Company's independent auditors (or to nominate the independent auditor to be
proposed for any shareholder approval in the Company's proxy statement).
MEETINGS
The Committee is to meet at least three times per fiscal year, and as many
additional times as the Committee deems necessary.
ATTENDANCE
A majority of the members of the Committee must be present at all Committee
meetings and every effort should be made to hold meetings with all members
present. As necessary or desirable, the
A-1
chairperson may request that members of management, the manager of internal
audit, and representatives of the independent auditors be present at meetings of
the Committee.
MINUTES
Minutes of each Committee meeting are to be prepared summarizing the matters
discussed.
SPECIFIC DUTIES
The Committee is to:
(1) Inform the independent auditors and management that the independent
auditors and the members of the Committee may communicate with each
other at any time.
(2) Review with the Company's management, independent auditors, and manager
of internal audit, the Company's policies and procedures to reasonably
assure the adequacy of internal accounting and financial reporting
controls.
(3) Have familiarity with the accounting and reporting principles and
practices applied by the Company in preparing its financial statements
and make, or cause to be made, all necessary inquiries of management and
the independent auditors concerning established standards of corporate
conduct and performance and any deviations therefrom.
(4) Review the adequacy and scope of the annual internal audit plan with the
manager of internal audit as well as the independent auditors.
(5) Review, prior to the annual audit, the scope and general extent of the
independent auditor's audit examinations. The auditor's fees are to be
arranged with management and annually summarized for Committee review
and approval.
(6) Review with management the extent of nonaudit services planned to be
provided by the independent auditors in relation to the objectivity
needed in the audit.
(7) Review with management and the independent auditors, upon completion of
their audit, financial results at year end prior to filing or
distribution.
(8) Evaluate the cooperation received by the independent auditors during
their audit examination, including their access to all requested
records, data and information, and also inquire of the independent
auditors whether there have been any disagreements with management,
which if not satisfactorily resolved would have caused the independent
auditors to issue a non-standard report on the Company's financial
statements. Elicit the comments of management regarding the
responsiveness of the independent auditors to the Company's needs.
(9) Discuss with the independent auditors and management the quality of the
Company's financial and accounting personnel and any relevant
recommendations the independent auditors may have.
(10) Discuss any significant changes to the Company's accounting principles
and any items required to be communicated to the independent auditors in
accordance with SAS 61, as amended.
(11) Review and reassess the adequacy of this Charter at least annually and
submit this Charter to the Board of Directors for approval and have this
Charter published at least every three years in accordance with SEC
regulations.
(12) Ensure that the independent auditors submit on a periodic basis to the
Committee a formal written statement delineating all relationships
between the independent auditors and the Company, actively engage in a
dialogue with the independent auditors with respect to any disclosed
relationships or services that may impact the objectivity and
independence of the
A-2
independent auditors, and recommend that the Board take appropriate
action in response to the independent auditors' report to satisfy itself
of the auditors' independence.
(13) Recommend to the Board the retention or replacement of the independent
auditors.
(14) Apprise the Board, as necessary, through minutes and special
presentations of significant developments in the course of performing
the above duties.
(15) Annually prepare a report to shareholders as required by the SEC for
inclusion in the Company's annual proxy statement.
(16) Recommend to the Board any appropriate extensions or changes in the
duties of the Committee.
A-3
EXHIBIT B
COMPUTER ASSOCIATES INTERNATIONAL, INC.
2001 STOCK OPTION PLAN
Effective July 1, 2001
ARTICLE I
ESTABLISHMENT AND PURPOSE
SECTION 1.01 PURPOSE. The purpose of this Computer Associates
International, Inc. 2001 Stock Option Plan (the "Plan") is to enable Computer
Associates International, Inc. (the "Company") to achieve superior financial
performance, as reflected in the performance of its Common Stock and other key
financial or operating indicators by (i) providing incentives and rewards to
Employees and Consultants who are in a position to contribute materially to the
success and long-term objectives of the Company, (ii) aiding in the recruitment
and retention of Employees of outstanding ability, and (iii) providing Employees
and Consultants an opportunity to acquire or expand equity interests in the
Company, thus aligning the interests of such Employees and Consultants with
those of the Company's shareholders. Towards these objectives, the Plan provides
for grants of Nonqualified Stock and Incentive Stock Options.
SECTION 1.02 EFFECTIVE DATE; SHAREHOLDER APPROVAL. The Plan is effective
as of July 1, 2001, subject to the approval by a vote at the Company's 2001
Annual Meeting of Stockholders, or any adjournment of such meeting, of the
holders of at least a majority of the Shares of the Company, present in person
or by proxy and entitled to vote at such meeting. Any Awards granted under the
Plan prior to the approval of the Plan by the Company's shareholders, as
provided herein, shall be contingent on such approval; if such approval is not
obtained, the Plan shall have no effect, and any Awards granted under the Plan
shall be rescinded.
ARTICLE II
DEFINITIONS
For purposes of the Plan, the following terms shall have the following
meanings, unless another definition is clearly indicated by particular usage and
context:
SECTION 2.01 "AWARD" means any Nonqualified Stock Option or Incentive
Stock Option granted under the Plan to a Participant by the Committee pursuant
to such terms, conditions, restrictions and/ or limitations (if any) as the
Committee may establish and set forth in the applicable Award Certificate.
SECTION 2.02 "AWARD CERTIFICATE" means the document distributed, either in
writing or by electronic means, issued by the Committee to a Participant
evidencing the grant of a Stock Option.
SECTION 2.03 "BOARD" means the Board of Directors of the Company.
