SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Computer Associates International, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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[X] No fee required.
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<PAGE>
COMPUTER ASSOCIATES INTERNATIONAL, INC.
One Computer Associates Plaza
Islandia, NY 11749
1-516-342-5224
July 12, 1999
Dear Fellow Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Computer Associates International, Inc. (the "Company"), to be held at 10:00
a.m. Eastern Daylight Time on Wednesday, August 25, 1999 at the Islandia
Marriott Hotel, located at 3635 Express Drive North, Hauppauge, New York.
The Board of Directors urges you to read the accompanying Notice of
Annual Meeting and Proxy Statement, and recommends that you vote (1) FOR the
election of the directors nominated; (2) FOR approval of the Year 2000 Employee
Stock Purchase Plan; (3) FOR ratification of the Board's appointment of KPMG LLP
as the Company's independent auditors for the fiscal year ending March 31, 2000;
and (4) AGAINST the stockholder proposal relating to executive compensation.
The vote of every stockholder is important. As an added convenience and
cost-savings measure for our stockholders, we are offering voting by telephone
and the Internet. Registered holders and most "street name" holders will find
the instructions on the enclosed proxy card. Whether or not you plan to attend
the meeting, it is important that your shares be represented. Accordingly, we
urge you to use the electronic voting alternatives available, or sign, date, and
mail the enclosed proxy card in the envelope provided at your earliest
convenience.
Admission to the Annual Meeting will be by ticket only.
Stockholders planning on attending the meeting should use the two cut-out
admission tickets on the outside back cover of this booklet. A map showing
the location of the meeting is also included.
Thank you for your cooperation and support.
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 25, 1999,
at 10:00 a.m. Eastern Daylight Time at the Islandia Marriott Hotel, located at
3635 Express Drive North, Hauppauge, 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 the Year 2000 Employee Stock Purchase Plan;
3. To ratify the appointment of KPMG LLP as the Company's independent
auditors for the fiscal year ending March 31, 2000; and
4. To consider and vote upon a stockholder proposal relating to
executive compensation described in the accompanying Proxy
Statement, if such proposal is presented at the meeting.
5. 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 29, 1999 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 on the
outside back cover of this proxy booklet.
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 June 29, 1999.
Whether or not you expect to attend, STOCKHOLDERS ARE REQUESTED TO VOTE
THEIR SHARES ELECTRONICALLY BY FOLLOWING THE INSTRUCTIONS ON THE PROXY CARD, OR
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
/s/Michael A. McElroy
Michael A. McElroy
Secretary
Islandia, New York
July 12, 1999
<PAGE>
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 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 25, 1999, 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 12, 1999. 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.
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 Year 2000 Employee Stock Purchase Plan; (3)
FOR ratification of the appointment of KPMG LLP as the Company's independent
auditors for the fiscal year ending March 31, 2000; and (4) AGAINST the
stockholder proposal relating to executive compensation.
Record Date and Voting Rights
Only stockholders of record at the close of business on June 29, 1999 are
entitled to notice of and to vote at the meeting or any adjournment thereof. On
June 29, 1999, the Company had outstanding 536,909,574 shares of Common Stock.
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 the Year 2000 Employee Stock Purchase Plan, the
selection of the independent auditors and the stockholder proposal relating to
executive compensation. 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, 1999 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 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 June 29, 1999 by the persons,
other than members of the Board of Directors and management of the Company,
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/ 123,087,500(1) 22.9%
Careal Holding AG
Utoquai 49
8022 Zurich, Switzerland
Massachusetts Financial Services Company 30,500,517(2) 5.7%
500 Boylston Street
Boston, MA 02116
<FN>
(1) According to a Form 4 for February 1999, filed by Walter Haefner. Mr.
Haefner has the sole voting and dispositive power with respect to
123,087,500 shares of the Company's Common Stock held of record by Careal
Holding AG.
<FN>
(2) According to a Schedule 13G dated February 11, 1999, Massachusetts
Financial Services Company, has sole voting power with respect to
30,184,417 shares and sole dispositive power with respect to 30,500,517
shares of the Company's Common Stock.
</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 29, 1999 for (i) each
director and nominee, 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 nominees, and executive officers as a
group (14 persons). Information with respect to beneficial ownership is based
upon information furnished to the Company by each security holder.
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Percent
Name of Beneficial Owner Beneficially Owned(1)(2) of Class
<S> <C> <C>
Directors and Nominees:
Russell M. Artzt 3,237,046(4) .6%
Alfonse M. D'Amato -- *
Willem F.P. de Vogel 57,552 *
Irving Goldstein 59,875 *
Richard A. Grasso 48,750 *
Shirley Strum Kenny 11,000 *
Sanjay Kumar 5,677,992(4) 1.1%
Roel Pieper -- *
Charles B. Wang 33,909,144(3)(4) 6.4%
Non-Directors:
Charles P. McWade 15,506 *
Peter A. Schwartz 2,073,866 .4%
Ira H. Zar 206,608 *
All Directors and Executive Officers
as a Group (14 persons) 45,338,843 8.4%
* Represents less than .1% of the outstanding Common Stock.
<FN>
(1) Includes shares that may be acquired within 60 days after June 29, 1999
through the exercise of stock options as follows: Mr. Artzt, 1,576,889; Mr.
Kumar, 1,375,814; Mr. McWade, 5,001; Mr. Schwartz, 1,939,597; Mr. Wang,
9,074,567; Mr. Zar, 189,347; Mr. de Vogel, 40,500; Mr. Goldstein, 40,500;
Mr. Grasso, 33,750; and all directors, nominees, and executive officers as
a group, 16,501,563.
<FN>
(2) Includes shares credited to the executives' accounts in the Company's
tax-qualified profit-sharing plan as follows: Mr. Artzt, 20,171; Mr. Kumar,
32,963; Mr. McWade, 1,497; Mr. Schwartz, 3,035; Mr. Wang, 1,527; Mr. Zar,
2,749; and all executive officers as a group, 86,567.
<FN>
(3) Includes 127,885 shares owned directly and as trustee for a minor by Mr.
Wang's spouse, an employee of the Company; 2,210,941 shares subject to
employee stock options held by Mr. Wang's spouse, which are exercisable
within 60 days after June 29, 1999; and 1,177 shares credited to the
account of Mr. Wang's spouse in the Company's tax-qualified profit-sharing
plan. Mr. Wang disclaims beneficial ownership of such shares.
<FN>
(4) Reflects the issuance of all vested shares under the 1995 Key Employee
Stock Ownership Plan: Mr. Artzt, 1,320,931 shares; Mr. Kumar, 4,088,130
shares; and Mr. Wang, 9,334,205 shares.
</TABLE>
<PAGE>
ITEM 1--ELECTION OF DIRECTORS
Nominees
It is proposed that the nine 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, Alfonse M. D'Amato, Willem F.P.
de Vogel, Irving Goldstein, Richard A. Grasso, Shirley Strum Kenny, Sanjay
Kumar, Roel Pieper, 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.
<PAGE>
<TABLE>
<CAPTION>
Director
Age Since
<S> <C> <C>
Russell M. Artzt (1) 52 1980
Executive Vice President-Research and Development since
April 1987 and the Senior Development Officer of the Company
since 1976
Alfonse M. D'Amato 61 1999
Partner in Park Strategies LLP, a business consulting
firm, since January 1999. United States Senator from January
1981 until January 1999. During his tenure, 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.
Willem F.P. de Vogel (2) (3) 48 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
Morton Industrial Group.
