<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /x/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Norstan, Inc.
- --------------------------------------------------------------------------------
(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:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO]
605 NORTH HIGHWAY 169
PLYMOUTH, MINNESOTA 55441
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 23, 1997
---------------------
TO THE SHAREHOLDERS OF NORSTAN, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the shareholders of
Norstan, Inc., a Minnesota corporation, will be held on Tuesday, September 23,
1997, at 2:00 P.M., at 605 North Highway 169, 11th Floor, Plymouth, Minnesota,
for the following purposes:
1. To elect seven directors.
2. To ratify the appointment of Arthur Andersen LLP as independent auditors
for the fiscal year ending April 30, 1998.
3. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
Only shareholders of record at the close of business on July 28, 1997, are
entitled to notice of and to vote at the Annual Meeting and any adjournment
thereof.
Each of you is invited and urged to attend the Annual Meeting in person if
possible. Whether or not you are able to attend in person, you are requested to
date, sign and return promptly the enclosed proxy in the envelope enclosed for
your convenience.
By Order of the Board of Directors
WINSTON E. MUNSON, Secretary
August 21, 1997
<PAGE>
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS OF
NORSTAN, INC.
605 NORTH HIGHWAY 169
PLYMOUTH, MINNESOTA 55441
TO BE HELD SEPTEMBER 23, 1997
SOLICITATION OF PROXIES
The enclosed proxy is solicited by and on behalf of the Board of Directors
of Norstan, Inc. (the "Company") for use at the Annual Meeting of shareholders
on September 23, 1997, and any adjournment thereof. The approximate date on
which this Proxy Statement and form of proxy will first be sent or given to
shareholders is August 21, 1997.
The expense of the solicitation of proxies for this Annual Meeting,
including the cost of mailing, has been or will be borne by the Company.
Arrangements will be made with brokerage houses and other custodian nominees and
fiduciaries to send proxies and proxy materials to their principals and the
Company will reimburse them for their expense in so doing. In addition to
solicitation by mail, proxies may be solicited by telephone, telegraph or
personally.
VOTING AND REVOCATION OF PROXY
Only shareholders of record at the close of business on July 28, 1997, are
entitled to notice of and to vote at the meeting. Each share so held entitles
the holder to one vote upon each matter to be voted upon. On July 28, 1997, the
Company had outstanding 9,452,503 shares of common stock. A quorum, consisting
of a majority of the outstanding shares of the common stock entitled to vote at
the Annual Meeting, must be present in person or represented by proxy before
action may be taken at the Annual Meeting.
All shares represented by proxies which have been properly executed and
returned will be voted at the meeting. Where a specification is made by the
shareholder as provided in the form of proxy, the shares will be voted in
accordance with such specification. If no specification is made, the shares will
be voted (i) FOR the election of the nominees for directors named in this Proxy
Statement, and (ii) FOR the ratification of the appointment of Arthur Andersen
LLP as independent auditors for the fiscal year ending April 30, 1998.
Any proxy given pursuant to this solicitation may be revoked by the person
giving the proxy at any time before it is voted. Proxies may be revoked by (a)
giving written notice of such revocation to the Secretary of the Company, (b)
giving another written proxy bearing a later date, or (c) attending the Annual
Meeting and voting in person (although attendance at the Annual Meeting will not
in and of itself constitute a revocation of a proxy).
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the Inspectors of Election appointed for the meeting and will determine if a
quorum is present. If an executed proxy card is returned and the shareholder has
abstained from voting on any matter, the shares represented by such proxy will
be considered present at the meeting for purposes of determining a quorum and
for purposes of calculating the vote, but will not be considered to have been
voted in favor of such matter. If an executed proxy is returned by a broker
holding shares in street name which indicates that the broker does not have
discretionary authority as to certain shares to vote on one or more matters,
such shares will be considered present at the meeting for purposes of
determining a quorum, but will not be considered to be represented at the
meeting for purposes of calculating the vote with respect to such matter.
1
<PAGE>
ELECTION OF DIRECTORS
The property, affairs and business of the Company are managed under the
direction of the Board of Directors. The bylaws of the Company provide that the
number of directors shall be not less than three nor more than fifteen, with the
number to be determined by the Board of Directors. The Board of Directors has
fixed the number of directors at seven for the ensuing year, and seven directors
will be elected at the Annual Meeting for a term of one year. Each of the
nominees named below is now a director of the Company and has served
continuously as a director of the Company since the year indicated. All nominees
have indicated a willingness to serve if elected.
All shares represented by proxies which have been properly executed and
returned will be voted for the election of the seven nominees named below,
unless other instructions are indicated thereon. In the event any one or more of
such nominees should for any reason be unable to serve as a director, it is
intended that the enclosed proxy will be voted for such person or persons as may
be selected in accordance with the best judgment of the proxy holders named
therein. The Board of Directors knows of no reason to anticipate that any of the
nominees named herein will be unable or unwilling to serve. Directors are
elected by a plurality of the votes cast for the election of directors at the
Annual Meeting.
<TABLE>
<CAPTION>
DIRECTOR
NAME POSITION WITH COMPANY AGE SINCE
- ---------------------------------------------------------------------------------------------------- --- --------
<S> <C> <C> <C>
Paul Baszucki Chairman of the Board and Director 57 1975
David R. Richard President, Chief Executive Officer and Director 55 1997
Richard Cohen Vice Chairman of the Board and Director 53 1971
Connie M. Levi Director 57 1993
Gerald D. Pint Director 61 1983
Dr. Jagdish N. Sheth Director 58 1995
Herbert F. Trader Director 60 1983
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES
NAMED ABOVE.
INFORMATION CONCERNING DIRECTORS,
NOMINEES AND EXECUTIVE OFFICERS
DIRECTORS AND NOMINEES
Certain information concerning the directors and nominees of the Company is
set forth below.
