<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
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 Section240.14a-11(c) or
Section240.14a-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.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]
5101 SHADY OAK ROAD
MINNETONKA, MINNESOTA 55343
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 21, 1999
------------------------
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 21,
1999, at 2:00 p.m., at 5101 Shady Oak Road, Minnetonka, Minnesota 55343, for the
following purposes:
1. To elect seven directors.
2. To adopt the 2000 Employee Stock Purchase Plan of Norstan, Inc. and the
reservation for issuance thereunder of 400,000 shares of the Company's
common stock.
3. To ratify the appointment of Arthur Andersen LLP as independent auditors
for the fiscal year ending April 30, 2000.
4. 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 23, 1999 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
[SIGNATURE]
/s/ NEIL I. SELL, SECRETARY
August 18, 1999
<PAGE>
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS OF
NORSTAN, INC.
5101 SHADY OAK ROAD
MINNETONKA, MINNESOTA 55343
TO BE HELD SEPTEMBER 21, 1999
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 21, 1999, 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 18, 1999.
The expense of the solicitation of proxies for this Annual Meeting,
including the cost of mailing, has been 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 23, 1999 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 23, 1999, the
Company had outstanding 10,850,996 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, (ii) FOR the adoption of the 2000 Employee Stock Purchase Plan of
Norstan, Inc. and the reservation for issuance thereunder of 400,000 shares of
the Company's common stock, and (iii) FOR the ratification of the appointment of
Arthur Andersen LLP as independent auditors for the fiscal year ending April 30,
2000.
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
<PAGE>
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.
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 OF DIRECTOR NOMINEE POSITION WITH THE COMPANY AGE SINCE
- ------------------------------------------------ ------------------------------------------------ --- -----------
<S> <C> <C> <C>
Paul Baszucki................................... Chairman of the Board and Director 59 1975
David R. Richard................................ President, Chief Executive Officer and Director 57 1997
Richard Cohen................................... Vice Chairman of the Board and Director 55 1971
Constance M. Levi............................... Director 59 1993
Gerald D. Pint.................................. Director 63 1983
Dr. Jagdish N. Sheth............................ Director 60 1995
Herbert F. Trader............................... Director 62 1983
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
NOMINEES NAMED ABOVE.
2
<PAGE>
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
and has served as a director since 1975. He was the Chief Executive Officer of
the Company from 1986 to May 1997. Mr. Baszucki was Co-Chairman of the Board of
Directors of the Company from June 1995 to May 1997 and Vice Chairman of the
Board of Directors 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, Mr.
Baszucki 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 and has served as a director since September 1997. Prior
to joining Norstan, Mr. Richard retired from the IBM Corporation in 1997 after
30 years of service. His IBM career started in 1967 in Santa Barbara,
California, and included a number of executive assignments in Atlanta,
Cincinnati, Dallas, Minneapolis and San Francisco. In 1996, Mr. Richard was
named general manager of services for IBM North America and helped lead IBM in
the design, development and delivery of the company's services strategy and
implementation. Mr. Richard is the chairperson of the Greater Minneapolis
Chamber of Commerce and a director of the Lind Family Foundation.
RICHARD COHEN has been Vice Chairman of the Board of the Company since 1984
and has served as a director since 1971. Mr. Cohen served as the Company's
Treasurer from 1971 to June 1997 and as Chief Financial Officer of the Company
from May 1991 to June 1997.
CONSTANCE M. LEVI has served as a director since 1993. She was President of
the Greater Minneapolis Chamber of Commerce from August 1988 until her
retirement in 1994. Ms. Levi is a Trustee of the Lutheran Brotherhood Family of
Funds. Ms. Levi 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. Ms. Levi has served as a director or member
of numerous governmental, public service, and nonprofit boards and
organizations.
GERALD D. PINT has served as a director since 1983. Since 1993, he has been
a telecommunications consultant. He was the Group Vice President for the Telecom
Systems Group of 3M from 1989 until his retirement from 3M in 1993. Mr. Pint 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 served as a director since 1995. He has been the
Charles H. Kellstadt Professor of Marketing in the Goizueta Business School,
Emory University since 1991. Prior to Dr. Sheth's 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).
HERBERT F. TRADER has served as a director since 1983. Mr. Trader has been a
consultant specializing in international marketing and management and
telecommunication delivered computer services since 1995. From January 1991 to
January 1995, Mr. Trader 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 1987 until his retirement in January 1991, Mr. Trader
served as Vice President, Training and Education Group for Control Data
Corporation, a computer company. Mr. Trader was President of
3
<PAGE>
Business Development Group for Control Data Corporation from 1985 to 1987. Mr.
Trader serves as a director of Jumpstech, Inc., a development stage e-commerce
company.
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, 1999, the Company's Board of
Directors met 11 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.
The Board of Directors has an Audit Committee, consisting of three
non-employee directors, Constance M. Levi, Herbert F. Trader and Richard Cohen.
The Audit Committee, which met on three occasions during the fiscal year ended
April 30, 1999, 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.
The Board of Directors has a Compensation and Stock Option Committee,
consisting of three non-employee directors, Gerald D. Pint and Jagdish Sheth and
Richard Cohen. The Compensation and Stock Option Committee, which met four times
during the fiscal year ended April 30, 1999, 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
Non-employee directors receive an annual retainer fee of $12,000 payable in
shares of the Company's common stock. Non-employee directors also receive 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.
Under the Norstan, Inc. Restated Non-Employee Directors' Plan, each director
of the Company who was not an employee of the Company or a subsidiary receives a
20,000 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 Non-Employee Directors' Plan provides that options generally 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 157,560 shares are reserved for issuance under the Restated
Non-Employee Directors' Plan.
In September 1998, each non-employee director received an option grant
covering 1,000 shares of the Company's common stock. These options were fully
vested on the date of grant.
As of July 31, 1999, options to purchase 73,800 shares were outstanding
under the Restated Non-Employee Directors' Plan and 83,760 shares are available
for grant.