Irving Goldstein (2) (3) 61 1990
Director General and Chief Executive Officer of INTELSAT,
an international satellite telecommunications company,
from February 1992 until his retirement in December 1998.
He was Chairman and Chief Executive Officer of COMSAT (formerly
known as Communications Satellite Corporation) from October
1985 to February 1992, and President from May 1983 to October
1985, and was a director of that company from May 1983 to
February 1992. He is also a director of IDT Corporation.
Richard A. Grasso (3)(4) 52 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) (4) 64 1994
President of the State University of New 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) 37 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.
<PAGE>
Director
Age Since
<S> <C> <C>
Roel Pieper 43 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. He is also a
director of Lincoln National Corporation and General Magic, Inc.
Charles B. Wang (1) (4) 54 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 Stock Option and Compensation Committee.
<FN>
(4) Member Nominating Committee.
</TABLE>
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, 1999, the Board of Directors of
the Company held fourteen meetings. In addition to these meetings, the Board of
Directors acted by unanimous written consent on three occasions. Each Director
attended more than 75% of the Board meetings and meetings of the Board
committees on which he or she served, except for Mr. Pieper, who was not a
member of the Board of Directors for the entire fiscal year, and Mr. D'Amato,
who joined the Board of Directors subsequent to the end of the fiscal year. The
Company has standing Executive, Audit, Stock Option and Compensation, and
Nominating Committees.
The Executive Committee consists of Russell M. Artzt, Sanjay Kumar, and Charles
B. Wang. During fiscal year 1999, the Executive Committee did not meet, but
acted by unanimous written consent on two occasions.
The Stock Option and Compensation Committee of the Board (the "Compensation
Committee") consists of three non-employee directors, Willem F.P. de Vogel,
Irving Goldstein, and Richard A. Grasso. 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, and 1993 Stock Option Plan for
Non-Employee Directors (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 1999, the Compensation
Committee met six times.
The Audit Committee of the Board consists of three non-employee directors,
Willem F.P. de Vogel, Irving Goldstein, and Shirley Strum Kenny. 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 1999. The Audit Committee has recommended the selection of
KPMG LLP as independent auditors for the fiscal year ending March 31, 2000.
The Nominating Committee of the Board consists of three directors, Richard A.
Grasso, Shirley Strum Kenny, and Charles B. Wang. The committee has
responsibility for suggesting nominees to the Board for election as directors.
During fiscal year 1999, the Nominating Committee met once.
<PAGE>
Director's Compensation
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 12, 1998, the Board of Directors established its annual
Director Fee for the succeeding twelve months at $45,000. The Director Fee will
be credited to each director's Deferred Stock Compensation Account based on the
Fair Market Value of the Company's stock on August 24, 1999. Directors who are
also employees of the Company receive no Board or Committee fees.
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 the Company's 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 13, 1998,
each Non-Employee Director, except Ms. Kenny, was granted 6,750 options to
acquire shares of Common Stock at $36.94 per share. On the advice of the New
York State Commission on Ethical Practices, Ms. 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, Ms. 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 on page 9 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 fiscal year
end, the members of the Compensation Committee were Willem F.P. de Vogel, Irving
Goldstein, and Richard A. Grasso.
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 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.
<PAGE>
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 determined for 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 Company's 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 grants to key executives stock options which vest (i.e., become
exercisable) 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 Company's
1991 Stock Incentive 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 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 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. Wang's fiscal year
1999 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 1999 performance produced a return
on average stockholders' equity, in excess of the predetermined threshold.
Pursuant to the 1994 Annual Incentive Compensation Plan for fiscal year 1999,
Mr. Wang'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. Mr. Wang's total performance-based at-risk compensation
calculated under the 1994 Annual Incentive Compensation Plan was approximately
$16,906,000. This amount was reduced by the Compensation Committee to
$9,000,000. In addition, 60% of this amount or $5,400,000, as reduced, was
granted in unregistered Company Common Stock.
<PAGE>
Long-Term Equity Participation. Under the terms of the 1995 Plan, all shares
awarded under the 1995 Plan became fully vested on May 21, 1998. Mr. Wang, upon
achievement of the performance objectives described in the 1995 Plan, received
9,334,205 shares after adjustment for applicable taxes. These shares are subject
to significant limitation on transfer for seven years after vesting. In
addition, Mr. Wang has agreed to restrict the transfer of 8,100,000 additional
shares of Common Stock which he currently owns. Such restriction will lapse
concomitantly with those for shares under the 1995 Plan.
Benefits. Mr. Wang received matching and discretionary contributions to the
Company's benefit plans of $23,948 in fiscal year 1999. 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 of most of the Company's other executive officers,
including the four persons listed in the Summary Compensation Table on page 10,
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 Company's 1991 Stock Incentive Plan, and access to the
Company's standard employee benefit plans. For fiscal 1999, the Compensation
Committee allocated an aggregate of approximately 1% of the Company's net income
to the four executive officers, other than the Chief Executive Officer. Except
for Messrs. McWade and Zar, approximately 60% of this amount was awarded in the
form of unregistered Company Common Stock. Under the 1995 Plan, two of the
executive officers have been awarded shares of Common Stock on the same basis
and same performance objectives as described for the Chief Executive Officer.
These shares are subject to significant limitations on transfer for seven years
after vesting.
Deductibility
Beginning in 1994, Section 162(m) of the U.S. Internal Revenue Code of 1986
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
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 under the Company's 1991 Stock Incentive 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:
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 (using the closing price on the NYSE at March 31, 1999 of $35.56) with the
Standard & Poor's Computer Software and Services Index* and the Standard &
Poor's 500 Index during the fiscal years 1995 through 1999 assuming the
investment of $100 on April 1, 1994 and the reinvestment of dividends.
<TABLE>
<CAPTION>
TOTAL RETURN DATA
3/31/94 3/31/95 3/31/96 3/31/97 3/31/98 3/31/99
<S> <C> <C> <C> <C> <C> <C>
Computer Associates
International, Inc. 100 193 351 286 638 394
S&P Computer Software
and Services Index 100 135 191 268 489 847
S&P 500 Index 100 116 153 183 271 321
<FN>
* The Standard & Poor's Computer Software and Services Index is composed of the
following companies:
</TABLE>
Adobe Systems, Inc. Microsoft Corporation
America Online, Inc. Novell, Inc.
Autodesk, Inc. Oracle Corporation
BMC Software, Inc. Parametric Technology Corporation
Computer Associates International, Inc. PeopleSoft, Inc.
