<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.142-12
Cray Research, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Cray Research, Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/x/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:*
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO]
March 31, 1994
Dear Stockholder:
The date for this year's Annual Meeting is Tuesday, May 17. It will be held at
the Minnesota Historical Society, in St. Paul, beginning at 10:00 a.m.
The Annual Meeting is an opportunity for you to meet the directors of your
Company and some of the people who manage it.
It is very important that your shares be represented at the meeting, whether you
can attend or not, and I urge you to sign and return your proxy card in the
enclosed envelope.
Sincerely,
John F. Carlson
Chairman and
Chief Executive Officer
<PAGE>
CRAY RESEARCH, INC.
655A Lone Oak Drive
Eagan, Minnesota 55121
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 1994 Annual Meeting of Stockholders of Cray Research, Inc. (the "Company")
will be held at the Minnesota Historical Society, 345 Kellogg Boulevard West,
St. Paul, Minnesota, at 10:00 a.m. on May 17, 1994, for the following purposes:
(1) To elect eight directors for the following year;
(2) To ratify the appointment of KPMG Peat Marwick as independent auditors
for the Company for the year ending December 31, 1994; and
(3) To transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on March 21, 1994, will be
entitled to vote at the meeting or any adjournments.
By Order of the Board of Directors,
David E. Frasch
Secretary
March 31, 1994
<PAGE>
CRAY RESEARCH, INC.
655A Lone Oak Drive
Eagan, Minnesota 55121
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Cray Research, Inc. of proxies in the accompanying form
from holders of shares of Common Stock to be voted at the Annual Meeting of
Stockholders to be held at 10:00 a.m. on May 17, 1994, at the Minnesota
Historical Society, 345 Kellogg Boulevard West, St. Paul, Minnesota.
Stockholders of record as of the close of business on March 21, 1994, will be
entitled to vote at the meeting or any adjournments. On that date, the Company
had 25,905,745 shares of Common Stock outstanding. Each share is entitled to one
vote. The presence of 12,952,873 shares, in person or by proxy, will constitute
a quorum for the meeting. A stockholder may revoke a proxy at any time before it
is exercised by filing with the Secretary of the Company a written statement
revoking the proxy or another proxy bearing a later date. When a proxy card is
returned properly signed, the shares represented will be voted in accordance
with the stockholder's directions. If no directions are indicated on the proxy
card, the shares will be voted in favor of adopting the proposals to be
considered at the meeting.
The cost of solicitation of proxies will be borne by the Company. In addition to
solicitation by mail, the Company has engaged Georgeson & Company, Inc. to
solicit on behalf of the Board of Directors proxies from beneficial owners of
the Company's Common Stock held by brokers, bank nominees and other
institutional holders. This firm will be paid approximately $10,000 and will be
reimbursed for certain of its expenses in connection with its proxy
solicitation. The Company will also reimburse brokers and other persons holding
stock in their names or in the names of nominees for expenses incurred in
sending proxy material to beneficial owners and obtaining their proxies.
Additionally, there may be incidental personal solicitation at nominal expense
made by regular employees of the Company.
This Proxy Statement and the enclosed form of proxy will be mailed to each
stockholder on or about March 31, 1994, together with the Annual Report to
Stockholders of the Company for the year ended December 31, 1993. Such Annual
Report to Stockholders does not form any part of the material for the
solicitation of proxies.