4
<PAGE>
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 OF EXECUTIVE POSITIONS WITH THE COMPANY AGE SINCE
- ----------------------------------------------- ----------------------------------------------- --- -----------
<S> <C> <C> <C>
Kenneth S. MacKenzie........................... Executive Vice President and Chief Financial 58 1997
Officer
Roger D. Van Beusekom.......................... Executive Vice President of Financial Services 60 1996
Peter E. Stilson............................... Executive Vice President of Communication 46 1999
Solutions
Jeffrey A. Lusenhop............................ President, Norstan Consulting, Inc. 46 1999
</TABLE>
KENNETH S. MACKENZIE has been Executive Vice President and Chief Financial
Officer of the Company since June 1997. From March 1996 to June 1997, Mr.
MacKenzie served as Vice President of Strategic Alliances of Manpower Inc., an
employment services organization. From December 1995 to March 1996, Mr.
MacKenzie served as Vice President of McKesson Drug Co., a distributor of drugs
and toiletries. From December 1994 to December 1995, Mr. MacKenzie was Director
of Managed Services of Manpower Inc. From August 1992 to December 1994, Mr.
MacKenzie 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.
ROGER D. VAN BEUSEKOM has been Executive Vice President of Financial
Services since February 1996. Mr. Van Beusekom served in various managerial
capacities with Financial Services from 1986 to 1992.
PETER E. STILSON has been Executive Vice President of Communication
Solutions since December 1998. Mr. Stilson has been employed by Norstan since
July 1987. From February 1998 to December 1998, Mr. Stilson served as Vice
President of Sales for Canada. From May 1996 to February 1998, Mr. Stilson was
Vice President/General Manager of the Southern (U.S.) Area. Mr. Stilson was
Director of Sales for the South Region from January 1994 to May 1996.
Previously, Mr. Stilson held several Norstan sales management positions.
JEFFREY A. LUSENHOP has been President of Norstan Consulting since July
1999. From April 1998 to July 1999, Mr. Lusenhop served as President of
Connaissance Consulting, LLC, a 75 percent owned subsidiary of Norstan. From
June 1995 to April 1998, Mr. Lusenhop served as Vice President of Information
Systems of Nationwide Insurance and Casualty Company, a division of the
Nationwide Insurance Enterprise. From July 1975 to June 1995, Mr. Lusenhop held
several positions in the information technology industry for NCR Corporation,
which was later succeeded by AT&T.
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 and Richard
were determined by the Board of Directors acting on the recommendations of the
Committee. Messrs. Baszucki and Richard annually review and establish the base
salaries and bonus formulas for all other executive officers who are not
directors of the Company.
5
<PAGE>
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 Committee intends to utilize direct compensation as a tool to attract
and retain the high-quality executive talent needed to grow and develop the
Company's businesses. Compensation is also intended to motivate increased
performance within the Company and to reward sustained performance of
individuals who achieve and exceed performance goals. The Company's compensation
programs strive to encourage results that foster higher levels of individual
performance and teamwork, provide value-added products and services to customers
and enhance shareholder value. For senior-level executives, the Company's
compensation programs are designed to link executive compensation to the
Company's financial performance. The programs also align executives toward
common goals and tie their rewards significantly to the creation of value for
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 to
participants of cash compensation 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 business unit performance objectives. The target
level of pretax earnings is assigned a significantly greater weight than the
weight assigned to each of the remaining factors. At the beginning of the fiscal
year ended April 30, 1999, 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 1999, 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
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 appreciation
opportunities which provides an incentive to build long-term shareholder value.
STOCK OPTIONS AND RESTRICTED STOCK AWARDS
Stock options reward and encourage effective leadership that contribute to
the Company's long-term financial success, as measured by the 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 shareholders 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 appreciation
opportunity for executives. This approach also provides a greater opportunity
for reward when long-term performance is consistently achieved. 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 three to five year period. Restricted
stock awards generally have restrictions that lapse over a three to five year
period. The annual bonus and long-term incentives impose considerable risk upon
the total executive compensation package. These elements are variable, may
fluctuate significantly from year to year and are directly tied to the Company's
financial and stock price performance.
6
<PAGE>
CHIEF EXECUTIVE OFFICER COMPENSATION
The salary and bonus of the Chief Executive Officer are set by and subject
to the discretion of the Committee with Board approval. The compensation for
David Richard, the Company's Chief Executive Officer during fiscal 1999, was
determined by using a process and applying a philosophy similar to that employed
for other executive officers. The Committee considers its members' views as to
comparative compensation for like positions at other businesses, together with
its own assessment of Mr. Richard's performance and contributions to the
Company, recommending a salary and performance bonus formula for the Board of
Directors' approval. For fiscal 1999 no bonus was paid to Mr. Richard or to any
of the senior executives since the Company did not achieve its performance
objectives.
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 Section 162(m) of the Internal
Revenue Code of 1986, as amended, relating to the deductibility of annual
executive compensation in excess of $1,000,000. 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.
<TABLE>
<S> <C>
August 12, 1999 Compensation and Stock Option Committee
Gerald D. Pint
Dr. Jagdish N. Sheth
Richard W. Cohen
</TABLE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Each of Messrs. Baszucki, Richard and MacKenzie (the "Executives") has
entered into an employment agreement with the Company (collectively, the
"Agreements"). The Agreements expire on April 30, 2001, subject to automatic
renewal for an additional 24 month period each May 1, unless the Company
provides the Executive with prior written notice to the contrary. The Agreements
provide that Executives are entitled to participate in all employee benefit
plans and fringe benefit programs maintained by the Company for its executive
officers. In the event of death or other termination of employment without
"cause" (as defined in the Agreements) during the term of the Agreements, each
Executive is entitled to receive his base salary for a period of 12 months
thereafter. Current base salaries are $340,000, $366,000 and $187,250,
respectively, for Messrs. Baszucki, Richard and MacKenzie. Each Agreement also
contains a provision designed to encourage the Executives to carry out their
employment duties in the event of a change of control (as defined below). Such
provisions state that upon a change of control, the Executive's period of
employment under the Agreement is automatically extended to the date that is 36
months from the date of the change in control. In addition, if after a change in
control the Executive's employment is terminated by the Company without cause or
by the Executive within 18 months after the change in control or by him during
the term of the Agreement as a result of (i) changes in his duties,
compensation, benefits or work location,
7
<PAGE>
(ii) a risk of mental or physical illness posed by contractual performance of
his duties, or (iii) "good reason" (as defined in the Agreement), the Executive
will receive as compensation twice his annual salary and incentive payment, the
vesting of all shares of restricted stock, performance awards, stock
appreciation rights and stock options and certain other benefits.
