<PAGE>
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:
[X] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
C-COR.net Corp.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] 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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
C-COR.net Corp.
60 Decibel Road
State College, PA 16801 USA
814-238-2461/800-233-2267
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
October 19, 1999
TO THE SHAREHOLDERS:
The Annual Meeting of Shareholders of C-COR.net Corp. will be held at
the offices of the Corporation, 60 Decibel Road, State College, Pennsylvania, on
October 19, 1999, at 9:00 a.m. for the following purposes:
1. To consider and act upon a proposal to elect four Directors:
three Directors to serve a term of three years and one
Director to serve a term of one year, and until their
respective successors are elected and qualified.
2. To approve an amendment to increase from 24,000,000 to
50,000,000 the number of shares of Common Stock authorized for
issuance under the Corporation's Amended and Restated Articles
of Incorporation filed with the Secretary of the Commonwealth
of Pennsylvania on February 19, 1981, as amended (the "Current
Articles"), an increase of 26,000,000 shares.
3. To approve an amendment to the Current Articles to eliminate
the right of shareholders to cumulate votes in the election of
directors.
4. To transact such other business as may properly come before
the meeting.
The Board of Directors has fixed September 7, 1999, as the record date
for determining the holders of Common Stock entitled to notice of and to vote at
the meeting and any adjournments. Consequently, only holders of Common Stock of
record on the transfer books of the Corporation at the close of business on
September 7, 1999, will be entitled to notice of and to vote at the meeting and
any adjournments.
Please complete, date and sign the enclosed proxy and return it
promptly. If you attend the meeting, you may vote in person.
/s/ William T. Hanelly
WILLIAM T. HANELLY
Vice President-Finance, Secretary
and Treasurer
September 20, 1999
<PAGE>
C-COR.net Corp.
60 Decibel Road
State College, PA 16801 USA
814-238-2461/800-233-2267
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD OCTOBER 19, 1999
GENERAL INFORMATION
This Proxy Statement is furnished to shareholders at the direction and
on behalf of the Board of Directors of C-COR.net Corp., a Pennsylvania
corporation (the "Corporation"), for the purpose of soliciting proxies for use
at the Annual Meeting of Shareholders of the Corporation to be held on October
19, 1999 (the "Meeting"), at the time and place and for the purposes set forth
in the accompanying Notice of Annual Meeting of Shareholders. This Proxy
Statement and the accompanying proxy are being mailed or given to shareholders
of the Corporation on or about September 20, 1999.
The shares represented by the proxy will be voted if the proxy is
received in time for the meeting. However, any proxy given pursuant to this
solicitation may be revoked at any time before it is exercised by giving notice
of such revocation to the Secretary of the Corporation, by appearing at the
meeting and voting in person, or by returning a later dated proxy.
When your proxy card is returned properly signed, those shares will be
voted in accordance with your instructions. The Board of Directors knows of no
matters that are likely to be brought before the meeting, other than the matters
specifically referred to in the notice of the meeting. With respect to other
matters which may properly come before the meeting, the persons named in the
accompanying proxy will vote in their discretion.
SOLICITATION OF PROXIES
The cost of preparing and mailing the Notice of Annual Meeting, this
Proxy Statement and form of proxy will be borne by the Corporation. In addition
to use of the mails, proxies may be solicited by officers, Directors and other
employees of the Corporation by telephone or personal solicitation. No
additional compensation will be paid to such individuals. The Corporation may
pay persons holding stock in their names, or those of their nominees, for their
expenses in sending proxies and proxy materials to beneficial owners. The
Corporation may also hire and pay a professional proxy solicitor.
<PAGE>
QUORUM AND VOTING RIGHTS
Only shareholders of record at the close of business on September 7,
1999, will be entitled to vote at the Annual Meeting. On such date, there were
10,688,356 shares of the Corporation's Common Stock, $.10 par value per share
(the "Common Stock"), outstanding, each share being entitled to one vote, except
that the holders have cumulative voting rights in the election of Directors.
Therefore, each shareholder is entitled to as many votes in the election of
those directors to be elected for a term expiring in 2000 or 2002, as the case
may be, as shall equal the number of his or her shares of Common Stock
multiplied by the number of directors of each such class to be elected. A
shareholder may cast all such votes for a single nominee or may distribute them
between two or more nominees within such class as he or she sees fit. To
cumulate votes in this manner, the proxy must be clearly marked to indicate the
number of votes to be cast for each nominee. Execution of a proxy giving
authority to vote for the nominees named herein will give discretion to the
named proxies to vote shares cumulatively for fewer than all nominees. In the
absence of instructions, the shares represented at the meeting by the enclosed
proxy will be voted "FOR" the nominees for director, "FOR" the amendment
("Proposal No. 2") to increase the number of shares of Common Stock authorized
for issuance under the Corporation's Amended and Restated Articles of
Incorporation filed with the Secretary of the Commonwealth of Pennsylvania on
February 19, 1981, as amended (the "Current Articles") and "FOR" the amendment
("Proposal No. 3") to the Current Articles to eliminate the right of
shareholders to cumulate votes in the election of Directors.
Approval of Proposal No. 2 and Proposal No. 3 and any other matters
brought before the meeting, other than the election of directors, will require
the favorable vote of a majority of the outstanding shares of Common Stock,
present in person or represented by proxy at the meeting. The Corporation is not
aware of any matter, other than as referred to in this Proxy Statement to be
presented at the meeting.
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of Common Stock outstanding on the record date will
constitute a quorum at the meeting. Votes withheld and abstentions will be
counted in determining the presence of a quorum but will not be voted. Broker
non-votes will not be counted in determining the presence of a quorum and will
not be voted.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Four Directors are to be elected: three Directors to hold office for
terms of three years and until their successors shall have been elected and
qualified, and one Director to hold office for a term of one year and until his
successor shall have been elected and qualified. The shares represented by the
proxy will be voted for the nominees whose names appear herein, unless authority
to vote for one or more of such nominees is specifically withheld in the proxy.
The persons designated as proxies will have the right to vote cumulatively and
to distribute their votes
2
<PAGE>
among such nominees as they consider advisable. They reserve full discretion to
cast votes for another person in the event that any nominee is unable to serve.
The nominee for election as a Director for a term expiring in 2000
receiving the highest number of votes cast by shareholders entitled to vote
thereon, and the three nominees for election as Directors for terms expiring in
2002 receiving the highest number of votes cast by shareholders entitled to vote
thereon, will be elected to serve on the Board of Directors. All of the nominees
have indicated that they are willing to stand for election, and are willing to
serve, if elected, but if any of them should decline to serve or become
unavailable, an event which the Board of Directors does not anticipate, the
persons named in the proxy will vote for such nominees as may be designated by
the Board of Directors unless the Board of Directors reduces the number of
Directors accordingly.
The following table sets forth information as to nominees for Directors
of the Corporation, as well as information as to the Directors of the
Corporation who are continuing to serve. The offices referred to in the table
are offices of the Corporation, unless otherwise indicated.
INFORMATION REGARDING DIRECTOR NOMINEES
<TABLE>
<CAPTION>
Principal Occupations
and Business During Year First
Last Five Years and Became a
Nominee and Age Current Directorships Director
--------------- ---------------------------- ---------------
<S> <C> <C>
To be elected for a term expiring in 2000:
Michael J. Farrell, 49 President - Farrell & Co., an investment banking N/A
firm specializing in investing in and organizing
mergers involving manufacturing companies since
1982; President and CEO - MK Rail Corporation from
1995 to 1996, President and COO from 1994 to 1995;
Chairman of the Board - Farrell & Co.; Director -
Freedom Forge, Federated Investors, Inc., American
Alloys and Pittsburgh Flatroll Company; Board
of Visitors - Pennsylvania State University Smeal
College of Business Administration; Foundation
Board Member - the Shadyside Hospital.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Principal Occupations
and Business During Year First
Last Five Years and Became a
Nominee and Age Current Directorships Director
--------------- ---------------------------- ---------------
<S> <C> <C>
To be elected for a term expiring in 2002:
David A. Woodle, 43 President and Chief Executive Officer since July 20, 1998
1998; General Manager-Strategic Systems of Raytheon
Systems Company, a company providing computer
systems integration services to government and
commercial customers, from January 1998 to July
1998; Vice President and General Manager, Raytheon
E-Systems, HRB Systems from June 1996 to January
1998; VP, Strategic Programs and TMS, Raytheon
E-Systems, HRB Systems from October 1990 to June
1996.
