<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
COMPUTER NETWORK TECHNOLOGY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(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:
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Notes:
<PAGE>
LOGO
COMPUTER NETWORK TECHNOLOGY CORPORATION
605 NORTH HIGHWAY 169, SUITE 800
MINNEAPOLIS, MINNESOTA 55441
(612) 797-6000
April 8, 1997
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of the Shareholders of
Computer Network Technology Corporation (the "Company") at the Radisson Plaza
Hotel, 35 South Seventh Street, Minneapolis, Minnesota, on Thursday, May 15,
1997, beginning at 10:00 a.m.
The 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 1996 and report on
current items of interest to our shareholders. In addition, certain members of
the Company's Board of Directors (the "Board") 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,
/s/ Thomas G. Hudson
Thomas G. Hudson
President and Chief Executive Officer
<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 15, 1997
------------------------------------------------------------
TO OUR SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of
Computer Network Technology Corporation, a Minnesota corporation, will be held
on Thursday, May 15, 1997 at the Radisson Plaza Hotel, 35 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 4,350,000 to 5,400,000;
(3) To amend the 1992 Employee Stock Purchase Plan to increase the number
of shares authorized for issuance thereunder from 450,000 to 500,000
and to modify the definition of "affiliate" as used in the Plan to
allow the Board of Directors discretion in determining which affiliates
of the Company (and, therefore, their employees) will be eligible to
participate in the Plan;
(4) To ratify and approve the appointment of KPMG Peat Marwick LLP as
independent auditors for the year ending December 31, 1997; and
(5) To transact other business that may properly come before the meeting.
Shareholders of record on March 24, 1997 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
/s/ Thomas G. Hudson
April 8, 1997 Thomas G. Hudson
Minneapolis, Minnesota President and Chief Executive Officer
<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 15, 1997
GENERAL
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Computer Network Technology Corporation of proxies to be
voted at the Annual Meeting of the Shareholders of the Company (the "Annual
Meeting") to be held on Thursday, May 15, 1997 at the Radisson Plaza Hotel, 35
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 8, 1997. 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 24, 1997 are the only persons entitled to
vote at the Annual Meeting. As of that date, there were issued and outstanding
23,419,814 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
THOMAS G. HUDSON, 50 years of age, has been President and Chief Executive
Officer since June 1996, a director since August 1996, and Acting Chief
Financial Officer since December 1996. From 1993 to June 1996, Mr. Hudson was
Senior Vice President of McGraw Hill Companies, a leading information services
provider, serving as General Manager of its F.W. Dodge Division, and as Senior
Vice President, Corporate Development. From 1968 to 1993, Mr. Hudson served in
a number of management positions at IBM Corporation, most recently as Vice
President Services Sector Division. Mr. Hudson's IBM career included varied
product development, marketing and strategic responsibilities for IBM's
financial services customers and extensive international and large systems
experience. He is a graduate of the University of Notre Dame and New York
University. He attended the Harvard Advanced Management Program in 1990.
ERWIN A. KELEN, 61 years of age, has been a director since June 1988. Mr.
Kelen is President of Kelen Ventures and a partner of Camir Investments. He is
a private investor active in venture capital investments, investment
management and helping small companies grow. 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. He is a graduate of
the Technical University of Budapest and the University of Minnesota Graduate
School.
LAWRENCE PERLMAN, 58 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, and has
been Chairman and Chief Executive Officer since November 1992. Ceridian
Corporation is a leading information services and defense electronics company
that serves the human resources, electronic media, transportation, gaming and
government markets. Mr. Perlman also serves as a director of Ceridian
Corporation, Seagate Technology, Inc., and Valspar Corporation. He is a
graduate of Carleton College and Harvard Law School.
JOHN A. ROLLWAGEN, 56 years of age, has been a director since June 1993 and
Chairman of the Board since December 1995. Mr. Rollwagen is a private investor
and venture partner with St. Paul Venture Capital, a venture
2
<PAGE>
capital firm. From January 1993 to May 1993, Mr. Rollwagen served as U.S.
Department of Commerce Deputy Secretary-Designate. Beginning in 1975, Mr.
Rollwagen served in executive capacities with Cray Research, Inc. ("Cray").
Mr. Rollwagen served as Chairman and Chief Executive Officer of Cray from 1981
to January 1993. Mr. Rollwagen serves as a director of Plasma and Materials
Technology, Inc. and several private companies. He is a graduate of The
Massachusetts Institute of Technology and Harvard Graduate School of Business
Administration.
MEETINGS AND COMMITTEES OF THE BOARD
The Board held six meetings during 1996 and otherwise conducted business by
written resolutions signed by all directors. All directors, except for Mr.
Perlman, 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. Mr.
Perlman, who attended 66% of the total number of meetings of the Board and
Committees, provided his input to the other directors on a regular basis.
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 1996.
During 1996, the Compensation Committee was composed of Messrs. Kelen and
Perlman. Mr. Rollwagen became a member of the Committee on February 14, 1997.
The primary purpose of this Committee is set forth in the "Report on Executive
Compensation" contained in this Proxy Statement. The Compensation Committee
held one meeting in 1996 and otherwise conducted business by written
resolutions signed by the Committee members.
The Executive Committee possesses the power and authority to act on behalf
of the Board between meetings of the Board. The Committee is comprised of
Messrs. Kelen, Perlman, and Rollwagen. The Executive Committee of the Board
met several times during the year. A series of telephone meetings were held
during the year, including additional regular meetings with Executive
Committee members and discussions upon Mr. Hudson's joining the Board in
August 1996. Periodic telephone discussions followed and were used to address
issues in a timely fashion.
The Board does not have a nominating committee.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company, Chairman of the Board or
Vice Chairman of the Board receive a retainer of $2,500 per quarter ($10,000
per year), plus reimbursement of out-of-pocket expenses incurred on behalf of
the Company. In December 1996, the Board of Directors approved a change to its
director compensation program. Effective January 1, 1997, the annual retainer
paid to outside directors increased to $20,000. The Board reviewed the
director compensation practices of companies in similar industries in terms of
market capitalization and concluded that this increase was appropriate to
maintain the continued competitiveness of the total compensation package
offered to the Company's outside directors. In consideration for their
services provided in 1996 as Chairman and Vice Chairman of the Board, Messrs.
Rollwagen and Kelen received $108,000 and $72,000, respectively. As of January
1, 1997, the additional compensation for Messrs. Rollwagen and Kelen for such
services was terminated.
In addition to a cash retainer, stock options are also a key component of
the outside directors' total compensation package. The Company's 1992 Stock
Award Plan (the "Stock Award Plan") provides for non-employee director stock
options. Please refer to the section entitled "Proposal to Amend the 1992
Stock Award Plan - Types of Awards" for a discussion of non-employee director
stock awards.
3
<PAGE>
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 24, 1997, 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. The
address of each director and executive officer is 605 North Highway 169, Suite
800, Minneapolis, Minnesota 55441. 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 AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OUTSTANDING
------------------------------------ -------------------- ------------
<S> <C> <C>
Kopp Investment Advisors, Inc.(/1/) 1,868,163 7.98%
6600 France Avenue South, Suite 672
Edina, MN 55435
Thomas G. Hudson(/2/) 183,398 *
Bruce T. Coleman(/3/) 45,000 *
Erwin A. Kelen(/4/) 389,577 1.65%
John A. Rollwagen(/4/) 229,171 *
Lawrence Perlman(/4/) 146,629 *
Richard G. Helgeson(/5/) 25,000 *
Kathleen E. Brush -- *
Peter Dixon(/6/) 39,622 *
John R. Brintnall(/7/) 65,517 *
William C. Collette(/8/) 31,960 *
Scott A. McCourt(/9/) 12,500 *
All executive officers and directors 1,182,298 4.86%
as a
group (13 persons)(/1//0/)(/1//1/)
</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 January 28, 1997 filed by Kopp
with the Securities and Exchange Commission. The number of shares owned by
Kopp is stated as of December 31, 1996.
(2) Includes 183,330 shares that may be acquired upon exercise of a non-
qualified stock option. This option is currently exercisable or is
exercisable within 60 days. Also includes 68 shares held by Connecticut
General Trust Company as trustee of the Company's 401(k) Plan.
(3) Mr. Coleman's association with the Company terminated in August 1996.
These shares are not included in the "All executive officers and directors
as a group" total and include 45,000 shares that may be acquired upon
exercise of non-qualified stock options. These options are currently
exercisable or are exercisable within 60 days.
(4) Includes 166,667, 219,171, and 133,333 shares that may be acquired upon
the exercise of non-qualified stock options held by Messrs. Kelen,
Rollwagen, and Perlman, respectively. These options are currently
exercisable or are exercisable within 60 days.
(5) Includes 25,000 shares that may be acquired upon exercise of incentive and
non-qualified stock options. These options are currently exercisable or
are exercisable within 60 days.
(6) Includes 38,126 shares that may be acquired upon exercise of incentive and
non-qualified stock options. These options are currently exercisable or
are exercisable within 60 days.
(7) Mr. Brintnall's executive officer status with the Company terminated in
December 1996, and his employment with the Company terminated in February
1997. These shares are not included in the "All executive officers and
directors as a group" total and includes 24,217 shares that may be
acquired upon the exercise of incentive and non-qualified stock options.
These options are currently exercisable.
4
<PAGE>
(8) Includes 27,500 shares that may be acquired upon exercise of incentive and
non-qualified stock options. These options are currently exercisable or
are exercisable within 60 days. Also includes 3,964 shares held by
Connecticut General Trust Company as trustee of the Company's 401(k) Plan.
(9) Includes 12,500 shares that may be acquired upon exercise of incentive
stock options. These options are currently exercisable or are exercisable
within 60 days.
(10) Includes 6,034 shares held by Connecticut General Trust Company as
trustee of the Company's 401(k) Plan for the benefit of three officers.
(11) Includes 898,124 shares that may be acquired upon exercise of incentive
and non-qualified stock options. These options, including those discussed
above, are currently exercisable or exercisable within 60 days. Includes
only current officers and directors.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 1996 or prior years complied with all such
reporting requirements, except for the January 1997 late filing by Mr.
Rollwagen of the form required to report a purchase of Common Stock in
November 1996.
REPORT ON EXECUTIVE COMPENSATION
OVERVIEW
The Compensation Committee is responsible for recommending to the Board the
Company's executive compensation philosophy, for determining all aspects of
the President and Chief Executive Officer's compensation, and the review and
approval of recommendations for compensation paid to the other executives. The
Committee is also responsible for administering the Company's stock-based
compensation plans. The Committee is comprised entirely of independent,
outside directors. During 1996, the Committee was comprised of Messrs. Kelen
and Perlman. On February 14, 1997, Mr. Rollwagen also became a member of the
Committee.
The primary objectives of executive compensation are to provide compensation
that will attract, retain, reward and motivate a highly effective Executive
Team that will lead the Company in achieving its business goals in a highly
competitive and rapidly changing industry; to ensure that compensation
opportunities for executives are competitively positioned and yet reasonable
in light of the Company's objectives; and to emphasize and reinforce the link
of pay for individual and Company performance.
The Committee believes that the Company's executive compensation program
provides an overall level of compensation opportunity that is competitive with
comparably sized companies within the computer industry.
COMPONENTS OF EXECUTIVE COMPENSATION
The total compensation mix for executives consists of annual cash
compensation in the form of base salaries and annual cash incentives, long-
term incentives in the form of stock options to acquire Common Stock and
various benefits generally available to other employees. As a result, much of
an executive's compensation is based upon the financial performance of the
Company. The following sections describe each component of compensation.
5
<PAGE>
ANNUAL CASH COMPENSATION: This includes base salary and annual incentives.
