<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (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 Rule 14a-11(c) or Rule 14a-12.
Computer Network Technology Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(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:
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(4) Date Filed:
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<PAGE> 2
[COMPUTER NETWORK TECHNOLOGY LOGO]
Computer Network Technology Corporation
6000 Nathan Lane North
Minneapolis, Minnesota 55442
(763) 268-6000
April 13, 2000
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of the Shareholders
of Computer Network Technology Corporation (the "Company") at the Company's
headquarters, 6000 Nathan Lane North, in the Minneapolis suburb of Plymouth,
Minnesota, on Thursday, May 25, 2000, beginning at 10:00 a.m. Please refer to
the map in the back of this proxy statement for directions to the Company's
headquarters.
The Secretary's Notice of the Annual Meeting and the Proxy Statement that
appear on the following pages describe the matters scheduled to come before the
meeting. At the meeting, I will discuss the Company's performance in 1999 and
report on current items of interest to our shareholders. In addition, certain
members of the Company's board of directors and executives of the Company, as
well as representatives of KPMG 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
Chairman of the Board, President
and Chief Executive Officer
<PAGE> 3
[COMPUTER NETWORK TECHNOLOGY LOGO]
Computer Network Technology Corporation
6000 Nathan Lane North
Minneapolis, Minnesota 55442
(763) 268-6000
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 25, 2000
- --------------------------------------------------------------------------------
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 25, 2000 at the Company's headquarters at 6000 Nathan Lane
North, in the Minneapolis suburb of Plymouth, Minnesota, beginning at 10:00 a.m.
for the following purposes:
(1) To fix the number of directors at five and to elect five persons to the
board of directors to serve until the next Annual Meeting of the
Shareholders;
(2) To approve the adoption of the RealLegacy.com, Inc. 2000 Officer and
Director Stock Award Plan;
(3) To ratify and approve the appointment of KPMG LLP as independent
auditors for the fiscal year ending January 31, 2001; and
(4) To transact other business that may properly come before the meeting.
Shareholders of record as of the close of business on March 27, 2000 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/ GREGORY T. BARNUM
Gregory T. Barnum
Vice President of Finance, Chief
Financial Officer
and Corporate Secretary
April 13, 2000
Minneapolis, Minnesota
<PAGE> 4
[COMPUTER NETWORK TECHNOLOGY CORPORATION]
Computer Network Technology Corporation
6000 Nathan Lane North
Minneapolis, Minnesota 55442
(763) 268-6000
- --------------------------------------------------------------------------------
PROXY STATEMENT
- --------------------------------------------------------------------------------
ANNUAL MEETING OF SHAREHOLDERS
MAY 25, 2000
GENERAL
This Proxy Statement is furnished in connection with the solicitation by
the board of directors (the "Board") 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 25, 2000 at the Company's
headquarters located at 6000 Nathan Lane North, Minneapolis, Minnesota,
beginning at 10:00 a.m. (local time), 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 13, 2000. THE BOARD OF DIRECTORS RECOMMENDS THAT
SHAREHOLDERS VOTE IN FAVOR OF ITEMS 1, 2 AND 3. Shares represented by properly
executed and returned proxies will, unless otherwise specified on the proxy
card, be voted FOR all of the nominees listed in Item 1 and FOR Items 2 and 3,
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 or at the Annual
Meeting.
The Company will pay expenses incurred in connection with the solicitation
of proxies. Proxies are being solicited by mail. In addition, directors,
officers and other employees of the Company may solicit proxies personally, by
telephone, by electronic mail, or by facsimile 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 as of the close of business on March 27, 2000 are
the only persons entitled to vote at the Annual Meeting. As of that date, there
were issued and outstanding 23,979,889 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.
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<PAGE> 5
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 five and nominates the five persons named below
for election as directors. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
ELECTION OF ALL NOMINEES.
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 to elect each of the five nominees named below.
NOMINEES TO THE BOARD
THOMAS G. HUDSON, 53 years of age, has served as President and Chief
Executive Officer since June 1996, as a director since August 1996 and as
Chairman of the Board of Directors since May 1999. From 1993 to June 1996, Mr.
Hudson served as 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. Mr. Hudson attended the Harvard Advanced
Management Program in 1990.
PATRICK W. GROSS, 55 years of age, has been a director since July 1997. Mr.
Gross founded American Management Systems, Inc. ("AMS") in 1970 where he serves
as Chairman of the Executive Committee and Principal Executive Officer. AMS is a
management consulting and systems integration firm applying information
technology to business and management in both the public and private sectors.
Between July 1968 and May 1970, Mr. Gross served on the staff of the U.S.
Secretary of Defense in the Office of Systems Analysis. Mr. Gross is Chairman of
Baker & Taylor Holdings, Inc., a private company, and serves as a director of
American Management Systems, Inc., Capital One Financial Corporation, Capital
One FSB, and Landmark Systems Corporation. Mr. Gross is a graduate of Rensselaer
Polytechnic Institute, University of Michigan and Stanford University.
ERWIN A. KELEN, 64 years of age, has been a director since June 1988. Mr.
Kelen is President of Kelen Ventures and a partner of Camir Investments, both
private investment entities. 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. Mr. Kelen is a graduate of the Technical University of Budapest and
the University of Minnesota Graduate School.
LAWRENCE PERLMAN, 61 years of age, has been a director since June 1988.
From January 1990 to December 1999, Mr. Perlman served as Chief Executive
Officer of Ceridian Corporation, retiring as of December 31, 1999. Mr. Perlman
served as Chairman of Ceridian from November 1992 to April 2000, retiring in
April 2000. Ceridian Corporation is a leading information services and defense
electronics company that
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<PAGE> 6
serves the human resources, electronic media, transportation, gaming and
government markets. Mr. Perlman also serves as a director of Ceridian
Corporation, Carlson Companies, Inc., Valspar Corporation and Amdocs Ltd. and as
Chairman and a director of Seagate Technology, Inc. Mr. Perlman is a graduate of
Carleton College and Harvard Law School.
JOHN A. ROLLWAGEN, 59 years of age, has been a director since June 1993 and
served as Chairman of the Board from December 1995 to May 1999. Mr. Rollwagen is
a private investor and venture partner with St. Paul Venture Capital, a venture
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 several private companies.
Mr. Rollwagen 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 five meetings during 1999 and otherwise conducted business
by written resolutions signed by all directors. Each director attended at least
80% of the total number of meetings of the Board plus 75% of the total number of
meetings of all committees on which he served.
The Audit Committee recommends to the Board the selection of independent
auditors, reviews the activities and reports of the independent auditors, and
reviews the internal accounting controls of the Company. The Audit Committee is
comprised of Messrs. Gross, Kelen, Perlman, and Rollwagen. The Audit Committee
held two meetings in 1999.
The Compensation Committee is comprised of Messrs. Gross, Kelen, Perlman,
and Rollwagen. The primary purpose of this Committee is set forth in the "Report
on Executive Compensation" contained in this Proxy Statement. The Compensation
Committee held four meetings in 1999 and otherwise conducted business by written
resolutions signed by the Committee members.
The Board does not have a standing nominating committee.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive a retainer of $5,000
per quarter, plus reimbursement of out-of-pocket expenses incurred on behalf of
the Company. Accordingly, the non-employee directors were each paid a retainer
of $20,000 for 1999. During 1999, each of the Company's non-employee directors
also received an option to purchase 20,000 shares of the Company's Common Stock
under the Company's 1992 Stock Award Plan.
5
<PAGE> 7
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 1, 2000, certain information
with respect to all shareholders known to the Company to have been beneficial
owners of more than 5% of its Common Stock, for each director and each executive
officer named in the Compensation Table on page 14, and all directors and
executive officers of the Company as a group. Unless otherwise indicated, each
person named in the table has sole voting and investment power as to the Common
Stock shown.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP STOCK OUTSTANDING
------------------------------------ ----------------- -----------------
<S> <C> <C>
Kopp Investment Advisors(1) 4,573,010 19.14%
7701 France Avenue South, Suite 500
Edina, Minnesota 55435
Massachusetts Financial Services Company(2) 2,821,298 11.81%
500 Boylston Street
Boston, Massachusetts 02116
Thomas G. Hudson(3) 546,546 2.24%
Erwin A. Kelen(4) 517,910 2.15%
John A. Rollwagen(4) 243,333 1.01%
Lawrence Perlman(4) 191,666 *
Patrick A. Gross(4) 85,009 *
Nick V. Ganio(5) 63,061 *
Martin G. Hahn(6) -- *
Peter Dixon(7) 35,061 *
William C. Collette(8) 35,225 *
Gregory T. Barnum(9) 14,750 *
All executive officers and directors as a Group (13 1,834,898 7.23%
persons)(10)(11)
</TABLE>
* Represents beneficial ownership of less than one percent of the outstanding
Common Stock.
