SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the registrant [x]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[x] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Computer Associates International, Inc.
------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Belden Frease, Secretary
-----------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[x] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] 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:
- -------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- -------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
- -------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- -------------------------------------------------------------------------
[ ] 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:
- ------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- ------------------------------------------------------------------------
(3) Filing party:
- ------------------------------------------------------------------------
(4) Dated filed:
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<PAGE>
COMPUTER ASSOCIATES INTERNATIONAL, INC.
One Computer Associates Plaza
Islandia, NY 11788-7000
1-516-342-5224
July 7, 1995
Dear Fellow Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Computer Associates International, Inc. to be held at 10:00 a.m.
Eastern Daylight Time, on Wednesday August 9, 1995 at our world
headquarters, One Computer Associates Plaza, Islandia, New York.
Your Board of Directors urges you to read the accompanying Notice of
Annual Meeting and Proxy Statement and recommends that you vote for the
election of the eight directors nominated, for approval of an Amendment
to the 1991 Stock Incentive Plan, for approval of an Amendment to the
1994 Annual Incentive Compensation Plan, for approval of the 1995 Key
Employee Stock Ownership Plan, and for ratification of the Board's
appointment of Ernst & Young LLP as the company's independent auditors
for the 1996 fiscal year.
The vote of every stockholder is important. Whether or not you plan
to attend the meeting, it is important that your shares be represented.
Accordingly, we urge you to sign, date, and mail the enclosed proxy in
the envelope provided at your earliest convenience.
Thank you for your cooperation.
Very truly yours,
/s/Charles B.Wang
Charles B. Wang
Chairman of the Board and
Chief Executive Officer
<PAGE>
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 9, 1995, at 10:00
a.m. Eastern Daylight Time, at the Company's world headquarters, One
Computer Associates Plaza, Islandia, New York, for the
following purposes:
1. To elect directors to serve for the ensuing year
and until their successors are elected;
2. To approve an Amendment to the Company's 1991 Stock
Incentive Plan;
3. To approve an Amendment to the Company's 1994
Annual Incentive Compensation Plan;
4. To approve the 1995 Key Employee Stock Ownership
Plan;
5. To ratify the appointment of Ernst & Young LLP as
the Company's independent auditors for the fiscal
year ending March 31, 1996; and
6. To transact such other business as may properly
come before the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on June 20,
1995 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.
If you plan to attend the meeting, please bring the admission ticket
attached to your proxy card.
Whether or not you expect to attend, STOCKHOLDERS ARE REQUESTED TO
SIGN, DATE AND RETURN THE ENCLOSED FORM OF PROXY IN THE ENVELOPE
PROVIDED. No postage is required if mailed in the United States.
By Order of the Board of Directors
Belden A. Frease
Secretary
Islandia, New York
July 7, 1995
<PAGE>
COMPUTER ASSOCIATES INTERNATIONAL, INC.
One Computer Associates Plaza
Islandia, NY 11788-7000
-----------
PROXY STATEMENT
-----------
GENERAL INFORMATION
PROXY SOLICITATION
This Proxy Statement is furnished to the holders of the Common Stock,
$.10 par value per share ("Common Stock"), of Computer Associates
International, Inc. (the "Company") in connection with the solicitation
of proxies on behalf of the Board of Directors of the Company for use at
the Annual Meeting of Stockholders to be held on Wednesday, August 9,
1995 at 10:00 a.m. (Eastern Daylight Time), at the Company's world
headquarters, One Computer Associates Plaza, Islandia, New York, and at
any adjournment thereof. The purposes of the meeting and the matters to
be acted upon are set forth in the accompanying Notice of Annual Meeting
of Stockholders. At present, the Board of Directors 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 7, 1995. The Company will
bear the cost of its solicitation of proxies. In addition to the use of
the mails, proxies may be solicited by personal interview, telephone,
telegram and telefax 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 by them in connection
therewith.
REVOCABILITY AND VOTING OF PROXY
A form of proxy for use at the meeting and a 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 specified
thereon. If no instructions are given, the proxies will be voted FOR the
election of management's eight nominees for election as directors, FOR
approval of an Amendment to the 1991 Stock Incentive Plan, FOR approval
of an Amendment to the 1994 Annual Incentive Compensation Plan, FOR
approval of the 1995 Key Employee Stock Ownership Plan, and FOR
ratification of the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending March 31, 1996.
RECORD DATE AND VOTING RIGHTS
Only stockholders of record at the close of business on June 20, 1995
are entitled to notice of and to vote at the meeting or any adjournment
thereof. On June 20, 1995, the Company had outstanding 160,593,508
shares of Common Stock, each of which (other than shares held in the
Company's treasury) is entitled to one vote upon matters presented at
the meeting.
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. Likewise, the inspectors of election will treat shares of
Common Stock represented by "broker non-votes" as present for purposes
of determining a quorum.
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.
<PAGE>
The affirmative vote of the holders of a majority of the shares of
Common Stock represented at the meeting in person or by proxy and
entitled to vote thereat will be required to approve an Amendment to the
1991 Stock Incentive Plan, to approve an Amendment to the 1994 Annual
Incentive Compensation Plan, to approve the 1995 Key Employee Stock
Ownership Plan and to ratify the selection of independent public
accountants. In determining whether such proposals have received the
requisite number of affirmative votes, abstentions and broker non-votes
will have the same effect as votes against the proposal.
ANNUAL REPORT
The Annual Report of the Company for the fiscal year ended March 31,
1995 is being mailed with this proxy statement.
Stockholders are referred to that 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 thereof.
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 June 13, 1995,
by the persons known to the Company to own, or deemed to own,
beneficially 5% or more of the Company's Common Stock:
<TABLE>
<CAPTION>
Number of Shares Percent of
Name and Address of Beneficial Owner Beneficially Owned Class (rounded)
------------------------------------ ------------------ ---------------
<S> <C> <C>
Walter Haefner/ 37,500,000(1) 23.4%
Careal Holding AG
Utoquai 49
8022 Zurich, Switzerland
FMR Corp. 10,667,208(2) 6.6%
82 Devonshire Street
Boston, MA 02109
<FN>
(1) According to a Schedule 13D, as amended, filed by Walter Haefner and
Careal Holding AG, Mr. Haefner has the sole voting and dispositive
power with respect to 37,500,000 shares of the Company's Common
Stock held of record by Careal Holding AG.
<FN>
(2) According to a Schedule 13G, filed by FMR Corp., FMR Corp has the
sole voting and dispositive power with respect to 177,757 shares of
the Company's Common Stock held of record by FMR Corp.
</TABLE>
BOARD AND MANAGEMENT OWNERSHIP
The following table sets forth certain information as to the
beneficial ownership of the Company's Common Stock as of June 13, 1995
for (i) each director, including Charles B. Wang, the Chairman and Chief
Executive Officer, Sanjay Kumar, President and Chief Operating Officer
and Russell M. Artzt, Executive Vice President-Research and Development,
(ii) the two most highly compensated executive officers other than
Messrs. Wang, Kumar, and Artzt, and (iii) all directors, and executive
officers as a group (13 persons). Information with respect to beneficial
ownership is based upon information furnished to the Company by each
security holder.
<TABLE>
<CAPTION>
Number of Shares Percent
Name of Beneficial Owner Beneficially Owned(1)(2) of Class
------------------------ ------------------------ --------
<S> <C> <C>
Director:
Russell M. Artzt 300,844 .2%
Willem F.P. de Vogel 7,720 *
Irving Goldstein 7,000 *
Richard A. Grasso 3,000 *
Shirley Strum Kenny 2,500 *
Sanjay Kumar 129,748 *
Edward C. Lord 2,400 *
Charles B. Wang 7,966,614(3) 5.0%
</TABLE>
<PAGE>
<TABLE>
BOARD AND MANAGEMENT OWNERSHIP (continued)
<CAPTION>
Number of Shares Percent
Name of Beneficial Owner Beneficially Owned(1)(2) of Class
------------------------ ------------------------ --------
<S> <C> <C>
Non-Directors:
Arnold S. Mazur 292,513 .2%
Peter Schwartz 200,486 .1%
All Directors and Executive Officers
as a Group (13 persons) 8,971,398 5.6%
---------------
<FN>
* Represents less than .1% of the outstanding Common Stock
<FN>
(1) Includes shares that may be acquired within 60 days after June 13,
1995 through exercise of employee and non-employee directors stock
options as follows: Mr. Artzt, 233,000; Mr. Kumar, 108,050;
Mr. Mazur, 271,515; Mr. Schwartz, 190,290; Mr. Wang, 1,615,608; Mr.
de Vogel, 4,000; Mr. Goldstein, 4,000; Mr. Grasso, 2,000; Mr. Lord,
2,000; and all directors and executive officers as a group,
2,473,211.