SECTION 2.04 "CHANGE IN CONTROL" means the happening of any of the
following events:
(a) an acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"))(a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25%
or more of either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of the Company entitled to
vote generally in the election of directors (the "Outstanding Company Voting
Securities"); excluding, however, the following:
B-1
(i) any acquisition directly from the Company, other than an acquisition by
virtue of the exercise of a conversion privilege unless the security being
so converted was itself directly acquired from the Company, (ii) any
acquisition by the Company, (iii) any acquisition by an employee benefit
plan (or related trust) sponsored or maintained by the Company or any entity
controlled by the Company, or (iv) any acquisition pursuant to a
transactions which complies with clauses (i), (ii) and (iii) of subsection
(c) of this Section 2.06;
(b) a change in the composition of the Board such that the individuals
who, as of the effective date of the Plan, constitute the Board (such Board
shall be hereinafter referred to as the "Incumbent Board") cease for any
reason to constitute a majority of the Board; PROVIDED, HOWEVER, for
purposes of this Section 2.06, that any individual who becomes a member of
the Board subsequent to the effective date of the Plan, whose election, or
nomination for election by the Company's shareholders, was approved by a
vote of a majority of those individuals who are members of the Board and who
were also members of the Incumbent Board (or deemed to be such pursuant to
this proviso) shall be considered as though such individual was a member of
the Incumbent Board; but, PROVIDED FURTHER, that any such individual whose
initial assumption of office occurs as a result of any actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board shall not be so considered as a member of the Incumbent Board;
(c) consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company
("Corporate Transaction"); excluding, however, such a Corporate Transaction
pursuant to which (i) all or substantially all of the individuals and
entities who are beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately prior to
such Corporate Transaction will beneficially own, directly or indirectly,
more than 50% of, respectively, the outstanding shares of common stock and
the combined voting power of the then outstanding voting securities entitled
to vote generally in the election of directors, as the case may be, of the
corporation resulting from such Corporate Transaction (including, without
limitation, a corporation which as the result of such transaction owns the
Company or all or substantially all of the Company's assets either directly
or through one or more subsidiaries) in substantially the same proportions
as their ownership, immediately prior to such Corporate Transaction, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (other than the Company, any employee
benefit plan (or related trust) of the Company or such corporation resulting
from such Corporate Transaction) will beneficially own, directly or
indirectly, 25% or more of, respectively, the outstanding shares of common
stock of the corporation resulting from such Corporate Transaction or the
combined voting power of the outstanding voting securities of such
corporation entitled to vote generally in the election of directors, except
to the extent that such ownership existed prior to the Corporate
Transaction, and (iii) individuals who were members of the Incumbent Board
will constitute at least a majority of the members of the Board of Directors
of the corporation resulting from such Corporate Transaction; or
(d) the approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
SECTION 2.05 "CODE" means the Internal Revenue Code of 1986, as amended.
SECTION 2.06 "COMMITTEE" means the Stock Option and Compensation Committee
of the Board or any successor committee or subcommittee of the Board which is
comprised solely of two or more outside directors (within the meaning of Section
162(m)(4)(C)(i) of the Code and the applicable regulations).
SECTION 2.07 "COMMON STOCK" means the Common Stock, $.10 par value per
share, of the Company.
B-2
SECTION 2.08 "COMPANY" means Computer Associates International, Inc.
SECTION 2.09 "CONSULTANT" means any consultant or adviser if:
(a) the consultant or advisor renders bona fide services to the Company;
(b) the services rendered by the consultant or advisor are not in
connection with the offer or sale of securities in a capital-raising
transaction and do not directly or indirectly promote or maintain a market
for the Company's securities; and
(c) the consultant or adviser is a natural person who has contracted
directly with the Company to render such services.
SECTION 2.10 "DISABLED" OR "DISABILITY" means permanently and totally
disabled within the meaning of Section 22(e) of the Code.
SECTION 2.11 "EMPLOYEE" means any individual who performs services as a
common law employee for the Company or a Related Company. "Employee" shall not
include any seasonal or temporary employees.
SECTION 2.12 "EXERCISE PRICE" means the price per Share, as fixed by the
Committee, at which Shares may be purchased under a Stock Option. In no event
shall the Exercise Price with respect to any Share subject to a Stock Option be
set at a price that is less than the Fair Market Value of a Share as of the date
of grant.
SECTION 2.13 "FAIR MARKET VALUE" means the closing sales price of a Share
as reported on the New York Stock Exchange (or any other reporting system
selected by the Committee, in its sole discretion) on the date as of which the
determination is being made or, if no sale of Shares is reported on such date,
on the next preceding day on which there were sales of Shares reported.
SECTION 2.14 "INCENTIVE STOCK OPTION" means a Stock Option granted under
the Plan that meets the requirements of Section 422 of the Code and any
regulations or rules promulgated thereunder and is designated by the Committee
in the Award Certificate to be an Incentive Stock Option.
SECTION 2.15 "NONQUALIFIED STOCK OPTION" means any Stock Option granted
under the Plan that is not an Incentive Stock Option.
SECTION 2.16 "PARTICIPANT" means an Employee or Consultant who has been
granted an Award under the Plan.
SECTION 2.17 "PLAN" means the Computer Associates International, Inc. 2001
Stock Option Plan, as set forth in this document and as may be amended from time
to time.
SECTION 2.18 "PRIOR PLAN" means the Computer Associates
International, Inc. 1991 Stock Incentive Plan.
SECTION 2.19 "RELATED COMPANY" means a consolidated subsidiary of the
Company for purposes of reporting in the Company's consolidated financial
statements.
SECTION 2.20 "REPORTING PERSON" means an Employee who is subject to the
reporting requirements of Section 16(a) of the Securities Exchange Act of 1934.
SECTION 2.21 "RETIREMENT" means retirement (i) at or after age 55 with ten
years of service or (ii) at or after age 65.
SECTION 2.22 "RIGHTS AGREEMENT" means the Rights Agreement dated June 18,
1991, as amended from time to time, between the Company and Mellon Investor
Services LLC (as successor rights agent to Manufacturers Hanover Trust Company).
SECTION 2.23 "SHARES" means shares of Common Stock.
B-3
SECTION 2.24 "STOCK OPTION" means a right granted under the Plan to
purchase from the Company a stated number of Shares at a specified price. Stock
Options awarded under the Plan shall be in the form of either Incentive Stock
Options or Nonqualified Stock Options.
SECTION 2.25 "TERMINATION OF CONSULTANCY" means the date of cessation of a
Consultant's service relationship with the Company for any reason, with or
without cause, as determined by the Company.
SECTION 2.26 "TERMINATION OF EMPLOYMENT" means the date of cessation of an
Employee's employment relationship with the Company and any Related Company for
any reason, with or without cause as determined by the Company; provided,
however, that for purposes of the Plan, an Employee's employment relationship
shall be treated as continuing intact while the Employee is on military leave,
sick leave or other bona fide leave of absence (such as temporary employment
with the Government) if the period of such leave does not exceed ninety (90)
days, or if longer, so long as the Employee's right to reemployment with the
Company or a Related Company is guaranteed either by statute or by contract.
Where the period of leave exceeds ninety (90) days and where the Employee's
right to reemployment is not guaranteed either by statute or contract, the
employment relationship will be deemed to have terminated on the ninety-first
(91st) day of such leave.
ARTICLE III
ADMINISTRATION
SECTION 3.01 THE COMMITTEE. The Plan shall be administered by the
Committee.