- -------------------------
(1) According to a Schedule 13G filed with the SEC on March 8, 2000 by (i) Kopp
Investment Advisors, Inc, a Minnesota corporation ("KIA") and a registered
investment advisor, (ii) Kopp Holding Company, a Minnesota corporation and
the parent corporation of KIA, ("KHC"), and (iii) LeRoy C. Kopp, the sole
stockholder of KHC ("Kopp" and collectively with KIA and KHC, the
"reporting persons"), KIA beneficially owns 4,313,010 shares of Common
Stock and Kopp beneficially owns 4,573,010 shares of Common Stock
(including the shares beneficially owned by KIA). KHC, as the parent
corporation of KIA, reports indirect ownership of the Common Stock
beneficially owned by KIA. KIA reports shared investment power with respect
to all of the shares of Common Stock it beneficially owns (by virtue of
limited powers of attorney and/or investment advisory agreements) and
reports sole voting power with respect to 1,352,000 shares. Kopp reports
sole voting and sole investment power with respect to 260,000 shares of
Common Stock he beneficially owns. All of the reporting persons have the
same business address. The ownership information above is as of February
29, 1999.
(2) According to a Schedule 13G filed with the SEC on February 8, 2000 by
Massachusetts Financial Services Company ("MFS"), a registered investment
advisor, MFS is deemed to have beneficial ownership of 2,821,298 shares of
the Company's Common Stock as of December 31, 1999. MFS reports sole voting
power for 2,248,698 of the shares of Common Stock and sole dispositive
power for 2,821,298 shares of Common Stock.
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<PAGE> 8
(3) Includes 509,031 shares that may be acquired upon exercise of incentive and
non-qualified stock options that are currently exercisable or are
exercisable within 60 days. Also includes 1,054 shares held by Connecticut
General Trust Company as trustee of the Company's 401(k) Plan.
(4) Includes 225,000, 238,333, 191,666 and 85,009 shares that may be acquired
upon the exercise of non-qualified stock options held by Messrs. Kelen,
Rollwagen, Perlman, and Gross, respectively. These options are currently
exercisable or are exercisable within 60 days.
(5) Includes 62,500 shares that may be acquired upon exercise of incentive and
non-qualified stock options that are currently exercisable or are
exercisable within 60 days.
(6) Mr. Hahn announced his intent to resign from the Company on October 26,
1999, to be effective November 12, 1999, and the Company subsequently
accepted his resignation effective November 1, 1999.
(7) Includes 29,895 shares that may be acquired upon exercise of incentive and
non-qualified stock options that are currently exercisable or are
exercisable within 60 days.
(8) Includes 31,000 shares that may be acquired upon exercise of incentive and
non-qualified stock options that are currently exercisable or are
exercisable within 60 days.
(9) Includes 10,000 shares that may be acquired upon exercise of incentive and
non-qualified stock options that are currently exercisable or are
exercisable within 60 days.
(10) Includes 1,054 shares held by Connecticut General Trust Company as trustee
of the Company's 401(k) Plan for the benefit of Mr. Hudson.
(11) Includes 1,480,059 shares that may be acquired upon exercise of incentive
and non-qualified stock. These options, including those discussed above,
are currently exercisable, or become exercisable within 60 days. Includes
only executive officers and directors as of March 1, 2000.
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<PAGE> 9
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. During 1999, 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 complied with such filing requirements.
REPORT ON EXECUTIVE COMPENSATION
OVERVIEW
The Compensation Committee (the Committee) is comprised entirely of
independent, outside directors and is responsible for recommending to the Board
the Company's executive compensation philosophy, for determining all aspects of
the Chief Executive Officer's compensation, and for review and approval of
recommendations for compensation paid to other executives. The Committee is also
responsible for administering the Company's stock-based compensation plans.
During 1999, the Committee was comprised of Messrs. Gross, Kelen, Perlman, and
Rollwagen.
The primary objectives of executive compensation are to provide
compensation that will attract, retain, reward and motivate a highly effective
Executive Team who 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 Company's total compensation for executives consists of annual cash
compensation in the form of base salaries and bonuses, and long-term incentives
in the form of participation in the Company's Executive Deferred Compensation
Plan and options to acquire Common Stock. In addition, executives are provided
with the same level and types of benefits that are generally available to other
employees. The Company's executive compensation strategy is designed to base a
significant portion of an executive's overall compensation on the financial
performance of the Company. The following sections describe each component of
executive compensation.
ANNUAL CASH COMPENSATION
Base salary and bonuses are established for the Company's executives each
year based on the executive's job responsibilities, level of experience, overall
performance and contributions, future potential, as well as information obtained
with respect to competitive pay practices. Comparative compensation data was
derived from an analysis of external compensation surveys encompassing companies
of similar size and industry, and from outside consultants. Bonuses may be based
on a combination of the Success Sharing Leadership Bonus Plan ("the Success
Sharing Plan"), individual performance bonuses or sales commissions. For 1999,
base salaries and bonuses for the Company's executives, other than its Chief
Executive Officer, were recommended to the Committee by the Company's Chief
Executive Officer, after consideration was given to the factors noted above and
consultation with the Company's Vice President of Human Resources.
The Success Sharing Plan is an incentive program which provides executives
and other key contributors with the opportunity to earn a cash bonus if the
Company achieves certain levels of revenue growth and pre-tax profitability,
with the level of bonus payment specifically tied to achievement of these key
performance measures.
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<PAGE> 10
At the beginning of each year, the Committee approves a success sharing
bonus participation rate for each executive and a grid for use in determining
the Company's success sharing bonus factor. The horizontal and vertical axes of
the grid are based on defined levels of revenue growth over the previous year
and pre-tax profit as a percentage of revenue (after deducting the cost of
success sharing bonuses and excluding special charges). The success sharing
factor is based on the grid and the Company's actual level of revenue growth and
pre-tax profitability. The success sharing bonus participation rate for each
executive is based on the executive's expected level of contribution to the
Company's overall financial performance. The success sharing bonus for an
executive is determined by multiplying their eligible base compensation by the
Company's success sharing bonus factor and their individual success sharing
bonus participation rate.
For 1999, the Company's success sharing bonus factor was six percent and
the individual success sharing bonus participation rates for the Company's
executives ranged from 20 percent to 60 percent. An executive having eligible
compensation of $125,000 and a success sharing bonus participation rate of 20
percent would have earned a 1999 success sharing bonus of $1,500.
In addition, certain executives earned commissions and other bonuses in
1999 by achieving various predetermined goals and objectives. For example, the
Company's Group Vice President of Worldwide Sales, Marketing and Services earned
commissions and bonuses in 1999 by achieving various revenue objectives.
LONG TERM INCENTIVES
Stock options are a key tool to recruit, retain, and motivate executive
officers and other key employees. The Committee determines the timing and number
of stock option grants for the Company's executives, including its Chief
Executive Officer, based on the anticipated contribution of the executive to the
Company's overall financial performance and their level of responsibility within
the Company. In determining the number of options to be granted, the Committee
also takes into consideration the number of options then held by the executive.
All stock options granted have an exercise price equal to fair market value on
the date of grant, generally vest over a four year period and expire ten years
from the date of grant.
In 1999, options to purchase Common Stock were granted to selected members
of the executive team at an exercise price of $21.875 per share that vest and
become exercisable after six years from the date of grant. The vesting of these
shares will accelerate, after one year, with respect to 50% of the options in
the event the average closing sales price of the Company's Common Stock exceeds
150% of the exercise price for sixty consecutive trading days. Vesting with
respect to 100% of the options will accelerate if the average closing sales
price of the Company's Common Stock exceeds 200% of the exercise price for a
period of sixty consecutive trading days.
The Company's Executive Deferred Compensation Plan provides eligible
executives with the opportunity to defer compensation and receive a matching
contribution equal to 20% of deferrals, up to an annual maximum of $10,000 per
year. The matching contribution is fully vested after four years of service.