For 1996, base salaries and annual target incentives of the executive officers
were recommended to the Committee by Bruce T. Coleman, the then Acting
President and Chief Executive Officer, after consultation with the Company's
Director of Human Resources. Both salary and annual target incentive (bonus)
opportunities are established each year based on the executive's job
responsibilities, level of experience, overall performance and contributions,
future potential, as well as information obtained on competitive pay
practices. Comparative compensation data was derived from an analysis by the
Company of external compensation surveys encompassing companies of similar
size and industry, and from outside consultants.
The Success Sharing Annual Leadership Bonus Plan (the "Success Sharing
Plan") is the Company's annual incentive program for most executives and key
contributors. The Success Sharing Plan is tied to key performance measures of
the Company's success--specifically, revenue growth and pre-tax profit. The
Compensation Committee believes that the level of bonus payouts from the
Success Sharing Plan should be consistent with the level of achievement of the
Company's key performance measures.
Bonuses under the Success Sharing Plan are derived from a grid approved by
the Committee, which may be modified from time to time. The horizontal and
vertical axes of the grid consist of defined levels of revenue growth over the
previous year and pre-tax profit as a percentage of revenue (determined after
deducting the cost of the bonuses). The intersection of these two key
performance measures determines the CNT Performance Factor, which is used
along with the individual's success sharing participation rate (described
below) to calculate the individual's bonus.
At the beginning of each year, the success sharing participation rate for
each executive is established and approved by the Committee, giving
consideration to the factors mentioned earlier. Each participant in the
Success Sharing Plan receives a bonus determined by multiplying their eligible
compensation (primarily salary) by their participation rate. The product of
these two numbers is then multiplied by the CNT Performance Factor, which is
derived from the grid described above.
The Committee, in 1996, approved a change to the grid to more accurately
reflect the Company's business targets. Given the Company's performance in
1996, including revenue growth and pre-tax profit, approximately 84 percent of
each individual's target bonus was paid out. In early 1996, the Compensation
Committee approved a plan to provide employees, including executives, the
opportunity to recover all or a portion of their targeted 1995 success sharing
bonuses, since an annual success sharing bonus was not paid out due to the
Company's low level of revenue growth that year. The recovery plan was based
on the achievement of certain aggressive financial targets in excess of its
internal business plans in 1996. Based on the financial results of the Company
in 1996, the eligible executives were able to recover approximately one half
of their targeted bonus for 1995.
In addition to the Success Sharing Plan, certain executives may participate
in other annual incentive plans relating to revenue achievement or individual
goal achievement. For example, the Vice President of Sales and the Vice
President of International have annual incentive plans that include the
achievement of revenue for their respective areas.
LONG TERM INCENTIVES: This includes stock options. Stock options are a key
tool to recruit, retain, and motivate executive officers and certain other
employees. 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, at the discretion of the Compensation Committee, based on the
anticipated contribution of the particular employee and the level of
responsibility of their position in the Company, as well as taking into
account the number of options then held by such employee. The criteria used to
determine stock option grants to the President and Chief Executive Officer are
the same criteria applied to other executives.
6
<PAGE>
BENEFITS: The Company generally provides the same level of benefits to
executives that are available to other employees.
COMPENSATION FOR THE PRESIDENT AND CHIEF EXECUTIVE OFFICER
The 1996 compensation for Thomas G. Hudson, the President and Chief
Executive Officer since June 1996, included an annualized base salary of
$250,000, a hiring bonus in the amount of $100,000, participation in the
Success Sharing Plan at a participation rate of 60%, with a $12,500 non-
recoverable minimum payment per calendar month for the period of July 1, 1996
through June 30, 1998, and a long-term incentive opportunity in the form of a
non-qualified stock option to purchase 500,000 shares of CNT's Common Stock.
These terms are governed by an employment agreement with Mr. Hudson that is
described more fully in the section entitled "Employment Agreements" on page
12. In determining the initial compensation levels for Mr. Hudson, the
Committee considered such factors as Mr. Hudson's extensive experience and
talents in the high technology industry and his expected impact to the
business, as well as information obtained on competitive pay practices.
Employee stock options, including those granted to executives, are granted
at the fair market value on the date of grant and the exercise price of
outstanding options normally is not modified. As disclosed in the table "Ten
Year Repricing" on page 11, prior to the option repricing in 1996, the Company
had not repriced any outstanding options since 1988. In 1996, however, the
Committee elected to reprice the original stock option granted to Mr. Hudson.
The original option was granted on June 8, 1996 with an exercise price of
$8.125 per share. By July 26, 1996, the market price of the stock had declined
to $4.8125 per share. The Compensation Committee determined that repricing of
Mr. Hudson's original option grant was necessary and advisable to
appropriately motivate the President and Chief Executive Officer and to
recognize the unusual and significant decline that had occurred in the market
price of the Company's Common Stock within a short period of time since the
original grant.
The 1996 compensation for Bruce T. Coleman, the Company's Acting President
and CEO prior to the employment of Mr. Hudson, included cash compensation of
$85,548 for the period of March 1996 through August 1996, and a long-term
incentive opportunity in the form of a non-qualified stock option to purchase
15,000 shares of CNT's common stock. This was governed in part by an
Independent Contractor Agreement dated December 12, 1995. The terms of Mr.
Coleman's agreement are described in the section entitled "Employment
Agreements" on page 12. In determining the compensation for Mr. Coleman, the
Committee considered such factors as Mr. Coleman's experience in providing
interim CEO services to companies as well as information obtained on similar
practices.
INTERNAL REVENUE CODE SECTION 162(M)
Internal Revenue Code Section 162(m) limits the deductibility of
compensation over $1 million paid by a company to an executive officer. Other
than limiting the maximum number of shares that may be awarded to any employee
or other participant under the Stock Award Plan in any calendar year to
750,000 shares, the Compensation Committee currently does not have a policy
with respect to Section 162(m) because it is unlikely that such limit will
apply to compensation paid by the Company to any of the Company's executive
officers for at least the current year.
ERWIN A. KELEN
LAWRENCE PERLMAN
Members of the Compensation Committee
7
<PAGE>
SUMMARY COMPENSATION TABLE
The following table shows, for the Company's Chief Executive Officer, the
Company's former Acting Chief Executive Officer who served in that capacity
during a portion of fiscal 1996, each of the four other most highly
compensated executive officers of the Company at the end of fiscal 1996, and
two additional former executive officers who served during a portion of fiscal
1996 (collectively, the "Named Officers"), information concerning compensation
earned for services in all capacities during the fiscal year ended December
31, 1996, as well as compensation earned by each such person for the two
previous fiscal years (if the person was Chief Executive Officer or another
executive officer during any part of such fiscal year):
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
---------------------------------------- COMPENSATION
SHARES
NAME AND PRINCIPAL SALARY ALL OTHER UNDERLYING
POSITION YEAR ($) BONUS ($) COMPENSATION ($) OPTIONS (#)
- ------------------ ---- -------- --------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Thomas G. Hudson(/1/) 1996 $125,962 $75,000 $118,961 500,000
President and Chief
Executive Officer
Bruce T. Coleman(/2/) 1996 $ 85,548 -- -- 15,000
Former Acting President 1995 $ 60,000 -- -- 30,000
and Chief Executive
Officer
Richard G. Helgeson(/3/) 1996 $223,264 $26,330 $ 48,886 40,000
Vice President of Sales 1995 $ 56,934 -- $ 20,000 75,000
Kathleen E. Brush(/4/) 1996 $160,000 -- -- --
Former Acting Vice
President
of Marketing
Peter Dixon(/5/) 1996 $160,968 $43,643 -- 22,500
Vice President of
International 1995 $187,587 -- -- 18,750
1994 $134,593 $17,175 -- 11,250
John R. Brintnall(/6/) 1996 $135,000 $22,628 -- 25,000
Former Vice President of 1995 $111,500 -- -- 15,000
Finance, Chief Financial 1994 $102,862 $11,778 -- 8,750
Officer, and Treasurer
William C. Collette(/7/) 1996 $121,731 $34,460 -- 50,000
Vice President of
Engineering
Scott A. McCourt(/8/) 1996 $120,000 $20,220 -- 20,000
Vice President of
Brixton 1995 $ 18,231 -- -- 40,000
Development
</TABLE>
- --------
(1) Mr. Hudson was appointed President and Chief Executive Officer in June
1996. "All Other Compensation" consists of a $100,000 hiring bonus and
$18,961 associated with relocation expenses.
(2) Mr. Coleman's association with the Company terminated in August 1996.
(3) Mr. Helgeson was appointed an officer in September 1995. In 1996 and
1995, Mr. Helgeson's base salaries were $125,000 and $41,667,
respectively. The remainder of the amount shown for such years consists
of commissions earned. The "All Other Compensation" in 1996 consists of
$48,886 of commuting expenses paid by the Company and in 1995 consists of
a hiring bonus.
(4) Ms. Brush was appointed an officer in March 1996. Ms. Brush's association
with the Company terminated in August 1996.
(5) Mr. Dixon's base salary was $132,000 for both 1996 and 1995. The
remainder of the amount shown for such years consists of commissions
earned and vacation pay.
8
<PAGE>
(6) Mr. Brintnall's executive officer status with the Company terminated in
December 1996 and his employment with the Company terminated in February
1997.
(7) Mr. Collette became an officer of the Company in March 1996.
(8) Mr. McCourt became an officer of the Company in November 1995.
OPTION TABLES
The following tables summarize stock option grants and exercises during 1996
to or by the Named Officers and certain other information relative to such
options.
OPTION GRANTS IN FISCAL YEAR 1996
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(/3/)
------------------------------------------------------- ---------------------
NUMBER OF PERCENT OF
SHARES TOTAL OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION
NAME GRANTED(/1/) FISCAL YEAR PRICE(/2/) DATE 5% 10%
- ---- ------------ ------------- ---------- ----------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Thomas G. Hudson(/4/) 500,000 35.1% $4.8125 July 25, 2006 $1,515,938 $3,825,938
Bruce T. Coleman 15,000 1.1% $ 5.25 March 14, 2006 $ 49,613 $ 125,213
Richard G. Helgeson 25,000 1.8% $ 5.25 March 14, 2006 $ 82,688 $ 208,688
15,000 1.1% $ 5.75 November 12, 2006 $ 310,078 $ 782,578
Kathleen E. Brush -- -- -- -- -- --
Peter Dixon 10,000 0.7% $ 5.25 March 14, 2006 $ 33,075 $ 83,475
12,500 0.9% $ 5.75 November 12, 2006 $ 45,281 $ 114,281
John R. Brintnall(/5/) 10,000 0.7% $ 5.25 March 14, 2006 $ 33,075 $ 83,475
15,000 1.1% $ 5.75 November 12, 2006 $ 54,338 $ 137,138
William C. Collette 10,000 0.7% $ 5.25 March 14, 2006 $ 33,075 $ 83,475
25,000 1.8% $ 6.125 April 28, 2006 $ 96,469 $ 243,469
15,000 1.1% $ 5.75 November 12, 2006 $ 54,338 $ 137,138
Scott A. McCourt 10,000 0.7% $ 5.25 March 14, 2006 $ 33,075 $ 83,475
10,000 0.7% $ 5.75 November 12, 2006 $ 36,225 $ 91,425
</TABLE>
- --------
(1) Subject to acceleration at the discretion of the Compensation Committee or
upon the death or disability of the optionee, each option generally becomes
cumulatively exercisable with respect to 25% of the shares covered on each
of the first four anniversaries of the grant date. Messrs. Hudson, Coleman
and Collette received stock option grants in 1996 with the following terms:
Mr. Hudson's grant provides for the immediate vesting of 100,000 shares and
the remaining 400,000 shares vest and become exercisable ratably over a
period of 48 months from the date of grant. Mr. Coleman's grant provides
for the immediate vesting of 7,500 shares and the remaining 7,500 shares
vest and become exercisable ratably over a period of 3 months commencing on
the last day of March, 1996. Mr. Collette's 25,000 share option grant
provides for the cumulative vesting of 25% of the shares covered on each of
the first four anniversaries of December 12, 1995.