I. N. Rendall Harper, President, Chief Executive Officer and Treasurer, 1982
Jr., 61 American Micrographics Company, Inc., a computer
graphics company, since 1977. Partner, Keystone
Minority Capital Fund. Director Duquesne University
and Three Rivers Bank.
Dr. Frank Rusinko, Jr., 68 Senior Scientist and Director, Consortium for 1990
Premium Carbon Products from Coal, since June 1998,
and Senior Scientist and Director, Carbon Research
Center, since August 1991, College of Earth and
Mineral Sciences, The Pennsylvania State University;
Senior Scientist and Director, The Anthracite
Institute and The Cooperative Program in Coal
Research, from July 1992 to December 1995, College
of Earth and Mineral Sciences, The Pennsylvania
State University. Chairman, Transor Filter, U.S.A.,
a supplier of EDM filtration systems, since August
1991.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Principal Occupations
and Business During Year First
Last Five Years and Became a
Nominee and Age Current Directorships Director
--------------- ---------------------------- ---------------
<S> <C> <C>
Continuing Members of the Board of Directors - terms expiring in 2000:
Richard E. Perry, 69 Chairman since June 1986; Chief Executive Officer 1985
from July 1985 to August 1996 and from April 7, 1998
to July 20, 1998; President from July 1985 to
December 1992. Director, Scientific Systems, Inc.
Donald M. Cook, Jr., 68 Retired; formerly, President and Chief Operating 1988
Officer, SEMCOR, Inc., a corporation providing
systems engineering and management services, from
May 1990 to January 1996. Director, RMS Information
Systems, Inc.
Continuing Members of the Board of Directors - terms expiring in 2001:
Anne P. Jones, 64 Telecommunications Consultant, since October 1994; 1989
Partner, Washington, D.C. office of law
firm of Sutherland, Asbill & Brennan from
September 1983 to October 1994; Director,
Motorola, Inc., American Express Funds and
AMNEX, Inc.
Dr. James J. Tietjen, 66 Dean, School of Technology Management, The Stevens 1987
Institute of Technology, since July 1996; Head of
Department of Management and Engineering Management,
The Stevens Institute of Technology, from August
1994 to July 1996; President and Chief Executive
Officer, SRI International, a non-profit scientific
research firm, from December 1990 to January 1994.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Principal Occupations
and Business During Year First
Last Five Years and Became a
Nominee and Age Current Directorships Director
--------------- ---------------------------- ---------------
<S> <C> <C>
John J. Omlor, 64 President and Chief Executive Officer, John J. Omlor 1989
Associates, Ltd., a general business consulting
firm, since 1981; Executive Vice President and Chief
Financial Officer, Paper Manufacturers Co., a
manufacturer of office consumables, from September
1987 to September 1997. Director, Paper
Manufacturers Co. and FCG, Inc.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" EACH OF THE
NOMINEES PRESENTED.
6
<PAGE>
PROPOSAL NO. 2
APPROVAL OF THE INCREASE IN THE AUTHORIZED COMMON STOCK
The Corporation's shareholders are being asked to consider and approve
an amendment (also referred to herein and previously defined as "Proposal No.
2") to increase from 24,000,000 to 50,000,000 the number of shares of Common
Stock authorized for issuance under the Corporation's Amended and Restated
Articles of Incorporation, filed with the Secretary of the Commonwealth of
Pennsylvania on February 19, 1981, as heretofore amended (the "Current
Articles").
The Current Articles authorize 24,000,000 shares of Common Stock, par
value of $.10 per share, and 2,000,000 shares of Preferred Stock, no par value
per share. The Board of Directors believes this capital structure does not
provide for sufficient authorized shares of Common Stock for the future needs of
the Corporation. Therefore, the Board of Directors unanimously approved Proposal
No. 2 on August 17, 1999 to increase the authorized number of shares of Common
Stock from 24,000,000 shares to 50,000,000 shares, an increase of 26,000,000
shares. The resolution proposed by the Board of Directors for adoption by the
Shareholders is set forth as Appendix A to this Proxy Statement and is
incorporated herein by reference.
Reasons For and Effect of Amendment
On July 13, 1999, 10,629,919 shares of Common Stock were outstanding.
In addition, approximately 366,930 warrants and stock options to acquire an
aggregate of up to approximately 2,066,623 shares of Common Stock were
outstanding. After giving effect to the reservation of shares of Common Stock
issuable upon the exercise of the warrants and stock options previously granted
or available for grant under the Corporation's stock option plans and taking
into account shares of Common Stock reserved by the Corporation pursuant to a
definitive merger agreement the Corporation has entered into, the Corporation
presently has approximately 8,258,144 shares of authorized but unissued and
unreserved Common Stock.
If the shareholders approve Proposal No. 2, then the Board of Directors
would generally have the authority, without further action of the shareholders,
to issue the proposed additional shares of Common Stock from time to time as the
Board of Directors deems necessary. The Board of Directors believes it is
desirable to have the ability to issue additional shares of Common Stock for
general corporate purposes. Potential uses of the additional authorized shares
may include acquisitions of other businesses, equity financings, stock dividends
or distributions and issuances of options pursuant to the Corporation's stock
option plans. Any or all of these issuances could take place without further
action by the shareholders, unless shareholder action was required by applicable
law or rules of any stock exchange or quotation system on which the
Corporation's securities may then be listed.
7
<PAGE>
The proposed increase in the authorized number of shares of Common
Stock could have a number of effects on the Corporation's shareholders,
depending upon the exact nature and circumstances of any actual issuances of
authorized but unissued shares. The increase could deter takeovers, in that
additional shares could be issued (within the limits imposed by applicable law)
in one or more transactions that could make a change in control or takeover of
the Corporation more difficult. For example, additional shares could be issued
by the Corporation so as to dilute the stock ownership or voting rights of
persons seeking to obtain control of the Corporation. Similarly, the issuance of
additional shares to certain persons allied with the Corporation's management
could have the effect of making it more difficult to remove the Corporation's
current management by diluting the stock ownership or voting rights of persons
seeking to cause such removal. In addition, issuance of additional shares by the
Corporation could have an effect on the potential realizable value of a
shareholder's investment. In the absence of a proportionate increase in the
Corporation earnings and book value, an increase in the aggregate number of
outstanding shares of the Corporation caused by the issuance of the additional
shares would dilute the earnings per share and book value per share of all
outstanding shares of the Corporation's Common Stock. If such factors were
reflected in the price per share of Common Stock, the potential realizable value
of a shareholder's investment could be adversely affected. The holders of Common
Stock have no preemptive rights to purchase additional shares.
The favorable vote of a majority of the outstanding shares of Common
Stock present in person or represented by proxy at the Meeting, is required for
approval of Proposal No. 2.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL NO. 2.
8
<PAGE>
PROPOSAL NO. 3
APPROVAL OF THE ELIMINATION OF CUMULATIVE VOTING
The Corporation's shareholders are being asked to consider and approve
an amendment of the Current Articles to eliminate cumulative voting in the
election of directors of the Corporation (also referred to herein and previously
defined as "Proposal No. 3"). On August 17, 1999, the Board of Directors
unanimously approved Proposal No. 3. If Proposal No. 3 is adopted by the
shareholders, it will be effective for all elections occurring after the
Corporation's 1999 Annual Meeting. The resolution proposed by the Board of
Directors for adoption by the shareholders is set forth as Appendix B to this
Proxy Statement and is incorporated herein by reference.