PAUL BASZUCKI has been Chairman of the Board of the Company since May 1997.
He is also Chairman of the Board of Norstan Communications, Inc., Norstan
Network Services, Inc., Norstan Canada Inc., Connect Computer Company, Norstan
Network Services of New Hampshire, Inc., Norstan Financial Services, Inc. and
Norstan International, Inc. He was Chief Executive Officer of the Company from
1986 to May 1997, and Co-Chairman of the Board of the Company from June 1995 to
May 1997. He was Vice Chairman of the Board of the Company from 1987 to June
1995. He served as President and Chief Operating Officer of the Company from
1984 to 1987. Prior to 1984, he was Chief Executive Officer of Norstan
Communications, Inc. Mr. Baszucki is also a director of Washington Scientific
Industries, Inc. and G & K Services, Inc.
DAVID R. RICHARD has been President and Chief Executive Officer of the
Company since May 1997. He is also President and Chief Executive Officer of
Norstan Communications, Inc., Norstan Financial Services, Inc., Norstan Network
Services, Inc., Norstan Canada Inc., Norstan Network Services of New Hampshire
and Norstan International, Inc. and Vice Chairman of the Board of Connect
Computer
2
<PAGE>
Company. From January 1996 to May 1997, he was General Manager of Services for
North America for IBM, a multinational manufacturer and supplier of advanced
information processing technology and communications systems and services and
program products, and from April 1992 to January 1996, he was General Manager of
Southwestern Area for IBM.
RICHARD COHEN has been Vice Chairman of the Board of the Company since 1984.
He is also Vice Chairman of the Board of Norstan Communications, Inc., Norstan
Financial Services, Inc., Norstan Network Services, Inc., Norstan Canada Inc.,
Norstan Network Services of New Hampshire, Inc., Connect Computer Company and
Norstan International, Inc. He was Treasurer of the Company from 1971 to June
1997 and Chief Financial Officer of the Company from May 1991 to June 1997.
CONNIE M. LEVI was President of the Greater Minneapolis Chamber of Commerce
from August 1988 until her retirement in 1994. She is a Trustee of the Lutheran
Brotherhood Family of Funds. She was formerly the chairperson of Hamline
University Board, Chair of the Ethics Division of the Amdahl Commission and
Majority Leader of the Minnesota House of Representatives. She is or has been a
director or member of numerous governmental, public service, and nonprofit
boards and organizations.
GERALD D. PINT is a telecom consultant. He was the Group Vice President for
Telecom Systems Group of 3M Company, a multinational diversified manufacturer,
from 1989 until his retirement from 3M in 1993. He was Group Vice President for
ElectroTelecommunications Group of 3M Company from 1982 to 1989. Mr. Pint is
also a director of Inventronics, Ltd. and Communications Systems, Inc.
DR. JAGDISH N. SHETH has been the Charles H. Kellstadt Professor of
Marketing in the Goizueta Business School, Emory University since 1991. Prior to
his present position, he was the Robert E. Brooker Professor of Marketing at the
University of Southern California (7 years), the Walter H. Stellner
Distinguished Professor of Marketing at the University of Illinois (15 years),
and on the faculty of Columbia University (5 years), as well as the
Massachusetts Institute of Technology (2 years). Dr. Sheth is nationally and
internationally known for his scholarly contribution in Marketing, Customer
Satisfaction, Global Competition, and Strategic Thinking.
HERBERT F. TRADER is an independent consultant specializing in international
marketing and management and telecommunication delivered computer services. He
was Vice President and Director, International Programs of William C. Norris
Institute, a nonprofit corporation which promotes the use of computer technology
to enhance education and information exchange on an international level, from
January 1991 to January 1995. From 1987 to January 1991, he was Vice President,
Training and Education Group, for Control Data Corporation, a computer company.
He was President of Business Development Group for Control Data Corporation from
1985 to 1987.
The Company knows of no arrangements or understandings between a director or
nominee and any other person pursuant to which any person has been selected as a
director or nominee. There is no family relationship between any of the
nominees, directors or executive officers of the Company.
BOARD ACTIONS AND COMMITTEES
During the fiscal year ended April 30, 1997, the Company's Board of
Directors met eight times and took action by written consent six times. All of
the directors attended at least 75 percent of the aggregate number of meetings
of the Board of Directors and the committees of the board on which he or she
served except Dr. Sheth.
The Board of Directors has an Audit Committee, consisting of four
non-employee directors, Mr. Lehrman, Ms. Levi, Mr. Munson and Mr. Schweitzer.
The Audit Committee, which met twice during the fiscal year ended April 30,
1997, reviews and reports to the Board with respect to various auditing and
accounting matters, including the engagement of independent auditors, the scope
of audit procedures, the scope, frequency and results of internal audits, and
the adequacy of internal accounting controls.
3
<PAGE>
The Board of Directors has a Compensation and Stock Option Committee,
consisting of three non-employee directors, Messrs. Lehrman, Pint and
Schweitzer. The Compensation and Stock Option Committee, which met five times
during the fiscal year ended April 30, 1997, grants stock options and other
awards, reviews salary levels, bonuses and other matters and makes
recommendations to the Board of Directors in connection therewith.
The Board of Directors does not have a nominating committee.
COMPENSATION OF DIRECTORS
For the last fiscal year, non-employee directors received an annual retainer
fee of $12,000 which was payable in Company stock. Non-employee directors also
received a per meeting fee of $1,500 for each Board of Directors' meeting
attended. Employee directors do not receive any fees for serving on the Board or
on any Board committee. Directors are entitled to reimbursement for
out-of-pocket expenses in connection with attendance at board and committee
meetings.
The Board of Directors has set the annual retainer for non-employee
directors for the period beginning with the meeting of shareholders on September
23, 1997 at $12,000, which will be payable in Company stock, pursuant to the
Restated Non-Employee Directors' Stock Plan. Non-employee directors will also
receive a per meeting fee of $1,500 for each Board of Directors' meeting
attended.