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).
In September 1998 the Company entered into a consulting agreement with
Richard Cohen, a member of the Company's Board of Directors and former employee.
The agreement, which expires in August 2002, provides that Mr. Cohen will
consult with management and members of the Board of Directors from time to time
as required by the Board. Mr. Cohen receives consulting fees of $150,000 per
year and is prohibited from directly or indirectly competing with the Company
during the term of the Agreement.
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, 1999, whose total annual salary and bonus
compensation for the most recent fiscal year exceeded $100,000.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
------------------------
ANNUAL COMPENSATION(1) RESTRICTED
--------------------------------------- SECURITIES STOCK ALL OTHER
OTHER ANNUAL UNDERLYING AWARDS COMPENSATION
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS ($)(2)(3) ($)(4)
- ------------------------------------ ----------- --------- --------- ----------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul Baszucki....................... 1999 325,000 -- -- 60,000 -- 20,858
Chairman and Director 1998 308,700 197,108 -- 25,000 -- 14,232
1997 308,700 165,926 -- -- 91,500 13,579
David R. Richard.................... 1999 350,000 -- 48,251 75,000 -- 15,804
President and Chief Executive 1998 275,000 169,167 -- 80,000 283,750 4,206
Officer
Kevin Paulsen....................... 1999 217,692 -- -- 37,500 360,000 7,455
Executive Vice President, Norstan 1998 117,115 67,397 -- 30,000 109,200 --
Consulting, Inc.
Kenneth S. MacKenzie................ 1999 175,000 -- -- 37,500 -- 6,630
Executive Vice President 1998 143,611 77,191 -- 30,000 -- 3,546
Chief Financial Officer
Roger D. Van Beusekom............... 1999 150,000 -- -- 15,000 -- 8,772
Executive Vice President, 1998 136,515 99,826 -- 15,000 -- 4,750
Financial Services 1997 131,264 98,448 -- 15,000 -- 4,500
</TABLE>
- ------------------------
(1) Other annual compensation reported for Mr. Richard consists of country club
initiation fees and dues aggregating $42,851 and an automobile allowance of
$5,400. As permitted by the Security and Exchange Commission's rules
governing disclosure of executive compensation, perquisites and other
personal benefits for other named executive officers are excluded from the
table above
8
<PAGE>
because in each case the aggregate thereof did not exceed the lower of (i)
10 percent of the sum of the named executive officer's salary and bonus, or
(ii) $50,000.
(2) Restricted stock becomes vested in three to five equal annual installments.
The first installment becomes vested one year from the date of grant. Any
dividends declared on the Company's common stock will be paid on all shares
of restricted stock granted under the 1995 Long-Term Incentive Plan.
(3) As of April 30, 1999, Messrs. Richard and Paulsen held 12,000 and 15,730
shares, respectively, of restricted common stock of the Company, all subject
to risk of forfeiture which, on such date, had an aggregate market value of
$277,300. Based on the closing price of a share of common stock of $10.00 on
the Nasdaq National Market System at fiscal year-end.
(4) All Other Compensation reported represents: (i) Company matching
contributions to the 401(k) Plan of $11,241 for Mr. Baszucki, $10,525 for
Mr. Richard, $7,170 for Mr. Paulsen, $6,630 for Mr. MacKenzie and $7,582 for
Mr. Van Beusekom and (ii) payments for executive disability insurance
premiums as follows: Mr. Baszucki, $9,617, Mr. Richard, $5,279, Mr. Paulsen,
$285 and Mr. Van Beusekom, $1,190.
STOCK OPTIONS
The following tables provide certain information with respect to stock
options granted and stock options exercised in fiscal 1999 by the named
executive officers and the value of such officers' unexercised options at April
30, 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE
---------------------------------------------------------------- VALUE OF ASSUMED
PERCENTAGE OF ANNUAL RATES OF STOCK
NUMBER OF TOTAL OPTIONS PRICE APPRECIATION
SECURITIES GRANTED TO EXERCISE OR FOR OPTION TERM(4)
UNDERLYING OPTION EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANTED(2) FISCAL YEAR ($/SHARE)(3) DATE 5%($) 10%($)
- ------------------------------ ----------------- ----------------- ------------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Paul Baszucki................. 40,000 4.7% 20.72 8-07-08 521,228 1,320,894
20,000 2.3% 15.47 12-01-08 194,580 493,104
David R. Richard.............. 50,000 5.8% 20.72 8-07-08 651,535 1,651,117
25,000 2.9% 15.47 12-01-08 243,225 616,380
Kevin Paulsen................. 25,000 2.9% 24.00 6-18-08 377,337 956,245
12,500 1.5% 15.47 12-01-08 121,612 308,190
Kenneth S. MacKenzie.......... 25,000 2.9% 24.00 6-18-08 377,337 956,245
12,500 1.5% 15.47 12-01-08 121,612 308,190
Roger D. Van Beusekom......... 10,000 1.2% 24.00 6-18-08 150,935 382,498
5,000 .6% 15.47 12-01-08 48,645 123,276
</TABLE>
- ------------------------
(1) No SAR grants were made in the last fiscal year.
(2) The options become exercisable with respect to 25 percent of the shares one
year after the date of grant and an additional 25 percent of the shares
becomes exercisable on the same date of each of the three succeeding years.
(3) The options were granted at 100 percent of the fair market value on the date
of grant. The optionee may satisfy the exercise price by submitting cash or,
at the discretion of the Compensation and Stock Option Committee, shares of
common stock.
(4) The dollar amounts in these columns are the result of calculations at the 5
percent and 10 percent rates set by the Securities and Exchange Commission
and are not intended to forecast future appreciation of the Company's common
stock.
