Computer Associates 2004 Annual Report Download - page 91

The Company leases real estate and certain data processing and other equipment with lease terms expiring through 2023.
The leases are operating leases and provide for renewal options and additional rentals based on escalations in operating
expenses and real estate taxes. The Company has no material capital leases.
Rental expense under operating leases for the fiscal years ended March 31, 2004, 2003, and 2002, was $191 million,
$217 million, and $220 million, respectively. Future minimum lease payments are: 2005 — $135 million; 2006 — $102 million;
2007 — $72 million; 2008 — $45 million; 2009 — $35 million; and thereafter — $87 million. These future minimum lease
payments include sublease income of: 2005 — $31 million; 2006 — $28 million; 2007 — $26 million; 2008 — $24 million;
2009 — $20 million; and thereafter — $39 million.
The Company has commitments to invest approximately $3 million in connection with joint venture agreements.
In prior fiscal years, the Company sold individual accounts receivable under the prior business model to an external third
party subject to certain recourse provisions. These amounts subject to recourse approximated $127 million and $141 million
as of March 31, 2004 and 2003, respectively.
The Company, its former Chairman and CEO Charles B. Wang, its former Chairman and CEO Sanjay Kumar, and
Russell M. Artzt were defendants in a number of stockholder class action lawsuits, the first of which was filed July 23,
1998, alleging that a class consisting of all persons who purchased the Company’s common stock during the period from
January 20, 1998, until July 22, 1998, were harmed by misleading statements, misrepresentations, and omissions
regarding the Company’s future financial performance. These cases, which sought monetary damages, were consolidated
into a single action in the United States District Court for the Eastern District of New York (the Federal Court), the
proposed class was certified, and discovery was completed. Additionally, in February and March 2002, a number of
stockholder lawsuits were filed in the Federal Court against the Company and Messrs. Wang, Kumar, Ira H. Zar, the
Company’s former Chief Financial Officer, and in one instance, Mr. Artzt. The lawsuits generally alleged, among other
things, that the Company made misleading statements of material fact or omitted to state material facts necessary in order
to make the statements made, in light of the circumstances under which they were made, not misleading in connection
with the Company’s financial performance. Each of the named individual plaintiffs in the 2002 lawsuits sought to
represent a class consisting of purchasers of the Company’s common stock and call options and sellers of put options for
the period from May 28, 1999, through February 25, 2002. The 2002 cases were consolidated, and the Company’s
former independent auditor, Ernst & Young LLP, was named as a defendant. In addition, in May 2003, a class action
lawsuit captioned John A. Ambler v. Computer Associates International, Inc., et al. was filed in the Federal Court. The
complaint in this matter, a purported class action on behalf of the Computer Associates Savings Harvest Plan (the CASH
Plan) and the participants and beneficiaries of the CASH Plan for a class period running from March 30, 1998, through
May 30, 2003, asserted claims of breach of fiduciary duty under ERISA, the federal Employee Retirement Income
Security Act. The named defendants were the Company, the Company’s Board of Directors, the CASH Plan, the
Administrative Committee of the CASH Plan, and the following current or former employees and/or directors of the
Company: Charles B. Wang; Sanjay Kumar; Ira Zar; Russell M. Artzt; Peter A. Schwartz; Charles P. McWade; and various
unidentified alleged fiduciaries of the CASH Plan. The complaint alleged that the defendants breached their fiduciary
duties by causing the CASH Plan to invest in Company securities and sought damages in an unspecified amount.
A derivative lawsuit was filed against certain current and former directors of the Company, based on essentially the same
allegations as those contained in the February and March 2002 stockholder lawsuits discussed above. This action was
commenced in April 2002 in Delaware Chancery Court, and an amended complaint was filed in November 2002. The
defendants named in the amended complaints were the Company as a nominal defendant, current Company directors
Messrs. Artzt, Lewis S. Ranieri, and Alfonse M. D’Amato, and former Company directors Ms. Shirley Strum Kenny and
Messrs. Wang, Kumar, Willem de Vogel, Richard Grasso, and Roel Pieper. The derivative suit alleged breach of fiduciary
duties on the part of all the individual defendants and, as against the current and former management director defendants,
insider trading on the basis of allegedly misappropriated confidential, material information. The amended complaints
sought an accounting and recovery on behalf of the Company of an unspecified amount of damages, including recovery
of the profits allegedly realized from the sale of common stock of the Company.
On August 25, 2003, the Company announced the settlement of all outstanding litigation related to the above-referenced
stockholder and derivative actions as well as the settlement of an additional derivative action filed in the Federal Court in
connection with the settlement. Following the approval of the Federal Court, which was granted in December 2003, the
Company agreed to issue a total of up to 5.7 million shares of common stock to the shareholders represented in the three
class action lawsuits, including payment of attorneys’ fees. The settlement provides that if the Company’s share price is
below $23.43 per share at the time of distribution, up to 2.2 million of the 5.7 million shares will be payable in cash at
that price — or approximately $52 million in cash. In that case, the stock portion of the settlement would be reduced
to no less than 3.5 million shares. In January 2004, approximately 1.6 million settlement shares were issued along
with approximately $3.3 million to the plaintiffs’ attorneys for attorney fees and related expenses. In March 2004,
approximately 0.2 million settlement shares were issued to participants and beneficiaries of the CASH Plan. The
CA 2004 FORM 10-K | PAGE 63
Note 7 — Commitments and Contingencies