SECTION 3.02 AUTHORITY OF THE COMMITTEE. The Committee shall have
authority, in its sole and absolute discretion and subject to the terms of the
Plan, to (1) interpret the Plan; (2) prescribe such rules and regulations as it
deems necessary for the proper operation and administration of the Plan, and
amend or rescind any existing rules or regulations relating to the Plan;
(3) select Employees and Consultants to receive Awards under the Plan;
(4) determine the form of an Award, the number of Shares subject to an Award,
all the terms, conditions, restrictions and/or limitations, if any, of an Award
including, without limitation, the timing or conditions of exercise or vesting,
and the terms of any Award Certificate; (5) determine whether Awards will be
granted singly, in combination or in tandem; (6) except as provided in
Section 4.03(f), waive or amend any terms, conditions, restrictions or
limitations of an Award; (7) in accordance with Article V, make such adjustments
to the Plan (including but not limited to adjustment of the number of shares
available under the Plan or any Award) and/or to any Award granted under the
Plan, as may be appropriate; (8) accelerate the vesting or exercise of an Award
when such action or actions would be in the best interest of the Company;
(9) determine whether Nonqualified Stock Options may be transferable to family
members, a family trust or a family partnership; (10) establish such subplans as
the Committee may determine to be necessary in order to implement and administer
the Plan in foreign countries; and (11) take any and all other action it deems
necessary or advisable for the proper operation or administration of the Plan.
SECTION 3.03 EFFECT OF DETERMINATIONS. All determinations of the Committee
shall be final, binding and conclusive on all persons having an interest in the
Plan.
SECTION 3.04 DELEGATION OF AUTHORITY. The Committee, in its discretion,
may delegate its authority and duties under the Plan to such other individual,
individuals or committee as it may deem advisable, under such conditions and
subject to such limitations as the Committee may establish. Notwithstanding the
foregoing, only the Committee shall have authority to grant and administer
Awards to Reporting Persons or any Employee who is acting as a delegate of the
Committee in respect of the Plan.
SECTION 3.05 NO LIABILITY. No member of the Committee, nor any person
acting as a delegate of the Committee in respect of the Plan, shall be liable
for any losses incurred by any person resulting from any action, interpretation
or construction made in good faith with respect to the Plan or any Award granted
thereunder.
B-4
ARTICLE IV
AWARDS
SECTION 4.01 ELIGIBILITY. All Employees and Consultants shall be eligible
to receive Awards granted under the Plan, except that only Employees shall be
eligible to receive grants of Incentive Stock Options under the Plan.
SECTION 4.02 PARTICIPATION. The Committee, at its sole discretion, shall
select from time to time Participants from those persons eligible under
Section 4.01 above to receive Awards under the Plan.
SECTION 4.03 STOCK OPTIONS. Stock Options granted under the Plan shall, at
the discretion of the Committee, be in the form of either Nonqualified Stock
Options, Incentive Stock Options or a combination of the two, subject to the
restrictions set forth in paragraph (e) below. Where both an a Nonqualified
Stock Option and an Incentive Stock Option are granted to a Participant at the
same time, such Awards shall be deemed to have been granted in separate grants,
shall be clearly identified, and in no event will the exercise of one such Award
affect the right to exercise the other Award. The Committee shall designate the
form of the Stock Option at the time of grant and such form shall be specified
in the Award Certificate. Stock Options shall be subject to the following terms
and conditions:
(a) AMOUNT OF SHARES. The Committee may grant Stock Options to a
Participant in such amounts as the Committee may determine, subject to the
limitations set forth in Section 5.01 of the Plan. The number of Shares
subject to a Stock Option shall be set forth in the applicable Award
Certificate.
(b) EXERCISE PRICE. The per Share Exercise Price of a Stock Option
shall be determined by the Committee at the time of grant and set forth in
the Award Certificate. In no event shall the Exercise Price of a Stock
Option be less than the Fair Market Value of a Shares as of the date of
grant.
(c) TERM AND TIMING OF EXERCISE. Each Stock Option granted under the
Plan shall be exercisable in whole or in part, subject to the following
conditions, limitations and restrictions:
(i) The Committee shall have the discretion to determine when each
Stock Option granted hereunder shall become exercisable, and prescribe
any vesting schedule limiting the exercisability of such Stock Option as
it may deem appropriate; provided, however, that, except as otherwise
provided in this Section 4.03(c), no Stock Option shall become
exercisable prior to the date which is one year after the date on which
the Option was granted;
(ii) Stock Options shall lapse ten years after the date of grant;
(iii) The Committee may, on a case by case basis, provide in an Award
Certificate that the Stock Options subject to the Award shall become
immediately exercisable upon a Change in Control;
(iv) All Stock Options granted to a Participant shall become
immediately exercisable upon the death of the Participant and must be
exercised, if at all, within one year after such Participant's death, but
in no event after the date such Stock Options would otherwise lapse, by
the estate or by the person given authority to exercise such Stock
Options by his will or by operation of law. In the event a Stock Option
is exercised by the executor or administrator of a deceased Participant,
or by the person or persons to whom the Stock Option has been transferred
by the Participant's will or the applicable laws of descent and
distribution, the Company shall be under no obligation to deliver Shares
thereunder unless and until the Company is satisfied that the person or
persons exercising the Stock Option is or are the duly appointed
executor(s) or administrator(s) of the deceased Participant or the person
to whom
B-5
the Stock Option has been transferred by the Participant's will or by the
applicable laws of descent and distribution;
(v) Except as otherwise provided in Section 7.03, upon an Employee's
Termination of Employment, or a Consultant's Termination of Consultancy,
for any reason other than death, all Stock Options that have not become
exercisable as of the date of termination shall be forfeited and to the
extent that Stock Options have become exercisable as of such date, such
Stock Options must be exercised, if at all, within 30 days after such
Termination of Employment or Termination of Consultancy, or within such
other period determined by the Committee and set forth in the applicable
Award Certificate; and
(vi) Notwithstanding the foregoing, the Committee may, at its
discretion, set forth in the applicable Award Certificate vesting
schedules and time periods for permitted exercise that differ from those
provided herein in the event of the Disability or Retirement of an
Employee, or such other event as it may determine to be appropriate;
provided, however, that in no event shall the Committee provide in an
Award Certificate for the exercise of any portion of a Stock Option after
the date such Stock Option would otherwise lapse.