(2) Fair market value per share on the date of grant as determined in
accordance with the 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.
(4) In June 1996, Mr. Hudson was granted options to purchase 500,000 shares at
an exercise price of $8.125 per share. These options were subsequently
reissued at an exercise price of $4.8125 per share as reflected in the
table above. For more information on option repricing, see the "Report on
Executive Compensation" on page 5 and the "Ten-Year Repricing" table on
page 11.
(5) Mr. Brintnall's executive officer status with the Company terminated in
December 1996 and his employment with the Company terminated in February
1997. All remaining exercisable options will terminate if not exercised
within 90 days from the date of his employment termination.
9
<PAGE>
AGGREGATED OPTION EXERCISES IN 1996 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SHARES UNDERLYING IN-THE-MONEY OPTIONS
UNEXERCISED AT FISCAL YEAR-
SHARES OPTIONS AT FISCAL YEAR-END (#) END(/2/)(/3/)
ACQUIRED ON VALUE ------------------------------ -------------------------
NAME EXERCISE (#) REALIZED(/1/) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ------------ ------------- ------------------------------ -------------------------
<S> <C> <C> <C> <C>
Thomas G. Hudson -- -- 149,998 / 350,002 $28,125 / $65,625
Bruce T. Coleman -- -- 45,000 / -- -- / --
Richard G. Helgeson -- -- 18,750 / 96,250 -- / --
Kathleen E. Brush -- -- -- / -- -- / --
Peter Dixon 30,000 $135,000 32,814 / 49,686 -- / --
John R. Brintnall 5,000 $ 10,000 28,123 / 45,627 $ 5,000 / --
William C. Collette -- -- 20,375 / 76,625 -- / --
Scott A. McCourt -- -- 10,000 / 50,000 -- / --
</TABLE>
- --------
(1) Market value of underlying securities at date of exercise minus the
exercise price.
(2) Market value of underlying securities at year-end ($5.00 per share) minus
the exercise price.
(3) Except for Messrs. Hudson and Brintnall, all the officers' options were at
an exercise price above $5.00 per share.
10
<PAGE>
TEN-YEAR REPRICING
The following table presents information on all repricings of stock options
held by any executive officer during the last ten fiscal years.
<TABLE>
<CAPTION>
LENGTH OF
MARKET ORIGINAL OPTION
NUMBER PRICE EXERCISE TERM REMAINING
OF OF STOCK PRICE NEW AT DATE OF
OPTIONS AT TIME OF AT TIME OF EXERCISE REPRICING
NAME DATE REPRICED REPRICING REPRICING PRICE (YEARS)
- ---- ------------------ -------- ---------- ---------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Thomas G. Hudson July 26, 1996 500,000 $4.8125 $8.125 $4.8125 9.87
President and Chief
Executive Officer
C. McKenzie Lewis III(/1/) August 4, 1986 350,000(/2/) 5.00 6.00 5.00 4.78
Former President and Chief December 3, 1986 350,000(/2/) 4.43 5.00 4.43 4.67
Executive Officer October 23, 1987 350,000(/2/) 2.625 4.43 2.625 4.11
October 23, 1987 22,570(/3/) 2.625 4.43 2.625 4.11
September 19, 1988 15,799(/3/) 1.22 2.625 1.22 4.09
September 19, 1988 45,700 1.12 2.1875 1.12 4.25
September 19, 1988 45,700 1.12 2.1875 1.12 4.25
September 19, 1988 245,000(/2/) 1.22 2.625 1.22 4.09
John D. Beagan(/1/) September 4, 1987 40,000(/4/) 3.1875 4.1875 3.1875 4.92
Former Vice President of October 23, 1987 40,000(/4/) 2.625 3.1875 2.625 4.87
Customer Support Services September 19, 1988 28,000(/4/) 1.22 2.625 1.22 4.09
John R. Brintnall(/1/) August 4, 1986 27,000(/5/) 5.00 7.6875 5.00 4.90
Former Vice President February 20, 1987 13,000(/6/) 4.625 7.6875 4.625 4.36
Finance, Chief Financial July 9, 1987 27,000(/5/) 3.94 5.00 3.94 4.07
Officer, and Treasurer July 9, 1987 20,000(/7/) 3.94 4.43 3.94 4.40
July 9, 1987 13,000(/6/) 3.94 4.625 3.94 4.62
October 23, 1987 13,000(/6/) 2.625 3.94 2.625 4.71
October 23, 1987 47,000(/5/,/7/,/8/) 2.625 3.94 2.625 4.71
September 19, 1988 18,900(/9/) 1.22 2.625 1.22 4.09
September 19, 1988 14,000(/1//0/) 1.22 2.625 1.22 4.09
September 21, 1988 40,000 1.12 1.75 1.12 4.37
September 21, 1988 13,000(/6/) 1.12 2.625 1.12 4.09
Kenneth Flies(/1/) July 9, 1987 100,000(/1//1/) 3.94 4.50 3.94 4.36
Former Vice President of October 23, 1987 100,000(/1//1/) 2.625 3.94 2.625 4.36
Sale and Marketing September 19, 1988 70,000(/1//1/) 1.22 2.625 1.22 4.09
</TABLE>
- -----------------
(1) No longer employed by the Company, but was an executive officer within the
ten-year period covered by the table.
(2) The 350,000 share option was reissued on August 4, 1986 at $5.00. On
December 3, 1986 it was reissued a second time at $4.43 and again reissued
on October 23, 1987 at $2.625. This option was again reissued on September
19, 1988 for 245,000 shares at $1.22 and the remaining option to purchase
105,000 shares was canceled as a part of this repricing.
(3) The 22,570 share option was reissued at $2.625. On September 19, 1988,
this option was again reissued for 15,799 shares at an exercise price of
$1.22 per share and the remaining option to purchase 6,771 shares was
canceled as a part of this repricing.
(4) The 40,000 share option was reissued on September 4, 1987 at $3.1875. On
October 23, 1987, it was reissued a second time at $2.625. This option was
again reissued for 28,000 shares at $1.22 per share on September 19, 1988
and the remaining option to purchase 12,000 shares was canceled as part of
this repricing.
11
<PAGE>
(5) The 27,000 share option was reissued on August 4, 1986 at $5.00. On July 9,
1987, this option was reissued as part of a 47,000 option at $3.94 per
share in connection with the transaction discussed in footnote 7.
(6) The 13,000 share option was reissued on February 20, 1987 at $4.625. On
July 9, 1987, it was reissued a second time at $3.94 per share. This option
was again reissued on October 23, 1987 at $2.625 and on September 21, 1988
for $1.12 per share.
(7) The 20,000 share option was reissued on July 9, 1987 as part of a 47,000
share option at $3.94 per share in connection with the second transaction
mentioned in footnote 5.
(8) The 47,000 share option was reissued on October 23, 1987 as two options,
one at 20,000 shares the other at 27,000 shares, both options had an
exercise price of $2.625 per share.
(9) The 27,000 share option mentioned in footnote 8 was reissued on September
19, 1988 for 18,900 shares at $1.22 and the remaining option to purchase
8,100 shares was canceled as a part of this repricing.
(10) The 20,000 share option mentioned in footnote 8 was reissued on September
19, 1988 for 14,000 shares at $1.22 and the remaining option to purchase
6,000 shares was canceled as a part of this repricing.
(11) The 100,000 share option was reissued on July 9, 1987 at $3.94. On October
23, 1987, it was reissued a second time at $2.625. This option was again
reissued on September 19, 1988 for 70,000 at $1.22 and the remaining option
to purchase 30,000 shares was canceled as a part of this repricing.
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Thomas G. Hudson as of
June 9, 1996, whereby he serves as President and Chief Executive Officer of
the Company. The agreement provides Mr. Hudson with an annualized base salary
of $250,000, or such greater amount as the Board in its discretion may from
time to time determine. Effective January 1, 1997, the Board approved an
increase to Mr. Hudson's annualized base salary to $285,000. The employment
agreement also provides for a hiring bonus in the amount of $100,000 (which
was paid in 1996); participation in CNT's Success Sharing Annual Leadership
Bonus Program at a participation rate of 60%, with a $12,500 non-recoverable
minimum payment per calendar month for the period of July 1, 1996 through June
30, 1998; and a long-term incentive opportunity in the form of a non-qualified
stock option to purchase 500,000 shares of CNT's Common Stock. In the event of
a "Change of Control," the number of unvested Options equal to the number of
then vested options shall become immediately vested and exercisable, provided
in no event shall less than an aggregate of 250,000 options be vested and
exercisable upon a Change of Control. If Mr. Hudson's employment ends by
reason of termination without cause, then the Company shall continue to pay
Mr. Hudson's base salary and reimburse him for expenses incurred to retain
ongoing COBRA benefits, at the rate then in effect, for a period of one year
following the date of termination, provided that if termination occurs upon or
within six months after a Change of Control, he shall receive a lump sum
payment equal to one year's base salary. The Company has also agreed to
reimburse Mr. Hudson in terms of certain relocation expenses.
Under an Independent Contractor Agreement dated December 12, 1995, the
Company engaged Bruce T. Coleman as Acting President and Chief Executive
Officer. In connection with such services, Mr. Coleman was paid $60,000 in
December 1995 and received a monthly fee of $20,000 commencing in March 1996
through June 1996 with special arrangements thereafter. Mr. Coleman was paid a
total of $85,548 in 1996. 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 agreement.
The Company has agreed to reimburse Mr. Helgeson in terms of certain
commuting and relocation expenses.
12
<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, 1991, 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.
PROXY GRAPH APPEARS HERE
--------------------------------------------------------
<TABLE>
<CAPTION>
12/31/91 12/31/92 12/31/93 12/31/94 12/30/95 12/29/96
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CNT Common Stock 100.0 115.8 226.3 143.4 94.7 105.3
- --------------------------------------------------------------------------
The Nasdaq Total 100.0 116.4 133.6 130.6 184.7 227.1
Return Index
- --------------------------------------------------------------------------
The Nasdaq Computer 100.0 134.4 127.4 139.9 220.4 295.9
Manufacturers Index
</TABLE>
- -------------------------------------------------------------------------------
13
<PAGE>
PROPOSAL TO AMEND THE 1992 STOCK AWARD PLAN
(ITEM 2 ON PROXY CARD)
AMENDMENT OF STOCK AWARD PLAN
The Stock Award Plan was adopted by the Board and approved by the
shareholders in 1992 and 4,350,000 shares of Common Stock are reserved for
issuance. The Board has adopted, subject to shareholder approval, an amendment
to the Company's Stock Award Plan to increase the number of shares authorized
for issuance thereunder from 4,350,000 shares to 5,400,000 shares, an increase
of 1,050,000 shares.
The Board of Directors believes that stock options have been and will
continue to be an important compensation element in attracting, retaining and
motivating key employees. As of December 31, 1996, there were 711,127 shares
of Common Stock available for future grants of stock options and other awards
under the Stock Award Plan. The Board of Directors believes that the increase
in authorized shares is necessary because of the need to continue to make
awards under the Stock Award Plan to attract, retain and motivate key
employees and to use such awards in relation to a planned increase in the
number of employees of the Company. The shareholders are being asked to
approve this amendment to the Stock Award Plan at the Annual Meeting.