2
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table contains information as of February 28, 1994, regarding
beneficial ownership of Common Stock of the Company, its only class of voting
securities, by each person known by the Company to own 5% or more of such
outstanding shares, each director, each nominee for director, each of the
executive officers named in the "Summary Compensation Table" below and the
executive officers and directors as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP(1)(5) OF CLASS
<S> <C> <C>
- -------------------------------------------------------------------------------------------
Boatmen's Bancshares, Inc. 1,335,438(2) 5.2
One Boatmen's Plaza
St. Louis, Missouri 63101
State Treasurer, State of Michigan 2,370,460(3) 9.2
P.O. Box 15128
Lansing, Michigan 48901
Mellon Bank Corporation 2,712,000(4) 10.5
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
John F. Carlson 64,429 *
5,508(6) *
Lester T. Davis 57,574 *
Livio D. DeSimone 11,600 *
100(7)
Carl W. Diem 22,019 *
Lawrence E. Eaton 1,000 *
Robert H. Ewald 43,914 *
Catherine M. Hapka -- *
Philip G. Heasley -- *
Robert G. Potter 8,500 *
Andrew Scott 51,550 *
7,000(8)
Jan H. Suwinski 2,800 *
All executive officers and directors as a group 376,634(9) 1.5
(13 persons)
<FN>
- ---------
* Less than 1%.
(1) Beneficial ownership results from sole voting and investment power except
as noted in footnotes below.
(2) Information was derived from the stockholder's Schedule 13G as of January
28, 1994, which reported aggregate beneficial ownership of 1,335,438
shares, with sole voting power as to 1,311,824 shares, shared voting power
as to 21,214 shares, sole dispositive power as to 0 shares and shared
dispositive power as to 1,330,928 shares.
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
(3) Information was based on the stockholder's Schedule 13D as of December 11,
1990, and Form 13F as of December 31, 1993.
(4) Information was derived from the stockholder's Schedule 13G as of February
11, 1994, which reported aggregate beneficial ownership of 2,712,000
shares, with sole voting power as to 1,854,000 shares, shared voting power
as to 70,000 shares, sole dispositive power as to 2,225,000 shares and
shared dispositive power as to 487,000 shares.
(5) Includes shares which the officer or director has the right to acquire
within 60 days upon exercise of presently outstanding stock options as
follows: John F. Carlson -- 53,985; Lester T. Davis -- 28,083; Livio D.
DeSimone -- 11,500; Carl W. Diem -- 19,225; Robert H. Ewald -- 41,622;
Robert G. Potter -- 8,250; Andrew Scott -- 31,481; Jan H. Suwinski --
2,500.
(6) Mr. Carlson disclaims beneficial ownership of these shares, which are
owned by his spouse and children.
(7) Mr. DeSimone disclaims beneficial ownership of these shares, which are
owned by his spouse.
(8) Mr. Scott disclaims beneficial ownership of these shares, which are owned
by his spouse.
(9) Includes 275,727 shares which certain of the officers and directors have
the right to acquire within 60 days upon exercise of presently outstanding
stock options. Also included in the total number of shares beneficially
owned by the group are 16,939 shares which were individually owned by the
spouses or children of four officers and directors. Of the number of
shares beneficially owned by the group, 99,907 shares were outstanding on
February 28, 1994 and, if outstanding on the record date, would be
entitled to vote at the meeting (less than 1% of all shares entitled to
vote).
</TABLE>
ELECTION OF DIRECTORS
Eight directors of the Company are to be elected at the meeting to hold office
until the next annual meeting and until their successors are elected. The
affirmative vote of stockholders holding a majority of shares of Common Stock
present in person or represented by proxy is necessary for the election of each
nominee. The proxies named on the enclosed proxy card intend to vote FOR the
election of the eight nominees named below, unless otherwise instructed. All of
the nominees except Mr. Eaton are presently members of the Board of
4
<PAGE>
Directors. In the event any nominee should become unable or unwilling to serve
as a director, it is intended that the persons acting under the proxy will vote
for the election, in his or her stead, of such other person as the Board of
Directors of the Company may recommend.
<TABLE>
<CAPTION>
SERVED AS
NAME AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
<S> <C> <C>
- ------------------------------------------------------------------------------------------------
John F. Carlson 55 Chairman and Chief Executive Officer of the 1991
Company
Lester T. Davis 63 Chief Operating Officer of the Company 1990
Lawrence E. Eaton 56 Executive Vice President Information, Imaging and --
Electronic Sector and Corporate Services, 3M
Company (Diversified Manufacturing) St. Paul,
Minnesota
Catherine M. Hapka 39 Vice President Advanced Communications Services, 1994
US WEST Communications, Inc. (Data
Communications) Minneapolis, Minnesota
Philip G. Heasley 44 Vice Chairman, First Bank Systems, Inc. and 1994
President Retail Product Group (Banking)
Minneapolis, Minnesota
Robert G. Potter 54 Executive Vice President, Monsanto Company and 1990
President, The Chemical Group (Chemicals) St.