Under cumulative voting, each shareholder may cast a number of votes
equal to the number of shares held by such shareholder, multiplied by the number
of directors of the class to be elected at the meeting. The shareholder may cast
such votes entirely for one candidate or allocate them among two or more
nominees for director in any manner desired by the shareholder. The candidates
receiving the highest number of votes, up to the number of shareholders to be
elected, are elected. Cumulative voting enables a shareholder, or a group of
shareholders, representing a small minority of the votes cast to elect one or
more nominees. If Proposal No. 3 is adopted by the shareholders, each of the
Corporation's directors would instead be elected by a plurality of the votes
cast.
The Board of Directors believes that every director of a publicly held
corporation should represent the interests of at least a plurality of
shareholders. As noted above, with cumulative voting in effect, it would be
possible for shareholders holding a substantial minority of the shares, whose
interests and goals may not be consistent with those of the holders of a
majority of the shares, to obtain representation on the Board of Directors. The
Board of Directors believes that such representation could be disruptive and
could impair the efficient management of the Corporation for the benefit of
shareholders generally. With plurality voting, a nominee could not be elected
without relatively wide support. The Board of Directors believes that this would
be in the best interests of the Corporation and its shareholders.
Elimination of cumulative voting in the election of directors could,
under certain circumstances, make it more difficult for a shareholder who
acquires a substantial number of shares to obtain representation on the Board of
Directors. To the extent that it impedes the ability of a shareholder to obtain
representation on the Board of Directors, the proposed amendment might render
more difficult any attempt by a minority holder or group of holders of a
significant number, but less than a majority, of voting shares to monitor,
change, or influence the management or policies of the Corporation, and might be
viewed as perpetuating management and having an anti-takeover effect. In
addition to the proposed Proposal No. 3, the Corporation has the following other
provisions in its Articles of Incorporation or Bylaws or agreements which could
be viewed as having anti-takeover effects: (a) a provision requiring advance
notice for shareholder nominations of directors, (b) a staggered Board, (c)
"blank check" preferred stock, (d) removal of directors only for cause, (e) no
shareholder action by partial written consent, (f) a supermajority (66 2/3%)
vote
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<PAGE>
required to approve certain transactions between the Corporation and an
"interested shareholder" and (g) a shareholder rights plan.
The proposed Proposal No. 3 is not in response to an effort by a
minority shareholder or group of shareholders to obtain representation on the
Board of Directors or acquire greater influence in the management of the
Corporation's business, nor is the Corporation aware of any such effort.
Further, it is not in response to any attempt to acquire control of the
Corporation, nor is the Corporation aware of any such attempt.
The favorable vote of a majority of the outstanding shares of Common
Stock present in person or represented by proxy at the Meeting is required for
approval of the Proposal No. 3.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE PROPOSAL NO.
3.
10
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS
The following table shows, as of August 24, 1999, as to each Director
and nominee for Director of the Corporation, and as to the Chief Executive
Officer, the former Chief Executive Officer during the last fiscal year and the
executive officers of the Corporation listed in the Summary Compensation Table
included elsewhere in this Proxy Statement, and as to all of the Corporation's
Directors, Director nominees, former Chief Executive Officer during the last
fiscal year and executive officers as a group (including the Chief Executive
Officer), the amount and nature of beneficial ownership of the Corporation's
Common Stock owned by such individuals. All stock with respect to which a person
has the right to acquire beneficial ownership within 60 days is considered
beneficially owned by that person for purposes of this table even though such
stock may not be actually outstanding. Unless otherwise noted, all shares are
owned directly with sole voting and sole investment power.
<TABLE>
<CAPTION>
Amount and
Nature of Percent of
Name of Beneficial Owner Beneficial Class
- ------------------------ ---------- -----
<S> <C> <C>
Donald M. Cook, Jr. 7,250 (1) *
David J. Eng 33,722 (2) *
Michael J. Farrell 0 (3) *
I.N. Rendall Harper, Jr. 9,250 (4) *
Anne P. Jones 6,250 (5) *
Chris A. Miller 14,427 (6) *
Donald F. Miller 23,612 (7) *
Gerhard B. Nederlof 41,809 (8) *
John J. Omlor 15,250 (9) *
Richard E. Perry 315,683(10) 2.9%
Dr. Frank Rusinko, Jr. 6,750 (11) *
Dr. James J. Tietjen 11,250 (12) *
David A. Woodle 16,300 (13) *
All Directors, Director nominees and executive
officers as a group (18 persons) 1,420,393 (14) 12.9%
</TABLE>
- -----------------
* Represents less than 1% of the Corporation's Common Stock
(1) Includes options (exercisable at August 24, 1999) to purchase 3,500
shares of Common Stock.
(2) Includes options (exercisable at August 24, 1999 or within 60 days
thereof) to purchase 30,700 shares of Common Stock and 1,917 shares
of Common Stock held for Mr. Eng's account in the Corporation's
Retirement Savings and Profit Sharing Plans.
(3) On August 25, 1999, Mr. Farrell purchased 2500 shares of Common
Stock.
(4) Includes 2,000 shares of Common Stock owned by Mr. Harper's wife.
Mr. Harper disclaims beneficial ownership of the shares owned by
his wife.
(5) Includes options (exercisable at August 24, 1999) to purchase 2,750
shares of Common Stock.
(6) Includes options (exercisable at August 24, 1999 or within 60 days
thereof) to purchase 8,000 shares of Common Stock and 127 shares of
Common Stock held for Mr. Miller's account in the Corporation's
Retirement Savings and Profit Sharing Plans.
(7) Includes options (exercisable at August 24, 1999 or within 60 days
thereof) to purchase 19,850 shares of Common Stock and 315 shares
of Common Stock held for Mr. Miller's account in the Corporation's
Retirement Savings and Profit Sharing Plans.
11
<PAGE>
(8) Includes options (exercisable at August 24, 1999 or within 60 days
thereof) to purchase 30,344 shares of Common Stock.
(9) Includes options (exercisable at August 24, 1999) to purchase 3,250
shares of Common Stock and 10,000 shares held under a deferred
benefit plan of J.J. Omlor Associates Ltd.
(10) Includes options (exercisable at August 24, 1999) to purchase
200,000 shares of Common Stock, 15,683 shares of Common Stock held
for Mr. Perry's account in the Corporation's Retirement Savings and
Profit Sharing Plans and 100,000 shares owned by the Perry Family
Limited Partnership. Mr. Perry served as interim Chief Executive
Officer from April 7, 1998 until July 20, 1998.
(11) Includes options (exercisable at August 24, 1999) to purchase 3,750
shares of Common Stock.
(12) Includes options (exercisable at August 24, 1999) to purchase 3,250
shares of Common Stock.
(13) Includes options (exercisable at August 24, 1999 or within 60 days
thereof) to purchase 12,500 shares of Common Stock and 2,201 Shares
of Common Stock held for Mr. Woodle's account in the Corporation's
Retirement Savings and Profit Sharing Plans. The Corporation's
Board of Directors elected Mr. Woodle as the Corporation's
President and Chief Executive Officer on June 16, 1998, effective
July 20, 1998.
(14) Includes the shares and options referred to in the notes above, and
options (exercisable at August 24, 1999 or within 60 days thereof)
to purchase 23,120 shares of Common Stock and 2,061 shares of
Common Stock held for the account of additional executive officers
in the Corporation's Retirement Savings and Profit Sharing Plans. A
Director disclaims beneficial ownership of 2,000 shares owned by
his wife. This amount includes shares of Common Stock owned by
David R. Ames and Terry L. Wright who became executive officers on
July 9, 1999 when the Corporation acquired Convergence.com
Corporation. Mr. Ames and Mr. Wright each own 446,190 shares of
common stock.