PURPOSE
The purpose of the Stock Award Plan is to assist the Company in recruiting
and retaining key employees 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 non-employee directors, as that term is defined in Rule 16b-3(b)
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 non-employee 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.
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 503 employees who may receive awards under the Stock Award Plan.
The number of shares of the Company's Common Stock available for issuance
under the Stock Award Plan is 4,350,000 (subject to adjustment for stock
splits, stock dividends, and similar changes in the Company's capitalization).
If the amendment is approved, 5,400,000 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 750,000 shares of Common Stock in any
one calendar year. Grants of options to individual participants
14
<PAGE>
in any calendar year under the Stock Award Plan have historically been below
this 750,000 share limit. The last reported per share sale price of the
Company's Common Stock on the Nasdaq National Market on March 24, 1997, was
$5.50.
The Stock Award Plan provides that all awards are subject to agreements
containing the terms and conditions of the awards. These 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 non-qualified stock options, performance units, and non-employee
director stock options. Subject to the restrictions described in this Proxy
Statement with respect to incentive stock options and non-employee director
options, these 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 Non-qualified Stock Options. Both incentive stock options and
non-qualified 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 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. Set forth below is a description of the Outside
Director Awards granted to non-employee directors under the Stock Award Plan.
1. Full Annual Options. The Stock Award Plan provides for the automatic
grant of non-qualified stock options to purchase 20,000 shares of Common Stock
to each person who is not an employee of the Company
15
<PAGE>
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 and vest and become exercisable ratably over a period of 12
months from the date of grant.
2. Partial Annual Options. The Stock Award Plan provides that each non-
employee director first elected or appointed to the Board on a date other than
the date of an annual meeting of shareholders shall receive a Partial Annual
Non-qualified Stock Option grant of 20,000 shares (prorated on a monthly
basis). Partial Annual Options vest and become exercisable ratably over the
same number of months used in determining the shares, from the date of grant.
3. Initial Options. The Stock Award Plan provides that each non-employee
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 non-qualified
stock option to purchase 50,000 shares of Common Stock. These options vest and
become exercisable ratably over a period of 60 months from the date of grant.
4. Executive Committee Options. The Stock Award Plan provides that each non-
employee director first elected or appointed to the Executive Committee shall
receive a one-time grant of a non-qualified stock option to purchase 33,333
shares of Common Stock, the Vice Chairman of the Board shall receive a one-
time grant of a non-qualified stock option to purchase 66,666 shares of Common
Stock, and the Chairman of the Board shall receive a one-time grant of a non-
qualified stock option to purchase 100,000 shares of Common Stock. No
Executive Committee Options shall be granted to any non-employee 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.
All types of Outside Director Awards under the Stock Award Plan described
above are not exclusive and are in addition to any of the other awards to
which a director may be entitled. All options are granted at an exercise price
equal to the fair market value of the Common Stock on the grant date and shall
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 this 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) or upon the director's death or permanent disability.
ACCELERATION OF AWARDS, LAPSE OF RESTRICTIONS, FORFEITURE
Except with respect to option grants to non-employee 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
16
<PAGE>
changes. Adjustments in performance targets and payments on performance units
are also permitted upon the 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 the recipient before
the expiration of the statutory holding periods (a "disqualifying
disposition"), the 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 non-qualified stock option, the tax consequences of which are
discussed below.
Non-qualified 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 non-qualified 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 non-qualified 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
17
<PAGE>
are delivered to the recipient upon payment of the performance unit award; and
(iii) the amount of such ordinary 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.
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 the option is exercised by the option holder. To the extent
the option is treated as a non-qualified 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 750,000 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 750,000 share
limit. The purpose of this 750,000 share limit is to afford the Board and the
Compensation Committee great 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.
BOARD RECOMMENDATION AND VOTING REQUIREMENTS
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THIS AMENDMENT TO THE STOCK
AWARD PLAN. The affirmative vote of holders of a majority of the voting power
of the outstanding shares of Common Stock of the
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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 Award
Plan by 1,050,000. Proxies solicited by the Board will be voted for approval
of this amendment, unless shareholders specify otherwise in their proxies.
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 450,000
shares of Common Stock are reserved for issuance. The Board has adopted,
subject to shareholder approval, an amendment to the Company's Stock Purchase
Plan to increase the number of shares authorized for issuance thereunder from
450,000 shares to 500,000 shares, an increase of 50,000 shares. As of June 1,
1996, there were 118,445 shares of Common Stock available for future grants
under the Stock Purchase Plan. The Board of Directors believes that to enable
the Company to continue to offer employees the opportunity to purchase shares
of Common Stock under the Stock Purchase Plan and to accommodate the growth in
the number of employees, the increase in the number of authorized shares is
necessary. The Board also adopted a second amendment, subject to shareholder
approval, modifying the definition of "Affiliate" in Section 2.1(a) of the
Stock Purchase Plan to allow the Board discretion in determining which
affiliates of the Company (and, therefore, their employees) will be eligible
to participate in the plan. The shareholders are being asked to approve these
amendments to the Stock Purchase Plan 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 section entitled "Proposal to Amend the 1992 Stock
Award Plan" 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.
ELIGIBILITY AND NUMBER OF SHARES
Up to 450,000 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 500,000 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.
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Currently, 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 is defined as the 12-
month period beginning on June 1 of each year and ending on May 31 of the
succeeding year.
There may be situations, however, where, because of costs associated with
administering the Stock Purchase Plan, regulatory concerns applicable to
entities operating in foreign jurisdictions, or for other reasons, it is not
advisable to automatically extend the opportunity to participate in the plan
to the employees of certain of the Company's affiliates. Therefore, the Board
has approved an amendment to the Stock Purchase Plan to provide the Board with
the discretion to decide on a case-by-case basis which affiliates will be
included as eligible affiliates under the plan. The proposed amendment would
change the definition of "Affiliate" in the plan as follows: " "Affiliate'
means any parent or subsidiary corporation of the Company, as defined in
Sections 424(e) and 424(f) of the Code, and whose participation in the Plan
has been approved by the Board of Directors." This amendment is to be
effective as of February 14, 1997, subject to shareholder approval. The effect
of the proposed amendment would be to prevent the employees of any
corporation, a majority of the voting stock of which is directly or indirectly
owned by the Company, from automatically becoming eligible to participate in
the Stock Purchase Plan. The approval of the Company's Board would be required
before such employees would be eligible to participate.
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, 1996 through May 31, 1997 Purchase Period, 168 employees
were participating in the Stock Purchase Plan as of March 24, 1997.
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
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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.
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 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.
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.
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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.
BOARD RECOMMENDATION AND VOTING REQUIREMENTS
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENTS TO THE STOCK
PURCHASE PLAN. The affirmative vote of holders of a majority of the voting
power of the outstanding shares of Common Stock of the
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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 Purchase
Plan by 50,000 and to modify the plan's definition of "Affiliate." Proxies
solicited by the Board will be voted for approval of the amendments, unless
shareholders specify otherwise in their proxies.
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. 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, 1997, 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 1998 annual meeting must be
received by the Company by December 9, 1997 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, 1996, 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/ Thomas G. Hudson
Thomas G. Hudson
President and Chief Executive Officer
Minneapolis, Minnesota
April 8, 1997
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EXHIBIT A
1992 STOCK AWARD PLAN
(as amended through May 1996)
1. Purpose. The purpose of this 1992 Stock Award Plan (the "Plan") is to
motivate key personnel, including non-employee directors, to produce a superior
return to the shareholders of Computer Network Technology Corporation by
offering such personnel an opportunity to realize Stock appreciation, by
facilitating Stock ownership, and by rewarding them for achieving a high level
of corporate performance. This Plan is also intended to facilitate recruiting
and retaining key personnel of outstanding ability by providing an attractive
capital accumulation opportunity.
2. Definitions.
2.1 The terms defined in this section are used (and capitalized)
elsewhere in this Plan.
(a) "Affiliate" means any corporation that is a "parent
corporation" or "subsidiary corporation" of the Company, as those
terms are defined in Section 424(e) and (f) of the Code, or any
successor provision.
(b) "Agreement" means a written contract entered into between the
Company or an Affiliate and a Participant containing the terms and
conditions of an Award in such form (not inconsistent with this Plan)
as the Committee approves from time to time, together with all
amendments thereto, which amendments may be unilaterally made by the
Company (with the approval of the Committee) unless such amendments
are deemed by the Committee to be materially adverse to the
Participant and are not required as a matter of law.
(c) "Award" means a grant made under this Plan in the form of
Options or Performance Units.
(d) "Board" means the Board of Directors of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(f) "Committee" means two or more Disinterested Persons
designated by the Board to administer this Plan under Section 3
hereof.
(g) "Company" means Computer Network Technology Corporation, a
Minnesota corporation, or any successor to substantially all of its
businesses.
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(h) "Disinterested Person" means a member of the Board who is
considered a disinterested person within the meaning of Exchange Act
Rule l6b-3 or any successor definition.
(i) "Effective Date" means the date specified in Section 9.1
hereof.
(j) "Employee" means any employee (including an officer or
director who is also an employee) of the Company or an Affiliate.
"Employee" shall also include other individuals and entities who are
not "employees" of the Company or an Affiliate but who provide
services to the Company or an Affiliate in the capacity of an advisor
or consultant. In addition, references herein to "employment" and
similar terms shall include the providing of services in any such
capacity.
(k) "Event" means any of the following:
(i) The acquisition by an individual, entity, or group
(within the meaning of Section 13(d)(3) or l4(d)(2) of the
Exchange Act) of beneficial ownership (within the meaning of
Exchange Act Rule 13d-3) of 40% or more of either (A) the then
outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (B) the combined voting
power of the then outstanding voting securities of the Company
entitled to vote generally in the election of the Board (the
"Outstanding Company Voting Securities"); provided, however, that
the following acquisitions shall not constitute an Event:
(1) any acquisition of voting securities of the Company
directly from the Company,
(2) any acquisition of voting securities of the Company
by the Company or any of its wholly owned Subsidiaries,
(3) any acquisition of voting securities of the Company
by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any of its Subsidiaries, or
(4) any acquisition by any corporation with respect to
which, immediately following such acquisition, more than 60%
of, respectively, the then outstanding shares of common
stock of such corporation and the combined voting power of
the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were
the beneficial owners, respectively, of the
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Outstanding Company Common Stock and Outstanding Company
Voting Securities immediately prior to such acquisition in
substantially the same proportions as was their ownership,
immediately prior to such acquisition, of the Outstanding
Company Common Stock and Outstanding Company Voting
Securities, as the case may be;
(ii) Individuals who, as of the Effective Date, constitute
the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to the
Effective Date whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or
threatened election contest which was (or, if threatened, would
have been) subject to Exchange Act Rule 14a-l l;
(iii) Approval by the shareholders of the Company of a
reorganization, merger, consolidation, or statutory exchange of
Outstanding Company Voting Securities, unless immediately
following such reorganization, merger, consolidation, or
exchange, all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such reorganization, merger,
consolidation, owned, directly or indirectly, more than 60% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such
reorganization, merger, consolidation, or exchange in
substantially the same proportions as was their ownership,
immediately prior to such reorganization, merger, consolidation,
or exchange, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be; or
(iv) Approval by the shareholders of the Company of (A) a
complete liquidation or dissolution of the Company or (B) the
sale or other disposition of all or substantially all of the
assets of the Company, other than to a corporation with respect
to which, immediately following such sale or other disposition,
more than 60% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of
the then outstanding voting securities of such corporation
entitled to vote generally in the
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election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such sale or other disposition in
substantially the same proportion as was their ownership,
immediately prior to such sale or other disposition, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be.