<FN>
(2) Includes shares credited to the executives' accounts in the
Company's tax-qualified profit-sharing plan as follows: Mr. Artzt,
597; Mr. Kumar, 8,891; Mr. Mazur, 598; Mr. Schwartz, 596; Mr. Wang,
147; and all executive officers as a group, 12,035.
<FN>
(3) Includes 22,002 shares owned directly by Mr. Wang's wife, an
employee of the Company; 167,847 shares subject to employee stock
options held by Mr. Wang's wife, which are exercisable within 60
days after June 13, 1995; and 168 shares credited to the account of
Mr. Wang's wife in the Company's tax-qualified profit-sharing plan.
Mr. Wang disclaims beneficial ownership of such shares.
</TABLE>
ITEM 1--ELECTION OF DIRECTORS
NOMINEES
It is proposed that the eight persons named below will be elected at
the 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, Willem F.P. de Vogel, Irving Goldstein, Richard A. Grasso,
Shirley Strum Kenny, Sanjay Kumar, Edward C. Lord and Charles B. Wang to
serve as directors until the next Annual Meeting of Stockholders and
until their successors shall have been duly elected and qualified. Each
of the nominees now serves as a director of the Company. 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
anticipate), 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 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.
<TABLE>
<CAPTION>
Director
Age Since
----- --------
<S> <C> <C>
Russell M. Artzt (1) 48 1980
Executive Vice President-Research
and Development since April 1987 and
the Senior Development Officer
of the Company since 1976.
Willem F.P. de Vogel (2) (3) 44 1991
President of Three Cities Research,
Inc., a 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 MLX Corp.
<PAGE>
<CAPTION>
Director
Age Since
----- --------
<S> <C> <C>
Irving Goldstein (2) (3) 57 1990
Director General and Chief Executive
Officer of INTELSAT, an international
satellite telecommunications company,
since February 1992. He was
Chairman and Chief Executive Officer
of Communications Satellite Corporation
from October 1985 to February 1992
and President from May 1983 to
October 1985, and was a director
from May 1983 to February 1992.
Richard A. Grasso (3) 48 1994
Chairman and Chief Executive
Officer of the 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) 60 1994
President of the State
University of New York at
StonyBrook 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) 33 1994
President and Chief Operating
Officer since January 1994.
He was 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.
Edward C. Lord (2) 45 1988
Senior Vice President of IBJ
Schroder Bank & Trust Company, a
commercial banking institution
in New York City, since 1987 and
Vice President since 1978. He
has managed corporate banking
and personal lending activities
for IBJ Schroder Bank & Trust
Company for more than twelve
years.
Charles B. Wang (1) 50 1976
Chief Executive Officer of the
Company since 1976 and Chairman
of the Board since April 1980.
He is also a director of Symbol
Technologies, Inc.
- -----------------
<FN>
(1) Member Executive Committee.
<FN>
(2) Member Audit Committee.
<FN>
(3) Member Compensation Committee.
<FN>
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE
NOMINEES LISTED ABOVE.
</TABLE>
<PAGE>
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During the Company's fiscal year ended March 31, 1995, 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 seventy-five percent
(75%) of the Board meetings and meetings of the Board committees on
which he or she served except for Shirley Strum Kenny who was not a
member of the Board of Directors or the Audit Committee for the entire
fiscal year. The Company has a standing Executive Committee, Audit
Committee and Stock Option and Compensation Committee, but does not have
a standing nominating committee, the functions of which are performed by
the entire Board.
The Stock Option and Compensation Committee of the Board (the
"Compensation Committee") consists of three non-employee directors,
Irving Goldstein, Willem F.P. de Vogel and Richard A. Grasso. During
fiscal year 1995, the Compensation Committee met three times. A
subcommittee consisting of Messrs. de Vogel and Goldstein met once
during fiscal 1995 to determine performance-based incentive compensation
and stock grants under the Company's 1994 Annual Incentive Compensation
Plan and 1995 Key Employee Stock Ownership Plan. The Compensation
Committee also has the power to prescribe, amend and rescind rules
relating to the 1991 Stock Incentive Plan, 1981 Incentive Stock Option
Plan, 1987 Non-Statutory Stock Option Plan and 1993 Stock Option Plan
for Non-Employee Directors, 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 "Compensation Committee Report on
Executive Compensation."
The Audit Committee of the Board consists of four non-employee
directors, Willem F.P. de Vogel, Irving Goldstein, Shirley Strum Kenny
and Edward C. Lord. 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 two times during fiscal year 1995.
The Audit Committee has recommended the selection of Ernst & Young LLP
as independent auditors for the fiscal year ending March 31, 1996.
Compensation for non-employee directors is set at $30,000 per year. In
addition, each non-employee director receives $500 for each meeting of
the Board of Directors or any of its committees he attends in person,
provided, however, that if a Board meeting and a committee meeting take
place on the same day only one attendance fee is paid for that day.
Directors who are also employees of the Company or its subsidiaries
receive no compensation for serving as directors or as members of board
committees.
Under the Company's 1993 Stock Option Plan for Non-Employee Directors,
non-employee directors are automatically awarded options to acquire up
to 2,000 shares of the Company's Common Stock per year depending on the
Company's attainment of specific return on equity objectives. Pursuant
to such Plan, the exercise price of such options is an amount equal to
the fair market value of the shares covered by such options on the date
of grant.
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
Compensation Committee of the Company's Board of Directors and the Stock
Performance Graph set forth below in accordance with Securities Exchange
Commission requirements, shall not be incorporated by reference into any
such filings.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL
Decisions as to certain compensation of the Company's executive
officers are made by the Compensation Committee (the "Committee") of the
Company's Board of Directors, none of whom are employees of the Company.
At the Company's fiscal year end, the members of the Committee were
Willem F.P. de Vogel, Irving Goldstein and Richard A. Grasso. During the
fiscal year ended March 31, 1995, the Committee met three times. A
subcommittee (the "Subcommittee") consisting of Messrs. de Vogel and
Goldstein, who are defined as "outside directors" for purposes of
Section 162(m) of the Internal Revenue Code, as amended (the "Code") was
formed to act upon performance-based executive compensation and met once
during the year.
COMPENSATION POLICIES
The Committee's executive compensation policies are designed to
attract and retain executives capable of leading the Company in a
<PAGE>
rapidly evolving computer software marketplace and to motivate such
executives to maximize profitability and stockholder value. The
Committee has designed the Company's Comprehensive Executive
Compensation Plan 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 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 compensation based on achievement of predetermined
individual and Company performance targets. The Company's 1994 Annual
Incentive Compensation Plan, which is administered by a Subcommittee
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
determined for each executive officer prior to the commencement of each
fiscal year. The Subcommittee has also established certain caps on the
annual incentive compensation that can be earned by the executive
officers if the Company's growth in earnings per share from the prior
fiscal year is less than projected. The Subcommittee 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 Company's Common Stock subject
to certain holding restrictions.
Long-term Equity Participation. The 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 stockholder's value. To this end, the
Committee grants to key executives stock options which vest (i.e.,
become exercisable) over a five-year period 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 Company's 1991 Stock Incentive Plan have a term of 10 years
from the date of grant, and subject to the above vesting restrictions,
may be exercised at any time during such term. The Committee has
authorized, subject to shareholder approval, the grant to certain key
employees of shares of Common Stock under the proposed 1995 Key Employee
Stock Ownership Plan. These grants are non-transferrable and subject to
substantial risk of forfeiture before the end of fiscal year 2000, if
certain performance objectives are not attained, and further subject to
significant limitations on transfer for seven years thereafter.
Benefits. The benefits available to executive officers are the same as
those offered to all full-time employees. In general, they are the
standard protection against financial catastrophe that can result from
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 Company's CASH
Plan, to the extent permitted under the CASH Plan and applicable
Employment Retirement Income Security Act of 1974, as amended ("ERISA")
and the Code. The Company's medical, dental, and disability plans and
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
After consulting with the Company's independent compensation advisors,
the Committee determined each component of Mr. Wang's fiscal year 1995
compensation as follows.
Base Salary. Mr. Wang's base salary of $1,000,000 was not increased
from that of the two previous fiscal years.
Annual Incentives. The Company's fiscal year 1995 performance produced
a return on average stockholders' equity of 44.9%, excluding a write-off
of purchased research and development associated with The ASK Group,
Inc. acquisition. Mr. Wang's total performance-based at risk
compensation calculated under the 1994 Annual Incentive Compensation
Plan was $7,641,625, or 88% of his total compensation. Pursuant to this
plan for fiscal year 1995, Mr. Wang's award was calculated as 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.
