<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
[X] Definitive Proxy Statement RULE 14C-5(D)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Computer Network Technology Corporation
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
LOGO
COMPUTER NETWORK TECHNOLOGY CORPORATION
605 NORTH HIGHWAY 169, SUITE 800
MINNEAPOLIS, MINNESOTA 55441
(612) 797-6000
April 4, 1996
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of the Shareholders
of Computer Network Technology Corporation (the "Company") at the Marriott
City Center, 30 South Seventh Street, Minneapolis, Minnesota, on Friday, May
17, 1996, beginning at 10:00 a.m.
The Secretary's Notice of the Annual Meeting and the Proxy Statement that
appear on the following pages describe the matters scheduled to come before
the meeting. At the meeting, I will discuss the Company's performance in 1995
and report on current items of interest to our shareholders. In addition,
certain members of the Company's Board of Directors and officers of the
Company, as well as representatives of KPMG Peat Marwick LLP, the Company's
independent auditors, will be available to answer your questions.
I hope you will be able to attend the meeting in person and look forward to
seeing you. PLEASE MARK, DATE, AND SIGN THE ENCLOSED PROXY AND RETURN IT IN
THE ACCOMPANYING ENVELOPE AS QUICKLY AS POSSIBLE, EVEN IF YOU PLAN TO ATTEND
THE MEETING. If you attend the meeting you may withdraw any proxy previously
given and vote your shares in person.
On behalf of your Board of Directors and the Company's employees, thank you
for your support of and interest in the Company.
Sincerely,
LOGO
John A. Rollwagen
Chairman of the Board
<PAGE>
LOGO
COMPUTER NETWORK TECHNOLOGY CORPORATION
605 NORTH HIGHWAY 169, SUITE 800
MINNEAPOLIS, MINNESOTA 55441
(612)797-6000
-------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 17, 1996
-------------------------------------------------------------
TO OUR SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of
Computer Network Technology Corporation, a Minnesota corporation (the
"Company"), will be held on Friday, May 17, 1996 at the Marriott City Center,
30 South Seventh Street, Minneapolis, Minnesota, beginning at 10:00 a.m. for
the following purposes:
(1) To fix the number of directors at four and to elect four persons to the
Board of Directors to serve until the next Annual Meeting of the
Shareholders;
(2) To amend the 1992 Stock Award Plan to increase the number of shares
authorized for issuance thereunder from 3,250,000 to 4,350,000; to
provide for the automatic grant of certain stock options to nonemployee
directors upon initial election or appointment to the Executive
Committee of the Board and upon initial election as Chairman or Vice
Chairman of the Board; and to increase the maximum number of shares
subject to options that can be awarded to any single employee during
any calendar year to 750,000;
(3) To amend the 1992 Employee Stock Purchase Plan to increase the number
of shares authorized for issuance thereunder from 400,000 to 450,000
and to limit the number of shares that may be purchased thereunder to
5,000 per Participant for any annual Purchase Period;
(4) To ratify and approve the appointment of KPMG Peat Marwick LLP as
independent auditors for the year ending December 31, 1996; and
(5) To transact other business that may properly come before the meeting.
Shareholders of record on March 20, 1996 are the only persons entitled to
notice of and to vote at the meeting.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, AND
SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. IF
YOU LATER DESIRE TO REVOKE YOUR PROXY, YOU MAY DO SO AT ANY TIME BEFORE IT IS
EXERCISED.
BY ORDER OF THE BOARD OF DIRECTORS
LOGO
April 4, 1996 Lewis Shender,
Minneapolis, Minnesota Secretary
<PAGE>
LOGO
COMPUTER NETWORK TECHNOLOGY CORPORATION
605 NORTH HIGHWAY 169, SUITE 800
MINNEAPOLIS, MINNESOTA 55441
(612) 797-6000
----------------------
PROXY STATEMENT
----------------------
ANNUAL MEETING OF SHAREHOLDERS
MAY 17, 1996
GENERAL
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors (the "Board") of Computer Network Technology Corporation
(the "Company") of proxies to be voted at the Annual Meeting of the
Shareholders of the Company (the "Annual Meeting") to be held on Friday, May
17, 1996 at the Marriott City Center, 30 South Seventh Street, Minneapolis,
Minnesota, beginning at 10:00 a.m., and at any adjournments thereof. This
Proxy Statement and the accompanying proxy card are furnished in connection
with the proxy solicitation and are being mailed to shareholders beginning
approximately April 4, 1996. Shares represented by properly executed and
returned proxies will, unless otherwise specified on the proxy card, be voted
FOR Items 1, 2, 3 and 4 as set forth on the proxy card and be voted in the
discretion of the proxy holders as to any other matter that may properly come
before the meeting. A shareholder voting through a proxy who abstains with
respect to a certain proposal is considered to be present and entitled to vote
on such proposal at the meeting, and is in effect a negative vote, but a
shareholder (including a broker) who does not give authority to a proxy holder
to vote, or withholds authority to vote, on a certain proposal shall not be
considered present and entitled to vote on such proposal.
The proxy may be revoked at any time prior to its exercise by providing
written notice of revocation or another proxy bearing a later date to the
Secretary of the Company at the address set forth above.
The Company will pay expenses incurred in connection with the solicitation
of proxies. Proxies are being solicited by mail and may also be solicited
personally, by telephone, by electronic mail, or by facsimile by directors,
officers, and other employees of the Company without additional compensation
to them. The Company has requested brokerage houses, nominees, custodians, and
fiduciaries to forward solicitation material to the beneficial owners of
Common Stock of the Company and will reimburse such persons for their
expenses.
Shareholders of record on March 20, 1996 are the only persons entitled to
vote at the Annual Meeting. As of that date, there were issued and outstanding
23,124,610 shares of Common Stock, the only authorized and issued voting
security of the Company. Each shareholder is entitled to one vote for each
share held.
<PAGE>
ELECTION OF DIRECTORS
(ITEM 1 ON PROXY CARD)
The By-Laws of the Company provide that the number of directors that
constitute the Board shall be fixed from time to time by the shareholders of
the Company and that directors shall be elected at the Annual Meeting and
shall hold office until the next Annual Meeting of shareholders and until
their successors are elected and qualified. The Board recommends that the
number of directors constituting the Board be set at four and nominates the
four persons named below for election as directors.
The accompanying proxy will be voted in favor of the election of the
following nominees as directors, each of whom is currently a director, unless
the shareholder giving the proxy indicates to the contrary on the proxy. All
nominees have agreed to stand for election at the Annual Meeting. If any
nominee is not available as a candidate for director at the time of the Annual
Meeting, the proxies will be voted for another nominee designated by the Board
to fill such vacancy, unless the shareholder giving the proxy indicates to the
contrary on the proxy.
The affirmative vote of the holders of a majority of the voting power of the
outstanding shares of Common Stock of the Company entitled to vote on the
election of directors and present, in person or by proxy, at the Annual
Meeting is required for election to the Board of each of the four nominees
named below.
NOMINEES TO THE BOARD
BRUCE T. COLEMAN, 56 years of age, has been Acting President and Chief
Executive Officer of the Company and a director since December 1995. Since
September 1991, Mr. Coleman has served as the Chief Executive Officer of El
Salto Advisors, a consulting firm that provides advice and interim CEO
services to companies. From 1988 to 1991, Mr. Coleman managed Information
Science, Inc., a human resource software and service company. Mr. Coleman was
the President, Chief Executive Officer, and a director of Boole and Babbage,
Inc., which develops and markets software products, from 1985 to 1988. Mr.
Coleman is also a director of Printronix, Inc.
ERWIN A. KELEN, 60 years of age, has been a director since June 1988 and
Vice Chairman of the Board since December 1995. Mr. Kelen is a private
investor. From 1984 to 1990, Mr. Kelen was President and Chief Executive
Officer of DataMyte Corporation, a wholly owned subsidiary of Allen Bradley
Co. Mr. Kelen is also a director of Printronix, Inc., Insignia Systems, Inc.,
and CyberOptics Corporation.
LAWRENCE PERLMAN, 57 years of age, has been a director since June 1988. From
January 1990 to November 1992, Mr. Perlman was President and Chief Executive
Officer of Ceridian Corporation, formerly Control Data Corporation ("CDC"),
and has been Chairman and Chief Executive Officer since November 1992. Mr.
Perlman also serves as a director of Ceridian Corporation, Bio-Vascular, Inc.,
Seagate Technology, Inc., and Valspar Corporation. He is a graduate of
Carleton College and Harvard Law School.
JOHN A. ROLLWAGEN, 55 years of age, has been a director since June 1993 and
Chairman of the Board since December 1995. Mr. Rollwagen is a private
investor. From January 1993 to May 1993, Mr. Rollwagen served as U.S.
Department of Commerce Deputy Secretary-Designate. Mr. Rollwagen served in
executive capacities with Cray Research, Inc. ("Cray") beginning in 1975, and,
from 1981 to January 1993, Mr. Rollwagen served as Chairman and Chief Executive
Officer of Cray. Mr. Rollwagen serves as a director of Minnesota Brewing Co. and
BroadBand Technologies, Inc. He is a graduate of The Massachusetts Institute of
Technology and Harvard Graduate School of Business Administration.
2
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD
The Board held seven meetings during 1995 and otherwise conducted business
by written resolutions signed by all directors. Each director attended at
least 75% of the total number of meetings of the Board plus the total number
of meetings of all committees on which he served.
The Audit Committee recommends to the Board the selection of independent
auditors, reviews the activities and reports of the independent auditors, and
reviews the internal accounting controls of the Company. The Audit Committee
is comprised of Messrs. Kelen, Perlman, and Rollwagen. The Audit Committee
held two meetings in 1995.