(v) Notwithstanding the above, an Event shall not be deemed
to occur with respect to a Participant if the acquisition of the
40% or greater interest referred to in subsection (i) is by a
group, acting in concert, that includes that recipient or if at
least 40% of the then outstanding common stock or combined voting
power of the then outstanding voting securities (or voting equity
interests) of the surviving corporation or of any corporation (or
other entity) acquiring all or substantially all of the assets of
the Company shall be beneficially owned, directly or indirectly,
immediately after a reorganization, merger, consolidation,
statutory share exchange or disposition of assets referred to in
subsections (iii) or (iv) by a group, acting in concert, that
includes that Participant.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" as of any date means, unless otherwise
expressly provided in this Plan:
(i) the closing sale price of a Share on the date
immediately preceding that date or, if no sale of Shares shall
have occurred on that date, on the next preceding day on which a
sale occurred of Shares on the National Association of Securities
Dealers, Inc. Automated Quotations National Market System
("NMS"), or
(ii) if the Shares are not quoted on the NMS, what the
Committee determines in good faith to be 100% of the fair market
value of a Share on that date.
Provided, however, if the NMS has closed for the day at the time
the event occurs that triggers a determination of Fair Market Value,
whether the grant of an Award, the exercise of an Option or otherwise,
all references in this Section 2.1(m) to the "date immediately
preceding that date" shall be deemed to be references to "that date."
In the case of an Incentive Stock Option, if such determination of
Fair Market Value is not consistent with the then current regulations
of the Secretary of the Treasury, Fair Market Value shall be
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determined in accordance with said regulations. The determination of
Fair Market Value shall be subject to adjustment as provided in
Section 13 hereof.
(n) "Fundamental Change" means a dissolution or liquidation of
the Company, a sale of substantially all of the assets of the Company,
a merger or consolidation of the Company with or into any other
corporation, regardless of whether the Company is the surviving
corporation, or a statutory share exchange involving capital stock of
the Company.
(o) "Incentive Stock Option" means any Option designated as such
and granted in accordance with the requirements of Code Section 422 or
any successor to said section.
(p) "Non-Qualified Stock Option" means an Option other than an
Incentive Stock Option.
(q) "Option" means a right to purchase Stock, including both Non-
Qualified Stock Options and Incentive Stock Options.
(r) "Outside Directors" means those directors of Company who are
not employees of the Company or any Affiliate.
(s) "Participant" means an Employee or an Outside Director to
whom an Award is made.
(t) "Performance Cycle" means the period of time as specified in
an Agreement over which Performance Units are to be earned.
(u) "Performance Units" means an Award made under Section 7.2
hereof.
(v) "Plan" means this 1992 Stock Award Plan, as amended from time
to time.
(w) "Retirement" of an Employee means termination of employment
with the Company or an Affiliate on or after the date the Employee
attains age 55.
(x) "Share" means a share of Stock.
(y) "Stock" means the common stock, $.01 par value per share (as
such par value may be adjusted from time to time), of the Company.
(z) "Subsidiary" means a subsidiary corporation," as that term is
defined in Section 424(f) of the Code, or any successor provision.
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(aa) "Successor" means the legal representative of the estate of
a deceased Participant or the person or persons who may, by bequest or
inheritance, or under the terms of an Award or of forms submitted by
the Participant to the Committee under Section 17 hereof, acquire the
right to exercise an Option or receive cash or Shares issuable in
satisfaction of an Award in the event of a Participant's death.
(bb) "Term" means the period during which an Option may be
exercised.
2.2 Number. Except when otherwise indicated by context, any term
used in the singular shall also include the plural.
3. Administration.
3.1 Authority of Committee.
(a) General. The Committee shall administer this Plan. The
Committee may delegate all or any portion of its authority under this
Plan to persons who are not Disinterested Persons solely for purposes
of determining and administering Awards to Employees who are not then
subject to the reporting requirements of Section 16 of the Exchange
Act. The Committee shall have exclusive power to make Awards, to
determine when and to whom Awards will be granted, the form of each
Award, the amount of each Award, and any other terms or conditions of
each Award. Each Award shall be subject to an Agreement authorized by
the Committee. The Committee's interpretation of this Plan and of any
Awards made under this Plan shall be final and binding on all persons.
The Committee shall have the power to establish regulations to
administer this Plan and to change such regulations.
(b) Options to Outside Directors. Notwithstanding any contrary
provisions of this Plan, the granting and terms, conditions, and
eligibility requirements of Non-Qualified Stock Options granted to
Outside Directors are to be governed solely by the provisions in this
Plan pertaining thereto and the Committee shall have no discretion
with respect to the granting of such Options to Outside Directors
under this Plan or to alter or amend any terms, conditions, and
eligibility requirements of such an Option granted, or to be granted,
to an Outside Director.
3.2 Indemnification. To the full extent permitted by law, (a) no
member of the Committee or any person to whom the Committee delegates
authority under this Plan shall be liable for any action or determination
taken or made in good faith with respect to this Plan or any Award made
under this Plan and (b) the members of the Committee and each person to
whom the Committee delegates authority under this Plan shall be entitled to
indemnification by the Company with regard to such actions and
determinations.
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4. Shares Available Under this Plan. The number of Shares available for
distribution under this Plan shall not exceed 4,350,000 (subject to adjustment
under Section 13 hereof). Any Shares subject to the terms and conditions of an
Award under this Plan that are not used because the terms and conditions of the
Award are not met may again be used for an Award under this Plan.
5. Eligibility. Awards may be granted under this Plan to Employees, and
such Awards shall have the terms and conditions specified in Sections 6 and 7
hereof and elsewhere in this Plan. The granting of Awards to Employees is
solely at the discretion of the Committee. In addition, Non-Qualified Stock
Options shall be granted under this Plan to each Outside Director, and such
Options shall have the terms and conditions specified in Section 8 hereof.
6. General Terms of Awards to Employees.
6.1 Amount of Award. Each Agreement with an Employee shall set
forth the number of Shares to which the Option subject to such Agreement
applies or the number of Performance Units subject to such Agreement, as
the case may be.
6.2 Term. Each Agreement with an Employee shall set forth the Term
of the Option or the Performance Cycle for the Performance Units, as the
case may be. An Agreement with an Employee may permit an acceleration of
the expiration of the applicable Term upon such terms and conditions as
shall be set forth in the Agreement, which may, but need not, include
without limitation acceleration resulting from the occurrence of an Event
or in the event of the Participant's death or Retirement. Acceleration of
the Performance Cycle of Performance Units shall be subject to Section
7.2(b) hereof.
6.3 Transferability. During the lifetime of an Employee to whom an
Award is granted, only such Participant (or such Participant's legal
representative) may exercise an Option or receive payment with respect to
an Award of Performance Units. No Award of Options or Performance Units
may be sold, assigned, transferred, exchanged, or otherwise encumbered, and
any attempt to do so shall be of no effect. Notwithstanding the
immediately preceding sentence, an Agreement may provide that the Award
subject to the Agreement shall be transferable to a Successor in the event
of a Participant's death.
6.4 Termination of Employment. No unexercised Option may be
exercised by an Employee and no payment with respect to Performance Units
for which the applicable Performance Cycle has not been completed shall be
made if the Employee's employment with the Company and its Affiliates shall
be voluntarily terminated or involuntarily terminated with or without cause
prior to the expiration of the term of the Option or the completion of the
Performance Cycle, as the case may be, except as provided in the Agreement
applicable to that Award. An Award made to an Employee may be exercised
by, or paid to, the Successor of a Participant following
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the death of such Participant to the extent, and during the period of time,
if any, provided in the applicable Agreement.
7. Terms and Conditions of Specific Employee Awards.
7.1 Stock Options.
(a) Terms of All Options. Each Option shall be granted as either
an Incentive Stock Option or a Non-Qualified Stock Option. Only Non-
Qualified Stock Options may be granted to Employees who are not
employees of the Company or an Affiliate but who provide services to
the Company or an Affiliate in the capacity of an advisor or
consultant. The purchase price of each Share subject to an Option
shall be determined by the Committee and set forth in the Agreement,
but shall not be less than 100% of the Fair Market Value of a Share as
of the date the Option is granted. The purchase price of the Shares
with respect to which an Option is exercised shall be payable in full
at the time of exercise, provided that to the extent permitted by law,
the Agreement may permit some or all Participants simultaneously to
exercise Options and sell the Shares thereby acquired pursuant to a
brokerage or similar relationship and use the proceeds from such sale
as payment of the purchase price of such Shares. The purchase price
may be payable in cash, in Stock having a Fair Market Value as of the
date the Option is exercised equal to the purchase price of the Stock
being purchased pursuant to the Option, or a combination thereof as
determined by the Committee and provided in the Agreement. Each
Option shall be exercisable in whole or in part on the terms provided
in the Agreement. In no event shall any Option be exercisable at any
time after its expiration date. When an Option is no longer
exercisable, it shall be deemed to have lapsed or terminated. The
number of Shares for which any Employee may be granted Options in any
one calendar year shall not exceed 750,000.
(b) Incentive Stock Options. In addition to the other terms and
conditions applicable to all Options:
(i) the aggregate Fair Market Value (determined as of the
date the Option is granted) of the Shares with respect to which
Incentive Stock Options held by an individual first become
exercisable in any calendar year (under this Plan and all other
incentive stock option plans of the Company and its Affiliates)
shall not exceed $100,000 (or such other limit as may be required
by the Code) if such limitation is necessary to qualify the
Option as an incentive Stock Option;
(ii) an Incentive Stock Option shall not be exercisable more
than 10 years after the date of grant (or such other limit as may
be
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required by the Code) if such limitation is necessary to
qualify the Option as an Incentive Stock Option; and
(iii) the Agreement covering an Incentive Stock Option
shall contain such other terms and provisions which the Committee
determines necessary to qualify such Option as an Incentive Stock
Option.
7.2 Performance Units.
(a) Initial Award. An Award of Performance Units shall entitle
such Participant (or a Successor) to future payments of cash, Stock,
or a combination of cash and Stock, as determined by the Committee and
provided in the Agreement, based upon the achievement of performance
targets established by the Committee. Such performance targets may,
but need not, include without limitation targets relating to one or
more of corporate, group, unit, Affiliate, or individual performance.
The Agreement may establish that a portion of a full or maximum amount
of a Participant's Award will be paid for performance which exceeds
the minimum target but falls below the maximum target applicable to
such Award. The Agreement shall also provide for the timing of such
payment. Following the conclusion or acceleration of each Performance
Cycle, the Committee shall determine the extent to which (i)
performance targets have been attained, (ii) any other terms and
conditions with respect to an Award relating to such Performance Cycle
have been satisfied, and (iii) payment is due with respect to an Award
of Performance Units.
(b) Acceleration and Adjustment. The Agreement may permit an
acceleration of the Performance Cycle and an adjustment of performance
targets and payments with respect to some or all of the Performance
Units awarded to a Participant upon such terms and conditions as shall
be set forth in the Agreement, upon the occurrence of certain events,
which may, but need not include without limitation an Event, a
Fundamental Change, the Participant's death or Retirement or, with
respect to payments in Stock with respect to Performance Units, a
reclassification, stock dividend, stock split, or stock combination as
provided in Section 13 hereof.