The Company has maintained a directors' stock option plan for non-employee
directors since 1986. In 1995, the Restated Non-Employee Directors' Stock Plan
("Restated Directors' Plan") was approved by the shareholders. Under the
Restated Directors' Plan each director of the Company who was not an employee of
the Company or a subsidiary receives a 10,000 share option upon his or her
initial election as a director. The exercise price of the option is equal to the
market price on the date of grant. The Restated Directors' Plan provides that
options become exercisable in installments over a four-year period. If a person
ceases to be a director, he or she may exercise the option within two years
after ceasing to be a director to the extent it is otherwise exercisable at the
date of termination. A total of 292,000 shares were reserved for issuance under
the Restated Directors' Plan. As of July 1, 1997, options to purchase 40,000
shares were outstanding under the Restated Directors' Plan and 120,000 shares
are available for grant.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Certain information concerning current executive officers of the Company who
are not directors is set forth below.
<TABLE>
<CAPTION>
EXECUTIVE
OFFICER
NAME POSITIONS WITH THE COMPANY AGE SINCE
- ---------------------------- --------------------------------------------------------- --- ---------
<S> <C> <C> <C>
Thomas M. Kieffer Executive Vice President of Norstan Consulting of Norstan 39 1996
Communications, Inc., and Chief Executive Officer of
Connect Computer Company
Kenneth S. MacKenzie Executive Vice President, Treasurer and Chief Financial 56 1997
Officer
James J. Radabaugh Executive Vice President and General Manager of Area 50 1992
Operations of Norstan Communications, Inc.
Roger D. Van Beusekom Executive Vice President and General Manager of Rolm 58 1996
Resale Systems and Norstan Resale Services of Norstan
Communications, Inc. and Executive Vice President of
Norstan Financial Services, Inc.
</TABLE>
4
<PAGE>
THOMAS M. KIEFFER has been Executive Vice President of Norstan Consulting of
Norstan Communications, Inc. since June 1997 and Chief Executive Officer of
Connect Computer Company or its predecessor company since July 1986.
KENNETH S. MACKENZIE has been Executive Vice President, Treasurer and Chief
Financial Officer of the Company since June 1997. He is also Executive Vice
President, Treasurer and Chief Financial Officer of Norstan Communications,
Inc., Norstan Financial Services, Inc., Norstan Canada Inc., Norstan Network
Services, Inc., Norstan Network Services of New Hampshire, Inc., Connect
Computer Company and Norstan International, Inc. From March 1996 to June 1997,
he was Vice President of Strategic Alliances of Manpower Inc., an employment
services organization. From December 1995 to March 1996, he was Vice President
of McKesson Drug Co., a distributor of drugs and toiletries. From December 1994
to December 1995, he was Director of Managed Services of Manpower Inc. From
August 1992 to December 1994, he was General Manager of Tascor, an outsourcing
services organization. From April 1990 to August 1992, he was Chief Financial
Officer of Eduquest, an IBM educational business unit.
JAMES J. RADABAUGH has been Executive Vice President and General Manager of
Area Operations of Norstan Communications, Inc. since May 1996. From May 1995 to
May 1996, he was Executive Vice President of Customer Services of Norstan
Communications, Inc. From May 1994 to May 1995, he was Executive Vice President
and Area General Manager of Norstan Canada Inc. From August 1992 to May 1994, he
was President and Chief Operating Officer of Norstan Canada Inc. From April to
August 1992, he was Executive Vice President and General Manager of Norstan
Canada Inc. From 1990 to 1992, he was Vice President of Field Support for the
Central Region of Norstan Communications, Inc. Prior to 1990, Mr. Radabaugh was
employed by ROLM Corporation in various management positions.
ROGER D. VAN BEUSEKOM has been Executive Vice President and General Manager
of Rolm Resale Systems and Norstan Resale Services of Norstan Communications,
Inc. and Executive Vice President of Norstan Financial Services, Inc. since
February 1996. From May 1994 to February 1996, he was Executive Vice President
and General Manager of Norstan Financial Services, Inc. From August 1986 to May
1994, he was President of Norstan Financial Services, Inc.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
The Compensation and Stock Option Committee ("Committee") of the Board of
Directors is composed entirely of non-employee directors. The Committee is
responsible for developing and making recommendations to the Board of Directors
with respect to the Company's executive compensation policies. Further, the
Committee annually reviews and makes recommendations to the Board of Directors
concerning the compensation to be paid to the executive officers who are also
directors. The base salaries and bonus formulas for Messrs. Baszucki, Cohen and
Richard were determined by the Board of Directors acting on the recommendations
of the Committee. Messrs. Baszucki, Cohen and Richard annually review and
establish the base salaries and bonus formulas for all other executive officers
who are not directors of the Company.
The components of the Company's executive compensation program which are
subject to the discretion of the Committee on an individual basis include (a)
base salaries, (b) performance based bonuses, (c) stock options, (d) restricted
stock grants and (e) other awards.
The Company's executive compensation philosophy is to link executive
compensation directly to earnings performance and therefore to increases in
shareholder value. The objectives of the Company's executive compensation
program are to:
- Support the achievement of desired Company earnings performance.
5
<PAGE>
- Provide compensation that enables the Company to attract and retain key
executives.
- Provide compensation opportunities that are linked to the performance of
the Company and that directly link the interests of the executives with
the interests of the shareholders.
The Company's executive officers are eligible for annual cash bonuses under
a performance bonus program. The program provides for the establishment of
various annual performance goals which, if achieved, result in the payment of
cash compensation to participants for that year over and above their base
salary. The program is intended to focus management attention on key business
goals and to reward superior performance. Goals under the program generally
include corporate performance objectives and individual performance objectives.