Forty percent of Mr. Wang's target incentive compensation award under
this formula was awarded by the Subcommittee in Company Common Stock
which is restricted from transfer for two years from the date of award.
Long-term Equity Participation. The Committee granted Mr. Wang 353,250
incentive and non-statutory options under the Company's 1991 Stock
Incentive Plan. The Committee also authorized, subject to shareholder
approval, the grant to Mr. Wang of 1,200,000 shares of Common Stock
under the 1995 Key Employee Stock Ownership Plan. As described in such
plan, these shares are non-transferable and subject to substantial risk
<PAGE>
of forfeiture before the end of fiscal year 2000, if certain performance
objectives are not attained, and further subject to significant
limitations on transfer for seven years thereafter. Mr. Wang has agreed
to restrict the transfer of 2,400,000 shares of Common Stock which he
currently owns. Such restrictions will lapse concomitant with those on
shares granted under the 1995 Key Employee Stock Ownership Plan.
Benefits. Mr. Wang received matching and discretionary contributions
to the Company's benefit plans of $26,425 in fiscal year 1995. He was
also eligible for benefits under the Company's medical, dental, and
disability plans consistent with those available to other full-time
employees.
OTHER EXECUTIVE OFFICERS
The compensation plans of the Company's other executive officers,
including the four persons shown in the Summary Compensation Table
below, provide for a base salary, annual incentive cash compensation
based on a fixed percentage of the Company's aggregate net income over
and above a predetermined return on average stockholders' equity for the
fiscal year, long-term equity grants under the Company's 1991 Stock
Incentive Plan and access to the Company's standard employee benefit
plans. For fiscal 1995, the Subcommittee allocated an aggregate of
approximately 2.5% of the Company's net income in excess of a specified
equity cost to the four below named executive officers, other than the
Chief Executive Officer. Forty percent of this amount was awarded in the
form of Company Common Stock which is restricted from transfer for two
years from date of award. The Committee has authorized, subject to
shareholder approval, the grant to two of the executive officers of
shares of Common Stock under the proposed 1995 Key Employee Stock
Ownership Plan. These shares are non-transferrable and subject to
substantial risk of forfeiture before the end of fiscal year 2000, if
certain performance objectives are not attained, and further subject to
significant limitations on transfer for seven years thereafter.
In addition, approximately sixty percent of the Company's
approximately 7,550 employees, including the Chief Executive Officer and
the four executive officers referred to in the tables below and four
non-employee directors, were granted options to purchase an aggregate of
2,710,000 shares of the Company's Common Stock. This grant represents
approximately 1.7% of the Company's total shares outstanding at March
31, 1995. The Committee believes that a significant vested interest
demonstrated by their ownership of stock and stock options is a strong
incentive to align the interests of all directors, employees, and
particularly the executive officers, with the interests of the
stockholders.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE COMPANY'SBOARD OF
DIRECTORS:
Willem F.P. de Vogel
Irving Goldstein
Richard A. Grasso
<PAGE>
COMMON SHARE PRICE PERFORMANCE GRAPH
The following graph compares cumulative total return of the Company's
Common Stock with the Standard and Poor's 500 Index and the Standard and
Poor's Computer Software and Services Index during the fiscal years 1990
through 1995* assuming the investment of $100 on April 1, 1990 and the
reinvestment of dividends.
(Line graph of data table shown below)
<TABLE>
TOTAL RETURN DATA
<CAPTION>
3/31/90 3/31/91 3/31/92 3/31/93 3/31/94 3/31/95
<S> <C> <C> <C> <C> <C> <C>
Computer Associates 100 65 114 177 229 443
S&P 500 Index 100 114 127 146 149 172
S&P Computer Software
and Services Index** 100 91 118 156 175 236
<FN>
Source: Standard and Poor's Compustat Custom Business Unit
<FN>
* The Company's fiscal years ended March 31 of each year.
<FN>
** The Standard and Poor's Computer Software and Services Index is
composed of the following companies:
Autodesk Inc. Lotus Development Corporation
Automatic Data Processing, Inc. Microsoft Corporation
Ceridian Corporation Novell Inc.
Computer Associates International,Inc. Oracle Systems Corporation
Computer Sciences Corporation Shared Medical Systems Corporation
First Data
</TABLE>
<PAGE>
COMPENSATION AND OTHER INFORMATION CONCERNING EXECUTIVE OFFICERS
The following table sets forth the cash and non-cash compensation for
the Chief Executive Officer and each of the four next most highly
compensated executive officers of the Company for each of the fiscal
years ended March 31, 1995, 1994 and 1993, respectively.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term
Compensation Awards
Name and Fiscal Annual Compensation Restricted Stock Option All Other
Principal Position Year Salary Incentive(1) Awards ($)(2) Awards(#)(3) Compensation(4)
- -------------------- ------ ------ ----------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Charles B. Wang 1995 $1,000,000 $4,585,000 $3,056,625 353,250 $38,425
Chairman of the Board 1994 $1,000,000 $5,729,000 303,900 $30,942
and Chief Executive 1993 $1,000,000 $2,700,000 306,950 $19,271
Officer
Sanjay Kumar 1995 $ 650,000 $2,667,000 $1,777,747 253,250 $38,425
President and Chief 1994 $ 400,000 $1,690,000 203,900 $31,686
Operating Officer 1993 $ 300,000 $ 632,500 156,950 $17,443
Russell M. Artzt 1995 $ 550,000 $ 954,000 $ 635,787 183,250 $38,425
Executive Vice 1994 $ 400,000 $1,195,000 153,900 $32,177
President-Research 1993 $ 300,000 $ 582,500 106,950 $17,297
and Development
Arnold S. Mazur 1995 $ 450,000 $ 523,000 $ 348,472 --- $38,425
Executive Vice 1994 $ 400,000 $ 880,000 153,900 $31,686
President-Sales 1993 $ 300,000 $ 582,500 106,950 $17,463
Peter Schwartz 1995 $ 450,000 $ 488,000 $ 325,197 128,250 $38,425
Senior Vice 1994 $ 400,000 $ 530,000 103,900 $30,565
President-Finance and 1993 $ 300,000 $ 307,500 56,590 $16,567
Chief Financial Officer
<FN>
(1) All incentive compensation shown for fiscal years 1994 and 1995 was
awarded under the 1994 Annual Incentive Compensation Plan.
<FN>
(2) The Compensation Committee of the Board of Directors has authorized,
subject to shareholder approval, the grant of shares of Common Stock
under the 1994 Annual Incentive Compensation Plan, as amended.
<FN>
(3) All options granted to such executive officers of the Company 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.
<FN>
(4) Consists of Company contributions to the Company's benefit plans,
and for fiscal year 1995 a non-reimbursed travel allowance of
$12,000 for each executive officer.
</TABLE>
<PAGE>
The following tables summarize option grants and exercises during the
fiscal year ended March 31, 1995 to or by the executive officers named
in the Summary Compensation Table above, and the value of the options
held by such person on March 31, 1995.
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>
Granted Percent of Exercise Expiration Potential Appreciation
Name Options Total Grants Price Date 5%(1) 10%(2)
- ---------- ------- ------------ ----- ---- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
C.B. Wang 353,250 13.0% $30.625 May 12, 2004 $ 6,803,559 $ 17,241,554
S. Kumar 253,250 9.3% $30.625 May 12, 2004 $ 4,877,569 $ 12,360,718
R.M. Artzt 183,250 6.8% $30.625 May 12, 2004 $ 3,529,376 $ 8,944,132
A.S. Mazur --- --- $30.625 May 12, 2004 $ --- $ ---
P. Schwartz 128,250 4.7% $30.625 May 12, 2004 $ 2,470,082 $ 6,259,273
All Optionees 2,600,000 95.9% $30.625 May 12, 2004 $ 50,075,734 $ 126,901,744
100,000 3.7% $53.125 January 18, 2005 $ 1,925,990 $ 4,880,836
10,000 .4% $41.000 August 18, 2004 $ 192,599 $ 488,084
All Stockholders(3) N/A N/A N/A N/A $5,979,646,359 $15,153,597,904
- -----------------------
<FN>
(1) Realizable net value if Company stock were to increase in value five
percent (5%) per year for the ten year term of the options.
<FN>
(2) Realizable net value if Company stock were to increase in value ten
percent (10%) per year for the ten year term of the options.
<FN>
(3) Realizable increase in value to all stockholders if all outstanding
shares of Company stock (160,137,850 at March 31, 1995) were to
increase in value five percent (5%) or ten percent (10%) per year
from its March 31, 1995 value for ten consecutive years.