(d) PAYMENT OF EXERCISE PRICE. The Exercise Price shall be paid in full
when the Stock Option is exercised and stock certificates shall be
registered and delivered only upon receipt of such payment. Payment of the
Exercise Price may be made in cash or by certified check, bank draft, wire
transfer, or postal or express money order. In addition, at the discretion
of the Committee, payment of all or a portion of the Exercise Price may be
made by:
(i) Delivering a properly executed exercise notice to the Company, or
its agent, together with irrevocable instructions to a broker to deliver
promptly to the Company the amount of sale or loan proceeds with respect
to the portion of the Shares to be acquired upon exercise having a Fair
Market Value on the date of exercise equal to the sum of the applicable
portion of the Exercise Price being so paid;
(ii) Tendering (actually or by attestation) to the Company previously
acquired Shares that have been held by the Participant for at least six
months having a Fair Market Value on the day prior to the date of
exercise equal to the applicable portion of the Exercise Price being so
paid; or
(iii) any combination of the foregoing.
(e) INCENTIVE STOCK OPTIONS. Incentive Stock Options granted under the
Plan shall be subject to the following additional conditions, limitations
and restrictions:
(i) ELIGIBILITY. Incentive Stock Options may only be granted to
Employees of the Company or a Related Company that is a subsidiary or
parent corporation, within the meaning of Code Section 424, of the
Company. In no event may an Incentive Stock Option be granted to an
Employee who owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or such Related
Company or to a Consultant.
(ii) AMOUNT OF AWARD. The aggregate Fair Market Value on the date
of grant of the Shares with respect to which such Incentive Stock Options
first become exercisable during any calendar year under the terms of the
Plan for any Participant may not exceed $100,000. For purposes of this
$100,000 limit, the Participant's Incentive Stock Options under this Plan
and all Plan's maintained by the Company and a Related Company shall be
aggregated. To the extent any Incentive Stock Option first becomes
exercisable in a calendar year and such limit would be exceeded, such
Incentive Stock Option shall thereafter be treated as a Nonqualified
Stock Option for all purposes.
B-6
(iii) TIMING OF EXERCISE. In the event that the Committee exercises
its discretion to permit an Incentive Stock Option to be exercised by a
Participant more than 30 days after the Participant's Termination of
Employment and such exercise occurs more than three months after such
Participant has ceased being an Employee (or more than 12 months after
the Participant is Disabled), such Incentive Stock Option shall
thereafter be treated as a Nonqualified Stock Option for all purposes.
(iv) TRANSFER RESTRICTIONS. In no event shall the Committee permit
an Incentive Stock Option to be transferred by a Participant other than
by will or the laws of descent and distribution, and any Incentive Stock
Option granted hereunder shall be exercisable, during his or her
lifetime, only by the Participant.
(f) NO REPRICING. Except as otherwise provided in Section 5.03, in no
event shall the Committee decrease the Exercise Price of a Stock Option
after the date of grant or cancel outstanding Stock Options and grant
replacement Stock Options with a lower exercise price without first
obtaining the approval of the holders of a majority of the Shares present in
person or by proxy at a meeting of the Company's shareholders and entitled
to vote at such meeting.
SECTION 4.04 CODE SECTION 162(M). It is the intent of the Company that
Awards granted under the Plan satisfy, and that this Article IV be interpreted
in a manner that satisfies, the applicable requirements of Code Section 162(m)
and the regulations thereunder so that the Company's tax deduction for Awards is
not disallowed in whole or in part by operation of Code Section 162(m). If any
provision or this Plan or of any Award would otherwise frustrate or conflict
with such intent, that provision shall be interpreted and deemed amended so as
to avoid such conflict.
ARTICLE V
SHARES SUBJECT TO THE PLAN; ADJUSTMENTS
SECTION 5.01 SHARES AVAILABLE. The Shares issuable under the Plan shall be
authorized but unissued Shares or Shares held in the Company's treasury that
have been approved by the Company's shareholders for issuance under the Prior
Plan but which, as of the June 24, 2001 termination date of such Prior Plan,
have not been awarded under such Prior Plan. Subject to adjustment in accordance
with Section 5.03, the total number of Shares with respect to which Awards may
be issued under the Plan may equal but shall not exceed in the aggregate
7,500,000 Shares; provided, however, that from the aggregate limit no more than
1,000,000 Shares in the form of Stock Options may be granted to any one
Participant during any fiscal year of the Company. All 7,500,000 Shares that
will be made available under this Plan may be awarded in the form of Incentive
Stock Options.
SECTION 5.02 COUNTING RULES. For purposes of determining the number of
Shares remaining available under the Plan (i.e., Shares originally approved
under the Prior Plan, but made available for issuance under this Plan in
accordance with Section 5.01), any Shares related to Awards which terminate by
expiration, forfeiture, cancellation or otherwise without issuance of Shares, or
are settled in cash in lieu of Shares, shall be available again for issuance
under the Plan. In the event Shares are tendered or withheld in payment of all
or part of the Exercise Price of a Stock Option, or in satisfaction of the
withholding obligations thereunder, the Shares so tendered or withheld shall
become available for issuance under the Plan.
SECTION 5.03 ADJUSTMENTS. In the event of a change in the outstanding
Shares by reason of any stock split, reverse stock split, dividend or other
distribution (whether in the form of cash, Shares, other securities or other
property), extraordinary cash dividend, recapitalization, merger, consolidation,
split-up, spin-off, reorganization, combination, repurchase or exchange of
Shares or other securities, the exercisability of stock purchase rights received
under the Rights Agreement, the issuance of warrants or other rights to purchase
Shares or other securities, or other similar corporate transaction or event, if
B-7
the Committee shall determine, in its sole discretion, that, in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan, such transaction or event equitably requires an
adjustment in the number or kind of Shares that may be issued under the Plan, in
the number or kind of Shares subject to an outstanding Stock Option, or in the
Exercise Price of a Stock Option, such adjustment shall be made by the Committee
and shall be conclusive and binding for all purposes under the Plan.