The target level of pretax earnings is assigned a significantly greater weight
than the aggregate weight assigned to all remaining factors. At the beginning of
the fiscal year ended April 30, 1997, performance goals for purposes of
determining annual incentive compensation were determined based on strategic and
financial measurements including a target level of pretax earnings. For fiscal
1997, the Company's executive officers were eligible to receive a specified
percentage of their base salary as a bonus payable upon achievement of
established Company, group and/or individual performance goals.
LONG-TERM COMPENSATION PROGRAM
The Norstan, Inc. 1995 Long-Term Incentive Plan (the "1995 Plan") provides
for grants of stock options, restricted stock grants, stock appreciation rights,
performance awards and other stock based awards. Through stock grants and awards
under this plan, executives will receive significant equity opportunity which
provides an incentive to build long-term stockholder value.
STOCK OPTIONS
Stock options reward and encourage effective leadership that contributes to
the Company's long-term financial success, as measured by an appreciation in its
stock price. Stock options only have value for the executives when the price of
the Company's stock appreciates in value from the date the stock options are
granted. All stockholders will benefit from such increases in the Company's
stock price.
Executives are considered for stock option grants consistent with the
Company's goal to include in total compensation a long-term equity interest for
executives. This also provides a greater opportunity for reward when long-term
performance is consistently achieved. No stock options were granted to current
executive officers during fiscal 1997, except that Messrs. Radabaugh and Van
Beusekom received stock option grants of 25,000 shares and 15,000 shares,
respectively. Generally, stock options are granted at an exercise price equal to
the fair market value of the Company's common stock on the date of grant, have
ten-year terms, and have exercise restrictions which lapse over a five-year
period. The restricted stock awards generally have restrictions which lapse over
a three to five year period. The annual bonus and long-term incentives introduce
considerable risk to the total executive compensation package. These elements
are variable, may fluctuate significantly from year to year and are directly
tied to Company performance.
CHIEF EXECUTIVE OFFICER COMPENSATION
The salary and bonus of the Chief Executive Officer is set by and subject to
the discretion of the Committee with Board approval. The compensation for Paul
Baszucki, the Company's Chief Executive Officer during fiscal 1997, was
determined by using a process and philosophy similar to that used for other
executive officers. The Committee considers its members' views as to comparative
compensation for like positions at other companies together with its own
assessment of Mr. Baszucki's performance and contributions to the Company,
recommending a salary and performance bonus formula for the Board of Directors'
approval. For fiscal 1997, he received a bonus of 54% of his base salary which
bonus was primarily based on achieving a target level of pretax earnings but
also included asset management and
6
<PAGE>
strategic goals. The Committee believes Mr. Baszucki has managed the Company
well in a challenging business climate and has achieved significantly better
results than other companies in the industry.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are no interlocking relationships, as defined in the regulations of
the Securities and Exchange Commission, involving members of the Board of
Directors, or its Compensation and Stock Option Committee.
GENERAL
The Committee has reviewed the provisions of Internal Revenue Code Section
162(m) relating to the deductibility of annual executive compensation in excess
of $1,000,000, and the proposed regulations relating to Section 162(m). The
Committee currently does not have a policy with respect to Section 162(m)
because it is unlikely that such limit will apply to compensation paid by the
Company to any of the Company's executive officers in the near future.
The purpose of this report is to inform shareholders of the responsibilities
and the philosophy of the Committee with respect to executive compensation.
Neither this report nor the Performance Graph are intended to be used for any
other purpose or to be incorporated by reference in any of the Company's past or
future filings with the Securities and Exchange Commission.
August 4, 1997 Compensation and Stock Option Committee
Arnold Lehrman, CHAIRMAN
Gerald D. Pint
Stanley H. Schweitzer
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
In April 1995, the Company entered into an employment agreement with Mr.
Baszucki. The agreement had an initial term which would have ended on April 30,
1998, but was automatically extended on May 1, 1997, and is automatically
extended on each May 1st thereafter, to a date which is 24 months after such
renewal date unless the Company gives written notice to the contrary. The
employment agreement provides for the participation of Mr. Baszucki in the
employee benefit plans and fringe benefit programs which are from time to time
maintained by the Company for its executive officers and for certain other
fringe benefits. Base salary will be continued, at the level then in effect, for
a period of 12 months if Mr. Baszucki dies during the employment period. The
base salary for the current fiscal year for Mr. Baszucki is $308,700. The
employment agreement also has provisions designed to encourage Mr. Baszucki to
continue to carry out his duties in the event of a change in control (as
hereinafter defined) of the Company. Under the agreement, if a change in control
of the Company occurs, Mr. Baszucki's employment period is automatically
extended to a date that is 36 months after the date of the change in control.
If, after a change in control, Mr. Baszucki's employment is terminated by the
Company (other than for cause) or by him within 18 months after the change in
control or by him during the term of the agreement (1) because of certain
changes in his duties, compensation, benefits or work location, or (2) because
contractual performance of his duties becomes hazardous to his physical or
mental health, or (3) for "good reason" (as defined in the agreement), Mr.
Baszucki would receive the compensation and benefits set forth below.
In April 1997, the Company entered into an employment agreement with Mr.
David Richard. The agreement has an initial term which ends on April 30, 1999,
which is automatically extended on May 1, 1998, and on each May 1st thereafter,
to a date which is 24 months after such renewal date unless the Company gives
written notice to the contrary. The employment agreement provides for
participation in the
7
<PAGE>
employee benefit plans and fringe benefit programs which are from time to time
maintained by the Company for its executive officers and for certain other
benefits. Base salary will be continued, at the level then in effect, for a
period of 12 months if Mr. Richard dies during the employment period, or if the
Company terminates his employment without cause during the employment period.
