<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] 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 Rule 14a-11(c) or Rule 14a-12
CSP INC.
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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)
(1) 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:
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/ / 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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CSP INC.
(A MASSACHUSETTS CORPORATION)
------------------------
NOTICE OF SPECIAL MEETING IN LIEU OF
ANNUAL MEETING OF STOCKHOLDERS
------------------------
JANUARY 8, 1998
Notice is hereby given that a Special Meeting in lieu of Annual Meeting of
Stockholders of CSP Inc. (the "Company") will be held at the offices of Foley,
Hoag & Eliot LLP, Sixteenth Floor, One Post Office Square, Boston,
Massachusetts, on Thursday, January 8, 1998, beginning at 10:00 a.m. local time,
for the following purposes:
1. To elect two Class II Directors, each for a three-year term.
2. To act upon a proposal to approve and adopt the 1997 Stock Option Plan.
3. To act upon a proposal to approve and adopt the CSP Inc. 1997 Employee
Stock Purchase Plan.
4. To act upon a proposal to amend the Company's Articles of Organization
to provide that meetings of stockholders may be held anywhere in the
United States.
5. To act upon a proposal to amend the Company's by-laws to relative to
changing the date of the Annual Meeting of Stockholders from the second
Tuesday of December to the second Tuesday of January in each year.
6. To transact such further business as may properly come before the
Meeting, or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on November 21, 1997
as the record date for determining the stockholders of the Company entitled to
notice of, and to vote at, said Meeting and any adjournment thereof. Only
stockholders of record on such date are entitled to notice of, and to vote at,
said Meeting or any adjournment thereof.
By Order of the Board of Directors
DEAN F. HANLEY
Clerk
November 28, 1997
YOUR VOTE IS IMPORTANT.
PLEASE SIGN AND RETURN THE ENCLOSED PROXY,
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
<PAGE> 3
CSP INC.
(A MASSACHUSETTS CORPORATION)
------------------------
PROXY STATEMENT
------------------------
SPECIAL MEETING IN LIEU OF
ANNUAL MEETING OF STOCKHOLDERS
JANUARY 8, 1998
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of CSP Inc. ("CSPI" or the "Company") of proxies for use
at a Special Meeting in lieu of Annual Meeting of Stockholders to be held on
January 8, 1998 (the "Meeting") and at any adjournment thereof. A form of proxy
is enclosed. Any stockholder executing such a proxy may revoke it at any time
insofar as it has not been exercised. All properly executed proxies that are
received by the Company before the Meeting and that are not revoked will be
voted in accordance with the stockholder's direction at the Meeting. The
principal executive offices of the Company are located at 40 Linnell Circle,
Billerica, Massachusetts 01821. The approximate date on which this Proxy
Statement and the form of proxy will be sent to stockholders is November 28,
1997.
ANNUAL REPORT TO STOCKHOLDERS
The Company's Annual Report for the fiscal year ended August 29, 1997
accompanies this Proxy Statement, but is not incorporated herein and is not to
be deemed a part hereof.
ITEM 1. ELECTION OF DIRECTORS
The Company, as a Massachusetts corporation with a class of voting stock
registered under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), has a Board of Directors divided into three classes, as nearly equal in
size as practicable, referred to as Class I, Class II and Class III. The
Directors in each class serve for a term of three years and until their
successors are duly elected and qualified. As the term of one class expires, a
successor class is elected at the annual meeting of stockholders for that year.
There are currently three Class II Directors, whose terms will expire at the
Special Meeting in lieu of Annual Meeting to be held on January 8, 1998; two
Class III Directors, who were elected to serve until the annual meeting to be
held with respect to the end of the 1998 fiscal year; and two Class I Directors,
who were elected to serve until the annual meeting to held with respect to the
end of the 1999 fiscal year.
Pursuant to the by-laws of the Company, the Board of Directors has fixed
the number of Directors that constitutes the entire Board of Directors at six,
effective as of the date of the Meeting, following the resignation from the
Board of Directors of its present Chairman, Mr. Samuel Ochlis. The Board of
Directors has nominated two Class II Directors for election at the Meeting.
Unless authority is withheld, proxies in the accompanying form will be
voted in favor of electing as Class II Directors, to hold office until the
annual meeting to be held with respect to the end of fiscal year 2000 and until
their respective successors are elected and qualified, the two Class II nominees
identified in the table below. If the proxy is executed in such a manner as to
withhold authority to vote for one or more nominees for Director, such
instructions will be followed by the persons named in the proxy.
Under the by-laws of the Company, a majority of the shares of the Company's
common stock, par value $.01 per share ("Common Stock"), issued and outstanding
and entitled to vote will constitute a quorum for the Meeting. If a quorum is
present, the vote of the holders of a plurality of the shares of Common Stock
<PAGE> 4
present or represented at the Meeting and entitled to vote is required to elect
Directors. If a quorum is not present at the scheduled time for the Meeting, the
persons named in the proxy will vote to adjourn the Meeting until a later date
when a quorum can be obtained. Pursuant to the Company's by-laws, if it is
necessary to adjourn the Meeting for that purpose, no notice of the time and
place of the adjourned meeting is required to be given to stockholders.
In general, votes withheld from any nominee for election as Director,
abstentions, and broker "non-votes" are counted as present or represented for
purposes of determining the presence or absence of a quorum for the meeting. A
"non-vote" occurs when a broker or nominee holding shares for a beneficial owner
does not vote on a proposal because, in respect of such proposal, the broker or
nominee does not have discretionary voting power and has not received
instructions from the beneficial owner. The vote on each matter submitted to
stockholders is tabulated separately. Abstentions are included in the number of
shares present or represented and voting on each matter. Broker "non-votes" are
not so included.
Each of the nominees for Director is currently a member of the Board of
Directors. Although the Company expects each nominee to accept nomination and to
serve if elected, if a nominee is unable to serve at the time of election, then
proxies will be voted for some other person or the Board of Directors will fix
the number of Directors at a lesser number.
NOMINEES
Listed below are the nominees for Class II Director with information
showing the age of each, the year each was first elected a Director of the
Company, and the business affiliations of each.
<TABLE>
<CAPTION>
NAME, AGE AND CLASS BUSINESS AFFILIATIONS
- --------------------------------- --------------------------------------------------------
<S> <C>
John D. Ingram (61).............. Director of CSPI since 1994; Research Fellow at
Schlumberger Limited from 1991 to the present; Vice
President-Chief Technical Officer of Schlumberger
Limited from 1987 to 1991. Dr. Ingram serves on the
External Advisory Board of the School of Earth and
Planetary Sciences, California Institute of
Technology; the Advisory Board of the School of
Computer Science of Carnegie Mellon University; and
the External Advisory Board-NSF-Center for Research in
Parallel Computation -- Rice University/CAL Tech/Oak
Ridge/Los Alamos.
J. David Lyons (59).............. Director of CSPI since March 1997; Managing Class II
Director at Aubin International, Inc. from 1996 to the
present; Executive Vice President and General Manager
at National Data Corporation from 1993 to 1996;
Executive Vice President Sales and Marketing,
Syncordia from 1991 to 1993.
</TABLE>
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DIRECTORS
Listed below are the continuing Directors of the Company, with information
showing the age of each, the year each was first elected a Director of the
Company, and the business affiliations of each. Messrs. Frusztajer and Smith are
Class I Directors, whose terms expire in 1999. Messrs. Lupinetti and James are
Class III Directors, whose terms expire in 1998.
<TABLE>
<CAPTION>
NAME, AGE AND CLASS BUSINESS AFFILIATIONS
- ---------------------------------------- --------------------------------------------------------
<S> <C>
Boruch B. Frusztajer (67)............... Director of CSPI since 1977; since July 1984, President
Class I of BBF Corp., an industrial management company; founder
in 1976 and until July 1984 President of BBF Inc., a
manufacturer of components, materials and systems for
measurement and control; Director of PRI Automation
Inc.
Sandford D. Smith (50).................. Director of CSPI since 1993; President of Specialty
Class I Therapeutics of Genzyme Corp., a biopharmaceutical
company, since April 1996; President and Chief
Executive Officer of Repligen Corporation from 1987 to
1996; Director of Ariad Pharmaceuticals, Inc. and
Chemex Pharmaceuticals, Inc.
Alexander R. Lupinetti (51)............. Director, Chief Executive Officer and President of CSPI
Class III since October 1996; President and Chief Executive
Officer of each of the TCAM Systems Inc., Shared
Systems Corporation and SoftCom Systems, Inc.,
subsidiaries of Stratus Computer Inc., from November
1987 to September 1996; Northeastern General Manager
for the Engineering and Scientific Division of
International Business Machines, Inc. from 1984 to
1987.
C. Shelton James (58)................... Director of CSPI since 1994; President of Fundamental
Class III Management Corporation, which is engaged in the
management of investment partnerships, since 1993,
Executive Vice President from 1990 to 1993; Chief
Executive Officer and Chairman of the Board of
Elcotel, Inc. since May 1991; Director of NAI
Technologies, Concurrent Computer Corporation,
Cyberguard Corp. and S.K. Technologies; Trustee of
Clarkson University.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE NOMINEES FOR
DIRECTOR LISTED IN THIS PROXY STATEMENT.
CHAIRMAN ANNOUNCES RETIREMENT
Samuel Ochlis, Chairman of the Board of Directors of CSP Inc. announced
that he will retire effective as of the date of the Meeting. Mr. Ochlis was
elected a Director of CSP Inc. in July 1973 and became Executive Vice President
in January 1974. He was elected President in August 1978 and later became Chief
Executive Officer until he retired from that post to become Chairman in 1994.
The Board has elected Mr. Lupinetti to be Mr. Ochlis's successor as Chairman.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Company's Board of Directors met five times during the fiscal year
ended August 29, 1997 ("fiscal 1997").
The Board of Directors has an Audit Committee and a Compensation Committee,
but does not have a nominating committee or other committee performing similar
functions. The Audit Committee consists of Messrs. Frusztajer and James and is
responsible for recommending the selection of the Company's independent
accountants, reviewing the scope of the annual examination of the Company's
financial statements, reviewing the report of the independent accountants,
reviewing the independent accountant's recommendations to management concerning
auditing, accounting and tax issues, aiding the Board in discharging its
responsibility in financial reporting and related matters and reviewing the fees
of the independent accountants. The Audit Committee met twice during fiscal
1997. The Compensation Committee
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consists of Messrs. Smith and Frusztajer and Dr. Ingram and is responsible for
determining the compensation of the executive officers and management of the
Company and administering the Company's stock option plans and granting stock
options to employees and other persons eligible thereunder. The Compensation
Committee met three times during fiscal 1997.
COMPENSATION OF DIRECTORS
Each Director, other than the Chairman of the Board, who is not an employee
of the Company receives a quarterly fee of $440 to serve as a Director, a
quarterly fee of $138 for each committee of the Board of which he is a member
and a fee of $550, plus expenses, for each meeting of the Board which he
attends. The Chairman received a quarterly fee of $660 to serve as Chairman, a
quarterly fee of $206 for each committee of the Board of which he was a member
and a fee of $825, plus expenses, for each meeting of the Board which he
attended. The Chairman of the Board did not serve on any committee of the Board
in fiscal 1997. Mr. Lupinetti, as an employee Director, will not receive any
additional compensation for his service as Chairman following Mr. Ochlis'
retirement.
Under the Company's 1991 Stock Option Plan, each non-employee Director also
receives an annual non-discretionary grant of a non-statutory option to purchase
1,000 shares of Common Stock on the last business day of January in each year.