The Compensation Committee recommends to the Board the compensation for the
President and the other executive officers, grants awards under and
administers the 1992 Stock Award Plan (the "Stock Award Plan"), and
administers the 1992 Employee Stock Purchase Plan (the "Stock Purchase Plan").
The Compensation Committee is composed of Messrs. Kelen and Perlman; Mr.
Rollwagen was a member of the committee until December 12, 1995. The
Compensation Committee held six meetings in 1995 and otherwise conducted
business by written resolutions signed by the committee members.
The Board established the Executive Committee in December 1995. The
Executive Committee possesses the power and authority to act on behalf of the
Board between meetings of the Board. The Executive Committee is comprised of
Messrs. Kelen, Perlman and Rollwagen. The Executive Committee held one meeting
in 1995.
The Board does not have a nominating committee.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company or Chairman of the Board or
Vice Chairman of the Board are paid a retainer of $2,500 per quarter, plus
reimbursement of out-of-pocket expenses incurred on behalf of the Company.
During 1995, the Company paid Mr. Perlman cash compensation of $10,000.
Messrs. Rollwagen and Kelen received $2,500 per calendar quarter as
nonemployee directors until they were elected as Chairman and Vice Chairman,
respectively. In consideration of his service as Chairman, Mr. Rollwagen
receives $12,000 per calendar month. Mr. Kelen receives $8,000 per calendar
month in consideration of his service as Vice Chairman. Because their
elections as Chairman and Vice Chairman occurred on December 12, 1995, Messrs.
Rollwagen's and Kelen's quarterly payments and payments in consideration of
their services in such offices were prorated to such date. During 1995, Mr.
Rollwagen earned $17,350 and Mr. Kelen earned $14,800 in cash compensation.
Each nonemployee director also receives automatic annual grants of options to
purchase shares of Common Stock under the Stock Award Plan. In 1995, Messrs.
Kelen, Perlman, and Rollwagen each received automatic annual option grants to
purchase 20,000 shares of Common Stock under the Stock Award Plan. Mr.
Rollwagen also received a grant of a nonqualified option to purchase 100,000
shares of Common Stock in consideration of his agreement to provide services
to the Company as its Chairman. Mr. Coleman is not considered a nonemployee
director and, consequently, does not receive a quarterly retainer or automatic
annual grants of options as described in this paragraph.
In 1995, the Board adopted an amendment to the 1992 Stock Award Plan,
subject to shareholder approval, providing that each nonemployee director who
is elected or appointed to the Executive Committee of the Board shall receive
a one-time grant of an option to purchase 33,333 shares of Common Stock. In
addition, any such director elected or appointed to the Executive Committee
and elected to serve as Chairman or Vice Chairman shall receive, respectively,
an additional one-time grant of a stock option to purchase 66,667 and 33,333
shares of Common Stock. Under these provisions, Messrs. Kelen and Perlman
received, respectively, additional options to purchase 66,666 and 33,333
shares of Common Stock in 1995; however, the grant of these options is subject
to shareholder approval of the proposed amendments to the Stock Award Plan at
the Annual Meeting. See "PROPOSAL TO AMEND 1992 STOCK AWARD PLAN," below. Mr.
Rollwagen did not receive any options to purchase shares of Common Stock under
these provisions because by the terms of the amendment the grant of the option
to purchase 100,000 shares of Common Stock referred to in the prior paragraph
made him ineligible to receive a grant under the Stock Award Plan upon his
election as Chairman.
3
<PAGE>
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 20, 1996, certain information
with respect to all shareholders known to the Company to have been beneficial
owners of more than 5% of its Common Stock, each director, each executive
officer or former executive officer named in the Compensation Table on page 8,
and all directors and executive officers of the Company as a group. Unless
otherwise indicated, each person named in the table has sole voting and
investment power as to the Common Stock shown.
<TABLE>
<CAPTION>
PERCENT OF
AMOUNT AND NATURE OF COMMON STOCK
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OUTSTANDING
------------------------ -------------------- ------------
<S> <C> <C>
Kopp Investment Advisors, Inc./(1)/ 2,217,353 9.59%
6600 France Avenue South, Suite 672
Edina, MN 55435
Bruce T. Coleman/(2)/ 55,000 *
C. McKenzie Lewis III/(3)/ 651,897 2.81%
Erwin A. Kelen/(4)/ 295,685 1.27%
John A. Rollwagen/(4)/ 130,840 *
Lawrence Perlman/(4)/ 97,181 *
Peter Dixon/(5)/ 54,124 *
John R. Brintnall/(6)/ 55,177 *
Julie C. Quintal/(7)/ 27,542 *
Eugene D. Misukanis/(8)/ 287,400 1.24%
Herbert L. Rush III/(9)/ 226,543 *
All executive officers and directors as a group 777,026 3.29%
(13 persons)/(3)/ /(8)/ /(9)/ /(10)/ /(11)/
</TABLE>
- ------------------
* Represents beneficial ownership of less than one percent of the outstanding
Common Stock.
(1) Kopp Investment Advisors, Inc. ("Kopp"), a Minnesota investment advisor,
has shared investment power and no voting power with respect to all of
such shares. The information relating to the share ownership of Kopp has
been derived from the Schedule 13G dated February 5, 1996 filed by Kopp
with the Securities and Exchange Commission. The number of shares owned by
Kopp is stated as of December 31, 1995.
(2) Includes 40,000 shares that may be acquired upon exercise of nonqualified
stock options. These options are currently exercisable or are exercisable
within 60 days.
(3) Mr. Lewis' employment with the Company terminated in February 1996. These
shares are not included in the "All executive officers and directors as a
group" total. Includes 38,500 shares that may be acquired upon the
exercise of nonqualified stock options. These options are currently
exercisable or are exercisable within 60 days. Includes 16,300 shares
owned by Mr. Lewis' wife, as to all of which Mr. Lewis disclaims
beneficial ownership.
(4) Includes 107,775, 93,885 and 130,840 shares that may be acquired upon the
exercise of nonqualified stock options held by Messrs. Kelen, Perlman, and
Rollwagen, respectively. These options are currently exercisable or are
exercisable within 60 days.
(5) Includes 50,624 shares that may be acquired upon exercise of incentive and
nonqualified stock options. These options are currently exercisable or are
exercisable within 60 days.
(6) Includes 24,373 shares that may be acquired upon exercise of incentive
stock options. These options are currently exercisable or exercisable
within 60 days.
(7) Includes 26,873 shares that may be acquired upon exercise of incentive and
nonqualified stock options. These options are currently exercisable or are
exercisable within 60 days.
4
<PAGE>
(8) Mr. Misukanis' employment with the Company terminated in December 1995.
These shares are not included in the "All executive officers and directors
as a group" total. In connection with a severance agreement entered into
with Mr. Misukanis, the Company has the obligation to repurchase from Mr.
Misukanis up to 280,000 shares on the last trading day of calendar year
1997 for a price of $8.50 per share. The obligation will expire if, for
any five consecutive trading days prior to the last trading day of 1997,
the closing market price for the Company's Common Stock equals or exceeds
$8.50 per share.
(9) Mr. Rush's employment with the Company terminated in October 1995. These
shares are not included in the "All executive officers and directors as a
group" total.
(10) Includes 4,628 shares held by Connecticut General Trust Company as
trustee of the Company's 401(k) Plan for the benefit of two officers.
(11) Includes 506,119 shares that may be acquired upon exercise of incentive
and nonqualified stock options. These options, including those discussed
above, are currently exercisable or exercisable within 60 days. Includes
only current officers and directors.
BENEFICIAL OWNERSHIP REPORTING
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who own more than 10% of the
Company's Common Stock, to file periodic reports of ownership and changes in
ownership with the Securities and Exchange Commission. Based solely on its
review of the copies of such reports received by it and of written
representations from certain reporting persons regarding filings required to
be made by such persons, the Company believes that all persons required under
Section 16(a) to file beneficial ownership reports with respect to the
Company's Common Stock during 1995 or prior years complied with all such
reporting requirements, except for the late filing of the form required upon
the election of Mr. Coleman as Acting President and Chief Executive Officer
and director.
REPORT ON EXECUTIVE COMPENSATION
GENERAL
The Compensation Committee of the Board is composed of the independent,
outside directors whose names appear following this report (Mr. Rollwagen
resigned from the committee on December 12, 1995). The Compensation
Committee's responsibilities include recommending to the Board the amount and
type of compensation for the executive officers of the Company, including the
President, and the administration of the Company's stock-based benefit plans.
The Compensation Committee recommended to the Board, and the Board approved,
executive compensation for 1995.
It is the philosophy of the Compensation Committee that the total
compensation of the Company's executive officers should be based, in large
part, on the financial performance of the Company. Compensation for executive
officers includes three major elements: base salaries, annual bonuses under
the Company's Success Sharing Bonus Plan, and options to acquire Common Stock.
In addition, executive officers are entitled to participate in the Company's
benefit plans, such as the 401(k) Salary Savings Plan, the 1992 Employee Stock
Purchase Plan, and medical, dental, life, and disability insurance plans, on
the same terms as other employees.
SALARY
For 1995, base salaries were recommended to the Board by C. McKenzie Lewis
III, the then President of the Company, after consultation with the Company's
Director of Human Resources, who determined a total compensation range for
each executive officer's position based on commercially available compensation
surveys, both national and regional. These compensation surveys, which
commonly show groupings based on company revenue, location, and industry,
generally provide information concerning average base salary, average bonus,
and average total compensation for comparable executive positions. Using these
compensation surveys and targeted total compensation ranges, base salaries of
executive officers are generally set so that if the Company
5
<PAGE>
achieves superior financial results each executive officer's total
compensation would be near the 75th percentile of the total compensation range
applicable to such executive officer. Mr. Lewis' base salary in 1995 was set
below the average base salary of the market data because the Compensation
Committee determined that a larger percentage of his total compensation should
be directly related to overall corporate financial performance than for the
other executive officers. Consequently, the percentage of Mr. Lewis' salary
multiplied by the CNT Performance Factor (as described below) was set higher
than the percentage for the other executive officers.