The base salary for the current fiscal year for Mr. Richard is $275,000. The
employment agreement also has provisions designed to encourage Mr. Richard to
continue to carry out his duties in the event of a change in control (as
hereinafter defined) of the Company. Under the agreement, if a change in control
of the Company occurs, Mr. Richard's employment period is automatically extended
to a date that is 36 months after the date of the change in control. If, after a
change in control, Mr. Richard's employment is terminated by the Company (other
than for cause) or by him within 18 months after the change in control or by him
during the term of the agreement (1) because of certain changes in his duties,
compensation, benefits or work location, or (2) because contractual performance
of his duties becomes hazardous to his physical or mental health, or (3) for
"good reason" (as defined in the agreement), Mr. Richard would receive the
compensation and benefits set forth below.
In April 1995, the Company entered into an employment agreement with Mr.
Richard Cohen. The agreement had an initial term which would have ended on April
30, 1998, but was automatically extended on May 1, 1997, and is automatically
extended on each May 1st thereafter, to a date which is 24 months after such
renewal date unless the Company gives written notice to the contrary. The
employment agreement provides for participation in the employee benefit plans
and fringe benefit programs which are from time to time maintained by the
Company for its executive officers. Base salary will be continued, at the level
then in effect, for a period of 12 months if Mr. Cohen dies during the
employment period, or if the Company terminates his employment without cause
during the employment period. The base salary for the current fiscal year for
Mr. Cohen is $183,750. The employment agreement also has provisions designed to
encourage Mr. Cohen to continue to carry out his duties in the event of a change
in control (as hereinafter defined) of the Company. Under the agreement, if a
change in control of the Company occurs, Mr. Cohen's employment period is
automatically extended to a date that is 36 months after the date of the change
in control. If, after a change in control, Mr. Cohen's employment is terminated
by the Company (other than for cause) or by him within 18 months after the
change in control or by him during the term of the agreement (1) because of
certain changes in his duties, compensation, benefits or work location, or (2)
because contractual performance of his duties becomes hazardous to his physical
or mental health, or (3) for "good reason" (as defined in the agreement), Mr.
Cohen would receive the compensation and benefits set forth below.
If as above provided, the officer's employment is terminated as a result of
a change in control, the compensation and benefits to be received by such
officer are (1) two times his annual salary and incentive payment, (2) any
resulting damages including two times the amount of his annual benefits under
the Company's employee welfare benefit plans and perquisite programs, (3) up to
$15,000 in outplacement expenses and (4) the vesting of all shares of restricted
stock, performance awards, stock appreciation rights and stock options.
A "change in control" is deemed to occur when and if (i) any person (1)
makes a tender offer for the Company's common stock pursuant to which shares of
the Company are purchased or (2) acquires at least 20% of Company's stock or
(ii) the shareholders of the Company approve a plan of merger or consolidation
or to sell substantially all the assets of the Company or to liquidate the
Company or (iii) a majority of the Board of Directors become individuals other
than "Continuing Directors" (as defined in the agreements).
8
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and noncash compensation for each of
the last three fiscal years awarded to or earned by the Chief Executive Officer
of the Company and each of the four most highly compensated executive officers
of the Company as of April 30, 1997, whose total annual salary and bonus
compensation for the most recent fiscal year exceeded $100,000.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
OTHER ANNUAL
NAME AND PRINCIPAL FISCAL BONUS COMPENSATION
POSITION YEAR SALARY ($) ($)(1) ($)(2)
- ------------------------- ------ ---------- --------- ------------
<S> <C> <C> <C> <C>
Paul Baszucki 1997 $308,700 $ 165,926 --
Chairman and Director 1996 $294,000 $ 205,800 --
1995 $279,562 $ 126,755 --
Richard Cohen 1997 $183,750 $ 98,766 --
Vice Chairman and 1996 $175,000 $ 122,500 --
Director 1995 $164,115 $ 74,410 --
Thomas Kieffer 1997 $200,000 $ 86,251 --
Executive Vice President 1996 $ -0- $ -0- --
of Norstan Consulting of 1995 $ -0- $ -0- --
Norstan Communications,
Inc.
James J. Radabaugh 1997 $180,000 $ 105,922 --
Executive Vice President 1996 $130,500 $ 85,755 --
and General Manager of 1995 $117,500 $ 88,125 --
Area Operations of
Norstan Communications,
Inc.
Roger D. Van Beusekom 1997 $131,264 $ 98,448 --
Executive Vice President 1996 $117,200 $ 87,900 --
and General Manager of 1995 $111,550 $ 50,482 --
Rolm Resale Services and
Norstan Resale Services
of Norstan
Communications, Inc.
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
<CAPTION>
LONG TERM COMPENSATION
AWARDS PAYOUTS
RESTRICTED SECURITIES
STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL AWARDS OPTIONS/ PAYOUTS COMPENSATION
POSITION ($)(3)(4) SAR'S (#) ($) ($)(5)
- ------------------------- --------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Paul Baszucki $91,500 -0- shs. $-0- $13,579
Chairman and Director $-0- -0- shs. $-0- $12,728
$-0- -0- shs. $-0- $11,916
Richard Cohen $91,500 -0- shs. $-0- $ 7,595
Vice Chairman and $-0- -0- shs. $-0- $ 7,002
Director $-0- -0- shs. $-0- $ 6,695
Thomas Kieffer $-0- -0- shs. $-0- $ 1,425
Executive Vice President $-0- -0- shs. $-0- $-0-
of Norstan Consulting of $-0- -0- shs. $-0- $-0-
Norstan Communications,
Inc.
James J. Radabaugh $-0- 25,000 shs. $-0- $ 4,500
Executive Vice President $-0- 20,000 shs. $-0- $ 4,050
and General Manager of $-0- -0- shs. $-0- $ 3,600
Area Operations of
Norstan Communications,
Inc.
Roger D. Van Beusekom $-0- 15,000 shs. $-0- $ 4,500
Executive Vice President $-0- -0- shs. $-0- $ 4,050
and General Manager of $-0- -0- shs. $-0- $ 3,600
Rolm Resale Services and
Norstan Resale Services
of Norstan
Communications, Inc.