COMPENSATION FOR THE PRESIDENT AND CHIEF EXECUTIVE OFFICER
The 1999 compensation plan for the Company's President and Chief Executive
Officer, Thomas G. Hudson, included annual base salary of $330,000 and
participation in the Success Sharing Plan at a rate of 60 percent. Mr. Hudson
received one stock option grant in 1999 for the purchase of 300,000 shares of
Common Stock at an exercise price of $21.875 per share. The option grants made
to Mr. Hudson were based upon his performance and leadership with the Company.
The grants placed a significant portion of his total compensation at risk, since
the options' value depends on the appreciation of the Company's Common Stock
over the option term.
INTERNAL REVENUE CODE SECTION 162(M)
Internal Revenue Code (the "Code") Section 162(m) limits the deductibility
of compensation over $1 million paid by a company to an executive officer in
certain circumstances. Because the maximum number
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<PAGE> 11
of shares that may be awarded to any employee or other participant under the
Stock Award Plan in any calendar year is limited to 750,000 shares, the
Committee believes that compensation with respect to any stock options granted
to executive officers will qualify as performance-based compensation not subject
to the $1 million limit under Section 162(m). The Committee does not otherwise
currently have a policy with respect to Section 162(m) because the Committee
believes that it is unlikely that such limit will apply to compensation paid by
the Company to any of the Company's executive officers for at least the current
year.
PATRICK A. GROSS
ERWIN A. KELEN
LAWRENCE PERLMAN
JOHN ROLLWAGEN
Members of the Compensation Committee
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SUMMARY COMPENSATION TABLE
The following table shows, for the Company's Chief Executive Officer, each
of the four other most highly compensated executive officers of the Company at
the end of fiscal 1999, and one additional executive officer who served in that
capacity during a portion of 1999 (collectively, the "Named Officers"),
information concerning compensation earned for services in all capacities during
the fiscal year ended December 31, 1999, as well as compensation earned by each
such person for the three previous fiscal years (if the person was the Chief
Executive Officer or another executive officer during any part of such fiscal
year):
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------- SHARES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($) OPTIONS(#) COMPENSATION $
--------------------------- ---- ---------- --------- ---------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Thomas G. Hudson(1) 1999 $330,000 $ 11,880 $25,689 300,000 $ 11,000
Chairman of the Board, 1998 $300,000 $290,200 $37,996 75,000 $ 11,000
President and Chief 1997 $285,000 $150,000 $ 3,863 200,000 $135,411
Executive Officer
Nick V. Ganio(2) 1999 $192,500 $239,335 $10,209 30,000 $ 11,000
Group Vice President of 1998 $138,541 $196,260 $ 3,527 250,000 $ 60,000
Worldwide Sales, Marketing
and Services
Martin G. Hahn(3) 1999 $193,269 -- $16,013 -- $ 10,000
Vice President and General 1998 $165,000 $113,838 $11,474 17,000 $ 11,000
Manager -- Enterprise 1997 $ 35,380 -- $ 203 100,000 $ 2,000
Integration Solutions
Division
Peter Dixon(4) 1999 $150,000 $ 48,281 $ 4,517 -- $ 5,339
Vice President of Worldwide 1998 $130,000 $ 97,833 $ 735 50,000 $ 2,233
Business Development and 1997 $127,500 $ 47,976 $ 124 14,500 $ 1,600
Product Marketing
William C. Collette(5) 1999 $165,000 $ 29,012 $ 4,998 45,000 $ 2,313
Chief Technology Officer and 1998 $150,000 $109,626 $ 1,680 15,000 $ 3,058
Vice President of Advanced 1997 $137,885 $ 52,020 $ 313 40,000 $ 2,395
Technology
Gregory T. Barnum(6) 1999 $190,000 $ 4,560 $ 3,064 90,000 $ 1,960
Chief Financial Officer, 1998 $178,000 $ 85,734 $ 1,976 30,000 $ 2,800
Vice President of Finance 1997 $ 80,067 -- $ 103 85,000 $ 400
and Corporate Secretary
</TABLE>
(1) Mr. Hudson's "Bonus" in 1999 consists of an $11,880 success sharing bonus.
"Other Annual Compensation" in 1999 consists of earnings credits under the
Company's Executive Deferred Compensation Plan. "All Other Compensation" in
1999, 1998 and 1997 includes a $1,000 401(k) match and a $10,000 Executive
Deferred Compensation match. In addition, "All Other Compensation" in 1997
includes $124,411 for reimbursements of relocation expenses.
(2) Mr. Ganio's "Bonus" in 1999 consists of a $3,465 success sharing bonus and
$235,870 of sales commissions and performance bonuses. "Other Annual
Compensation" in 1999 consists of earnings credits under the Company's
Executive Deferred Compensation Plan. "All Other Compensation" in 1999
consists of a $1,000 401(k) match and a $10,000 Executive Deferred
Compensation match, and in 1998 consists of a sign-on bonus of $50,000 and a
$10,000 Executive Deferred Compensation match.
(3) Mr. Hahn announced his intent to resign from the Company on October 26, 1999
to be effective November 12, 1999, and the Company subsequently accepted his
resignation effective November 1, 1999. "Other Annual Compensation" in 1999
consists of earnings credits under the Company's Executive Deferred
Compensation Plan. "All Other Compensation" in 1999 consists of a $10,000
Executive
11
<PAGE> 13
Deferred Compensation match. At the time Mr. Hahn's resignation was accepted
he was 50% vested in the deferred compensation plan, and, as a result, only
one-half of amounts shown in the "All Other Compensation" column were paid
to Mr. Hahn.
(4) Mr. Dixon's "Bonus" in 1999 consists of a $2,700 success sharing bonus and
$45,581 of performance bonuses. Mr. Dixon's "Bonus" in 1998 consists of a
$28,031 success sharing bonus, $23,000 of MBO performance bonuses and
$46,802 of commissions. "Other Annual Compensation" consists of earnings
credits under the Company's Executive Deferred Compensation Plan. "All Other
Compensation" consists of a $1,000 401(k) match paid by the Company in both
1999 and 1998 and an Executive Deferred Compensation match in 1999 and 1998
of $4,339 and $1,233, respectively.
(5) Mr. Collette's "Bonus" in 1999 consists of a $3,465 success sharing bonus
and $25,547 of performance bonuses. Mr. Collette's "Bonus" in 1998 consists
of a $38,813 success sharing bonus, $35,000 of MBO performance bonuses and
$35,813 of product revenue bonuses. "Other Annual Compensation" consists of
earnings credits under the Company's Executive Deferred Compensation Plan.
"All Other Compensation" consists of a $1,000 401(k) match paid by the
Company in both 1999 and 1998 and an Executive Deferred Compensation match
in 1999 and 1998 of $1,313 and $2,058, respectively.
(6) Mr. Barnum's "Bonus" in 1999 consists of a $4,560 success sharing bonus.
"Other Annual Compensation" in 1999 consists of earnings credits under the
Company's Executive Deferred Compensation Plan. "All Other Compensation" in
1999 consists of a $1,000 401(k) match and a $960 Executive Deferred
Compensation match.
12
<PAGE> 14
OPTION TABLES
The following tables summarize stock option grants and exercises during
1999 to or by the Named Officers and certain other information relative to such
options.
OPTION GRANTS IN FISCAL YEAR 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF PERCENT OF ASSUMED ANNUAL RATES OF
SHARES TOTAL OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM(4)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ------------------------------
NAME GRANTED FISCAL YEAR PRICE(3) DATE 5% 10%
---- ---------- ------------- -------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Thomas G. Hudson(1) 300,000 17.67% $21.875 May 12, 2009 $4,134,375 $10,434,375
Nick V. Ganio (1) 30,000 1.77% $21.875 May 12, 2009 $ 413,438 $ 1,043,438
Martin G. Hahn(2) 110,000 6.48% $21.875 May 12, 2009 $1,515,938 $ 3,825,938
Peter Dixon -- -- -- -- -- --
William C. Collette(1) 45,000 2.65% $21.875 May 12, 2009 $ 620,156 $ 1,565,156
Gregory T. Barnum(1) 90,000 5.30% $21.875 May 12, 2009 $1,240,313 $ 3,130,313
</TABLE>
(1) These options become exercisable after six years from the date of grant. The
vesting of these shares will accelerate, after one year, with respect to 50%
of the options, in the event the average closing sales price of the
Company's Common Stock exceeds 150% of the exercise price for a period of
sixty consecutive trading days. Vesting with respect to 100% of the options
will accelerate if the average closing sales price of the Company's Common
Stock exceeds 200% of the exercise price for a period of sixty consecutive
trading days.