In connection with the management reorganization that occurred in December
1995, Mr. Lewis resigned as President and Chief Executive Officer of the
Company and accepted appointment as the Company's Executive Vice President of
Marketing and Engineering. Mr. Lewis resigned from the Company in February
1996. Bruce T. Coleman was appointed Acting President and Chief Executive
Officer on December 12, 1995 under an Independent Contractor Agreement dated
such date. The terms of such Agreement are discussed on page 10 under
"Employment and Severance Agreements." Mr. Coleman's compensation was the
result of arms-length negotiation between the Company and Mr. Coleman.
SUCCESS SHARING BONUS PLAN
All employees of the Company (other than salespersons and systems
consultants, who are eligible for other incentive compensation programs;
Kathleen E. Brush, the Company's Acting Vice President of Marketing and an
executive officer since March 1996; and Mr. Coleman) participate in the
Company's Success Sharing Bonus Plan, which provides a formula for cash
bonuses. The Committee expects that Mr. Coleman's and Ms. Brush's successors
will participate in the Success Sharing Bonus Plan. In 1995, executive
officers (other than the Vice President of Sales and Mr. Coleman), and certain
managers and other key employees, participated in the Leadership Program of
the Success Sharing Bonus Plan. Bonuses under the Success Sharing Bonus Plan
are derived from a table established by the Board annually. The horizontal and
vertical axes of this table consist of defined levels of revenue growth over
the same period in the preceding year and pre-tax profit as a percentage of
revenue (pre-tax profit is determined after deducting the cost of the success
sharing bonuses), respectively. Each participant in the Success Sharing Bonus
Plan receives a bonus determined by multiplying a percentage of his or her
eligible compensation (primarily salary) by the CNT Performance Factor
("CPF"), which is determined using the table discussed above. For participants
in the Success Sharing Leadership Program, bonuses are paid annually and are
based on annual financial performance. Other participants in the Success
Sharing Bonus Plan are paid bonuses quarterly based on quarterly results.
The percentage of an executive officer's salary subject to multiplication by
the CPF in 1995 was determined by the Board in advance by taking into
consideration the executive officer's expected contribution to the Company's
overall financial performance. The Board and the Compensation Committee
believe that the Success Sharing Leadership Program properly encourages
executive officers to focus on annual Company-wide goals of both revenue
growth and profitability and rewards them in a manner that is consistent with
the annual performance of the Company as a whole. The Company did not
experience revenue growth in 1995. As a result, none of the executive officers
received a success sharing bonus and Mr. Lewis and other executive officers
were compensated below the midpoint of their total compensation ranges in
1995. In general, the Board and the Compensation Committee believe that, when
the Company achieves disappointing operating financial results, as it did in
1995, the executive officers should be compensated below the midpoint of the
total compensation ranges used in connection with the determination of their
respective total compensation. As a point of comparison, Mr. Lewis' success
sharing bonus constituted approximately 23% of his base salary in 1994, when
the Company achieved more favorable financial results.
6
<PAGE>
In early 1996, the Compensation Committee and the Board approved a plan to
provide employees, including executive officers, with the opportunity to
recapture all or a portion of their targeted 1995 success sharing bonuses if
the Company achieves certain aggressive financial targets in excess of its
internal business plans in 1996.
In 1995, the Vice President of Sales did not participate in the Success
Sharing Leadership Program. The Board and the Compensation Committee
determined that the Vice President of Sales should be compensated based on
product revenue and other corporate goals as measured against targets
established by the President. For 1996, the Vice President of Sales and the
Vice President of International, in addition to their base salaries, will
participate in the Success Sharing Leadership Program and will be eligible to
receive certain additional incentive compensation based on product revenue
generated by their respective areas.
STOCK OPTIONS
The third element of executive compensation has been the granting of stock
options, which are designed to recruit, retain, and motivate executive
officers and certain other employees. For executive officers who joined the
Company in its early stages, larger grants of stock options permitted the
Company to attract these executive officers and compensate them for assuming
the career and income risks inherent in joining a small, growth-oriented
company. Stock options have been granted at the Common Stock's fair market
value on the date of grant. The timing and amount of stock options have been
determined, in the discretion of the Compensation Committee, based on the
anticipated contribution of the particular employee and the importance of his
or her position in the Company. In determining the number of options to be
granted to executive officers and other employees, the Compensation Committee
takes into account the number of options then held by such executive officers
or employees. The criteria used to determine stock option grants to the
President are the same criteria applied to other executive officers. Under the
Company's 1983 Incentive Stock Option Plan and 1986 Nonqualified Stock Option
Plan, grants were made by the Board acting as the Stock Option Committee. In
1992, these plans were terminated, except that previously granted options
remained outstanding, and the Company adopted the 1992 Stock Award Plan, which
was initially administered by the Stock Plans Committee and is now
administered by the Compensation Committee, each of which has been composed
solely of independent, outside directors. The tables on page 9 set forth
certain information about stock options that have been granted to and
exercised by certain executive officers.
INTERNAL REVENUE CODE SECTION 162(M)
Internal Revenue Code Section 162(m) limits the deductibility of
compensation over $1 million paid by a company to an executive officer. Other
than limiting the maximum number of shares that may be awarded to any employee
or other participant under the Stock Award Plan in any calendar year to
250,000 shares (750,00 shares under the proposed amendment to the Stock Award
Plan), the Compensation Committee currently does not have a policy with
respect to Section 162(m) because it is unlikely that such limit will apply to
compensation paid by the Company to any of the Company's executive officers
for at least the current year.
ERWIN A. KELEN
LAWRENCE PERLMAN
JOHN A. ROLLWAGEN*
Members of the Compensation Committee
* Mr. Rollwagen resigned from the Compensation Committee upon his election as
Chairman of the Board on December 12, 1995.
7
<PAGE>
SUMMARY COMPENSATION TABLE
The following table shows, for the Company's Chief Executive Officer, the
Company's former Chief Executive Officer who served in that capacity during a
portion of fiscal 1995, each of the three other most highly compensated
executive officers of the Company at the end of fiscal 1995, and two
additional former executive officers who served during a portion of fiscal
1995 (collectively, the "Named Officers"), information concerning compensation
earned for services in all capacities during the fiscal year ended December
31, 1995, as well as compensation earned by each such person for the two
previous fiscal years (if the person was Chief Executive Officer or another
executive officer during any part of such fiscal year):
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- ------------
SHARES
ALL OTHER UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($) OPTIONS (#)
- --------------------------- ---- ---------- --------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Bruce T. Coleman 1995 $ 60,000 -- -- 30,000
Acting President and 1994 -- -- -- --
Chief Executive Officer 1993 -- -- -- --
C. McKenzie Lewis III/(1)/ 1995 $204,000 -- $ 624,000 35,500
Executive Vice President of
Marketing and Engineering 1994 $185,250 $ 42,422 -- 22,000
1993 $165,000 $153,853 -- 55,000
Peter Dixon/(2)/ 1995 $186,970 -- -- 18,750
Vice President of International 1994 $134,593 $ 17,175 -- 11,250
1993 $116,000 $ 64,898 -- 30,000
John R. Brintnall 1995 $111,500 -- -- 15,000
Vice President of Finance, 1994 $102,862 $ 11,778 -- 8,750
Chief Financial Officer,
and Treasurer 1993 $100,000 $ 46,622 -- 20,000
Julie C. Quintal/(3)/ 1995 $102,458 -- -- 15,000
Vice President of Customer Support 1994 $ 88,633 $ 10,148 -- 8,750
1993 $ 66,420 $ 30,967 -- 50,000
Eugene D. Misukanis/(4)/ 1995 $149,305 -- $1,508,000 25,375
Vice President of Engineering 1994 $131,625 $ 26,374 -- 15,250
1993 $122,000 $ 85,318 -- 140,000
Herbert L. Rush III/(5)/ 1995 $102,486 -- $ 10,000 20,000
Vice President of Engineering 1994 $ 84,129 $ 11,222 -- 66,500
1993 -- -- -- --
</TABLE>
- ------------------
(1) Mr. Lewis' employment with the Company terminated in February 1996. The
amount attributed to "All other compensation" includes severance payments,
insurance, outplacement, and office costs accrued in 1995 that will be
paid for the benefit of Mr. Lewis in connection with his termination.
(2) In 1995, Mr. Dixon's base salary was $132,000. The remainder of the amount
shown for 1995 includes commissions earned.
(3) In 1994, Ms. Quintal's salary includes $18,831 for short term disability.
(4) Mr. Misukanis' employment with the Company terminated in December 1995 and
the amount attributed to "All other compensation" includes $388,000 for
severance payments, insurance, outplacement, and office costs accrued in
1995 that will be paid for the benefit of Mr. Misukanis in connection with
his termination. In connection with the severance agreement entered into
with Mr. Misukanis, the Company has the obligation to repurchase from Mr.
Misukanis up to 280,000 shares of Common Stock on the last trading day of
calendar year 1997 for a price of $8.50 per share. The obligation will
expire if, for any five consecutive trading days prior to the last trading
day of 1997, the closing market price for the Common Stock equals or
exceeds $8.50 per share. During 1995, the Company recorded severance
expense relating to this obligation in the amount of $1,120,000.
(5) Mr. Rush's employment with the Company terminated in October 1995 and the
amount attributed to "All other compensation" includes severance payments
made to Mr. Rush in connection with his termination.
8
<PAGE>
OPTION TABLES
The following tables summarize stock option grants and exercises during 1995
to or by the Named Officers and certain other information relative to such
options.