Computer Sciences Corporation Unisys Corporation
Compuware Corporation
<PAGE>
COMPENSATION AND OTHER INFORMATION CONCERNING EXECUTIVE OFFICERS
The following table sets forth the cash and non-cash compensation for the Chief
Executive Officer and each of the four next most highly compensated executive
officers of the Company for each of the fiscal years ended March 31, 1999, 1998,
and 1997, respectively.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Compensation Awards
Name and Fiscal Annual Compensation Restricted Stock Option All Other
Principal Position Year Salary Incentive(1) Awards ($)(2) Awards (#)(3) Compensation(4)
<S> <C> <C> <C> <C> <C> <C>
Charles B. Wang 1999 $ 1,000,000 $ 3,600,000 $650,812,050 -- $35,948
Chairman of the Board 1998 $ 1,000,000 $ 6,000,000 $ 9,000,000 -- $36,400
and Chief Executive 1997 $ 1,000,000 $ 5,000,000 $ 7,000,000 -- $36,400
Officer
Sanjay Kumar 1999 $ 900,000 $ 2,400,000 $326,306,025 -- $35,948
President and Chief 1998 $ 900,000 $ 4,240,000 $ 6,360,000 -- $36,400
Operating Officer 1997 $ 900,000 $ 3,250,000 $ 5,850,000 -- $36,400
Russell M. Artzt 1999 $ 750,000 $ 720,000 $108,648,675 -- $35,948
Executive Vice 1998 $ 750,000 $ 1,165,000 $ 1,745,000 -- $36,400
President-Research 1997 $ 750,000 $ 975,000 $ 1,425,000 -- $36,400
and Development
Charles P. McWade 1999 $ 200,000 $ 450,000 -- 52,700 $31,233
Senior Vice 1998 $ 200,000 $ 350,000 -- 130,515 $32,520
President-Business 1997 $ 175,000 $ 315,000 -- 115,357 $30,410
Development
Ira H. Zar 1999 $ 247,500 $ 340,000 -- 152,700 $31,948
Senior Vice President- 1998 $ 190,000 $ 125,000 -- 130,515 $31,494
Finance and Chief 1997 $ 160,000 $ 100,000 -- 115,357 $30,410
Financial Officer
Peter A. Schwartz(5) 1999 $ 600,000 $ 218,750 -- -- $ 7,667
Executive Vice 1998 $ 600,000 $ 580,000 $ 875,000 443,015 $36,400
President-Finance and 1997 $ 600,000 $ 525,000 $ 675,000 396,607 $36,400
Chief Financial Officer
- ----------------
<FN>
(1) Includes incentive compensation for Messrs. Wang, Kumar, Artzt, and
Schwartz, for fiscal years 1997, 1998, and 1999, made under the 1994 Annual
Incentive Compensation Plan.
<FN>
(2) Includes restricted stock awarded under the 1994 Annual Incentive
Compensation Plan for Messrs. Wang, Kumar, and Artzt, for fiscal year 1999
in the amounts of $5,400,000, $3,600,000, and $1,080,000, respectively.
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 20.25 million 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.
<PAGE>
<FN>
(3) Option awards reflect the three-for-two stock splits effective June 19,
1996 and November 5, 1997. 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.
<FN>
(4) Consists of Company contributions to the Company's benefit plans and a
non-reimbursed travel allowance for each executive officer of $12,000 for
each fiscal year.
<FN>
(5) Peter Schwartz resigned as Executive Vice President-Finance and Chief
Financial Officer on June 22, 1998. The amount of annual incentive
compensation for fiscal 1999 was reduced accordingly.
</TABLE>
<TABLE>
The following tables summarize option grants and exercises during the fiscal
year ended March 31, 1999 to or by the executive officers named in the Summary
Compensation Table on page 10, and the value of the options held by such person
on March 31, 1999.
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Granted Percent of Exercise Expiration Potential Appreciation
Name Options Total Grants(3) Price Date 5%(1) 10%(2)
<S> <C> <C> <C> <C> <C> <C>
C.B. Wang -- -- -- -- -- --
S. Kumar -- -- -- -- -- --
R.M. Artzt -- -- -- -- -- --
C.P. McWade 52,700 1.1% $36.50 October 20, 2008 $1,209,710 $3,065,643
I. H. Zar 152,700 3.3% $36.50 October 20, 2008 $3,505,176 $8,882,803
P. Schwartz -- -- -- -- -- --
- ----------------
<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) Based on a total of 4,650,425 options granted.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
Number of Net Value of Unexercised
Unexercised Options In-The-Money Options
Shares Acquired/ Value at March 31, 1999 at March 31, 1999(3)
Name Exercised Realized(1) Exercisable(2) Unexercisable Exercisable(2) Unexercisable
<S> <C> <C> <C> <C> <C> <C>
C.B. Wang -- -- 8,399,231 1,056,541 $251,152,275 $ 20,816,946
S. Kumar 757,708 $ 29,552,273 869,564 816,073 $ 18,359,624 $ 15,875,426
R.M. Artzt 440,227 $ 17,265,607 1,221,334 559,573 $ 30,100,126 $ 10,985,325
C.P. McWade 73,822 $ 1,889,827 5,218 322,775 $ 104 $ 1,739,278
I. H. Zar -- -- 120,311 417,713 $ 1,767,843 $ 1,605,191
P. Schwartz 147,723 $ 4,485,278 1,554,273 1,125,801 $ 38,542,191 $ 9,979,881
- ---------------
<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
anniverary; 15% on the second anniversary; 20% on the third anniversary;
25% on the fourth anniversary; and 30% on the fifth anniversary.
<FN>
(3) Pro forma net valuation based on the March 31, 1999 closing price of
$35.56, less fair market price at the grant date.
</TABLE>
<PAGE>
Employee's 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 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 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 the 1999 fiscal year, the Company contributed $23,948 for the accounts of
each of Messrs. Wang, Kumar, and Artzt, $19,233 for the account of Mr. McWade,
$19,948 for the account of Mr. Zar, $3,167 for the account of Mr. Schwartz, and
$20,151,000 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 on page 10.
Stock Option Plans
During fiscal year 1999, 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 twelve years.
<PAGE>
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 an incentive stock option under
the Code.
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 1981 Plan, the 1987 Plan, the 1991 Plan, and the 1993 Plan are administered
by the Compensation Committee of the Board of Directors. 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.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
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
more than 10% 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 (the "NYSE") initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company ("Section
16(a) Forms"). Officers, directors, and greater than 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 certain reporting persons during the fiscal year
ended March 31, 1999, the Company believes that each of its officers, directors,
and greater than 10% beneficial stockholders complied with all applicable filing
requirements.
Certain Transactions
During the fiscal year ended March 31, 1999, 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, employment issues, and litigation, received
approximately $536,000 in fees and disbursements during the fiscal year. In the
opinion of management, the aforementioned legal services were fair and
reasonable and as favorable to the Company as those which could have been
obtained from other third parties.
<PAGE>
Mr. Peter A. Schwartz, a former Executive Vice President of Finance and Chief
Financial Officer of the Company, entered into an agreement to remain with the
Company in a non-executive capacity. Mr. Schwartz will perform such advisory and
consulting duties as may be reasonably requested from time to time by the
Company's Chief Operating Officer. For these services and in consideration of a
five-year non-competition covenant, the Company agreed to pay Mr. Schwartz
$600,000 for the year ending March 31, 2000, $400,000 for each of the years
ending March 31, 2001 and 2002, and $300,000 for the year ending March 31, 2003.
ITEM 2 - YEAR 2000 EMPLOYEE STOCK PURCHASE PLAN
The stockholders will be asked to consider and vote on a proposal to approve and
adopt the Company's Year 2000 Employee Stock Purchase Plan (the "Plan"). The
Plan was approved by the Company's Board of Directors on May 26, 1999, subject
to approval by the stockholders of the Company.
The following is a summary of the terms and provisions of the Plan and of
certain tax effects of participation in the Plan. The Plan generally may be
amended from time to time, or terminated in its entirety, in the discretion of
the Board of Directors. This summary is qualified in its entirety by reference
to the full text of the Plan, as amended from time to time. A copy of the Plan
is attached hereto as Exhibit A. To the extent that there is a conflict between
this summary and the Plan, the terms of the Plan shall govern.
Purpose
The purpose of the Plan is to attract employees to the Company and its
participating subsidiaries, to induce employees to remain with the Company and
its subsidiaries, and to encourage them to increase their efforts to make the
Company's business more successful by providing equity-based incentives to
eligible employees of the Company and its subsidiaries. The Plan is intended to
comply with the provisions of Section 423 of the Internal Revenue Code of 1986
(the "Code").
