<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:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
C-COR.net Corp.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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 Logo]
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 17, 2000
----------------
TO THE SHAREHOLDERS:
The Annual Meeting of Shareholders of C-COR.net Corp. will be held at the
offices of the Company,60 Decibel Road, State College, Pennsylvania, on October
17, 2000, at 9:00 a.m. for the following purposes:
1. To elect three Directors to serve terms of three years and until their
respective successors are elected and qualified.
2. To approve the amended and restated C-COR.net Corp. Incentive Plan.
3. To transact such other business as may properly come before the Annual
Meeting.
The Board of Directors has fixed September 8, 2000 as the record date for
determining the holders of Common Stock entitled to notice of and to vote at
the Annual Meeting and any adjournments. Consequently, only holders of Common
Stock of record on the transfer books of the Company at the close of business
on September 8, 2000, will be entitled to notice of and to vote at the Annual
Meeting and any adjournments.
Please complete, date and sign the enclosed proxy and return it promptly, or
if you prefer, you may use the Company's Internet voting procedures or cast
your vote via telephone. If you attend the Annual Meeting, you may vote in
person.
/s/ William T. Hanelly
WILLIAM T. HANELLY
Vice President-Finance, Secretary
and Treasurer
September 13, 2000
<PAGE>
[C-Cor.net Logo]
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 17, 2000
----------------
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 "Company"), for the purpose of soliciting proxies for use at the Annual
Meeting of Shareholders of the Company to be held on October 17, 2000 (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 Company
on or about September 15, 2000.
Your shares may be voted at the Meeting only if you are present in person or
represented by proxy. Shareholders have a choice of voting (a) by completing a
proxy/voting instruction card and mailing it in the postage paid envelope
provided, (b) over the Internet, or (c) by telephone using a toll-free number.
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 Company, by timely delivery of a properly executed later dated proxy
(including an Internet or telephone vote), or by appearing at the Meeting and
voting in person. The method by which you vote will in no way limit your right
to vote at the Meeting if you later decide to attend in person.
When your proxy card is returned properly signed, the shares represented by
your proxy 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 Annual
Meeting of Shareholders. 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 Company. In addition to use of
the mails, proxies may be solicited by officers, Directors and other employees
of the Company by telephone or personal solicitation. No additional
compensation will be paid to such individuals. The Company 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 Company 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 8, 2000
will be entitled to vote at the Meeting. On the record date, there were
34,042,388 shares of the Company's Common Stock, $.05 par value per share (the
"Common Stock"), outstanding, each share being entitled to one vote.
Proxies in the form enclosed, if properly executed and received in time for
voting, and not revoked, will be voted as directed on the proxies. In the
absence of instructions, the shares represented at the Meeting by the enclosed
proxy will be voted "FOR" the nominees for Director ("Proposal No. 1") and
"FOR" approving the amended and restated Incentive Plan ("Proposal No. 2").
Each share of Common Stock is entitled to one vote on each matter which may
be brought before the Meeting. The election of Directors will be determined by
a plurality vote and the three nominees receiving the most "FOR" votes for
terms of three years will be elected. Approval of Proposal No. 2 and any other
matters brought before the Meeting, other than the election of Directors, will
require the favorable vote of a majority of the shares of Common Stock cast on
the proposal by shareholders entitled to vote thereon at the Meeting. The
Company 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," or proxies submitted by brokers that do not indicate a vote for
some or all of the proposals (because they do not have discretionary voting
authority and have not received instructions as how to vote on those
proposals), will not be counted in determining the presence of a quorum and
will not be voted.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Three Directors are to be elected to hold office for terms of three years
and until their successors shall have been elected and qualified. The Board of
Directors consists of nine director seats. Currently, there are eight Directors
and one vacancy. There is no nominee designated to fill the vacancy. Five of
the current Directors are continuing members of the Board of Directors. 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 reserve
full discretion to cast votes for another person in the event that any nominee
is unable to serve.
The three nominees for election as Directors for terms expiring in 2003
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. If any of them should decline to serve or become
unavailable, an event that 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.
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The following table sets forth information as to nominees for Directors of
the Company, as well as information as to the Directors of the Company who will
continue to serve after the Meeting. The offices referred to in the table are
offices of the Company, 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
--------------- --------------------- ----------
<C> <S> <C>
To be elected for terms expiring in 2003:
Donald M. Cook, Jr., 69.................. Retired; formerly, 1988
President and Chief
Operating Officer,
SEMCOR, Inc., a company
providing systems
engineering and
management services,
from May 1990 to January
1996.
Michael J. Farrell, 50................... President--Farrell & 1999
Co., an investment
banking firm
specializing in
investing in and
organizing mergers
involving manufacturing
companies since 1982;
President and CEO--MK
Rail Company from 1995
to 1996; 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.
Christine Jack Toretti, 43............... Chairman and Chief N/A
Executive Officer, S.W.
Jack Drilling Company, a
land based natural gas
drilling company, since
April 1999, President
and Chief Executive
Officer from March 1990
to April 1999;
President, The Jack
Company since August
1989; Managing Partner,
C&N Company and C&N
Company No. 2,
partnerships that invest
in gas well production,
since February 1971;
Director--S&T Bancorp
and The Lockhart
Company.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Principal Occupations and
Business During Year First
Last Five Years and Current Became a
Nominee and Age Directorships Director
--------------- --------------------------- ----------
<C> <S> <C>
Continuing Members of the Board of Directors--terms expiring in 2002:
David A. Woodle, 44............ Chairman elect; President and 1998
Chief Executive Officer since
July 20, 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, Jr., 62.. President, Chief Executive 1982
Officer and Treasurer, 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., 69..... Senior Scientist and Director, 1990
Consortium for 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.
Chairman, Transor Filter, U.S.A.,
a supplier of EDM filtration
systems, since August 1991.
Continuing Members of the Board of Directors--terms expiring in 2001:
Dr. James J. Tietjen, 67....... Dean, School of Technology 1987
Management, The Stevens 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.
John J. Omlor, 65.............. President and Chief Executive 1989
Officer, John J. Omlor
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., FCG,
Inc. and PBTI International.
Mr. Omlor also serves on the
Board of Directors of Fortress
Technologies as a representative
of the Company.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" EACH OF THE
NOMINEES PRESENTED.
4
<PAGE>
PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO C-COR.NET CORP. INCENTIVE PLAN
The C-COR.net Incentive Plan (the "Incentive Plan") was unanimously approved
by the Board of Directors on April 29, 1998 as a successor to the 1988 Stock
Option Plan and the 1989 Non-Employee Directors' Non-Qualified Stock Option
Plan. On August 15, 2000, the Board of Directors unanimously approved certain
amendments to and restated the Company's Incentive Plan. The purposes of the
amendments are (i) to permit the granting of Incentive Stock Options (within
the meaning of Section 422 of the Internal Revenue Code (the "Code")), (ii) to
increase from 2,000,000 to 5,000,000 the maximum aggregate number of shares of
Common Stock which may be issued under the Incentive Plan, (iii) to increase
from 100,000 to 750,000 shares the maximum number of shares of the Company's
Common Stock for which a participant may be granted Stock Options during a
calendar year, (iv) to increase from $100,000 to $4,000,000 the maximum value
of Performance Unit awards that may be granted to any participant during any
calendar year, (v) to provide for full vesting and payment of Common Stock or
cash covered by outstanding Performance Share awards and Performance Unit
awards in the event of a Change in Control, and (vi) to make certain other
changes in the terms and conditions of awards under the Incentive Plan,
including to permit the Board to grant Stock Options with special terms and
conditions intended to maximize the tax efficiency of such Stock Options
granted to Company employees whose residency, citizenship or place of work
subject them to taxation by a country other than the United States.