ADDITIONAL INFORMATION
Board of Directors
The Board of Directors held 10 meetings during the fiscal year ended
June 25, 1999. Each of the incumbent Directors attended over 75% of the meetings
of the Board of Directors and Committees on which they served. During fiscal
year 1999, non-employee board members received an annual retainer of $7,000 if
they did not serve as the chairperson of any Committee or $7,500 if they served
as a chairperson, and $1,500 for each meeting of the Board of Directors and
$1,000 for each meeting of the Committees thereof that they attended. In
addition, under the 1989 Non-Employee Directors' Non-Qualified Stock Option
Plan, each non-employee Director received a grant of options to purchase 1,000
shares of the Corporation's Common Stock upon his or her initial election as a
Director and an annual grant of options to purchase 250 shares of the
Corporation's Common Stock thereafter. The options granted under the 1989
Non-Employee Directors' Non-Qualified Stock Option Plan have an exercise price
equal to the fair market value of the Common Stock on the date of grant.
The standing committees of the Board are the Executive Committee, the
Audit Committee, the Compensation Committee, the Strategic Planning Committee,
the Nominating Committee and the Technology Innovation Committee. The members of
all of these committees are appointed by the Board.
12
<PAGE>
Executive Committee
The Executive Committee is currently comprised of Richard E. Perry
(Chairman), Donald M. Cook, Jr., I.N. Rendall Harper, Jr., John J. Omlor and
David A. Woodle. During intervals between meetings of the Board of Directors,
the Executive Committee may exercise all powers of the Board of Directors in the
management of all affairs of the Corporation in such manner as the Committee
deems to be in the best interests of the Corporation. The Executive Committee
met 4 times during the last fiscal year.
Audit Committee
The Audit Committee is currently comprised of I.N. Rendall Harper, Jr.
(Chairman), Anne P. Jones and Dr. Frank Rusinko, Jr. During fiscal year 1999,
Javad K. Hassan was a member of the Audit Committee until his resignation from
the Board of Directors on June 27, 1999. The Audit Committee is responsible for
determining the adequacy of corporate accounting, financial and operating
controls and meets with the Corporation's internal and independent auditors to
review the services rendered by them to the Corporation. During the last fiscal
year, the Audit Committee held 3 meetings.
Compensation Committee
The Compensation Committee is currently comprised of Donald M. Cook,
Jr. (Chairman), Anne P. Jones and Dr. James J. Tietjen. The Compensation
Committee is responsible for managing the Corporation's 1988 Stock Option Plan
(the "1988 Plan"), the 1989 Non-Employee Directors' Non-Qualified Stock Option
Plan (the "1989 Plan"), the Incentive Plan (the "1998 Plan") and the Profit
Incentive Plan (the "Profit Plan"), and approving the compensation of officers
of the Corporation. No member of the Compensation Committee is an employee of
the Corporation, or an executive officer of a company on whose board an
executive officer of the Corporation serves as a director. The Compensation
Committee held 9 meetings during the last fiscal year.
Strategic Planning Committee
The Strategic Planning Committee, currently comprised of Richard E.
Perry (Chairman), Donald M. Cook, Jr., I.N. Rendall Harper, Jr., Anne P. Jones,
John J. Omlor, Dr. Frank Rusinko, Jr., Dr. James J. Tietjen and David A. Woodle,
permits the Corporation's management to discuss strategic planning with
experienced Directors. During fiscal year 1999, Javad K. Hassan was a member of
the Strategic Planning Committee until his resignation from the Board of
Directors on June 27, 1999. The Strategic Planning Committee held 6 meetings
during the last fiscal year.
Nominating Committee
The Nominating Committee, currently comprised of Richard E. Perry
(Chairman), I.N. Rendall Harper, Jr., Anne P. Jones and Dr. Frank Rusinko, Jr.,
was created for the purpose of recommending nominees for election to the Board
of Directors and as Executive Officers. The
13
<PAGE>
Nominating Committee will consider nominees for Directors recommended by
shareholders upon submission in writing to the Secretary of the Corporation of
the names of such nominees, together with their qualifications for service with
the Corporation. The Nominating Committee held 2 meetings during the last fiscal
year.
Technology Innovation Committee
The Technology Innovation Committee, currently comprised of Dr. James
J. Tietjen (Chairman), John J. Omlor and Dr. Frank Rusinko, Jr., provides the
Corporation's management with the opportunity to discuss ways that new
technologies and engineering resources can be developed and implemented. During
fiscal year 1999, Javad K. Hassan was a member of the Technology Innovation
Committee until his resignation from the Board of Directors on June 27, 1999.
The Technology Innovation Committee held 7 meetings during the last fiscal year.
14
<PAGE>
PRINCIPAL HOLDERS
The following table sets forth, as of August 24, 1999 (unless otherwise
noted), the beneficial ownership of the Corporation's Common Stock of each
person who is known by the Corporation to own beneficially more than 5% of the
issued and outstanding shares of the Corporation's Common Stock. The
percentages set forth in this table do not reflect the issuance of 1,433,323
shares of the Corporation's Common Stock in connection with the completion of a
merger on July 9, 1999 because the Schedules 13G and 13D relied upon for this
table were based on the number of shares outstanding on December 31, 1998. The
Corporation has relied on information received from each of the shareholders as
to beneficial ownership, including information contained on Schedules 13G and
13D, except with respect to the TCW Group, Inc ("TCW"). According to an amended
Schedule 13G, dated February, 12, 1999, received by the Corporation from TCW,
TCW beneficially owned 496,000 shares of the Corporation's Common Stock.
However, the Corporation has reason to believe, based on a Nasdaq-AMEX Online
report dated as of September 2, 1999, that TCW presently owns no shares of the
Corporation's Common Stock.
<TABLE>
<CAPTION>
Amount and
Nature of Percent of
Name of Beneficial Owner Beneficial Class
- ------------------------ ---------- -----
<S> <C> <C>
Citigroup, Inc. 1,203,327 (1) 13.2%
153 East 53rd Street
New York, NY 10043
Fenimore Asset Management, Inc. 785,929 (2) 8.63%
118 North Grand Street
Cobleskill, NY 12043
Wellington Management Company, LLP 694,000 (3) 7.62%
75 State Street
Boston, MA 02109
BankAmerica Corporation 480,650 (4) 5.28%
100 North Tryon Street
Charlotte, N.C. 28255
</TABLE>
- -------------------
(1) Based upon an amended Schedule 13G, dated January 12, 1999, filed by
Citigroup Inc. ("Citigroup"), Salomon Smith Barney, Inc. ("SSB"), Salomon
Brothers Holding Company Inc. ("SBHC"), Salomon Smith Barney Holdings
Inc. ("SSB Holdings") and Mutual Management Corp. ("MMC"), a registered
investment advisor. SBHC is the sole stockholder of SSB; SSB Holdings is
the sole stockholder of each SBHC and MMC; and Citigroup is the sole
stockholder of SSB Holdings. Citigroup and SSB Holdings both disclaim
beneficial ownership of such shares.
(2) Based upon an amended Schedule 13G, dated February 5, 1999, received by
the Corporation from Fenimore Asset Management, Inc., a registered
investment advisor, and Thomas O. Putnam.
(3) Based upon a Schedule 13G, dated December 31, 1998, received by the
Corporation from Wellington Management Company, LLP, a registered
investment advisor.
15
<PAGE>
(4) Based upon a Schedule 13D dated January 28, 1999, received by the
Corporation from BankAmerica Corporation ("BankAmerica") a registered
bank holding company, NB Holdings Corporation ("NB Holdings") which is a
holding company of its subsidiaries, NationsBank NA, a bank, NationsBanc
Advisors Inc., a registered investment advisor and TradeStreet Investment
Associates Inc., a registered investment advisor. By virtue of the
corporate relationships between these companies, BankAmerica (the parent
company) may be deemed to possess indirect beneficial ownership of shares
beneficially owned by its lower tier subsidiaries. The power to vote and
dispose of shares may be deemed to be shared between entities due to
their corporate relationships.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Report of Board of Directors' Compensation Committee on Executive Compensation
- ------------------------------------------------------------------------------
The Compensation Committee (the "Committee") is comprised of Mr. Cook
(Chairman), Ms. Jones and Dr. Tietjen, none of whom is or has been an officer or
employee of the Corporation.