8. Terms and Conditions of Outside Director Awards.
8.1 Initial Outside Director Option Grants. Each Outside Director
first elected or appointed to the Board at any time after May 27, 1993,
shall receive, by virtue of serving as an Outside Director of the Company,
an initial grant of a Non-Qualified Stock Option to purchase 50,000 Shares
(each, an "Initial Outside Director Option"). An Initial Outside Director
Option shall be deemed to be granted to an Outside Director immediately
after the Outside Director's initial election or
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appointment to the Board. After receiving an Initial Outside Director
Option, an Outside Director shall not receive any additional Initial
Outside Director Options. Outside Directors as of May 27, 1993 and
directors who, as of the date of initial election or appointment to the
Board, are or were employees of the Company or any Affiliate and later
become Outside Directors shall not receive Initial Outside Director
Options.
8.2 Annual Outside Director Option Grants.
(a) Full Annual Outside Director Option Grants. For the Annual
Meeting of Shareholders in May 1992 and for each Annual Meeting of
Shareholders thereafter during the term of this Plan, each Outside
Director serving as an Outside Director of the Company (and not as an
employee of the Company or any Affiliate) immediately following such
Annual Meeting shall be granted, by virtue of serving as an Outside
Director of the Company, a Non-Qualified Stock Option to purchase
20,000 Shares (each, an "Annual Outside Director Option"). Such
Annual Outside Director Option shall be deemed to be granted to each
Outside Director immediately after the Annual Meeting and shall be
granted regardless of whether or not such Outside Director previously
received, or simultaneously receives, an Initial Outside Director
Option.
(b) Partial Annual Director Option Grants. Each Outside Director
first elected or appointed to the Board after May 27, 1993, and on a
date other than the date of an Annual Meeting of Shareholders, shall
be granted, by virtue of serving as an Outside Director of the
Company, a Non-Qualified Stock Option to purchase a number of Shares
equal to 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, provided that fractional shares shall be rounded to the nearest
whole Share (each, a "Partial Annual Outside Director Option").
Partial Annual Outside Director Options shall be deemed to be granted
to eligible Outside Directors contemporaneously with the grant of such
Outside Director's Initial Outside Director Option. Initial Outside
Director Options, Annual Outside Director Options, Partial Annual
Outside Director Options, and Executive Committee Options together are
sometimes referred to as "Outside Director Options."
8.3 Executive Committee Option Grants. In the event that the Board
appoints an Executive Committee of the Board, each Outside Director who is
elected or appointed to the Executive Committee (including the initial
members
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thereof) shall receive a one-time grant of a Non-Qualified Stock
Option to purchase 33,333 Shares; in addition, any Outside Director elected
or appointed to the Executive Committee and elected to serve as Vice
Chairman of the Board shall receive an additional one-time grant of a Non-
Qualified Stock Option to purchase 33,333 Shares, and any Outside Director
elected or appointed to the Executive Committee and elected to serve as
Chairman of the Board shall receive an additional one-time grant of a Non-
Qualified Stock Option to purchase 66,667 (collectively, "Executive
Committee Option Grants"). These Executive Committee Option Grants are in
addition to any Full or Partial Annual Outside Director Option Grants and
Initial Options to which a director may be entitled. No Executive
Committee Option Grants shall be granted to any Outside 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 Option Grants under the Plan.
8.4 Term and Exercisability of Options.
(a) Exercisability.
(i) Initial Outside Director Options shall vest and become
exercisable cumulatively on a monthly basis, as follows: On the
last day of the calendar month in which the Initial Outside
Director Option is granted, 853 Shares shall become vested and
exercisable. An additional 833 Shares covered by such Initial
Outside Director Option shall become vested and exercisable on
the last day of each of the next succeeding 59 calendar months.
(ii) Annual Outside Director Options shall vest and become
exercisable cumulatively on a monthly basis, as follows: On the
last day of each of the first eleven calendar months following
the calendar month in which the Annual Outside Director Option is
granted, 1,666 Shares shall become vested and exercisable. On
the earlier of (A) the first anniversary of the grant of the
Annual Outside Director Option or (B) the date of the first
Annual Meeting of Shareholders following the grant of the Annual
Outside Director Option, 1,674 Shares shall become vested and
exercisable.
(iii) Partial Annual Outside Director Options shall vest
and become exercisable cumulatively on a monthly basis, beginning
with the last day of the calendar month in which the Partial
Annual Outside Director Option is granted and ending with the
earlier of (A) the first anniversary of the most recently held
Annual Meeting of Shareholders prior to the grant of the Partial
Annual Outside Director Option or (B)
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the date of the first Annual Meeting of Shareholders following
the grant of the Partial Annual Outside Director Option, in as
nearly equal installments of whole Shares as possible, provided
that all but the last monthly vesting shall be for the same
number of whole Shares and the last monthly vesting shall be for
an equal or greater number of whole Shares.
(iv) Executive Committee Options shall vest and become
exercisable cumulatively on a monthly basis, beginning with the
last day of the calendar month in which the Executive Committee
Option is granted and ending on the first anniversary thereof, in
as nearly equal installments of whole Shares as possible,
provided that all but the last monthly vesting shall be for the
same number of whole Shares and the last monthly vesting shall be
for an equal or greater number of whole Shares.
Notwithstanding the foregoing, vesting of an Outside Director
Option shall accelerate and the Outside Director Option shall become
immediately exercisable in full upon the occurrence of any Event or
upon the death or permanent disability of the Outside Director holding
such Outside Director Option, unless such Outside Director Option
shall have expired.
Each Outside Director Option, to the extent exercisable, shall be
exercisable in whole or in part.
(b) Term. Outside Director Options shall expire at the earlier
of (i) the 10-year anniversary date of the Outside Director Option's
grant, or (ii) 30 days after the date the Outside Director ceases to
be a director of the Company unless such cessation results from such
director's death or permanent disability. In no event shall any
Outside Director Option be exercisable at any time after its
expiration date. When an Outside Director Option is no longer
exercisable, it shall be deemed to have lapsed or terminated.
8.5 Option Price. The purchase price of each Share subject to an
Outside Director Option shall be the Fair Market Value per Share on the
date of grant under Section 8.1, 8.2 or 8.3 (the date of initial election
or appointment of the Outside Director with respect to an Initial Outside
Director Option, a Partial Annual Outside Director Option, and an Executive
Committee Option and the date of the applicable Annual Meeting of
Shareholders with respect to an Annual Outside Director Option).
Notwithstanding anything to the contrary stated in this Plan, for purposes
of this Section and the definition of Fair Market Value in Section 2.1(m)
hereof, each Outside Director Option shall be deemed conclusively to have
been granted prior to close of the applicable securities exchange or system
on the date it is deemed to have
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been granted. An Outside Director may exercise an Outside Director Option
using as payment any form of consideration provided for in Section 7.1(a)
hereof, which form of payment shall be within the sole discretion of the
Outside Director, notwithstanding anything stated in Section 7.1(a) hereof.
8.6 Option Agreement. Outside Director Options granted to each
Outside Director under this Plan shall be evidenced by an agreement signed
on behalf of the Company by an officer thereof which only incorporates by
reference the terms of this Plan.
8.7 Transferability. During the lifetime of an Outside Director
who has been granted an Outside Director Option, only the Outside Director
(or such Outside Director's legal representative) may exercise the Outside
Director Option. No Outside Director Option may be sold, assigned,
transferred, exchanged, or otherwise encumbered, and any attempt to do so
shall be of no effect. Unless the Outside Director Option shall have
expired, in the event of an Outside Director's death, the Outside Director
Option granted to such Outside Director shall be transferable to the
beneficiary, if any, designated by the Outside Director in writing to the
Company prior to the Outside Director's death and such beneficiary shall
succeed to the rights of the Outside Director to the extent permitted by
law. If no such designation of a beneficiary has been made, the Outside
Director's legal representative shall succeed to the Outside Director
Option, which shall be transferable by will or pursuant to the laws of
descent and distribution.
9. Effective Date of this Plan.
9.1 Effective Date. This Plan shall become effective as of March
5, 1992, the date of adoption of this Plan by the Board, provided that this
Plan is approved and ratified by the affirmative vote of the holders of a
majority of the outstanding Shares of Stock present or represented and
entitled to vote in person or by proxy at a meeting of the shareholders of
the Company no later than December 31, 1992.
9.2 Duration of this Plan. This Plan shall remain in effect until
all Stock subject to it shall be distributed or all Awards have expired or
lapsed, whichever is latest to occur, or this Plan is terminated pursuant
to Section 12 hereof. No Award of an Incentive Stock Option shall be made
more than 10 years after the effective date (or such other limit as may be
required by the Code) if such limitation is necessary to qualify the Option
as an Incentive Stock Option. Except with respect to Director Options, the
date and time of approval by the Committee of the granting of an Award
shall be considered the date and time at which such Award is made or
granted, notwithstanding the date of any Agreement with respect to such
Award.
10. Right to Terminate Employment. Nothing in this Plan or in any
Agreement shall confer upon any Participant who is an Employee the right to
continue in the
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employment of the Company or any Affiliate or affect any right which the Company
or any Affiliate may have to terminate the employment of the Participant with or
without cause.
11. Tax Withholding. The Company may withhold from any cash payment
under this Plan to a Participant or other person an amount sufficient to cover
any required withholding taxes. The Company shall have the right to require a
Participant or other person receiving Stock under this Plan to pay to the
Company a cash amount sufficient to cover any required withholding taxes. In
lieu of all or any part of such a cash payment from a person receiving Stock
under this Plan, the Committee may permit the individual to elect to cover all
or any part of the required withholdings, and to cover any additional
withholdings up to the amount needed to cover the individual's full FICA and
federal, state, and local income tax with respect to income arising from payment
of the Award, through a reduction of the number of Shares delivered to such
individual or a subsequent return to the Company of Shares held by the
Participant or other person, in each case valued in the same manner as used in
computing the withholding taxes under the applicable laws: provided, however,
that if at any time withholding shall be required with respect to Outside
Directors, the Committee is required to permit an Outside Director to make such
an election. Such elections are subject to the following limitations if, and to
the extent, such limitations are necessary to comply with Exchange Act Rule 16b-
3 or any successor provision:
(a) Time of Election. Any such election by a Participant who is
then subject to the reporting requirements of Section 16 of the
Exchange Act or any successor provision ("Section 16") or a Successor
of such a Participant may be made only if the conditions set forth in
clauses (i) and (ii) below are satisfied:
(i) (A) The election may be made during the period beginning
on the third business day following the date of public release of
the Company's quarterly or annual summary statements of
operations and ending on the twelfth business day following such
date of public release, or (B) the election may be made at least
six months prior to the date as of which the amount of tax to be
withheld is determined.
(ii) An election may not be made within six months of the
date of grant of the Award to which the payment relates.
(b) Committee Approval. Any such election by a Participant then
subject to the reporting requirements of Section 16 or a Successor of
such a Participant is irrevocable and, except for Director Options, is
subject to approval by the Committee. The Committee's approval may be
granted in advance but is subject to revocation by the Committee at
any time.
12. Amendment, Modification, and Termination of this Plan. Except as
hereinafter provided in this Section, the Board may at any time amend, modify,
terminate, or suspend this Plan. Amendments are subject to approval of the
shareholders of the Company only if such approval is necessary to maintain this
Plan in compliance with the requirements
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of Exchange Act Rule 16b-3, Code Section 422, their successor provisions, or any
other applicable law or regulation. Without the approval of the shareholders of
the Company, no amendment, modification, termination or suspension of this Plan
may alter the provisions of this Plan so as to change the terms, conditions, or
eligibility requirements of a Director Option granted, or, subject to the right
of the Board to discontinue this Plan, to be granted, to Outside Directors under
this Plan. In no event shall the eligibility requirements for the receipt of
Director Options by Outside Directors or the formula for determining the amount
of Shares subject to Director Options granted to Outside Directors or the timing
of the grant or the exercise price of such Director Options be amended more than
once every six months other than to comply with changes in the Code. No
termination, suspension, or modification of this Plan may materially and
adversely affect any right acquired by any Participant (or a Participant's legal
representative) or any Successor under an Award granted before the date of
termination, suspension, or modification, unless otherwise agreed by the
Participant in the Agreement or otherwise or required as a matter of law. It is
conclusively presumed that any adjustment for changes in capitalization provided
for in Section 7.2(b) or Section 13 hereof does not adversely affect any right
of a Participant under an Award.