</TABLE>
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
Number of Net Value of Unexercised
Unexercised Options In-The-Money Options
Shares Acquired/ Value at March 31, 1995 at March 31, 1995(3)
Name Exercised Realized(1) Exercisable(2) Unexercisable Exercisable(2) Unexercisable
- --------- --------- ----------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
C.B. Wang 1,473,308 1,080,622 $68,967,058 $41,329,071
S. Kumar 87,807 $3,140,440 20,750 607,123 $ 1,037,676 $21,497,810
R.M. Artzt 136,400 $4,721,913 295,547 497,153 $13,772,509 $18,482,054
A.S. Mazur 8,000 $ 478,500 227,040 271,400 $10,872,796 $11,012,211
P. Schwartz 5,600 $ 249,550 150,562 293,628 $ 7,196,053 $10,276,908
- ------------------
<FN>
(1) Market value of shares purchased at exercise date less aggregate
option exercise price.
<FN>
(2) All option grants vest over a five year period: 10% on the first
anniversary; 15% the second anniversary; 20% the third anniversary;
25% the fourth anniversary; and 30% the fifth anniversary.
<FN>
(3) Pro forma net valuation based on March 31, 1995 closing price
($59.375) less fair market price at the grant date.
</TABLE>
<PAGE>
EMPLOYEES' PROFIT SHARING PLANS
The Company maintains a profit sharing plan, the Computer Associates
Savings Harvest Plan ("CASH Plan"), for the benefit of employees of the
Company. The CASH Plan is intended to be a qualified plan under Section
401(a) of the 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 participants in the CASH
Plan, 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 annual 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. 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 and employees of the Company
appointed by the Board of Directors. All employees who have been in the
employ of the Company for at least one year are eligible to participate.
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 1995, the Company contributed $26,425 for each of
the accounts of Messrs. Wang, Kumar, Artzt, Mazur and Schwartz, and
$19,980,174 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 on page 9.
STOCK OPTION PLANS
During fiscal year 1995, the Company maintained the 1981 Incentive
Stock Option Plan (the "1981 Plan") which provides for the issuance to
key employees of incentive stock options to purchase up to a maximum of
8,000,000 shares of Common Stock of the Company. 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 1981 Plan has
been administered by the Compensation Committee which determined the
persons to whom incentive stock options were granted, the number of
shares subject to such options and the terms of the stock options.
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. Incentive
stock options may be granted for terms of up to ten years. The option
price of an incentive stock option may not be less than the market price
of the shares of Common Stock on the date the option is granted.
The Company's 1991 Stock Incentive Plan (the "1991 Plan") provides
that up to an aggregate of 10,000,000 shares (the proposed Amendment
would increase this amount to 20,000,000 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 per share exercise price of options and SARs granted under the 1991
Plan may not be less than 100% of the Fair Market Value (as defined
below) of a share of the Company's Common Stock on the date of grant.
Shares of Common Stock acquired under the 1991 Plan 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).
<PAGE>
The 1991 Plan is administered by the Compensation Committee of the
Board of Directors, which 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 Compensation Committee also
has the power to interpret the 1991 Plan and to determine the terms,
exercise price and form of exercise payment for each option granted
under the 1981 and 1991 Plans, including whether such option is intended
to qualify as an incentive stock option under the Code.
The Company also maintains the 1987 Non-Statutory Stock Option Plan
(the "1987 Plan") pursuant to which non-statutory options to purchase up
to 5,000,000 shares of Common Stock of the Company 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 twelve years. The Compensation
Committee of the Board of Directors also administers the 1987 Plan.
The 1993 Stock Option Plan for Non-Employee Directors (the "1993
Plan") provides for non-statutory options to purchase up to 100,000
shares of Common Stock of the Company to be available for grant to each
member of the Board of Directors who is not otherwise an employee of the
Company. Pursuant to the 1993 Plan, the exercise price shall be the fair
market value of the shares covered by the option at the date of grant.
The 1993 Plan is administered by the Compensation Committee of the Board
of Directors.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more
than ten percent of a registered class of the Company's equity
securities, to file with the Securities and Exchange Commission ("SEC")
and the New York Stock Exchange ("NYSE") initial reports of ownership
and reports of changes in ownership of Common Stock and other equity
securities of the Company. Officers, directors and greater than ten
percent 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 certain reporting
persons, during the fiscal year ended March 31, 1995, the Company
believes that each of its officers, directors and greater than ten
percent beneficial stockholders complied with all applicable filing
requirements.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Richard A. Grasso, a director of the Company and a member of the
Compensation Committee is the Chairman and Chief Executive Officer of
the New York Stock Exchange (the "NYSE"). The Company's Common Stock has
been listed and traded on the NYSE since September 1986, and in fiscal
year 1995, the Company paid listing fees totaling $156,801 to the NYSE.
Although Mr. Grasso is a "disinterested director" under Rule 16b-3 of
the 1934 Securities Exchange Act (the "Act"), some interpretations of
Section 162(m) of the Code would not consider Mr. Grasso to be an
"outside director" for purposes of determining or recommending executive
compensation levels. The Company does not consider this to be a valid
distinction, but has established a two member Subcommittee (not
including Mr. Grasso) of the Compensation Committee which has and will
decide and recommend any compensation plans likely to exceed the
$1,000,000 Section 162(m) threshold.
CERTAIN TRANSACTIONS
Mr. Anthony W. Wang, a former President and Chief Operating Officer of
the Company, and a brother of Charles B. Wang, Chairman and CEO, has an
agreement to remain with the Company in a non-executive capacity until
March 31, 1997. During this term, Mr. Wang will assist the Company in
the prosecution and defense of certain litigation and will perform such
other advisory and consulting duties as may be reasonably requested from
time to time by the Company's Chief Executive Officer. For these
services and in consideration of a five-year non-competition covenant,
the Company agreed to pay Mr. Wang $500,000 per year. Under his
agreement Mr. Wang will not be entitled to receive additional stock
option grants, but stock options granted to Mr. Wang during his tenure
as an officer of the Company will continue to vest and be exercisable.
<PAGE>
ITEM 2--AMENDMENT TO THE COMPANY'S 1991 STOCK INCENTIVE PLAN
On June 24, 1991, the Board of Directors of the Company ratified and
approved the Computer Associates International, Inc. 1991 Stock
Incentive Plan (the "1991 Plan"). The stockholders of the Company voted
to approve the 1991 Plan on August 14, 1991. On May 17, 1995, the
Company's Board of Directors voted to amend Paragraph 6.1(a) of the 1991
Plan, to increase the number of shares of Common Stock reserved and
available for issuance under Options and SAR's granted under this plan
from 10,000,000 shares to 20,000,000 shares (the "1991 Plan Amendment").
At March 31, 1995, 4,086,925 shares were available for future grants.
The 1991 Plan Amendment is being submitted for stockholder approval at
the meeting. A description of the 1991 Plan, as amended, is set forth on
page 11 under the caption "Stock Option Plans."
The 1991 Plan was established in order to promote the growth and
profitability of the Company and its subsidiaries and to provide
officers and key employees of the Company and its subsidiaries with an
incentive to achieve long-term corporate objectives, to attract and
retain key employees of outstanding competence, and to provide such key
employees with an opportunity to acquire an equity interest in the
Company. The number of options granted to the Company's Chief Executive
Officer, each of the four next most highly compensated executive
officers and all employees as a group in the most recent fiscal year
ended March 31, 1995, and the dollar value of such grants (based upon
assumed increases in the value of the Common Stock), in each case are
depicted in the table of Option/SAR Grants In Last Fiscal Year shown on
page 10.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE
AMENDMENT TO THE COMPANY'S 1991 STOCK INCENTIVE PLAN.
ITEM 3--AMENDMENT TO THE COMPANY'S 1994 ANNUAL INCENTIVE PLAN
On May 25, 1994, the Board of Directors of the Company ratified and
approved the Computer Associates International, Inc. 1994 Annual
Incentive Compensation Plan (the "Incentive Plan") which had been
previously adopted by the Subcommittee of the Compensation Committee of
The Board of Directors (the "Committee") on March 31, 1994. The
stockholders of the Company voted to approve the Incentive Plan on
August 10, 1994. An Amendment to the Incentive Plan for certain key
employees was adopted by the Committee on March 24, 1995 and approved by
the Board of Directors of the Company on May 17, 1995 ("the Amendment").
The Amendment, which amends the Incentive Plan to permit the Committee
to pay all or a portion of the Annual Incentive award in Common Stock is
being submitted for stockholder approval at the meeting.