Proposal No. 2 seeks shareholder approval of the Incentive Plan as amended
and restated by the Board on August 15, 2000 (the "Amended Incentive Plan"). If
Proposal No. 2 is approved, the entire Amended Incentive Plan will be deemed
effective as of August 15, 2000. If Proposal No. 2 is not approved, then (i)
the amendment described above that permits the granting of Incentive Stock
Options will not become effective since this amendment requires shareholder
approval under the Code and (ii) the Company will not be able to deduct
compensation in excess of $1,000,000 for any executive officer since
shareholder approval is required under Section 162(m) of the Code in order to
qualify for an exemption from the $1,000,000 deduction limit. All other
amendments will be deemed effective as of August 15, 2000, however, since they
do not require shareholder approval if no Incentive Stock Options will be
issued under the Amended Incentive Plan.
The following summary describes the material features of the Amended
Incentive Plan.
Term and Purpose.
The Incentive Plan became effective October 1, 1998. No awards may be
granted under the Amended Incentive Plan after April 29, 2008, but awards
granted prior to such date may extend beyond that date. The purpose of the
Amended Incentive Plan is to enable the Company to offer certain of its
officers, key employees and Directors equity interests in the Company and other
incentive awards, including performance-based stock incentives, thereby
attracting, retaining and rewarding such persons, and strengthening the
mutuality of interests between such persons and the Company's shareholders.
Administration.
The Amended Incentive Plan will be administered and interpreted by the
Board; provided, however, that the Board may delegate this responsibility to a
committee comprised of two or more members of the Board. The Amended Incentive
Plan provides for the grant of Stock Options, Restricted Stock, Performance
Shares and Performance Units. The Board has the authority to select the
eligible persons to whom awards under the Amended Incentive Plan may from time
to time be granted; to determine whether and to what extent awards are to be
granted under the Amended Incentive Plan to one or more eligible persons; to
determine whether Stock Options are to be Incentive Stock Options or Non-
Qualified Stock Options; to determine the number of shares of Common Stock to
be covered by each such award granted; to determine the terms and conditions,
not inconsistent with the terms of the Amended Incentive Plan, of any award
granted under the Amended Incentive Plan, including the option or purchase
price, any restriction or limitation on the award or the underlying shares of
Common Stock, any vesting schedule or acceleration provisions, and any
forfeiture provisions. Subject to the
5
<PAGE>
terms of the Amended Incentive Plan, the Board has the authority to administer
and interpret the Amended Incentive Plan and to prescribe rules, guidelines and
practices for administration of the Amended Incentive Plan. Any decision,
interpretation or other action made or taken in good faith by the Board shall
be final, binding and conclusive.
Shares Available.
The maximum number of shares of Common Stock that may be issued under the
Amended Incentive Plan is 5,000,000 shares (formerly 2,000,000 shares), plus an
additional number of shares equal to the number of options that remain
available for grant under the Company's 1988 Stock Option Plan and 1989 Non-
Employee Directors' Non-Qualified Stock Option Plan on August 15, 2000. The
shares issuable under the Amended Incentive Plan may be either authorized and
unissued shares of Common Stock or issued Common Stock reacquired by the
Company. If any option granted under the Amended Incentive Plan expires,
terminates or is cancelled for any reason without having been exercised in
full, the number of unpurchased shares will again be available for the purposes
of the Amended Incentive Plan. Further, if any shares of Restricted Stock are
forfeited or any award of Performance Shares terminates without the delivery of
such shares, the shares subject to such award, to the extent of such forfeiture
or termination, will again be available for the purposes of the Amended
Incentive Plan.
In the event of any merger, reorganization, consolidation, recapitalization,
dividend (other than a regular cash dividend), stock split, or other change in
corporate structure affecting the Common Stock, a substitution or adjustment
will be made in the maximum aggregate number of shares that may be issued under
the Amended Incentive Plan and with respect to which Stock Options or
Performance Shares may be granted under the Amended Incentive Plan to any
individual during any calendar year. A substitution or adjustment also will be
made in the number and option price of shares subject to outstanding Stock
Options granted under the Amended Incentive Plan and in the number of shares
subject to other outstanding awards granted under the Amended Incentive Plan.
The substitution or adjustment will be determined by the Board, in its sole
discretion, provided that the number of shares subject to any award shall
always be a whole number.
Eligibility.
Officers and employees of the Company and its subsidiaries are eligible to
be granted awards under the Amended Incentive Plan. Directors of the Company
who are not employees of the Company or any of its subsidiaries are eligible to
be granted awards other than Incentive Stock Options under the Amended
Incentive Plan.
Types of Awards
Stock Options. A stock option is a contractual right to purchase a number of
shares at a price determined at the date the option is granted. Stock Options
granted under the Amended Incentive Plan may be designated Non-Qualified Stock
Options (that is, options that do not qualify as incentive stock options under
the Code) or Incentive Stock Options. See "Federal Income Tax Consequences"
below. Each Stock Option granted under the Amended Incentive Plan will be
evidenced by, and subject to the terms of, a Stock Option Certificate that
specifies the number of shares of Common Stock subject to the Stock Option, the
option exercise price, the option term, whether the option is an Incentive
Stock Option or a Non-Qualified Stock Option, and other terms and conditions
applicable to the Stock Option.
Price and Term. The option exercise price for Stock Options granted under
the Amended Incentive Plan will be fixed by the Board at the time of grant, but
may not be less than 100% of the fair market value of a share of Common Stock
on the date the option is granted. The term of Stock Options granted under the
Amended Incentive Plan will be fixed by the Board at the time of grant, but no
Stock Option may be exercisable more than eight years after the date it is
granted. With respect to any individual owning shares of Common Stock
representing 10% or more of the total combined voting power of all classes of
stock of the
6
<PAGE>
Company (a "10 Percent Holder"), special exercise price and term limits apply
to Incentive Stock Options, namely the option price must be at 110% of the fair
market value of a share of Common Stock on the date the option is granted and
the Incentive Stock Option may not be exercisable more than five years from the
date of its grant.
Exercisability and Method of Exercise. The Board has the authority, at the
time a Stock Option is granted, to provide that Stock Option will become
exercisable in installments, or only after a specified waiting period. When
these provisions are satisfied, the Stock Option is "vested" and may be
exercised in accordance with the terms of the Amended Incentive Plan. The Board
may waive or amend any installment exercise or waiting period provisions after
the Stock Option is granted, based on such factors as the Board, in its sole
discretion, deems appropriate. Stock Options that are vested may be exercised
in whole or in part at any time during the option term by delivering to the
Company payment in full of the option exercise price, among other things.