13. Adjustment for Changes in Capitalization. Appropriate adjustments
in the aggregate number and type of Shares available for Awards under this Plan
(including the maximum number of Shares that shall be made subject to Options
granted to Outside Directors under Section 8 hereof) and in the number and type
of Shares and amount of cash subject to Awards then outstanding, in the Option
price as to any outstanding Options and, subject to Section 7.2(b) hereof, in
outstanding Performance Units and payments with respect to outstanding
Performance Units may be made by the Committee in its sole discretion, and with
respect to Director Options, shall be made to give effect to adjustments made in
the number or type of Shares of the Company through a Fundamental Change
(subject to Section 14 hereof), recapitalization, reclassification, stock
dividend, stock split, stock combination, or other relevant change, provided
that fractional Shares shall be rounded to the nearest whole share.
14. Fundamental Change. In the event of a proposed Fundamental Change:
(a) involving a merger, consolidation, or statutory share exchange, unless
appropriate provision shall be made for the protection of the outstanding
Options by the substitution of options and appropriate voting common stock of
the corporation surviving any such merger or consolidation or, if appropriate,
the parent corporation of the Company or such surviving corporation, to be
issuable upon the exercise of options in lieu of Options and capital stock of
the Company, or (b) involving the dissolution or liquidation of the Company, the
Committee shall declare, at least 20 days prior to the occurrence of the
Fundamental Change, and provide written notice to each holder of an Option of
the declaration, that each outstanding Option, whether or not then exercisable,
shall be canceled at the time of, or immediately prior to the occurrence of the
Fundamental Change in exchange for payment to each holder of an Option, within
ten days after the Fundamental Change, of cash equal to the amount, if any, for
each Share covered by the canceled Option, by which the Fair Market Value (as
defined in this Section) per Share exceeds the exercise price per Share covered
by such Option. At the time of the declaration provided for in the immediately
preceding sentence, each Option
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shall immediately become excercisable in full and each person holding an Option
shall have the right, during the period preceding the time of cancellation of
the Option, to exercise the Option as to all or any part of the Shares covered
thereby. In the event of a declaration pursuant to this Section 14, each
outstanding Option that shall not have been exercised prior to the Fundamental
Change shall be canceled at the time of, or immediately prior to, the
Fundamental Change, as provided in the declaration. Notwithstanding the
foregoing, no person holding an Option shall be entitled to the payment provided
for in this Section 14 if such Option shall have expired pursuant to an
Agreement. For purposes of this Section only, "Fair Market Value" per Share
means the cash plus the fair market value, as determined in good faith by the
Committee, of the non-cash consideration to be received per Share by the
shareholders of the Company upon the occurrence of the Fundamental Change,
notwithstanding anything to the contrary provided in this Plan.
15. Unfunded Plan. This Plan shall be unfunded and the Company shall
not be required to segregate any assets that may at any time be represented by
Awards under this Plan.
16. Other Benefit and Compensation Programs. Payments and other
benefits received by a Participant under an Award shall not be deemed a part of
a Participant's regular, recurring compensation for purposes of any termination,
indemnity, or severance pay laws and shall not be included in, nor have any
effect on, the determination of benefits under any other employee benefit plan,
contract, or similar arrangement provided by the Company or an Affiliate, unless
expressly so provided by such other plan, contract, or arrangement or the
Committee determines that an Award or portion of an Award should be included to
reflect competitive compensation practices or to recognize that an Award has
been made in lieu of a portion of competitive cash compensation.
17. Beneficiary Upon Participant's Death. To the extent that the
transfer of a Participant's Award at death is permitted under an Agreement, (a)
a Participant's Award shall be transferable to the beneficiary, if any,
designated on forms prescribed by and filed with the Committee and (b) upon the
death of the Participant, such beneficiary shall succeed to the rights of the
Participant to the extent permitted by law and this Plan. If no such
designation of a beneficiary has been made, the Participant's legal
representative shall succeed to the Awards, which shall be transferable by will
or pursuant to laws of descent and distribution to the extent permitted under an
Agreement.
18. Governing Law. To the extent that federal laws do not otherwise
control, this Plan and all determinations made and actions taken pursuant to
this Plan shall be governed by the laws of Minnesota and construed accordingly.
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EXHIBIT B
1992 EMPLOYEE STOCK PURCHASE PLAN
(as amended through May 1996)
1. Purpose and Scope of Plan. The purpose of the 1992 Employee Stock
Purchase Plan (the "Plan") is to provide the employees of Computer Network
Technology Corporation (the "Company") and its affiliates with an opportunity to
acquire a proprietary interest in the Company through the purchase of its common
stock and, thus, to develop a stronger incentive to work for the continued
success of the Company. The Plan is intended to be an "employee stock purchase
plan" within the meaning of Section 473(b) of the Internal Revenue Code of 1986,
as amended, and shall be interpreted and administered in a manner consistent
with such intent.
2. Definitions.
2.1 Whenever used in this Plan:
(a) "Affiliate" means any parent or subsidiary corporation of
the Company. as defined in Sections 434(e) and 424(f) of the Code.
(b) "Base Compensation" means the gross cash compensation
(including wage, salary, and overtime earnings) paid by the Company or
any Affiliate to a Participant in accordance with the terms of
emloyment, but excluding all incentive Compensation, cash received
upon receipt of Certificates of Recognition, expense allowances
(including, without limitation, moving expense allowances), and
compensation payable in a form other than cash, provided that such
compensation will be determined without regard to any earnings
reduction agreements made pursuant to (i) a qualified cash or deferred
arrangement under Section 401(k) of the Code or (ii) a cafeteria plan
established under Section 125 of the Code.
(c) "Board of Directors'' means the board of directors of
the Company.
(d) "Code" means the Internal Revenue Code of 1986, as
amended.
(e) "Committee" means the Compensation Committee of the
Board of Directors.
(f) "Common Stock" means the common stock, par value $.01
per share, of the Company.
(g) "Company" means Computer Network Technology
Corporation.
(h) "Compensation" means the sum of a Participant's Base
Compensation and his or her Incentive Compensation.
(i) "Eligible Employee" means any employee of the Company or
an Affiliate whose customary employment is (i) at least 20 hours per
week and (ii) for more than 5 months in any calendar year, provided,
however, that "Eligible Employee" shall not include any person who
would be deemed for purposes of Section 423(b)(3) of the Code to own
stock possessing 5% or more of the total combined voting power or
value of all classes of stock of the Company.
(j) "Incentive Compensation" means compensation paid to a
Participant pursuant to the Success Sharing Plan of the Company or in
the form of commissions.
<PAGE>
(k) "Fair Market Value" as of any date means:
(i) the closing sale price of a share of Common
Stock on the date specified or, if no sale of shares of
Common Stock shall have occurred on that date, on the next
preceding day on which a sale occurred of shares on the
National Association of Securities Dealers Inc. Automated
Quotations National Market System ("NMS"), or
(ii) if the shares of Common Stock are not quoted on
the NMS, what the Committee determines in good faith to be
the fair market value of a share of Common Stock on that
date.
If such determination of Fair Market Value is not consistent
with the then current regulations of the Secretary of the
Treasury applicable to plans intended to qualify as an
"employee stock purchase plan" within the meaning of Section
423(b) of the Code, Fair Market Value shall be determined in
accordance with said regulations. The determination of Fair
Market Value shall be subject to adjustment as provided in
Section 14 hereof.
(l) "Participant" means an Eligible Employee who has elected
to participate in the Plan in the manner set forth in Section 4.
(m) "Plan" means this 1992 Employee Stock Purchase Plan.
(n) "Purchase Period" means the period of July 1, 1992 to May
31, 1993, and thereafter the l2-month period beginning on June 1 of
each year and ending on May 31 of the succeeding year.
(o) "Stock Purchase Account" means the account maintained in
the books and records of the Company recording the amount withheld
from each Participant through payroll deductions made under the Plan.
3. Scope of the Plan. Options to purchase shares of Common Stock may be
granted by the Company to Eligible Employees during the period commencing July
1, 1992 and ending May 31, 2002 as hereinafter provided, but not more than
450,000 shares of Common Stock (subject to adjustment as provided in Section 14
hereof) shall be purchased pursuant to such options. All options granted
pursuant to this Plan shall be subject to the same terms, conditions, rights,
and privileges. The shares of Common Stock delivered by the Company pursuant to
this Plan may be acquired shares having the status of authorized but unissued
shares, newly issued shares, or both.
4. Eligibility and Participation. To be eligible to participate in this
Plan for a given Purchase Period, an employee must be an Eligible Employee on
the first day of such Purchase Period. An Eligible Employee may elect to
participate in the Plan by filing an enrollment form with the Committee in
advance of the Purchase Period that authorizes regular payroll deductions from
Compensation beginning with the first payday in the Purchase Period and
continuing until the Eligible Employee withdraws from the Plan or ceases to be
an Eligible Employee.
5. Amount of Common Stock Each Eligible Employee May Purchase.
5.1 Subject to the provisions of this Plan, each Eligible Employee
shall be offered the option to purchase on the last day of the Purchase
Period the largest number of whole shares of Common Stock that can be
purchased at the price specified in Section 5.2 hereof with the entire
credit balance in the Participant's Stock Purchase Account: provided
however, that no more than the lesser of (i) 5,000 shares of Common Stock
and other stock for each Purchase Period or (ii) $25,000 in Fair Market
Value (determined at the beginning of each Purchase Period) of shares of
Common Stock and other stock may be purchased under this Plan and all other
employee stock purchase plans (if any) of the Company and the Affiliates by
any Participant for each calendar year. If the purchases by all
Participants would otherwise cause the aggregate number of shares of Common
Stock to be sold under the Plan to exceed
2
<PAGE>
the number specified in Section 3 hereof, however, each Participant shall
be allocated a ratable portion of the maximum number of shares of Common
Stock which may be sold.
5.2 The purchase price of each share of Common Stock sold pursuant to
this Plan will be the lesser of (i) 85% of the Fair Market Value of such
share on the first business day of the Purchase Period or (ii) 85% of the
Fair Market Value of such share on the last business day of the Purchase
Period.
6. Method of Participation.
6.1 The Committee shall give notice to Eligible Employees of each
offering of options to purchase shares of Common Stock pursuant to this
Plan and the terms and conditions for each offering. Such notice is
subject to revision by the Company at any time prior to the date of grant
of the option. The first day of a Purchase Period is the date contemplated
by the Company as the date of grant of the option to purchase such shares.
6.2 Each Eligible Employee who desires to participate in the Plan for
a Purchase Period shall signify his or her election to do so by signing an
election form developed by the Committee. An Eligible Employee may elect
different withholding percentages for Base Compensation and for Incentive
Compensation, provided that the withholding percentage as to each must
always be a whole percentage from 0% to 10%. Notwithstanding the foregoing,
a Particpant may not withhold more than $5,000 in the aggregate during each
Purchase Period. An election to participate in the Plan and to authorize
payroll deductions as described herein must be made before the commencement
of the Purchase Period to which it relates and shall remain in effect
unless and until such Participant withdraws from this Plan, modifies his or
her authorization, or terminates his or her employment with the Company as
hereinafter provided.