The aggregate number of shares that may be issued pursuant to this arrangement
is 20,000. These non-discretionary options have an exercise price per share
equal to the fair market value of the Common Stock on the date of grant, are not
exercisable until after six months following such date, have a term of three
years and are fully vested after six months. The Company's 1997 Stock Option
Plan provides for similar non-discretionary grants to non-employee Directors,
except that no such options will be granted until no options are available for
grant under the corresponding provisions of the Company's 1991 Stock Option
Plan.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following Summary Compensation Table sets
forth certain information regarding compensation paid or accrued by the Company
with respect to the Company's Chief Executive Officer and the Company's most
highly compensated officers other than the Chief Executive Officer who served as
officers during fiscal 1997 and whose annual compensation exceeds $100,000 for
fiscal 1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION ----------------------
NAME AND PRINCIPAL POSITION FISCAL -------------------- OPTION ALL OTHER
(AT AUGUST 29, 1997) YEAR SALARY BONUS GRANTS COMPENSATION
- ------------------------------------------ ------ -------- ------- ------- ------------
<S> <C> <C> <C> <C> <C>
Alexander R. Lupinetti.................... 1997 $183,477 $40,000 60,000 $ 3,875(1)
President and Chief 1996 -- -- --
Executive Officer 1995 -- -- --
Michael M. Stern.......................... 1997 $120,702 $10,863 1,000 $ 40,535(2)
Vice President of Operations 1996 $120,020 $ 0 -- $ 36,065(3)
and Treasurer 1995 $112,998 $ 0 2,000 $ 31,937(4)
Gary W. Levine............................ 1997 $ 92,104 $10,000 2,000 $ 3,366(5)
Vice President of Finance 1996 $111,173 $ 0 -- $ 3,042(5)
and Chief Financial Officer 1995 $ 85,685 $ 0 -- $ 2,862(5)
James A. Waggett.......................... 1997 $ 91,935 $ 9,242 1,000 $ 41,529(6)
Vice President 1996 $101,760 $18,950 -- $ 36,659(7)
Marketing Development 1995 $ 95,804 $ 3,000 -- $ 32,368(8)
</TABLE>
- ---------------
(1) This amount is comprised of a $3,875 contribution by the Company to Mr.
Lupinetti's 401(k) plan.
(2) This amount is comprised of a $3,899 contribution of the Company to Mr.
Stern's 401(k) plan and the accrual of $36,636 under the Company's
supplemental retirement income plan.
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(3) This amount is comprised of a $3,908 contribution by the Company to Mr.
Stern's 401(k) plan and the accrual of $32,157 under the Company's
supplemental retirement income plan.
(4) This amount is comprised of a $3,770 contribution by the Company to Mr.
Stern's 401(k) plan and the accrual of $28,167 under the Company's
supplemental retirement income plan.
(5) This amount represents a contribution by the Company to Mr. Levine's 401(k)
plan.
(6) This amount is comprised of a $3,564 contribution by the Company to Mr.
Waggett's 401(k) plan and the accrual of $37,965 under the Company's
supplemental retirement income plan.
(7) This amount comprised of a $3,336 contribution by the Company to Mr.
Waggett's 401(k) plan and the accrual of $33,323 under the Company's
supplemental retirement income plan.
(8) This amount is comprised of a $3,179 contribution by the Company to Mr.
Waggett's 401(k) plan and the accrual of $29,189 under the Company's
supplemental retirement income plan.
Option Grants Table. The following Option Grants Table sets forth certain
information regarding stock options granted during the fiscal year ended August
29, 1997 by the Company to the executive officers named in the Summary
Compensation Table:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZED VALUE AT
--------------------------------------------------- ASSUMED ANNUAL
PERCENTAGE OF RATES OF STOCK
TOTAL OF OPTIONS EXERCISE PRICE APPRECIATION
GRANTED TO PRICE FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PER SHARE EXPIRATION -----------------------
NAME GRANTED FISCAL YEAR ($/SH)(1) DATE 5% 10%
- ------------------------------ ------- ---------------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Alexander R. Lupinetti........ 60,000 51.61% $ 7.625 9/30/06 $287,719 $1,186,637
Michael M. Stern.............. 1,000 0.86% $ 6.125 4/02/07 $ 3,852 $ 9,762
Gary W. Levine................ 2,000 1.72% $ 6.125 4/02/07 $ 7,704 $ 19,523
James A. Waggett.............. 1,000 0.86% $ 6.125 4/02/07 $ 3,852 $ 9,762
</TABLE>
- ---------------
(1) Stock options were granted at an exercise price equal to the fair market
value of the Company's Common Stock on the date of the grant. The stock
options expire ten years from the date of grant.
(2) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compounded rates of appreciation of the
Company's Common Stock over the term of the options. These numbers are
calculated based on rules promulgated by the Securities and Exchange
Commission and do not reflect the Company's estimates of future stock price
growth. Actual gains, if any, on stock option exercises and Common Stock
holdings are dependent on the timing of such exercise and sale of the shares
and the future performance of the Company's Common Stock. There can be no
assurances that the rates of appreciation assumed in this table can be
achieved or that the amounts shown will be received by the individuals.
Mr. John Clary, CEO and President, and Manfred Appel, Vice President of
Finance of MODCOMP, Inc., a wholly-owned subsidiary of CSPI, were granted
options to acquire 10,000 and 5,000 shares of Common Stock, respectively, at the
market price of $7.00 per share as part of the consummation of the Company's
acquisition of MODCOMP during fiscal 1997. Mr. Lupinetti was granted options to
acquire 40,000 shares of Common Stock at an exercise price per share of $8.00,
the fair market value of the Common Stock on October 31, 1997, the date of
grant.
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Fiscal Year-End Option Table. The following Fiscal Year-End Option Table
sets forth certain information regarding stock options held as of August 29,
1997 by the executive officers named in the Summary Compensation Table.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(2)
ACQUIRED VALUE ----------------------------- -----------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ ------------ ------------ ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Alexander R. Lupinetti.. 0 n/a 0 60,000 $ 0 $ 22,500
Michael M. Stern........ 0 n/a 5,600 2,000 $ 2,144 $ 2,219
Gary W. Levine.......... 5000 $ 6,850 10,000 3,000 $ 15,344 $ 4,094
James A. Waggett........ 9400 $ 12,878 3,000 1,900 $ 2,110 $ 2,185
</TABLE>
- ---------------
(1) Value is based on the difference between the fair market value of the Common
Stock on the date of exercise of the applicable option and the exercise
price of such option. These values may never be realized. Actual gains, if
any, will depend on the value of the Common Stock on the date of the sale of
the shares.
(2) Value is based on the last sales price of Common Stock ($8.00) on Friday,
August 29, 1997, the last day of fiscal 1997, less the applicable option
exercise price. These values have not been and may never be realized. Actual
gains, if any, on exercise will depend on the value of the Common Stock on
the date of the sale of the shares.
401(K) PLAN
The Company has a defined contribution profit-sharing plan pursuant to
Section 401(k) of the Internal Revenue Code for the benefit of its employees,
including officers. The Board of Directors of the Company determines from year
to year whether and to what extent the Company will contribute to the 401(k)
plan by making matching contributions to the plan or by making profit-sharing
contributions to the plan, allocated in proportion to each eligible employee's
compensation, as a percentage of the compensation of all eligible employees.
During fiscal year 1997, the matching contribution by the Company was set at 50%
of contributions by eligible employees up to a maximum of 6% of salary.
SUPPLEMENTAL RETIREMENT INCOME PLAN
In addition to the foregoing, the Company has a nonqualified supplemental
retirement income plan pursuant to which the Company provides additional
retirement benefits to 12 present or former employees, all of whom are or were
highly compensated or supervisory employees long employed by the Company,
including three of the Company's current executive officers and the retiring
Chairman of the Board. Under the plan, the Company will pay to each participant,
generally over a 10 or 15 year period commencing upon termination of employment
with the Company for any reason after a specified normal retirement date, a
series of monthly payments based on, among other things, a factor based on such
participant's salary as of January 1, 1985 and years of service with the Company
(the "Normal Retirement Benefit"). In the event of termination of employment
prior to the normal retirement date, the Company will pay, in a series of
monthly payments, the actuarial equivalent of the Normal Retirement Benefit
(based on the participant's age at the time of termination of employment) to a
participant (i) whose employment with the Company is terminated after a
specified early retirement date as defined in the plan, (ii) whose employment is
otherwise terminated with the consent of the committee that administers the
plan, or (iii) in the sole discretion of the committee, whose employment is
terminated prior to the normal retirement date by reason of disability. Reduced
benefits are paid to any participant whose employment with the Company is
terminated for any reason other than retirement, disability or death. The annual
benefits payable under the plan upon retirement at the normal retirement date of
Messrs. Waggett and Stern are $51,142 and $57,155, respectively.
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<PAGE> 9
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
For information about the Company's contract with Mr. Luipinetti, see
"Compensation Committee Report -- Chief Executive Officer Compensation."
The Company has an agreement with Samuel Ochlis dated January 5, 1987, as
amended in November 1988 and August 1995, that provides for, among other things,
the payment of deferred compensation to Mr. Ochlis or, if he is not living, to a
trust for the benefit of his children, upon the termination of Mr. Ochlis'
employment with the Company by reason of retirement, disability or death. Mr.
Ochlis' term as an employee of the Company ended on August 30, 1995. Under the
agreement, as amended, Mr. Ochlis or his children's trust, as the case may be,
will receive for a period of up to ten years yearly payments in an amount equal
to $84,036, less the amount payable to him or his designated beneficiary in each
of such years under the Company's retirement plans other than its 401(k) plan.
The Company will be relieved of its obligation to pay deferred compensation if
at any time prior to the expiration of the payout period Mr. Ochlis accepts
employment with, or renders any assistance for compensation to, any competitor
of the Company without the prior written consent of the Company.
In connection with his employment agreement, in September 1989, the Company
established a so-called "rabbi" trust for the benefit of Mr. Ochlis. Subject to
claims of the Company's general creditors in the event of the Company's
insolvency or bankruptcy, the trust assets are to be held for the exclusive
purpose of providing deferred compensation to Mr. Ochlis in accordance with the
terms of his employment agreement. The trust agreement provides that Mr. Ochlis
shall have no preferred claims on, or any beneficial interest in, any of the
trust assets until such time as the assets are paid to him. Under current
federal income tax law, Mr. Ochlis will not be taxed until he actually receives
payment from the trust. Instead, the Company is taxable on the trust income and
is not allowed a tax deduction for contributions to the trust or offsetting
deductions for trust income until Mr. Ochlis is actually paid.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board is composed of three Directors,
Messrs. Smith and Frusztajer and Dr. Ingram. The Compensation Committee is also
empowered to administer the Company's stock option plans. This Committee is
currently charged with the responsibility of reviewing and approving executive
officers' compensation and approving all discretionary grants of stock options
under the Company's stock option plans. The following describes the compensation
programs in effect during fiscal 1997.
COMPENSATION POLICY
The Company's compensation policies are designed to pay executives an
annual salary that is industry competitive and an annual bonus that is based
both on the performance of the Company and on individual goals established for
each of the executives for the fiscal year. The Company also has longer term
incentives based on stock options. All three components of compensation are
reviewed annually by the committee to ensure salaries remain competitive,
bonuses reward performance and stock options provide continued incentives.
Salaries for executive officers are based on the duties and
responsibilities of the position held by the executive compared with executive
officers of other companies in the industry. Salaries are reviewed and
established annually. Various industry salary surveys are reviewed and provided
to the Committee to review in establishing the new compensation. Each executive
has a performance review prepared by the Chief Executive Officer. During this
review the officer's performance over the prior year is assessed and goals are
established for the next year. This information is communicated to the
Compensation Committee and, based on this review and salary surveys, the annual
salary for the executive is established for next year.
Executive officers and key management employees participate in the bonus
plan. Payments under the plan are contingent on the Company meeting its sales
and operating profit objectives for the fiscal year. Based on the extent to
which the Company achieves those objectives, each participant receives up to 30%
of the maximum bonus. If, in addition, the officer or employee achieves his
individual goals established by the Company, the balance of the bonus will be
paid. The Committee reviews both the individual and Company
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goals annually. In fiscal 1997, Messrs. Lupinetti, Stern, Levine, and Waggett
were paid bonuses by the Company in the amounts of $40,000, $10,863, $10,000,
and $9,242, respectively, based on the attainment of individual objectives.
Approximately 13.3% of the Company's compensation to executives in fiscal 1997
was in the form of bonuses.