- -------------------------
- -------------------------
</TABLE>
(1) Reflects bonus earned during the fiscal year. For all fiscal years all or a
portion of the bonus was paid during the next fiscal year.
(2) Perquisites are excluded as their aggregate value did not meet the reporting
threshold of the lesser of $50,000 or 10% of salary plus bonus reported for
each named executive officer.
(3) The stock becomes vested in five equal annual installments. The first 20%
becomes vested one year from date of grant. The officer would receive any
dividends paid on the shares.
(4) As of April 30, 1997, Messrs. Baszucki and Cohen each held 6,000 shares of
restricted common stock of the Company, subject to risk of forfeiture which,
on such date, had a market value of $84,000. The aggregate restricted stock
holdings for named executive officers at the end of the fiscal year were
12,000 shares of common stock with an aggregate market value of $168,000,
based on the closing price of a share of common stock of $14.00 on the
NASDAQ National Market System at fiscal year-end.
(5) All Other Compensation reported represents: (i) Company contributions to the
401(k) Plan of $4,500 for each executive officer except Mr. Kieffer who had
a contribution of $1,425, and (ii) payments for executive disability
insurance as follows: Mr. Baszucki, $9,079; and Mr. Cohen, $3,095.
9
<PAGE>
STOCK OPTIONS
The following tables provide certain information with respect to stock
options granted and stock options exercised in fiscal 1997 by the named
executive officers and the value of such officers' unexercised options at April
30, 1997.
OPTION GRANTS IN LAST FISCAL YEAR (1)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- -------------------------------------------------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES % OF TOTAL ANNUAL RATE OF STOCK
UNDERLYING OPTIONS EXERCISE PRICE APPRECIATION FOR
OPTIONS GRANTED TO OR BASE OPTION TERM (4)
GRANTED EMPLOYEES IN PRICE EXPIRATION ----------------------
NAME (#)(2) FISCAL YEAR ($/SH)(3) DATE 5%($) 10%($)
- ---------------------------- ----------- ----------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Paul Baszucki -0- -0- -0- -- -0- -0-
Richard Cohen -0- -0- -0- -- -0- -0-
Thomas M. Kieffer -0- -0- -0- -- -0- -0-
James J. Radabaugh 25,000 8.1% $ 15.00 8/20/06 $ 207,000 $ 509,750
Roger D. Van Beusekom 15,000 4.8% $ 15.00 8/20/06 $ 124,200 $ 305,850
</TABLE>
- ------------------------
(1) No SAR grants were made in the last fiscal year.
(2) The options become exercisable with respect to 20% of the shares one year
after the date of grant and an additional 20% of the shares becomes
exercisable on the same date of each of the four succeeding years.
(3) The options were granted at 100% of the fair market value on the date of
grant. The optionee may satisfy the exercise price by submitting shares
and/or cash.
(4) The dollar amounts in these columns are the result of calculations at the 5%
and 10% rates set by the SEC and are not intended to forecast future
appreciation of the Company's Common Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FY-END (#)(1) AT FY-END ($)(2)
SHARES ACQUIRED VALUE ---------------------------- --------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- --------------- ------------ ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Paul Baszucki 170,000 $ 2,145,400 -0- -0- $ -0- $ -0-
Richard Cohen -0- $ -0- -0- -0- $ -0- $ -0-
Thomas M. Kieffer -0- $ -0- -0- -0- $ -0- $ -0-
James J. Radabaugh -0- $ -0- 4,000 41,000 $ 8,480 $ 33,920
Roger D. Van Beusekom -0- $ -0- -0- 15,000 $ -0- $ -0-
</TABLE>
- ------------------------
(1) There are no securities underlying outstanding stock appreciation rights.
(2) Calculated on the basis of the number of shares subject to such option
multiplied by the excess of the closing price of a share of common stock of
$14.00 on the NASDAQ National Market System, at fiscal year-end over the
exercise price of such option.
10
<PAGE>
PERFORMANCE GRAPH
The following performance graph compares cumulative total shareholder
returns on the Company's common stock over the last five fiscal years, ended
April 30, 1997, with the NASDAQ Stock Market (U.S. Companies) Index and the
NASDAQ Non-Financial Stock Index, assuming an initial investment of $100 at the
beginning of the period and the reinvestment of all dividends.
COMPARISON OF FIVE YEAR-CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR
NORSTAN, INC.