OPTION GRANTS IN 1995
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
- ------------------------------------------------------------------------------------------ ANNUAL RATES OF STOCK
PERCENT OF TOTAL PRICE APPRECIATION FOR
NUMBER OF SHARES OPTIONS GRANTED OPTION TERM /(3)/
UNDERLYING OPTIONS TO EMPLOYEES IN EXERCISE EXPIRATION ------------------------
NAME GRANTED/(1)/ FISCAL YEAR PRICE/(2)/ DATE 5% 10%
- --------------------- ------------------ ---------------- ------------ ----------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Bruce T. Coleman 30,000 2.9% $ 6.13 December 11, 2005 $ 115,763 $ 292,163
C. McKenzie Lewis III 13,500 1.3% $11.13 July 19, 2005 $ 94,618 $ 238,798
11,000 1.1% $ 8.88 April 13, 2005 $ 61,504 $ 155,224
11,000 1.1% $ 6.44 January 30, 2005 $ 44,612 $ 112,592
Peter Dixon 7,500 0.7% $11.13 July 19, 2005 $ 52,566 $ 132,666
5,625 0.5% $ 8.88 April 13, 2005 $ 31,451 $ 79,376
5,625 0.5% $ 6.44 January 30, 2005 $ 22,813 $ 57,575
John R. Brintnall 6,250 0.6% $11.13 July 19, 2005 $ 43,805 $ 110,555
4,375 0.4% $ 8.88 April 13, 2005 $ 24,462 $ 61,737
4,375 0.4% $ 6.44 January 30, 2005 $ 17,743 $ 44,781
Julie C. Quintal 6,250 0.6% $11.13 July 19, 2005 $ 43,805 $ 110,555
4,375 0.4% $ 8.88 April 13, 2005 $ 24,462 $ 61,737
4,375 0.4% $ 6.44 January 30, 2005 $ 17,743 $ 44,781
Eugene D. Misukanis 10,125 1.0% $11.13 July 19, 2005 $ 70,964 $ 179,099
7,625 0.7% $ 8.88 April 13, 2005 $ 42,633 $ 107,598
7,625 0.7% $ 6.44 January 30, 2005 $ 30,924 $ 78,047
Herbert L. Rush III 7,500 0.7% $11.13 July 19, 2005 $ 52,566 $ 132,666
6,250 0.6% $ 8.88 April 13, 2005 $ 34,945 $ 88,195
6,250 0.6% $ 6.44 January 30, 2005 $ 25,348 $ 63,973
</TABLE>
- ------------------
(1) Subject to acceleration at the discretion of the Compensation Committee or
upon the death or disability of the optionee, each option becomes
cummulatively exercisable with respect to 25% of the shares covered on
each of the first four anniversaries of the grant date.
(2) Fair market value per share on the date of grant, in accordance with the
1992 Stock Award Plan.
(3) The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future Common Stock price.
AGGREGATED OPTION EXERCISES IN 1995 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR- IN-THE-MONEY OPTIONS
SHARES END (#) AT FISCAL YEAR-END/(2)/
ACQUIRED ON VALUE ------------------------- -------------------------
EXERCISE (#) REALIZED/(1)/ EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
------------ --------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Bruce T. Coleman -- -- 5,000 / 25,000 $ 0 / $0
C. McKenzie Lewis III -- -- 213,000 / 79,500 $180,000 / $0
Peter Dixon 10,000 $ 60,650 40,312 / 49,688 $ 11,250 / $3,750
John R. Brintnall 14,000 $126,875 19,687 / 34,063 $ 3,750 / $1,250
Julie C. Quintal 15,000 $ 99,300 12,187 / 46,563 $ 0 / $0
Eugene D. Misukanis 70,000 $367,500 - / - $ 0 / $0
Herbert L. Rush III 36,000 $293,850 - / - $ 0 / $0
</TABLE>
- ------------------
(1) Market value of underlying securities at date of exercise minus the
exercise price.
(2) Market value of underlying securities at year-end ( $4.50 per share) minus
the exercise price.
9
<PAGE>
EMPLOYMENT AGREEMENTS
Under an Independent Contractor Agreement dated December 12, 1995, the
Company has engaged Mr. Coleman as Acting President and Chief Executive
Officer. In connection with such services, Mr. Coleman was paid $60,000 in
December 1995 and will receive a monthly fee of $20,000 commencing in March
1996; if Mr. Coleman's engagement with the Company extends after June 11,
1996, the appropriate fee shall be agreed upon mutually by Mr. Coleman and the
Company. The Independent Contractor Agreement contains certain restrictive
covenants, including a prohibition on the use of proprietary information and a
restriction on recruiting or hiring any employee of the Company for a period
of one year after termination of the Independent Contractor Agreement. Either
party may terminate the Independent Contractor Agreement at any time. It is
the intention of the parties that the Independent Contractor Agreement and Mr.
Coleman's engagement with the Company will terminate when the Company hires a
permanent chief executive officer.
The Company and Mr. Lewis entered into a revised employment agreement as of
December 29, 1995 (the "Lewis Employment Agreement") in connection with his
resignation as President and Chief Executive Officer and appointment as
Executive Vice President of Marketing and Engineering. Mr. Lewis resigned from
the Company in February 1996. Under the terms of the Lewis Employment
Agreement, Mr. Lewis remains entitled to the following: (i) a continuation of
his salary ($204,000 per year) for a period of two years following such
termination; (ii) to continue to participate in the Company's Success Sharing
Bonus program for 1996; (iii) the continued vesting, for a period of two years
thereafter, of certain stock options held by Mr. Lewis on the date of his
termination, as if he had remained an employee of the Company during such
period; (iv) to continue to receive certain medical, life, and dental
insurance coverage for two years following such termination; and (v) to
certain outplacement services and office and secretarial support. Under the
Lewis Employment Agreement, Mr. Lewis has agreed not to compete with the
Company until December 30, 1997.
In connection with his termination of employment, the Company and Mr.
Misukanis entered into a Severance Agreement dated December 11, 1995. Under
the Severance Agreement, the Company has agreed to: (i) pay to Mr. Misukanis
$300,000 in 48 equal monthly installments for the two-year period commencing
January 1996; (ii) continue medical, life, and dental insurance for Mr.
Misukanis during 1996; and (iii) provide certain outplacement services and,
for a period of two years, certain office and secretarial support to Mr.
Misukanis. Under the Severance Agreement, Mr. Misukanis forfeited as of
December 11, 1995 all unexercised options held by him. The Severance Agreement
also contains certain restrictive covenants, including a prohibition on the
use of proprietary information and a restriction on Mr. Misukanis' ability to
engage in activities in competition with the Company until December 12, 1997.
Under the Severance Agreement, the Company is obligated to repurchase from Mr.
Misukanis up to 280,000 shares of Common Stock held by him on the last trading
day of 1997 for a price of $8.50 per share. Such obligation will expire if,
for any five consecutive trading days prior to the last trading day of 1997,
the closing market price for the Company's Common Stock equals or exceeds
$8.50 per share.
The Company also has entered into employment agreements with the other Named
Officers, among other employees.
10
<PAGE>
COMPARATIVE STOCK PRICE PERFORMANCE
The graph below compares the cumulative total shareholder return on the
Common Stock of the Company ("CNT Common Stock") for the last five fiscal
years with the cumulative total return on The Nasdaq Stock Market (U.S.
Companies) Index ("The Nasdaq Total Return Index") and the Computer
Manufacturers Nasdaq Industry Category Index ("The Nasdaq Computer
Manufacturers Index") for the same periods as compiled by the Center for
Research in Security Prices of the University of Chicago Graduate School of
Business (assuming the investment of $100 in CNT Common Stock, The Nasdaq
Total Return Index, and The Nasdaq Computer Manufacturers Index on December
31, 1990, and reinvestment of all dividends). The Nasdaq Computer
Manufacturers Index is comprised of all companies listed on The Nasdaq Stock
Market with SIC Code No. 357. The Company will promptly make available a list
of the companies comprising the Nasdaq Computer Manufacturers Index on the
request of a shareholder in writing to the Secretary of the Company at the
address set forth on the first page of this Proxy Statement.
[GRAPH APPEARS HERE]
--------------------------------------------------------
<TABLE>
<CAPTION>
12/31/90 12/31/91 12/31/92 12/31/93 12/30/94 12/29/95
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CNT Common Stock 100.0 200.0 231.6 452.6 286.8 189.5
- --------------------------------------------------------------------------
The Nasdaq Total 100.0 160.6 186.9 214.5 209.7 296.3
Return Index
- --------------------------------------------------------------------------
The Nasdaq Computer 100.0 139.9 188.1 178.2 195.7 308.2
Manufacturers Index
</TABLE>
- -------------------------------------------------------------------------------
11
<PAGE>
PROPOSAL TO AMEND THE 1992 STOCK AWARD PLAN
(ITEM 2 ON PROXY CARD)
AMENDMENT OF STOCK AWARD PLAN
The 1992 Stock Award Plan (the "Stock Award Plan") was adopted by the Board
and approved by the shareholders in 1992 and 650,000 shares of Common Stock
were initially reserved for issuance under the Stock Award Plan at the 1992
Annual Meeting of Shareholders. In 1993, the Board adopted and the
shareholders approved an amendment to the Stock Award Plan increasing the
number of shares reserved for issuance thereunder to 1,050,000 shares. The
Board adopted and the shareholders approved a further amendment to the Stock
Award Plan in 1994, increasing the number of shares reserved for issuance
thereunder to 3,250,000. As of March 15, 1996, options to purchase 2,800,436
shares of Common Stock have been granted under the Stock Award Plan (net of
cancellations), and 449,564 shares (exclusive of the additional 1,100,000
shares subject to shareholder approval at the meeting) are available for
future grants.