9
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
The following table summarizes information with respect to options held by
the executive officers named in the Summary Compensation Table and the value of
the options held by such persons as of the end of the last fiscal year.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE MONEY OPTIONS AT
SHARES OPTIONS AT FY-END (#) FY-END ($)
ACQUIRED ON VALUE ---------------------------- --------------------------
NAME EXERCISE(#) REALIZED($) EXERCISEABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------ ----------- ----------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Paul Baszucki....................... -- -- 5,000 80,000 -- --
David R. Richard.................... -- -- 32,000 123,000 -- --
Kevin Paulsen....................... -- -- 6,000 61,500 -- --
Kenneth S. MacKenzie................ -- -- 6,000 61,500 -- --
Roger D. Van Beusekom............... -- -- 9,000 36,000 -- --
</TABLE>
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, 1999, 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>
COMPANY MARKET PEER
<S> <C> <C> <C>
Index Index Index
4/29/94 100.000 100.000 100.000
5/31/94 96.923 100.244 99.230
6/30/94 107.692 96.580 94.384
7/29/94 106.154 98.564 96.863
8/31/94 119.231 104.844 103.469
9/30/94 116.923 104.576 103.747
10/31/94 123.077 106.616 106.768
11/30/94 118.462 103.083 103.277
12/30/94 107.692 103.363 103.381
1/31/95 113.846 103.957 103.030
2/28/95 118.077 109.452 108.340
3/31/95 140.000 112.701 112.172
4/28/95 138.462 116.251 116.199
5/31/95 144.615 119.258 118.862
6/30/95 149.231 128.916 129.707
7/31/95 153.846 138.383 139.604
8/31/95 156.923 141.193 141.435
9/29/95 160.000 144.443 144.617
10/31/95 153.846 143.611 143.137
11/30/95 153.846 146.980 145.826
12/29/95 155.385 146.202 144.094
1/31/96 155.385 146.934 145.137
2/29/96 156.923 152.534 151.575
3/29/96 165.000 153.047 151.346
4/30/96 166.154 165.725 166.011
5/31/96 220.000 173.329 174.342
6/28/96 229.231 165.516 164.675
7/31/96 200.000 150.781 147.948
8/30/96 203.077 159.239 156.234
9/30/96 212.308 171.411 168.818
10/31/96 216.923 169.514 165.739
11/29/96 196.923 180.031 175.714
12/31/96 221.539 179.880 175.065
1/31/97 206.154 192.645 188.606
2/28/97 190.769 181.990 175.323
3/31/97 190.769 170.124 163.250
4/30/97 172.308 175.421 168.675
5/30/97 178.462 195.292 189.088
6/30/97 200.000 201.295 193.473
7/31/97 215.385 222.505 214.781
8/29/97 240.000 222.173 214.467
9/30/97 264.616 235.346 226.606
10/31/97 276.923 223.086 212.838
11/28/97 304.616 224.275 212.502
12/31/97 292.308 220.417 205.004
1/30/98 289.231 227.393 214.222
2/27/98 343.077 248.775 236.214
3/31/98 304.616 257.954 244.950
4/30/98 295.385 262.298 249.178
5/29/98 304.616 247.739 234.910
6/30/98 308.462 265.042 252.674
7/31/98 283.077 261.932 250.261
8/31/98 215.385 210.215 199.416
9/30/98 215.385 239.396 227.904
10/30/98 210.769 249.745 237.713
11/30/98 188.461 274.959 264.224
12/31/98 218.461 310.591 300.441
1/29/99 152.308 355.693 348.882
2/26/99 123.077 323.784 315.522
3/31/99 113.846 347.161 340.365
4/30/99 123.077 356.452 346.945
</TABLE>
10
<PAGE>
BENEFICIAL OWNERSHIP OF PRINCIPAL SHAREHOLDERS
AND MANAGEMENT
The following table sets forth information as of July 23, 1999 (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............................................................. 418,103(3) 3.8
David R. Richard.......................................................... 87,037(4) *
Kevin Paulsen............................................................. 46,252(5) *
Kenneth S. MacKenzie...................................................... 18,126(6) *
Roger D. Van Buesekom..................................................... 88,778(7) *
Dr. Jagdish N. Sheth...................................................... 19,770(8) *
Herbert F. Trader......................................................... 28,770(9) *
Constance M. Levi......................................................... 25,170(10) *
Gerald D. Pint............................................................ 19,270(11) *
Richard W. Cohen.......................................................... 511,383(12) 4.7
All directors, nominees and executive officers as a group (11 persons,
including those named above)............................................ 1,278,409(13) 11.6
OTHER BENEFICIAL OWNERS:
Heartland Advisors, Inc................................................... 1,853,400(14) 17.1
790 North Milwaukee Street
Milwaukee, WI 53202
David L. Babson & Company, Incorporated................................... 647,500(15) 6.0
One Memorial Drive
Cambridge, MA 02142
US Bancorp................................................................ 627,956(16) 5.8
601 Second Avenue South
Minneapolis, MN 55402
</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.
(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 570 shares owned by Mr. Baszucki's spouse and 17,267 shares owned
by a family foundation with respect to which Mr. Baszucki serves as
trustee. Mr. Baszucki disclaims beneficial ownership of all such shares.
Also includes 17,000 shares issuable to Mr. Baszucki upon exercise of
options exercisable within 60 days.
(4) Includes 56,500 shares issuable to Mr. Richard upon exercise of options
exercisable within 60 days.
11
<PAGE>
(5) Includes 12,250 shares issuable to Mr. Paulsen upon exercise of options
exercisable within 60 days.
(6) Includes 16,250 shares issuable to Mr. MacKenzie upon exercise of options
exercisable within 60 days.
(7) Includes 21,181 shares held by a trust with respect to which Mr. Van
Beusekom serves as trustee. Also includes 17,500 shares issuable to Mr. Van
Beusekom upon exercise of options exercisable within 60 days.
(8) Includes 17,000 shares issuable to Dr. Sheth upon exercise of options
exercisable within 60 days.
(9) Includes 2,000 shares issuable to Mr. Trader upon exercise of options
exercisable within 60 days.
(10) Includes 22,000 shares issuable to Ms. Levi upon exercise of options
exercisable within 60 days.
(11) Includes 2,000 shares issuable to Mr. Pint upon exercise of options
exercisable within 60 days.