Unless otherwise determined by the Board at or after the time of grant, the
option exercise price may be paid in the form of Common Stock owned by the
optionee (and for which the optionee has good title free and clear of any liens
and encumbrances), based on the fair market value of the Common Stock on the
date of exercise, or through a broker-assisted cashless exercise.
Termination of Employment or Service. Unless otherwise provided by the Board
at the time the Stock Option is granted, if an optionee ceases to be an
employee or Director of the Company for any reason other than normal
retirement, disability or death, any Stock Option held by the optionee that was
vested as of the date of the termination of employment or service may be
exercised by the optionee for a period of thirty days following the date of
termination or until the expiration of the stated term of the Stock Option,
whichever period is shorter. Any Stock Option that was not vested on the date
of the termination of employment or service will terminate on that date.
Unless otherwise provided by the Board at the time the Stock Option is
granted, if an optionee ceases to be an employee or Director of the Company by
reason of normal retirement or death, all of the Stock Options held by the
optionee will become fully exercisable, and may be exercised by the optionee
(or the legal representative of the optionee's estate) for a period of one year
after the date of the optionee's death or retirement or until the expiration of
the stated term of the Stock Option, whichever is shorter. In the case of an
Incentive Stock Option, such option must generally be exercised within 3 months
of retirement in order to be treated as an Incentive Stock Option.
Unless otherwise provided by the Board at the time the Stock Option is
granted, if an optionee ceases to be an employee or Director of the Company as
a result of a disability, any Stock Option held by the optionee that was
exercisable on the date of the termination of employment or service may be
exercised by the optionee for a period of one year after the date of the
termination or until the expiration of the stated term of the Stock Option,
whichever period is shorter.
The Board may, in its sole discretion, accelerate the exercisability of any
outstanding Stock Option or extend the post-termination exercise period for any
Stock Option held by an optionee who ceases to be an employee or Director of
the Company, provided that the post-termination exercise period may not extend
beyond the expiration of the stated term of such Stock Option.
Restricted Stock. An award of Restricted Stock gives the participant the
right to receive shares of Common Stock at the end of a specified period (the
"Restriction Period") if he or she continues to be an employee or Director of
the Company throughout the Restriction Period. Restricted Stock will be
forfeited to the Company if the participant ceases to be an employee or
Director of the Company during the Restriction Period. A participant will have
all of the rights of a holder of Common Stock with respect to shares subject to
the award, including the right to vote such shares and to receive dividends
thereon, except that the participant will not be permitted to sell, transfer,
pledge or assign the shares as long as they are held in custody by the Company.
7
<PAGE>
Subject to the terms of the Amended Incentive Plan, the Board will determine
the persons to whom, and the time or times at which, grants of Restricted Stock
will be made, the number of shares of Common Stock subject to each award, the
time or times within which such awards may be subject to forfeiture, the
vesting schedule and any rights to accelerate the vesting schedule, and any
other terms and conditions of the awards. The Board may provide for the lapse
of restrictions in installments and may waive such restrictions, in whole or in
part, at any time after the date of the award, based on such factors as the
Board, in its sole discretion, deems appropriate.
Termination of Employment or Services. Subject to the provisions of the
Amended Incentive Plan and the Restricted Stock Award Certificate, if a
participant ceases to be an employee or Director of the Company for any reason
other than normal retirement, disability or death, all Restricted Stock will be
forfeited to the Company.
Subject to the provisions of the Amended Incentive Plan and the Restricted
Stock Award Certificate, if a participant ceases to be an employee or Director
of the Company during the Restriction Period due to normal retirement,
disability or death, restrictions will lapse with respect to a percentage of
the Restricted Stock award that is equal to the percentage of the Restriction
Period that has elapsed as of the date of the participant's termination of
employment or service, and stock certificates representing such shares will be
released from custody and delivered to the participant (or the participant's
estate).
Performance Shares. A Performance Share gives the participant the right to
receive shares of Common Stock at the end of a specified performance period
(the "Performance Period") upon the attainment of specified performance goals.
Such goals must be established by the Board in writing not later than 90 days
after the commencement of the Performance Period, provided that the outcome is
substantially uncertain at the time the goal is established. The performance
goals may be based on the Company's stock price, return on assets, return on
capital employed, return on shareholders' equity, earnings, earnings per share,
total shareholder return, sales, costs, or such other objective performance
goals as may be established by the Board from time to time. A participant will
not be deemed to be the holder of Common Stock, or to have the rights of a
holder of Common Stock, unless and until a stock certificate representing the
shares subject to the Performance Share award is issued to the participant.
Subject to the terms of the Amended Incentive Plan, the Board will determine
the persons to whom, and the time or times at which, Performance Shares will be
awarded, the number of Performance Shares to be included in each award, the
duration of the Performance Period, the conditions under which the Performance
Shares will vest, and the other terms and conditions of the awards.
Vesting and Payment. After the expiration of a Performance Period, the
Board, in its sole discretion, will determine the extent to which the
applicable performance goals and all other material terms of the award have
been achieved, and the number of the Performance Shares of each participant
that have vested. The participant will receive the number of shares specified
in the Performance Share Certificate as soon as practicable thereafter.
Termination of Employment or Service. Unless otherwise provided by the Board
at the time of grant, if a participant ceases to be an employee or Director of
the Company during the Performance Period for any reason (including death,
disability or retirement), all Performance Shares will be forfeited to the
Company.
Performance Units. A Performance Unit gives the participant the right to
receive a fixed dollar amount, payable in cash, shares of Common Stock, or a
combination, at the end of a specified period of time (the "Performance Cycle")
upon the attainment of specified performance goals. Such goals must be
established by the Board in writing not later than 90 days after the
commencement of the Performance Cycle, provided that the outcome is
substantially uncertain at the time the goal is established. The performance
goals may be based on the Company's stock price, return on assets, return on
capital employed, return on shareholders' equity, earnings, earnings per share,
total shareholder return, sales, costs, or such other objective performance
goals as may be established by the Board from time to time.
Subject to the terms of the Amended Incentive Plan, the Board will determine
the persons to whom, and the time or times at which, Performance Units will be
awarded, the number of Performance Units to be included in
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<PAGE>
each award, the duration of the Performance Cycle, the conditions under which
the Performance Units will vest, the ability of participants to defer the
receipt of payment of Performance Units, and the other terms and conditions of
the awards.
Vesting and Payment. After the expiration of a Performance Cycle, the Board,
in its sole discretion, will determine the extent to which the applicable
performance goals and all other material terms of the award have been achieved,
and the percentage of the Performance Units of each participant that have
vested. The participant will receive payment of the amount specified in the
Performance Unit Certificate as soon as practicable thereafter. Payment may be
made in cash, shares of Common Stock or a combination of both, as determined by
the Board, in its sole discretion.
Termination of Employment or Services. Unless otherwise provided by the
Board at the time of grant, if a participant ceases to be an employee or
Director of the Company during the Performance Cycle for any reason (including
death, disability or retirement), the Performance Units will be forfeited to
the Company.
Individual Limits.
During any calendar year, the following individual limits apply to grants
made under the Amended Incentive Plan: the maximum number of shares of Common
Stock that may be subject to Stock Options is 750,000 shares, the maximum
number of shares of Common Stock that may be subject to Performance Share
awards is 100,000 shares and the maximum dollar amount of Performance Unit
awards is $4,000,000.