Shares Available Under the Plan
If approved by the stockholders, the Plan becomes effective on January 1, 2000.
Shares of common stock of the Company delivered under the Plan ("Common Stock")
may be authorized but unissued shares of the Company or shares that were once
issued and subsequently reacquired by the Company. Subject to adjustment upon a
merger, reorganization, stock split or other similar corporate change, the
Company reserved and made available for issuance and purchase under the Plan,
30,000,000 shares of Common Stock.
Eligibility
In general, all employees of the Company or any of its subsidiaries which the
Committee (see below under "Administration") designates for participation in the
Plan are eligible to participate in the Plan. In addition, in general terms,
employees who own 5% or more of Company stock are not eligible to participate.
The Committee may also provide for other exclusions permitted by Section 423 of
the Code.
Administration
The Plan is administered by a committee appointed by the Board of Directors. The
Board of Directors is expressly permitted to designate the Stock Option and
Compensation Committee as the committee that will administer the Plan. The
committee administering the Plan from time to time is referred to herein as the
"Committee." The Committee may make such rules and regulations and establish
such procedures for the administration of the Plan as it deems appropriate. The
Committee has authority to interpret the Plan, with such interpretations to be
conclusive and binding on all persons and otherwise accorded the maximum
deference permitted by law. The Committee shall take any other actions and make
any other determinations or decisions that it deems necessary or appropriate in
connection with the Plan or the administration or interpretation thereof.
<PAGE>
Purchases of Stock
To enroll in the Plan, an employee must elect a percentage of his or her base
pay, from 1% to 25%, in 1% increments, to be withheld, unless otherwise provided
by the Committee. For these purposes, base pay excludes, among other things, any
payments for reimbursement of expenses, bonuses, incentive compensation,
overtime, deferred compensation and other non-cash or non-basic payments. All
payroll deductions shall be credited, as promptly as practicable, to a payroll
account (the "Payroll Account") in the name of the participating employee.
Except as described below, payroll withholding elections are made separately for
each offer period under the Plan. Unless otherwise provided by the Committee,
offer periods will begin on each January 1 and July 1 (such beginning date being
referred to below as the "offer date"), and end on the business day coincident
with or immediately preceding the following June 30 and December 31,
respectively. Thus, if June 30 and December 31 are business days in a particular
calendar year, the offer periods in the calendar year would be the six-month
period beginning on each of January 1 and July 1. Generally, an election to
participate for an offer period must be made during the enrollment period
preceding the offer period, as established by the Committee.
If so provided by the Committee, a participant who has made an election for an
offer period will be deemed to have elected to participate for the next offer
period and to have authorized the same percentage payroll deduction, unless the
participant elects otherwise during the applicable enrollment period. Initially,
it is contemplated that the elections made for a January-June offer period will
apply for the following July-December offer period unless the participant
otherwise elects. Thus, for example, a participant making a 5% election for the
January-June 2000 offer period will be deemed to have made a 5% election for the
July-December 2000 offer period, unless the participant elects otherwise in the
enrollment period applicable to the July-December 2000 offer period. It is not
anticipated that this rule will be used for the first offer period in a calendar
year, and, therefore, unless the Committee provides otherwise, affirmative
elections will need to be made to participate in the offer periods which
commence each January 1. Unless otherwise provided by the Committee,
participants will not be able to withdraw, revoke or change their payroll
deduction election at any time during the offer period to which the percentage
applies.
As noted above, the amount of payroll deductions for each month is credited to
the applicable participant's Payroll Account. On the last day of each offer
period, the balance that has accrued in the participant's Payroll Account for
the offer period will be used to buy Common Stock at a purchase price equal to
the lesser of (i) 85% of the Fair Market Value of the stock on the offer date
and (ii) 85% of the Fair Market Value of the stock on the last day of the offer
period. The Code and the Plan impose certain limits on the amount of Common
Stock that can be purchased with payroll deductions under the Plan. In general,
there is a $25,000 limit on the value of Common Stock that can be purchased by
any participant under the Plan in any calendar year. Additionally, unless
otherwise provided by the Committee for an offer period, a participant may not
purchase more than 5,000 shares of Common Stock for any one offer period.
The shares purchased with a participant's payroll deductions will be credited to
an individual securities account maintained by a brokerage firm which has been
selected by the Company (the "Stock Account"). Each participant will receive
periodic account statements regarding his or her Stock Account. Unless otherwise
provided by the Committee, shares purchased under the Plan generally must remain
in the participant's Stock Account at such brokerage firm until the holding
period requirements of Section 423 of the Code (generally, as discussed below,
two years from the offer date) have been satisfied, unless the participant makes
an earlier disposition of the shares. No fractional shares are to be purchased
under the Plan, unless otherwise provided by the Committee. Any cash remaining
in Payroll Accounts after the purchase of whole shares is generally applied for
use in the next offer period. The Committee may also establish a dividend
reinvestment program, under which dividends on shares in the Stock Account would
be used to purchase additional whole shares.
<PAGE>
If a participant's employment terminates for any reason, then, notwithstanding
any other provision of the Plan, the balance in his or her Payroll Account which
has not yet been invested will be refunded to the participant (or, in the event
of death, will be paid to his or her estate) as soon as practicable.
Rights granted under the Plan are not transferable other than by will or the
laws of descent and distribution and are exercisable during a participant's
lifetime only by the participant.
Non-U.S. Subsidiaries
In the discretion of the Committee, eligible employees of participating non-U.S.
Subsidiaries (if any) shall participate in the Plan on terms and conditions
different from those specified in the Plan. The participation by any eligible
employee of a non-U.S. Subsidiary shall be deemed to be under a separate and
distinct Plan. Any limitations on the number of shares under the Plan shall be
applied and administered with respect to the aggregate of the Plan and all such
separate plans.
Withholding: Disqualifying Dispositions
The Company will deduct from all Payroll Accounts all federal, state, local and
other taxes required by law to be withheld with respect to such payments. If
shares of Common Stock are disposed of in a disposition that does not satisfy
the holding period requirements of Section 423 of the Code (generally, as
discussed below, two years from the offer date), the employee shall notify the
Company in writing as soon as practicable thereafter and shall pay any tax
withholding obligation as a result of the disqualifying disposition (or satisfy
such other arrangements as may be permitted by the Committee).
Amendment and Termination of the Plan; Stockholder Approval
The Board of Directors may at any time, or from time to time, amend the Plan in
any respect; provided, however, that the Plan may not be amended in any way that
would cause, if such amendment were not approved by the stockholders of Common
Stock, the Plan to fail to comply with the requirements for employee stock
purchase plans under Section 423 of the Code or any other requirement of
applicable law or regulation unless and until stockholder approval is obtained.
No amendment of the Plan shall alter or impair any rights outstanding at the
time of the such amendment to purchase shares of Common Stock pursuant to any
offer under the Plan.
The Board may terminate the Plan any time at its discretion; provided that, no
termination of the Plan shall alter or impair any rights outstanding at the time
of the such termination to purchase shares of Common Stock pursuant to any
offering of the right to purchase shares of Common Stock under the Plan.
Federal Income Tax Consequences
The Plan is intended to qualify for favorable income tax treatment under
Sections 421 and 423 of the Code. Payroll deductions will be made on an
after-tax basis. Thus, participants will have to pay income tax on the dollars
withheld from their paychecks under the Plan.