The primary role of the Committee is to determine the compensation of
the executives of the Corporation and its subsidiaries. The Committee is
responsible for reviewing pay levels for senior executives, overseeing the
Profit Plan, the 1988 Plan, the 1989 Plan and the 1998 Plan, and recommending to
the full Board of Directors appropriate actions to achieve a sound executive
compensation policy in support of the Corporation's short- and long-term
business objectives.
The executive compensation programs of the Corporation are designed to
achieve three fundamental objectives: (1) attract and retain qualified
executives; (2) motivate performance to achieve specific strategic objectives of
the Corporation; and (3) align the interests of senior management with the
long-term interests of the Corporation's shareholders. At present, the basic
components of the Corporation's executive compensation program are base
salaries, the Profit Plan and long-term incentive compensation. The Corporation
also provides broad-based employee benefit plans and certain other executive
benefit plans. During the fiscal year ended June 25, 1999, the Committee
continued to review the Corporation's compensation programs and practices. For
the fiscal year ended June 25, 1999, the compensation for the Chief Executive
Officer and other executive officers included adjustments to provide for a more
market-based base salary structure while continuing to include a significant
portion of variable or "at risk" pay.
Base Salary: For the fiscal year ended June 25, 1999, base salary for
officers was below the median for comparable companies, and officers were given
the opportunity to exceed this median via the officers' allocation under the
Profit Plan.
Profit Plan: Under the Profit Plan in effect for the fiscal year ended
June 25, 1999, all full-time, active employees were eligible to participate
except for employees of certain subsidiaries and employees participating in a
Sales and Marketing Incentive Plan. The Profit Plan provides variable
compensation based on the relationship of the pre-incentive, pre-tax profits of
the Corporation compared to the Annual Financial Plan, endorsed by the Board of
Directors at the beginning of each fiscal year. The Profit Plan is designed to
provide incentive to management and all other employees to achieve and improve
upon the profit levels set forth in the Annual Financial Plan. Pre-incentive,
pre-tax profits must be at least 90 percent of that which is reflected in the
Corporation's Annual Financial
16
<PAGE>
Plan in order to generate a Profit Plan pool. The pool is 10 percent of pre-
incentive, pre-tax profits up to 100 percent of the target profits set forth in
the Annual Financial Plan and is 20 percent for the incremental amounts above
the target profits set forth in the Annual Financial Plan. Further, the Profit
Plan pool is allocated to various sub-pools for distribution, based upon the
employee's classification and a separate sub-pool is established for officers
with 2 percent per officer of the total Profit Plan pool allocated to the
officer sub-pool. Each employee's (other than officers) payout is the ratio of
his or her base earnings to the total base earnings of all employees in their
sub-pool. Each officer will receive an equal portion of the officer sub-pool,
except that the President and CEO will receive three times as much as the other
officers. Amounts payable under the Profit Plan are paid in quarterly
installments to certain employees, with the remainder of employees, including
officers, eligible for an annual payment under the plan.
Long-Term Incentive Compensation: On April 29, 1998, the Board of
Directors adopted the 1998 Plan as a successor to the 1988 Plan and the 1989
Plan. The purposes of the 1988 Plan and the 1998 Plan are to benefit the
Corporation by providing increased incentive to employees, to aid the
Corporation in attracting and retaining qualified employees and to promote the
identification of such persons' interests with those of the Corporation's
shareholders. All active, full-time employees of the Corporation are eligible to
receive stock options, which are granted at a price equal to the current fair
market value of the Corporation's stock and will be of value to the employee
only if the stock value increases over time. In addition to stock options, under
the 1998 Plan, all employees are eligible to receive restricted stock (which are
awards that give the participant the right to receive shares of common stock at
the end of a specified period if he or she continues to be an employee of the
Corporation at the end of such period), performance shares (which are awards to
receive shares of common stock if certain performance goals are met) and
performance units (which are awards to receive a fixed dollar amount, payable in
cash, common stock or a combination of such if certain performance goals are
met). Stock option awards generally vest over a five-year or four-year period
and expire in ten or eight years. Consistent with these purposes, options were
granted under the 1988 Plan and the 1998 Plan to certain of the Corporation's
executive officers during the fiscal year ended June 25, 1999.
The Corporation has a Supplemental Retirement Plan for a select group
of management employees. The management employees who have been eligible to
participate in this plan for ten years and remain employees until age 65, will
receive a supplemental retirement benefit of $18,000 a year payable for 15
years. The management employees who have been eligible to participate in this
plan for five years and are age 60 or older or who have been a participant for
ten years and are age 55 or older, may elect to retire and receive a reduced
supplemental retirement benefit. The years of service requirements were waived
for three executive officers who had participated in the Supplemental Retirement
Plan prior to the amendment of the plan to include years of service
requirements. Beneficiary benefits are a part of this plan.
The Corporation maintains certain broad-based employee benefit plans in
which senior executives participate. These plans include Retirement Savings and
Profit Sharing Plans, life and health insurance plans, and change of control
agreements. These plans are not directly tied to the Corporation's performance.
17
<PAGE>
Chief Executive Compensation: On June 16, 1998, David A. Woodle was
appointed President and Chief Executive Officer of the Corporation, effective
July 20, 1998. On July 22, 1998, the Corporation entered into an employment
agreement with Mr. Woodle which was reviewed by the Committee and amended on
June 22, 1999 (as so amended, the "Agreement"). Pursuant to the Agreement, Mr.
Woodle has agreed to serve as President and Chief Executive Officer of the
Corporation for a term of five years ending on July 30, 2003. The Agreement
provides for an annual base salary of $200,000 (subject to annual review by the
Committee), as well as certain fringe benefits. After its review this past June,
the Committee increased Mr. Woodle's annual base salary to $250,000 for the
remaining term of the Agreement. The Agreement further provides that Mr. Woodle
is eligible to participate in the Corporation's profit incentive plan then in
effect. In accordance with the terms of the Agreement, Mr. Woodle has been
granted the following options: (1) an option for the purchase of 50,000 shares
of the Corporation's Common Stock under the 1988 Plan, vesting over a four-year
period at a rate of 12,500 shares per year, (2) two options, each for the
purchase of 25,000 shares of the Corporation's Common Stock under the 1998 Plan,
each vesting over a four-year period at a rate of 6,250 shares per year with one
option providing for accelerated vesting if the Corporation's revenues equal or
exceed $200 million for the fiscal year ending June 30, 2000 and (3) an option
to purchase 40,000 shares of the Corporation's Common Stock under the 1998 Plan,
25,000 of these shares vesting over a period of four years at a rate of 6,250
shares per year and 15,000 of these shares vesting on an accelerated basis if
the market value of the Common Stock of the Corporation reaches $50 per share
(as adjusted for stock splits and similar transactions). The Agreement provides
that Mr. Woodle will be entitled to participate in the Corporation's
supplemental retirement plan with an annual supplemental retirement benefit of
$25,000 commencing on Mr. Woodle's retirement and continuing for a period of 15
years in accordance with and subject to the terms of such plan. The Agreement
also provides that in the event that Mr. Woodle's employment with the
Corporation is terminated involuntarily within 18 months of a change of control
(defined as ownership of 30 percent or more of the Corporation's voting stock or
a merger, sale of 50 percent or more of the assets of the Corporation or a
change in a majority of Directors), Mr. Woodle would be entitled to receive two
times his annual salary, two times the Corporation's annual 401(k) matching
contribution made on his behalf and continuation of health and other insurance
programs and other fringe benefits for a period of two years. Mr. Woodle would
also receive an amount in cash equal to two times the amount that would have
been paid to him under the Corporation's profit incentive plan then in effect.