Change of Control.
In the event of a Change of Control (as defined below), all outstanding
Stock Options will immediately become fully exercisable, restrictions will
lapse with respect to a percentage of each outstanding Restricted Stock award
equal to the percentage of the Restriction Period that has elapsed as of the
date of the Change of Control and all Performance Share awards and all
Performance Unit awards will immediately become fully vested. For purposes of
the Amended Incentive Plan, a "Change of Control" is defined to mean the
occurrence of any one of the following: (i) any person or group of persons
acting in concert acquires ownership of or the right to vote or to direct the
voting of shares of capital stock of the Company representing 30% or more of
the total voting power of the Company, or (ii) the Company merges or
consolidates with another corporation and less than 50% of the total voting
power of the surviving corporation is represented by shares held by former
shareholders of the Company prior to such merger or consolidation, or (iii) the
Company sells more than 50% of its assets to another corporation or other
entity or person, or (iv) as the result of, or in connection with, any cash
tender or exchange offer, merger or other business combination, sale of assets
or contested election, the persons who were the Directors of the Company before
the transaction cease to constitute a majority of Directors of the Company.
Federal Income Tax Consequences.
The Federal income tax discussion set forth below is intended for general
information only. State and local income tax consequences are not discussed,
and may vary from locality to locality. Also not discussed are tax consequences
that may exist for optionees who work or reside outside the United States, with
respect to the laws of such foreign nations of work or residence. The Amended
Incentive Plan contains authority for the Board of Directors to grant options
with special terms and condition, as may be considered desirable by the Board
to improve the tax efficacy of the stock option under the tax laws of such
country.
Non-Qualified Stock Options. Under present Treasury regulations, an optionee
who is granted a Non-Qualified Stock Option will not realize taxable income at
the time the option is granted. In general, an optionee will be subject to tax
for the year of exercise on an amount of ordinary income equal to the excess of
the fair market value of the shares on the date of exercise over the option
price, and the Company will receive a corresponding deduction. Income tax
withholding requirements apply upon exercise. The optionee's basis in the
9
<PAGE>
shares so acquired will be equal to the option price plus the amount of
ordinary income upon which he is taxed. Upon subsequent disposition of the
shares, the optionee will realize capital gain or loss, long-term or short-
term, depending upon the length of time the shares are held after the option is
exercised.
Incentive Stock Options. An optionee is not taxed at the time an Incentive
Stock Option is granted. The tax consequences upon exercise and later
disposition depend upon whether the optionee was an employee of the Company or
a subsidiary at all times from the date of grant until three months preceding
exercise (one year in the case of death or disability) and on whether the
optionee holds the shares for more than one year after exercise and two years
after the date of grant of the option.
If the optionee satisfies both the employment rule and the holding rule, for
regular tax purposes the optionee will not realize income upon exercise of the
option and the Company will not be allowed an income tax deduction at any time.
The difference between the option price and the amount realized upon
disposition of the shares by the optionee will constitute a long-term capital
gain or a long-term capital loss, as the case may be.
If the optionee meets the employment rule but fails to observe the holding
rule (a "disqualifying disposition"), the optionee generally recognizes as
ordinary income, in the year of the disqualifying disposition, the excess of
the fair market value of the shares at the date of exercise over the option
price. Any excess of the sales price over the fair market value at the date of
exercise will be recognized by the optionee as capital gain (long-term or
short-term depending on the length of time the stock was held after the option
was exercised). If, however, the sales price is less than the fair market value
at the date of exercise, then the ordinary income recognized by the optionee is
generally limited to the excess of the sales price over the option price. In
both situations, the Company's tax deduction is limited to the amount of
ordinary income recognized by the optionee. Under current Internal Revenue
Service guidelines, the Company is not required to withhold any Federal income
tax in the event of a disqualifying disposition.
Different consequences will apply for an optionee subject to the alternative
minimum tax.
Restricted Stock. Receipt of a Restricted Stock award will not be a taxable
event to the participant for federal income tax purposes. Rather, the
participant will be deemed to receive compensation taxable as ordinary income,
and the Company will be entitled to an equivalent deduction (subject to any
applicable Code limitation), on the date the forfeiture provisions lapse or are
waived. The participant's income and the Company's deduction is equal to the
fair market value of the shares of Common Stock subject to the award on the
date of lapse or waiver of the restrictions.
Performance Shares. A participant will not be taxed upon the grant of
Performance Shares. Upon receipt of the underlying shares of Common Stock, the
participant will be taxed at ordinary income tax rates on the fair market value
of the shares of Common Stock received, and the Company will be entitled to a
corresponding tax deduction. The participant's basis in any shares of Common
Stock acquired pursuant to a Performance Share award will be equal to the
amount of ordinary income on which he or she was taxed and, upon subsequent
disposition, any gain or loss will be capital gain or loss.
Performance Units. A participant will not be taxed upon the grant of
Performance Units. Upon receipt of the underlying cash, the participant will be
taxed at ordinary income tax rates on the amount of cash received, and the
Company will be entitled to a corresponding tax deduction. If the participant
receives shares of Common Stock in lieu of cash, he or she will be taxed at
ordinary income tax rates on the fair market value of the shares received.
Withholding of Taxes.
The Company has the right to reduce the number of shares of Common Stock
otherwise deliverable pursuant to the Amended Incentive Plan by an amount that
would have a fair market value equal to the amount of all federal, state and
local taxes to be withheld, or to deduct the amount of these taxes from any
cash
10
<PAGE>
payment to be made to a participant pursuant to the Amended Incentive Plan or
otherwise. In connection with this withholding, the Board may make such
arrangements, consistent with the Amended Incentive Plan, as it deems
appropriate.
Termination or Amendment.
The Board may at any time amend, discontinue or terminate the Amended
Incentive Plan in whole or in part, provided that unless otherwise required by
law, the rights of a participant with respect to awards granted prior to the
amendment, discontinuance or termination may not be impaired without the
participant's consent. The Company will seek the approval of its shareholders
for an amendment if such approval is necessary to comply with the Code, Federal
or state securities law or any other applicable rules or regulations. Unless
sooner terminated, the Amended Incentive Plan will expire on April 29, 2008 and
no awards may be granted after this date.
The Board may amend the terms of any award previously granted under the
Amended Incentive Plan, prospectively or retroactively, but no amendment or
other action by the Board may impair the rights of any holder without the
holder's consent.
Plan Benefits.
The amount of future benefits from grants under the Amended Incentive Plan
are not determinable because such grants are made at the discretion of the
Board. To review grants made during the last fiscal year under the Incentive
Plan prior to its amendment, see the tables captioned "Option Grants in Last
Fiscal Year" and "Long-Term Incentive Plan--Awards in Last Fiscal Year."
The favorable vote of a majority of the shares of Common Stock cast on
Proposal No. 2 by the shareholders entitled to vote thereon at the Meeting is
required for approval of Proposal No. 2.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL NO. 2.