6.3 Any Eligible Employee who does not make a timely election as
provided in Section 6.2 hereof shall be deemed to have elected not to
participate in the Plan. Such election shall be irrevocable for such
Purchase Period.
7. Stock Purchase Account.
7.1 The Company shall maintain a Stock Purchase Account for each
Participant. Payroll deductions pursuant to Section 6 hereof will be
credited to such Stock Purchase Accounts on each payday.
7.2 No interest will be credited to a Participant's Stock Purchase
Account.
7.3 The Stock Purchase Account is established solely for accounting
purposes, and all amounts credited to the Stock Purchase Account will
remain part of the general assets of the Company.
7.4 A Participant may not make any separate cash payment into his or
her Stock Purchase Account.
8. Right to Reduce Participation or to Withdraw.
8.1 A Participant may, at any time during a Purchase Period, direct
the Company to make no further deductions from his or her Compensation or
to reduce the amount of such deductions. Upon either of such actions,
future payroll deductions with respect to such Participant shall cease or
be reduced in accordance with the Participant's direction.
8.2 Any Participant who stops payroll deductions may not thereafter
resume payroll deductions for the 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.
8.3 At any time before the end of a Purchase Period, any Participant
may also withdraw from the Plan. In such event, all future payroll
deductions shall cease and the entire credit balance in the
3
<PAGE>
Participant's Stock Purchase Account will be paid to the Participant,
without interest, in cash within 60 days. A Participant who withdraws from
the Plan will not be eligible to reenter the Plan until the next succeeding
Purchase Period.
8.4 Notification of a Participant's election to reduce or terminate
deductions, or to withdraw from the Plan, shall be made by the filing of an
appropriate notice to such effect with the Committee.
9. Termination of Employment.
9.1 If the employment of a Participant is terminated prior to
conclusion of the Purchase Period because of death, permanent disability,
or retirement at or after age 65, or earlier with the consent of the
Committee, the Participant or his or her legal representative, as
applicable, may either:
(a) withdraw from the Plan, in which event the Company shall
refund in cash the entire balance in the Participant's Stock Purchase
Account; or
(b) elect to receive a distribution of only a portion of his
or her Stock Purchase Account, in which event the Company shall refund
such portion in cash and shall leave the balance of the Stock Purchase
Account to be applied at the end of the Purchase Period towards the
acquisition of shares of Common Stock as provided in Section 10
hereof.
9.2 The election of a Participant or his or her legal representative,
as applicable, pursuant to Section 9.1 shall be made within three months of
the event causing the termination of employment, but not (except in the
case of death) later than the conclusion of the Purchase Period.
Notification of the election shall be filed with the Committee and, in the
event no notification has been filed within the prescribed period, the
Participant shall be deemed to have elected to withdraw from the Plan in
accordance with Section 9.l(a) hereof.
9.3 If the employment of a Participant is terminated for any reason
other than those specified in Section 9.1 hereof, the Company shall refund
in cash all amounts credited to his or her Stock Purchase Account.
10. Exercise of Option and Purchase of Shares.
10.1 As of the last day of the Purchase Period, the entire credit
balance in each Participant's Stock Purchase Account will be used to
purchase the largest number of whole shares of Common Stock purchasable
with such amount (subject to the limitations of Section 5 hereof) unless
the Participant has filed an appropriate form with the Committee in advance
of that date (which either elects to purchase a specified number of whole
shares which is less than the number described above or elects to receive
the entire credit balance in cash).
10.2 Any amount remaining in a Participant's Stock Purchase Account
after such purchase (or the entire credit balance if the Participant
elected not to purchase any shares) will be paid to the Participant in cash
within 60 days after the end of the Purchase Period.
10.3 As soon as practicable after the close of the Purchase Period,
certificates for the number of whole shares of Common Stock, determined as
aforesaid, purchased by each Participant shall be issued and delivered to
him or her.
11. Rights as a Stockholder. A Participant shall not be entitled to any
of the rights or privileges of a stockholder of the Company with respect to such
shares, including the right to receive any dividends which may be declared by
the Company, until he or she actually has paid the purchase price for such
shares and certificates have been issued to him or her in accordance with
Section 10.
12. Rights Not Transferable. A Participant's rights under this Plan are
exercisable only by the Participant during his or her lifetime, and may not be
sold, pledged, assigned, or transferred in any manner other
4
<PAGE>
than by will or the laws of descent and distribution. Any attempt to sell,
pledge, assign, or transfer the same shall be null and void and without effect.
The amounts credited to a Stock Purchase Account may not be assigned,
transferred, pledged, or hypothecated in any way, and any attempted assignment,
transfer, pledge, hypothecation, or other disposition of such amounts will be
null and void and without effect.
13. Administration of the Plan.
13.1 This Plan shall be administered by the Committee, which is
authorized to make such uniform rules as may be necessary to carry out its
provisions. The Committee shall determine any questions arising in the
administration, interpretation, and application of this Plan, and all such
determinations shall be conclusive and binding on all parties.
13.2 If any option granted under this Plan shall lapse or terminate
unexercised, the number of shares of Common Stock covered thereby shall
again become available for sale under this Plan.
14. Adjustment Upon Changes in Capitalization. In the event or any change
in the Common Stock of the Company by reason of stock dividends, stock splits,
corporate separations, recapitalizations, mergers, consolidations, combinations,
exchanges of shares, and the like, the aggregate number and class of shares
available under this Plan and the number, class, and purchase price of shares
under option but not yet purchased under this Plan, shall be adjusted
appropriately by the Committee.
15. Registration of Certificate. Stock certificates will be registered in
the name of the Participant, or jointly in the name of the Participant and
another person, as the Participant may direct on an appropriate form.
16. Amendment of Plan. The Board of Directors may at any time amend this
Plan in any respect which shall not adversely affect the rights of Participants
pursuant to options accepted under this Plan, except that, without stockholder
approval on the same basis as required by Section 19.1, no amendment shall be
made (i) to increase the number of shares to be reserved under this Plan, (ii)
to decrease the minimum purchase price, (iii) to withdraw the administration of
this Plan from the Committee, or (iv) to change the definition of employees
eligible to participate in the Plan.
17. Effective Date of Plan. This Plan shall consist of an offering
commencing July 1, 1992 and ending May 31, 1993 and thereafter 9 consecutive
annual offerings beginning on June 1 of each year and ending on May 31 of the
subsequent year. All rights of Participants in any offering hereunder shall
terminate at the earlier of the conclusion of the last Purchase Period
authorized herein on May 31, 2002 or:
17.1 On the day that 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;
17.2 At any time, at the discretion of the Board of Directors, after
30 days' notice has been given to all Participants.
Upon termination of this Plan, shares of Common Stock in accordance with Section
10 shall be issued to Participants, and cash, if any, remaining in the
Participants' Stock Purchase Accounts shall be refunded to them, as if the Plan
were terminated at the end of a Purchase Period.
18. Governmental Regulations and Listing. All rights granted or to be
granted to Eligible Employees under this Plan are expressly subject to all
applicable laws and regulations and to the approval of all governmental
authorities required in connection with the authorization, issuance, sale, or
transfer of the shares of Common Stock reserved for this Plan, including,
without limitation, there being a current registration statement of the Company
under the Securities Act of 1933 as amended, covering the shares of Common Stock
purchasable under options on the last day of the Purchase Period applicable to
such options, and if such a registration statement shall not then be effective,
the term of such options and the Purchase Period shall be extended until the
first business day after the effective date of such a registration statement, or
post-effective amendment thereto. If applicable, all such rights hereunder are
also similarly subject to effectiveness of an appropriate listing application to
the National
5
<PAGE>
Association of Securities Dealers, Inc. covering the shares of Common Stock
under the Plan upon official notice of issuance.
19. Miscellaneous.
19.1 This Plan shall be submitted for approval by the stockholders of
the Company prior to May 31, 1992. If not so approved prior to such date,
this Plan shall terminate on June 1, 1992.
19.2 This Plan shall not be deemed to constitute a contract of
employment between the Company and Participant, nor shall it interfere with
the right of the Company to terminate any Participant and treat him or her
without regard to the effect which such treatment might have upon him or
her under this Plan.
19.3 Wherever appropriate as used herein, the masculine gender may be
read as the feminine gender, the feminine gender may be read as the
masculine gender, the singular may be read as the plural, and the plural
may be read as the singular.
19.4 This Plan, and all agreements hereunder, shall be construed in
accordance with and governed by the laws of the State of Minnesota.
19.5 Delivery of shares of Common Stock or of cash pursuant to this
Plan shall be subject to any required withholding taxes. A person entitled
to receive shares of Common Stock may, as a condition precedent to
receiving such shares, be required to pay the Company a cash amount equal
to the amount of any required withholdings.
6
<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 8, 1997, hereby appoints Kristine E. Ochu and Jeffrey A.
Bertelsen 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 24, 1997, at
the Annual Meeting of Shareholders to be held on May 15, 1997 at the Radisson
Plaza Hotel, 35 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.
<TABLE>
<CAPTION>
ELECTION OF DIRECTORS NOMINEES: Thomas G. Hudson, Erwin A. Kelen, Lawrence Perlman, John A. Rollwagen
<S> <C> <C>
FOR WITHHOLD (INSTRUCTION: To withhold authority to vote for any individual nominee, write that
all nominees listed AUTHORITY nominee's name on the space provided below.)
(except as marked to vote for
to the contrary at all nominees
right) listed
[_] [_] -----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
2. PROPOSAL TO AMEND THE 1992 STOCK AWARD PLAN
to increase the number of shares authorized for issuance
thereunder from 4,350,000 to 5,400,000.
<S> <C> <C>
FOR AGAINST ABSTAIN
[_] [_] [_]
</TABLE>
3. PROPOSAL TO AMEND THE 1992 EMPLOYEE STOCK PURCHASE PLAN to increase the
number of shares authorized for issuance thereunder from 450,000 to 500,000
and to modify the definition of "affiliate" as used in the Plan to allow the
Board of Directors discretion in determining which affiliates of the Company
(and, therefore, their employees) will be eligible to participate in the
Plan.
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, 1997.
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.
<PAGE>
1997 - COMPUTER NETWORK TECHNOLOGY CORPORATION--VOTING INSTRUCTION CARD
401(k) SALARY SAVINGS PLAN
ANNUAL MEETING OF SHAREHOLDERS
MAY 15, 1997 - 10:00 A.M.
RADISSON PLAZA HOTEL, 35 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 15, 1997, 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 7, 1997.
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.
<TABLE>
<CAPTION>
ELECTION OF DIRECTORS NOMINEES: Thomas G. Hudson, Erwin A. Kelen, Lawrence Perlman, John A. Rollwagen
<S> <C> <C>
FOR WITHHOLD (INSTRUCTION: To withhold authority to vote for any individual nominee, write that
all nominees listed AUTHORITY nominee's name on the space provided below.)
(except as marked to vote for
to the contrary at all nominees
right) listed
[_] [_] -----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
2. PROPOSAL TO AMEND THE 1992 STOCK AWARD PLAN
to increase the number of shares authorized for issuance
thereunder from 4,350,000 to 5,400,000.
<S> <C> <C>
FOR AGAINST ABSTAIN
[_] [_] [_]
</TABLE>
3. PROPOSAL TO AMEND THE 1992 EMPLOYEE STOCK PURCHASE PLAN to increase the
number of shares authorized for issuance thereunder from 450,000 to 500,000
and to modify the definition of "affiliate" as used in the Plan to allow the
Board of Directors discretion in determining which affiliates of the Company
(and, therefore, their employees) will be eligible to participate in the
Plan.
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, 1997.
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.