SECTION 5.04 CONSOLIDATION, MERGER OR SALE OF ASSETS. Upon the occurrence
of (i) a merger, consolidation, acquisition of property or stock, reorganization
or otherwise involving the Company in which the Company is not to be the
surviving corporation, (ii) a merger, consolidation, acquisition of property or
stock, reorganization or otherwise involving the Company in which the Company is
the surviving corporation but holders of Shares receive securities of another
corporation, or (iii) a sale of all or substantially all of the Company's assets
(as an entirety) or capital stock to another person, any Award granted hereunder
shall be deemed to apply to the securities, cash or other property (subject to
adjustment by cash payment in lieu of fractional interests) to which a holder of
the number of Shares equal to the number of Shares the Participant would have
been entitled, and proper provisions shall be made to ensure that this clause is
a condition to any such transaction; PROVIDED, HOWEVER, that the Committee (or,
if applicable, the Board of Directors of the entity assuming the Company's
obligations under the Plan) shall, in its discretion, have the power to either:
(a) provide, upon written notice to Participants, that all Awards that
are currently exercisable must be exercised within the time period specified
in the notice and that all Awards not exercised as of the expiration of such
period shall be terminated without consideration; PROVIDED, HOWEVER, that
the Committee (or successor Board of Directors) may provide, in its
discretion, that for purposes of this subsection, all outstanding Awards are
currently exercisable, whether or not vested; or
(b) cancel any or all Awards and, in consideration of such cancellation,
pay to each Participant an amount in cash with respect to each Share
issuable under an Award equal to the difference between the Fair Market
Value of such Share on such date (or, if greater, the value per Share of the
consideration received by holders of Shares as a result of such merger,
consolidation, reorganization or sale) and the Exercise Price.
SECTION 5.05 POOLING. Notwithstanding anything to the contrary in the
Plan, the Committee shall have no authority to take any action under the Plan
where such action would adversely affect the Company's ability to account for
any business combination as a "pooling of interests."
SECTION 5.06 FRACTIONAL SHARES. No fractional Shares shall be issued under
the Plan. In the event that a Participant acquires the right to receive a
fractional Share under the Plan, such Participant shall receive, in lieu of such
fractional Share, cash equal to the Fair Market Value of the fractional Share as
of the date of settlement.
ARTICLE VI
AMENDMENT AND TERMINATION
SECTION 6.01 AMENDMENT. The Plan may be amended at any time and from time
to time by the Board without the approval of shareholders of the Company, except
that no amendment which increases the aggregate number of Shares which may be
issued pursuant to the Plan, decreases the Exercise Price at which Stock Options
may be granted or materially modifies the eligibility requirements for
participation in the Plan shall be effective unless and until the same is
approved by the shareholders of the Company. No amendment of the Plan shall
adversely affect any right of any Participant with respect to any Award
theretofore granted without such Participant's written consent.
B-8
SECTION 6.02 TERMINATION. The Plan shall terminate upon the earlier of the
following dates or events to occur:
(a) the adoption of a resolution of the Board terminating the Plan; or
(b) the three-year anniversary of the date of the Company's 2001 Annual
Meeting of Stockholders.
No Awards shall be granted under this Plan after it has been terminated.
However, the termination of the Plan shall not alter or impair any of the rights
or obligations of any person, without such person's consent, under any Award
theretofore granted under the Plan. After the termination of the Plan, any
previously granted Awards shall remain in effect and shall continue to be
governed by the terms of the Plan and the applicable Award Certificate.
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.01 NONTRANSFERABILITY OF AWARDS. Except as otherwise provided in
this Section 7.01, no Stock Options awarded under the Plan shall be subject in
any manner to alienation, anticipation, sale, assignment, pledge, encumbrance or
transfer, other than by will or by the laws of descent or distribution, by the
Participant and no other persons shall otherwise acquire any rights therein.
Nothing in the preceding sentence, however, shall bar the transfer of a
Nonqualified Stock Option to a Participant's spouse pursuant to a qualified
domestic relations order as defined by Section 414(p) of the Code or Section
206(d) of the Employee Retirement Income Security Act or 1974, as amended.
During the lifetime of a Participant, Stock Options (except for Nonqualified
Stock Options that are transferable pursuant to subparagraphs (a) and
(b) below) shall be exercisable only by the Participant and shall not be
assignable or transferable except as provided above.
(a) in the case of a Nonqualified Stock Option, the Committee may, in
its sole discretion, provide in the applicable Award Certificate that all or
any part of such Nonqualified Stock Option may, subject to the prior written
consent of the Committee, be transferred to one or more of a following
classes of donees: family member, a trust for the benefit of a family
member, a limited partnership whose partners are solely family members or
any other legal entity set up for the benefit of family members. For
purposes of this Section 7.01, a family member means a Participant's spouse,
children, grandchildren, parents, grandparents (natural, step, adopted, or
in-laws), siblings, nieces, nephews and grandnieces and grandnephews.
(b) except as otherwise provided in the applicable Award Certificate,
any Nonqualified Stock Option transferred by a Participant pursuant to
paragraph (a) above may be exercised by the transferee only to the extent
such Nonqualified Stock Option would have been exercisable by the
Participant had no transfer occurred. Any such transferred Nonqualified
Stock Option shall be subject to all of the same terms and conditions as
provided in the Plan and in the applicable Award Certificate. The
Participant or the Participant's estate shall remain liable for any
withholding tax which may be imposed by any federal, state or local tax
authority and the transfer of Shares upon exercise of such Nonqualified
Stock Option shall be conditioned on the payment of such withholding tax.
The Committee may, in its sole discretion, withhold its consent to all or a
part of any transfer of a Nonqualified Stock Option pursuant to this
Section 7.01 unless and until the Participant makes arrangements
satisfactory to the Committee for the payment of any such withholding tax.
The Participant must immediately notify the Committee, in such form and
manner as required by the Committee, of any proposed transfer of a
Nonqualified Stock Option pursuant to this Section 7.01 and no such transfer
shall be effective until the Committee consents thereto in writing.
B-9
(c) anything in this Section 7.01 to the contrary notwithstanding, in no
event may the Committee permit an Incentive Stock Option to be transferred
by any Participant other than by will or the laws of descent and
distribution.
SECTION 7.02 WITHHOLDING OF TAXES. As a condition to the delivery of any
Shares pursuant to the exercise of a Stock Option, the Committee may require
that the Participant, at the time of such exercise, pay to the Company by cash
or by certified check, bank draft, wire transfer or postal or express money
order an amount sufficient to satisfy any applicable tax withholding
obligations. The Committee may, however, in its discretion, accept payment of
tax withholding obligations through any of the Exercise Price payment methods
described in Section 4.03(d). In addition, the Committee may, in its discretion,
permit payment of tax withholding obligations to be made by instructing the
Company to withhold Shares that would otherwise be issued on exercise having a
Fair Market Value on the date of exercise equal to the applicable portion of the
tax withholding obligations being so paid. Notwithstanding the foregoing, in no
event may any amount greater than the minimum statutory withholding obligation
be satisfied by tendering or withholding Shares.