Louis, Missouri
Andrew Scott 65 Vice Chairman and Counsel of the Company 1973
Jan H. Suwinski 52 Executive Vice President, Opto-Electronics Group, 1992
Corning Inc. (Specialty materials and laboratory
services) Corning, New York
</TABLE>
The principal occupations of all the nominees for director are indicated in the
preceding table. All nominees except Ms. Hapka have served their respective
employers in either their present positions or other executive capacities for
more than five years. Ms. Hapka was President of Data Services Division for
Control Data Corporation from 1989-1990, prior to joining US WEST
Communications, Inc., as Vice President, Advanced Communication Services in May,
1991.
Nominees for election to the Company's Board of Directors serve as directors of
other publicly held corporations as follows: Mr. Carlson -- TSI, Incorporated;
Mr. Eaton -- 3M Company.
During 1993 there were six meetings of the Board of Directors. The Board's Audit
Committee met two times, its Compensation and Development Committee met six
times and its Finance Committee met two times. The Board of Directors does not
have a Nominating Committee or a committee performing similar functions.
The Audit Committee, consisting of Livio D. DeSimone (Chairman), Robert G.
Potter, and Jan H. Suwinski, performs principally the following functions:
recommends to the Board of Directors the engagement of the Company's independent
auditors; reviews with the independent auditors the plan and results of the
auditing engagement; reviews the adequacy
5
<PAGE>
of the internal accounting controls; reviews the range of audit and non-audit
professional service fees; approves such services; and considers the
independence of the Company's independent auditors.
The Compensation and Development Committee (formerly the Compensation
Committee), consisting of Robert G. Potter (Chairman), Livio D. DeSimone,
Catherine M. Hapka and Jan H. Suwinski, reviews and recommends for approval to
the Board of Directors the remuneration arrangements for the Company's executive
officers and directors and the adoption of compensation and option plans in
which these persons and other key employees of the Company may participate. The
Compensation and Development Committee is directly responsible for granting all
options to participants under the Company's stock option plans (other than the
1989 Non-Employee Directors' Stock Option Plan), and it recommends to the Board
benefits payable to employees under the Company's other benefit plans.
The Finance Committee, consisting of Jan H. Suwinski (Chairman), Livio D.
DeSimone, and Robert G. Potter, reviews the Company's current and long range
financial position, financial policies and performance objectives; makes
recommendations to the Board of Directors on allocation of capital and banking
relationships; evaluates retirement plan investment management and fund
performance; and recommends share reserves for the Company's stock programs.
Mr. Livio D. DeSimone, who has served as a director since 1986, will retire from
the Board at this year's annual meeting. He is Chairman and CEO of 3M Company
and serves as a director of 3M, Dayton Hudson Corporation, General Mills, Inc.
and Vulcan Materials Company.
COMPENSATION OF DIRECTORS
The Company paid each director during the year ended December 31, 1993, other
than Messrs. Carlson, Davis, and Scott, directors' fees of $20,000 plus $1,000
for each Board and committee meeting attended. Chairmen of the Audit,
Compensation and Development and Finance Committees also received an additional
$1,500 for chairing those committees.
Under a retirement income plan established for non-employee directors, after
retirement from the Board, each director will receive a retirement benefit equal
to the final annual retainer times the number of years served on the Board of
Directors or 15 years, whichever is less. The amount is payable annually for a
period not to exceed 15 years, or in a lump sum equivalent, at the director's
option. In 1993, the Company accrued $99,459 of expense and made payments
totalling $265,791 under the plan.