The Incentive Plan was established as part of an initiative to
document and codify the Company's existing management compensation
structure (described above under "Compensation Committee Report on
Executive Compensation"), and to provide guidelines under which the
Committee will determine and award future incentive compensation to
eligible management employees of the Company. Prior to the start of each
fiscal year, the Committee identifies those key executives whose
responsibilities and performance most directly affect attainment of the
Company's larger objectives ("Participants"). The individuals covered
and the amounts paid under this Incentive Plan in the most recent fiscal
year ended March 31, 1995 are depicted in the Summary Compensation Table
shown on page 9.
The Incentive Plan was developed as a result of a detailed review by
the Company's senior management and the Committee of all aspects of the
Company's compensation structure. Such review was aided by an
independent management consultant's comprehensive study of the
compensation practices of other companies in related businesses. Senior
management and the Committee also considered the impact of the enactment
of Section 162(m) of the Code, which limits in certain circumstances the
deductibility of compensation in excess of $1 million paid to certain
executive officers.
DESCRIPTION OF THE INCENTIVE PLAN
The material terms of the incentive plan are summarized below. Such
summary is qualified in its entirety by reference to the complete text
of the Incentive Plan, as amended, attached as Exhibit A to this Proxy
Statement.
Under the Incentive Plan, the Participants will be eligible to receive
an Annual Incentive award based upon the attainment and certification of
performance goals established by the Committee.
<PAGE>
The Committee shall adopt these performance goals in advance of each
fiscal year (or in advance of such other date as may be permitted under
Section 162(m) of the Code). Each Participant will be assigned a target
Annual Incentive award ("Target") for such fiscal year equal to a
specific percentage of the net income of the Company less 15%, or such
other threshold as may be established by the Committee, of the average
stockholders' equity for the Company on a consolidated basis. To the
extent that the Company's annual performance is better or worse than the
levels established by the Committee, each participant's actual Annual
Incentive will be greater or less than the Target for that fiscal year.
The Committee will also adopt a mathematical formula or matrix for the
fiscal year which indicates the extent to which the Annual Incentive
will be reduced if the Company's net income per share does not exceed
the prior fiscal year's net income per share. With respect to the
Company's current fiscal year 1996, such determinations were made by the
Committee at a meeting held on March 31, 1995, in accordance with rules
issued by the Internal Revenue Service.
The Committee believes that stock ownership by management is
beneficial in aligning management's and stockholders' interest in the
enhancement of stockholder value. To this end, the Committee has adopted
the Amendment, which provides that the Board of Directors has the
discretion to pay all or a portion of the Annual Incentive award earned
by Participants in Common Stock rather than in cash. Subject to approval
of the Amendment, the Committee has resolved that, for fiscal year 1995,
the Company will pay 40% of the Annual Incentive award earned by certain
of the Participants in Common Stock rather than in cash. The
substitution of Common Stock for cash under the Incentive Plan for
fiscal year 1995 will be based on the closing price on the New York
Stock Exchange of the Common Stock on March 31, 1995. Any stock awarded
pursuant to the Amendment will not be registered under the Securities
Act of 1933 or applicable State securities laws, and will not be
transferable by the recipients for two years from the date of issuance
of the stock to them.
Except as the Committee may otherwise in its sole discretion provide,
all Target awards under the Incentive plan are contingent upon the
Participant remaining in the employ of the Company or its subsidiaries.
The Incentive Plan may be amended or terminated by the Board of
Directors of the Company at any time, provided that bonuses earned but
unpaid are paid promptly after such termination. Payment of any awards
under the Incentive Plan will be calculated and approved by the
Committee prior to payment.
The Incentive Plan, in conjunction with the Base Salary, Long-term
Equity Participation, the 1995 Plan (defined below) and the benefits
programs is intended to align the Company's compensation standards with
those of comparable companies in related businesses. In its discretion
the Committee intends to establish Targets under the Incentive Plan
which, if achieved, will result in total compensation for the Company's
executives that will attract and retain high achieving performers. In
addition, the Board of Directors believes that the Incentive Plan will
continue to motivate such executives to achieve maximum profitability
and stockholder returns.
As discussed above, Section 162(m) of the Code imposes limits on the
ability of public companies to deduct compensation in excess of $1
million paid to certain key employees in certain circumstances. If
stockholder approval of the Amendment is obtained, then all incentive
compensation awarded under the Incentive Plan will continue to qualify
for an exception to Section 162(m) of the Code relating to
performance-based compensation and, therefore, will be deductible by the
Company for Federal income tax purposes.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE
AMENDMENT TO THE COMPANY'S 1994 ANNUAL INCENTIVE PLAN.
ITEM 4--THE 1995 KEY EMPLOYEE STOCK OWNERSHIP PLAN
On May 17, 1995, the Board of Directors of the Company ratified and
approved the Computer Associates' 1995 Key Employee Stock Ownership Plan
(the "1995 Plan"), which had been previously adopted by the Committee on
March 31, 1995. The 1995 Plan is being submitted for stockholder
approval at the meeting.
The purpose of the 1995 Plan is to promote the creation of stockholder
value by encouraging, recognizing and rewarding sustained outstanding
individual performance by certain key employees who are largely
responsible for the management, growth and protection of the business.
The Committee believes that stockholder value will also be enhanced by
the retention of these key individuals.
<PAGE>
DESCRIPTION OF THE 1995 PLAN
The following is a summary of certain of the provisions of the 1995
Plan; the summary is not, however, intended to be complete, and is
qualified by reference to the complete text of the 1995 Plan attached as
Exhibit B to this Proxy Statement.
Under the 1995 Plan, the Committee is authorized to grant, subject to
the attainment of certain Common Stock price objectives, up to 6,000,000
shares of the Company's Common Stock (the "Common Stock") to three key
executives. The Committee has initially authorized, subject to
shareholder approval, the grant of 2,000,000 shares of Common Stock (the
"Initial Grant") as described below and may grant up to an additional
4,000,000 shares (the "Additional Grants") based on the price per share
of the Common Stock achieving target levels over the next five years.
The Initial Grant and Additional Grants are non-transferable and subject
to significant risk of forfeiture during the next five years (through
the end of the Company's fiscal year 2000), and further subject to
significant limitations on transfer during the seven years following
vesting. In addition to the transfer restrictions imposed on the Initial
Grant and Additional Grants, Mr. Wang has agreed to restrict the
transfer of an additional number of shares which he currently owns equal
to twice the number of shares he received as part of the Initial Grant
which have not been forfeited. These shares will be restricted on the
same terms as the Initial Grant.
The Initial Grants are being made to the CEO and two other key
employees:
<TABLE>
<CAPTION>
Initial Shares
<S> <C>
Charles B. Wang, Chairman and Chief Executive Officer 1,200,000
Sanjay Kumar, President and Chief Operating Officer 600,000
Russell M. Artzt, Executive Vice President--Research 200,000
and Development
The Committee may grant Additional Grants to these individuals if
certain target prices for Common Stock are met in the Company's fiscal
years 1996 through 2000. In general, the targets have been set to
achieve an annual 20% increase in the price per share of the Common
Stock. In each of these years, if the closing price of Common Stock
exceeds target levels on at least 30 trading days, each of the employees
listed above will receive a grant of additional shares of restricted
stock. The maximum possible Additional Grants for the CEO and the two
other key employees are as follows:
</TABLE>
<TABLE>
<CAPTION>
Additional Shares
<S> <C>
Charles B. Wang, Chairman and Chief Executive Officer 2,400,000
Sanjay Kumar, President and Chief Operating Officer 1,200,000
Russell M. Artzt, Executive Vice President--Research 400,000
and Development
</TABLE>
VESTING
The Initial Grant and the Additional Grants made prior to the end of
the Company's fiscal year 2000 will vest (and will no longer be subject
to forfeiture) at the end of fiscal year 2000 if, during that fiscal
year, the closing price on the New York Stock Exchange Composite Tape
(the "NYSE") for the Common Stock exceeds $131.00 per share on at least
60 trading days. In the event the closing price on the NYSE exceeds
$131.00 per share on fewer than 60 trading days but exceeds $105.00 per
share for 60 or more trading days during fiscal year 2000, all
Additional Grants and 60% of the Initial Grants will be forfeited. In
the event the closing price on the NYSE exceeds $105.00 per share on
fewer than 60 trading days but exceeds $75.00 per share on more than 60
trading days during fiscal year 2000, all Additional Grants and 80% of
the Initial Grants will be subject to forfeiture; but if at any time
prior to March 31, 2000, the closing price on the NYSE exceeds $75.00
per share on 60 or more trading days, 20% of the Initial Grant shall
vest, subject to the continued employment of the key employees, as
described in the following paragraph. If the closing price on the NYSE
exceeds $180.00 per share for any 60 trading days within any twelve
month period, the vesting will accelerate to an earlier date.