SECTION 7.03 SPECIAL FORFEITURE PROVISION. The Committee may, at its
discretion, provide in an Award Certificate that a Stock Option granted to any
Participant who, without prior written approval of the Company, enters into any
employment or consultation arrangement (including service as an agent, partner,
stockholder, consultant, officer or director) to any entity or person engaged in
any business in which the Company or its affiliates is engaged which, in the
sole judgment of the Company, is competitive with the Company or any subsidiary
or affiliate, shall forfeit all rights under any outstanding Stock Option and
shall return to the Company the amount of any profit realized upon the exercise,
within such period as the Committee may determine, of any Stock Option. This
special forfeiture provision will not apply to a particular grant unless it is
so specified in the Award Certificate.
SECTION 7.04 NO IMPLIED RIGHTS. The establishment and subsequent operation
of the Plan, including eligibility as a Participant, shall not be construed as
conferring any legal or other right upon any Employee for the continuation or
his or her employment. The Company expressly reserves the right, which may be
exercised at any time and without regard to when such exercise occurs, to
discharge any individual and/or treat him or her without regard to the effect
which such treatment might have upon him or her as a Participant in the Plan.
SECTION 7.05 NO OBLIGATION TO EXERCISE OPTIONS. The granting of a Stock
Option shall impose no obligation upon the Participant to exercise such Stock
Option.
SECTION 7.06 NO RIGHTS AS SHAREHOLDERS. A Participant granted an Award
under the Plan shall have no rights as a shareholder of the Company with respect
to such Award unless and until such time as certificates for the Shares
underlying the Award are registered in such Participant's name. The right of any
Participant to receive an Award by virtue of participation in the Plan shall be
no greater than the right of any unsecured general creditor of the Company.
SECTION 7.07 INDEMNIFICATION OF COMMITTEE. The Company shall indemnify, to
the full extent permitted by law, each person made or threatened to be made a
party to any civil or criminal action or proceeding by reason of the fact that
he, or his testator or intestate, is or was a member of the Committee or a
delegate of the Committee so acting.
SECTION 7.08 NO REQUIRED SEGREGATION OF ASSETS. Neither the Company nor
any Related Company shall be required to segregate any assets that may at any
time be represented by Awards granted pursuant to the Plan.
SECTION 7.09 NATURE OF PAYMENTS. All Awards made pursuant to the Plan are
in consideration of services for the Company or the Related Companies. Any gain
realized pursuant to Awards under the Plan constitutes a special incentive
payment to the Participant and shall not be taken into account as compensation
for purposes of any of the employee benefit plans of the Company or any Related
B-10
Company except as may be determined by the Board or by the board of directors of
the applicable Related Company.
SECTION 7.10 SECURITIES EXCHANGE ACT COMPLIANCE. Awards under the Plan are
intended to satisfy the requirements of Rule 16b-3 under the Securities Exchange
Act of 1934. If any provision or this Plan or of any grant of an Award would
otherwise frustrate or conflict with such intent, that provision shall be
interpreted and deemed amended so as to avoid such conflict.
SECTION 7.11 GOVERNING LAW; SEVERABILITY. The Plan and all determinations
made and actions taken thereunder shall be governed by the internal substantive
laws, and not the choice of law rules, of the State of New York and construed
accordingly, to the extent not superseded by applicable federal law. If any
provision of the Plan shall be held unlawful or otherwise invalid or
unenforceable in whole or in part, the unlawfulness, invalidity or
unenforceability shall not affect any other provision of the Plan or part
thereof, each of which shall remain in full force and effect.
B-11
EXHIBIT C
INFORMATION CONCERNING PARTICIPANTS IN THE SOLICITATION
Under applicable SEC regulations, the members of the Board of Directors and
certain officers and employees of Computer Associates may be deemed to be
"participants" in the Company's solicitation of proxies from the Company's
shareholders to vote in favor of the election of the directors nominated by the
Board, approval of the 2001 Stock Option Plan, and ratification of the Board's
appointment of KPMG LLP as Computer Associates' independent auditors for the
fiscal year ending March 31, 2002. Set forth below with respect to each
participant are his or her name, principal occupation or employment, business
address, the number of shares of the Company's Common Stock beneficially owned
and additional information concerning transactions in shares of Common Stock of
the Company during the past two years. Unless otherwise indicated, the business
address of each participant is One Computer Associates Plaza, Islandia, New York
11749.
DIRECTORS AND DIRECTOR NOMINEES
The principal occupation of the Company's directors who may be deemed
participants in the solicitation are set forth under "ITEM 1--ELECTION OF
DIRECTORS" in this proxy statement. The name, business and address of the
directors are as follows:
NAME ADDRESS
---- -------
Russell M. Artzt..................... *
Linus W. L. Cheung................... Pacific Century Cyberworks Limited
Hong Kong Telecom Tower, 42nd Street
Taikoo Place, Quarry Bay, Hong Kong
Alfonse M. D'Amato................... Park Strategies LLC
101 Park Avenue, Suite 2506
New York, NY 10178
Willem F. P. de Vogel................ Three Cities Research, Inc.
135 East 57th St.
New York, NY10022
Richard A. Grasso.................... New York Stock Exchange
11 Wall Street, Room 604
New York, NY 10005
Shirley Strum Kenny.................. State University at Stony Brook
Administration Building, Room 310
Stony Brook, NY 11794 - 0701
Sanjay Kumar......................... *
Roel Pieper.......................... Insight Capital Partners Europe
2061 CR Bloemendaal
Mollaan 1a
The Netherlands
C-1
NAME ADDRESS
---- -------
Lewis S. Ranieri..................... Ranieri & Co, Inc.
50 Charles Lindbergh Blvd., Suite 500
Uniondale, NY 11553 - 3600
Charles B. Wang...................... *
------------------------
* Unless otherwise indicated, the director's address is c/o Computer
Associates International, Inc., One Computer Associates Plaza, Islandia, NY
11749.
CERTAIN OFFICERS AND EMPLOYEES
NAME PRINCIPAL OCCUPATION
---- --------------------
Lisa C. Savino....................... Vice President - Investor Relations
Ira H. Zar........................... Executive Vice President - Finance and Chief
Financial Officer
INFORMATION REGARDING OWNERSHIP OF THE COMPANY'S SECURITIES BY PARTICIPANTS
None of the participants owns any of the Company's Common Stock of record
but not beneficially. The number of shares of the Company's Common Stock held by
directors and the named executive officers is set forth under the "BOARD AND
MANAGEMENT OWNERSHIP" section of this proxy statement. The number of shares of
the Company's Common Stock held by the other participants as of July 5, 2001 is
set forth below. The information includes shares of Computer Associates Common
Stock that may be acquired within 60 days after July 5, 2001 through the
exercise of stock options, and shares of Computer Associates Common Stock
credited to the individual's account in the Company's tax-qualified
profit-sharing plan.