(2) These options became exercisable after six years from the date of grant and
provided for accelerated vesting in the event specific performance goals
were achieved. Mr. Hahn announced his intent to resign from the Company on
October 26, 1999, to be effective November 12, 1999, and the Company
subsequently accepted his resignation effective November 1, 1999. These
options were cancelled on November 1, 1999, upon the effectiveness of Mr.
Hahn's resignation.
(3) Fair market value per share on the date of grant as determined in accordance
with the Stock Award Plan.
(4) The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future Common Stock price.
AGGREGATED OPTION EXERCISES IN 1999 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE OPTIONS AT FISCAL YEAR-END(#) AT FISCAL YEAR-END(2)
NAME EXERCISE(#) REALIZED(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- ----------- ----------------------------- -------------------------
<S> <C> <C> <C> <C>
Thomas G. Hudson 115,954 $1,608,873 452,782 / 506,264 $8,140,116 / $3,780,977
Nick V. Ganio 62,500 $ 878,594 -- / 217,500 -- / $3,453,859
Martin G. Hahn 25,000 $ 373,450 -- / -- -- / --
Peter Dixon 71,105 $ 444,788 23,645 / 52,250 $ 424,071 / $ 923,168
William C. Collette 92,250 $ 776,685 22,250 / 82,500 $ 348,566 / $ 667,626
Gregory T. Barnum 40,000 $ 547,589 10,000 / 155,000 $ 147,661 / $1,195,860
</TABLE>
(1) The dollar value realized is equal to the difference between the closing
market value on the date the shares were exercised and the exercise price.
(2) The dollar value of unexercised in-the-money options at fiscal year end is
equal to the difference between the market value of the shares underlying
the options and the exercise price.
13
<PAGE> 15
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Thomas G. Hudson
to serve as its President and Chief Executive Officer. Effective January 1, 1999
the Committee approved an increase in Mr. Hudson's annualized base salary to
$330,000 and a success sharing bonus at a 60 percent participation rate. The
agreement provided for a long-term incentive in the form of a non-qualified
stock option to purchase 500,000 shares of the Company'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 entered into an employment arrangement with Nick V. Ganio,
Group Vice President of Worldwide Sales, Marketing and Services which, upon
termination of employment other than for cause, provides for severance equal to
his base salary for a period of six months, with the opportunity for an
additional six months of severance in the event he has not found employment.
14
<PAGE> 16
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 of The Nasdaq Stock Market (U.S. Companies)
Index ("Nasdaq Total Return Index") and the Computer Manufacturers Nasdaq
Industry Category Index ("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, 1994, 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.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
NASDAQ STOCK MARKET NASDAQ COMPUTER
CNT COMMON STOCK (U.S. COMPANIES) MANUFACTURERS INDEX
---------------- ------------------- -------------------
<S> <C> <C> <C>
1994 100.0 100.0 100.0
1995 66.1 141.3 157.4
1996 73.4 173.9 211.1
1997 51.4 213.1 255.3
1998 183.5 300.2 553.3
1999 336.7 545.7 1167.0
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CNT Common Stock 100.0 66.1 73.4 51.4 183.5 336.7
- ---------------------------------------------------------------------------------------------------------------------
Nasdaq Total Return Index 100.0 141.3 173.9 213.1 300.2 545.7
- ---------------------------------------------------------------------------------------------------------------------
Nasdaq Computer Manufacturers Index 100.0 157.4 211.1 255.3 553.3 1,167.0
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 17
PROPOSAL TO APPROVE THE ADOPTION OF THE
REALLEGACY.COM, INC.
2000 DIRECTOR AND OFFICER STOCK AWARD PLAN
(ITEM 2 ON PROXY CARD)
BACKGROUND
RealLegacy.com, Inc. ("RealLegacy") is a wholly-owned subsidiary of the
Company that holds some, but not all, of the assets of the Company's Enterprise
Integration Solutions Division. There is currently no public market for
RealLegacy common stock; however, the Company has announced its intention to
investigate the divestiture of its Enterprise Integration Solutions Division.
Although the terms relating to any such divestiture have not been finalized, and
the Company is under no obligation to complete the proposed divestiture, the
Company's Board believes that providing stock based compensation in RealLegacy
will be an important element in attracting, retaining and motivating the key
employees, consultants, advisors, officers and directors of RealLegacy and the
Company who may be crucial to the successful implementation and completion of
any such divestiture, as well as the operations of RealLegacy following any such
divestiture, if completed. Accordingly, the Board has approved stock award plans
providing for the grant of stock options and other equity based benefits to such
individuals.
APPROVAL OF REALLEGACY STOCK AWARD PLANS
The RealLegacy.com, Inc. 2000 Director and Officer Stock Award Plan (the "D
& O Plan") was adopted by the boards of directors of the Company and RealLegacy,
and approved by the Company as its sole shareholder, as of February 1, 2000.
Subject to approval by the Company's shareholders, 1,500,000 shares of common
stock of RealLegacy have been reserved for issuance under the D & O Plan, which
provides for the grant of stock-based awards to officers and directors of
RealLegacy and the Company pursuant to the terms and conditions described below.
As of the date of this Proxy Statement, no options have been granted under the D
& O Plan. The Company's shareholders are being asked to approve the adoption of
the D & O Plan at the Annual Meeting. The Company is seeking shareholder
approval of the D & O Plan in order to ensure compliance with the requirements
of Sections 162(m) of the Code and the requirements of the Nasdaq National
Market System.
The RealLegacy.com, Inc. 2000 Employee Stock Award Plan (the "Employee
Plan") was also approved by the boards of directors of the Company and
RealLegacy, and by the Company as its sole shareholder as of February 1, 2000,
and 3,500,000 shares of common stock of RealLegacy were reserved for issuance
thereunder. As of March 31, 2000, no options have been granted under the
Employee Plan.
SUMMARY OF PLAN
The following summary is qualified in its entirety by reference to the full
text of the D & O Plan attached to this Proxy Statement as Appendix A.
PURPOSE. The purpose of the D & O Plan is to motivate officers and
directors of RealLegacy and the Company to produce a superior return to the
shareholders of RealLegacy 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. The D & O Plan is also intended
to facilitate recruiting and retaining key personnel of outstanding ability by
providing an attractive capital accumulation opportunity.
ADMINISTRATION. The D & O Plan will initially be administered by a
committee (the "Committee") designated by the board of directors of RealLegacy
composed of two or more directors of RealLegacy (or the Company, for so long as
RealLegacy remains a subsidiary of the Company) 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 and "outside directors," as that
term is defined in the Code. At this time, Thomas G. Hudson is the only member
of the board of directors of RealLegacy. The Committee has the exclusive power
to adopt and revise rules relating to the D & O Plan and to determine the timing
of grants, identity of recipients, the form and amount of each award and other
terms and conditions of awards. Awards to outside directors of
16
<PAGE> 18
CNT will initially be subject to the approval of a majority of the board of
directors of each of CNT and RealLegacy.
ELIGIBILITY. Participation in the D & O Plan is limited to officers and
directors of RealLegacy and the Company.
NUMBER OF SHARES. The number of shares of RealLegacy's common stock
available for issuance under the D & O Plan is 1,500,000 (subject to adjustment
for stock splits, stock dividends, and similar changes in capitalization, and
acquisitions). Any shares subject to awards that are not used because the terms
and conditions of grant are not met may be reallocated as though they had not
previously been awarded.
TYPES OF AWARDS. The D & O Plan provides for the grant of incentive and
non-qualified stock options, performance units, restricted and unrestricted
stock, and other stock-based awards.
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 D & O 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 federal tax laws place certain additional
restrictions on incentive stock options, if granted. 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 RealLegacy common stock, or a
combination of cash and common stock, as determined by the Committee.