No income will be recognized when payroll deductions are used to buy Common
Stock at a discount. The discount at the time of purchase will not be taken into
account for income tax purposes until the Common Stock is sold. The income tax
consequences associated with a sale of Common Stock purchased under the Plan
depend upon when the sale occurs and the length of the participant's holding
period for his or her Common Stock. The Plan has been designed with the intent
that if the sale occurs more than two years after the applicable offer date,
then a participant generally will realize taxable gain or loss equal to the
difference between the selling price and the amount paid for the shares. If the
shares are sold at a gain, then the participant will recognize ordinary income
equal to the lesser of (i) the excess of the Fair Market Value of the shares at
the time of disposition over the actual purchase price, or (ii) the excess of
the Fair Market Value of the shares on the offer date over the purchase price
determined as of the offer date (that is, the purchase price that would have
applied if the offer period were to have ended on the offer date). The balance
of the gain, if any, will be treated as long-term capital gain. If the shares
are sold at a loss, then no ordinary income is realized and the entire loss will
be treated as a long-term capital loss.
<PAGE>
However, if the Common Stock purchased under the Plan is sold within two years
after the applicable offer date, then, regardless of whether the participant has
a profit or loss on the sale, it is expected that the discount received when the
shares were purchased generally will be taxable as ordinary income. The Company
is entitled to a deduction for the amounts taxable to a participant as ordinary
income. The participant will also recognize taxable capital gain or loss (which
will be short-term or long-term, depending upon the holding period) on the sale
equal to the difference between the selling price and the Fair Market Value of
the shares at the time they were purchased.
Special rules may apply if the Committee establishes an offer period that is
greater than one year in duration. In addition, special tax rules may apply to
those participants who are subject to the rules set forth in Section 16 of the
Securities Exchange Act of 1934.
The foregoing tax discussion is a general description of certain expected
federal income tax results under current law. No attempt has been made to
address any state and local, foreign or estate and gift tax consequences that
may arise in connection with participation in the Plan. All affected individuals
should consult their own advisors if they wish any further details or have
special questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL AND
ADOPTION OF THE YEAR 2000 EMPLOYEE STOCK PURCHASE PLAN.
ITEM 3--RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed KPMG LLP ("KPMG"), independent auditors, to
audit the Company's consolidated financial statements for the fiscal year ending
March 31, 2000. The firm of Ernst & Young LLP ("Ernst & Young") served as
independent auditors for the Company for the fiscal year ended March 31, 1999.
At the Annual Meeting, shareholders are being asked to ratify the appointment of
KPMG as the Company's independent auditors for fiscal year 2000. Representatives
of KPMG and Ernst & Young are expected to be present at the Annual Meeting and
will have the opportunity to respond to appropriate questions.
On June 29, 1999, the Audit Committee of the Company's Board of Directors
recommended to the full Board of Directors that the Company engage the
independent certified public accounting firm of KPMG to audit the consolidated
financial statements of the Company for the year ending March 31, 2000. The
Board of Directors adopted the Committee's recommendation and approved the
proposed engagement of KPMG. Accordingly, the engagement of Ernst & Young as the
Company's independent auditors was discontinued as of that date.
The reports of Ernst & Young on the Company's consolidated financial statements
for each of the two fiscal years in the period ended March 31, 1999 did not
contain an adverse opinion or a disclaimer of opinion and were not qualified or
modified as to uncertainty, audit scope or accounting principles.
In connection with the audits of the Company's consolidated financial statements
for each of the two fiscal years ended March 31, 1999 and March 31, 1998, 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.
There were no reportable events (as defined in Regulation S-K Item 304(a)(1)(v))
during the two fiscal years ended March 31, 1999 and March 31, 1998, and the
subsequent interim period prior to June 29, 1999.
The Company did not consult with KPMG during the last two fiscal years in the
period ended March 31, 1999 or the subsequent interim period prior to June 29,
1999 on either the application of accounting principles or type of opinion KPMG
might issue on the Company's financial statements.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPOINTMENT OF KPMG LLP
AS THE COMPANY'S INDEPENDENT AUDITORS.
<PAGE>
ITEM 4--STOCKHOLDER PROPOSAL RELATING TO EXECUTIVE COMPENSATION
Roger J. Rath, 1950 Kingsforth Drive, Fallston, MD 21047, beneficial owner of
200 shares of Computer Associates common stock, has requested the Company to
present the following proposal at this year's meeting:
WHEREAS, in 1997, top U.S. CEOs earned on average 326 times the average factory
worker's pay, a dramatic rise from the 42 times reported in 1980 (Business
Week);
WHEREAS, although U.S. multinational corporations increasingly see themselves as
global companies, taking advantage of global labor markets, they continue to pay
their executives at levels far surpassing levels common in Europe, Asia, and
Latin America;
WHEREAS, in May 1998, Computer Associates' three top officers received more than
20 million shares of Company stock worth more than $1.1 billion. These shares
were received for meeting performance goals over the prior three years.
Compensation expert Professor Graef Crystal noted that during this three-year
period, one-third of all large companies performed better than Computer
Associates;
WHEREAS, for the three years ending March 1998, Computer Associates' CEO Charles
Wang accumulated $430 million in total compensation (including three years worth
of paper profits on unexcercised stock options), or $143 million per year,
making him one of the highest paid corporate executives in the history of
America. These figures do not include Mr. Wang's $670 million stock grant in May
1998;
WHEREAS, New York Times reporter David Cay Johnston commented, "had the stock
awards been divided evenly among the company's 9,850 employees, each would have
received shares worth more than $113,000;
WHEREAS, we believe that shareholder value is created not by a few leaders, but
by thousands of Computer Associates employees working together;
WHEREAS, excessive executive compensation is costly to shareholders. The $675
million after-tax cost of the 1998 stock awards equaled 43% of the Company's
entire pre-charge after-tax net income over the three-year period ending June
30, 1998 that the stock awards were earned;
WHEREAS, business leaders and thinkers ranging from J.P. Morgan to Peter Drucker
have argued against wide pay gaps within enterprise and called for limits on
executive pay based on multiples of workers compensation;
THEREFORE, BE IT RESOLVED that shareholders urge the Board of Directors to act
to prevent excessive executive compensation and to assure that executives'
financial interests do not run counter to the interests of the Corporation's
primary assets: its employees. In order to reach this end, shareholders request
that the Board:
(1) Establish a cap on CEO compensation expressed as a multiple of the pay of
the lowest paid worker at Computer Associates;
(2) Prepare a report for shareholders disclosing the multiple used in setting
the cap and explaining the factors used in determining the appropriate cap.
SUPPORTING STATEMENT: In asking Computer Associates to establish a cap on
executive compensation, we have not sought to impose our own arbitrary cap on
executive pay. Instead, we have asked our Company to wrestle with the issue of
the rising pay gap between corporate executives and those they seek to lead. By
imposing the financial discipline of a pay cap, we hope our Company can help
reverse a long-standing trend that is neither good for business nor society.
Please vote YES.
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST THIS PROPOSAL FOR THE
FOLLOWING REASONS:
Setting the compensation and incentives for the Chief Executive Officer is a key
responsibility of the Stock Option and Compensation Committee of the Board of
Directors (the "Committee"). As discussed in the Stock Option and Compensation
Committee Report on Executive Compensation on pages 6 to 8, the Committee
considers a number of factors in establishing incentives and compensation. Based
upon its consideration of these factors, your directors believe that Mr. Wang's
overall compensation level is appropriate in light of the value that his
superior leadership, vision, and dedication has provided since Mr. Wang founded
the Company in 1976.