All stock granted under the 1995 Plan to an executive will be
forfeited if the executive's employment is terminated prior to the fifth
anniversary of the date of the Initial Grant for reasons other than
death or disability. In the event of death or disability, all Initial
Grants and Additional Grants made as to such executive through such date
will immediately vest and will not be subject to the restrictions on
transfer described below.
<PAGE>
TRANSFER
Following the vesting of Common Stock, the shares of stock are subject
to significant transfer restrictions which phase out over seven years.
CHANGE OF CONTROL
In the event of a Change of Control (as defined in the 1995 Plan), any
shares not previously issued as Additional Grants will be issued as
Additional Grants at the time of the Change of Control based on the
price per share or similar valuation realized in the transaction giving
rise to the Change of Control. The Initial Grants and Additional Grants
will immediately vest and the restrictions on transfer will be either
eliminated or reduced to a maximum of one year.
Section 162(m) of the Code imposes limits on the ability of public
companies to deduct compensation in excess of $1 million paid to certain
key employees in certain circumstances. If stockholder approval of the
1995 Plan is obtained, then all incentive compensation awarded under the
1995 Plan will qualify for an exception to Section 162(m) of the Code
relating to performance-based compensation and, therefore, will be
deductible by the Company for Federal income tax purposes.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE
COMPANY'S 1995 KEY EMPLOYEE STOCK OWNERSHIP PLAN.
ITEM 5--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. Ernst & Young LLP
(and its predecessor firm Ernst & Whinney) has been the independent
auditor for the Company since 1980 and has been appointed to serve in
that capacity for the 1996 fiscal year. The Board of Directors will ask
the stockholders to ratify the appointment of this firm as independent
auditors for the Company at the Annual Meeting.
A representative of Ernst & Young LLP will be present at the meeting
and will be available to respond to appropriate questions from
stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPOINTMENT OF
ERNST & YOUNG AS THE COMPANY'S INDEPENDENT AUDITORS.
STOCKHOLDER PROPOSALS
The Company's By-Laws require advance notice for any stockholder
nomination or proposal at an annual or special meeting. In general, all
nominations or proposals must be delivered to the Secretary of the
Company at the address set forth below, not less than 60 days nor more
than 90 days prior to the first anniversary of the preceding year's
annual meeting. Any stockholder desiring a copy of the Company's By-Laws
will be furnished a copy without charge upon written request to the
Secretary of the Company. The submission deadline for stockholder
proposals for consideration for inclusion in proxy materials for the
1996 Annual Meeting is March 9, 1996.
<PAGE>
OTHER BUSINESS
The Board of Directors knows of no other business to be acted upon at
the meeting. However, if any other business properly comes before the
meeting, 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 sign and date
your proxy and return it in the enclosed envelope.
By Order of the Board of Directors
Belden A. Frease
Secretary
Dated: July 7, 1995
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.: MR. BELDEN A. FREASE, SECRETARY, ONE COMPUTER ASSOCIATES
PLAZA, ISLANDIA, NEW YORK 11788-7000.
<PAGE>
EXHIBIT A
COMPUTER ASSOCIATES INTERNATIONAL, INC.1994 ANNUAL INCENTIVE
COMPENSATION PLAN
(As Amended and Restated as of August 9, 1995)
I. ESTABLISHMENT AND PURPOSE.
1.1 Purpose. Computer Associates International, Inc. (the "Company")
established the 1994 Annual Incentive Compensation Plan (the
"Plan"), effective as of April 1, 1994. The Plan is intended to
attract and retain the services of executives who are in a
position to influence the success of the Company by providing an
award based on the Company's financial performance. Further,
this Plan is designed to motivate key executives to increase
shareholder value by improving operating results and efficiently
employing the Company's capital.
1.2 Effective Date. The Plan was effective as of April 1, 1994, and
approved August 10, 1994 by an affirmative vote, of the holders
of a majority of the outstanding shares of the common stock of
the Company, present in person or by proxy and entitled to vote
at the 1994 Annual Meeting of Stockholders. An amendment to
provide for the payment of all or a portion of the Annual
Incentive award (defined below) in Company Common Stock was
effective March 24, 1995 subject to the approval by an
affirmative vote at the 1995 Annual Meeting of Stockholders, or
any adjournment thereof, of holders of a majority of outstanding
shares of the Company's common stock, present in person or by
proxy and entitled to vote at the meeting.
II. Definitions.
2.1 Defined Terms. When used in the Plan, the following terms shall
have the meanings specified below, subject to the provisions of
Sections 3.3 and 3.4.:
2.1.1 "Annual Incentive" means the result of applying the
predetermined individual percentage to the result of
subtracting the annual Cost of Equity from the Company's
Net Income.
2.1.2 "Average Equity" means the "five-point" quarterly average
of the Equity for the Plan Year, the first point being the
preceding year end.
2.1.3 "Board" means the Company's Board of Directors.
2.1.4 "Code" means the Internal Revenue Code of 1986, as
amended.
2.1.5 "Committee" means the Compensation Subcommittee of the
Board of Directors of the Company formed to act on
performance-based compensation for key executives.
2.1.6 "Common Stock" means the Common Stock, $.10 par value per
share, of the Company.
2.1.7 "Cost of Equity" means the Company's imputed equity cost
based on a formula approved by the Committee prior to the
start of the Plan Year.
2.1.8 "Equity" means the Company's reported shareholders' equity
for the Plan Year.
2.1.9 "Net Income'' means the Company's net income, in
accordance with Generally Accepted Accounting Principles,
as reported for the Plan Year, adjusted for cumulative
effects of changes in accounting standards.
2.1.10 "Normal Retirement'' or "Early Retirement'' means any
termination of employment (other than by death or
disability) after a Participant's normal or early
retirement date (as defined in the Company's CASH Plan).
2.1.11 "NYSE" means the New York Stock Exchange Composite
Tape.
2.1.12 "Participant" means as to any Plan Year a key
executive of the Company who is likely to have a
significant impact on the value added performance of the
Company. An employee must be approved as a Participant by
the Committee before the beginning of each Plan Year.
2.1.13 "Plan Year" means the fiscal year commencing April 1,
1994 and ending March 31, 1995 and each succeeding fiscal
year.
<PAGE>
2.1.14 "Target Annual Incentive" means the target incentive
opportunity for an individual, expressed as a percentage
of the projected Value Added for a specific Plan Year. The
schedule of individual Target Annual Incentives shall be
determined by the Committee in accordance with Section
3.2.
2.1.15 "Value Added" means Net Income minus the Cost of
Equity. The Cost of Equity is determined by multiplying
the Company's Average Equity by a percentage fixed by the
Committee.
III. AWARDS AND COMMITTEE DETERMINATIONS
3.1 Opportunity. The Committee shall approve participation in the
Plan and establish a Target Annual Incentive for each
Participant, based on his or her role and responsibilities,
prior to the beginning of each Plan Year.
3.2 Awards. Payment under this Plan will be based on a payout table
adopted by the Committee in writing prior to the start of the
Plan Year. The form of such table will generally remain
unchanged for a period of years; however, the Committee reserves
the right (in its sole discretion) to modify the table, provided
that such modification is done prior to the start of the
applicable Plan Year (or in advance of such other date as may be
permitted under Section 162(m) of the Code). The payout table
will provide 100% of a Participant's Target Annual Incentive if
a certain level of Value Added is achieved, and greater or
lesser awards for Value Added that exceeds or is less than,
respectively, the level at which 100% of Target Annual
Incentives are paid. At the discretion of the Committee, some or
all of a Participant's calculated Annual Incentive may be
awarded in shares of the Company's Common Stock, and will be
based on the NYSE closing price of the Common Stock on the last
day of the Plan Year. The payout table will be further limited
by any pre-established limits or caps based on Company or
individual performance which the Committee has previously
determined, so as not to exceed a maximum of 5% of Net Income
for any Participant in any Plan Year.
3.3 Determination. Prior to the start of any Plan Year, the
Committee shall determine for such Plan Year whether any
significant nonrecurring item (e.g., an acquisition, or the gain
or loss on a divestiture, of a business) will be excluded from
the calculation of Value Added for the Plan Year, as well as any
limitations based on Company or individual performance. Such
determination or limitation shall apply only to events or
performance that have occurred since the adoption of this Plan
or that may occur in the Plan Year.
3.4 Adjustments Prior to Payment. The Committee, in its sole
discretion, may reduce the award for any Participant below the
award that would otherwise be payable in accordance with the
Plan.
3.5 Certification. The Committee shall certify in writing the level
of Value Added achieved and the respective Annual Incentive
amounts earned for the Plan Year prior to payment of awards.