NAME OF NUMBER OF SHARES PERCENT
BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
---------------- ------------------ --------
Lisa C. Savino...................................... 24,688 *
------------------------
* Represents less than 1% of the outstanding Common Stock.
INFORMATION REGARDING TRANSACTIONS IN THE COMPANY'S SECURITIES BY PARTICIPANTS
The following table sets forth purchases and sales of the Company's
securities by the participants listed below during the past two years. Unless
otherwise indicated, all transactions are in the public market.
NUMBER OF SHARES OF
COMMON STOCK, OR OPTIONS
TO ACQUIRE SUCH STOCK,
NAME DATE ACQUIRED OR (DISPOSED OF) NOTES
---- -------- ------------------------- --------
DIRECTORS
-------------------------------------
Russell M. Artzt..................... 07/21/99 250,000 (1)
08/9/99 300,000 (2)
08/9/99 (300,000) (7)
02/02/00 136,564 (2)
02/03/00 163,436 (2)
02/09/00 (300,000) (7)
C-2
NUMBER OF SHARES OF
COMMON STOCK, OR OPTIONS
TO ACQUIRE SUCH STOCK,
NAME DATE ACQUIRED OR (DISPOSED OF) NOTES
---- -------- ------------------------- --------
03/31/00 506 (8)
05/22/00 13,785 (5)
12/08/00 (450,000) (3)
03/31/01 634 (9)
05/31/01 24,132 (2)
Alfonse M. D'Amato................... 08/26/99 6,750 (1)
08/31/00 6,750 (1)
Willem F.P. de Vogel................. 08/26/99 6,750 (1)
08/31/00 6,750 (1)
Richard A. Grasso.................... 08/26/99 6,750 (1)
08/31/00 6,750 (1)
Shirley Strum Kenny.................. 07/07/00 2,000 (7)
Sanjay Kumar......................... 07/21/99 750,000 (1)
09/07/99 (150,000) (7)
12/02/99 (94,500) (7)
12/02/99 (5,500) (7)
03/03/00 100,000 (2)
03/03/00 (100,000) (7)
03/31/00 468 (8)
05/22/00 80,000 (5)
06/02/00 (100,000) (7)
06/30/00 357 (10)
12/08/00 (1,350,000) (3)
12/21/00 567,064 (2)
03/31/01 630 (9)
Roel Pieper.......................... 08/26/99 6,750 (1)
08/31/00 6,750 (1)
Charles B. Wang...................... 07/21/99 1,000,000 (1)
07/27/99 (100,000) (7)
07/28/99 (70,000) (7)
07/29/99 (9,500) (7)
07/30/99 (20,500) (7)
08/02/99 (100,000) (7)
10/20/99 (300,000) (7)
10/20/99 (335) (4)
12/29/99 (181,800) (4)
01/10/00 (1,120) (4)
02/07/00 (179,500) (7)
02/08/00 (120,500) (7)
03/31/00 310 (8)
05/18/00 (5,000) (7)
05/22/00 121,208 (5)
05/22/00 (20,000) (7)
05/23/00 (50,000) (7)
05/24/00 (50,000) (7)
05/25/00 (25,000) (7)
05/30/00 (45,000) (7)
06/01/00 (105,000) (7)
C-3
NUMBER OF SHARES OF
COMMON STOCK, OR OPTIONS
TO ACQUIRE SUCH STOCK,
NAME DATE ACQUIRED OR (DISPOSED OF) NOTES
---- -------- ------------------------- --------
06/13/00 2,568,750 (2)
06/13/00 (1,078,029) (6)
09/01/00 (615) (4)
09/18/00 (1,863) (4)
12/08/00 (2,700,000) (3)
12/28/00 (526,000) (4)
03/31/01 177 (9)
OFFICERS AND EMPLOYEES
-------------------------------------
Lisa C. Savino....................... 07/21/99 20,000 (1)
11/26/99 (1,000) (7)
01/28/00 (1,300) (7)
03/31/00 (407) (11)
07/20/00 40,000 (1)
Ira H. Zar........................... 07/21/99 500,000 (1)
10/20/99 152,700 (1)
03/31/00 306 (8)
07/20/00 900,000 (1)
------------------------
(1) Grant of Stock Option.
(2) Exercise of Stock Option.
(3) Shares disposed to the Company pursuant to the Stipulation of Settlement,
dated 12/8/00, in Sanders v. Computer Associates International, Inc.
(4) Gift (Given).
(5) Stock Grant under the 1994 Annual Incentive Compensation Plan.
(6) Payment of Exercise Price and Taxes on Option by Delivering Securities to
Company.
(7) Open Market Purchase or (Sale).
(8) Shares acquired and held through the Computer Associates Savings Harvest
Plan, a 401(k) plan. Information presented as of March 31, 2000.
(9) Shares acquired and held through the Computer Associates Savings Harvest
Plan, a 401(k) plan. Information presented as of March 31, 2001.
(10) Shares acquired and held through the Computer Associates Employee Stock
Purchase Plan, an employee benefit plan. Information presented as of
June 30, 2000.
(11) Shares disposed of pursuant to an intra-plan transfer under the Computer
Associates Savings Harvest Plan, a 401(k) plan. Information presented as of
March 31, 2000.
C-4
MISCELLANEOUS INFORMATION CONCERNING PARTICIPANTS
Except as described in this Exhibit C or in the proxy statement, to the best
knowledge of the Company, none of the participants nor any of their respective
affiliates or associates (together, the "Participant Affiliates") (i) directly
or indirectly beneficially owns any shares of the Company's Common Stock or any
securities of any subsidiary of the Company or (ii) has had any relationship
with the Company in any capacity other than as a shareholder, employee, officer
or director. Furthermore, except as described in this Exhibit C or in this proxy
statement, to the best knowledge of the Company, no participant or Participant
Affiliate is either a party to any transaction or series of transaction since
the beginning of the Company's last fiscal year, or has knowledge of any
currently proposed transaction or series of transactions, (i) in which the
Company or any of its subsidiaries was or is to be a party, (ii) in which the
amount involved exceeds $60,000, and (iii) in which any participant or
Participant Affiliate had or will have, a direct or indirect material interest.