The 1989 Non-Employee Directors' Stock Option Plan (the "Directors' Plan")
provides for the issuance to non-employee directors of the Company of options to
purchase authorized but unissued or reacquired Common Stock. The Directors' Plan
provides for the granting of an initial option for 10,000 shares of Common Stock
on the date the director first assumes office as a director and the grant of an
option for an additional 1,000 shares upon the reelection of such director at
each subsequent annual stockholders' meeting. The options granted under the
Directors' Plan are "nonstatutory options" not qualifying under Section 422A or
other similar
6
<PAGE>
provisions of the Internal Revenue Code. The option price per share for options
granted under the Directors' Plan is the closing price for the Common Stock on
the New York Stock Exchange on the date of grant. The options granted are
exercisable in four successive 25% cumulative annual installments commencing one
year after the date of grant and expire ten years from the date of grant if
unexercised.
EXECUTIVE COMPENSATION
COMPENSATION AND DEVELOPMENT COMMITTEE REPORT
Composed entirely of outside directors, the Compensation and Development
Committee of the Board of Directors (the "Committee") is responsible for
reviewing and approving remuneration arrangements for the Company's executive
officers and the adoption and administration of compensation and stock option
plans in which these individuals and other key employees participate. In
addition, they review and provide direction for the development of future
leadership to meet the long term organization and growth requirements of the
Company.
The Company's executive compensation philosophy is to pay for individual and
Company results in a manner that is competitive with companies of similar
revenue size in the computer industry. Standard industry compensation surveys,
which include companies in the S&P 500 Computer Systems Index and other computer
companies, are used, and the comparison group for a position represents an
industry sample of sufficient size to produce meaningful pay comparisons and pay
statistics. Competitiveness is measured taking into consideration base salary,
annual bonus, and long-term incentive compensation plans. An executive officer's
total cash compensation (salary and bonus) is targeted at the average of the
comparison group.
BASE SALARY: Salaries for individual positions are evaluated to assure
competitiveness of total cash compensation in relation to the comparison group.
Executive officers receive merit increases based principally on individual
performance, overall Company financial performance, and general market
conditions. During 1993, executive officers did not receive merit increases due
to the Company's 1992 financial performance, however, some executive officers
were promoted to new positions during 1993 and received increases to reflect
their increased responsibilities. Compensation for the majority of the officers
was below market.
SHORT-TERM INCENTIVES: Executive officers are eligible for cash bonuses under
the Company's Annual Incentive Plan, a broad-based incentive plan covering mid-
and upper-level management and technical employees. Target incentive levels are
set between 45% and 60% of salary for executive officers. Payouts with respect
to 1993 were based on Company performance as well as individual performance
against objectives which directly supported the achievement of the Company
goals. Company performance for 1993 was measured on the basis of annual revenue
and earnings per share growth, as well as performance on specific technical
objectives. The technical objectives goal in 1993 consisted of key milestones in
development projects, reliability improvement, and applications. The revenue
growth target was an increase of 11.5% over 1992 and the earnings per share
growth target was a 257% increase over 1992's pre-
7
<PAGE>
restructure earnings per share of $.70. The revenue growth goal, earnings per
share growth goal, and technical objectives as a group were weighted equally in
determining Company performance.
In 1993, the revenue growth goal was exceeded, performance on the earnings per
share goal was slightly below target, and the technical objectives goal was
completed above target. Company performance against these measures resulted in a
slightly higher than target level payout, expressed as a Company Performance
Ratio. In 1993, plan participants' individual performances against their own
objectives were evaluated and individual award percentages were determined.
Actual payouts to plan participants (as a percentage of salary) were calculated
by multiplying each participant's individual award percentage by the Company
Performance Ratio. Some executive officers received awards greater than target
due to extraordinary individual contributions in achieving Company goals.
In addition, executive officers participate in the Incentive Cash Profit Sharing
Plan, a Company-wide plan which generates cash awards to employees based on
achievement of a preestablished level of financial performance. For 1993, the
plan performance measure was an earnings target and this plan did not pay
awards.