To compete in an increasingly complex technology-based global marketplace, the
Company must attract and retain the best leadership talent. The Board believes
that a cap, whether internally or externally imposed, would limit its ability to
search for and retain the skills and talent necessary to continue the Company's
preeminent business results.
Therefore, your directors believe that it would not be in the best interests of
the stockholders to establish an arbitrary cap on the compensation paid to the
Chief Executive Officer. Doing so could unduly inhibit the Company's flexibility
in providing compensation arrangements needed to reward and retain a current
Chief Executive Officer in a competitive environment or to attract and motivate
other Chief Executive Officers in the future. For these reasons, the Board of
Directors recommends a vote against this proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST THIS PROPOSAL.
STOCKHOLDER PROPOSALS
The Company's By-laws require advance notice for any stockholder nomination or
proposal at an annual or special meeting of stockholders. In general, all
nominations or proposals must be delivered to the Secretary of the Company at
the Company's World headquarters. The submission deadline for stockholder
proposals for consideration for inclusion in proxy materials for the 2000 Annual
Meeting is March 8, 2000.
<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 postpaid envelope.
By Order of the Board of Directors
/s/Michael A. McElroy
Michael A. McElroy
Secretary
Dated: July 12, 1999
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
<PAGE>
Exhibit A
COMPUTER ASSOCIATES INTERNATIONAL, INC.
YEAR 2000 EMPLOYEE STOCK PURCHASE PLAN
The Company wishes to attract employees to the Company and its Subsidiaries and
to induce employees to remain with the Company and its Subsidiaries, and to
encourage them to increase their efforts to make the Company's business more
successful, whether directly or through its Subsidiaries. In furtherance
thereof, the Plan is designed to provide equity-based incentives to the eligible
employees of the Company and its Subsidiaries. The Plan is intended to comply
with the provisions of Section 423 of the Code and shall be administered,
interpreted and construed accordingly.
I. Definitions
1.1 When used herein, the following terms shall have the respective meanings set
forth below:
1.1.1 "Board of Directors" means the Board of Directors of the Company.
1.1.2 "Code" means the Internal Revenue Code of 1986, as amended.
1.1.3 "Committee" means the committee appointed by the Board of
Directors of the Company under Section 3 hereof.
1.1.4 "Common Stock" means the Common Stock, par value $0.10 per share, of
the Company.
1.1.5 "Company" means Computer Associates International, Inc., a
Delaware corporation.
1.1.6 "Effective Date" means January 1, 2000.
1.1.7 "Eligible Compensation" for any pay period means, unless
otherwise determined by the Committee, the amount of base salary for such
period. Eligible Compensation does not include, without limitation, any
payments for reimbursement of expenses, bonuses, incentive compensation,
overtime, deferred compensation, and other non-cash or non-basic payments,
unless otherwise determined by the Committee.
1.1.8 "Eligible Employee" means employees eligible to participate in
the Plan pursuant to the provisions of Section IV.
1.1.9 "Enrollment Period" means such period preceding an Offer Period as
is specified by the Committee with respect to such Offer Period.
1.1.10 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
1.1.11 "Fair Market Value" per Share as of a particular date means (i)
if Shares are then listed on a national stock exchange, the closing price per
Share on the exchange for the last preceding date on which there was a sale of
Shares on such exchange, as determined by the Committee, (ii) if Shares are not
then listed on a national stock exchange but are then traded on an
over-the-counter market, the average of the closing bid and asked prices for
such Shares in such over-the-counter market for the last preceding date on which
there was a sale of such Shares in such market, as determined by the Committee,
or (iii) if Shares are not then listed on a national exchange or traded on an
over-the-counter market, such value as the Committee in its discretion may in
good faith determine; provided that, where such shares are so listed or traded,
the Committee may make discretionary determinations where the shares have not
been traded for ten trading days.
1.1.12 "Offer Date" means each January 1 and July 1, unless otherwise
provided by the Committee.
1.1.13 "Offer Period" means the period commencing on each Offer Date and
ending on the next succeeding Purchase Date.
<PAGE>
1.1.14 "Participating Employee" means an employee (i) for whom payroll
deductions are currently being made or (ii) for whom payroll deductions are not
currently being made because he or she has reached the limitation set forth in
the first sentence of Section VI.
1.1.15 "Payroll Account" means an account maintained by the Company
with respect to each Participating Employee as contemplated by Section V.
1.1.16 "Plan" means this Computer Associates International, Inc. Year
2000 Employee Stock Purchase Plan, as it may from time to time be amended.
1.1.17 "Plan Year" means the calendar year.
1.1.18 "Purchase Date" means the business day coincident with or
immediately preceding each June 30 and December 31, unless otherwise provided by
the Committee.
1.1.19 "Shares" means shares of Common Stock.
1.1.20 "Stock Account" means a brokerage account as contemplated by
Section 8.
1.1.21 "Subsidiary" means any corporation that is a "subsidiary
corporation" with respect to the Company under Section 424(f) of the Code.
II. Shares Reserved for the Plan
2.1 There shall be reserved for issuance and purchase by employees under the
Plan an aggregate of 30,000,000 Shares, subject to adjustment as provided in
Section XIII. Shares subject to the Plan may be Shares now or hereafter
authorized but unissued, or Shares that were once issued and subsequently
reacquired by the Company. If and to the extent that any right to purchase
reserved Shares shall not be exercised by any employee for any reason or if such
right to purchase shall terminate as provided herein, Shares that have not been
so purchased hereunder shall again become available for the purposes of the Plan
unless the Plan shall have been terminated, but such unpurchased Shares shall
not be deemed to increase the aggregate number of Shares specified above to be
reserved for purposes of the Plan (subject to adjustment as provided in Section
XIII).
III. Administration of the Plan
3.1 The Plan shall be administered by the Committee appointed by the Board
of Directors. The Board of Directors shall consider the rules of Rule 16b-3
promulgated under the Exchange Act and Section 162(m) of the Code in connection
with any such appointment, if and to the extent that such appointments may have
an effect thereunder. Each member of the Committee shall serve at the pleasure
of the Board of Directors. The acts of a majority of the members present at any
meeting of the Committee at which a quorum is present, or acts approved in
writing by a majority of the entire Committee, shall be the acts of the
Committee for purposes of the Plan. If and to the extent applicable, no member
of the Committee may act as to matters under the Plan specifically relating to
such member. Notwithstanding the foregoing, the Board of Directors may designate
the Stock Option and Compensation Committee of the Board of Directors to act as
the Committee hereunder.
3.2 The Committee may make such rules and regulations and establish such
procedures for the administration of the Plan as it deems appropriate. The
Committee shall have authority to interpret the Plan, with such interpretations
to be conclusive and binding on all persons and otherwise accorded the maximum
deference permitted by law and shall take any other actions and make any other
determinations or decisions that it deems necessary or appropriate in connection
with the Plan or the administration or interpretation thereof.
<PAGE>
IV. Eligible Employees
4.1 Except as described below, all employees of the Company and each Subsidiary
designated for participation herein by the Committee shall be eligible to
participate in the Plan, provided that each of such employees does not own, for
purposes of Section 423 of the Code, immediately after the right is granted,
stock possessing 5% or more of the total combined voting power or value of all
classes of capital stock of the Company or of a Subsidiary.
4.2 The Committee may also exclude from participation in the Plan any or all of
(i) a group of highly compensated employees designated by the Committee as being
ineligible to participate in the Plan as permitted by Section 423(b)(4)(D) of
the Code, (ii) employees who have been employed by the Company or any Subsidiary
for less than two years, (iii) employees whose customary employment is for not
more than five months in any calendar year, and (iv) employees who customarily
work 20 hours per week or less. The employment of an employee of a Subsidiary
which ceases to be a "Subsidiary" as defined herein shall, automatically and
without any further action, be deemed to have terminated as a result thereof
(and such employee shall cease to be an Eligible Employee hereunder).