To enable the Company to continue to grant incentive stock option awards and
other stock and stock-based compensation awards and to use such awards in
relation to a planned increase in the number of employees of the Company, the
Board has approved an amendment to the Stock Award Plan to further increase
the number of shares reserved for issuance thereunder by 1,100,000, thereby
increasing the total number of shares reserved thereunder to 4,350,000,
subject to shareholder approval. In addition, to enable the Company to use
stock option grants to compensate nonemployee directors for the management
responsibilities and time commitment entailed by service on the Executive
Committee of the Board (the "Executive Committee"), the Board has approved an
amendment to the Stock Award Plan, subject to shareholder approval, providing
for automatic option grants to nonemployee directors when initially elected or
appointed to the Executive Committee and upon initial election as Chairman or
Vice Chairman of the Board. The Board has also approved an amendment to the
Stock Award Plan, subject to shareholder approval, to increase the maximum
number of shares subject to options that can be awarded to any single employee
during any calendar year to 750,000. The shareholders are being asked to
approve these amendments to the Stock Award Plan at the Annual Meeting.
PURPOSE
The purpose of the Stock Award Plan is to recruit and retain key employees
and others and to motivate them to produce a superior return to the Company's
shareholders by offering an opportunity to realize stock appreciation,
facilitating stock ownership, and rewarding a high level of corporate
financial performance.
ADMINISTRATION
The Stock Award Plan is administered by the Compensation Committee (the
"Committee"), a committee of the Board composed of two or more directors who
are "disinterested persons," as that term is defined in Rule 16b-3(c)
promulgated under the Securities Exchange Act of 1934, as amended. The
Committee has the authority, subject to the terms of the Stock Award Plan (in
particular with respect to nonemployee directors as described below), to adopt
and revise rules relating to the Stock Award Plan and to determine the timing
of grants, identity of recipients, and other terms and conditions of awards.
The Committee may delegate its responsibilities under the Stock Award Plan to
members of the Company's management and others with respect to the selection
and grant of awards to employees of the Company who are not deemed to be
officers, directors, or 10% shareholders of the Company under applicable
federal securities laws.
12
<PAGE>
ELIGIBILITY AND NUMBER OF SHARES
Officers, other employees, consultants, and independent contractors of the
Company and its affiliates are eligible to receive awards under the Stock
Award Plan at the discretion of the Committee. The Company currently has
approximately 419 employees who may receive awards under the Stock Award Plan.
The number of shares of the Company's Common Stock available for
distribution under the Stock Award Plan is 3,250,000 (subject to adjustment
for stock splits, stock dividends, and similar changes in the Company's
capitalization). If the amendment is approved, 4,350,000 shares of Common
Stock will be available for issuance under the Stock Award Plan (subject to
adjustment for stock splits, stock dividends, and similar changes in the
Company's capitalization). In addition, no participant in the Stock Award Plan
may receive options to purchase more than 250,000 shares of Common Stock in
any one calendar year. Grants of options to individual participants in any
calendar year under the Stock Award Plan have historically been significantly
below this 250,000 share limit. If the amendment is approved, an individual
participant under the Stock Award Plan could receive options to purchase up to
750,000 shares of Common Stock in any calendar year. The last reported per
share sale price of the Company's Common Stock on the Nasdaq National Market
on March 20, 1996, was $5.625.
The Stock Award Plan provides that all awards are subject to agreements
containing the terms and conditions of the awards. Such agreements are entered
into by the recipients of the awards and the Company when the awards are
granted. Agreements with employees are subject to amendment, including
unilateral amendment by the Company (upon authorization of the Committee),
unless such amendments are determined by the Committee to be materially
adverse to the recipient and are not required as a matter of law. Any shares
of Common Stock subject to awards under the Stock Award Plan that are not used
because the terms and conditions of the awards are not met may be reallocated
under the Stock Award Plan as though they had not previously been awarded.
TYPES OF AWARDS
The types of awards that may be granted under the Stock Award Plan include
incentive and nonqualified stock options, performance units, and nonemployee
director stock options. Subject to the restrictions described in this Proxy
Statement with respect to incentive stock options and nonemployee director
options, such awards are exercisable by the recipients at such times as are
determined by the Committee. No award is assignable or transferable by a
recipient except that the Committee, in its discretion, may permit transfers
of awards in the event of death.
Incentive and Nonqualified Stock Options. Both incentive stock options and
nonqualified stock options may be granted to recipients at such exercise
prices as the Committee may determine, but not less than 100% of their fair
market value (as defined in the Stock Award Plan) as of the date the option is
granted. Stock options may be granted and exercised at such times as the
Committee may determine, except that unless applicable federal tax laws are
modified: (i) no incentive stock options may be granted more than ten years
after the effective date of the Stock Award Plan; (ii) an incentive stock
option shall not be exercisable more than ten years after the date of grant;
and (iii) the aggregate fair market value of the shares of the Company's
Common Stock with respect to which incentive stock options held by an employee
under the Stock Award Plan or any other plan of the Company or any affiliate
may first become exercisable in any calendar year may not exceed $100,000.
Incentive stock options may only be granted to employees of the Company and
its subsidiaries. The purchase price for stock purchased upon the exercise of
the options may be payable in cash, in stock having a fair market value on the
date the option is exercised equal to the option price of the stock being
purchased, or in a combination of cash and stock, as determined by the
Committee. The Committee may permit participants to
13
<PAGE>
exercise options and simultaneously sell the stock purchased upon such
exercise and use the sale proceeds to pay the purchase price and/or any
required withholding taxes.
Performance Units. Performance units entitle the recipient to payment in
amounts determined by the Committee based upon the achievement of specified
performance targets during a specified term. Payments with respect to
performance units may be paid in cash, shares of Common Stock, or a
combination of cash and Common Stock, as determined by the Committee.
Outside Director Awards. At the Annual Meeting, shareholders will be asked
to approve an amendment to the Stock Award Plan providing for the automatic
grant of options to nonemployee directors at the time they initially become
members of the Executive Committee and when a member of the Executive
Committee is initially elected or appointed to serve as Chairman or Vice
Chairman of the Board. Prior to this amendment, the Stock Award Plan provided
only for grants of options to nonemployee directors at the time of each annual
meeting of the shareholders of the Company or when initially elected or
appointed as a director. The purpose of this amendment is to make stock
options under the Stock Award Plan a more useful tool in attracting qualified
outside directors to join the Board and to serve on the Executive Committee
and in certain capacities on the Board deemed beneficial to the Company. Set
forth below is a description of the Outside Director Awards to be granted to
nonemployee directors under the Stock Award Plan as so amended.
1. Full Annual Options. The Stock Award Plan provides for the automatic
grant of nonqualified stock options to purchase 20,000 shares of Common Stock
to each person who is not an employee of the Company and is elected, re-
elected, or serving an unexpired term as a director at any annual meeting of
shareholders. Full Annual Options are granted as of the date of such meeting,
are exercisable at a price equal to 100% of the fair market value of the
Common Stock on such date, and vest and become exercisable ratably over a
period of 12 months from the date of grant. Full Annual Options are granted in
addition to any Initial Options and Executive Committee Options (see below) to
which a director may be entitled.
2. Partial Annual Options. The Stock Award Plan provides that each
nonemployee director first elected or appointed to the Board on a date other
than the date of an annual meeting of shareholders shall receive nonqualified
stock options subject to the same terms and conditions as apply to Full Annual
Options, except that instead of being 20,000, the number of shares subject to
such option shall be prorated, based on the following formula: 20,000
multiplied by a fraction, the numerator of which is the number of calendar
months (but not to exceed 12) beginning with, and including, the month in
which the initial election or appointment occurs and ending with, and
including, the month in which the first anniversary of the most recently held
annual meeting of shareholders prior to the grant of such option occurs and
the denominator of which is 12. Partial Annual Options vest and become
exercisable ratably over the same number of months used in the numerator of
the formula discussed above. Such Partial Annual Options are granted in
addition to any Initial Options and Executive Committee Options to which a
director may be entitled.
3. Initial Options. The Stock Award Plan provides that each nonemployee
director first elected or appointed to the Board shall receive, as of the date
of such initial election or appointment, a one-time grant of a nonqualified
stock option to purchase 50,000 shares of Common Stock at an exercise price
equal to 100% of the fair market value of the Common Stock on the grant date.
Such Initial Options are granted in addition to any Full or Partial Annual
Options and Executive Committee Options (see below) to which such director may
be entitled. These options vest and become exercisable ratably over a period
of 60 months from the date of grant.
14
<PAGE>
4. Executive Committee Options. The amendment provides that in the event
that the Board appoints an Executive Committee, each nonemployee director who
is elected or appointed to the Executive Committee (including the initial
members thereof) shall receive a one-time grant of a nonqualified stock option
to purchase 33,333 shares of Common Stock at an exercise price equal to 100% of
the fair market value of the Common Stock on the grant date. In addition, any
nonemployee director elected or appointed to the Executive Committee and elected
to serve as Vice Chairman of the Board (including any person holding any such
position at the time the Board adopted the amendment on December 12, 1995) shall
receive an additional one-time grant of a nonqualified stock option to purchase
33,333 shares of Common Stock at an exercise price equal to 100% of the fair
market value of the Common Stock on the grant date and any nonemployee director
elected or appointed to the Executive Committee and elected to serve as Chairman
of the Board (including any person holding any such position at the time the
Board adopted the amendment on December 12, 1995) shall receive an additional
one-time grant of a nonqualified stock option to purchase 66,667 shares of
Common Stock at an exercise price equal to 100% of the fair market value of the
Common Stock on the grant date. Such Executive Committee Options are granted in
addition to any Full or Partial Annual Options and Initial Options to which a
director may be entitled. No Executive Committee Options shall be granted to any
nonemployee director who, within the 12 months prior to election or appointment
to the Executive Committee or to the position of Vice Chairman or Chairman of
the Board, as the case may be, has received any options to purchase shares of
the Company other than Outside Director Awards under the Stock Award Plan.