The Company from time to time grants stock options to some or all of its
executives and key employees as a means of creating a long-term incentive and
benefit. All stock options granted in fiscal 1997 were at the fair market value
of shares of Common Stock on the date of grant. Thus, no benefit will accrue to
the executive or key employee from the stock option grant until the Common Stock
appreciates. This creates a long-term goal for appreciation of the Common Stock
which coincides with the interests of the stockholders.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Company has an employment agreement with Mr. Lupinetti dated September
12, 1996 (the "Employment Agreement"), pursuant to which Mr. Lupinetti became
Director, Chief Executive Officer and President of the Company effective October
1, 1996. Under the terms of the agreement Mr. Lupinetti's initial base salary
was $200,000 per year with eligibility for bonus compensation of $40,000 based
on the achievement of certain goals or an executive bonus of up to 50% of his
salary based on the attainment of certain financial objectives. In addition, the
Company granted Mr. Lupinetti options to acquire up to 60,000 shares of Common
Stock at an exercise price of $7.63 per share, the fair market value of the
Common Stock on the date of grant. Such options vest under normal circumstances
at a rate of 25% a year commencing after one year of service. However, if the
Company is acquired by a way of sale of substantially all of its assets or by
merger, such options will fully vest at the time of such acquisition. The
Company also has provided Mr. Lupinetti with an automobile. In the event Mr.
Lupinetti's employment is terminated by the Company other than for cause (as
defined), Mr. Lupinetti is entitled to 12 months of severance pay at his then
effective annual salary per month. Based on the achievements accomplished in
fiscal 1997, the Compensation Committee approved increasing Mr. Lupinetti's base
salary to $250,000 on October 31, 1997. Mr. Lupinetti was also granted 40,000
options to acquire Common Stock under the Company's 1991 Stock Option Plan at an
exercise price per share of $8.00, the fair market value of the Common Stock on
the date of the grant. In addition, Mr. Lupinetti will be eligible for an
executive bonus based on the Company's Variable Compensation Program, which is
based on achieving revenue and earnings per share objectives.
COMPENSATION COMMITTEE
Sandford D. Smith
Boruch B. Frusztajer
John D. Ingram
8
<PAGE> 11
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Sandford D. Smith, Boruch B. Frusztajer and John D. Ingram served on the
Compensation Committee during fiscal 1997. Persons serving on the Compensation
Committee had no relationships with the Company other than their relationship to
the Company as Directors entitled to the receipt of standard compensation as
Directors and members of certain committees of the Board and their relationship
to the Company as stockholders. No person serving on the Compensation Committee
or on the Board of Directors is an executive officer of another entity for which
an executive officer of the Company serves on the board of directors or on that
entity's compensation committee.
PERFORMANCE GRAPH
The following Performance Graph compares the performance of the Company's
cumulative stockholder return with that of a broad market index (the Nasdaq
Stock Market Index) and a published industry index (the Nasdaq Computer
Manufacturers' Index) for each of the most recent five fiscal years. The
cumulative stockholder return for shares of Common Stock and each of the indices
is calculated assuming that $100 was invested on August 28, 1992. The Company
paid no cash dividends during the periods shown. The performance of the indices
is shown on a total return (dividends reinvested) basis. The graph lines merely
connect year-end dates and do not reflect fluctuations between those dates.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG CSP INC., THE NASDAQ STOCK MARKET (U.S.)
INDEX AND THE NASDAQ COMPUTER MANUFACTURER INDEX
<TABLE>
<CAPTION>
Cumulative Total Return
-------------------------------------------------------------------
8/28/92 8/27/93 8/26/94 8/25/95 8/30/96 8/29/97
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
CSP Inc...................................... CSPI 100 116 111 109 94 100
NASDAQ STOCK MARKET (U.S.)................... INAS 100 132 137 185 209 291
NASDAQ COMPUTER MANUFACTURER................. INAC 100 115 120 211 251 399
</TABLE>
* $100 invested on 8/28/92 in stock or on 8/31/92 in index -- including
reinvestment of dividends.
9
<PAGE> 12
ITEM 2. APPROVAL OF THE 1997 STOCK OPTION PLAN
REASONS FOR THE 1997 PLAN
The Company's 1997 Stock Option Plan (the "1997 Plan"), which authorizes
the grant of options to acquire up to 150,000 shares of Common Stock, was
adopted by the Board of Directors on October 9, 1997. The Company is proposing
that stockholders approve the 1997 Plan, so that the Company will be able to
continue to grant incentive stock options to its employees after no options are
available for grant under the existing 1991 Stock Option Plan. As of November
14, 1997, only 38,700 options remained available for grant under the 1991 Stock
Option Plan. Approval of the 1997 Plan is being submitted to a vote of the
stockholders for two reasons. First, stockholder approval is required by the
incentive stock option provisions of the Internal Revenue Code of 1986, as
amended (the "Code"). Second, the Company believes that stockholder approval may
be required by regulations of the National Association of Securities Dealers
applicable to issuers of securities in connection with option plans.
If a quorum is present at the Meeting, the vote of a majority of the shares
of Common Stock present or represented at the Meeting and entitled to vote is
necessary to approve the 1997 Plan.
A copy of the 1997 Plan is attached to this Proxy Statement as Exhibit A.
DESCRIPTION OF THE 1997 PLAN
The purpose of the 1997 Plan is to provide additional incentive to present
and future executives and key employees of the Company and of its subsidiaries
by affording them an opportunity to acquire or increase their proprietary
interest in the Company through the acquisition of shares of its Common Stock.
By encouraging stock ownership by such executives and key employees, the Company
seeks to attract and retain in its employ persons of exceptional competence and
seeks to furnish an added incentive for them to increase their efforts on behalf
of the Company. Options granted under the 1997 Plan may be either "incentive
stock options" as defined in Section 422 of the Code or non-statutory stock
options.
The 1997 Plan may be administered by the Board of Directors or by the
Compensation Committee (the "Committee"), the members of which are appointed
from time to time by the Board of Directors. All questions of interpretation and
application of the Plan, of options granted thereunder and of the value of
shares of Common Stock subject to an option, are subject to the determination,
which is final and binding, of a majority of the Board or the Committee, as the
case may be. The Board of Directors (but not the Committee) may, in its
discretion, modify, revise or terminate the 1997 Plan at any time, but the
aggregate number of shares issuable under the 1997 Plan may not be increased
(except in the event of certain changes in the Company's capital structure)
without the consent of the stockholders. Unless sooner terminated by the Board,
the 1997 Plan will terminate when all of the Common Stock with respect to which
options may be granted under the Plan has been issued upon the exercise of such
options. No options may be granted under the 1997 Plan after October 8, 2007.
The 1997 Plan authorizes the grant of options for the purchase of up to
150,000 authorized and unissued or treasury shares of Common Stock to employees
(including officers, whether or not they are Directors, and Directors who are
also employees) of the Company or any parent or subsidiary of the Company.
Incentive stock options may be granted only to officers and other employees.
Non-statutory options may be granted to officers and other employees, to members
of the Board or the board of any subsidiary, and to other persons providing
services to the Company or any subsidiary. No incentive stock option may be
granted under the 1997 Plan to a greater than ten percent stockholder, unless
the purchase price per share is not less than 110% of the fair market value of
the stock at the time such option is granted, and unless the option is not
exercisable more than five years after the date it is granted.
The exercise price for each stock option is determined by the Board or the
Committee. However, the exercise price of an incentive stock option may not be
less than 100% (110% in the case of an incentive stock option granted to a
greater than ten percent stockholder) of the fair market value of the Common
Stock at the time the option is granted. Although the Company has no present
plans to grant options at less than fair market value, non-statutory options may
have an exercise price that is less than, equal to, or greater than the
10
<PAGE> 13
fair market value of the Common Stock on the date of grant. Payment of the
exercise price may be made in cash or, with the consent of the Board or the
Committee, by delivery of issued and outstanding shares of Common Stock of the
Company having a fair market value equal to or less than the option price of the
shares being acquired, with the balance, if any, to be paid in cash.
Under the 1997 Plan, the aggregate fair market value (determined at the
time the option is granted) of stock for which incentive stock options are
exercisable for the first time by an employee during any calendar year (under
all plans of the Company and any parent or subsidiary corporations of the
Company) is limited to $100,000, but the value of stock for which incentive
stock options may be granted to an employee in a given year may exceed $100,000.
No option granted under the 1997 Plan may extend for a period exceeding ten
years from the date of grant, and the Board or the Committee determines the rate
at which an option may be exercised. No incentive stock option issued under the
Plan may be transferred other than by will or the laws of descent and
distribution, and each option is exercisable, during the lifetime of the
optionee, by him/her only.
Except in the case of death or retirement for reasons of age or disability,
options granted under the 1997 Plan will terminate prior to their expiration
dates 30 days after termination of the optionee's employment without cause and
immediately upon termination of employment for cause, as defined in the Plan.
Under the 1997 Plan, options terminate before their expiration dates 180 days
after the optionee's death while in the employ of the Company or 90 days after
the optionee's retirement for reasons of age or disability. Shares of Common
Stock subject to an option (or the unexercised portion thereof) that expires or
terminates under the Plan without being exercised may again be subject to an
option under the Plan.
Each non-employee Director will receive an annual non-discretionary grant
of a non-statutory option to purchase 1,000 shares of Common Stock on the last
business day of January in each year commencing in 1998, except that no such
options will be granted until no options are available to be granted under the
corresponding provisions of the 1991 Plan. The aggregate number of shares that
may be issued pursuant to this formula is 10,000. However, Directors may also be
granted options otherwise than pursuant to these provisions. These
non-discretionary options will have an exercise price per share equal to the
fair market value of the Common Stock on the date of grant, will not be
exercisable until after six months following such date, will have a term of
three years and will be fully vested after six months.
Options granted under the 1997 Plan may, in the discretion of the Board or
the Committee, provide that shares purchased upon the exercise of such options
will be subject to a right of repurchase in favor of the Company, upon such
terms and conditions as determined by the Board or the Committee. The repurchase
price per share, or a formula for determining the repurchase price per share, is
fixed by the Board or the Committee at the time the option is granted.
Under the 1997 Plan, the Board of Directors may, in its discretion, specify
upon the granting of an option that as a condition of exercise the optionee
agrees that upon request of the Company or the underwriters managing any
underwritten offering of the Company's securities the optionee will not, for up
to 180 days from the effective date of any registration of securities of the
Company, sell or otherwise dispose of any shares issued pursuant to the exercise
of such option without the prior written consent of the Company or such
underwriters.
The grantee of a non-statutory option recognizes no income for federal
income tax purposes on the grant thereof. On the exercise of such an option, the
difference between the exercise price and the fair market value of the shares
purchased under the option at the time of such purchase will be recognized by
the option holder in the year of exercise as ordinary income, and the fair
market value of the shares on the date of exercise will be the tax basis thereof
for computing gain or loss on any subsequent sale. The Company may reduce its
taxable income by an amount equal to the amount recognized by the option holder
as ordinary income upon exercise of a non-statutory option.
Generally, the grantee of the incentive stock option recognizes no income
for federal income tax purposes at the time of grant or exercise of the option.
Rather, the holder ordinarily will recognize taxable income upon subsequent
disposition of the shares purchased under the option. If no disposition of
shares acquired upon
11
<PAGE> 14
exercise of an incentive stock option is made by the optionee within two years
of the date of grant or within one year after exercise of the option, any gain
realized by the optionee on the subsequent sale of such shares is treated, for
federal income tax purposes, as mid-term capital gain if the shares were held
for more than twelve months but not more than eighteen months and as long-term
capital gain if the shares were held for more than eighteen months. The price
paid for the shares purchased upon the exercise of the option will be the tax
basis for computing any gain. If the shares are sold prior to the expiration of
such periods (a "disqualifying disposition"), the difference between the lesser
of the value of the stock at the date of exercise or the date of sale and the
exercise price of the stock is treated as compensation taxable to the grantee as
ordinary income and the excess gain, if any, is treated as capital gain (which
will be mid-term capital gain if the shares were held for more than twelve
months but not more than eighteen months and long-term capital gain if the
shares were held for more than eighteen months). The amount by which the fair
market value of shares at the time of exercise of the incentive stock option
covering such shares exceeds the option price for such shares is a tax
preference item and is included in "alternative minimum taxable income" for the
purpose of computing the "alternative minimum tax." The Company does not
withhold any tax in connection with the grant or exercise of an incentive stock
option and, in the usual circumstances, the Company is not entitled to any tax
deduction in connection with the grant or exercise of an incentive stock option.
The Company believes that, under current federal tax law, options granted
under the 1997 Plan will not, at the time of grant, have a readily ascertainable
fair market value. Accordingly, under the applicable provisions of the Code,
even if options do not qualify as incentive stock options, the grantee of such a
non-statutory option would recognize no income for federal income tax purposes
on the grant thereof. The 1997 Plan is not subject to the provisions of the
Employee Retirement Income Security Act of 1974.