11
<PAGE>
ADDITIONAL INFORMATION
Board of Directors
During fiscal year 2000, non-employee Board members received an annual
retainer of $10,000 if they did not serve as the chairperson of any Committee
or $11,000 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, except that they received only $500 if a meeting was attended by
teleconference. Each Director receives a grant of options to purchase 2,000
shares of the Company's Common Stock upon his or her initial election as a
Director and an annual grant of options to purchase 2,000 shares of the
Company's Common Stock thereafter. These options have an exercise price equal
to the fair market value of the Common Stock on the date of grant. In addition
to the regular compensation described herein, each Director was granted a one-
time bonus consisting of options to purchase 3,000 shares of the Company's
Common Stock as compensation for the additional services provided by the Board
of Directors in connection with the four acquisitions and the follow-on
offering of stock completed by the Company during fiscal year 2000.
The Board of Directors held 10 meetings during fiscal year 2000. Each of the
incumbent Directors attended over 75% of the meetings of the Board of Directors
and Committees on which they served. 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 Services
Committee. The members of all of these committees are appointed by the Board.
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. At the end of his current term in October 2000, Richard E.
Perry will retire from the Board of Directors and the Executive Committee will
appoint a new Chairman. 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 Company in such manner as the
Committee deems to be in the best interests of the Company. The Executive
Committee held four meetings during the last fiscal year.
Audit Committee
The Audit Committee is currently comprised of Dr. Frank Rusinko, Jr.
(Chairman), Michael J. Farrell and Dr. James J. Tietjen. The Audit Committee is
responsible for determining the adequacy of corporate accounting, financial and
operating controls and meets with the Company's internal and independent
auditors to review the services rendered by them to the Company. The Audit
Committee held three meetings during the last fiscal year.
Compensation Committee
The Compensation Committee is currently comprised of Dr. James J. Tietjen
(Chairman), Donald M. Cook, Jr. and Dr. Frank Rusinko, Jr. During fiscal year
2000, Anne P. Jones was a member of the Compensation Committee until her
resignation from the Board of Directors on February 12, 2000. The Compensation
Committee is responsible for managing the Company's stock option plans, the
Profit Incentive Plan (the "Profit Plan"), and approving the compensation of
officers of the Company. No member of the Compensation Committee is an employee
of the Company, or an executive officer of a company on whose board an
executive officer of the Company serves as a director. The Compensation
Committee held ten meetings during the last fiscal year.
12
<PAGE>
Strategic Planning Committee
The Strategic Planning Committee, currently comprised of Richard E. Perry
(Chairman), Donald M. Cook, Jr., Michael J. Farrell, I.N. Rendall Harper, Jr.,
John J. Omlor, Dr. Frank Rusinko, Jr., Dr. James J. Tietjen and David A.
Woodle, permits the Company's management to discuss strategic planning with
experienced Directors. At the end of his current term in October 2000, Richard
E. Perry will retire from the Board of Directors and the Strategic Planning
Committee will appoint a new Chairman. During fiscal year 2000, Anne P. Jones
was a member of the Strategic Planning Committee until her resignation from the
Board of Directors on February 12, 2000. The Strategic Planning Committee held
six meetings during the last fiscal year.
Nominating Committee
The Nominating Committee, currently comprised of Richard E. Perry
(Chairman), Michael J. Farrell and Dr. Frank Rusinko, Jr., was created for the
purpose of recommending nominees for election to the Board of Directors and as
Executive Officers. At the end of his current term in October 2000, Richard E.
Perry will retire from the Board of Directors and the Nominating Committee will
appoint a new Chairman. During fiscal year 2000, Anne P. Jones was a member of
the Nominating Committee until her resignation from the Board of Directors on
February 12, 2000. The Nominating Committee will consider nominees for
Directors recommended by shareholders upon submission in writing to the
Secretary of the Company of the names of such nominees, together with their
qualifications for service with the Company. The Nominating Committee held two
meetings during the last fiscal year.
Services Committee
The Services Committee is currently comprised of Donald M. Cook, Jr.
(Chairman), I.N. Rendall Harper, Jr. and John J. Omlor. The Services Committee
was created during fiscal year 2000 to guide the strategic development and
expansion of the Broadband Management Services segment. The Services Committee
held two meetings during the last fiscal year.
13
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS
The following table shows, as of August 26, 2000, as to each Director and
nominee for Director of the Company, as to the Chief Executive Officer and each
of the executive officers of the Company listed in the Summary Compensation
Table included elsewhere in this Proxy Statement, and as to all of the
Company's Directors, Director nominees and executive officers as a group
(including the Chief Executive Officer), the amount and nature of beneficial
ownership of the Company'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.................................... 14,500(1) *
David J. Eng.......................................... 113,406(2) *
Michael J. Farrell.................................... 5,000 *
Lawrence R. Fisher.................................... 47,018(3) *
I.N. Rendall Harper, Jr............................... 20,500(4) *
Donald F. Miller...................................... 100,701(5) *
Gerhard B. Nederlof................................... 148,878(6) *
John J. Omlor......................................... 32,500(7) *
Dr. Frank Rusinko, Jr................................. 20,500(8) *
Dr. James J. Tietjen.................................. 24,500(9) *
Christine Jack Toretti................................ -- *
David A. Woodle....................................... 167,500(10) *
All Directors, Director nominees and
executive officers as a group (16 persons) .......... 1,431,979(11) 4.08%
</TABLE>
--------
* Represents less than 1% of the Company's Common Stock
(1) Includes options exercisable at August 26, 2000 to purchase 5,500 shares
of Common Stock.
(2) Includes options exercisable at August 26, 2000 to purchase 102,100 shares
of Common Stock and 4,261 shares of Common Stock held for Mr. Eng's
account in the Company's Retirement Savings and Profit Sharing Plans.
(3) Includes options exercisable at August 26, 2000 to purchase 41,560 shares
of Common Stock and 1,110 shares of Common Stock held in Mr. Fisher's
account in the Company's Retirement Savings and Profit Sharing Plans.
(4) Includes options exercisable at August 26, 2000 to purchase 2,000 shares
of Common Stock.
(5) Includes options exercisable at August 26, 2000 to purchase 92,000 shares
of Common Stock and 630 shares of Common Stock held for Mr. Miller's
account in the Company's Retirement Savings and Profit Sharing Plans.
(6) Includes options exercisable at August 26, 2000 to purchase 121,238 shares
of Common Stock.
(7) Includes options exercisable at August 26, 2000 to purchase 7,500 shares
of Common Stock and 20,000 shares held under a deferred benefit plan of
J.J. Omlor Associates Ltd.
(8) Includes options exercisable at August 26, 2000 to purchase 9,500 shares
of Common Stock.
(9) Includes options exercisable at August 26, 2000 to purchase 8,500 shares
of Common Stock.
(10) Includes options exercisable at August 26, 2000 to purchase 155,000 shares
of Common Stock and 8,535 Shares of Common Stock held for Mr. Woodle's
account in the Company's Retirement Savings and Profit Sharing Plans.
(11) Includes options exercisable at August 26, 2000 or within 60 days thereof
to purchase 1,040,998 shares of Common Stock and 51,451 shares of Common
Stock held for accounts in the Company's Retirement Savings and Profit
Sharing Plans.