Pursuant to this provision and subject to shareholder approval of the amendment,
Messrs. Kelen and Perlman, respectively, received options to purchase 66,666 and
33,333 shares of Common Stock on December 12, 1995, the date upon which the
Board created an Executive Committee and appointed Messrs. Rollwagen, Kelen and
Perlman to it and upon which the Board elected Messrs. Rollwagen and Kelen as
Chairman and Vice Chairman of the Board, respectively. Mr. Rollwagen was not
entitled to any Executive Committee Options because he received a grant of a
non-qualified option other than an Outside Director Award within the 12 months
prior to his appointment to the Executive Committee and his election to the
position of Chairman of the Board.
All options granted to nonemployee directors under the Stock Award Plan
expire at the earlier of the 10-year anniversary date of such option's grant
or 30 days after the date the director ceases to be a director of the Company,
unless such cessation results from the death or permanent disability of such
director. The shares purchasable under such options become immediately vested
and exercisable in the event of a change in control (as defined in the Stock
Award Plan) and upon the director's death or permanent disability.
ACCELERATION OF AWARDS, LAPSE OF RESTRICTIONS, FORFEITURE
Except with respect to option grants to nonemployee directors, the Committee
may provide for accelerated exercisability of options or acceleration of the
term with respect to which the achievement of performance targets for
performance units is determined in the event of a change in control of the
Company, other fundamental changes in the corporate structure of the Company,
the death or retirement of the recipient, or such other events as the
Committee may determine. The Committee may provide that certain awards may be
exercised in certain events after the termination of employment or death of
the recipient.
ADJUSTMENTS, MODIFICATION, TERMINATION
Except with respect to Outside Director Awards, the Stock Award Plan
provides the Committee with discretion to adjust the kind and number of shares
available for awards or subject to outstanding awards, the option price of
outstanding options, and performance targets for, and payments under,
outstanding awards of performance units in the event of mergers,
recapitalization, stock dividends, stock splits, or other relevant changes.
Adjustments in performance targets and payments on performance units are also
permitted upon the
15
<PAGE>
occurrence of such other events as may be specified by the Committee, which
may include changes in the Company's accounting practices or changes in the
recipient's title or employment responsibilities. The Stock Award Plan also
gives the Board the right to terminate, suspend, or modify the Stock Award
Plan, except that amendments to the Stock Award Plan are subject to
shareholder approval if needed to comply with Rule 16b-3 of the Securities
Exchange Act of 1934 (or its successor provisions) or the incentive stock
option provisions of federal tax law. Under the Stock Award Plan, the
Committee may cancel outstanding options and performance units generally in
exchange for cash payments to the recipients in the event of certain
dissolutions, liquidations, mergers, statutory share exchanges, or other
similar events involving the Company.
FEDERAL TAX CONSIDERATIONS
Incentive Stock Options. No taxable income to a recipient will be realized,
and the Company will not be entitled to any related deduction, at the time any
incentive stock option is granted under the Stock Award Plan. If certain
statutory employment and holding period conditions are satisfied before the
recipient disposes of shares acquired pursuant to the exercise of such an
option, then no taxable income will result upon the exercise of such option
and the Company will not be entitled to any deduction in connection with such
exercise. Upon disposition of the shares after expiration of the statutory
holding periods, any gain or loss realized by a recipient will be a capital
gain or loss. The Company will not be entitled to a deduction with respect to
a disposition of the shares by a recipient after the expiration of the
statutory holding periods.
Except in the event of death, if shares acquired by a recipient upon the
exercise of an incentive stock option are disposed of by such recipient before
the expiration of the statutory holding periods (a "disqualifying
disposition"), such recipient will be considered to have realized
compensation, taxed as ordinary income in the year of disposition, in an
amount, not exceeding the gain realized on such disposition, equal to the
difference between the exercise price and the fair market value of the shares
on the date of exercise of the option. The Company will be entitled to a
deduction at the same time and in the same amount as the recipient is deemed
to have realized ordinary income. Generally, any gain realized on the
disposition in excess of the amount treated as compensation or any loss
realized on the disposition will constitute capital gain or loss,
respectively. If the recipient pays the option price with shares that were
originally acquired pursuant to the exercise of an incentive stock option and
the statutory holding periods for such shares have not been met, the recipient
will be treated as having made a disqualifying disposition of such shares, and
the tax consequences of such disqualifying disposition will be as described
above.
The foregoing discussion applies only for regular tax purposes. For
alternative minimum tax purposes, an incentive stock option will be treated as
if it were a nonqualified stock option, the tax consequences of which are
discussed below.
Nonqualified Stock Options. No taxable income to a recipient will be
realized, and the Company will not be entitled to any related deduction, at
the time any nonqualified stock option is granted under the Stock Award Plan.
Generally, at the time shares are transferred to the recipient pursuant to the
exercise of a nonqualified stock option, the recipient will realize ordinary
income, and the Company will be entitled to a deduction, equal to the excess
fair market value of the stock on the date of exercise over the option price.
Upon disposition of the shares, any additional gain or loss realized by the
recipient will be taxed as a capital gain or loss.
Performance Units. Generally: (i) the recipient will not realize income upon
the grant of a performance unit award; (ii) the recipient will realize
ordinary income, and the Company will be entitled to a corresponding
deduction, in the year cash, shares of Common Stock, or a combination of cash
and shares of Common Stock are delivered to the recipient upon payment of the
performance unit award; and (iii) the amount of such ordinary
16
<PAGE>
income and deduction will be the amount of cash received plus the fair market
value of the shares of Common Stock received on the date they are received.
When the recipient disposes of shares received in payment of a performance
unit award, the difference between the amount received upon such disposition
and the fair market value of such shares on the date the recipient realizes
ordinary income will be treated as a capital gain or loss.
WITHHOLDING
The Stock Award Plan permits the Company to withhold from cash awards, and
to require a recipient receiving Common Stock under the Stock Award Plan to
pay the Company, in cash, an amount sufficient to cover any required
withholding taxes. In lieu of cash, the Committee may permit a recipient of a
stock award to cover withholding obligations through a reduction in the number
of shares delivered to such recipient or the surrender to the Company of
shares previously received by the recipient. The use of stock to satisfy
withholding obligations is subject to certain restrictions if the recipient is
an officer or director of the Company or deemed to be a holder of 10% or more
of the Company's capital stock under applicable securities laws.
COMPANY TAX DEDUCTIONS
The Internal Revenue Code of 1986, as amended (the "Code"), limits the
allowable deduction for compensation paid to or accrued with respect to the
Chief Executive Officer and each of the four other most highly compensated
employees of a publicly held corporation to no more than $1 million per year.
Certain types of compensation are exempted from this deduction limitation,
including compensation subject to: (i) the attainment of an objective
performance goal or goals; (ii) an outside director requirement; and (iii) a
shareholder approval requirement. The deduction with respect to any stock
option meeting the requirements described above is not subject to the $1
million per employee per year deduction limitations.
The tax deduction of the Company with respect to any other stock option is
determined when such option is exercised by the option holder. To the extent
such option is treated as a nonqualified option, the deductible amount
generally will equal the difference between the fair market value of the
Common Stock of the Company on the date of exercise and the exercise price of
the option, multiplied by the total number of options exercised.
The stock options of the Company granted pursuant to the Stock Award Plan
are awarded at a price not less than the fair market value of the Common Stock
of the Company on the date of the grant. Thus, such options are treated as
"performance-based" compensation under the first requirement of the Code set
forth above. The Board plans to continue to review the composition of the
Compensation Committee to ensure that it will consist entirely of "outside
directors" (as such term is defined by the Code) in order to satisfy the
second requirement of the Code set forth above.
In order to satisfy the final requirement of the Code set forth above, the
Stock Award Plan sets at 250,000 the maximum number of shares subject to
options that can be awarded to any single employee during a specified period.
Grants of options to individual participants in any calendar year under the
Stock Award Plan have historically been significantly below this 250,000 share
limit. At the Annual Meeting, shareholders will be asked to approve an
amendment to the Stock Award Plan to increase the maximum number of shares
subject to options that can be awarded to any single employee during a
calendar year to 750,000. The purpose of this amendment is to afford the Board
and the Compensation Committee greater flexibility in connection with the
recruitment and retention of executives and other high level employees. In
satisfying the requirements of the Code, the Stock Award Plan qualifies the
stock options granted under it so as to preserve the corresponding tax
deductions of the Company if and when such stock options are exercised.
17
<PAGE>
VOTING REQUIREMENTS
The affirmative vote of holders of a majority of the voting power of the
outstanding shares of Common Stock of the Company entitled to vote on this
item and present, in person or by proxy, at the Annual Meeting is required for
approval of the amendments to increase the number of shares of Common Stock
reserved for issuance under the Stock Award Plan by 1,100,000 and to provide
for the automatic grant of options to nonemployee directors when initially
elected or appointed to the Executive Committee and upon initial election as
Chairman or Vice Chairman of the Board. Proxies solicited by the Board will be
voted for approval of these amendments, unless shareholders specify otherwise
in their proxies. THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THESE AMENDMENTS
TO THE STOCK AWARD PLAN.