A special bonus equal to approximately one week of pay was awarded to
substantially all employees, including executive officers, in the Supercomputer
Operations and corporate administration groups because these groups exceeded
divisional goals.
Finally, executive officers participate in a deferred profit sharing program
which generates the only Company-sponsored retirement benefits. For 1993,
contributions of four percent of eligible wages were made by the Company to
deferred profit sharing, and the Company 401(k) match was fifty cents per dollar
of employee contribution, up to a maximum of $1,000.
LONG-TERM INCENTIVES: The Company grants stock options to a broad base of
employees under the 1989 Employee Benefit Stock Plan. The level of stock option
grants for executive officers is intended to be competitive with those of the
comparison group. Options are granted at fair market value on the date of grant.
The purpose of the plan is to align the interests of employees and the Company.
In 1993, executive officers were granted stock options at a level greater than
the competitive average because the Committee wanted to create a significant
incentive to increase shareholder value and in light of the fact no options were
granted to executive officers in 1992. These grants have value only as the
Company stock price increases.
The recently enacted Section 162(m) of the Internal Revenue Code generally
limits the corporate tax deduction for compensation paid to executive officers
named in the Summary Compensation Table to $1 million, unless certain
requirements are met. While the Company's compensation plans are performance
based plans, they do not meet all the requirements set forth in current proposed
regulations. The Internal Revenue Service is not expected to issue
8
<PAGE>
final regulations until sometime in 1994. Therefore, there is some uncertainty
in what the final interpretation of the law will be. The proposed regulations do
contain a "grandfather" provision for certain compensation paid under existing
plans.
The Compensation Committee has determined that based on current information
available, it is not necessary to modify the Company's compensation plans at
this time since the compensation paid to executive officers would either be less
than the $1 million limit or would be exempted under the "grandfather" provision
of the regulations and, therefore, deductible. The Committee will continue to
monitor and assess various alternatives concerning this issue in order to
maximize corporate tax deductions without limiting the Company's flexibility to
attract and retain qualified executives.
CEO REMUNERATION: As Chairman of the Board and Chief Executive Officer, Mr.
Carlson's 1993 compensation was tied directly to Company performance. His 1993
base salary was $357,442. He received a 15% increase over his 1992 base salary
in January 1993 when he was elected by the Board of Directors to serve as
Chairman of the Board and Chief Executive Officer. Based on comparison group
data, Mr. Carlson's 1993 base salary after the increase was below the market
average by more than twenty percent. Prior to his election to his current
position, he served in the position of President and Chief Operating Officer
since September 1991. His individual objectives for 1993 were substantially the
same as the Company's objectives of revenue and earnings per share growth, and
achievement of technical objectives. Company performance under the Annual
Incentive Plan was slightly above target overall and Mr. Carlson received a
bonus of 72.8% of his eligible wages for the year, a total bonus of $267,092.
The Committee awarded Mr. Carlson a bonus greater than target because of the
significant contributions he made in a difficult business environment. In
addition, in recognition of his promotion to Chairman and Chief Executive
Officer and to create a significant incentive to increase shareholder value, the
Committee awarded him a stock option covering 60,000 shares, granted at the fair
market value of $27.50 on the date of grant.
In 1993, former Chairman and Chief Executive Officer John Rollwagen received
$44,374 in base salary for the month of January. His annual salary had not
changed since December 1991. In January 1993 Mr. Rollwagen resigned and received
a severance payment of $384,571 in recognition of his many years of service to
the Company.