14
<PAGE>
PRINCIPAL HOLDERS
The following table sets forth, as of August 21, 2000 (unless otherwise
noted), the beneficial ownership of the Company's Common Stock of each person
who is known by the Company to own beneficially more than 5% of the issued and
outstanding shares of the Company's Common Stock. The Company 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 Pilgrim Baxter Associates, Ltd. ("Pilgrim Baxter") and Fenimore Asset
Management, Inc. ("Fenimore"). According to an amended Schedule 13G, dated
January 7, 2000, received by the Company from Pilgrim Baxter, Pilgrim Baxter
beneficially owned 963,800 shares of the Company's Common Stock and 6.48% of
the Company's then outstanding shares of Common Stock. According to an amended
Schedule 13G, dated February 7, 2000, received by the Company from Fenimore,
Fenimore beneficially owned 914,584 shares of the Company's Common Stock and
14.68% of the Company's then outstanding shares of Common Stock. However, the
Company has reason to believe, based on a Nasdaq-AMEX online report dated as of
August 21, 2000, that Pilgrim Baxter owns 169,900 shares of the Company's
Common Stock and Fenimore no longer owns shares of the Company's Common Stock.
<TABLE>
<CAPTION>
Amount and
Nature of Percent of
Name of Beneficial Owner Beneficial Class
------------------------ ---------- ----------
<S> <C> <C>
AMVESCAP PLC........................................... 3,233,650(1) 10.09%
11 Devonshire Square
London EC2M 4YR
England
Salomon Smith Barney Holdings Inc...................... 2,424,420(2) 7.7%
338 Greenwich Street
New York, NY 10013
</TABLE>
--------
(1) Based upon an amended Schedule 13G, dated May 9, 2000 filed by AMVESCAP
PLC; AVZ, Inc.; AIM Management Group Inc.; AMVESCAP Group Services, Inc.;
INVESCO, Inc.; INVESCO North American Holdings, Inc.; INVESCO Capital
Management, Inc., a registered investment adviser; INVESCO Funds Group,
Inc., a registered investment adviser; INVESCO Management & Research, Inc.,
a registered investment adviser; INVESCO Realty Advisers, Inc.; and INVESCO
(NY) Asset Management, Inc. The reporting persons all disclaim beneficial
ownership of such shares.
(2) Based upon an amended Schedule 13G, dated January 28, 2000, filed by
Salomon, Smith Barney Holdings Inc. ("SSB Holdings") and Citigroup, Inc.
("Citigroup"). Citigroup is the sole stockholder of SSB Holdings. Citigroup
and SSB Holdings both disclaim beneficial ownership of such shares. The
percentage set forth in this table does not reflect the issuance of
1,603,577 shares of the Company's Common Stock in connection with the
completion of a merger on February 18, 2000.
15
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Report of Board of Directors' Compensation Committee on Executive Compensation
The Compensation Committee (the "Committee") is comprised of Dr. Tietjen
(Chairman), Mr. Cook and Dr. Rusinko, none of whom is or has been an officer or
employee of the Company
The Committee is responsible for reviewing compensation for senior
executives, overseeing the Profit Plan, and administering the Company's stock
option plans, which include the current Incentive Plan and the predecessor 1988
Stock Option Plan and 1989 Non-Employee Directors' Stock Option Plan.
The executive compensation programs of the Company are designed to achieve
three fundamental objectives: (1) attract and retain qualified executives; (2)
motivate performance to achieve specific strategic objectives of the Company;
and (3) align the interests of senior management with the long-term interests
of the Company's shareholders. At present, the basic components of the
executive compensation program are base salaries, the Profit Plan and long-term
incentive compensation. The Company also provides broad-based employee benefit
plans and certain other executive benefit plans. During fiscal year 2000, the
Committee continued to review the Company's compensation programs and
practices.
Base Salary: Base salaries for executives, including the Chief Executive
Officer, are set according to the responsibilities of the position, the
specific skills and experience of the individual and the competitive market for
executive talent. Market data is gathered from salary surveys of comparable
companies operating in the same and similar industries. Executive salary levels
are set to approximate average levels and the executives are given the
opportunity to exceed this through participation in the Profit Plan. The
Committee reviews salaries annually and adjusts them as appropriate to reflect
changes in market conditions and individual performance and responsibilities.
Profit Plan: Under the Profit Plan in effect for fiscal year 2000, 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
achievement of profit goals endorsed by the Board of Directors at the beginning
of the fiscal year. This Profit Plan reflects the Committee's belief that a
meaningful component of executive compensation should be contingent upon the
profit performance of the Company.
Long-Term Incentive Compensation: The Committee believes that the Company's
Incentive Plan is an essential tool to align the long-term interests of
shareholders and employees, especially executive management. All active, full-
time employees of the Company are eligible to receive stock options, which are
generally granted when an employee joins the Company and on an annual basis
thereafter. The size of initial option grants is based upon the position,
responsibilities and expected contribution of the individual, with subsequent
grants also taking into account the individual's performance. Stock options
generally vest over a four-year period and are granted at an exercise price
equal to the fair market value of the Company's common stock at the time of
grant. This approach is designed to maximize shareholder value over a long
term, as no benefit is realized from the option grant unless the price of the
Company's common stock has increased over a number of years. In addition to
stock options, the Incentive Plan provides for Restricted Stock awards,
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). Consistent with these purposes,
options were granted under the Incentive Plan to certain of the Company's
executive officers during fiscal year 2000.
The Company has a Supplemental Retirement Plan for certain executives.
Executives 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 $18,000 a year payable for 15 years. Executives who have been eligible to
participate in this plan for five years and are age 60 or older or who have
been a participant for ten years and are age 55 or older, may elect to retire
and receive a reduced supplemental retirement benefit.
16
<PAGE>
The Company maintains certain broad-based employee benefit plans in which
executives participate. These plans include Retirement Savings and Profit
Sharing Plans, life and health insurance plans, and a Company stock purchase
plan. These plans are not directly tied to the Company's performance.
The compensation of the Chief Executive Officer in fiscal year 2000 was
determined in a manner substantially consistent with that of other executive
officers, taking into account the Committee's evaluation of the Company's need
to attract, motivate and retain a highly qualified Chief Executive Officer.
Specific terms and provisions of the compensation package were determined as a
result of negotiations between the Committee and the Chief Executive Officer.
Compensation Committee
Dr. James J. Tietjen, Chairman
Donald M. Cook, Jr
Dr. Frank Rusinko, Jr.