As of October 31, 1997, no options had been granted under the 1997 Plan.
Based on the closing price per share of the Company's Common Stock as reported
on Nasdaq at that date, the total market value of the 150,000 shares issuable
under the 1997 Plan was $1,200,000.
If the 1997 Plan is approved by the stockholders, the Company intends to
file a registration statement under the Securities Act of 1933 covering the
150,000 shares thus authorized. The Board of Directors has not determined what
action it will take in the event that the stockholders do not approve the
proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO APPROVE
AND ADOPT THE 1997 STOCK OPTION PLAN DESCRIBED IN THIS PROXY STATEMENT.
ITEM 3. APPROVAL OF THE CSP INC. 1997 EMPLOYEE STOCK PURCHASE PLAN
The Company's 1997 Employee Stock Purchase Plan (the "Stock Purchase
Plan"), covering up to 250,000 shares of Common Stock, was adopted by the Board
of Directors on October 9, 1997. The Stock Purchase Plan is being submitted to
the Company's stockholders as required by applicable provisions of Section 423
of the Code relating to "employee stock purchase plans" as defined therein. If
the Stock Purchase Plan is approved by stockholders, an employee participating
in the Stock Purchase Plan will incur no federal income tax liability upon the
purchase of shares under the Stock Purchase Plan.
There are reserved for issuance and purchase by employees under the Stock
Purchase Plan an aggregate of 250,000 shares of the Company's Common Stock,
subject to adjustment for stock splits or stock dividends. Shares subject to the
Stock Purchase Plan may be shares of the Company's Common Stock now or hereafter
authorized but unissued or shares held in treasury.
If a quorum is present at the Meeting, the vote of a majority of the shares
of Common Stock present or represented at the Meeting and entitled to vote is
necessary to approve the Stock Purchase Plan.
A copy of the Stock Purchase Plan is attached to this Proxy Statement as
Exhibit B.
REASONS FOR THE STOCK PURCHASE PLAN
The purpose of the Stock Purchase Plan is to secure for the Company and its
stockholders the benefits of the incentives inherent in the ownership of the
Company's capital stock by present and future employees of
12
<PAGE> 15
the Company and its subsidiaries. The Stock Purchase Plan is intended to
strengthen the mutuality of interests between the Company's stockholders and
employees, including non-management employees, by encouraging greater numbers of
such persons to acquire and hold shares of the Company's Common Stock. Stock
purchase plans similar to the Stock Purchase Plan are common and have proven to
be an effective method of motivating and retaining employees at all levels. The
Company anticipates that participation in the Stock Purchase Plan will benefit
the Company and its stockholders through enhanced employee motivation and
awareness of the Company's stock performance.
DESCRIPTION OF THE STOCK PURCHASE PLAN
ELIGIBILITY
Any of the approximately 250 employees (i.e., all persons employed by the
Company and its subsidiaries) of the Company and its subsidiaries at October 31,
1997, and any future employees of the Company and its present and future
subsidiaries, if they are eligible employees, may participate under the Stock
Purchase Plan except as noted below.
All regular employees who have attained the age of majority as determined
by the laws of their state of residence and who have completed at least six
months employment and have customary employment of a minimum of 20 hours per
week are eligible to participate. Employees who own five percent or more of the
Company's voting stock are not eligible to participate in the Stock Purchase
Plan. Additionally, no employee may be granted an option under the Stock
Purchase Plan that would entitle such employee to acquire Common Stock with a
fair market value in excess of $25,000 in any calendar year.
COMMENCEMENT, TERMINATION AND MODIFICATION
The Stock Purchase Plan will become effective and the first offering period
will commence as of January 1, 1998 and is subject to stockholder approval to
obtain the benefits mentioned above for participating employees. Each offering
period will be six months long.
The Stock Purchase Plan and all rights of employees under the Stock
Purchase Plan will terminate (a) on the investment date that participating
employees would, but the limitation set forth below, become entitled to purchase
a number of shares greater than the number of reserved shares remaining
available for purchase or (b) at the discretion of the Board of Directors, at
any time before that. If the Stock Purchase Plan terminates because
participating employees have become entitled to purchase more shares than are
available for purchase, reserved shares remaining available for purchase as of
the termination date will be issued to participating employees on a pro rata
basis, and any excess funds thereafter remaining in employees' accounts will be
refunded.
The Board of Directors may amend the Stock Purchase Plan in any respect,
except that the Stock Purchase Plan may not be amended in any way that will
cause rights issued under it to fail to meet the requirements for an employee
stock purchase plan as defined in Section 423 of the Internal Revenue Code
which, among other things, requires stockholder approval for an increase in the
number of shares issued under the Stock Purchase Plan except pursuant to the
anti-dilution provisions of the Stock Purchase Plan. In addition, no amendment
may make any change which would adversely affect the rights of any participant
in the Stock Purchase Plan with respect to an offering period under the Stock
Purchase Plan that has already commenced.
The Board of Directors may terminate the Stock Purchase Plan at any time.
No such termination may affect the rights of a participant in the Stock Purchase
Plan with respect to an offering period under the Stock Purchase Plan that has
already commenced except that the Stock Purchase Plan and such rights may be
terminated (and payroll deductions returned) without regard to the rights of a
participant in the Stock Purchase Plan if the stockholders do not approve the
Stock Purchase Plan. Without stockholder approval, current federal tax law
provides the 15% discount from the fair market value of the stock will be
treated as taxable compensation in the year of purchase by the participating
associate, thus negating the advantageous federal tax treatment the Stock
Purchase Plan is expected to provide to employees.
13
<PAGE> 16
ADMINISTRATION
The Stock Purchase Plan is administered, at the Company's expense, by the
Compensation Committee of the Board of Directors. The Committee may request
advice or assistance and employ or direct any other persons necessary for the
proper administration of the Stock Purchase Plan. Subject to the express
provisions of the Stock Purchase Plan, the Committee has the authority to
interpret the Stock Purchase Plan, to prescribe, amend and rescind rules and
regulations relating to the Stock Purchase Plan, and to make all other
determinations necessary or advisable in administering the Stock Purchase Plan,
all of which determinations will be final and binding upon all persons, unless
otherwise determined by the Board of Directors.
PURCHASE PRICE AND METHOD OF PURCHASE
Participating employees will authorize the Company or subsidiary employer
to make payroll deductions, not exceeding 10% of the salary or wages during the
prior 12-month period, divided by the number of pay periods in the following
twelve months. The minimum deduction will be $5.00 per pay period. The payroll
deductions will be used to purchase shares of stock at the end of each offering
period, as determined by the Committee, at a price equal to 85% of the lesser of
the last trading price of the Common Stock on the Nasdaq on the commencement and
termination dates of such offering period. The Company will maintain an
investment account for each participating employee, and will issue periodic
reports to the employee of his or her stockholders, although the Stock Purchase
Plan does not expressly require such reports to be issued. Participating
employees will not pay any brokerage or similar commission in connection with
the purchase of stock under the Stock Purchase Plan.
As of October 31, 1997, no shares had been issued under the Stock Purchase
Plan. Based on the closing price per share of the Company's Common Stock as
reported by Nasdaq on that date, the total market value of the 250,000 shares
issuable under the Stock Purchase Plan was $2,000,000.
If the Stock Purchase Plan is approved by the stockholders, the Company
intends to file a registration statement under the Securities Act of 1933
covering the 250,000 shares thus authorized.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO APPROVE
AND ADOPT THE CSP INC. 1997 EMPLOYEE STOCK PURCHASE PLAN DESCRIBED IN THIS PROXY
STATEMENT.
ITEM 4. APPROVAL OF AN AMENDMENT TO THE COMPANY'S ARTICLES OF ORGANIZATION
The Articles of Organization of the Company currently do not permit the
Company to hold meetings of its stockholders outside the Commonwealth of
Massachusetts. On October 9, 1997, the Board of Directors voted to propose and
declare advisable an amendment to the Company's Articles of Organization to
permit the Company to hold meetings of stockholders either in Massachusetts or
elsewhere in the United States.
The Board of Directors believes that the authority of the Company to hold
meetings of its stockholders outside the Commonwealth of Massachusetts is
desirable to enhance the Company's ability to use annual meetings to raise
visibility of the Company. The Board believes that this goal can be achieved by,
among other things, holding meetings in jurisdictions where significant
operations of the Company are located. Due to its recent acquisitions, the
Company has an increased presence outside the Commonwealth of Massachusetts,
with significant facilities in Florida, Maryland and Virginia. The Board
believes it may be appropriate or desirable to hold stockholders' meetings
outside Massachusetts at some future time.
The affirmative vote of the holders of two-thirds of the outstanding shares
of Common Stock is required to approve this amendment to the Company's Articles
of Organization.
Massachusetts law provides no dissenters' rights of appraisal to
stockholders who may object to the adoption of the amendment to the Articles of
Organization described above.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO AMEND
THE ARTICLES OF ORGANIZATION AS DESCRIBED IN THIS PROXY STATEMENT.
14
<PAGE> 17
ITEM 5. APPROVAL OF BY-LAW AMENDMENTS WITH RESPECT TO THE DATE AND TIME OF THE
ANNUAL MEETING OF STOCKHOLDERS
The by-laws of the Company currently require that the Annual Meeting of
stockholders of the Company (the "Annual Meeting") be held at 10:00 a.m. on the
second Tuesday of December in each year. For the reasons set forth below, the
Board of Directors strongly supports and unanimously recommends an amendment to
the Company's by-laws that would provide that the Annual Meeting be held at
10:00 a.m., local time, on the second Tuesday of January in each year. Under
Massachusetts law, the time of the Annual Meeting is established by the by-laws,
and under the Company's by-laws, only the stockholders are empowered to change
the date of the Annual Meeting.
The Board of Directors believes that recent acquisitions by the Company,
notably the acquisition of Modcomp, have resulted in the Company's owning
significant international operations. This factor makes it impracticable, if not
impossible, for the Company to present financial results for its first fiscal
quarter (which concludes at the end of November) in time for an Annual Meeting
in early December. Because the Board considers it very desirable that first
quarter financial information be available by the time of the Annual Meeting,
the Board is recommending that the stockholders change the date of the Annual
Meeting as set forth in Article II of the by-laws to the second Tuesday in
January, essentially a month later than the current date. The Board expects that
this will ensure that the Company can present its first quarter financial
results to its stockholders at the time of the Annual Meeting. The by-law is
also being amended to specify that the time of the meeting be "local time,"
i.e., the time at the place where the meeting is being held.
A copy of the by-law provisions as proposed to be amended is attached to
this Proxy Statement as Exhibit C.
If a quorum is present at the Meeting, the vote of a majority of the shares
present or represented at the Meeting and entitled to vote is necessary to
approve these changes to the by-laws of the Company. The first Annual Meeting
scheduled to be held under the amended by-laws would be scheduled to take place
on January 12, 1999.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO AMEND
THE BY-LAWS OF THE COMPANY AS DESCRIBED IN THIS PROXY STATEMENT.
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
The Company's only issued and outstanding class of voting securities is its
Common Stock. Holders of the Common Stock are entitled to one vote per share of
such stock held by them of record at the close of business on October 31, 1997
upon each matter which may come before the Meeting. At the close of business on
October 31, 1997, there were 2,679,870 shares of Common Stock issued and
outstanding.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of October 31, 1997
regarding each person known by the Company to own beneficially more than 5% of
the Company's Common Stock, each Director and nominee for Director of the
Company, each executive officer named in the Summary Compensation Table and all
Directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT
NAME OWNED (1) OF CLASS(2)
--------------------------------------------------- ------------- -----------
<S> <C> <C>
Heartland Value Fund............................... 501,600(3) 18.2%
790 N. Milwaukee
Street Milwaukee, WI 53202
</TABLE>
15
<PAGE> 18
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT
NAME OWNED (1) OF CLASS(2)
--------------------------------------------------- ------------- -----------
<S> <C> <C>
Fundamental Management Corporation................. 262,000(4) 9.5%
4000 Hollywood Blvd.,
Suite 610 N. Hollywood, FL 33021
Quest Advisory Corp................................ 199,005(5) 7.2%
Quest Advisory Co.
