Computer Associates 2006 Annual Report Download - page 96

Change in Control Severance Policy
The Company currently maintains a Change in Control Severance Policy (the “Policy”), which was approved by the
Board of Directors on October 18, 2004 and covers such senior executives of the Company as the Board of Directors
may designate from time to time. Currently, ten executives of the Company are covered by the Policy.
The Policy provides for certain payments and benefits in the event that, following a change in control or potential
change in control of the Company, a covered executive’s employment is terminated either without cause by the
Company or for good reason by the executive. The amount of the severance payment would range from 1.00 to
2.99 times an executive’s annual base salary and bonus as determined from time to time by the Board of Directors,
as specified in Schedules A, B and C to the Policy. John A. Swainson and Michael Christenson are Schedule A
participants in the Policy and, thus, would be entitled to severance payments equal to 2.99 times their respective
annual base salaries and bonuses. Gary Quinn, as a Schedule B participant, would be entitled to a severance
payment equal to 2.00 times his annual base salary and bonus and Russell Artzt would be entitled to a severance
payment equal to 1.00 times his annual base salary and bonus. The Policy also provides the following additional
benefits: (a) pro-rated target bonus payments for the year of termination, (b) a payment equal to the cost of
18 months’ continued health coverage, (c) one year of outplacement services, (d) if applicable, certain relocation
expenses and (e) payments to make the executive whole with respect to excise taxes under certain conditions. Under
the Policy, a “change in control” would include, among other things, (a) the acquisition of 35% or more of the
Company’s voting power, (b) a change in a majority of the incumbent members of the Company’s Board of
Directors, (c) the sale of all or substantially all the Company’s assets, (d) the consummation of certain mergers or
other business combinations, and (e) stockholder approval of a plan of liquidation or dissolution.
Deferred Compensation Plan for John A. Swainson
On April 29, 2005, the Company entered into a deferred compensation plan and related trust agreement for the
benefit of John A. Swainson. The plan and trust fulfill the Company’s obligation under Mr. Swainson’s employment
agreement entered into on November 22, 2004, to provide him with the present value of $2.8 million in respect of
certain benefits he would have received had he remained employed with IBM plus interest on such amount since the
execution of Mr. Swainson’s employment agreement. Mr. Swainson had an initial deferred compensation account
balance of $2,835,000 and is entitled to notionally allocate his account balance among various investment options
(generally those options available to the Company’s U.S. employees under their qualified 401(k) plan) for the
purpose of determining the value of his account. The plan provides for Mr. Swainson to receive in cash the lump sum
value of his deferred compensation balance upon the earliest of his death, six months after his “separation from
service” or a “change in control” (as each term is defined in the plan document). The trust is in the form of a “rabbi
trust” whose assets are subject to the claims of the Company’s creditors.
Executive Deferred Compensation Plan
The Company offers to senior executives, including the Named Executive Officers, the opportunity to defer a
portion of their cash bonus compensation payable under the Company’s Annual Bonus program with respect to a
given fiscal year. Among other things, this plan promotes the interest of the Company and its stockholders by
encouraging certain key employees to remain in the employ of the Company by providing them with a means by
which they may request to defer receipt of a portion of their compensation. Compensation that is deferred is credited
to a participant’s account, which is indexed to one or more investment options chosen by the participant. The
amount credited is adjusted for, among other things, hypothetical investment earnings, expenses and gains or losses
to the investment options. The investment options generally track those options available to the Company’s
U.S. employees under their qualified 401(k) plan.
In accordance with the terms of the executive deferred compensation plan, a participant receives a lump sum
distribution of the value of his or her deferral account after the earliest of death, disability, six months after
“separation from service”, a termination in connection with a “change in control” (as each term is defined in the
plan document) or a date specified by the participant (generally 5, 10 or 15 years following the end of the
performance period relating to the bonus that is being deferred). As explained in the Compensation and Human
Resource Committee Report on Executive Compensation, executives did not receive any payments under the
Company’s Annual Bonus program for fiscal year 2006 and, therefore, no amounts were deferred under this plan
76