17
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation
received by certain executive officers of the Company.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
------------------------------- ----------------------
Other Annual Securities All Other
Name and Principal Fiscal Compensation Restricted Underlying Compensation
Position Year Salary($) Bonus($) ($) Stock($) Options(#) ($)(1)
------------------ ------ --------- -------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
David A. Woodle(2)...... 2000 248,072 224,953 9,600(3) -- 222,000 24,210
President and Chief 1999 184,628 95,882 8,800 -- 280,000 11,313
Executive Officer 1998 -- -- -- -- -- --
Gerhard B. Nederlof(4).. 2000 150,757 198,047 -- -- 5,000 12,187
Senior Vice President, 1999 144,651 38,028 -- 10,875(5) 28,000 9,215
EuroPacific Business 1998 135,114 31,148 119,034 -- 40,000 6,905
David J. Eng(6)......... 2000 147,705 198,047 -- -- 15,000 12,004
Senior Vice President, 1999 131,621 38,028 5,385 10,875(5) 50,000 8,756
the Americas Business 1998 116,904 26,905 250 -- 40,000 7,029
Lawrence R. Fisher(7)... 2000 119,323 198,047 -- -- 5,000 10,031
Vice President, Science 1999 106,773 38,028 -- -- 14,000 6,942
and Technology 1998 93,707 21,602 1,273 -- 22,000 5,682
Donald F. Miller........ 2000 115,750 136,516 -- -- 5,000 9,127
Vice President, 1999 109,800 38,028 5,212 -- 20,000 7,436
Operations 1998 102,118 23,541 1,113 -- 34,000 6,194
& Manufacturing
</TABLE>
--------
(1) Consists of the Company's matching contributions to the Company's
employees' retirement savings plans for the account of the persons
indicated.
(2) The Company's Board of Directors elected Mr. Woodle as the Company's
President and Chief Executive Officer on June 16, 1998, effective July 20,
1998. Mr. Woodle is the Chairman elect.
(3) Represents payment for car allowance.
(4) Mr. Nederlof was appointed Senior Vice President--Marketing in September
1998, Sr. Vice President--Broadband Management Services in July 1999 and
was appointed to his present position effective February 18, 2000.
(5) Represents a grant of 2,000 shares of restricted stock valued at the market
price of $5.438 per share for unrestricted stock on the date of grant. The
restricted stock vests on June 30, 2001. These are the only shares of
restricted stock held by the named executive officer as of the end of the
last fiscal year.
(6) Mr. Eng was appointed Senior Vice President--Worldwide Sales in March 1997
and was appointed to his present position effective February 18, 2000.
(7) Mr. Fisher was appointed Vice President--Science and Technology in July
1999. Prior to that, he served as Vice President--Engineering.
18
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning the grant of stock
options during fiscal year 2000 to the executive officers named in the summary
compensation table. All such grants were made under the Incentive Plan.
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------
Potential Realizable
Number of % of Total Value at Assumed
Securities Options Annual Rates of Stock
Underlying Granted to Exercise Price Appreciation
Options Employees or Base for Option Term(2)
Granted(1) in Fiscal Price Expiration ---------------------
Name (#) Year ($/Sh) Date 5%($) 10%($)
---- ---------- ---------- -------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
David A. Woodle......... 50,000 3.3% $27.50 12/05/07 $ 656,501 $1,572,435
172,000 11.5% 22.00 05/22/08 1,806,691 4,327,340
Donald F. Miller........ 5,000 0.3% 22.00 05/22/08 52,520 125,795
Gerhard B. Nederlof..... 5,000 0.3% 22.00 05/22/08 52,520 125,795
David J. Eng............ 15,000 1.0% 22.00 05/22/08 157,560 377,384
Lawrence R. Fisher...... 5,000 0.3% 22.00 5/22/08 52,520 125,795
</TABLE>
--------
(1) Represents options granted under the Company's Incentive Plan to acquire
shares of Common Stock. The options were granted at an exercise price equal
to the fair market value of the Company's Common Stock on the business day
previous to the date of grant. The options become exercisable in the
increments of 25% per year over four years, beginning on the first
anniversary of the date of grant.
(2) Potential realizable value is based on the assumed annual growth rates of
the market price of the common stock of 5% and 10% required by the
Securities and Exchange Commission. These assumed rates are not intended to
forecast future appreciation of the Company's stock price.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning the exercise of stock
options during fiscal year 2000 by the executive officers named in the summary
compensation table.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money(2) Options
Shares Value Options At FY/end(#) FY/end ($)(3)
Acquired On Realized ------------------------- -------------------------
Name Exercise (#) ($)(1) Exercisable/Unexercisable Exercisable/Unexercisable
---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
David A. Woodle......... -- -- 130,000/372,000 $2,408,438/$3,527,188
Gerhard B. Nederlof..... -- -- 121,238/1,400 $ 2,279,545/$ 22,838
David J. Eng............ -- -- 95,350/59,650 $ 1,733,663/$ 892,619
Donald F. Miller........ -- -- 53,200/38,800 $ 948,875/$ 649,363
Lawrence R. Fisher...... -- -- 38,000/27,500 $ 679,691/$ 444,094
</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 Company's Common Stock at June 30, 2000.
(3) Based on the market value of $27.00 per share on June 30, 2000.
19
<PAGE>
LONG-TERM INCENTIVE PLAN--AWARDS IN LAST FISCAL YEAR
The following table sets forth information concerning the number of
Performance Units granted in fiscal year 2000 under the Company's Incentive
Plan to the executive officers of the Company named in the Summary Compensation
Table. Mr. Nederlof, Mr. Eng, Mr. Miller and Mr. Fisher did not receive any
long term incentive awards in fiscal 2000 and, accordingly, are not included in
the table.
<TABLE>
<CAPTION>
Performance
or Other
Period
Until Estimated future Payouts under
Number of Shares, Maturation Non-Stock Price-Based Plans(1)
Units or Other or ---------------------------------
Name Rights (#)(1) Payout(1) Threshold($) Target($) Maximum($)
---- ------------------- ----------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
David A. Woodle......... 4 Performance Units 2/28/02 $ 0 $750,000 $3,000,000
</TABLE>
--------
(1) Performance Units awarded under the Company's Incentive Plan will only be
paid if the Company's market capitalization equals or exceeds $1.25 billion
in December 2001. The named executive officer will not receive any
Performance Units unless this target is met.
EMPLOYMENT CONTRACTS AND TERMINATION
OF EMPLOYMENT ARRANGEMENTS
In June 1998, the Company and Mr. Woodle entered into an employment
agreement which was reviewed by the Compensation 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
Company 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
Compensation Committee), as well as certain fringe benefits. The Compensation
Committee increased Mr. Woodle's annual base salary to $250,000 for fiscal year
2000 and to $300,000 beginning in July 2000 and for the remaining term of the
Agreement. The Agreement further provides that Mr. Woodle is eligible to
participate in the Company's profit incentive plan then in effect and that he
will be entitled to participate in the Company'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. Mr. Woodle also has a change of control
agreement with the Company. This agreement provides that in the event that Mr.
Woodle's employment with the Company is terminated involuntarily within 18
months of a change of control (defined as ownership of 30 percent or more of
the Company's voting stock or a merger, sale of 50 percent or more of the
assets of the Company or a change in a majority of Directors), Mr. Woodle would
be entitled to receive two times his annual salary, two times the Company'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 the sum of
the prior two years' awards from the 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. If payments by the Company or deemed compensation received by Mr.
Woodle pursuant to his change in control agreement result in him becoming
subject to "excise tax" under Section 4999 of the Code, the Company is
obligated to pay an additional amount required to "gross up" such amount paid
by Mr. Woodle in excise taxes. Mr. Woodle will be entitled to the same benefits
described above if, within 18 months following such a change of control, he
resigns based on his good faith belief that his status or responsibilities with
the Company have diminished subsequent to a change of control.