(12) Includes 25,646 shares owned by Mr. Cohen's spouse, 104,556 shares held by
Mr. Cohen in his capacity as custodian for minor children and 247,748
shares owned by various trusts and foundations with respect to which Mr.
Cohen serves as trustee. Mr. Cohen disclaims beneficial ownership of all
such shares. Also includes 6,000 shares issuable to Mr. Cohen upon
exercise of options exercisable within 60 days.
(13) Includes 178,750 shares issuable to the Company's officers and directors
pursuant to the exercise of options held by them and exercisable within
the next 60 days.
(14) According to a Schedule 13G dated May 10, 1999, and filed with the
Securities and Exchange Commission, Heartland Advisors, Inc. has sole
dispositive power with respect to all such shares and sole voting power
over 1,260,600 shares.
(15) According to a Schedule 13G dated January 26, 1999, and filed with the
Securities and Exchange Commission, David L. Babson & Company, Inc. has
sole voting power and sole dispositive power with respect to all such
shares.
(16) A Schedule 13G dated February 11, 1999 and filed by US Bancorp with the
Securities and Exchange Commission states that US Bancorp has sole voting
power with respect to all such shares, shared dispositive power with
respect to 710 of such shares and sole dispositive power with respect to
604,956 shares.
12
<PAGE>
PROPOSAL TO ADOPT THE
2000 EMPLOYEE STOCK PURCHASE PLAN
OF NORSTAN, INC.
On June 17, 1999, the Board of Directors of the Company adopted the 2000
Employee Stock Purchase Plan of Norstan, Inc. (the "Stock Purchase Plan"),
subject to approval by the Company's shareholders. The Stock Purchase Plan is
intended to create an identity of interest between the Company's employees and
shareholders by providing employees with an incentive to purchase shares of the
Company's common stock. Under the terms of the Stock Purchase Plan, employees
may acquire shares of the Company's stock at a 15 percent discount from their
fair market value. In addition, the Stock Purchase Plan provides a mechanism
whereby employees may pay for their share purchases with periodic deductions
from their payroll. The complete text of the Stock Purchase Plan is attached
hereto as Exhibit A to the Proxy Statement. In the event that shareholder
approval is not received, the Stock Purchase Plan will be terminated.
SCOPE
The Stock Purchase Plan authorizes the issuance of up to 400,000 shares of
the Company's common stock to eligible participants. The Stock Purchase Plan
does not have a stated term.
OFFERINGS UNDER THE STOCK PURCHASE PLAN
Each calendar quarter, the Company will offer participants the option to
purchase shares of common stock through voluntary payroll deductions for up to
10 percent of their base compensation. Substantially all of the employees and
its subsidiaries will be eligible to participate in the Stock Purchase Plan.
Under the Stock Purchase Plan, the option exercise price for shares of common
stock will be eighty-five percent of the closing price of the Company's common
stock as reported on Nasdaq (or any other national securities exchange) on the
first or the last day of each three month Offering Period (as defined in the
Stock Purchase Plan), whichever is lower. Employees may acquire up to that
number of full shares purchasable at the option exercise price with ten percent
of their compensation, subject to certain limitations. Shares of the Company's
common stock are purchased for the account of each participant at the conclusion
of the application Offering Period with funds deducted from the participant's
payroll during such period.
ELIGIBILITY
Subject to certain limitations involving the magnitude of (i) existing
beneficial ownership of the Company's common stock, and (ii) options to acquire
the Company's common stock previously granted during the year under all benefit
plans sponsored by the Company, all employees of the Company and its
subsidiaries who have attained the age of 18 and completed one month of
employment are eligible to participate in the Stock Purchase Plan.
ADMINISTRATION
The Stock Purchase plan will be administered by the Company's Board of
Directors. Expenses of administering the Stock Purchase Plan will be borne by
the Company.
ADJUSTMENTS; TERMINATION; AND AMENDMENT
In the event of any change in the Company's capitalization, including any
merger, consolidation, acquisition or stock split, appropriate adjustments will
be made to the number and class of shares available under the Stock Purchase
Plan, the purchase price per share and the associated share purchase rights. The
Board of Directors may terminate or amend the Stock Purchase Plan; PROVIDED,
HOWEVER, that in the absence of shareholder approval, the Board may not: (i)
increase the maximum number of shares which may be issued under the Plan; or
(ii) amend the requirements as to the class of employees eligible to purchase
stock under the Stock Purchase Plan.
13
<PAGE>
TAX TREATMENT OF THE PARTICIPATING EMPLOYEES
Participating employees will not recognize income for federal income tax
purposes either upon enrollment of the Stock Purchase Plan or upon the purchase
of shares. All tax consequences are deferred until a participating employee
sells the shares, disposes of the shares by gift, or dies.
If shares are held for the greater of: (a) one year after the date of
purchase; and (b) two years from the applicable date of grant, or if the
participating employee dies while owning the shares, the participating employee
realizes ordinary income on a sale (or a disposition by way of gift or upon
death) equal to the excess of the fair market value of the shares on the date of
purchase over the purchase price. All additional gain upon the sale of shares is
treated as long-term capital gain. If the shares are sold and the sale price is
less than the purchase price, there is no ordinary income and the participating
employee has a long-term capital loss for the difference between the sale price
and the purchase price.
If the shares are sold or are otherwise disposed of including by way of gift
(but not death, bequest or inheritance) (in any case a "disqualifying
disposition") prior to the expiration of holding period described above, the
participating employee realizes ordinary income at the time of sale or other
disposition, taxable to the extent that the fair market value of the shares at
the date of purchase is greater than the purchase price. This excess will
constitute ordinary income (currently subject to withholding) in the year of the
sale or other disposition even if no gain is realized on the sale or if a
gratuitous transfer is made. The difference, if any, between the proceeds of
sale and the fair market value of the shares at the date of purchase is a
capital gain or loss.
TAX TREATMENT OF THE COMPANY
The Company will be entitled to a deduction in connection with the
disposition of shares acquired under the Stock Purchase Plan only to the extent
that the participating employee recognizes ordinary income on a disqualifying
disposition of the shares. The Company will treat any transfer of record
ownership of shares as a disposition, unless it is notified to the contrary. In
order to enable the Company to learn of disqualifying dispositions and ascertain
the amount of the deductions to which it is entitled, participating employees
will be required to notify the Company in writing of the date and terms of any
disposition of shares purchased under the Stock Purchase Plan.