IV. PAYMENT OF AWARDS
4.1 Right to Receive Payment. Any Annual Incentive amounts that may
become due under this Plan shall be made solely from the general
assets of the Company, normally on or before the May 31st next
following the end of the Plan Year during which the award was
earned. Nothing in this Plan shall be construed to create a
trust or to establish or evidence any Participant's claim of any
right other than as an unsecured general creditor with respect
to any payment to which he or she may be entitled.
4.1.1 Employment for Plan Year. If a Participant's employment
with the Company continues for the entire Plan Year, the
Participant shall be entitled to receive full payment of
the award amount determined under Article III for the Plan
Year in accordance with the terms of the Plan.
4.1.2 Retirement, Disability or Death. In the event of death,
Disability or Normal or Early Retirement of a Participant
during a Plan Year, the Committee (in its sole discretion)
will determine on a pro rata basis the amount of the
partial award (if any) to be paid to such Participant (or
to his or her personal representative) for such Plan Year.
Payments will be made in cash at the same time as other
awards to Participants are made for the same Plan Year.
<PAGE>
4.1.3 Resignation or Discharge. If during a Plan Year, a
Participant's employment with the Company terminates by
reason of resignation or discharge, the Committee (in its
sole discretion) will determine on a pro rata basis the
amount of partial award (if any) to be paid to such
participant for such Plan Year. Payments will be made in
cash at the same time as other awards to participants are
made for the same plan year.
4.2 Beneficiaries. Each Participant may designate, in writing and on
such form as the Company may prescribe, one or more
beneficiaries to receive any amount that is payable after the
individual's death. In the event of a Participant's death, any
award that is payable to such Participant shall be paid to his
or her beneficiary or, in the event that no beneficiary has been
designated, to his or her estate.
V. ADMINISTRATION
5.1 Committee. The Plan shall be administered by the Committee or a
subcommittee composed of not less than two independent outside
Directors. No employee or former employee of the Company may
serve on the Committee.
5.2 Rules and lnterpretation. The Committee shall be vested with all
discretion and authority as it deems necessary or appropriate to
administer the Plan and to interpret the provisions of the Plan.
Any determination, decision or action of the Committee in
connection with the construction, interpretation, administration
or application of the Plan shall be final, conclusive and
binding upon all persons.
5.3 Records. The records of the Committee with respect to the Plan
shall be conclusive on all Participants and their beneficiaries
and on all other persons.
5.4 Tax Withholding. The Company shall withhold all applicable taxes
required by law from any payment, including any federal, FICA,
state and local taxes. If, pursuant to this Plan, a Participant
receives same or all of his Annual Incentive award in shares of
Common Stock, the Participant may elect to have the withholding
made from the portion of the Annual Incentive award that is paid
in Common Stock. The reduction in the number of shares of Common
Stock paid to such Participant to satisfy this withholding shall
be equal to the amount of tax withheld divided by the closing
price of the Common Stock on the NYSE on the last day of the
Plan Year, rounded down to the nearest share.
VI. GENERAL PROVISIONS
6.1 Nonassignability. Prior to the time of any payment under the
Plan, a Participant shall have no right by way of anticipation
or otherwise to assign or transfer any interest under this Plan.
6.2 Employment Rights/Participation. The establishment and
subsequent operation of the Plan, including eligibility as a
Participant, shall not be construed as conferring any legal or
other rights upon any Participant or any other individual for
the continuation of his or her employment for any Plan Year or
any other period. The Company expressly reserves the right,
which may be exercised at any time and without regard to when
during a Plan Year or other accounting period 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 this Plan. Being a
Participant in any one Plan Year does not confer any right to be
named as a Participant for any succeeding Plan Year.
6.3 No Individual Liability. No member of the Committee or the
Board, or any officer of the Company, shall be liable for any
determination, decision or action made in good faith with
respect to the Plan or any award made under the Plan.
6.4 Severability; Governing Law. If any particular provision of this
Plan is found to be invalid or unenforceable, such provision
shall not affect the other provisions of the Plan, but the Plan
shall be construed in all respects as if such invalid provision
had been omitted. The provisions of the Plan shall be governed
by and construed in accordance with the laws of the State of New
York.
<PAGE>
VII. AMENDMENT AND TERMINATION
7.1 Amendment and Termination. The Committee may prospectively amend
or terminate the Plan at any time and for any reason; provided,
however, that such amendment shall not relieve the Company of
its obligations under Section 7.2.
7.2 Change in Control of the Company. In the event of a change in
control of the Company (defined as acquisition by any person or
persons of 50% or more of the Company's Common Stock, or a
transaction requiring stockholder approval involving the sale of
all or substantially all of the Company's assets, or the merger
of the Company with or into a previously unaffiliated
corporation), not later than the 20th business day following the
date of such event, the Company shall pay each Participant an
award that is the greater of (i) an award calculated in
accordance with Article III above, but using the period ending
on the day immediately prior to the day a change in control
occurred as the last day of the fiscal year for purposes of
determining Value Added, or (ii) a pro rata amount of each
Participant's Target Annual Incentive for the Plan Year, based
upon the portion of the fiscal year that has elapsed as of the
date of the change in control.
<PAGE>
EXHIBIT B
COMPUTER ASSOCIATES INTERNATIONAL, INC.
1995 KEY EMPLOYEE OWNERSHIP PLAN
I. ESTABLISHMENT AND PURPOSE
1.1 Purpose. Computer Associates International, Inc. (the "Company")
hereby establishes the 1995 Key Employee Stock Ownership Plan
(the "Plan"), effective as of May 25, 1995. The Plan is intended
to encourage, recognize and reward sustained outstanding
individual performance by certain key employees who are largely
responsible for the management, growth and protection of the
business. Further, this Plan is designed to enhance stockholder
value through the retention by the Company of these key
executives.
1.2 Effective Date. The Plan is effective as of May 25, 1995,
subject to the approval by an affirmative vote at the 1995
Annual Meeting of Stockholders, or any adjournment at such
meeting, of the holders of a majority of the outstanding shares
of the common stock of the Company, present in person or by
proxy and entitled to vote at such meeting.
II. DEFINITIONS
2.1 Defined Terms. When used in the Plan, the following terms shall
have the meanings specified below:
2.1.1 "Additional Grants" means any additional grants of Common
Stock to Participants pursuant to Section 3.3 of this
Plan.
2.1.2 "Board" means the Company's Board of Directors.
2.1.3 "Change in Control of the Company" means any of the
following: (i) the acquisition by any person or persons of
50% or more of the Company's Common Stock, (ii) a
transaction requiring stockholder approval involving the
sale or transfer of all or substantially all of the
Company's assets, or (iii) the merger of the Company with
or into a previously unaffiliated corporation.
2.1.4 "Committee" means the Compensation Subcommittee of the
Board formed to act on performance-based compensation for
key executives.
2.1.5 "Common Stock" means the Common Stock of the Company.
2.1.6 "Initial Grant" means the initial grant of Common Stock to
Participants pursuant to Section 3.2 of this Plan.
2.1.7 "Normal Vesting Date" means March 31, 2000.
2.1.8 "NYSE" means the New York Stock Exchange Composite Tape.
2.1.9 "Participant" means as to any Plan Year each of Charles B.
Wang, Sanjay Kumar and Russell M. Artzt.
2.1.10 "Plan Year" means the fiscal year commencing April 1,
1995 and ending March 31, 1996 and each succeeding fiscal
year up to and including the fiscal year commencing April
1, 1999 and ending March 31, 2000.
III. AWARDS AND COMMITTEE DETERMINATIONS
3.1 Authorization. The Committee is authorized to grant up to
6,000,000 shares of Common Stock to the Participants.
<PAGE>
3.2 Initial Grant. The Committee has initially authorized, subject
to shareholder approval, the grant of 2,000,000 shares of Common
Stock to the Participants in the following percentages:
<TABLE>
<CAPTION>
Participant %
<S> <C>
Charles B. Wang 60
Sanjay Kumar 30
Russell M. Artzt 10
3.3 Additional Grants. Unless granted earlier pursuant to Section
4.4 of this Plan, at the end of each Plan Year, the Committee
shall make Additional Grants of up to the lesser of (i)
4,000,000 less the cumulative number of Additional Grants for
prior Plan Years, and (ii) the amount corresponding to the
highest target price set forth in the table below that was
achieved by the closing price of the Common Stock on the NYSE on
at least 30 trading days during the Plan Year:
</TABLE>
<TABLE>
<CAPTION>
Plan Year Number of Shares Target Price
<S> <C> <C>
1996 800,000 75
1,600,000 90
2,400,000 110
3,200,000 130
4,000,000 155
1997 800,000 90
1,600,000 110
2,400,000 130
3,200,000 155
1998 800,000 110
1,600,000 130
2,400,000 155
1999 800,000 130
1,600,000 155
2000 800,000 155
</TABLE>
The target price shall be appropriately adjusted to reflect any
stock dividends, stock splits, recapitalization, reorganization,
merger, consolidation, split-up, combination or other similar
transactions during the Plan Year. Additional Grants shall be
made to the Participants in the percentages set forth in Section
3.2 of this Plan.