1414 Avenue of the Americas
New York, NY 10019
Dimensional Fund Advisors Inc...................... 231,300(6) 8.4%
1299 Ocean Avenue
Santa Monica, CA 90401
David L. Babson & Co., Inc......................... 228,300(7) 8.3%
One Memorial Drive
Cambridge, MA 02142
C. Shelton James................................... 264,000(8) 9.6%
c/o Fundamental Management Corporation
4000 Hollywood Blvd., Suite 610 N.
Hollywood, FL 33021
Alexander R. Lupinetti............................. 15,000(9) **
J. David Lyons(*).................................. 0 **
Samuel Ochlis...................................... 54,627(10) 2.0%
Boruch B. Frusztajer............................... 16,500(11) **
John D. Ingram (*)................................. 3,000(9) **
Sandford D. Smith.................................. 3,000(9) **
James A. Waggett................................... 32,225(12) 1.2%
Michael M. Stern................................... 102,600(13) 3.7%
Gary W. Levine..................................... 11,200(14) **
All Directors and executive officers as a group
(14 persons)..................................... 509,652(15) 20.4%
</TABLE>
- ---------------
* Nominee for Director.
** Owns less than one percent.
(1) Except as otherwise noted, all person and entities have sole voting and
investment power over their shares. All amounts shown in this column
include shares obtainable upon exercise of stock options exercisable within
60 days of the date of this table.
(2) Computed pursuant to Rule 13d-3 under the Exchange Act.
(3) Heartland Advisors, Inc. ("Heartland") has furnished the Company with a
report on Schedule 13G dated February 12, 1997, in which it is stated that
Heartland is a registered investment advisor, that Heartland has sole
dispositive power with respect to 501,600 shares of the Company's Common
Stock, and that Heartland has sole voting power with respect to 447,600 of
such shares.
(4) Based on information provided to the Company by Mr. James and on a report
on Schedule 13D and two amendments thereto dated, respectively, April 18,
1994, April 26, 1994 and July 7, 1994, Fundamental Management Corporation
("FMC") solely controls the voting and investment of securities owned of
record by several limited partnerships of which FMC is the sole managing
general partner. C. Shelton James, a Director and nominee for Director of
the Company, is President of Fundamental Management Corporation. See
footnote 8.
(5) Quest Advisory Corp. ("Quest"), Quest Management Company ("QMC") and
Charles M. Royce have furnished the Company with a joint report on Schedule
13G dated February 3, 1997, in which it is
16
<PAGE> 19
stated that both Quest and QMC are registered investment advisors, that
Quest has sole voting and investment power with respect to 220,805 of these
shares, and that QMC has sole voting and investment power with respect to
34,400 of these shares. The report also states that Mr. Charles M. Royce
may be deemed to be a controlling person of Quest and QMC, and as such may
be deemed to own beneficially all of the shares covered by the report. Mr.
Royce disclaims beneficial ownership of all such shares.
(6) Dimensional Fund Advisors Inc. ("Dimensional"), DFA Investment Dimensions
Group Inc. (the "Fund") and The DFA Investment Trust Company (the "Trust")
have furnished the Company with a joint report on Schedule 13G dated
February 5, 1997, in which Dimensional has advised the Company that it is a
registered investment advisor and that Dimensional has sole dispositive
power with respect to 231,300 shares of the Company's Common Stock and sole
voting power with respect to 140,600 of those shares, and that persons who
are officers of Dimensional are also officers of the Fund and the Trust
(each an open-end investment company registered under The Investment
Company Act of 1940) and in their capacities as officers of the Fund and
the Trust, these persons exercise the voting power with respect to 31,200
and 59,900 shares of the Company's Common Stock, respectively.
(7) David L. Babson & Co., Inc. ("Babson") has furnished the Company with a
report on Schedule 13G dated February 7,1997, in which Babson states that
it is a registered investment advisor, that Babson has sole dispositive
power with respect to 228,300 shares of the Company's Common Stock, that
Babson has sole voting power with respect to 150,700 of such shares and
that Babson has shared voting power with respect to 77,800 of such shares.
(8) Includes 262,000 shares directly owned by Fundamental Management
Corporation, as described in footnote 4. Mr. James is President of
Fundamental Management Corporation. Also includes 2,000 shares obtainable
upon exercise of stock options.
(9) These shares are obtainable upon exercise of stock options.
(10) Includes 2,000 shares obtainable upon exercise of stock options.
(11) Includes 3,000 shares obtainable upon exercise of stock options.
(12) Includes 8,000 shares owned by Mr. Waggett's wife and 3,000 shares
obtainable upon exercise of stock options.
(13) Includes 7,000 shares owned by Mr. Stern's wife. Mr. Stern disclaims
beneficial ownership of these shares. Also includes 5,600 shares obtainable
upon exercise of stock options.
(14) Includes 10,000 shares obtainable upon exercise of stock options.
(15) Includes 117,338 shares obtainable upon exercise of stock options.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities Exchange Commission. Officers, directors and
greater-than-10% stockholders are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company during fiscal 1997 and Forms 5 and amendments thereto
furnished to the Company with respect to fiscal 1997, or written representations
that Form 5 was not required, the Company believes that all Section 16(a) filing
requirements applicable to its officers, directors and greater-than-10%
stockholders were fulfilled in a timely manner.
INFORMATION CONCERNING AUDITORS
The Board of Directors selected the firm KPMG Peat Marwick LLP ("Peat
Marwick") to audit the Company's financial statements for the past fiscal year.
The Company's Board of Directors has not yet selected the Company's independent
public accountant for the current fiscal year. A representative of Peat
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Marwick is expected to be present at the Annual Meeting, will have the
opportunity to make a statement if such representative desires to do so and will
be available to respond to appropriate questions.
SOLICITATION
No compensation will be paid by any person in connection with the
solicitation of proxies. Brokers, banks and other nominees will be reimbursed
for their out-of-pocket expenses and other reasonable clerical expenses incurred
in obtaining instructions from beneficial owners of the Common Stock. In
addition to the solicitation by mail, special solicitation of proxies may, in
certain circumstances, be made personally or by telephone by Directors, officers
and certain employees of the Company, or by American Stock Transfer & Trust
Company, the Company's transfer agent. It is expected that the expense of such
special solicitation will be nominal. All expenses incurred in connection with
this solicitation will be borne by the Company.
DATE WHEN STOCKHOLDER PROPOSALS ARE REQUIRED TO BE FURNISHED
TO THE COMPANY FOR THE NEXT ANNUAL MEETING
In order to be eligible for inclusion in the Company's proxy materials,
stockholder proposals to be submitted for vote at the 1998 annual meeting of
stockholders or special meeting in lieu thereof must comply with SEC regulations
and must be delivered to the Company on or before Thursday, July 10, 1998.
In addition, the Company's by-laws set forth certain procedural
requirements, including a notice requirement, that apply to stockholders wishing
to nominate a Director or propose an item of business for consideration at the
scheduled meeting or special meeting in lieu thereof.
MISCELLANEOUS
The Board does not intend to present at the Meeting any business other than
the proposals listed herein, and the Board was not aware, a reasonable time
before mailing this Proxy Statement to stockholders, of any other business which
may be properly presented for action at the Meeting. If any other business
should come before the Meeting, the persons present will have discretionary
authority to vote the shares they own or represent by proxy in accordance with
their judgment.
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EXHIBIT A
CSP INC
1997 STOCK OPTION PLAN
SECTION 1. PURPOSE
This 1997 Stock Option Plan (the "Plan") is intended to attract and retain
highly qualified and competent employees and directors, to serve as a
performance incentive for officers and employees of CSP Inc., a Massachusetts
corporation (the "Company"), or its Subsidiaries (as hereinafter defined), and
for certain other individuals providing services to or acting as directors of
the Company or its Subsidiaries, to encourage persons to whom options are
granted (a "Grantee" or "Grantees") to acquire or increase a proprietary
interest in the success of the Company and to maintain and enhance the Company's
long-term performance and profitability. The Company intends that this purpose
will be effected by the granting of incentive stock options ("Incentive
Options") as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") and other stock options ("Non-Statutory Options") under the
Plan. The term "Subsidiaries" means any corporations in which stock possessing
50% or more of the total combined voting power of all classes of stock of any
such corporation or corporations is owned directly or indirectly by the Company.
SECTION 2. OPTIONS TO BE GRANTED AND ADMINISTRATION
2.1 Options to be Granted. Options granted under the Plan may be either
Incentive Options or Non-Statutory Options.
2.2 Administration. This Plan shall be administered by the Company's
Board of Directors (the "Board") or by a committee consisting of at least two
members of the Board. It is the intention of the Company that the Plan generally
shall be administered so as to comply with the provisions of Rule 16b-3 under
the Securities Exchange Act of 1934 (the "Exchange Act"), but the authority and
validity of any act taken or not taken by the Committee shall not be affected if
any person administering the Plan is not a "Non-Employee Director" as defined in
the Rule. Except as specifically reserved to the Board under the terms of the
Plan, the Board or the Committee, as the case may be, shall have full and final
authority to operate, manage and administer the Plan on behalf of the Company.
This authority shall include, but not be limited to: (i) the power to grant,
modify and amend options conditionally or unconditionally; (ii) the power to
prescribe the form or forms of the instruments evidencing options granted under
the Plan; (iii) the power to interpret the Plan; (iv) the power to provide
regulations for the operation of the incentive features of the Plan, and
otherwise to prescribe regulations for interpretation, management and
administration of the Plan; (v) the power to delegate to other persons the
responsibility for performing ministerial acts in furtherance of the Plan's
purpose; and (vi) the power to engage the services of persons or organizations
in furtherance of the Plan's purpose, including but not limited to banks,
insurance companies, brokerage firms and consultants.
In addition, as to each option, except for options granted pursuant to
Section 4.2, the Board or the Committee, as the case may be, shall have full and
final authority in its discretion: (i) to determine the number of shares subject
to each option; (ii) to determine the time or times at which options will be
granted; (iii) to determine the price for the shares subject to each option,
which price shall be subject to the applicable requirements, if any, of Section
5 (c) hereof; (iv) to determine the duration of the exercise period of each
option, which shall not exceed the limitations specified in Section 5 (a)
hereof; and (v) to determine the time or times when each option shall become
exercisable. The Board or the Committee may, in its sole discretion and on a
case by case basis, accelerate the schedule of the time or times when options
granted hereunder may be exercised or reduce the exercise price per share.
No member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any option granted
hereunder.
2.3 Appointment and Proceedings of Committee. If the Board establishes
the Committee, the Board may from time to time appoint members of the Committee
in substitution for or in addition to members
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previously appointed, and subject to Section 2.2 hereof may fill vacancies,
however caused, in the Committee. The Committee shall select one of its members
as its chairman and shall hold its meetings at such times and places as it shall
deem advisable. A majority of its members shall constitute a quorum, and all
actions of the Committee shall require the affirmative vote of a majority of its
members. Any action may be taken by a written instrument signed by all of the
members, and any action so taken shall be fully effective as if it had been
taken by a vote of majority of the members at a meeting duly called and held.
SECTION 3. STOCK
3.1 Shares Subject to Plan. The stock subject to options granted under
the Plan shall be shares of the Company's common stock, $.01 par value ("Common
Stock"), either authorized but unissued or held in treasury. The total number of
shares that may be issued pursuant to options granted under the Plan shall not
exceed an aggregate of 150,000 shares of Common Stock, of which not more than
10,000 shares may be issued pursuant to Section 4.2 hereof. Such numbers of
shares shall be subject to adjustment in accordance with Section 7.
3.2 Lapsed or Unexercised Options. Whenever any outstanding option under
the Plan expires, is canceled or is otherwise terminated (other than by
exercise), the shares of Common Stock allocable to the unexercised portion of
such option shall be restored to the Plan and shall again become available for
the grant of other options under the Plan.
SECTION 4. ELIGIBILITY
4.1 Eligible Grantees. Incentive Options may be granted only to officers
and other employees of the Company or its Subsidiaries, including members of the
Board who are also employees of the Company or Subsidiary. Non-Statutory Options
may be granted to officers or other employees of the Company or its
Subsidiaries, including members of the Board, members of the board of directors
of any Subsidiary, and to certain other individuals providing services to the
Company or its Subsidiaries. Non-Statutory Options may be granted to members of
the Board who are not employees of the Company or any Subsidiary ("Outside
Directors") either as provided in Section 4.2 hereof or otherwise as provided by
the Plan.