The above discussion is intended to summarize the applicable provisions of
the Internal Code that are in effect as of the date hereof. The tax consequences
of participating in the Stock Purchase Plan may vary with respect to individual
situations. Accordingly, employees should consult with their tax advisors in
regard to the tax consequences of participating in the Stock Purchase Plan as to
both federal and state income tax considerations.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF ADOPTING THE 2000
EMPLOYEE STOCK PURCHASE PLAN OF NORSTAN, INC.
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, 2000. 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
14
<PAGE>
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 1999 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 2000 must be received at the Company's office
on or before April 20, 2000 in order to be considered for inclusion in the
Company's Proxy Statement and form of proxy relating to that meeting. If the
Company is not provided notice of a shareholder proposal which the shareholder
has not previously sought to include in the Company's proxy statement by July 4,
2000, the management proxies will be allowed to use their discretionary voting
authority when the proposal is raised at the meeting.
COMPLIANCE WITH SECTION 16(A)
The Company's directors, its executive officers, and any persons holding
more than 10% of the Company's total issued and outstanding shares of 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. In making this disclosure, the Company has
relied solely on written representations of its directors, executive officers
and beneficial owners of more than 10 percent of common stock and copies of the
reports that they have filed with the Securities and Exchange Commission.
FINANCIAL AND OTHER INFORMATION
The Company's Annual Report for the fiscal year ended April 30, 1999,
including financial statements, is being sent to shareholders of record as of
the close of business on July 23, 1999 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, 1999 as filed with the Commission to any shareholder
who submits a written request to the Company's offices, Attention: Investor
Relations, Norstan, Inc., 5101 Shady Oak Road, Minnetonka, MN 55343-4100. The
Company's Annual Report is also available on the World Wide Web at the following
address: www.norstan.com.
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
/s/ NEIL I. SELL, SECRETARY
August 18, 1999
15
<PAGE>
EXHIBIT A
2000 EMPLOYEE STOCK PURCHASE PLAN
OF
NORSTAN, INC.
1. PURPOSE. Norstan, Inc. (hereinafter referred to as the "Company")
proposes to grant to employees of the Company and of such subsidiaries as the
Company's Board of Directors (the "Board of Directors") may designate from time
to time the opportunity to purchase common stock of the Company. Such common
stock shall be purchased pursuant to this Plan, which is the 2000 EMPLOYEE STOCK
PURCHASE PLAN OF NORSTAN, INC. (hereinafter referred to as the "Plan"). The Plan
is intended to encourage stock ownership by all employees of the Company, and to
be incentive to them to remain in its employ, improve operations, increase
profits and contribute more significantly to the Company's success.
2. RULES OF INTERPRETATION. The Company intends that the Plan qualify as
an "employee stock purchase plan" under Section 423 of the Internal Revenue Code
of 1986, as amended ("Section 423"), and shall be construed in a manner
consistent with the requirements of Section 423, or any successor provision, and
the regulations thereunder.
3. ADMINISTRATION OF THE PLAN. This Plan shall be administered by the
Board of Directors of the Company; however, the Board of Directors may, from
time to time, delegate its administrative or other duties under the Plan to an
agent. The Board of Directors shall have full power and authority to construe,
interpret and administer this Plan and to make determinations which shall be
final, conclusive and binding upon all persons, including without limitations,
the Company, its shareholders, and any employee participating in this Plan. The
Board of Directors shall have the power to provide regulations for the
administration of this Plan and to make any changes in such regulations as from
time to time it deems necessary.
4. STOCK SUBJECT TO THE PLAN. A total of 400,000 shares of the common
stock, par value $.10 per share, of the Company may be issued under this Plan,
subject to adjustment as provided herein.
5. OFFERINGS. There will be four annual offerings of the Company's common
stock under the Plan each calendar year (the "Offering Period(s)"). In each
calendar year, the first Offering Period will begin on January 1 and end on
March 31, the second Offering Period will begin on April 1 and end on June 30,
the third Offering Period will begin on July 1 and end on September 30, and the
fourth Offering Period will begin on October 1 and end on December 31. The first
day of each Offering Period shall be deemed the "Offering Commencement Date" and
the last day the "Offering Termination Date" for such Offering Period.
6. ELIGIBILITY. Any employee of the Company or its Subsidiaries who has
attained the age of 18 and completed one month of employment is eligible to
participate in this Plan. For purposes of this Plan, "Subsidiary" means any
entity, at least 75 percent of the outstanding voting stock or voting power of
which is beneficially owned, directly or indirectly, presently or in the future,
by the Company.
7. PARTICIPATION. Any eligible employee may elect to participate in this
Plan at any time during the continuance of this Plan by delivering to the
Company an authorization for payroll deductions, executed by the participating
employee (the "Participant"), in such form as may be prescribed by the Company
from time to time (a "Subscription Agreement"). Such elections are to be
effective the first day of the next pay period succeeding processing of the
authorization form and will apply to the current Offering Period and any
subsequent Offering Period until such election is changed or revoked by the
Participant.
A-1
<PAGE>
An employee's participation in this Plan is entirely voluntary. Each
employee shall understand that there are risks involved in stock ownership and
that the Company, its Subsidiaries and their officers and directors are making
no recommendations to their employees regarding the purchase of shares of the
Company, which is a personal decision for each employee.
8. EMPLOYEE CONTRIBUTIONS. A Participant shall, by completing a
Subscription Agreement, authorize payroll deductions in an amount specified by
the Participant in said form. No payroll deduction shall be less than $10.00 per
pay period, nor more, per pay period, than 10% of the gross pay of the
Participant. Such authorization form shall be effective for the current Offering
Period and all future Offering Periods until changed or revoked by the
Participant. Subsequent to the completion of such authorization form, not more
than one change in the authorized payroll deduction may be made by the
Participant in each Offering Period. The effective date of any change in future
payroll deductions will be the first day of the next pay period succeeding
processing of the change form.