Restricted and Unrestricted Stock and Other Stock-Based Awards. The
Committee is authorized to grant, either alone or in conjunction with other
awards, restricted and unrestricted stock and other stock-based awards. The
Committee shall determine the persons to whom such awards are made, the timing
and amount of such awards, and all other terms and conditions, including
restrictions on resale.
Outside Director Awards. Outside directors of the Company and RealLegacy
may, at the discretion of the Board and in accordance with the terms of the
Stock Award Plan, be granted awards at various times including when an outside
director is first elected or appointed to the board, when an outside director is
re-elected to the board or at other times as may be appropriate.
ASSIGNMENT. No award is assignable or transferable by a recipient. However,
the Committee, in its discretion, may permit transfers of awards in the event of
death or when the award (other than incentive stock options) is transferred to
members of the recipient's immediate family or to one or more trusts for the
benefit of such family members or partnerships in which such family members are
the only partners, if the recipient receives no consideration for the transfer.
ACCELERATION OF AWARDS, LAPSE OF RESTRICTIONS, FORFEITURE. The Committee
may provide for the lapse of restrictions on restricted stock or other awards,
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 RealLegacy, other fundamental
changes in the corporate structure of RealLegacy, 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. The D & O 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
17
<PAGE> 19
outstanding options, and performance targets for, and payments under,
outstanding awards of performance units in the event of mergers,
recapitalization, stock dividends, stock splits, or other relevant changes. The
D & O Plan also gives the RealLegacy board of directors the right to terminate,
suspend, or modify the D & O Plan, except that amendments to the D & O Plan are
subject to shareholder approval if needed to comply with the incentive stock
option provisions of federal tax law. Under the D & O 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
RealLegacy.
WITHHOLDING. The D & O Plan permits RealLegacy to withhold from cash
awards, and to require a recipient receiving common stock under the D & O Plan
to pay RealLegacy, 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 RealLegacy of shares
previously received by the recipient.
OPTION AGREEMENTS. The D & O 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 RealLegacy when the awards
are granted.
FEDERAL TAX CONSIDERATIONS
TAX LIABILITY OF RECIPIENT. Generally, no taxable income to a recipient
will be realized, and neither RealLegacy nor the Company will be entitled to any
related deduction, at the time any award is granted under the D & O Plan.
Realization of income upon exercise and transfer of shares to the recipient
depends upon the type of award granted.
Incentive Stock Options. No taxable income to a recipient will be realized
at the time any incentive stock option is granted under the D & O 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.
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.
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.
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 at the time any non-qualified stock option is granted under the D & O
Plan. 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 equal to the excess of the 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 treated as a capital gain or
loss.
Restricted and Unrestricted Stock. Unless the recipient files an election
to be taxed under Section 83(b) of the Code, the recipient will not realize
income upon the grant of restricted stock, and the recipient will realize
ordinary income on the date the restrictions are removed or expire in the amount
of the fair market
18
<PAGE> 20
value of the restricted stock on that date. If the recipient files an election
to be taxed under Section 83(b) of the Code, the tax consequences to the
recipient, RealLegacy and the Company will be determined as of the date of the
grant of the restricted stock rather than as of the date of the removal or
expiration of the restrictions. With respect to awards of unrestricted stock,
the recipient will realize ordinary income upon the grant of the unrestricted
stock in the amount of the fair market value of such unrestricted stock on the
date of the grant. When the recipient disposes of restricted or unrestricted
stock, 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.
Performance Units. Generally, the recipient will not realize income upon
the grant of a performance unit award. The recipient will realize ordinary
income in the year the performance unit award is paid in the amount of cash
received plus the fair market value of the shares of common stock received on
the delivery date. 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.
TAX DEDUCTIONS BY REALLEGACY (OR THE COMPANY). Generally, RealLegacy (and
the Company, for so long as RealLegacy is a subsidiary of the Company and it
prepares consolidated tax returns) will be entitled to a deduction with respect
to any award granted under the D & O Plan to the extent that the recipient
realizes ordinary income therefrom, other than incentive stock options, for
which no deduction is allowed. The deduction will be determined at the time the
recipient realizes ordinary income and will be equal to the amount of ordinary
income realized by the recipient, as set forth above.
Limits on Deductibility. 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
award meeting the requirements described above is not subject to the $1 million
per employee per year deduction limitations.
The stock options granted pursuant to the D & O Plan will be awarded at
a price not less than the fair market value of RealLegacy common stock 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
RealLegacy board of directors plans to continue to review the composition of the
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 D & O Plan sets at 500,000 the maximum number of shares subject to options
that can be awarded to any single participant during a specified period. The
purpose of this 500,000 share limit is to afford the RealLegacy board and the
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 D & O Plan qualifies the stock options granted under it so as to
preserve the corresponding tax deductions of RealLegacy (and the Company, when
applicable) if and when such stock options are exercised.
BOARD RECOMMENDATION AND VOTING REQUIREMENTS
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE ADOPTION OF THE
REALLEGACY.COM, INC. DIRECTOR AND OFFICER 2000 STOCK AWARD PLAN. Provided a
quorum is present, the affirmative vote of holders of a majority of the voting
power of the outstanding shares of common stock of the Company entitled to vote
on this item and present, in person or by proxy, at the Annual Meeting is
required for approval of the adoption of the D & O Plan. Proxies solicited by
the Board will be voted for approval of this proposal, unless shareholders
specify otherwise in their proxies.
19
<PAGE> 21
PROPOSAL TO RATIFY THE APPOINTMENT OF
INDEPENDENT AUDITORS
(ITEM 3 ON PROXY CARD)
KPMG LLP has audited the financial statements of the Company since 1984 and
has no other relationship with or interest in the Company. The Board, based on
the recommendation of the Audit Committee, has again appointed KPMG LLP to serve
as the Company's independent auditors for the fiscal year ending January 31,
2001, subject to ratification by the shareholders. If the shareholders do not
ratify the appointment of KPMG LLP, the Board will select another firm of
independent auditors. Proxies solicited by the Board will be voted to ratify the
appointment of KPMG LLP, unless shareholders specify otherwise in their proxies.
Representatives of KPMG 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
The Company must receive any shareholder proposals for the Company's 2001
annual meeting by December 5, 2000 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.
The Company's Annual Report to shareholders for fiscal year 1999 is being
mailed with this Proxy Statement to shareholders entitled to notice of the
Annual Meeting. No part of the Company's annual report is incorporated herein
and no part is to be considered proxy soliciting materials.
THE CNT 1999 ANNUAL REPORT TO SHAREHOLDERS AND ANNUAL REPORT ON FORM 10-K,
INCLUDING FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1999, ACCOMPANIES
THIS PROXY STATEMENT. IF A SHAREHOLDER REQUESTS COPIES OF ANY EXHIBITS TO THE
FORM 10-K, THE COMPANY WILL REQUIRE THE PAYMENT OF A FEE COVERING ITS REASONABLE
EXPENSES IN FURNISHING SUCH EXHIBITS. ANY SUCH REQUESTS SHOULD BE ADDRESSED TO
INVESTOR RELATIONS, CNT, 6000 NATHAN LANE NORTH, MINNEAPOLIS, MINNESOTA 55442.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ GREGORY T. BARNUM
Gregory T. Barnum
Vice President of Finance, Chief
Financial Officer
and Corporate Secretary
Minneapolis, Minnesota
April 13, 2000
20
<PAGE> 22
APPENDIX A
REALLEGACY.COM, INC.
2000 DIRECTOR AND OFFICER STOCK AWARD PLAN
1. Purpose. The purpose of this 2000 Director and Officer Stock Award Plan
(the "Plan") is to motivate directors and officers, including Non-employee
Directors, to produce a superior return to the shareholders of RealLegacy.com,
Inc. 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,
Restricted Stock, Stock, Performance Units or any other Stock-based Award.
(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 Nonemployee Directors designated by the
Board to administer this Plan under Section 3 hereof. Individuals serving as
members of the Committee must also qualify as "outside directors" as defined in
Treasury Regs. sec. 1.162-27(e)(3)(i).
(g) "Company" means RealLegacy.com, Inc., a Minnesota corporation, or any
successor to substantially all of its businesses.
(h) "Nonemployee Director" means a member of the Board who is considered a
nonemployee director within the meaning of Exchange Act Rule l6b-3 or any
successor definition, or, during such time as the Company is a subsidiary of
Computer Network Technology Corporation (or any successor thereof), a member of
the Board of Directors of Computer Technology Corporation who is considered a
nonemployee director within the meaning of Exchange Act Rule 16b-3 or any
successor definition.