Compensation and Development
Committee
Robert G. Potter Catherine M. Hapka
Livio D. DeSimone Jan H. Suwinski
9
<PAGE>
SUMMARY COMPENSATION TABLE
The Summary Compensation Table below includes individual compensation
information for the Chief Executive Officer and the four other most highly paid
executive officers for services rendered in all capacities during the fiscal
years ended December 31, 1993, 1992 and 1991.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
--------------
ANNUAL COMPENSATION NUMBER OF
---------------------------------- SHARES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND COMPENSATION STOCK OPTIONS COMPENSATION
PRINCIPAL POSITION (1) SALARY BONUS (2) (3) GRANTED (4)
- ----------------------------------- -------- --------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
John F. Carlson 1993 $357,442 $267,092 $17,190 60,000 $ 10,749
Chairman and Chief 1992 314,766 -0- 3,695 -0- 10,664
Executive Officer 1991 268,296 109,604 3,078 15,000 10,290
Lester T. Davis 1993 301,662 178,352 -0- 48,000 10,736
Chief Operating Officer 1992 301,662 -0- -0- -0- 10,643
1991 264,567 108,081 -0- 15,000 10,290
Robert H. Ewald 1993 296,317 159,782 3,380 40,000 10,731
Chief Operating Officer, 1992 287,548 -0- 446 -0- 10,619
Supercomputer Operations 1991 258,822 81,873 517 15,000 10,285
Carl W. Diem 1993 200,013 128,653 -0- 29,500 9,202
Senior Vice President, Sales 1992 141,368 12,370 -0- -0- 6,655
and Marketing 1991 130,517 29,292 -0- 1,323 6,221
Andrew Scott 1993 211,806 103,198 2,493 19,500 9,684
Vice Chairman and 1992 211,806 -0- 1,937 -0- 9,815
Counsel 1991 200,728 63,508 1,315 10,000 9,350
John A. Rollwagen 1993 44,374 -0- 17,190 -0- 384,571
Former CEO 1992 384,571 -0- 9,199 -0- 10,778
1991 361,339 169,808 6,947 20,000 10,467
<FN>
- ------------
(1) Principal position represents the capacity in which the executive served
as of December 31, 1993. On January 29, 1993, John A. Rollwagen resigned
as the Company's Chairman and Chief Executive Officer. Upon Mr.
Rollwagen's resignation, Mr. Carlson was named Chairman and Chief
Executive Officer.
(2) Consists of cash compensation accrued during the fiscal year pursuant to
the Annual Incentive Plan and the cash bonus under the profit sharing
program.
(3) Amounts in this column represent compensation related to professional
income tax services provided to the executive. All executive officers of
the Company are offered professional income tax services. The cost of
these services and the personal income taxes owed by the executive on the
imputed income resulting from the receipt of this benefit are paid by the
Company and are reflected in this column.
(4) Represents contributions to the Company's Retirement Savings Plus Plan and
term life insurance premiums (less than $400 in any one year for each
executive officer) paid by the Company for the benefit of the executive
officer. Other compensation paid to Mr. Rollwagen in 1993 consisted of a
severance payment.
</TABLE>
Non-cash personal benefits paid to executive officers during each year in the
three year period ended December 31, 1993 did not exceed in the aggregate the
lesser of 10% of cash compensation or $50,000 for any individual executive
officer.
10
<PAGE>
Other than as noted in this Proxy Statement, the Company is not party to any
employment agreement with any of its executive officers, and during 1993 it had
no pension, profit sharing, remuneration, incentive or other retirement,
deferred compensation or contingent compensation plans of any kind solely for
the benefit of its executive officers.
STOCK OPTIONS
The following table presents, for each of the executive officers named in the
"Summary Compensation Table" above, the number of shares of Common Stock
purchased upon exercise of stock options during fiscal year 1993, the aggregate
dollar value realized upon exercise based on the market price of the stock on
the dates of exercise, and the number of stock options held by such executive
officers as of December 31, 1993, distinguishing between options that are
exercisable as of December 31, 1993 and those that will become exercisable at
various times in the future.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND AND F-Y-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING
VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FY-END AT FY-END (1)
ACQUIRED ON --------------------------- ----------------------
NAME EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------- -------------- --------------- ------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
John F. Carlson -0- -0- 38,985 38,177 -0- -0-
Lester T. Davis -0- -0- 16,083 48,677 -0- -0-
Robert H. Ewald -0- -0- 31,622 48,177 -0- -0-
Carl W. Diem -0- -0- 11,850 34,605 -0- -0-
Andrew Scott -0- -0- 26,606 25,177 -0- -0-
<FN>
- ------------
(1) The exercise prices of all options held by the executive officers named in
the table as of December 31, 1993 were greater than the market value of
the Company's Common Stock at that date of $25.625 per share.