4.2 Non-Discretionary Option Grants to Outside Directors. On the last
business day of January in each year (the "Grant Date"), each Outside Director
shall without any action of the Board or the Committee be granted a
Non-Statutory Option to purchase 1,000 shares of the Common Stock of the
Company; provided, that no such options will be granted until no options are
available to be granted under Section 4.2 of the Company's 1991 Stock Option
Plan. Options shall be granted pursuant to this Section 4.2 only to persons who
are serving as Outside Directors on the Grant Date. The option grant referred to
in this Section shall be subject to adjustment in accordance with Section 7
hereof. The purchase price per share of the Common Stock under each option
granted pursuant to this Section shall be equal to the fair market value of the
Common Stock on the date the option is granted. Each such option shall expire on
the third anniversary of the date of grant and shall not be exercisable until
after the expiration of six months following the date of grant, becoming fully
exercisable at that time.
4.3 Limitations of 10% Stockholders. No Incentive Option shall be granted
to an individual who, at the time the Incentive Option is granted, owns
(including ownership attributed pursuant to Section 424 of the Code) more than
10% of the total combined voting power of all classes of stock of the Company or
any parent or Subsidiary of the Company (a "greater-than-10% stockholder"),
unless such Incentive Option provides that (i) the purchases price per share
shall not be less than 110% of the fair market value of the Common Stock at the
time such Incentive Option is granted, and (ii) such Incentive Option shall not
be exercisable to any extent after the expiration of five years from the date it
is granted.
4.4 Limitation on Exercisable Options. The aggregate fair market value
(determined at the time the Incentive Option is granted) of the Common Stock
with respect to which Incentive Options are exercisable for the first time by
any person during any calendar year under the Plan and under any other option
plan of the Company (or a parent or subsidiary as defined in Section 424 of the
Code) shall not exceed $100,000. Any
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option granted in excess of the foregoing limitation shall be specifically
designated as being a Non-Statutory Option.
SECTION 5. AGREEMENTS EVIDENCING STOCK OPTIONS
Each option agreement (each, a "Plan agreement") shall contain such
provisions as the Committee shall from time to time deem appropriate. Plan
agreements need not be identical, but each such agreement by appropriate
language shall include the substance of all of the following provisions:
(a) Expiration. Except for options granted pursuant to Section 4.2
hereof, notwithstanding any other provision of the Plan or of any Plan
agreement, each option shall expire on the date specified in the Plan
agreement, which date shall not be later than the tenth anniversary of the
date on which the option was granted (fifth anniversary in the case of an
Incentive Option granted to a greater-than-10% stockholder).
(b) Exercise. Except for options granted pursuant to Section 4.2
hereof, each option shall be exercisable in full or in installments (which
need not be equal) and at such times as designated by the Board or the
Committee. To the extent not exercised, installments shall accumulate and
be exercisable, in whole or in part, at any time after becoming
exercisable, but not later than the date the option expires.
(c) Purchase Price. The purchase price per share of the Common Stock
under each Incentive Option shall be not less than the fair market value of
the Common Stock on the date the option is granted (110% of the fair market
value in the case of a greater-than-10% stockholder). Except as provided in
Section 4.2 hereof, the price at which shares may be purchased pursuant to
Non-Statutory Options shall be specified by the Committee at the time the
option is granted, and may be less than, equal to or greater than the fair
market value of the shares of Common Stock on the date such Non-Statutory
Option is granted, but shall not be less than the par value of shares of
Common Stock. For the purpose of the Plan, the fair market value of the
Common Stock shall be the closing price per share on the date of grant of
the option as reported by a nationally recognized stock exchange, or, if
the Common Stock is not listed on such an exchange, as reported by the
NASDAQ National Market System, or, if the Common Stock is not quoted on the
NASDAQ National Market System, the fair market value as determined by the
Board or the Committee.
(d) Transferability of Options. Options granted under the Plan and
the rights and privileges conferred thereby may not be transferred,
assigned, pledged or hypothecated in any manner (whether by operation of
law or otherwise) other than by will or by applicable laws of descent and
distribution, and shall not be subject to execution, attachment or similar
process. Upon any attempt so to transfer, assign, pledge, hypothecate or
otherwise dispose of any option under the Plan or any right or privilege
conferred hereby, contrary to the provisions of the Plan, or (if the Board
or the Committee shall so determine) upon any levy or any attachment or
similar process upon the rights and privileges conferred hereby, such
option shall thereupon terminate and become null and void.
(e) Termination of Employment or Death of Grantee. Except as may be
otherwise expressly provided in the terms and conditions of the Plan
agreements, options granted hereunder shall terminate on the earlier to
occur of:
(i) the date of expiration thereof; or
(ii) other than in the case of death of the Grantee or retirement
in good standing of the Grantee from the employ of the Company for
reasons of age or disability under the then established rules of the
Company, immediately upon termination of the employment or other
relationship between the Company and the Grantee for cause as determined
by the Committee, or 30 days after termination of the employment or
other relationship between the Company and the Grantee without cause.
An employment relationship between the Company and the Grantee shall be
deemed to exist during any period during which the Grantee is employed by the
Company or by any Subsidiary. Whether an authorized leave of absence or absence
on military government service shall constitute termination of the employment
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relationship between the Company and the Grantee shall be determined by the
Board or the Committee at the commencement thereof, and the Board or the
Committee shall promptly notify the Grantee of such determination.
As used herein, "cause" shall mean (x) any material breach by the Grantee
of any agreement to which the Grantee and the Company are both parties, (y) any
act or omission to act by the Grantee which may have a material and adverse
effect on the Company's business or on the Grantee's ability to perform services
for the Company, including, without limitation, the commission of any crime
(other than ordinary traffic violations), or (z) any material misconduct or
material neglect of duties by the Grantee in connection with the business or
affairs of the Company or any affiliate of the Company.
In the event of the death of a Grantee while in an employment or other
relationship with the Company and before the date of expiration of an option
held by such Grantee, such option shall terminate on the earlier of such date of
expiration or 180 days following the date of such death. After the death of the
Grantee, the Grantee's executors, administrators or any person or persons to
whom his option may be transferred by will or by laws of descent and
distribution shall have the right, at any time prior to such termination, to
exercise the option to the extent the Grantee was entitled to exercise such
option immediately prior to the Grantee's death.
If, before the date of expiration of the option, the Grantee shall be
retired in good standing from the employ of the Company for reasons of age or
disability under the then established rules of the Company, the option shall
terminate on the earlier of such date of expiration or 90 days after the date of
such retirement. In the event of such retirement, the Grantee shall have the
right prior to the termination of such option to exercise the option to the
extent to which the Grantee was entitled to exercise such option immediately
prior to such retirement.
(f) Rights of Grantees. No Grantee shall be deemed for any purpose to
be the owner of any shares of Common Stock subject to any option unless and
until (i) the option shall have been exercised pursuant to the terms
thereof and (ii) the Company shall have issued and delivered the shares to
the Grantee.
(g) Repurchase Right. The Board or the Committee may in its
discretion provide upon the grant of any option hereunder that the Company
shall have an option to repurchase, upon such terms and conditions as
determined by the Board or the Committee, all or any number of shares
purchased upon exercise of such option. The repurchase price per share
payable by the Company shall be such amount or be determined by such
formula as is fixed by the Board or the Committee at the time the option
for the shares subject to repurchase is granted. In the event the Board or
the Committee shall grant options subject to the Company's repurchase
option, the certificates representing the shares purchased pursuant to such
option shall carry a legend satisfactory to counsel for the Company
referring to the Company's repurchase option.
(h) "Lockup" Agreement. The Board or the Committee may in its
discretion specify upon granting an option that the Grantee shall agree for
a period of time (not to exceed 180 days) from the effective date of any
registration of securities of the Company (upon request of the Company or
the underwriters managing any underwritten offering of the Company's
securities), not to sell, make any short sale of, loan, grant any option
for the purchase of, or otherwise dispose of any shares issued pursuant to
the exercise of such option, without the prior written consent of the
Company or such underwriters, as the case may be.
SECTION 6. METHOD OF EXERCISE AND PAYMENT
6.1 Notice of Exercise. Any option granted under the Plan may be
exercised by the Grantee by delivering to the Company on any business day a
written notice (the "Notice") specifying the number of shares of Common Stock
with respect to which the Grantee then desires to exercise the option,
specifying the address to which the certificates for such shares are to be
mailed and accompanied by payment for such shares.
6.2 Exercise of Options. Payment for the shares of Common Stock purchased
pursuant to the exercise of an option shall be made either (i) in cash equal to
the option price for the number of shares specified in the
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Notice (the "Total Option Price"), or (ii) if authorized by the applicable Plan
agreement, in shares of Common Stock having a fair market value equal to or less
than the Total Option Price, plus cash in an amount equal to the excess, if any,
of the Total Option Price over the fair market value of such shares of Common
Stock. For the purpose of the preceding sentence, the fair market value of the
shares of Common Stock so delivered to the Company shall be determined in the
manner specified in Section 5(c) hereof. As promptly as practicable after
receipt of such Notice and payment, the Company shall deliver to the Grantee
certificates for the number of shares with respect to which such option has been
so exercised, issued in the Grantee's name; provided, however, that such
delivery shall be deemed effected for all purposes when the Company or a stock
transfer agent of the Company shall have deposited such certificates in the
United States mail, addressed to the Grantee, at the address specified pursuant
to Section 6.1.
SECTION 7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
7.1 No Effect of Options upon Certain Corporate Transactions. The
existence of outstanding options shall not affect in any way the right or power
of the Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or any
issue of Common Stock, or any issue of bonds, debentures, preferred or prior
preference stock ahead of or affecting the Common Stock or the rights thereof,
or the dissolution or liquidation of the Company, or any sale or transfer of all
or any part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
7.2 Stock Dividends, Recapitalizations, Etc. If the Company shall effect
a subdivision or consolidation of shares or other capital readjustment, the
payment of a stock dividend, or other increase or reduction of the number of
shares of the Common Stock outstanding, without receiving compensation therefor
in money, services or property, then (i) the number, class and per share price
of shares of stock subject to outstanding options hereunder shall be
appropriately adjusted in such a manner as to entitle a Grantee to receive upon
exercise of an option, for the same aggregate cash consideration, the same total
number and class of shares that the owner of an equal number of outstanding
shares of Common Stock would own as a result of the event requiring the
adjustment; and (ii) the number and class of shares that may be issued under,
and with respect to which options may be granted pursuant to, the Plan shall be
adjusted by substituting for the total number of shares of Common Stock then
reserved for issuance under, and with respect to which options may be granted
pursuant to, the Plan that number and class of shares of stock that the owner of
an equal number of outstanding shares of Common Stock would own as the result of
the event requiring the adjustment.
7.3 Determination of Adjustments. Adjustments under this Section 7 shall
be determined by the Committee and such determinations shall be conclusive. The
Committee shall have the discretion and power in any such event to determine and
to make effective provision for acceleration of the time or times at which any
option or portion thereof shall become exercisable. No fractional shares of
Common Stock shall be issued under the Plan on account of any adjustment
specified above.
7.4 No Adjustment in Certain Cases. Except as hereinbefore expressly
provided, the issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property
or for labor or services, either upon direct sale or upon the exercise of rights
or warrants to subscribe therefor, or upon conversion of shares or obligations
of the Company convertible into such shares or other securities, shall not
affect, and no adjustment by reason thereof shall be made with respect to the
number of price of shares of Common Stock then subject to outstanding options.
SECTION 8. EFFECT OF CERTAIN TRANSACTIONS
8.1 Merger without Change of Control. After a merger of one or more
corporations into the Company, or after a consolidation of the Company and one
or more corporations, in each case as a result of which (i) the Company shall be
the surviving corporation, and (ii) the stockholders of the Company immediately
prior to such merger or consolidation own after such merger or consolidation
shares representing at least fifty percent (50%) of the voting power of the
Company, each holder of an outstanding option shall, at no additional cost, be
entitled upon exercise of such option to receive (subject to any required action
by stockholders), instead of the number of shares as to which such option shall
then be so exercisable, the number and class of shares of
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stock or other securities to which such holder would have been entitled pursuant
to the terms of the agreement of merger or consolidation if, immediately prior
to such merger or consolidation, such holder had been the record holder of a
number of shares of Common Stock equal to the number of shares as to which such
option was exercisable.