Except as described in this Exhibit C or in the proxy statement, to the
knowledge of the Company, no participant or Participant Affiliate has any
substantial interest, direct or indirect, by security holdings or otherwise, in
any matter to be acted upon at the 2001 Annual Meeting of Stockholders.
To the knowledge of the Company, no participant or Participant Affiliate has
entered into any agreement or understanding with any person respecting any
future employment by the Company or its affiliates or any future transactions to
which the Company or any of its affiliates will or may be a party. Except as
described in this Exhibit C or in this proxy statement, there are no contracts,
arrangements or understandings by any participant or Participant Affiliate
within the past year with any person with respect to the Company's securities,
including, but not limited to, joint ventures, loan or option arrangements, puts
or calls, guarantees against loss or guarantees of profit, division of losses or
profits, or the giving or withholding of proxies.
C-5
IMPORTANT
Your proxy is important. No matter how many shares of Computer Associates
Common Stock you own, please give the Company your proxy "FOR" the election of
the Board's nominees for director and "AGAINST" the Wyly Slate signing, dating
and returning the Company's WHITE proxy card today in the postage prepaid
envelope provided.
YOUR BOARD URGES YOU NOT TO RETURN ANY PROXY CARDS
YOU MAY HAVE RECEIVED FROM WYLY
If you have already submitted a proxy to Wyly for the Annual Meeting, you
may change your vote to a vote "FOR" the election of the Board's nominees and
"AGAINST" the Wyly Slate by signing, dating and returning the Company's WHITE
proxy card, which must be dated after any proxy you may have submitted to Wyly.
Only your last dated proxy for the Annual Meeting will count at the meeting.
If any of your shares of Computer Associates Common Stock are held in the
name of a brokerage firm, bank, nominee or other institution, only it can vote
such shares and only upon receipt of your specific instructions. Please sign,
date and promptly mail the WHITE proxy card in the envelope provided by your
broker. Remember, your shares cannot be voted unless you return a signed and
executed proxy card to your broker.
If you have any questions or require any additional information or
assistance, please call either of our proxy solicitors, MacKenzie
Partners, Inc. or D.F. King & Co., Inc., at any of the numbers set forth below.
MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, New York 10010
Call 1-800-322-2885 (TOLL FREE IN THE UNITED STATES)
OR 1-212-929-5500 (COLLECT)
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Call 1-800-431-9642 (TOLL FREE IN THE UNITED STATES)
OR 1-212-269-5550 (COLLECT)
[LOGO]
PRELIMINARY COPIES
PROXY
COMPUTER ASSOCIATES INTERNATIONAL, INC.
2001 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPUTER ASSOCIATES BOARD OF
DIRECTORS FOR THE 2001 ANNUAL MEETING OF STOCKHOLDERS ON AUGUST 29, 2001.
The undersigned hereby appoints Daniel H. Burch and Jeanne M. Carr, and
each of them, as proxies, acting jointly and severally, with full power of
substitution, for and in the name of the undersigned to vote all shares of
Common Stock, par value $.10 per share, of Computer Associates International,
Inc., that the undersigned is entitled to vote at the Annual Meeting of
Stockholders to be held on Wednesday, August 29, 2001, at 10:00 a.m. Eastern
Daylight Time, at the Wyndham Wind Watch Hotel, 1717 Motor Parkway, Islandia,
New York, and at any adjournment or postponement thereof, upon the matters
set forth in the accompanying Notice of Annual Meeting of Stockholders and
upon such other matters as may properly come before the Annual Meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS SPECIFIED,THIS
PROXY WILL BE VOTED "FOR" PROPOSALS 1, 2, AND 3 AND IN THE DISCRETION OF THE
PROXIES UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL
MEETING. AT PRESENT, THE BOARD KNOWS OF NO OTHER BUSINESS WHICH WILL COME
BEFORE THE MEETING.
(CONTINUED ON REVERSE SIDE. PLEASE SIGN AND DATE.)
--------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
IF YOU HAVE ANY QUESTIONS, OR NEED ASSISTANCE VOTING, PLEASE CONTACT EITHER
ONE OF THE FIRMS ASSISTING US IN THE SOLICITATION OF PROXIES, MACKENZIE
PARTNERS, INC., TOLL FREE AT 1-800-322-2885, OR D.F. KING & CO., INC.,
TOLL FREE AT 1-800-431-9642
Please mark
your votes as /X/
indicated in
this example
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2, AND 3
FOR WITHHOLD
1. Election of the following director nominees to serve for / / / /
the following year and until their successors are elected:
Nominees are: Russell M. Artzt, Linus W.L. Cheung, Alfonse M. D'Amato,
Willem F.P. de Vogel, Richard A. Grasso, Shirley Strum Kenny, Sanjay Kumar,
Roel Pieper, Lewis S. Ranieri, Charles B. Wang.
Withhold vote only from:________________________________________________________
FOR AGAINST ABSTAIN
2. Approval of the 2001 Stock Option Plan. / / / / / /
3. Ratification of the appointment of KPMG LLP / / / / / /
as the Company's independent auditors for the
fiscal year ending March 31, 2002.
Mark here if your address has changed and provide us with your new
address in the space provided to the right: / /
New Address:
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
Signature ____________________ Signature ____________________ Date _____________
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THIS CARD. JOINT OWNERS SHOULD
EACH SIGN PERSONALLY. CORPORATION PROXIES SHOULD BE SIGNED IN CORPORATE NAME
BY AN AUTHORIZED OFFICER. EXECUTORS, ADMINISTRATORS, TRUSTEES OR GUARDIANS
SHOULD GIVE THEIR TITLE WHEN SIGNING.
--------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
Notice: If you plan on attending the 2001 Annual Meeting, please cut out and
use the admission ticket(s) below.
No admission will be granted without an admission ticket.
ANNUAL MEETING OF STOCKHOLDERS
AUGUST 29, 2001, 10:00 A.M. (EASTERN DAYLIGHT TIME)
WYNDHAM WIND WATCH HOTEL
1717 MOTOR PARKWAY
ISLANDIA, NY 11749
1-631-232-9800
From East of Islandia: Take 495 West to Exit 58. (Old Nichols Road.) Go North
on Old Nichols Road. Make a left on Motor Parkway. The Wyndham Wind Watch
Hotel is on the right. From West of Islandia: Take 495 East to Exit 57.
(Motor Parkway.)At the light, turn left. Go straight across Route 454
(Veterans Highway.) The Wyndham Wind Watch Hotel is on the left.
Please vote your shares in person at the 2001 Annual Meeting, or sign, date,
and return the proxy card promptly using the enclosed envelope.