</TABLE>
The following table presents, for each executive officer named in the "Summary
Compensation Table" above, the number of shares underlying options granted
during 1993, the exercise price for such options, their expiration date and
their potential realizable value.
11
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED RATES
INDIVIDUAL GRANTS OF STOCK PRICE
------------------------------------------------------------------------ APPRECIATION FOR
NUMBER OF SHARES % OF TOTAL OPTIONS EXERCISE OR OPTION TERM (2)
UNDERLYING OPTIONS GRANTED TO EMPLOYEES BASE PRICE PER EXPIRATION ----------------------
NAME GRANTED IN FISCAL YEAR SHARE (1) DATE 5% ($) 10% ($)
- --------------- ------------------- --------------------- --------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
John F. Carlson 60,000 4.8% $ 27.50 1/29/03 $1,037,676 $2,629,675
Lester T. Davis 48,000 3.9% $ 27.50 1/29/03 $ 830,141 $2,103,740
Robert H. Ewald 40,000 3.2% $ 27.50 1/29/03 $ 691,784 $1,753,117
Carl W. Diem 29,500 2.4% $ 27.50 1/29/03 $ 510,191 $1,292,924
Andrew Scott 19,500 1.6% $ 27.50 1/29/03 $ 337,245 $ 854,644
<FN>
- ------------
(1) All options were granted with an exercise price equal to the market price
on the date of grant and become exercisable in 25% annual installments
commencing one year from the date of grant.
(2) These values assume options are exercised at the end of their ten year
term and assume a prescribed rate of stock price appreciation. The actual
value of these options is dependent on future performance of the Common
Stock, and there is no assurance the values reflected in the table will be
realized.
</TABLE>
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total stockholder return on the Common
Stock of the Company for the last five years with the cumulative total return on
the S&P 500 Index and the S&P 500 Computer Systems Index over the same period
(assuming the investment of $100 in the Company's Common Stock, the S&P 500
Index and the S&P 500 Computer Systems Index on December 31, 1988, with
reinvestment of all dividends.)
<TABLE>
<S> <C> <C> <C>
Cray Reasearch,
Inc S&P 500 Index S&P 500 Computer Systems Index
1988 100 100 100
1989 70 132 83
1990 54 128 93
1991 69 166 83
1992 41 179 61
1993 46 197 63
</TABLE>
12
<PAGE>
EXECUTIVES' SEVERANCE COMPENSATION PLAN
The Company has adopted an Executives' Severance Compensation Plan (the
"Severance Plan") covering certain of its employees, including the persons named
in the "Summary Compensation Table" above. A covered employee is an employee who
is elected by the Board of Directors of the Company to a position of Vice
President or higher and customarily works at least 20 hours per week. The
Severance Plan provides that if the covered employee's employment with the
Company is terminated within 15 months after a "change of control" (as defined
in the Severance Plan) for certain specified reasons, the employee is entitled
to a severance payment. The Company will not be required to make such payment if
the termination is (a) due to the employee's death, voluntary retirement at or
after age 65, or disability, or (b) by the Company for "just cause" (as defined
in the Severance Plan). If the employee is entitled to a severance payment and
has been employed by the Company for at least six months as of the date of a
change of control, he or she will receive a lump sum cash payment equal to two
times his or her annual compensation. The Severance Plan provides for a pro rata
adjustment for employees with less than six months of employment at the date of
a change of control. For purposes of the Severance Plan, annual compensation
includes any wages, salary, bonus or incentive compensation, including amounts
deferred. It does not include income attributable to options granted under an
option plan. The Company may amend or terminate the Severance Plan at any time.