In addition, all outstanding options held by Mr. Woodle would become immediately
exercisable and remain exercisable until the original expiration date of such
options, subject to the requirements of the Internal Revenue Code. Mr. Woodle
will be entitled to the same benefits described above if, within two years
following such a change of control, he resigns based on his good faith belief
that his status or responsibilities with the Corporation has or have diminished
subsequent to a change of control.
18
<PAGE>
The Committee determined the terms and provisions of Mr. Woodle's
compensation arrangements in its subjective discretion, based, at least in part,
upon the Committee's evaluation of the Corporation's need to attract, motivate
and retain highly qualified executive officers. Such terms and provisions were
determined as a result of negotiations between the Committee and Mr. Woodle.
Submitted by,
Donald M. Cook, Jr., Chairman
Anne P. Jones
Dr. James J. Tietjen
19
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation
received by certain executive officers of the Corporation.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------------------------------------------------------------
Other All Other
Annual Compen-
Name and Principal Fiscal Compen- Restricted Options sation
Position Year Salary ($) Bonus ($) sation ($) Stock ($) (#) ($) (1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
David A. Woodle (2) 1999 184,628 95,882 8,800(3) - 140,000 11,313
President and Chief 1998 - - - - - -
Executive Officer 1997 - - - - - -
Richard E. Perry (4) 1999 200,007 38,028 - - - 12,536
Chairman 1998 205,776 42,564 31,638(5) - - 6,454
1997 153,851 4,095 7,200 - 25,000 10,790
Chris A. Miller 1999 124,661 38,028 4,808(6) - 7,000 8,305
Vice President-Services 1998 111,440 25,690 928(7) - 20,000 6,903
1997 94,898 2,327 1,401 - - 6,305
Gerhard B. Nederlof(8) 1999 144,651 38,028 - 10,875(10) 14,000 9,215
Senior Vice President- 1998 135,114 31,148 119,034(9) - 20,000 6,905
Marketing 1997 118,217 2,568 25,106 - - -
David J. Eng(11) 1999 131,621 38,028 5,385(6) 10,875(10) 25,000 8,756
Senior Vice President- 1998 116,904 26,905 250(12) - 20,000 7,029
Sales 1997 101,825 2,388 250 - - 6,679
Donald F. Miller 1999 109,800 38,028 5,212(13) - 10,000 7,436
Vice President, Opera-
tions & 1998 102,118 23,541 1,113(14) - 17,000 6,194
Manufacturing 1997 89,905 2,204 1,477 - - 5,978
</TABLE>
(1) Consists of the Corporation's matching contributions to the Corporation's
employees' retirement savings plans for the account of the persons
indicated.
(2) The Corporation's Board of Directors elected Mr. Woodle as the
Corporation's President and Chief Executive Officer on June 16, 1998,
effective July 20, 1998.
(3) Represents payment for car allowance.
(4) Includes compensation for acting as interim Chief Executive Officer from
April 7, 1998 until July 20, 1998 .
(5) Includes $1,800 payment for car allowance and $29,838 reimbursement for
financial and tax planning.
(6) Represents payment for sick day buy back.
(7) Represents travel savings sharing of $428 and miscellaneous bonus of
$500.
(8) Mr. Nederlof was appointed Senior Vice President-Marketing, Business
Development and Services effective March 1, 1997 and was appointed to his
present position effective September 1, 1998. He had previously served in
several executive sales positions with the Corporation.
(9) Represents relocation expenses of $112,107, housing allowance of $4,088,
transportation allowance of $2,215 and miscellaneous bonus of $624.
(10) Represents a grant of 1,000 shares of restricted stock valued at the
market price of $10.875 per share for unrestricted stock on the date of
grant. The restricted stock vests on June 30, 2001. These are the only
shares of restricted stock held by the named executive officer as of the
end of the last fiscal year.
20
<PAGE>
(11) Mr. Eng was appointed Senior Vice President-Worldwide Sales effective
March 1, 1997 and was appointed to his present position effective
September 1, 1998. He had previously served in several executive sales
positions with the Corporation.
(12) Represents miscellaneous bonus.
(13) Represents payment of $4,231 for sick day buy back and payment of $981
for travel savings.
(14) Represents travel savings sharing.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning the grant of
stock options during the 1999 fiscal year to the executive officers named in the
summary compensation table. All such grants were made under either the 1988 Plan
or the 1998 Plan.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term(1)
-----------------------------------------------------------------------------------------
% of Total
Options
Granted to Exercise
Options Employees or Base
Granted(2) in Fiscal Price Expiration
Name (#) Year ($/Sh) Date 5%($) 10%($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
David A. Woodle (3) 50,000 6.9% $16.6875 7/20/06 $398,377 $954,182
25,000 3.4% 12.50 10/26/06 149,205 359,312
25,000 3.4% 18.50 1/19/07 220,823 528,910
40,000 5.5% 21.875 6/23/99 417,774 1,000,640
Richard E. Perry (4) - - - - - -
Chris A. Miller 7,000 1.0% 21.875 6/23/99 73,110 175,112
Donald F. Miller 14,000 1.9% 21.875 6/23/99 146,221 350,224
Gerhard B. Nederlof 25,000 3.4% 21.875 6/23/99 261,108 625,400
David J. Eng 10,000 1.4% 21.875 6/23/99 104,443 250,160
- ---------
</TABLE>
(1) Potential realizable value is based on the assumed annual growth rates of
the market price of the common stock of 5% and 10% required by the
Securities and Exchange Commission and these rates are not intended to
forecast future appreciation of the Corporation's stock price.
(2) Represents options granted under the Corporation's 1988 Plan and 1998
Plan, to acquire shares of Common Stock. The options were granted at an
exercise price equal to the fair market value of the Corporation's Common
Stock on the business day previous to the date of grant. The options
become exercisable in the increments of 25% per year over four years,
beginning on the first anniversary of the date of grant. Vesting of
certain options described above will accelerate if the market value of
the Common Stock of the Corporation reaches $50 per share (as adjusted
for stock splits and similar transactions).
(3) The Corporation's Board of Directors elected Mr. Woodle as the
Corporation's President and Chief Executive Officer on June 16, 1998,
effective July 20, 1998.
(4) Mr. Perry served as interim Chief Executive Officer from April 7, 1998 to
July 20, 1998.
21
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES
The following table sets forth information concerning the exercise of
stock options during the 1999 fiscal year by the executive officers named in the
summary compensation table.
<TABLE>
<CAPTION>
Number of Value of
Unexercised Unexercised
Options In-the-Money(2)
At Options
FY/end (#) FY/end ($)(3)
Shares Acquired Exercisable/ Exercisable/
Name On Exercise (#) Value Realized ($)(1) Unexercisable Unexercisable
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
David A. Woodle(4) - - 0/100,000 $0/$1,609,375
Richard E. Perry(5) - - 200,000/0 $2,328,125/$ 0
Chris A. Miller 7,400 $73,500 9,300/20,400 $51,438/$206,175
Gerhard B. Nederlof - - 26,621/18,198 $267,944/$229,275
David J. Eng 2,000 $8,750 26,325/18,675 $357,138/$253,175
Donald F. Miller - - 15,650/17,850 $244,038/$263,788
</TABLE>
- ----------
(1) Represents the market value of option shares on the date the options
were exercised, less the exercise price. The value realized was
determined without consideration of taxes payable as a result of
exercise.
(2) "In-the-Money" options are options with an exercise price less than the
market price of the Corporation's Common Stock at June 25, 1999.
(3) Based on the market value of $25.25 per share on June 25, 1999.
(4) The Corporation's Board of Directors elected Mr. Woodle as the
Corporation's President and Chief Executive Officer on June 16, 1998,
effective July 20, 1998.