(i) "Effective Date" means the date specified in Section 9.1 hereof.
(j) "Employee" means any director or executive officer 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 director. 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
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"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 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 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 an employee 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
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<PAGE> 24
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.
(vi) Notwithstanding the above, an Event shall not be deemed to occur
upon a spin-off.
(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
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 or an Affiliate
who are not employees of the Company or any Affiliate.
(s) "Performance Cycle" means the period of time as specified in an
Agreement over which Performance Units are to be earned.
(t) "Performance Units" means an Award made under Section 7.2 hereof.
(u) "Plan" means this 2000 Director and Officer Stock Award Plan, as
amended from time to time.
(v) "Restricted Stock" means Stock granted under Plan Section 7.3 so long
as such Stock remains subject to one or more restrictions.
(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) "Spin-off" means a spin-off of 80% or more of the common equity of the
Company to shareholders of Computer Network Technology Corporation (or any
successor thereof) in a transaction under Section 355 of the Code.
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<PAGE> 25
(z) "Stock" means the common stock, $.01 par value per share (as such par
value may be adjusted from time to time), of the Company.
(aa) "Subsidiary" means a "subsidiary corporation," as that term is defined
in Section 424(f) of the Code, or any successor provision.
(bb) "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 an
employee's death.
(cc) "Term" means the period during which an Option may be exercised or the
period during which the restrictions or terms and conditions placed on
Restricted Stock are in effect.
(dd) "Transferee" means any member of the Participant's immediate family
(i.e., his or her children, step-children, grandchildren and spouse) or one or
more trusts for the benefit of such family members or partnerships in which such
family members are the only partners.
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. Except as provided in Section 3.1(b), the Committee shall
administer this Plan. 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 Awards granted to Outside Directors shall be determined by the Board of
Directors of the Company, and in addition while the Company is a Subsidiary of
Computer Network Technology Corporation (or any successor thereto), the Board of
Directors of Computer Network Technology Corporation (or any successor thereto).
3.2 Indemnification. To the full extent permitted by law, (a) no member of
the Board or 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 Board and of the Committee shall be entitled to
indemnification by the Company with regard to such actions and determinations.
4. Shares Available Under this Plan. The number of Shares available for
distribution under this Plan shall not exceed 1,500,000 (subject to adjustment
as provided in this Section 4 and 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. In addition, if, in accordance with this Plan, an
employee uses shares of Common Stock of the Company to (i) pay a purchase or
exercise price, including an Option exercise price, or (ii) satisfy tax
withholdings, only the number of shares issued net of the shares tendered in
payment of such purchase or exercise price and tax withholdings shall be deemed
to be issued for purposes of determining the maximum number of Shares available
under the Plan. Further, the maximum number of Shares available for distribution
under this Plan shall be increased to take into account any Awards granted under
Section 18 of this Plan.
5. Eligibility. Awards may be granted under this Plan to employee officers
of the Company and Affiliates and Outside Directors, 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 (other than Outside Directors) is
solely at the
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<PAGE> 26
discretion of the Committee; the granting of Awards to Outside Directors is
solely at the discretion of the boards referred to in Section 3.1(b). Recipients
of Awards under the Plan shall be referred to herein as "Participants".
6. General Terms of Awards.
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 Shares of Restricted Stock, Stock or Performance Units subject to such
Agreement, as the case may be.
6.2 Term. Each Agreement, other than those relating solely to Awards of
Shares without restrictions, shall set forth the Term of the Option or
Restricted Stock or the Performance Cycle for the Performance Units, as the case
may be. An Agreement 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 Employee's
death or Retirement. Acceleration of the Performance Cycle of Performance Units
shall be subject to Section 7.2(b) hereof.
6.3 Agreements. Each Award under this Plan shall be evidenced by an
Agreement setting forth the terms and conditions, as determined by the
Committee, which shall apply to such Award, in addition to the terms and
conditions specified in this Plan.
6.4 Transferability. Except as provided in this Section 6.4, during the
lifetime of an employee to whom an Award is granted, only that Participant (or
that Participant's legal representative) may exercise an Option or receive
payment with respect to Performance Units or any other Award. No Award of
Restricted Stock (prior to the expiration of the restrictions), Options or
Performance Units or other Award may be sold, assigned, transferred, exchanged
or otherwise encumbered other than pursuant to a domestic relations order as
defined in the Code or Title 1 of the Employee Retirement Income Security Act
("ERISA") or the rules thereunder; any attempted transfer in violation of this
Section 6.4 shall be of no effect. Notwithstanding the immediately preceding
sentence, the Committee, in an Agreement or otherwise at its discretion, may
provide (i) that the Award subject to the Agreement shall be transferable to a
Successor in the event of an employee's death, or (ii) that the Award (other
than Incentive Stock Options) may be transferable to a Transferee if the
Participant receives no consideration for the transfer. Any Award held by a
Transferee shall continue to be subject to the same terms and conditions that
were applicable to such Award immediately prior to its transfer. By way of
example and not limitation, (i) an Option may be exercised by a Transferee as
and to the extent that such Option has become exercisable and has not terminated
in accordance with the provisions of the Plan and the applicable Agreement and
(ii) for purposes of any provision of this Plan relating to notice to an
optionee or to vesting or termination of an Option upon the death, disability or
termination of employment of an optionee, the references to "optionee" shall
mean the original grantee of an option and not any Transferee. All transfers
shall also comply with Section 2.2 hereof.
7. Terms and Conditions of Specific 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 Outside Directors. 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
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<PAGE> 27
terminated. The number of Shares for which any Employee may be granted Options
in any one calendar year shall not exceed 500,000. The Committee may provide, in
an Agreement or otherwise, that an employee who exercises an Option and pays the
Option price in whole or in part with Shares then owned by the Participant will
be entitled to receive another Option covering the same number of shares
tendered and with a price of no less than Fair Market Value on the date of grant
of such additional Option ("Reload Option").
(b) Incentive Stock Options. In addition to the other terms and conditions
applicable to all Options:
(i) the maximum number of Plan shares that may be covered with respect
to incentive stock options is 1,500,000.
(ii) 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;
(iii) an Incentive Stock Option shall not be exercisable more than 10
years after the date of grant (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; and
(iv) 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 an employee'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. The maximum payment that can be made for awards
granted to any one individual shall be $1,000,000 for any single or combined
performance goals established for a specified performance period.
(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 an employee 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.
7.3 Restricted Stock Awards
(a) The Committee is authorized to grant, either alone or in conjunction
with other Awards, stock and stock-based Awards. The Committee shall determine
the persons to whom such Awards are made, the timing and amount of such Awards,
and all other terms and conditions. Company Common Stock granted to recipients
may be unrestricted or may contain such restrictions, including provisions
requiring forfeiture and imposing restrictions upon stock transfer, as the
Committee may determine. Unless forfeited, the recipient of restricted Common
Stock will have all other rights of a shareholder, including without limitation,
voting and
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<PAGE> 28
dividend rights. No more than 500,000 shares in the form of restricted stock and
stock shall be issued under the Stock Award Plan.
(b) An Award of Restricted Stock under the Plan shall consist of Shares
subject to restrictions on transfer and conditions of forfeiture, which
restrictions and conditions shall be included in the applicable Agreement. The
Committee may provide for the lapse or waiver of any such restriction or
condition based on such factors or criteria as the Committee, in its sole
discretion, may determine.
(c) Except as otherwise provided in the applicable Agreement, each Stock
certificate issued with respect to an Award of Restricted Stock shall either be
deposited with the Company or its designee, together with an assignment separate
from the certificate, in blank, signed by the Participant, or bear such legends
with respect to the restricted nature of the Restricted Stock evidenced thereby
as shall be provided for in the applicable Agreement.
(d) The Agreement shall describe the terms and conditions by which the
restrictions and conditions of forfeiture upon awarded Restricted Stock shall
lapse. Upon the lapse of the restrictions and conditions, Shares free of
restrictive legends, if any, relating to such restrictions shall be issued to
the Participant or a Successor or Transferee.
(e) An employee or a Successor or Transferee with a Restricted Stock Award
shall have all the other rights of a shareholder including, but not limited to,
the right to receive dividends and the right to vote the Shares of Restricted
Stock.