Mr. Nederlof has an employment agreement with the Company which provides
that Mr. Nederlof will serve as the Company's Senior Vice President-Marketing,
Business Development and Services (Mr. Nederlof's title was subsequently
changed to Senior Vice President, EuroPacific Business effective February 18,
2000) until December 31, 2001. The agreement provides that Mr. Nederlof's
salary will be reviewed annually by the Company and Mr. Nederlof's salary was
adjusted to $156,271 in July 2000. The agreement also provides Mr.
20
<PAGE>
Nederlof with incentive compensation as a participant in the Company's profit
incentive plan then in effect, an annual supplemental retirement benefit of
$18,000 per year pursuant to the Company's Supplemental Retirement Plan and
certain other fringe benefits. In addition, the agreement provides for payments
associated with Mr. Nederlof's relocation to the Company's European office.
The Company has change of control agreements with eight executives, in
addition to the previously described agreement with Mr. Woodle, which become
effective upon a change in control of the Company, as defined in the agreement.
In the event of a change in control, all outstanding stock options become
immediately exercisable without regard to whether the executive's employment is
terminated by reason of such change in control. In the event an executive is
terminated involuntarily within 18 months after a change in control, the
executive shall be entitled to: (a) two times annual salary; (b) two times the
Company's annual matching contribution to the Retirement Savings and Profit
Sharing Plan and deferral contributions to the Supplemental Executive
Retirement Plan; (c) the sum of the prior two years' awards from the profit
incentive plan then in effect; (d) 24 months' coverage under the Company's
various health insurance plans; and (e) benefits payable under the Supplemental
Retirement Plan, even if the executive has not yet attained age 55. If the
executive resigns within 18 months after a change in control, the executive
shall be entitled to the same benefits as from an involuntary termination if:
(a) the executive determines there has been a significant change in his/her
responsibilities or duties; or (b) the executive's base salary is reduced by
more than ten percent; or (c) the executive is required to relocate more than
40 miles from his/her former place of work. If payments by the Company or
deemed compensation the executive receives pursuant to the agreement result in
the executive becoming subject to "excise tax" under Section 4999 of the Code,
the Company shall pay such executive an additional amount required to "gross
up" such amount paid by the executive in excise taxes. Additionally, the
Company 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 executive relating to such
payments that the executive incurs in the enforcement of his or her rights
under the agreement by litigation or other legal action.
21
<PAGE>
PERFORMANCE GRAPH
The following graph compares the five-year cumulative total return of the
Company's Common Stock with the cumulative total return of the Peer Group (as
defined below), and the Nasdaq Market Index (as defined below) based on an
assumed investment of $100 on June 30, 1995, in each case assuming reinvestment
of all dividends.
The Peer Group has been selected by the Company and consists of ADC
Telecommunications, Inc.; Antec Corp.; Harmonic, Inc. and Scientific-Atlanta
Corp. The Peer Group represents companies with which the Company competes in
providing products and services to its customer base. For fiscal year 1999, the
Peer Group also included General Instrument Corp. Due to the acquisition of
General Instrument Corp. by Motorola, Inc. in January 2000, General Instrument
Corp. is no longer included in the Peer Group.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------
Company/Index 1995 1996 1997 1998 1999 2000
------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
C-COR.net Corp....................... 100.00 65.45 38.64 65.00 91.82 196.36
Peer Group........................... 100.00 101.60 145.12 152.16 201.52 753.02
Nasdaq Market Index.................. 100.00 125.88 151.64 201.01 281.68 423.84
</TABLE>
22
<PAGE>
CERTAIN TRANSACTIONS
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and Directors, and persons who own more than ten percent of a
registered class of the Company'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 Company. Officers, Directors and ten-percent shareholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file. To the Company's knowledge, based solely on a review of the copies
of such reports furnished to the Company and written representations that no
other reports were required during fiscal year 2000, its officers, Directors
and ten-percent shareholders complied with all applicable Section 16(a) filing
requirements except that (i) Mr. William Hanelly and Mr. Frank Rusinko were
each late filing a form with respect to stock they purchased on the open
market, (ii) Mr. Terry Wright and Mr. David Ames were each late filing forms
with respect to their securities ownership when they became officers of the
Company on July 9, 1999 and (iii) Mr. Ames and Mr. Chris Miller were each late
filing a form with respect to stock they sold.
INDEPENDENT AUDITORS
KPMG LLP, independent certified public accountants, audited the consolidated
financial statements of the Company for fiscal year 2000. Representatives of
KPMG LLP are expected to attend the Meeting, 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 to audit the Company's consolidated financial
statements for fiscal year 2001.
DEADLINE FOR SHAREHOLDERS' PROPOSALS
The Company must receive any proposal which a shareholder wishes to submit
to the 2001 Annual Meeting of Shareholders by May 24, 2001, for inclusion in
the proxy material for that meeting. Shareholder proposals to be presented at
the 2001 Annual Meeting of Shareholders, but not included in the proxy material
relating to that meeting, must be received no later than August 7, 2001.
Nothing in this paragraph shall be deemed to require the Company to include in
its proxy materials relating to the 2001 Annual Meeting of Shareholders any
shareholder proposal which does not meet all of the requirements for inclusion
established by the SEC and the Company'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 or to use the Company's Internet
or telephone voting procedures. No postage is necessary if the enclosed proxy
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 13, 2000
23
<PAGE>
[PROXY CARD]
C-COR.net Corp. Proxy Solicited on Behalf of the
State College, PA Board of Directors of the
Company for Annual Meeting of
Shareholders to be held October 17, 2000
PROXY
The undersigned hereby appoints Dr. Frank Rusinko, Jr. and I. N.
Rendall Harper, Jr., 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 17, 2000, 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.
(IF YOU ARE VOTING BY MAIL, PLEASE FILL IN, SIGN AND DATE THIS PROXY CARD ON THE
REVERSE SIDE AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE)
1
<PAGE>
ANNUAL MEETING OF SHAREHOLDERS
OF C-COR.NET CORP
OCTOBER 17, 2000
PROXY VOTING INSTRUCTIONS
TO VOTE BY MAIL
---------------
Please date, sign and mail your proxy card in the envelope provided as soon as
possible.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
--------------------------------------------
Please call TOLL FREE 1-800-PROXIES and follow the instructions. Have your
control number and control number available when you call.
VOTE BY INTERNET
----------------
Please access the web page at "www.voteproxy.com" and follow the on-screen
-----------------
instructions. Have your control number when you access the web page.
YOUR CONTROL NUMBER IS_______________
<PAGE>
1. ELECTION OF DIRECTORS
------------------------
FOR all nominees listed at right
(except as marked
to the contrary below)
WITHHOLD AUTHORITY to Nominees:
vote for all nominees For a term expiring in 2003:
listed at right Christine Jack Toretti
Donald M. Cook, Jr.
Michael J. Farrell
To withhold authority to vote for any individual nominee, write that nominee's
name in the space below.
-------------------------------------------------
2. Approve the amended and restated C-COR.net Incentive Plan
FOR [_] AGAINST [_] ABSTAIN [_]
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
Signature___________________ Signature_____________________ Dated______, 2000
(SEAL) (SEAL)
NOTE: Signature should be the same as the name printed above: executors,
administrators, trustees, guardians, attorneys and officers of Companys should
add their title when signing.
3