(5) Mr. Perry served as interim Chief Executive Officer from April 7, 1998
to July 20, 1998.
22
<PAGE>
LONG-TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
The following table sets forth information concerning the number of
Performance Shares granted in fiscal year 1998 under the Corporation's 1998
Incentive Plan to the executive officers of the Corporation named in the Summary
Compensation Table.
<TABLE>
<CAPTION>
Estimated future Payouts under Non-Stock
Price-Based Plans (1)
----------------------------------------
Performance or
Number of Shares, Other Period
Name Units or Other Until Maturation Threshold Target Maximum Shares
Rights (#)(1) or Payout(1) Shares(#) Shares(#) (#)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
David A. Woodle -
Richard E. Perry -
Chris A. Miller 2,000 10/13/98 - 6/30/00 2,000 2,000 2,000
Gerhard B. Nederlof 2,000 10/13/98 - 6/30/00 2,000 2,000 2,000
David J. Eng 2,000 10/13/98 - 6/30/00 2,000 2,000 2,000
Donald F. Miller 1,000 10/13/98 - 6/30/00 1,000 1,000 1,000
</TABLE>
- ---------
(1) Performance Shares awarded under the Corporation's 1998 Incentive Plan
will only be paid if the Corporation's revenues equal or exceed
$200,000,000 for its fiscal year ending on June 30, 2000. The named
executive officers will not receive any Performance Shares unless this
target is met.
EMPLOYMENT CONTRACTS AND TERMINATION
OF EMPLOYMENT ARRANGEMENTS
In June 1998, the Corporation and Mr. Woodle entered into an employment
agreement. This agreement is described in the "Report of Board of Directors'
Compensation Committee on Executive Compensation" in this Proxy Statement.
On July 21, 1997, the Corporation and Mr. Perry entered into an amended
and restated employment agreement which renewed and extended Mr. Perry's
employment until October 31, 2000 (subject to retirement in Mr. Perry's
discretion upon 30 days' notice). As amended, the agreement provides that Mr.
Perry will serve as the Chairman of the Corporation's Board of Directors for
which he will be entitled to receive an annual base salary of $100,000 and
incentive compensation as a participant in the Corporation's profit incentive
plan then in effect. The agreement also provides that options granted to Mr.
Perry under the 1988 Plan shall continue to be exercisable following his
retirement (or other termination of employment) for a period equal to the lesser
of five years or the stated expiration date of the options. Upon Mr. Perry's
retirement (or death prior to retirement), the agreement provides for continuing
payments to Mr. Perry of $50,000 per year for his life (and, upon his death, for
the life of his spouse). In addition, the agreement provides that in the event
of a change in control (defined as ownership of 30 percent or more of the
Corporation's voting stock or a merger, sale of substantially all the assets of
the Corporation or a change in a majority of Directors),which results within 18
months in involuntary termination of employment, he shall be entitled to receive
two times his then annual salary plus any awards under
23
<PAGE>
any incentive compensation plans, two times the Corporation's annual 401(k)
matching contribution made on his behalf, continuation of health and other
insurance programs and other fringe benefits for a period of two years, plus
cash sufficient to purchase a paid-up annuity of $1,000 a month for life. In
addition, all outstanding options held by Mr. Perry will become immediately
exercisable (if not already exercisable), and shall remain exercisable until the
original expiration date of such options, subject to the requirements of the
Internal Revenue Code. Mr. Perry will be entitled to the same benefits described
above if, within two years following such a change of control, he resigns based
on his good faith belief that his status or responsibilities with the
Corporation has or have diminished subsequent to a change of control.
The Corporation and Mr. Nederlof entered into an employment agreement
in 1992 which expired at the end of 1996. On July 30, 1997, the Corporation and
Mr. Nederlof entered into a new employment agreement which provides that Mr.
Nederlof will serve as the Corporation's Senior Vice President-Marketing,
Business Development and Services (Mr. Nederlof's title was subsequently changed
to Senior Vice President-Marketing and Services effective September 1, 1998)
until November 3, 1999. The agreement provides for an annual base salary of
$115,000 through June 27, 1997, and $128,000 thereafter, subject to annual
review by the Corporation. The agreement also provides Mr. Nederlof with
incentive compensation as a participant in the Corporation's profit incentive
plan then in effect, an annual supplemental retirement benefit of $18,000 per
year pursuant to the Corporation's Supplement Retirement Plan and certain other
fringe benefits. In addition, the agreement provided for an initial relocation
expense payment of $36,900 paid from March to June 1997 and a final relocation
expense payment of $120,000 to be paid on or before June 26, 1998 in connection
with Mr. Nederlof's relocation to State College, Pennsylvania, with such final
relocation expense payment subject to full or partial repayment in the event Mr.
Nederlof voluntarily resigned from his employment with the Corporation during
the one year period following the date of the agreement.
In addition, the Corporation has a change of control agreement with
each of the Corporation's officers (other than Messrs. Perry and Woodle) which
becomes effective upon a change in control of the Corporation, as defined in the
agreement. In the event an officer is terminated involuntarily within 18 months
after a change in control, the officer shall be entitled to: (a) two times
annual salary; (b) two times the Corporation's contribution to the officer's
Retirement Savings & Profit Sharing Plan; (c) the sum of the prior two years'
awards from the profit incentive plan then in effect; (d) 24 months' coverage
under the Corporation's various health insurance plans; (e) benefits payable
under the Supplemental Retirement Plan, even if the officer has not yet attained
age 55; and (f) all outstanding stock options become immediately exercisable. If
the officer resigns within 18 months after a change in control, the officer
shall be entitled to the same benefits as from an involuntary termination if:
(a) the officer determines there has been a significant change in his/her
responsibilities or duties; or (b) the officer's base salary is reduced by more
than ten percent; or (c) the officer is required to relocate more than 40 miles
from his/her former place of work. The Corporation is responsible for the fees
and expenses of counsel (up to a maximum of $500,000) and any additional amount
required to "gross up" the amount paid to cover federal and state income taxes
payable by such officer relating to such payments that the officer incurs in the
enforcement of his or her rights under this agreement by litigation or other
legal action.
24
<PAGE>
PERFORMANCE GRAPH
The following graph compares the five-year cumulative total return of
the Corporation's Common Stock with the cumulative total return of the New Peer
Group (as defined below), the Multichannel Peer Group (as defined below) and the
Nasdaq Market Index (as defined below) based on an assumed investment of $100 on
June 24, 1994, in each case assuming reinvestment of all dividends.
In previous years, the Corporation has presented graphs depicting
five-year comparisons of the cumulative total return on its Common Stock with
each of the Nasdaq National Market Index (the "Nasdaq Market Index") and a peer
group which consisted of the publicly traded equipment vendors as listed in
Multichannel News, which sometimes changed from year to year (the "Multichannel
Peer Group"). For the fiscal year ended June 25, 1999, the Multichannel Peer
Group included ADC Telecommunications, Inc.; Amphenol Corp. (Class A); Antec
Corp.; Broadcom Corp. (Class A); Cisco Systems, Inc.; CommScope, Inc.; CSG
Systems International Inc.; Enterprise Software, Inc. (formerly known as IndeNet
Inc.); General Instrument Corp.; General Semiconductor, Inc.; Harmonic, Inc.;
Oak Industries Inc.; Scientific-Atlanta Corp; Terayon Communication Systems and
Wegener Corp. Multichannel News also included Broadband Technologies, Inc. in
its list of publicly traded equipment vendors, however Broadband Technologies,
Inc. was delisted on February 12, 1999 and therefore is not included in the Peer
Group for purposes of this Performance Graph.
Starting with the fiscal year ended June 25, 1999, the Corporation will
include in its proxy statements stock price performance graphs comparing the
five-year cumulative total return on its Common Stock with that for the Nasdaq
Market Index and a peer group that the Corporation has selected (the "New Peer
Group"). For the fiscal year ended June 25, 1999, the New Peer Group consists of
ADC Telecommunications, Inc.; Antec Corp.; General Instrument Corp.; Harmonic,
Inc. and Scientific-Atlanta Corp. In March 1999, Harmonic Lightwaves, Inc.
merged with and into Harmonic, Inc. and changed its name to the Harmonic, Inc.