Payroll deductions which are authorized by Participants who are paid
compensation in foreign currency shall be used to purchase the maximum number of
shares allowed pursuant to the Plan. Prior to each Offering Period's
purchase/exercise, the Participants' functional currency payroll deductions will
be converted to United States dollars based on the applicable exchange rate as
of the Offering Termination Date.
9. NUMBER OF SHARES. On the Commencement Date of each Offering Period,
each Participant shall be deemed to have been granted an option to purchase a
maximum number of shares of common stock equal to:
(i) that percentage of the Participant's compensation which the
Participant has elected to have withheld (but not in any case in excess of
10%) multiplied by the Participant's gross pay during the Offering Period
then divided by the applicable Stock Price determined as provided in Section
10 below, or
(ii) the flat per pay period dollar amount which the Participant has
elected to have withheld (but not in any case in excess of 10% of the
Participant's gross pay) multiplied by the number of pay periods during the
Offering Period then divided by the applicable Stock Price determined as
provided in Section 10 below.
10. STOCK PRICE. The option price of stock purchased with payroll
deductions made during any Offering Period (the "Stock Price") for a Participant
therein shall be the lower of:
(i) 85 percent of the closing price of the stock on the Offering
Commencement Date for such Offering Period or the nearest prior business day
on which trading occurred on the NASDAQ National Market System, or
(ii) 85 percent of the closing price of the stock on the Offering
Termination Date for such Offering Period or the nearest prior business day
on which trading occurred on the NASDAQ National Market System.
11. LIMITATIONS ON PURCHASE. Anything herein to the contrary
notwithstanding:
(i) no Participant shall have the right to purchase common stock nor be
granted options to purchase common stock under the Plan and all other
employee stock purchase plans of the Company, if any, at a rate which
exceeds Twenty-Five Thousand Dollars ($25,000) of fair market value of such
stock (determined at the beginning of each calendar year) for each calendar
year in which such option is outstanding at any time. The foregoing
provision shall be interpreted so as to comply with Section 423(b)(8).
(ii) No Participant shall be granted an option if, immediately after the
grant, such Participant would own stock and/or hold outstanding options to
purchase stock possessing 5 percent or more
A-2
<PAGE>
of the total combined voting power or value of all classes of stock of the
Company. For purposes of determining stock ownership under this subparagraph
(iii), the rules of Section 424(d) of the Internal Revenue Code, or any
successor provision, shall apply.
(iii) The Board of Directors may, in its discretion, limit the number of
shares available for the Plan during any Offering Period, as it deems
appropriate.
12. EXERCISE OF OPTION/STOCK PURCHASE. Provided that a Participant has
been continuously employed by the Company or its Subsidiaries through the end of
a given Offering Period, then the Participant's option for the purchase of stock
granted during such Offering Period will be deemed to have been exercised
automatically on the applicable Offering Termination Date for the purchase of
the number of shares, including fractional shares, of common stock which the
accumulated payroll deductions the Participant has made during the Offering
Period will purchase at the applicable Stock Price (but not in excess of the
number of shares for which outstanding options have been granted to the
Participant pursuant to Section 9 and/or in excess of any limits set forth in
Section 11).
Shares purchased under the Plan will come from the Company's authorized but
unissued shares of common stock.
13. DELIVERY OF STOCK. As promptly as practicable after the Offering
Termination Date of each Offering Period, the Company will deliver to each
Participant in such Offering Period, as appropriate, the shares of common stock
purchased therein upon exercise of such Participant's option. The Company may
determine, in its discretion, the manner of delivery of shares of common stock
purchased under the Plan, which may be by electronic account entry into new or
existing accounts, delivery of stock certificates or such other means as the
Company, in its discretion, deems appropriate.
14. STOCK TRANSFER RESTRICTIONS. The Plan is intended to satisfy the
requirements of Section 423 of the IRS Code. A Participant will not obtain the
benefits of this provision if such Participant disposes of shares of common
stock acquired each Offering Period pursuant to the Plan within two (2) years
from the Offering Commencement Date of the applicable Offering Period or within
one (1) year from the date such common stock is purchased by the Participant,
the Offering Termination Date, whichever is later.
15. REFUND OF EMPLOYEE CONTRIBUTIONS. At any time prior to the Offering
Termination Date of an Offering Period, all amounts contributed hereunder by a
Participant by authorized payroll deductions during the applicable Offering
Period shall be refunded, without interest, to the Participant at his or her
request. If a Participant causes his or her contributions for any Offering
Period to be refunded, payroll deductions shall not resume in any succeeding
Offering Period until the Participant delivers to the Company a new Subscription
Agreement.
If the Board of Directors of the Company suspends or terminates this Plan as
hereinafter provided, it shall cause all amounts deducted hereunder from the
Participants' gross pay during the Offering Period in which such suspension or
termination occurs to be refunded, without interest, to the Participants.
16. TERMINATION OF EMPLOYMENT. If a Participant's employment with the
Company or its Subsidiaries is terminated for any reason, or upon the death of
the Participant, all amounts deducted under this Plan from the Participant's
gross pay during the Offering Period in which such termination or death occurs
shall be refunded, without interest, to the Participant.
17. ASSIGNMENT. The interest of a Participant hereunder with respect to
any options/shares is not subject to the claims of creditors, or to assignment
or transfer other than by will or the laws of descent and distribution.
18. DILUTION OR OTHER ADJUSTMENTS, DIVIDENDS. In the event of any change
in the capital structure of the Company, including but not limited to a change
resulting from a stock dividend or split-up, or
A-3
<PAGE>
combination or reclassification of shares, the Board of Directors shall make
such adjustments with respect to the shares subject to this Plan, or any
provision of this Plan, as it deems equitable to prevent dilution or enlargement
of the interests of Participants in this Plan.
19. MERGER, CONSOLIDATION, REORGANIZATION, LIQUIDATION. If the Company or
any of its Subsidiaries shall become a party to any corporate merger,
consolidation, major acquisition of property for stock, reorganization,
liquidation, or similar transaction, the Board of Directors shall have the power
to make such arrangements as it deems necessary, which may include termination
of this Plan, with respect to the amounts deducted hereunder from the
Participants' gross pay, and such arrangements shall be binding upon all
persons, including without limitation, the Company, its shareholders, and any
Participant in this Plan.