V. Election to Participate and Payroll Deductions
5.1 Each Eligible Employee may elect to participate in the Plan during the
Enrollment Period immediately prior to the beginning of each Offer Period during
a Plan Year. Each Eligible Employee may elect a payroll deduction of from 1% to
25% of Eligible Compensation from each paycheck, in increments of 1% (i.e., 1%,
2%, 3%, etc.), unless otherwise so provided by the Committee. Elections under
this Section V are subject to the limits set forth in Section VI. All payroll
deductions shall be credited, as promptly as practicable, to a Payroll Account
in the name of the Participating Employee. All funds held by the Company under
the Plan shall not be segregated from other corporate funds (except that the
Company may in its discretion establish separate bank or investment accounts in
its own name) and may be used by the Company for any corporate purpose.
5.2 Unless otherwise provided by the Committee, an election once made with
respect to an Offer Period may not be withdrawn, revoked or changed during such
Offer Period. If so provided by the Committee, an Eligible Employee who is a
Participating Employee immediately prior to the beginning of an Offer Period
will be deemed (i) to have elected to participate for such Offer Period and (ii)
to have authorized the same percentage payroll deduction for such Offer Period
in effect for such Eligible Employee as that in effect (without regard to
Section VI) on the day before such Offer Period. The Committee may adopt the
procedures set forth in the foregoing sentence for some but not all Offer
Periods (for example, for Offer Periods commencing after the beginning of a
calendar year but not for Offer Periods commencing on January 1).
VI. Limitation of Number of Shares That an Employee May Purchase
6.1 No right to purchase Shares under the Plan shall permit an employee to
purchase stock under all employee stock purchase plans of the Company and its
subsidiaries (as defined for purposes of Section 423 of the Code) at a rate
which in the aggregate exceeds $25,000 of the Fair Market Value of such stock
(determined under Section 423 of the Code at the time the right is granted) for
each calendar year in which the right is outstanding at any time. No employee
may purchase more than 5,000 Shares, or such other number of Shares as the
Committee may from time to time provide, for any one Offer Period.
VII. Purchase Price
7.1 The purchase price for each Share shall be the lesser of (i) 85% of the Fair
Market Value of such Shares on the Offer Date and (ii) 85% of the Fair Market
Value of such Shares on the Purchase Date.
<PAGE>
VIII. Method of Purchase
8.1 As of the Purchase Date, each Participating Employee shall be deemed,
without any further action, to have purchased the number of whole Shares which
the balance of his or her Payroll Account at that time will purchase, determined
by dividing the balance in his or her Payroll Account not theretofore invested
by the purchase price as determined in Section VII.
8.2 All Shares purchased as provided in the foregoing paragraph shall be
initially maintained in separate Stock Accounts for the Participating Employees
at a brokerage firm selected by, and pursuant to an arrangement with, the
Company. A Participating Employee shall be free to undertake a disposition (as
that term is defined in Section 424 of the Code) of the Shares in his or her
Stock Account at any time, whether by sale, exchange, gift or other transfer of
legal title, but, in the absence of such a disposition of such Shares, unless
otherwise provided by the Committee, the Shares must remain in the Participating
Employee's Stock Account at the brokerage firm so selected until the holding
period set forth in Section 423(a) of the Code has been satisfied. With respect
to those Shares for which the Section 423(a) holding period has been satisfied,
the Participating Employee may, without limitation, move those Shares to another
brokerage account of the Participating Employee's choosing or request that a
stock certificate be issued and delivered to him or her.
8.3 If and to the extent provided by the Committee, for so long as such Shares
are maintained in Stock Accounts, all dividends paid with respect to such Shares
may be credited to each Participating Employee's Stock Account, and will be
automatically reinvested in whole Shares. The Committee may provide that
transaction fees incurred with respect to dividend reinvestment be paid by
either the Company or the Participating Employee.
8.4 Unless otherwise provided by the Committee, in no event shall fractional
Shares be purchased hereunder, and any remaining cash in a Participating
Employee's Payroll Account resulting from such failure to invest in fractional
Shares shall remain in the Payroll Account for use in the next Option Period;
provided, however, that, if the Participating Employee is not an active
Participating Employee for such next Option Period, such remaining cash shall be
returned to the Participating Employee as soon as practicable. Notwithstanding
any other provision of the Plan, the Committee may permit the purchase of
fractional Shares hereunder and establish rules and procedures relating thereto.
IX. Termination of Employment
9.1 In the event of a Participating Employee's termination of employment during
an Offer Period (regardless of the reason therefor and regardless of the party
initiating the termination), then, notwithstanding any other provision of the
Plan to the contrary, the balance in the Participating Employee's Payroll
Account not theretofore invested, shall be refunded to him or her in full as
soon as practicable. In the event of his or her death, such refund shall be paid
to his or her estate.
X. Title of Stock Accounts
10.1 Each Stock Account may be in the name of the Participating Employee or, if
permitted by the Committee and the Participating Employee so indicates on the
appropriate form, in his or her name jointly with another person, with right of
survivorship. If permitted by the Committee, a Participating Employee who is a
resident of a jurisdiction that does not recognize such a joint tenancy may have
a Stock Account in his or her name as tenant in common with another person
without right of survivorship. To the extent the Committee allows for the
purchase of fractional Shares, in the event that a Participating Employee
directs in accordance with the Plan that his or her Shares be transferred from
the applicable Stock Account, any fractional Shares in the Participating
Employee's Stock Account shall be paid in cash in accordance with the generally
applicable rules and procedures of the brokerage firm maintaining the Stock
Accounts.
<PAGE>
XI. Rights as a Stockholder
11.1 At the time funds from a Participating Employee's Payroll Account are used
to purchase the Common Stock, he or she shall have all of the rights and
privileges of a stockholder of the Company with respect to the Shares purchased
under the Plan whether or not certificates representing such Shares have been
issued.
XII. Rights Not Transferable
12.1 Rights granted under the Plan are not transferable by a Participating
Employee other than by will or the laws of descent and distribution and are
exercisable during his or her lifetime only by him or her.
XIII. Adjustment in Case of Changes Affecting Common Stock
13.1 If (i) the Company shall at any time be involved in a merger,
consolidation, dissolution, liquidation, reorganization, exchange of shares,
sale of all or substantially all of the assets or stock of the Company or its
Subsidiaries or a transaction similar thereto, (ii) any stock dividend, stock
split, reverse stock split, stock combination, reclassification,
recapitalization or other similar change in the capital structure of the
Company, or any distribution to holders of Common Stock other than cash
dividends, shall occur or (iii) any other event shall occur which in the
judgment of the Committee necessitates action by way of adjusting the number or
kind of shares, or both, which thereafter may be sold under the Plan, then the
Committee may forthwith take any such action as in its judgment shall be
necessary to preserve to the Participating Employees' rights substantially
proportionate to the rights existing prior to such event, and to maintain the
continuing availability of Shares under Section II and the last sentence of
Section VI (if Shares are otherwise then available) in a manner consistent with
the intent hereof, including, without limitation, adjustments in (x) the number
and kind of shares subject to the Plan, (y) the purchase price of such shares
under the Plan, and (z) the number and kind of shares available under Section II
and the last sentence of Section VI. To the extent that such action shall
include an increase or decrease in the number of Shares (or units of other
property then available) subject to the Plan, the number of Shares (or units)
available under Section II and the last sentence of Section VI above shall be
increased or decreased, as the case may be, proportionately, as may be provided
by Committee in its discretion.