7.4 Other Awards. The Committee may from time to time grant Stock and other
Awards under the Plan including without limitations those Awards pursuant to
which Shares are or may in the future be acquired, Awards denominated in Stock
units, securities convertible into Stock and Phantom securities. The Committee,
in its sole discretion, shall determine the terms and conditions of such Awards
provided that such Awards shall not be inconsistent with the terms and purposes
of this Plan. The Committee may, at its sole discretion, direct the Company to
issue Shares subject to restrictive legends and/or stop transfer instructions
that are consistent with the terms and conditions of the Award to which the
Shares relate. Furthermore, the Committee may use stock available under this
Plan as payment for compensation, grants or rights and earned or due under any
other compensation plans or arrangements of the Company. No more than 500,000
shares in the form of restricted stock and stock shall be issued under the Stock
Award Plan.
8. Terms and Conditions of Outside Director Awards.
8.1 Issuance of Awards. Outside Directors may, in the discretion of the
Board and in accordance with the terms of this Plan, be granted Awards under
this Plan at various times, including when an Outside Director is first elected
or appointed to the Board of the Company or an Affiliate, when an Outside
Director is re-elected to the Board of the Company or an Affiliate or at other
times as may be deemed appropriate.
8.2 Terms of Awards. In addition to the terms set forth in Section 7.1 of
this Plan, Outside Director Awards may contain such other terms and conditions
as the Board determines.
9. Effective Date of this Plan.
9.1 Effective Date. This Plan shall become effective as of February 1,
2000, the effective date of adoption of this Plan by the Board.
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 (or such other time as the Committee shall
designate) 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.
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<PAGE> 29
10. Right to Terminate Employment. Nothing in this Plan or in any Agreement
shall confer upon any Employee the right to continue in the 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 Employee with or without cause.
11. Tax Withholding. The Company may withhold from any cash payment under
this Plan to an employee or other person (including a Successor or a Transferee)
an amount sufficient to cover any required withholding taxes. The Company shall
have the right to require an employee 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
Employee or other person, in each case valued in the same manner as used in
computing the withholding taxes under the applicable laws.
12. Amendment, Modification and Termination of this Plan.
(a) The Board may at any time and from time to time terminate, suspend or
modify the Plan. Except as limited in (b) below, the Committee may at any time
alter or amend any or all Agreements under the Plan to the extent permitted by
law. However, no such action may, without further approval of the shareholders
of the Company, be effective if such approval is required in order that the Plan
conform to the requirements of Code Section 422.
(b) No termination, suspension, or modification of the Plan will materially
and adversely affect any right acquired by any Participant or Successor or
Transferee under an Award granted before the date of termination, suspension, or
modification, unless otherwise agreed to by the Participant in the Agreement or
otherwise, or required as a matter of law; but it will be conclusively presumed
that any adjustment for changes in capitalization provided for in Plan Sections
7.2 or 13 does not adversely affect these rights.
13. Adjustment for Changes in Capitalization. Appropriate adjustments in
the aggregate number and type of Shares available for Awards under this Plan 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 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 which
occurs after a Spin-off: (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 shall immediately become
exercisable 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; provided,
however, that if such Fundamental Change does not become effective, then the
declaration pursuant to this Section 14(b) shall be rescinded, the acceleration
of the exercisability of the Option pursuant
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<PAGE> 30
to this Section 14(b) shall be void, and the Option shall be exercisable in
accordance with its terms. 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 an employee under an Award shall not be deemed a part of an
employee'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 Employee's Death. To the extent that the transfer of
an employee's Award at death is permitted under an Agreement, (a) an employee'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
Employee, such beneficiary shall succeed to the rights of the Employee 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. Corporate Mergers, Acquisitions, Etc. The Committee may also grant
Options, Restricted Stock or other Awards under the Plan having terms,
conditions and provisions that vary from those specified in this Plan provided
that any such awards are granted in substitution for, or in connection with the
assumption of, existing options, stock appreciation rights, restricted stock or
other awards granted, awarded or issued by another corporation and assumed or
otherwise agreed to be provided for by the Company pursuant to or by reason of a
transaction involving a corporate merger, consolidation, acquisition of property
or stock, separation, reorganization or liquidation to which the Company or a
subsidiary is a party.
19. Deferrals and Settlements. The Committee may require or permit
Employees to elect to defer the issuance of Shares or the settlement of Awards
in cash under such rules and procedures as it may establish under the Plan. It
may also provide that deferred settlements include the payment or crediting of
interest on the deferral amounts.
20. 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.
21. Securities Law and Other Regulatory Compliance. An Award will not be
effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance. Notwithstanding
any other provision in this Plan, the Company will have no obligation to issue
or deliver certificates for Shares under this Plan prior to (a) obtaining any
approvals from governmental agencies that the Company determines are necessary
or advisable and/or (b) completion of any registration or other qualification of
such Shares under any state or federal law or ruling of any governmental body
that the company determines to be necessary or advisable. The Company will be
under no obligation to register the
29
<PAGE> 31
Shares with the SEC or to effect compliance with the registration, qualification
or listing requirements of any state securities laws, stock exchange or
automated quotation system, and the Company will have no liability for any
inability or failure to do so.
22. Right of First Refusal.
(a) If at any time prior to the consummation of a Spin-off by the Company,
the Participant proposes to sell, transfer, assign, pledge, hypothecate, gift or
otherwise dispose of any Shares or other securities acquired upon the exercise
of an Option or upon the vesting of Restricted Stock (the "Transfer Shares") to
any person or entity (other than a member of Participant's immediate family or a
trust or other estate planning vehicle for the benefit of Participant or a
member of Participant's immediate family), the Company shall have the right to
repurchase the Transfer Shares under the terms and subject to the conditions set
forth in this paragraph (the "Right of First Refusal").
(b) Prior to any proposed transfer of the Transfer Shares, the Participant
shall give a written notice (the "Transfer Notice") to the Company describing
fully the proposed transfer, including the number of Transfer Shares, the name
and address of the proposed transferee (the "Proposed Transferee") and, if the
transfer is voluntary, the proposed transfer price and containing such
information necessary to show the bona fide nature of the proposed transfer. In
the event of a bona fide gift or involuntary transfer, the proposed transfer
price shall be deemed to be the Fair Market Value of the Transfer Shares as
determined by the Company in good faith. In the event the Participant proposes
to transfer any shares acquired upon the exercise of the Option to more than one
Proposed Transferee, the Participant shall provide a separate Transfer Notice
for the proposed transfer to each Proposed Transferee. The Transfer Notice shall
be signed by both the Participant and the Proposed Transferee and shall
constitute a binding commitment of the Participant and the Proposed Transferee
for the transfer of the Transfer Shares to the Proposed Transferee subject only
to the Company's Right of First Refusal.
(c) In the event that the Company shall determine that the information
provided by the Participant in the Transfer Notice is insufficient to establish
the bona fide nature of a proposed voluntary transfer, the Company shall give
the Participant written notice of the Participant's failure to comply with the
procedure described in this paragraph and the Participant shall have no right to
transfer the Transfer Shares without first complying with the procedures
described in this paragraph. The Participant shall not be permitted to transfer
the Transfer Shares if the proposed transfer is not bona fide.
(d) In the event the proposed transfer is deemed to be bona fide, the
Company shall have the right to purchase all or a portion of the Transfer Shares
at the lower of purchase price set forth in the Transfer Notice or Fair Market
Value by delivery to the Participant of a notice of exercise of the Right of
First Refusal within thirty (30) days after the date the Transfer Notice is
delivered to the Company. The Company's exercise or failure to exercise the
Right of First Refusal with respect to any proposed transfer described in a
Transfer Notice shall not affect the Company's ability to exercise the Right of
First Refusal with respect to any proposed transfer described in any other
Transfer Notice, whether or not such other Transfer Notice is issued by the
Participant or issued by a person other than the Participant with respect to a
proposed transfer to the same Proposed Transferee. If the Company exercises the
Right of First Refusal, the Company and the Participant shall thereupon
consummate the sale of the Transfer Shares to the Company payable in the manner
within sixty (60) days after the date of the Transfer Notice is delivered to the
Company (unless a longer period is offered by the Proposed Transferee). The
purchase price for the Transfer Shares shall be payable by the Company at its
discretion in full at the closing or through a promissory note payable in 24
equal monthly installments bearing interest at the mid-term Applicable Federal
Rate, or a combination thereof In the event the Transfer Notice provides for the
payment for the Transfer Shares other than in cash, the value of such
consideration shall be its cash equivalent as reasonably determined by the
Company. For purposes of the foregoing, cancellation of any indebtedness of the
Participant shall be treated as payment to the Participant in cash to the extent
of the unpaid principal and any accrued interest canceled.