However, if a change of control occurs, the Severance Plan may not be amended or
terminated.
PROPOSAL TO RATIFY THE APPOINTMENT OF AUDITORS
The Board of Directors has appointed KPMG Peat Marwick, independent certified
public accountants, as auditors of the Company for the year ending December 31,
1994. KPMG Peat Marwick has audited the financial statements of the Company
since incorporation and has no other relationship with or interest in the
Company.
Unless a contrary choice is specified, proxies solicited by the Board of
Directors will be voted FOR ratification of the appointment of KPMG Peat Marwick
as auditors for the Company for the year ending December 31, 1994.
Representatives of KPMG Peat Marwick will be present at the meeting, will have
an opportunity to make a statement if they so desire, and will be available to
respond to appropriate questions.
13
<PAGE>
STOCKHOLDER PROPOSALS AND OTHER MATTERS
Any stockholder desiring to have an appropriate proposal for action presented at
next year's Annual Meeting of Stockholders, now scheduled for May 1995, and who
wishes to have it set forth in the Proxy Statement and form of proxy for the
meeting, must notify the Company and submit the proposal in writing for receipt
at the Company's executive offices noted above not later than December 5, 1994.
See Securities and Exchange Commission Rule 14a-8 for additional applicable
requirements and procedures.
The Board of Directors of the Company knows of no other matters that will be
presented at this year's Annual Meeting of Stockholders. If any other matter
properly arises at the meeting, it is intended that the shares represented by
proxies in the accompanying form will be voted in accordance with the judgment
of the persons named in the proxies.
By Order of the Board of Directors
David E. Frasch
Secretary
March 31, 1994
14
<PAGE>
CRAY RESEARCH, INC.
PROXY FOR 1994 ANNUAL MEETING OF STOCKHOLDERS ON MAY 17, 1994
The undersigned hereby appoints John F. Carlson and David E. Frasch, or either
of them, with full power of substitution, as proxy or proxies, to vote for the
undersigned and in the undersigned's name all shares of Common Stock of Cray
Research, Inc. of the undersigned as if the undersigned were personally present
and voting at the 1994 Annual Meeting of Stockholders on May 17, 1994, and at
any adjournments thereof, on the following matters:
1. ELECTION OF DIRECTORS:
/ / For all eight nominees listed below (except as marked to the contrary
below)
/ / Withhold authority to vote for all nominees listed below
(INSTRUCTIONS: To withhold authority to vote for any individual nominee strike
a line through the nominee's name in the list below)
John F. Carlson, Lester T. Davis, Lawrence E. Eaton, Catherine M. Hapka
Philip G. Heasley, Robert G. Potter, Andrew Scott and Jan H. Suwinski
(2) PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG PEAT MARWICK AS INDEPENDENT
AUDITORS FOR THE COMPANY FOR THE YEAR ENDING DECEMBER 31, 1994.
/ / FOR / / AGAINST / / ABSTAIN
(3) SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENT THEREOF.
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
<PAGE>
<TABLE>
<S> <C>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS AND, IF NO ----------------------------------------
CHOICE IS SPECIFIED, WILL BE VOTED FOR MATTERS (1) AND (2) ABOVE, Signature of Stockholder
AND IN THE DISCRETION OF THE PROXY HOLDER ON ALL OTHER MATTERS. ----------------------------------------
(If there are co-owners, both must sign.)
The signature(s) should be exactly as the
name(s) appears printed to the left. If a
corporation, please sign the corporate name
in full by an authorized officer and indicate
the signer's office. When signing as
executor, administrator, fiduciary, attorney,
trustee or guardian, or as custodian for a
minor, please give full title as such. If a
partnership, sign in the partnership name.
Dated: ---------------------------, 1994
(Month) (Day)
</TABLE>
PLEASE DATE, SIGN AND MAIL THIS PROXY CARD IN THE ENCLOSED ENVELOPE. NO POSTAGE
IS REQUIRED.