PREPARED BY THE CENTER FOR RESEARCH IN SECURITY PRICES
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NASDAQ
<S> <C> <C> <C>
Non-Financial Stocks
Nasdaq SIC 0100-5999,
Stock Market 7000-9999
NORSTAN, INC. (US Companies) US & Foreign
4/30/92 $100.000 $100.000 $100.000
5/29/92 105.263 101.299 100.640
6/30/92 94.737 97.339 95.677
7/31/92 101.053 100.786 98.668
8/31/92 115.789 97.706 95.248
9/30/92 107.368 101.338 98.719
10/30/92 101.053 105.329 102.725
11/30/92 120.000 113.711 111.334
12/31/92 126.316 117.897 114.723
1/29/93 130.526 121.253 117.806
2/26/93 141.053 116.730 111.911
3/31/93 128.421 120.108 114.934
4/30/93 117.895 114.982 110.184
5/28/93 132.632 121.851 119.097
6/30/93 115.789 122.414 119.221
7/30/93 107.368 122.559 118.210
8/31/93 110.526 128.894 125.136
9/30/93 120.000 132.732 128.535
10/29/93 136.842 135.716 132.558
11/30/93 143.158 131.668 128.664
12/31/93 141.053 135.339 132.453
1/31/94 151.579 139.447 136.895
2/28/94 141.053 138.145 135.480
3/31/94 130.526 129.651 126.100
4/29/94 136.842 127.968 123.203
5/31/94 132.631 128.281 122.253
6/30/94 147.368 123.590 116.282
7/29/94 145.263 126.124 119.335
8/31/94 163.158 134.165 127.472
9/30/94 160.000 133.822 127.814
10/31/94 168.421 136.452 131.537
11/30/94 162.105 131.925 127.236
12/30/94 147.368 132.295 127.365
1/31/95 155.789 133.037 126.917
2/28/95 161.579 140.073 133.457
3/31/95 191.579 144.224 138.174
4/28/95 189.474 148.765 143.132
5/31/95 197.895 152.601 146.411
6/30/95 204.210 164.967 159.769
7/31/95 210.526 177.093 171.958
8/31/95 214.737 180.682 174.214
9/29/95 218.947 184.837 178.138
10/31/95 210.526 183.778 176.323
11/30/95 210.526 188.093 179.633
12/29/95 212.631 187.092 177.497
1/31/96 212.631 188.007 178.768
2/29/96 214.737 195.171 186.711
3/29/96 225.789 195.821 186.427
4/30/96 227.368 212.066 204.481
5/31/96 301.052 221.805 214.738
6/28/96 313.684 211.802 202.840
7/31/96 273.684 192.931 182.259
8/30/96 277.894 203.741 192.448
9/30/96 290.526 219.326 207.934
10/31/96 296.842 216.895 204.142
11/29/96 269.473 230.304 216.432
12/31/96 303.158 230.076 215.608
1/31/97 282.105 246.426 232.268
2/28/97 261.052 232.835 215.992
3/31/97 261.052 217.661 201.160
4/30/97 235.789 224.495 207.888
</TABLE>
LEGEND
<TABLE>
<CAPTION>
Symbol CRSP Total Returns Index for: 4/30/92 4/30/93 4/29/94 4/28/95 4/30/96 4/30/97
- --------- ----------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
NORSTAN, INC. 100.0 117.9 136.8 189.5 227.4 235.8
Nasdaq Stock Market (US Companies) 100.0 115.0 128.0 148.8 212.1 224.5
Nasdaq Non-Financial Stocks 100.0 110.2 123.2 143.1 204.5 207.9
SIC 0100-5999, 7000-9999 US & Foreign
</TABLE>
NOTES:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 04/30/92.
11
<PAGE>
BENEFICIAL OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth information as of July 1, 1997 (except as
otherwise noted), regarding the beneficial ownership of the common stock of the
Company, its only class of equity security outstanding, by each director or
nominee for director of the Company, by each current executive officer of the
Company named in the Summary Compensation Table herein, by all directors,
nominees and current executive officers as a group, and by each person
(including any "group" as that term is used in section 13(d)(3) of the
Securities Exchange Act of 1934, as amended) who is known by the Company to be
the beneficial owner of more than five percent of the common stock of the
Company:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF
BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP (1) OUTSTANDING (2)
- --------------------------------------- ------------------- ----------------
<S> <C> <C>
Directors, nominees and executive
officers:
Paul Baszucki 454,804(3)(4)(6) 4.8 %
David R. Richard 40,000(5) *
Richard Cohen 536,055(3)(4)(7) 5.7 %
Connie M. Levi 21,900(5) *
Gerald D. Pint 16,000 *
Herbert F. Trader 25,500 *
Dr. Jagdish N. Sheth 9,500(5) *
Thomas M. Kieffer 119,956(3)(4) 1.3 %
James J. Radabaugh 26,710(5) *
Roger D. Van Beusekom 70,852(3)(5) *
All directors, nominees and executive 1,321,277(3)(4)(5) 14.0 %
officers as a group (11 persons,
including those named above)
Other beneficial owners:
David L. Babson & Company, 783,200(8) 8.3 %
Incorporated
One Memorial Drive
Cambridge, MA 02142
First Bank System, Inc. 597,010(9) 6.3 %
601 Second Avenue South
Minneapolis, MN 55402
Heartland Advisors, Inc. 829,600(10) 8.8 %
790 North Milwaukee Street
Milwaukee, WI 53202
Perkins Capital Management, Inc. 616,030(11) 6.5 %
730 East Lake Street
Wayzata, MN 55391
</TABLE>
- ------------------------
* Less than one percent
(1) Each person has sole voting and sole dispositive powers with respect to the
outstanding shares held by the indicated person, except as otherwise noted.
12
<PAGE>
(2) Each figure showing the percentage of outstanding shares owned beneficially
has been calculated by treating as outstanding and owned the shares which
would be issuable within 60 days if stock options held by the indicated
person were exercised.
(3) Includes shares held by the indicated person as custodian or trustee for
others, as to which shares the indicated person has voting or dispositive
powers, as follows: Mr. Baszucki, 19,868 shares; Mr. Cohen, 324,704 shares;
Mr. Kieffer, 29,874 shares; Mr. Van Beusekom, 20,000 shares; all directors,
nominees and executive officers as a group, 394,446 shares.
(4) Includes shares beneficially held by members of the indicated person's
family, as to which shares the indicated person has no voting or dispositive
powers and disclaims beneficial ownership, as follows: Mr. Baszucki, 570
shares; Mr. Cohen, 53,246 shares; Mr. Kieffer, 17,512 shares; all directors,
nominees and executive officers as a group, 71,328 shares.
(5) Includes shares which would be issuable within 60 days if stock options
held by the indicated person were exercised, as follows: Ms. Levi, 20,000
shares; Dr. Sheth, 8,000 shares; Mr. Radabaugh, 13,000 shares; Mr. Richard,
20,000 shares; Mr. Van Beusekom, 3,000 shares; all directors, nominees and
executive officers as a group, 64,000 shares.
(6) Mr. Baszucki's address is 250 Wakefield Road, Wayzata, Minnesota 55391.