(e) If the Company falls to exercise the Right of First Refusal in full
within the period specified above, the Participant may consummate a transfer to
the Proposed Transferee of the Transfer Shares on the terms and conditions
described in the Transfer Notice, provided such transfer occurs not later than
one hundred
30
<PAGE> 32
twenty (120) days following delivery to the Company of the Transfer Notice. The
Company shall have the right to demand further assurances from the Participant
and the Proposed Transferee (in a form satisfactory to the Company) that the
transfer of the Transfer Shares was actually carried out on the terms and
conditions described in the Transfer Notice, No Transfer Shares shall be
transferred on the books of the Company until the Company has received such
assurances, if so demanded, and has approved the proposed transfer as bona fide.
Any proposed transfer on terms and conditions different from those described in
the Transfer Notice, as well as any subsequent proposed transfer by the
Participant, shall again be subject to the Right of First Refusal and shall
require compliance by the Participant with the procedure described in this
paragraph.
(f) All transferees of the Transfer Shares or any interest therein, other
than the Company, shall be required as a condition of such transfer to agree in
writing (in a form satisfactory to the Company) that such transferee shall
receive and hold such Transfer Shares or interests subject to the provisions of
this paragraph providing for the Right of First Refusal with respect to any
subsequent transfer. Any sale or transfer of any shares acquired upon exercise
of the Option or upon the vesting of Restricted Stock shall be void unless the
provisions of this paragraph are met.
(g) The Company shall have the right to assign the Right of First Refusal
at any time, whether or not the Participant has attempted a transfer, to one or
more persons as may be selected by the Company.
23. Legends. The Company may at any time place legends referencing the
Right of First Refusal and any applicable federal or state securities law
restrictions on all certificates representing shares of Stock underlying an
Award. Participants shall, at the request of the Company, promptly present to
the Company any and all certificates representing shares acquired pursuant to
Award in the possession of the Participant in order to effectuate the provisions
of this Section. Unless otherwise specified by the Company, legends placed on
such certificates may include, but shall not be limited to, the following:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS
MADE IN ACCORDANCE WITH RULE 144, OR THE COMPANY RECEIVES AN OPINION OF
COUNSEL FOR THE HOLDER OF THESE SECURITIES, REASONABLY SATISFACTORY TO THE
COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH
ACT.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF
FIRST REFUSAL IN FAVOR OF THE ISSUER OR ITS ASSIGNEE SET FORTH IN AN
AGREEMENT BETWEEN THE ISSUER AND THE REGISTERED HOLDER, OR SUCH HOLDER'S
PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE
OF THE ISSUER.
24. Lock-Up Agreement in Connection with Public Offering. Unless otherwise
determined by the Committee or any person administering the Plan pursuant to
Section 3.1, at or after the grant of an Award, the holder of shares of Stock
issued pursuant to the Plan may not sell, make short sale of, loan, grant any
options for the purchase of or otherwise dispose of any such shares without the
prior written consent of the Company or the underwriters managing any public
offering of the Company's Stock for a period of 180 days from the effective date
of the registration statement covering any public offering.
25. Participation by Foreign Nationals. The Committee, without amending the
Plan, may modify grants to foreign national or United States citizens employed
abroad in order to recognize differences in local law, tax policy or custom.
31
<PAGE> 33
CNT ANNUAL SHAREHOLDERS' MEETING LOCATION
May 25, 2000
10:00 AM
[CNT MAP]
<TABLE>
<S> <C>
FROM THE AIRPORT TO CNT MINNEAPOLIS
Follow the signs to Interstate 494 West. Take 494 CNT IS LOCATED ON
West THE NORTHWEST CORNER
Exit Highway 169 and go North. OF HIGHWAY 169
Exit at Bass Lake Road and go West. AND BASS LAKE ROAD.
Take a right at Nathan Lane
CNT is the first building on the right.
FROM DOWNTOWN TO CNT MINNEAPOLIS
Follow the signs to Interstate 394 West. Take 394
West. 6000 Nathan Lane North
Exit Highway 169 and go North. Minneapolis, MN 55442
Exit at Bass Lake Road and go West. (763) 268-6000
Take a right at Nathan Lane.
CNT is the first building on the right.
</TABLE>
[CNT LOGO]
Computer Network Technology
<PAGE> 34
Computer Network Technology Corporation (CNT)
Annual Shareholders Meeting
May 25, 2000
10:00 am
to be held at CNT's new headquarters:
6000 Nathan Lane North
Plymouth, Minnesota
763-268-6000
Attend CNT's Annual Shareholders Meeting online at www.cnt.com or in person.
Refer to map and directions in back of proxy statement.
<PAGE> 35
COMPUTER NETWORK TECHNOLOGY CORPORATION
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 25, 2000
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 13, 2000, hereby appoints Gregory T. Barnum 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 27, 2000, at
the Annual Meeting of Shareholders to be held on May 25, 2000 at 6000 Nathan
Lane North, Plymouth, Minnesota, at 10:00 a.m. and any adjournment or
postponement 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 ALL NOMINEES IN PROPOSAL NO. 1, AND FOR PROPOSALS NO. 2 AND 3. 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)
<PAGE> 36
1. ELECTION OF DIRECTORS
[ ] [ ]
FOR WITHHOLD AUTHORITY
all nominees listed to vote for all nominees listed
(except as marked to the contrary)
NOMINEES:
Thomas G. Hudson, Patrick W. Gross, Erwin A. Kelen, Lawrence Perlman
and John A. Rollwagen
INSTRUCTION:
To withhold authority to vote for any individual nominee, write that nominee's
name on the space provided below.
------------------------------------------
2. PROPOSAL TO APPROVE THE ADOPTION OF THE REALLEGACY.COM, INC. 2000 DIRECTOR
AND OFFICER STOCK AWARD PLAN.
[ ] [ ] [ ]
FOR AGAINST ABSTAIN
3. PROPOSAL TO RATIFY AND APPROVE THE APPOINTMENT OF KPMG LLP AS INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING JANUARY 31, 2001.
[ ] [ ] [ ]
FOR AGAINST ABSTAIN
4. OTHER BUSINESS
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.
<PAGE> 37
Computer Network Technology Corporation (CNT)
Annual Shareholders Meeting
May 25, 2000
10:00 am
to be held at CNT's new headquarters:
6000 Nathan Lane North
Plymouth, Minnesota
763-268-6000
Attend CNT's Annual Shareholders Meeting online at www.cnt.com or in person.
Refer to map and directions in back of proxy statement.
<PAGE> 38
COMPUTER NETWORK TECHNOLOGY CORPORATION
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 25, 2000
401(k) SALARY SAVINGS PLAN - VOTING INSTRUCTION CARD
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 shares of Computer Network Technology
Corporation stock allocated to you under the Plan at the Annual Meeting of
Shareholders to be held on May 25, 2000, and at any adjournment or postponement
therefore, 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 17, 2000.
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)
<PAGE> 39
1. ELECTION OF DIRECTORS
[ ] [ ]
FOR WITHHOLD AUTHORITY
all nominees listed to vote for all nominees listed
(except as marked to the contrary)
NOMINEES:
Thomas G. Hudson, Patrick W. Gross, Erwin A. Kelen, Lawrence Perlman and
John A. Rollwagen
INSTRUCTION:
To withhold authority to vote for any individual nominee, write that nominee's
name on the space provided below.
------------------------------------------
2. PROPOSAL TO APPROVE THE ADOPTION OF THE REALLEGACY.COM, INC. 2000 DIRECTOR
AND OFFICER STOCK AWARD PLAN.
[ ] [ ] [ ]
FOR AGAINST ABSTAIN
3. PROPOSAL TO RATIFY AND APPROVE THE APPOINTMENT OF KPMG LLP AS INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING JANUARY 31, 2000.
[ ] [ ] [ ]
FOR AGAINST ABSTAIN
4. OTHER BUSINESS
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.