PROPOSAL TO AMEND THE 1992 EMPLOYEE STOCK PURCHASE PLAN
(ITEM 3 ON PROXY CARD)
AMENDMENT OF EMPLOYEE STOCK PURCHASE PLAN
The 1992 Employee Stock Purchase Plan (the "Stock Purchase Plan") was
adopted by the Board and approved by the shareholders in 1992 and 150,000
shares of Common Stock were initially reserved for issuance under the Stock
Purchase Plan at the 1992 Annual Meeting of Shareholders. In 1993, the Board
adopted and the shareholders approved an amendment thereto increasing the
number of shares reserved for issuance thereunder to 300,000 shares. The Board
adopted and the shareholders approved a further amendment to the Stock
Purchase Plan in 1994, increasing the number of shares reserved for issuance
thereunder to 400,000. As of the date hereof, 274,099 shares of Common Stock
have been issued under the Stock Purchase Plan, and 125,901 shares of Common
Stock remain available for future grants. To accommodate the increasing number
of employees and to enable the Company to continue to offer employees the
opportunity to purchase shares of Common Stock under the Stock Purchase Plan,
the Board has approved an amendment to the Stock Purchase Plan to further
increase the number of shares reserved for issuance thereunder by 50,000,
thereby increasing the total number of shares reserved thereunder to 450,000,
subject to shareholder approval. The Board has also approved an amendment to
the Stock Purchase Plan providing that no Participant may purchase more than
5,000 shares of Common Stock under the Stock Purchase Plan (or any other stock
purchase plan of the Company) during any such Purchase Period. The
shareholders are being asked to approve such amendments at the Annual Meeting.
PURPOSE
The purpose of the Stock Purchase Plan is to provide eligible employees with
an opportunity to acquire a proprietary interest in the Company through the
purchase of Common Stock of the Company and, thereby, to develop a stronger
incentive to work for the continued success of the Company. The Stock Purchase
Plan is an employee stock purchase plan under Section 423 of the Internal
Revenue Code of 1986, as amended.
ADMINISTRATION
The Stock Purchase Plan is administered by the Compensation Committee, a
committee of the Board (see above). Subject to the provisions of the Stock
Purchase Plan, the Committee is authorized to determine any questions arising
in the administration, interpretation, and application of the Stock Purchase
Plan, and to make such rules as are necessary to carry out its provisions.
18
<PAGE>
ELIGIBILITY AND NUMBER OF SHARES
Up to 400,000 shares of Common Stock are reserved for issuance under the
Stock Purchase Plan, subject to appropriate adjustments by the Committee in
the event of certain changes in the outstanding shares of Common Stock by
reason of a stock dividend, stock split, corporate separation,
recapitalization, merger, consolidation, combination, exchange of shares and
the like. If the amendment to the Stock Purchase Plan is approved by the
shareholders, up to 450,000 shares of Common Stock will be reserved for
issuance under the Stock Purchase Plan (subject to adjustments as described
above). Shares delivered pursuant to the Stock Purchase Plan shall be newly
issued Common Stock of the Company.
Any employee of the Company or a parent or subsidiary corporation of the
Company (including officers and any directors who are also employees) is
eligible to participate in the Stock Purchase Plan for any "Purchase Period"
so long as, on the first day of such Purchase Period, the employee's customary
employment is: (i) at least 20 hours per week; and (ii) for more than five
months in any calendar year. Purchase Period means the 12-month period
beginning on June 1 of each year and ending on May 31 of the succeeding year.
Any eligible employee may elect to become a participant in the Stock
Purchase Plan by filing an enrollment form in advance of the Purchase Period
in which the employee wishes to participate. The enrollment form authorizes
payroll deductions beginning with the first payday in the Purchase Period and
continuing until the employee withdraws from the Purchase Plan or ceases to be
eligible to participate.
No employee may be granted the right to purchase Common Stock under, or
otherwise participate in, the Stock Purchase Plan if after the purchase such
employee would own (or have the right to purchase) stock of the Company
possessing 5% or more of the total combined voting power or value of all
classes of stock of the Company.
For the June 1, 1995 through May 31, 1996 Purchase Period, 163 employees
were participating in the Stock Purchase Plan as of March 20, 1996.
PARTICIPATION
An eligible employee who elects to participate in the Stock Purchase Plan
authorizes the Company to make payroll deductions of between 1% and 10% of the
employee's "Base Compensation" (meaning gross cash compensation paid in
accordance with the terms of employment, subject to certain exclusions set
forth in the Stock Purchase Plan) and "Incentive Compensation" (meaning
compensation paid pursuant to the Company's Success Sharing Bonus Plan or in
the form of commissions). The participant may elect different withholding
percentages for Base Compensation and Incentive Compensation, provided in each
case that the withholding percentage must always be a whole percentage from 0%
to 10%.
A participant may, at any time during the Purchase Period, elect to reduce
(but not increase) the amount of deductions or to make no further deductions,
as set forth in greater detail in the Stock Purchase Plan. A participant may
also elect to withdraw from the Stock Purchase Plan at any time before the end
of a Purchase Period. In the event of a withdrawal, all future payroll
deductions will cease and the amounts withheld will be paid to the participant
in cash within 60 days. Any participant who stops payroll deductions may not
thereafter resume payroll deductions for that Purchase Period, and any
participant who decreases payroll deductions may not thereafter further
decrease or increase such deductions, except that he or she may stop further
deductions.
Amounts withheld under the Stock Purchase Plan are held by the Company as
part of its general assets until the end of the Purchase Period and then
applied to purchase Common Stock of the Company as described below. No
interest is credited to a participant for amounts withheld.
19
<PAGE>
PURCHASE OF STOCK
Amounts withheld for a participant in the Stock Purchase Plan are used to
purchase Common Stock of the Company as of the last business day of the
Purchase Period at a price equal to 85% of the lesser of the Market Price (as
defined in the Stock Purchase Plan) of a share of Common Stock on either the
first or last business day of the Purchase Period. All amounts so withheld are
used to purchase the largest number of whole shares of Common Stock
purchasable with such amount, unless the participant has properly notified the
Committee in advance that he or she elects to purchase a lesser number of
whole shares or to receive the entire amount in cash. If the purchases by all
participants would exceed the number of shares of Common Stock available for
purchase under the Stock Purchase Plan, each participant will be allocated a
ratable portion of such available shares. Any amount not used to purchase
shares of Common Stock will be paid to the participant in cash within 60 days
after the end of the Purchase Period. No more than $5,000 may be withheld by
any Participant to purchase shares of Common Stock under the Stock Purchase
Plan during any Purchase Period.
As soon as practicable after the close of the Purchase Period, the Company
shall issue and deliver to participants certificates representing the
respective shares of Common Stock purchased under the Stock Purchase Plan.
No more than $5,000 in aggregate fair market value (determined at the
beginning of each Purchase Period) of shares of Common Stock and other stock
may be purchased under the Stock Purchase Plan and all other employee stock
purchase plans (if any) of the Company and any parent or subsidiary
corporations of the Company by any participant for each Purchase Period. If
the amendment to the Stock Purchase Plan is approved by the shareholders, no
more than 5,000 shares of Common Stock and other stock may be purchased under
the Stock Purchase Plan and all other employee stock purchase plans (if any)
of the Company and any parent of subsidiary corporations of the Company by any
participant for each Purchase Period.
DEATH, DISABILITY, RETIREMENT, OR OTHER TERMINATION OF EMPLOYMENT
If the participant's employment terminates because the employee has died,
becomes permanently disabled, or has retired at or after age 65 (or earlier
with the consent of the Committee), the participant (or his or her legal
representative) may either: (i) withdraw from the Stock Purchase Plan, in
which case all amounts withheld and not previously used to purchase Common
Stock pursuant to the Stock Purchase Plan will be refunded in cash; or (ii)
elect to receive a refund of only a portion of such amounts and to apply the
balance toward the acquisition of Common Stock at the end of the Purchase
Period. Any such election must be made within three months of the event
causing termination of employment, but not (except in the case of death) later
than the conclusion of the Purchase Period. If no notice of election is filed
with the Committee within the prescribed period, the participant will be
deemed to have elected to withdraw from the Stock Purchase Plan.
If a participant's employment terminates for any other reason, the Company
will refund in cash all amounts withheld and not previously used to purchase
Common Stock under the Stock Purchase Plan.
RIGHTS NOT TRANSFERABLE
The rights of a participant in the Stock Purchase Plan are exercisable only
by the participant during his or her lifetime. No right or interest of any
participant in the Stock Purchase Plan may be sold, pledged, assigned, or
transferred in any manner other than by will or the laws of descent and
distribution.
20
<PAGE>
AMENDMENT OR MODIFICATION
The Board may at any time amend or modify the Stock Purchase Plan, provided
that approval by the shareholders of the Company is required to: (i) increase
the number of shares of Common Stock to be reserved under the Stock Purchase
Plan (except for adjustments by reason of stock dividends, stock splits,
corporate separations, recapitalizations, mergers, consolidations
combinations, exchanges of shares and the like); (ii) decrease the minimum
purchase price (except for adjustments by reason of stock dividends, stock
splits, corporate separations, recapitalizations, mergers, consolidations
combinations, exchanges of shares and the like); (iii) withdraw the
administration of the Stock Purchase Plan from the Committee; or (iv) change
the definition of employees eligible to participate in the Stock Purchase
Plan.
TERMINATION
All rights of participants in any offering under the Stock Purchase Plan
will terminate at the earlier of: (i) the conclusion of the Purchase Period
ending May 31, 2002; (ii) the day participants become entitled to purchase a
number of shares of Common Stock equal to or greater than the number of shares
remaining available for purchase; or (iii) at any time, at the discretion of
the Board, after 30 days' notice has been given to all participants.
Upon termination, shares of Common Stock available under the Stock Purchase
Plan will be issued to participants and cash, if any, previously withheld and
not used to purchase Common Stock will be refunded to the participants, as if
the Stock Purchase Plan were terminated at the end of a Purchase Period.
FEDERAL TAX CONSIDERATIONS
No income will be recognized by participants due to their purchase of shares
under the Stock Purchase Plan until the disposal of those shares or the death
of the participant. Participants who hold their shares for more than one year
or die while holding their shares will have ordinary income in the year of
disposition or death equal to the lesser of: (i) the excess of the fair market
value of the shares on the date of disposition or death over the purchase
price paid by the participant; or (ii) the excess of the fair market value of
the shares on the first day of the year in which they were purchased by the
participant over the purchase price paid by the participant. If the holding
period has been satisfied when the participant sells the shares or the
participant dies while holding the shares, the Company will not be entitled to
any deduction in connection with the shares.