20. AMENDMENT AND TERMINATION. The Board of Directors shall have the right
at any time during the continuance of this Plan to amend, modify, supplement,
suspend or terminate this Plan, provided that in the absence of the approval of
the holders of a majority of the shares of common stock present in person or by
proxy at a duly constituted meeting of shareholders of the Company, no such
amendment, modification or supplement shall (i) increase the aggregate number of
shares which may be issued under this Plan, unless such increase is by reason of
any change in capital structure referred to in Section 18 hereof or (ii)
materially modify the requirements of plan eligibility.
21. SECURITIES LAWS. The issuance of shares of common stock pursuant to
this Plan shall be subject to all applicable laws, rules and regulations; shares
shall not be issued hereunder except upon approval of appropriate governmental
agencies or stock exchanges as may be required.
22. REPORTS. The Company shall make available to each Participant under
this Plan a copy of the Company's Annual Report to Shareholders each year during
the continuance of this Plan.
23. MISCELLANEOUS.
(i) A prospectus covering the shares offered under this Plan shall be
made available to each employee who is eligible to participate herein.
(ii) Each employee who becomes a Participant in this Plan shall be
deemed to have accepted all the terms and conditions contained in this Plan,
and shall be fully bound thereby.
(iii) This Plan shall be subject to changes, if any, which may be ordered
by the United States Securities and Exchange Commission or the appropriate
regulatory authorities in any states in which this Plan is registered or
filed.
(iv) This Plan shall be construed according to the laws of the state of
Minnesota.
24. COMPLIANCE WITH SECTION 16(B). In the case of Participants who are or
may be subject to Section 16 of the Securities and Exchange Act of 1934 (the
"Act"), it is the intent of the Company that the Plan and any award granted
hereunder satisfy and be interpreted in a manner that satisfies the applicable
requirements of Rule 16(b)-3, so that such persons will be entitled to the
benefits of Rule 16(b)-3 or other exemptive rules under Section 16 of the Act
and will not be subjected to liability thereunder. If any provision of the Plan
or any award would otherwise conflict with the intent expressed herein, that
provision, to the extent possible, shall be interpreted and deemed so as to
avoid such conflict. To the extent of any remaining irreconcilable conflict with
such intent, such provision or award shall be deemed void as applicable to
Participants who are or may be subject to Section 16 of the Act.
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<PAGE>
NORSTAN, INC.
ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, SEPTEMBER 21, 1999
2:00 P.M.
5101 SHADY OAK ROAD,
MINNETONKA, MN 55343
NORSTAN, INC.
5101 SHADY OAK ROAD, MINNETONKA, MN 55343 PROXY
- -------------------------------------------------------------------------------
NORSTAN, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS-SEPTEMBER 21, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. It will be voted
on the matters set forth on the reverse side of this form as directed by the
shareholder, but if no direction is made in the space provided, it will be
voted FOR the election of all nominees to the Board of Directors, FOR the
proposal to adopt the 2000 Employee Stock Purchase Plan of Norstan, Inc. and
the reservation for issuance there under of 400,000 shares of the Company's
common stock, and FOR the engagement of Arthur Andersen LLP as auditors for
the fiscal year ending April 30, 2000.
The undersigned, a shareholder of Norstan, Inc. (the "Company") hereby
appoints Paul Basucki and David R. Richard, and each of them as proxies, with
full power of substitution, to vote on behalf of the undersigned the number
of shares which the undersigned is then entitled to vote, at the Annual
Meeting of the Shareholders of Norstan, Inc. to be held at the offices of
the Company, 5101Shady Oak Road, Minnetonka, Minnesota on Tuesday, September
21, 1999, at 2:00 p.m., and any adjournments or postponements thereof upon
matters set forth below, with all the powers which the undersigned would
possess if personally present.
SEE REVERSE FOR VOTING INSTRUCTIONS
<PAGE>
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid
envelope we've provided or return it to The Norstan, Inc. c/o Shareowner
Services,-SM- P.O. Box 64873, St. Paul, MN 55164-0873
- Please detach here -
<TABLE>
<S> <C> <C> <C> <C>
1. Election of directors: 01 Paul Basucki 02 David R. Richard / / Vote FOR / / Vote WITHHELD
03 Richard Cohen 04 Constance M. Levi all nominees from all nominees
05 Gerald D. Pint 06 Jagdish N. Sheth
07 Herbert E. Trader
</TABLE>
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE,
WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.)
2. ADOPTION OF THE 2000 EMPLOYEE STOCK
PURCHASE PLAN of Norstan INC. AND / / For / / Against / / Abstain
RESERVATION OF 400,000 SHARES OF
COMMON STOCK FOR, ISSUANCE
THEREUNDER.
3. APPROVAL OF ARTHUR ANDERSEN LLP AS
INDEPENDENT AUDITORS FOR THE FISCAL / / For / / Against / / Abstain
YEAR ENDING APRIL 30, 2000.
4. Upon such other business as may
properly come before the meeting
and any adjournments or / / For / / Against / / Abstain
postponements thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE ELECTION OF EACH OF
THE NOMINEES TO THE BOARD OF DIRECTORS, THE PROPOSAL TO ADOPT THE 2000
EMPLOYEE STOCK PURCHASE PLAN OF NORSTAN, INC. AND THE ENGAGEMENT OF ARTHUR
ANDERSEN LLP AS AUDITORS FOR THE FISCAL YEAR ENDING APRIL 30, 2000.
Address Change? Mark Box / / The undersigned hereby revokes all previous
Indicate changes below: proxies relating to the shares covered hereby
and acknowledge receipt of the Notice and Proxy
Statement relating to the Annual Meeting.
Dated: _________________________, 1999
Signaturer(s) in Box
(SHAREHOLDERS MUST SIGN EXACTLY AS THE NAME
APPEARS AT LEFT. WHEN SIGNED AS A CORPORATE
OFFICER, EXECUTOR, ADMINISTRATOR, TRUSTEE,
GUARDIAN, ETC., PLEASE GIVE FULL TITLE AS SUCH.
BOTH JOINT TENANTS MUST SIGN.)