13.2 Notwithstanding any other provision of the Plan, if the Common Stock ceases
to be listed or traded, as applicable, on a national stock exchange or
over-the-counter market (a "Triggering Event"), then, in the discretion of the
Committee, (i) the balance in the Participating Employee's Payroll Account not
theretofore invested may be refunded to the Participating Employee, and such
Participating Employee shall have no further rights or benefits under the Plan,
(ii) an amount equal to the product of the Fair Market Value of a Share on the
date of the Triggering Event multiplied by the number of Shares such
Participating Employee would have been able to purchase with the balance of his
or her Payroll Account on such Triggering Event if such Triggering Event were
the Purchase Date may be paid to the Participating Employee, and such
Participating Employee shall have no further rights or benefits under the Plan,
or (iii) the Plan may be continued without regard to the application of this
sentence.
XIV. Amendment of the Plan
14.1 The Board of Directors may at any time, or from time to time, amend the
Plan in any respect; provided, however, that the Plan may not be amended in any
way that would cause, if such amendment were not approved Company's
shareholders, the Plan to fail to comply with
(i) the requirements for employee stock purchase plans under Section
423 of the Code; or
(ii) any other requirement of applicable law or regulation;
unless and until stockholder approval is obtained. No amendment of the Plan
shall alter or impair any rights outstanding at the time of the such amendment
to purchase Shares pursuant to any offer hereunder.
<PAGE>
XV. Termination of the Plan
15.1 The Plan and all rights of employees hereunder shall terminate:
(i) on the date that Participating Employees become entitled to
purchase a number of Shares greater than the number of reserved
Shares remaining available for purchase; or
(ii) at any time, at the discretion of the Board of Directors.
15.2 In the event that the Plan terminates under circumstances described in (i)
above, reserved Shares remaining as of the termination date shall be subject to
Participating Employees on a pro rata basis. No termination of the Plan shall
alter or impair any rights outstanding at the time of such termination to
purchase Shares pursuant to any offering of the right to purchase Shares
hereunder.
XVI. Governmental and Other Regulations; Further Assurances
16.1 The Plan, and the grant and exercise of the rights to purchase Shares
hereunder, and the Company's obligation to sell and deliver Shares upon the
exercise of rights to purchase Shares, shall be subject to all applicable
federal, state and foreign laws, rules and regulations, and to such approvals by
any regulatory or governmental agency as may be required. The Company shall not
be required to issue or deliver any certificates for Shares prior to the
completion of any registration or qualification of such Shares under, and the
obtaining of any approval under or compliance with, any state or federal law, or
any ruling or regulation of any government body which the Company shall, in its
sole discretion, determine to be necessary or advisable. Certificates for Shares
issued hereunder may be legended as the Committee may deem appropriate.
16.2 The Participating Employee shall take whatever additional actions and
execute whatever additional documents the Committee may in its reasonable
judgment deem necessary or advisable in order to carry out or effect one or more
of the obligations or restrictions imposed on the Participating Employee
pursuant to the Plan.
XVII. Non-U.S. Subsidiaries
17.1 Without amending the Plan, the Committee may allow for participation under
the terms hereunder by Eligible Employees of non-U.S. Subsidiaries with such
modifications of the terms and conditions otherwise specified hereunder as may
in the judgment of the Committee be necessary or desirable to foster and promote
achievement of the purposes hereof. In furtherance of such purposes, the
Committee may make such amendments, procedures and the like as may be necessary
or advisable to comply with provisions of laws (including tax laws) in other
countries in which such Subsidiaries operate or have employees. Without limiting
the generality of the foregoing, and notwithstanding any other provision of the
Plan, the participation hereunder of each participating non-U.S. Subsidiary
shall be deemed to be under a separate and distinct plan rather than under the
Plan. Notwithstanding the foregoing, any limitations on the number of Shares set
forth hereunder shall be applied and administered with respect to the aggregate
of the Plan and all such separate plans.
XVIII. Indemnification of Committee
18.1 The Company shall indemnify and hold harmless the members of the Board of
Directors of the Company and the members of the Committee from and against any
and all liabilities, costs and expenses incurred by such persons as a result of
any act or omission to act in connection with the performance of such person's
duties, responsibilities and obligations under the Plan if such person acts in
good faith and in a manner that he or she reasonably believes to be in, or not
opposed to, the best interests of the Company, to the maximum extent permitted
by law.
<PAGE>
XIX. Withholding; Disqualifying Dispositions
19.1 Notwithstanding any other provision of the Plan, the Company shall deduct
from all Payroll Accounts paid under the Plan all federal, state, local and
other taxes required by law to be withheld with respect to such payments.
19.2 If Shares acquired under the Plan are disposed of in a disposition that
does not satisfy the holding period requirements of Section 423(a) of the Code,
such Participating Employee shall notify the Company in writing as soon as
practicable thereafter of the date and terms of such disposition and, if the
Company (or any affiliate thereof) thereupon has a tax-withholding obligation,
shall pay to the Company (or such affiliate) an amount equal to any withholding
tax the Company (or affiliate) is required to pay as a result of the
disqualifying disposition (or satisfy such other arrangements as may be
permitted by the Committee.)
XX. Notices
20.1 All notices under the Plan shall be in writing (which for these purposes
shall include reasonably acceptable means of electronic transmission), and if to
the Company, shall be delivered to the Board of Directors or mailed to its
principal office, addressed to the attention of the Board of Directors; and if
to a Participating Employee, shall be delivered personally or mailed to such
Participating Employee at the address appearing in the records of the Company.
Such addresses may be changed at any time by written notice to the other party
given in accordance with this Section XX.
XXI. Severability
21.1 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.
XXII. No Right to Continued Employment
22.1 The Plan and any right to purchase Common Stock granted hereunder shall not
confer upon any employee any right with respect to continued employment by the
Company or any Subsidiary, nor shall they restrict or interfere in any way with
the right of the Company or any Subsidiary by which an employee is employed to
terminate his or her employment at any time.
XXIII. Captions
23.1 The use of captions in the Plan is for convenience. The captions are not
intended to and do not provide substantive rights.
XXIV. Effective Date of the Plan
24.1 The Plan shall be effective as of the Effective Date, provided that the
Plan is approved by the stockholders prior thereto.
XXV. Governing Law
25.1 The provisions of the Plan shall be governed by and construed in accordance
with the laws of the State of New York.
<PAGE>
Notice: If you plan on attending the 1999 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 25, 1999, 10:00 a.m. (Eastern Daylight Time)
Islandia Marriott Hotel
3635 Express Drive North
Hauppauge, NY 11788
1-516-232-3000
From East of Islandia: Take 495 West to Exit 58 (Old Nichols Road). The Islandia
Marriott Hotel is on the right.
From West of Islandia: Take 495 East to Exit 58 (Old Nichols Road). Go North on
Old Nichols Road. Make a left on Express Drive North. The Islandia Marriott
Hotel is on the right.
PLEASE VOTE YOUR SHARES VIA THE TELEPHONE OR INTERNET, OR
SIGN, DATE, AND RETURN
THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
Admission Ticket
Computer Associates
Software superior by design
Annual Meeting Of Stockholders
Islandia Marriott Hotel
3635 Express Drive North
Hauppauge, NY 11788
1-516-232-3000
August 25, 1999
10:00 a.m. EDT
Admit ONE