Participants who dispose of their shares within the one-year period after
the shares are transferred to them will be considered to have realized
ordinary income in the year of disposition in an amount equal to the
difference between the fair market value of the shares on the date they were
purchased by the participant and the price paid by the participant. If such
dispositions occur, the Company generally will be entitled to a deduction at
the same time and in the same amount as the participants who make those
dispositions are deemed to have realized ordinary income.
Participants will have a basis in their shares equal to the purchase price
of their shares plus any amount that must be treated as ordinary income at the
time of their disposition of the shares. Any gain realized on the disposition
of shares acquired under the Stock Purchase Plan in excess of the basis will
be capital gain.
VOTING REQUIREMENTS
The affirmative vote of holders of a majority of the voting power of the
outstanding shares of Common Stock of the Company entitled to vote on this
item and present, in person or by proxy, at the Annual Meeting is required for
approval of the amendment to increase the number of shares of Common Stock
reserved for issuance under the Stock Purchase Plan by 50,000. Proxies
solicited by the Board will be voted for approval of the amendment, unless
shareholders specify otherwise in their proxies. THE BOARD RECOMMENDS A VOTE
FOR APPROVAL OF THE AMENDMENT TO THE STOCK PURCHASE PLAN.
21
<PAGE>
PROPOSAL TO RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS
(ITEM 4 ON PROXY CARD)
KPMG Peat Marwick LLP has audited the financial statements of the Company
since 1984 and has no other relationship with or interest in the Company. The
Board, based on the recommendation of the Audit Committee, has again appointed
KPMG Peat Marwick LLP to serve as the Company's independent auditors for the
fiscal year ending December 31, 1996, subject to ratification by the
shareholders. If the shareholders do not ratify the appointment of KPMG Peat
Marwick LLP, another firm of independent auditors will be selected by the
Board. Proxies solicited by the Board will be voted to ratify the appointment
of KPMG Peat Marwick LLP, unless shareholders specify otherwise in their
proxies. Representatives of KPMG Peat Marwick LLP will be present at the
meeting, will have an opportunity to make a statement if they so desire, and
will be available to respond to questions.
SHAREHOLDER PROPOSALS AND OTHER MATTERS
Any shareholder proposals for the Company's 1997 Annual Meeting must be
received by the Company by December 7, 1996 in order to be included in the
proxy statement for that meeting. The proposals also must comply with all
applicable statutes and regulations.
At the time this Proxy Statement was mailed, the Board was not aware of any
matters to be presented for action at the Annual Meeting other than those
discussed in this Proxy Statement. If other matters properly come before the
meeting, the proxy holders have discretionary authority--unless it is
expressly revoked--to vote all proxies in accordance with their discretion.
SHAREHOLDERS WHO WISH TO OBTAIN A COPY OF THE COMPANY'S ANNUAL REPORT ON
FORM 10-K, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1995, MAY DO SO WITHOUT CHARGE UPON WRITTEN REQUEST
TO: INVESTOR RELATIONS, COMPUTER NETWORK TECHNOLOGY CORPORATION, 605 NORTH
HIGHWAY 169, SUITE 800, MINNEAPOLIS, MINNESOTA 55441.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Lewis Shender
Lewis Shender,
Secretary
Minneapolis, Minnesota
April 4, 1996
22
<PAGE>
________________________________________________________________________________
COMPUTER NETWORK TECHNOLOGY CORPORATION
605 North Highway 169, Suite 800, Minneapolis, Minnesota 55441
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned, having duly received the Notice of Annual Meeting and Proxy
Statement dated April 4, 1996, hereby appoints John R. Brintnall and Lewis
Shender as proxies (each with the power to act alone and with the power of
substitution and revocation), to represent the undersigned and to vote, as
designated on the reverse side, all shares of Common Stock of Computer Network
Technology Corporation held of record by the undersigned on March 20, 1996, at
the Annual Meeting of Shareholders to be held on May 17, 1996 at the Minneapolis
Marriott City Center, 30 South Seventh Street, Minneapolis, Minnesota, at
10:00 a.m. and any adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS NO. 1, 2, 3, AND 4. THE PROXIES ARE AUTHORIZED TO VOTE IN
THEIR DISCRETION WITH RESPECT TO OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE
MEETING.
(Continued on reverse side)
- --------------------------------------------------------------------------------
.FOLD AND DETACH HERE.
<PAGE>
Please mark
your votes as [X]
indicated in
this example
1. ELECTION OF DIRECTORS NOMINEES: Bruce T. Coleman, Erwin A. Kelen,
Lawrence Perlman, John A. Rollwagen
FOR WITHOLD (INSTRUCTION: To withhold authority to vote
all nominees listed AUTHORITY for any individual nominee, write that
(except as marked to vote for nominee's name in the space provided
to the contrary all nominees below.)
at right) listed
-------------------------------------------
[_] [_]
2. PROPOSAL TO AMEND THE 1992 STOCK AWARD PLAN to increase the number of shares
authorized for issuance thereunder from 3,250,000 to 4,350,000, to limit to
250,000 the number of shares for which any single participant may be granted
options in any one calendar year, to provide for the grant of options to
nonemployee directors when they become members of the Executive Committee and/or
Chairmen of Vice Chairmen, and to increase the maximum number of shares subject
to options that can be awarded to any single employee during a calendar year to
750,000.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. PROPOSAL TO AMEND THE 1992 EMPLOYEE STOCK PURCHASE PLAN to increase the
number of shares authorized for issuance thereunder from 400,000 to 450,000,
and to limit the number of shares that may be purchased thereunder to 5,000
per participant for any annual Purchase Period.
FOR AGAINST ABSTAIN
[_] [_] [_]
4. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG 5. The Proxies are authorized
PEAT MARWICK LLP as the independent auditors to vote in their discretion
for the Company for the fiscal year ending upon such other business as
December 31, 1996. may properly come before
the meeting.
FOR AGAINST ABSTAIN
[_] [_] [_]
PLEASE SIGN exactly as name appears on this card. When shares
are held by joint tenants, both should sign. If signing as
attorney, executor, administrator, trustee, or guardian,
please give full title as such. If a corporation, please sign
in full corporate name by president or other authorized
officer, If a partnership, please sign in partnership name by
an authorized person.
Dated:
-------------------------------------------------------
-------------------------------------------------------------
(Signature)
-------------------------------------------------------------
(Signature)
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
*FOLD AND DETACH HERE*
<PAGE>
________________________________________________________________________________
1996 - COMPUTER NETWORK TECHNOLOGY CORPORATION-VOTING INSTRUCTION CARD
401(k) SALARY SAVINGS PLAN
ANNUAL MEETING OF SHAREHOLDERS
MAY 17, 1996 -- 10:00 A.M.
MINNEAPOLIS MARRIOTT CITY CENTER, 30 SOUTH SEVENTH STREET, MINNEAPOLIS, MN
DIRECTIONS: As a participant in the Computer Network Technology Corporation
401(k) Salary Savings Plan, you are entitled to instruct the Plan's Trustee,
CIGNA Corporation, how to vote the stock allocated to you under the Plan at the
Annual Meeting of Shareholders to be held on May 17, 1996, and at any
adjournment thereof, upon the matters set forth in the Notice of such meeting.
Please complete this card and mail it in the enclosed postage-paid envelope
provided to you. It must be received no later than May 10, 1996.
VOTING INSTRUCTIONS: I, the participant in the Computer Network Technology
Corporation 401(k) Salary Savings Plan signing this voting instruction card,
hereby instruct the Plan's Trustee, CIGNA Corporation, to vote the shares of
Computer Network Technology Corporation stock allocated to me under the
foregoing Plan.
(Continued On Reverse Side)
- --------------------------------------------------------------------------------
.FOLD AND DETACH HERE.
<PAGE>
Please mark
your votes as
indicated in
this example [X]
1. ELECTION OF DIRECTORS NOMINEES: Bruce T. Coleman, Erwin A. Kelen,
Lawrence Perlman, John A. Rollwagen
FOR WITHHOLD (INSTRUCTION: To withhold authority to vote
all nominees listed AUTHORITY for any individual nominee write that
(except as marked to vote for nominee's name on the space provided below.)
to the contrary all nominees
at right) listed
[_] [_]
------------------------------------------
2. PROPOSAL TO AMEND THE 1992 STOCK AWARD PLAN to increase the number of shares
authorized for issuance thereunder from 3,250,000 to 4,350,000, to limit to
250,000 the number of shares for which any single participant may be granted
options in any one calendar year, to provide for the grant of options to
nonemployee directors when they become members of the Executive Committee
and/or Chairman or Vice Chairman, and to increase the maximum number of
shares subject to options that can be awarded to any single employee during a
calendar year to 750,000.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. PROPOSAL TO AMEND THE 1992 EMPLOYEE STOCK PURCHASE PLAN to increase the
number of shares authorized for issuance thereunder from 400,000 to 450,000,
and to limit the number of shares that may be purchased thereunder to 5,000
per participant for any annual Purchase Period.
FOR AGAINST ABSTAIN
[_] [_] [_]
4. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG PEAT MARWICK LLP as the
independent auditors for the Company for the fiscal year ending December 31,
1996.
FOR AGAINST ABSTAIN
[_] [_] [_]
5. The Proxies are authorized to vote in their discretion upon such other
business as may properly come before the meeting.
PLEASE SIGN exactly as name appears on this card. When shares are held by joint
tenants, both should sign. If signing as attorney, executor, administrator,
trustee, or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by an authorized person.
Dated:
--------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Signature)
- --------------------------------------------------------------------------------
(Signature)
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