In July 1997, General Instrument, Inc. effected a split-up of its businesses
into three publicly-traded companies: General Semiconductor, Inc.; CommScope,
Inc. and NextLevel Systems, Inc. NextLevel Systems, Inc. changed its name to
General Instrument Corp. in 1998. The Corporation believes the New Peer Group
provides a more balanced depiction of the Corporation's performance in relation
to its peers than the Multichannel Peer Group. The New Peer Group consists of
companies that the Corporation actually competes with in providing products and
services to its customer base and, therefore, provides a more meaningful basis
for comparison.
25
<PAGE>
ASSUMES $100 INVESTED ON JUNE 24, 1994
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING JUNE 25, 1999
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG C-COR.NET CORP.
NASDAQ MARKET INDEX AND PEER GROUP INDEX
<TABLE>
<CAPTION>
Company/Index Fiscal Year Ended
- ------------- --------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
C-COR.net Corp. 100.00 235.29 154.01 90.91 152.94 216.04
New Peer Group 100.00 146.08 148.34 213.47 223.11 311.85
Multichannel Peer Group 100.00 195.90 355.63 427.68 785.55 1513.39
Nasdaq Market Index 100.00 117.28 147.64 177.85 235.75 330.37
</TABLE>
CERTAIN TRANSACTIONS
On October 16, 1998, the Corporation accepted the voluntary resignation
of Mr. Lynn Hutcheson, its Senior Vice President of Engineering and Technology.
The Corporation paid severance fees to Mr. Hutcheson in the amount of $70,000
related to this resignation.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's officers and Directors, and persons who own more than ten percent
of a registered class of the Corporation's equity securities, to file with the
Securities and Exchange Commission ("SEC") initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Corporation. Officers, Directors and ten-percent shareholders are required
by SEC regulation to furnish the Corporation with copies of all Section 16(a)
forms they file. To the Corporation's knowledge, based solely on a review of the
copies of such reports furnished to the Corporation and written representations
that no other reports were required during the fiscal year ended June 25, 1999,
its officers, Directors and ten-percent shareholders complied with all
applicable Section 16(a) filing requirements, except that (i) Mr. Eng and Mr.
Nederlof were each late in filing a report with respect to restricted stock that
each received during the last fiscal year and (ii) Mr. Woodle, Mr. Chris Miller,
Mr. Donald Miller, Mr. Nederlof and Mr. Eng were each late in filing a report
with respect to stock options that each received during the last fiscal year.
INDEPENDENT AUDITORS
KPMG LLP, independent certified public accountants, audited the
consolidated financial statements of the Corporation for the fiscal year ended
June 25, 1999. Representatives of KPMG LLP are expected to attend the 1999
Annual Meeting of Shareholders, will have the opportunity to make a statement if
they desire to do so and are expected to be available to answer appropriate
questions. The Board of Directors has selected KPMG LLP as the independent
public accountants
26
<PAGE>
to audit the Corporation's consolidated financial statements for the fiscal year
ending June 25, 2000.
DEADLINE FOR SHAREHOLDERS' PROPOSALS
The Corporation must receive any proposal which a shareholder wishes to
submit to the 2000 Annual Meeting of Shareholders by May 23, 2000, for inclusion
in the proxy material for that meeting. Shareholder proposals to be presented at
the 2000 Annual Meeting of Shareholders, but not included in the proxy material
relating to that meeting, must be received no later than August 6, 2000. Nothing
in this paragraph shall be deemed to require the Corporation to include in its
proxy materials relating to the 2000 Annual Meeting of Shareholders any
shareholder proposal which does not meet all of the requirements for inclusion
established by the Securities and Exchange Commission and the Corporation's
By-laws at that time in effect.
OTHER MATTERS
Management does not know of any matters to be brought before the
meeting other than those referred to herein. If any other matters properly come
before the meeting, the persons designated as proxies will vote thereon in
accordance with their best judgment.
It is important that proxies be returned promptly. Each shareholder who
does not expect to attend the meeting in person is urged to sign and date the
enclosed form of proxy and return it by mail. No postage is necessary if it is
mailed in the United States.
By order of the Board of Directors,
/s/ William T. Hanelly
WILLIAM T. HANELLY
Vice President-Finance,
Secretary and Treasurer
September 20, 1999
27
<PAGE>
APPENDIX A
----------
RESOLVED, that Article 5(a) of the Corporation's Amended and
Restated Articles of Incorporation, as amended, be amended and restated in its
entirety to read in full as follows:
5(a). The aggregate number of shares which the corporation
should have authority to issue is Fifty Million (50,000,000)
shares of Common Stock having a par value of $.10 per share
and Two Million (2,000,000) shares of Preferred Stock, no par
value per share.
A-1
<PAGE>
APPENDIX B
----------
RESOLVED, that the Corporation's Amended and Restated Articles
of Incorporation, as amended, be amended to add a new Article 8 thereto, which
shall read in full as follows:
8. The shareholders of the Corporation shall not have the
right to cumulate votes in the election of directors.
A-2
<PAGE>
[PROXY CARD]
C-COR.net Corp. Proxy Solicited on Behalf of the
State College, PA Board of Directors of the
Corporation for Annual Meeting of
Shareholders to be held October 19, 1999
PROXY
The undersigned hereby appoints Anne P. Jones, Dr. James J.
Tietjen and John J. Omlor, and each of them, attorneys and proxies, with power
of substitution in each of them to vote and act for and on behalf of the
undersigned at the Annual Meeting of Shareholders of C-COR.net Corp. to be held
on Tuesday, October 19, 1999, and at all adjournments thereof, according to the
number of shares which the undersigned would be entitled to vote if then
personally present, as indicated hereon and in their discretion upon such other
business as may come before the meeting, all as set forth in the notice of the
meeting and in the proxy statement furnished herewith, copies of which have been
received by the undersigned; hereby ratifying and confirming all that said
attorneys and proxies may do or cause to be done by virtue hereof.
It is agreed that unless otherwise marked on the reverse
hereof said attorneys and proxies are appointed WITH authority to vote for the
election of directors and for the other proposals set forth on the reverse
hereof and to vote in their discretion on such other business as may properly
come before the meeting.
(PLEASE FILL IN, SIGN AND DATE THIS PROXY CARD ON THE REVERSE SIDE AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE)
1
<PAGE>
1. ELECTION OF DIRECTORS
FOR all nominees listed at right Nominee:
(except as marked For a term expiring in 2000:
to the contrary below) [ ] Michael J. Farrell
WITHHOLD AUTHORITY to Nominees:
vote for all nominees [ ] For a term expiring in 2002:
listed at right David A. Woodle
I.N. Rendall Harper, Jr.
Dr. Frank Rusinko, Jr.
To withhold authority to vote for any individual nominee, write that nominee's
name in the space below.
- --------------------------------------------------
2. The amendment to increase from 24,000,000 to 50,000,000 the number of
shares of Common Stock authorized for issuance under the
Corporation's Amended and Restated Articles of Incorporation filed
with the Secretary of the Commonwealth of Pennsylvania on February
19, 1981, as amended, an increase of 26,000,000 shares.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. The amendment to the Corporation's Amended and Restated Articles of
Incorporation filed with the Secretary of the Commonwealth of
Pennsylvania on February 19, 1981, as amended to eliminate the right
of shareholders to cumulate votes in the election of directors.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH
OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
Signature Signature Dated , 1999
-------------------- --------------------- -------
(SEAL) (SEAL)
NOTE: Signature should be the same as the name printed above: executors,
administrators, trustees, guardians, attorneys and officers of corporations
should add their title when signing.
2