3.4 Certification. The Committee shall certify in writing the target
level exceeded and the grants of Common Stock made for the Plan
Year prior to the making of the awards.
<PAGE>
IV. VESTING AND FORFEITABILITY
4.1 Termination. Subject to Section 4.4 of this Plan, if, prior to
March 31, 2000, a Participant's employment with the Company
terminates for reasons other than death or disability, all
Common Stock granted to the Participant pursuant to this Plan
shall be forfeited.
4.2 Death or Disability. In the event of the death or disability of
a Participant prior to the Normal Vesting Date, the Initial
Grant and any Additional Grants made to the Participant shall
immediately vest and shall not be subject to the restrictions on
transfer set forth in Article V of this Plan.
4.3 Certain Target Level Exceeded. Unless sooner vested under
Sections 4.2 or 4.4 of this Plan:.
4.3.1 The Initial Grant and any Additional Grants shall vest,
and shall no longer be subject to forfeiture, if any time
during the twelve-month period ending on the Normal
Vesting Date, the closing price of the Common Stock on the
NYSE exceeds $131.00 per share on at least 60 trading
days.
4.3.2 If, at any time during the twelve-month period ending on
the Normal Vesting Date, the closing price of the Common
Stock on the NYSE exceeds $131.00 per share on fewer than
60 trading days but exceeds $105.00 per share on 60 or
more trading days, (i) 100% of any Additional Grants and
60% of the Initial Grant shall be forfeited and (ii) 40%
of the Initial Grant shall vest, and shall no longer be
subject to forfeiture.
4.3.3 If, at any time during the twelve-month period ending on
the Normal Vesting Date, the closing price of the Common
Stock on the NYSE exceeds $105.00 per share on fewer than
60 trading days but exceeds $75.00 per share on 60 or more
trading days, (i) 100% of the Additional Grant and 80% of
the Initial Grant shall be forfeited and (ii) 20% of the
Initial Grant shall vest, and shall no longer be subject
to forfeiture; but if at any time prior to March 31, 2000,
the closing price of the Common Stock on the NYSE exceeds
$75.00 per share on 60 or more trading days, 20% of the
Initial Grant shall vest and, subject to Section 4.1,
shall no longer be subject to forfeiture.
4.4 Early Vesting. Notwithstanding Section 4.3, the Initial Grant
and any Additional Grants, including those made in accordance
with this Section 4.4, shall immediately vest, and shall no
longer be subject to forfeiture pursuant to either Section 4.1
of this Plan or Section 4.3 of this Plan, on the first day on or
before the Normal Vesting Date that the closing price of the
Common Stock on the NYSE has exceeded $180.00 per share for 60
trading days within any preceding twelve-month period. Any
Additional Grants not made before early vesting occurs pursuant
to this Section 4.4 shall be made at the end of the Plan Year in
which such early vesting occurs.
4.5 Beneficiaries. Each Participant may designate, in writing and on
such form as the Company may prescribe, one or more
beneficiaries to receive the Common Stock that vests under this
Plan upon the death of the Participant. In the event of the
death of a Participant, any Common Stock that vests pursuant to
Section 4.2 of this Plan shall be awarded to his beneficiary or,
in the event that no beneficiary has been designated, to his
estate.
V. TRANSFER RESTRICTIONS
5.1 In General. Except as provided in Section 4.2 of this Plan, the
shares of Common Stock granted to Participants under this Plan
are subject to the transfer restrictions set forth in this
Section 5.1 during the seven years following the date on which
ownership of the Common Stock vests in each Participant and is
no longer subject to forfeiture. For vesting purposes, each year
shall begin and end on an anniversary of a date of vesting. No
Participant shall sell, assign, transfer, pledge, make any short
sale of, grant any option for the purchase of, or otherwise
dispose of, any shares of Common Stock granted to such
Participant under this Plan, except by will or the laws of
descent and distribution; provided that in each of the seven
years following vesting, the number of such shares that are
transferable shall be equal to the product of (x) one plus the
number of full years since vesting and (y) 5% of the number of
shares of Common Stock issued to the Participant that vest on
the date of vesting of the Initial Grant and the Additional
Grants. All Initial and Additional Grants are freely
transferable after the seventh anniversary of Vesting. The
cumulative percentage of such Common Stock which may be
transferable during each year following vesting is as follows:
<TABLE>
<CAPTION>
Cumulative
During Year after Vesting Percentage Transferable
<S> <C>
1 5
2 10
3 15
4 20
5 25
6 30
7 35
8 100
</TABLE>
5.2 Special Transfer Restrictions for Charles Wang. Transfer
restrictions similar to those described in Section 5.1 of this
Plan shall apply to a number of shares of Common Stock owned by
Charles Wang on the Effective Date of the Plan, equal to twice
the number of shares awarded in the Initial Grant to him, until
the awarded shares are forfeited or become transferable.
VI. ADMINISTRATION
6.1 Committee. The Plan shall be administered by the Committee or a
subcommittee composed solely of at least two independent outside
directors of the Company. No employee or former employee of the
Company may serve on the Committee.
6.2 Rules and Interpretation. The Committee shall be vested with all
discretion and authority as it deems necessary or appropriate to
administer the Plan and to interpret the provisions of the Plan.
Any determination, decision or action of the Committee in
connection with the construction, interpretation, administration
or application of the Plan shall be final, conclusive and
binding upon all persons.
6.3 Records. The records of the Committee with respect to the Plan
shall be conclusive on all Participants and their beneficiaries
and on all other persons.
6.4 Tax Withholding. The Company shall withhold all applicable taxes
required by law upon the vesting of Common Stock under to the
Plan, including any federal, FICA, state and local taxes. The
Participant may elect to have the withholding made from the
portion of the grants that is paid in Common Stock. The
reduction in the number of shares of Common Stock paid to such
Participant to satisfy this withholding shall be equal to the
amount of tax withheld divided by the closing price of the
Common Stock on the NYSE on the last day of the Plan Year,
rounded down to the nearest share.
6.5 Residence. The Committee may require Participants to reside
within the State of New York, unless the headquarters of the
Company is located outside of the State of New York.
VII. GENERAL PROVISIONS
7.1 Nonassignability. Prior to the time of any vesting of Common
Stock under the Plan, a Participant shall have no right by way
to anticipation or otherwise to assign or transfer any interest
under this Plan other than as set forth in Section 4.5 of this
Plan.
7.2 Employment Rights/Participation. 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 Participant or any other individual for the
continuation of his or her employment for any Plan Year or any
other period. The Company expressly reserves the right, which
may be exercised at any time and without regard to when, during
a Plan Year or other accounting period, such exercise occurs, to
discharge any individual and/or treat him without regard to the
effect which such treatment might have upon him as a Participant
in this Plan.
7.3 No Individual Liability. No member of the Committee or the
Board, or any officer of the Company, shall be liable for any
determination, decision or action made in good faith with
respect to the Plan or any award under the Plan.
<PAGE>
7.4 Severability; Governing Law. If any particular provision of this
Plan is found to be invalid or unenforceable, such provision
shall not affect the other provisions of the Plan, but the Plan
shall be construed in all respects as if such invalid provision
had been omitted. The provisions of the Plan shall be governed
by and construed in accordance with the laws of the State of New
York.
VIII. AMENDMENT AND TERMINATION
8.1 Amendment and Termination. The Committee may prospectively amend
or terminate the Plan at any time and for any reason; provided,
however, that such amendment shall not relieve the Company of
its obligations under Section 8.2 of the Plan.
8.2 Change in Control of the Company; Tax Gross-Up. In the event of
a Change in Control of the Company, any Additional Grants not
previously made at the time of such Change in Control of the
Company shall be made based on the realized price per share or
similar valuation resulting from the transaction giving rise to
the Change in Control. The Initial Grant and any Additional
Grants shall immediately vest. All restrictions on transfer set
forth in Article V of this Plan either shall be eliminated or,
in the sole discretion of the Committee, shall be reduced to a
maximum of one year. If any Federal excise tax liability arises
as to any Participant as a result of the immediate vesting of
the Initial Grant and the Additional Grants pursuant to this
Section 8.2, the Participant shall receive a cash payment from
the Company which after deducting any Federal or state income or
excise taxes due as a result of the Company's making the cash
payment, is equal to the amount of excise tax liability.