8.2 Sale or Merger with Change of Control. If the Company is merged into
or consolidated with
another corporation under circumstances in which the Company is not the
surviving corporation, or if there is a merger or consolidation where the
Company is the surviving corporation but the stockholders of the Company
immediately prior to such merger or consolidation do not own after such merger
or consolidation shares representing at least fifty percent (50%) of the voting
power of the Company, or if unexercised options remain outstanding under the
Plan: (i) subject to the provisions of clause (iii) below, after the effective
date of such merger, consolidation, liquidation, sale or disposition, as the
case may be, each holder of an outstanding option shall be entitled, upon
exercise of such option, to receive, in lieu of shares of Common Stock, shares
of such stock or other securities, cash or property as the holders of shares of
Common Stock received pursuant to the terms of the merger, consolidation,
liquidation, sale or disposition; (ii) the Board or the Committee may accelerate
the time for exercise of all unexercised and unexpired options to a date prior
to the effective date of such merger, consolidation, liquidation, sale or
disposition, as the case may be, specified by the Board or the Committee; or
(iii) all outstanding options may be cancelled by the Board or the Committee as
of the effective date of such merger, consolidation, liquidation, sale or
disposition, provided that (x) notice of such cancellation shall be given to
each holder of an option and (y) each holder of an option shall have the right
to exercise such option to the extent that the same is then exercisable or, if
the Board or the Committee shall have accelerated the time for exercise of all
of the unexercised and unexpired options, in full during the 30-day period
preceding the effective date of such merger, consolidation, liquidation, sale or
disposition.
SECTION 9. AMENDMENT OF THE PLAN
The Board may terminate the Plan and may amend the Plan at any time, and
from time to time, subject to the limitation that, except as provided in
Sections 7 and 8 hereof, no amendment shall be effective unless approved by the
stockholders of the Company in accordance with applicable law and regulations,
at an annual or special meeting held within 12 months before or after the date
of adoption of such amendment, in any instance in which such amendment would:
(i) increase the number of shares of Common Stock that may be issued under, or
as to which options may be granted pursuant to, the Plan; or (ii) change in
substance the provisions of Section 4 hereof relating to eligibility to
participate in the Plan. Without limiting the generality of the foregoing, the
Board is expressly authorized to amend the Plan, at any time and from time to
time, to conform it to the provisions of Rule 16b-3 (or successor rule) under
the Exchange Act, as that Rule may be amended from time to time.
Except as provided in Section 7 and 8 hereof, rights and obligations under
any option granted before any amendment of the Plan shall not be altered or
impaired by such amendment, except with the consent of the Grantee.
SECTION 10. NON-EXCLUSIVITY OF THE PLAN; NON-UNIFORM DETERMINATIONS
Neither the adoption of the Plan by the Board nor the approval of the Plan
by the stockholders of the Company shall be construed as creating any
limitations on the power of the Board to adopt such other incentive arrangements
as it may deem desirable, including without limitation the granting of options
otherwise than under the Plan, and such arrangements may be either applicable
generally or only in specific cases.
The Board's, or the Committee's, as the case may be, determinations under
the Plan need not be uniform and may be made by it selectively among persons who
receive, or are eligible to receive, awards under the Plan (whether or not such
persons are similarly situated). Without limiting the generality of the
foregoing, the Board or the Committee shall be entitled, among other things, to
make non-uniform and selective determinations, and to enter into non-uniform and
selective Plan agreements, as to (i) the persons to receive awards under the
Plan, (ii) the terms and provisions of awards under the Plan, (iii) the exercise
by the Board
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or the Committee of its discretion in respect of the exercise of options
pursuant to the terms of the Plan, and (iv) the treatment of leaves of absence
pursuant to Section 5(e) hereof.
SECTION 11. GOVERNMENT AND OTHER REGULATIONS; TAX WITHHOLDING
The obligation of the Company to sell and deliver shares of Common Stock
with respect to options granted under the Plan shall be subject to all
applicable laws, rules and regulations, including all applicable federal and
state securities laws, and the obtaining of all such approvals by government
agencies as may be deemed necessary or appropriate by the Committee. All shares
sold under the Plan shall bear appropriate legends. The Company may, but shall
in no event be obligated to, register or qualify any securities covered hereby
under applicable federal and state securities laws; and in the event any shares
are so registered or qualified the Company may remove any legend on certificates
representing such shares. The Company shall not be obligated to take any other
affirmative action in order to cause the exercise of an option or the issuance
of shares pursuant thereto to comply with any law or regulation of any
governmental authority. The Plan shall be governed by and construed in
accordance with the laws of the State of Delaware.
Whenever under the Plan shares are to be delivered upon exercise of an
option, the Company shall be entitled to require as a condition of delivery that
the Grantee remit an amount sufficient to satisfy all federal, state and other
governmental tax requirements related thereto.
SECTION 12. EFFECTIVE DATE OF PLAN
The effective date of the Plan is October 9, 1997, the date on which it was
approved by the Board. No option may be granted under the Plan after October 8,
2007. Subject to the foregoing, options may be granted under the Plan at any
time subsequent to its effective date; provided, however, that (a) no such
option shall be exercised or exercisable unless the stockholders of the Company
shall have approved the Plan no later than one year from such effective date,
and (b) all options issued prior to the date of such stockholders' approval
shall contain a reference to such condition.
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EXHIBIT B
CSP INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE.
The CSP Inc. 1997 Employee Stock Purchase Plan (the "Plan") is intended to
provide a method whereby employees of CSP Inc. (the "Company") will have an
opportunity to acquire an ownership interest (or increase an existing ownership
interest) in the Company through the purchase of shares of the Common Stock of
the Company. It is the intention of the Company that the Plan qualify as an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code of
1986, as amended (the "Code"). The provisions of the Plan shall, accordingly, be
construed so as to extend and limit participation in a manner consistent with
the requirements of that section of the Code.
2. DEFINITIONS.
(a) "Board" means the Board of Directors of the Company.
(b) "Code" shall have the meaning set forth in Paragraph 1.
(c) "Committee" means the Compensation Committee of the Board.
(d) "Common Stock" means the common stock, par value $.01 per share, of the
Company.
(e) "Company" shall also include any Subsidiary (as hereinafter defined) of
CSP Inc. designated as a participant in the Plan by the Board, unless the
context otherwise requires.
(f) "Compensation" means, for the purpose of any Offering pursuant to this
Plan, base pay in effect as of the Offering Commencement Date (as hereinafter
defined). Compensation shall not include any deferred compensation other than
contributions by an individual through a salary reduction agreement to a cash or
deferred plan pursuant to Section 401(k) of the Code or to a cafeteria plan
pursuant to Section 125 of the Code.
(g) "Employee" means any person who is customarily employed by the Company
for more than 20 hours per week and more than five months in any calendar year.
(h) "Offering" shall have the meaning set forth in Paragraph 4.
(i) "Offering Commencement Date" shall have the meaning set forth in
Paragraph 4.
(j) "Offering Termination Date" shall have the meaning set forth in
Paragraph 4.
(k) "Plan" shall have the meaning set forth in Paragraph 1.
(l) "Subsidiary" shall mean any present or future corporation which is or
would constitute a "subsidiary corporation" as that term is defined in Section
424 of the Code.
3. ELIGIBILITY.
(a) Participation in the Plan is completely voluntary. Participation in any
one or more of the Offerings under the Plan shall neither limit, nor require,
participation in any other Offering (as hereinafter defined).
(b) Each employee of the Company shall be eligible to participate in the
Plan on the first Offering Commencement Date, as hereinafter defined, following
the completion of six months of continuous service with the Company.
Notwithstanding the foregoing, no employee shall be granted an option under the
Plan:
(i) if, immediately after the grant, such employee would own stock,
and/or hold outstanding options to purchase stock, possessing 5% or more of
the total combined voting power or value of all classes of stock of the
Company or any Subsidiary; for purposes of this Paragraph, the rules of
Section 424(d) of the Code shall apply in determining the stock ownership
of any employee; or
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(ii) which permits his rights to purchase stock under all Section 423
employee stock purchase plans of the Company and its Subsidiaries to exceed
$25,000 of the fair market value of the stock (determined at the time such
option is granted) for each calendar year in which such option is
outstanding; for purposes of this Paragraph, the rules of Section 423(b)(8)
of the Code shall apply.
4. OFFERING DATES.
The right to purchase stock hereunder shall be made available by a series
of six-month offerings (the "Offering" or "Offerings") to employees eligible in
accordance with Paragraph 3 hereof. The Committee will, in its discretion,
determine the applicable date of commencement ("Offering Commencement Date") and
termination date ("Offering Termination Date") for each Offering. Participation
in any one or more of the Offerings under the Plan shall neither limit, nor
require, participation in any other Offering.
5. PARTICIPATION.
Any eligible employee may become a participant by completing a payroll
deduction authorization form provided by the Company and filing it with the
Company's Chief Financial Officer 20 days prior to each applicable Offering
Commencement Date, as determined by the Committee pursuant to Paragraph 4.
6. PAYROLL DEDUCTIONS.
(a) At the time a participant files an authorization for a payroll
deduction, the participant shall elect to have deductions made from his or her
pay on each payday during any Offering in which he or she is a participant, at a
specified percentage of his or her Compensation as determined on the applicable
Offering Commencement Date; said percentage shall be in increments of one
percent up to a maximum percentage of ten percent.
(b) Payroll deductions for a participant shall commence on the Offering
Commencement Date when the applicable authorization for a payroll deduction
becomes effective and shall end on the Offering Termination Date of the Offering
to which such authorization is applicable, unless sooner terminated by the
participant as provided in Paragraph 9.
(c) All payroll deductions made for a participant shall be credited to his
or her account under the Plan. A participant may not make any separate cash
payment into such account.
(d) A participant may withdraw from the Plan at any time during the
applicable Offering period.
7. GRANTING OF OPTION.
(a) On the Offering Commencement Date of each Offering, a participating
employee shall be deemed to have been granted an option to purchase a maximum
number of shares of the Common Stock equal to an amount determined as follows:
(i) 85% of the market value per share of the Common Stock on the applicable
Offering Commencement Date shall be divided into an amount equal to the sum of
(X) the percentage of the employee's Compensation which he or she has elected to
have withheld (multiplied by the employee's Compensation over the Offering
period) plus (Y) any amounts in the employee's account on the Offering
Commencement Date that have been carried forward from prior Offerings,
multiplied by (ii) two. Such market value per share of the Common Stock shall be
determined as provided in clause (i) of Paragraph 7(b).
(b) The option price of the Common Stock purchased with payroll deductions
made during each such Offering for a participant therein shall be the lower of:
(i) 85% of the average of the bid and the asked prices as reported by
the Nasdaq Stock Market in the Wall Street Journal, or, if the Common Stock
is designated as a national market security by the National Association of
Securities Dealers, Inc. ("NASD"), the last trading price of the Common
Stock as reported by the Nasdaq National Market System in the Wall Street
Journal, or, if the Common Stock is listed on an exchange, the closing
price of the Common Stock on the exchange on the Offering Commencement Date
applicable to such Offering (or on the next regular business date on which
shares
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of the Common Stock shall be traded, in the event that no shares of the
Common Stock have been traded on the Offering Commencement Date); or if the
Common Stock is not quoted on Nasdaq, not designated as a Nasdaq national
market security and not listed on an exchange, 85% of the fair market value
on the Offering Commencement Date as determined by the Committee; and
(ii) 85% of the average of the bid and the asked prices as reported by
the Nasdaq Stock Market in the Wall Street Journal, or, if the Common Stock
is designated as a national market security by the NASD, the last trading
price of the Common Stock as reported by the Nasdaq National Market System
in the Wall Street Journal, or, if the Common Stock is listed on an
exchange, the closing price of the Common Stock on the exchange on the
Offering Termination Date applicable to such Offering (or on the next
regular business date on which shares of the Common Stock shall be traded,
in the event that no shares of the Common Stock shall have been traded on
the Offering Termination Date); or if the Common Stock is not quoted on
Nasdaq, not designated as a Nasdaq national market security and not listed
on an exchange, 85% of the fair market value on the Offering Termination
Date as determined by the Committee.