(7) Mr. Cohen's address is 6990 Tupa Drive, Edina, Minnesota 55439.
(8) According to a Schedule 13G dated February 7, 1997, and filed with the
Securities and Exchange Commission, David L. Babson & Company, Inc. has sole
voting power with respect to 485,300 of such shares and shared voting power
with respect to 297,900 of such shares and sole dispositive power with
respect to 783,200 of such shares.
(9) According to a Schedule 13G dated February 13, 1997, and filed with the
Securities and Exchange Commission, First Bank System, Inc. has sole voting
power with respect to 581,010 shares of such shares and shared voting power
with respect to 15,000 of such shares and sole dispositive power with
respect to 581,300 shares of such shares and shared dispositive power with
respect to 710 of such shares.
(10) According to a Schedule 13G dated February 12, 1997, and filed with the
Securities and Exchange Commission, Heartland Advisors, Inc. has sole voting
power with respect to 710,600 shares and sole dispositive power with respect
to 829,600 shares.
(11) According to a Schedule 13G dated January 24, 1997, and filed with the
Securities and Exchange Commission, Perkins Capital Management, Inc. has
sole voting power with respect to 182,900 shares and sole dispositive power
with respect to 616,030 shares.
COMPLIANCE WITH SECTION 16(A)
The Company's directors, its executive officers, and any persons holding
more than 10% of the outstanding common stock are required to file reports
concerning their initial ownership of common stock and any subsequent changes in
that ownership. The Company believes that the filing requirements for the last
fiscal year were satisfied and that all required forms were timely filed except
that Messrs. Baszucki, Cohen and Pint each filed one late Form 4 covering a
single transaction and Mr. Kieffer filed a late Form 3. In making this
disclosure, the Company has relied solely on written representations of its
directors, executive officers and beneficial owners of more than 10% of common
stock and copies of the reports that they have filed with the Securities and
Exchange Commission.
13
<PAGE>
PROPOSAL TO RATIFY THE APPOINTMENT
OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of Arthur Andersen LLP as
independent public accountants to audit the books, records and accounts of the
Company for the fiscal year ending April 30, 1998. The firm also audited the
books, records and accounts of the Company for the fiscal year ended April 30,
1981 and for each fiscal year thereafter.
Representatives of Arthur Andersen LLP will be present at the Annual
Meeting, will have an opportunity to make a statement if they desire to do so
and will be available to respond to appropriate questions by shareholders.
All shares represented by proxies that have been properly executed and
returned will be voted in favor of the ratification of the appointment of the
independent auditors, unless other instructions are indicated thereon.
Ratification of the appointment of the independent auditors requires the
affirmative vote of a majority of the shares present in person or by proxy at
the 1997 Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS.
PROPOSALS OF SHAREHOLDERS
Any proposal of a shareholder of the Company intended to be presented at the
Annual Meeting of shareholders in 1998 must be received at the Company's office
on or before April 23, 1998 in order to be considered for inclusion in the
Company's Proxy Statement and form of proxy relating to that meeting.
FINANCIAL AND OTHER INFORMATION
The Company's Annual Report for the fiscal year ended April 30, 1997,
including financial statements, is being sent to stockholders of record as of
the close of business on July 28, 1997 together with this Proxy Statement. The
Annual Report is not a part of the proxy solicitation materials. The Company
will furnish, without charge, a copy of its Annual Report on Form 10-K for the
fiscal year ended April 30, 1997 as filed with the Commission to any stockholder
who submits a written request to the Company's offices, Attention: Mary Kiernan,
Investor Relations, 605 North Highway 169, Twelfth Floor, Plymouth, Minnesota
55441.
OTHER MATTERS
At the date of this Proxy Statement, management knows of no other matters
which may come before the Annual Meeting. However, if any other matters properly
come before the meeting, it is the intention of the persons named in the
enclosed proxy form to vote such proxies received by the Company in accordance
with their judgment on such matters.
By Order of the Board of Directors
WINSTON E. MUNSON, SECRETARY
August 21, 1997
14
<PAGE>
PROXY
NORSTAN, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies given by the undersigned for the
Annual Meeting of the shareholders of Norstan, Inc. to be held on Tuesday,
September 23, 1997, at 2:00 P.M., at 605 North Highway 169, 11th Floor,
Plymouth, Minnesota, hereby appoints Paul Baszucki, David R. Richard and Winston
E. Munson, and any one or more of them, as proxy or proxies, with full power of
substitution and revocation, to vote for the undersigned and in the name of the
undersigned all shares of common stock of Norstan, Inc. of the undersigned, as
if the undersigned were personally present and voting at said Annual Meeting,
and all adjournments thereof, upon the following matters:
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS. Nominees: P. Baszucki, R. Cohen, C. Levi, G. Pint, D. Richard, J. Sheth, and H. Trader.
/ / VOTE FOR all nominees listed above / / VOTE WITHHELD as to all nominees listed above.
(except as marked to the contrary below).
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominee write
that nominee's name in the space provided below.)
_____________________________________________________________________________
2. Ratification of appointment of Arthur Andersen LLP as independent auditors
for the fiscal year ending April 30, 1998.
/ / For / / Against / / Abstain
3. In their discretion the Proxies are authorized to vote upon such matters as
may properly come before the meeting.
Please mark, date, sign and mail this proxy promptly in the enclosed
envelope.
<PAGE>
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1 AND 2.
The Board of Directors recommends a vote FOR Proposals 1 and 2.
The undersigned hereby acknowledges receipt of the Notice of the Annual
Meeting of Shareholders of Norstan, Inc. and the Proxy Statement furnished
therewith dated August 21, 1997.
Please sign your name exactly as it appears below. In the case of shares
owned in joint tenancy or as tenants in common, all should sign. Fiduciaries
should indicate their title and authority.
Dated: ________________________, 1997.
______________________________________
______________________________________
Signature