8. EXERCISE OF OPTION.
(a) Unless a participant gives written notice to the Chief Financial
Officer of the Company as hereinafter provided, his or her option for the
purchase of Common Stock with payroll deductions made during any Offering will
be deemed to have been exercised automatically on the Offering Termination Date
applicable to such Offering for the purchase of the number of full shares of
Common Stock which the accumulated payroll deductions in his or her account at
that time (plus any amounts in his or her account that have been carried forward
from prior Offerings) will purchase at the applicable option price (but not in
excess of the number of shares for which options have been granted to the
employee, pursuant to Paragraph 7(a)), and any excess in his account at that
time will be automatically returned to the Participant, except as otherwise
provided in Paragraph 8(b).
(b) Fractional shares will not be issued under the Plan and any accumulated
payroll deductions which would have been used to purchase fractional shares
shall be automatically carried forward to the next Offering unless the
participant elects, by written notice to the Chief Financial Officer of the
Company, to have the excess cash returned to the participant.
9. WITHDRAWAL AND TERMINATION.
(a) Prior to the Offering Termination Date for an Offering, any participant
may withdraw the payroll deductions credited to his or her account under the
Plan for such Offering by giving written notice to the Chief Financial Officer
of the Company. All of the participant's payroll deductions credited to such
account will be paid to the participant promptly after receipt of notice of
withdrawal, without interest, and no future payroll deduction will be made from
his or her pay during such Offering. The Company will treat any attempt to
borrow by a participant on the security of accumulated payroll deductions as an
election to withdraw such deductions.
(b) A participant's election not to participate in, or withdrawal from, any
Offering will not have any effect upon his or her eligibility to participant in
any succeeding Offering or in any similar plan which may hereafter be adopted by
the Company.
(c) Upon termination of the participant's employment for any reason,
including retirement but excluding death, the payroll deductions credited to his
or her account will be returned to the participant, or, in the case of his or
her death, to the person or persons entitled thereto under Paragraph 13.
(d) Upon termination of the participant's employment because of death, his
or her beneficiary (as defined in paragraph 13) shall have the right to elect,
by written notice given to the Company's Chief Financial Officer prior to the
expiration of a period of 90 days commencing with the date of the death of the
participant, either:
(i) to withdraw all of the payroll deductions credited to the
participant's account under the Plan; or
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(ii) to exercise the participant's option for the purchase of stock on
the Offering Termination Date next following the date of the participant's
death for the purchase of the number of full shares which the accumulated
payroll deductions in the participant's account at the date of the
participant's death will purchase at the applicable option price (subject
to the limitation contained in Paragraph 7(a)), and any excess in such
account will be returned to said beneficiary. In the event that no such
written notice of election shall be duly received by the office of the
Company's Chief Financial Officer, the beneficiary shall automatically be
deemed to have elected to withdraw the payroll deductions credited to the
participant's account at the date of the participant's death and the same
will be paid promptly to said beneficiary.
10. INTEREST.
No interest will be paid or allowed on any money paid into the Plan or
credited to the account of any participating employee.
11. STOCK.
(a) The maximum number of shares of Common Stock available for issuance and
purchase by employees under the Plan, subject to adjustment upon changes in
capitalization of the Company as provided in Paragraph 16, shall be 250,000
shares of Common Stock, $.01 par value per share, of the Company, either
authorized but unissued or held in treasury. If the total number of shares for
which options are exercised on any Offering Termination Date in accordance with
Paragraph 8 exceeds the number of shares that remain available for issuance and
purchase by employees under the Plan, the Company shall make a pro rata
allocation of the shares available for delivery and distribution in an equitable
manner, with the balances of payroll deductions credited to the account of each
participant under the Plan returned to the participant.
(b) The Participant will have no interest in the stock covered by his or
her option until such option has been exercised.
12. ADMINISTRATION.
The Plan shall be administered by the Committee. The interpretation and
construction of any provision of the Plan and adoption of rules and regulations
for administering the Plan shall be made by the Committee. Determinations made
by the Committee with respect to any matter or provision contained in the Plan
shall be final, conclusive and binding upon the Company and upon all
participants, their heirs or legal representatives. Any rule or regulation
adopted by the Committee shall remain in full force and effect unless and until
altered, or repealed by the Committee.
13. DESIGNATION OF BENEFICIARY.
A participant shall file with the Chief Financial Officer of the Company a
written designation of a beneficiary who is to receive any Common Stock and/or
cash under the Plan. Such designation of beneficiary may be changed by the
participant at any time by written notice. Upon the death of a participant and
upon receipt by the Company of proof of the identity and existence of a
beneficiary validly designated by the participant under the Plan, the Company
shall deliver such Common Stock and/or cash to such beneficiary. In the event of
the death of a participant and upon receipt by the Company of proof of the
identity and existence of a beneficiary validly designated by the participant
under the Plan, the Company shall deliver such Common Stock and/or cash to such
beneficiary. In the event of the death of a participant and in the absence of a
beneficiary validly designated under the Plan who is living at the time of such
participant's death, the Company shall deliver such Common Stock and/or cash to
the executor or administrator of the estate of the participant. No beneficiary
shall, prior to the death of the participant by whom he or she has been
designated, acquire any interest in the Common Stock and/or cash credited to the
participant under the Plan.
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14. TRANSFERABILITY.
Neither payroll deductions credited to a participant's account nor any
rights with regard to the exercise of an option or to receive Common Stock under
the Plan may be assigned, transferred, pledged, or otherwise disposed of in any
way by the participant other than by will or the laws of descent and
distribution. Any such attempted assignment, transfer, pledge, or other
disposition shall be without effect.
15. USE OF FUNDS.
All payroll deductions received or held by the Company under this Plan may
be used by the Company for any corporate purpose, and the Company shall not be
obligated to segregate such payroll deductions.
16. EFFECT OF CHANGES OF COMMON STOCK.
If the Company shall subdivide or reclassify the Common Stock which has
been or may be optioned under this Plan, or shall declare thereon any dividend
payable in shares of such Common Stock, or shall take any other action of a
similar nature affecting such Common Stock, then the number and class of shares
of Common Stock which may thereafter be optioned (in the aggregate and to any
participant) shall be adjusted accordingly and in the case of each option
outstanding at the time of any such action, the number and class of shares which
may thereafter be purchased pursuant to such option and the option price per
share shall be adjusted to such extent as may be determined by the Committee,
following consultation with the Company's independent public accountants and
counsel, to be necessary to preserve the rights of the holder of such option.
17. AMENDMENT OR TERMINATION.
The Board may at any time terminate or amend the Plan. No such termination
shall affect options previously granted, nor may an amendment make any change in
any option theretofore granted which would adversely affect the rights of any
participant holding options under the Plan, provided, that in the event the Plan
is not approved by the stockholders of the Company pursuant to Paragraph 20, the
Plan may be terminated, and funds received or held by the Company under this
Plan returned to participants, without regard to any such rights.
18. NOTICES.
All notices or other communications by a participant to the Company under
or in connection with the Plan shall be deemed to have been duly given when
received by the Chief Financial Officer of the Company.
19. MERGER OR CONSOLIDATION.
If the Company shall at any time merge into or consolidate with another
corporation, the holder of each option then outstanding will thereafter be
entitled to receive at the next Offering Termination Date, upon the exercise of
such option and for each share as to which such option shall be exercised, the
securities or property which a holder of one share of the Common Stock was
entitled to upon and at the time of such merger or consolidation. In accordance
with this Paragraph and Paragraph 16, the Committee shall determine the kind and
amount of such securities or property which such holder of an option shall be
entitled to receive. A sale of all or substantially all of the assets of the
Company shall be deemed a merger or consolidation for the foregoing purposes.
20. APPROVAL OF STOCKHOLDERS.
The Plan was approved by the Board of Directors on October 9, 1997. The
Plan is subject to the approval of the stockholders of the Company at their next
annual meeting or at any special meeting of the stockholders for which one of
the purposes of such a special meeting shall be to act upon the Plan.
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21. GOVERNMENTAL AND OTHER REGULATIONS.
The Plan, and the grant and exercise of the rights to purchase shares
hereunder, and the Company's obligation to sell and deliver shares upon the
exercise of rights to purchase shares, shall be subject to all applicable
federal, state and foreign laws, rules and regulations, and to such approvals by
any regulatory or governmental agency as may, in the opinion of counsel for the
Company, be required. The Plan shall be governed by, and construed and enforced
in accordance with, the provisions of Sections 421, 423 and 424 of the Code and
the substantive laws of the Commonwealth of Massachusetts. In the event of any
inconsistency between such provisions of the Code and any such laws, said
provisions of the Code shall govern to the extent necessary to preserve the
favorable federal income tax treatment afforded employee stock purchase plans
under Section 423 of the Code.
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EXHIBIT C
CSP INC.
BY-LAW PROVISIONS WITH RESPECT TO THE PROPOSED CHANGE IN THE
ANNUAL MEETING DATE, AS PROPOSED TO BE AMENDED
Article II, Paragraph 1 in its entirety:
"The annual meeting of the stockholders shall be held at 10:00 a.m., local
time, on the second Tuesday of January in each year, if it be not a legal
holiday, and if it be a legal holiday, then at the same hour on the next
succeeding day not a legal holiday (the "Specified Annual Meeting Date").
Purposes for which an annual meeting is to be held, additional to those
prescribed by law, by the Articles of Organization and by these By-Laws, may be
specified by the President or the Directors. If such annual meeting is omitted
on the day herein provided therefor, a special meeting may be held in place
thereof, and any business transacted or elections held at such meeting shall
have the same effect as if transacted or held at the annual meeting. Such
special meeting shall be called in the same manner and as provided for special
stockholders' meetings."
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PROXY CARD
==========
PROXY CSP INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of CSP Inc. hereby appoints Alexander R. Lupinetti
and Samuel Ochlis, and each or either of them, proxies (with power of
substitution to each and to each substitute appointed pursuant to such power) of
the undersigned to vote all shares of stock of the Corporation held by the
undersigned or which the undersigned may be entitled to vote at the Special
Meeting in lieu of Annual Meeting of Stockholders of the Corporation to be held
on Thursday, January 8, 1998, and at any and all adjournments thereof, with all
powers the undersigned would possess if personally present, as indicated below
and on the reverse side hereon upon the matters set forth herein and more fully
described in the Notice and Proxy Statement for said Meeting and in their
discretion upon all other matters which may properly come before said Meeting.
The undersigned hereby revokes all proxies, if any, hitherto given by him to
others for said Meeting.
IF THIS PROXY IS PROPERLY EXECUTED AND RETURNED, THE SHARES REPRESENTED HEREBY
WILL BE VOTED. IF A CHOICE IS SPECIFIED ON THE REVERSE SIDE HEREOF BY THE
STOCKHOLDER WITH RESPECT TO A MATTER TO BE ACTED UPON, THE SHARES WILL BE VOTED
UPON SUCH MATTER IN ACCORDANCE WITH THE SPECIFICATION SO MADE. IN THE ABSENCE OF
ANY SPECIFICATION, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR ALL
LISTED NOMINEES FOR DIRECTOR AND FOR EACH OTHER MATTER LISTED ON THE REVERSE
SIDE HEREOF.
(Continued and to be signed on the other side)
<PAGE> 36
[X] Please mark your votes as in this example
FOR WITHHOLD
--- --------
ALL nominees, AUTHORITY
except as for all
marked to the nominees.
contrary below.
Nominees:
Item 1. Election of Class II Directors: [ ] [ ] John D. Ingram
J. David Lyons
(INSTRUCTIONS: To withhold authority
to vote for any individual
nominee(s), print the name(s) of
such nominee(s) in the space
provided below. To vote for or to
withhold authority for all nominees,
see above)
FOR AGAINST ABSTAIN
Item 2. Approval of the CSP Inc.
1997 Stock Option Plan [ ] [ ] [ ]
Item 3. Approval of the CSP Inc.
Employee Stock Purchase Plan [ ] [ ] [ ]
Item 4. Approval of Amendment to the
CSP Inc. Articles of Organization [ ] [ ] [ ]
as Described in the Proxy Statement
Item 5. Approval of Amendments to the
By-Laws of CSP Inc. as Described in [ ] [ ] [ ]
the Proxy Statement
Check here if you plan to attend the Annual Meeting. [ ]
SIGNATURE(S)__________________________________ DATE__________________
NOTE: Please date, sign exactly as name appears hereon and return promptly. If
the shares are registered in the names of two or more persons, both should
sign. Executors, administrators, trustees, guardians, attorneys and
corporate officers should add their titles.
