<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.142-12
CONTROL DATA SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
RALPH W. BEHA
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:*
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / 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>
(CONTROL DATA LOGO)
NOTICE OF 1994 ANNUAL MEETING
AND
PROXY STATEMENT
CONTROL DATA SYSTEMS, INC.
4201 LEXINGTON AVENUE NORTH
ARDEN HILLS, MINNESOTA 55126-6198
<PAGE>
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
WEDNESDAY, MAY 18, 1994
To Our Stockholders:
The 1994 Annual Meeting of Stockholders of Control Data Systems, Inc., will
be held on Wednesday, May 18, 1994, at the Hotel Intercontinental, 111 East 48th
Street, New York, New York, at 10:00 a.m. Eastern Daylight Time, for the
following purposes:
1. Elect six Directors.
2. Approve appointment of KPMG Peat Marwick as Company's independent
auditors.
3. Approve adoption of amendments to the 1992 Equity Incentive Plan in
order to:
(i) increase the number of shares available for grant from 2,400,000 to
2,900,000;
(ii) provide for the annual grant of options to purchase 5,000 shares to
each of the non-employee Directors of the Company; and
(iii) establish the maximum number of options that may be granted to any
one individual during a one-year period at 300,000.
These items are more fully described in the following pages of the Proxy
Statement.
Stockholders of record at the close of business on March 22, 1994, will be
entitled to vote at the Meeting and any adjournments of the Meeting.
By Order of the Board of Directors,
Ralph W. Beha
GENERAL COUNSEL AND SECRETARY
Dated: April 1, 1994
YOUR VOTE IS IMPORTANT.
PLEASE DATE AND SIGN ENCLOSED PROXY CARD
AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
<PAGE>
(CONTROL DATA LOGO)
Control Data Systems,
Inc.
4201 Lexington Avenue
North
Arden Hills, MN
55126-6198
------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 18, 1994
------------------------
BACKGROUND. Control Data Systems, Inc. ("Control Data" or "the Company")
was established through the transfer by Ceridian Corporation of its Computer
Products business to the Company and Ceridian's subsequent immediate spin-off,
in July of 1992, of the Company to Ceridian's stockholders as a stock dividend.
Since August, 1992 the Common Stock of the Company has been traded on the Nasdaq
National Market System. This Proxy Statement is being furnished in connection
with the second annual meeting of the Company's stockholders since the spin-off.
SOLICITING OF PROXY. The Company's Board of Directors is soliciting the
accompanying Proxy for use at the Annual Meeting of Stockholders of Control Data
to be held on May 18, 1994, and at any adjournments thereof. This Proxy
Statement and the related Proxy and Notice of Annual Meeting are being mailed to
stockholders beginning on or about April 1, 1994.
PROXY VOTING PROCEDURES. A Proxy Card is enclosed. In order to register
your vote, please complete, date and sign the Proxy Card and return it in the
envelope supplied. A Proxy may be revoked at any time before it is exercised by
filing a written revocation with the Company's Secretary, by delivering to the
Company's Secretary a new written proxy, or by attending the Meeting and voting
in person.
When stock is registered in the name of more than one person, EACH such
person must sign the Proxy. If the stockholder is a corporation, the Proxy must
be signed in its corporate name by an executive or other authorized officer. If
signed as attorney, executor, administrator, trustee, guardian, custodian or in
any other representative capacity, the signer's full title must be given.
Shares represented by a properly executed Proxy received by Control Data
prior to the Meeting and not revoked will be voted in accordance with the
instructions of the stockholder or, if no instructions are indicated, they will,
subject to the following, be voted in accordance with the recommendations of the
Board of Directors. If a stockholder abstains from voting as to any item, then
the shares held by such stockholder shall be deemed present at the Meeting for
purposes of determining a quorum and for purposes of calculating the vote with
respect to such item, but such shares shall not be deemed to have been voted in
favor of such item. Therefore, abstentions as to an item will have the same
effect as votes against such item. If a broker returns any "nonvotes,"
indicating a lack of voting instruction by the beneficial holder of the shares
and a lack of discretionary authority on the part of the broker to vote on such
item, then the shares covered by such nonvotes shall be deemed present at the
meeting for purposes of determining a quorum but shall not be deemed to be
represented at the Meeting for purposes of calculating the vote required for
approval of such item.
<PAGE>
RECORD DATE AND QUORUM. Stockholders are entitled to one vote for each
share of Control Data Common Stock, $.01 par value, they hold of record as of
the close of business on March 22, 1994. Holders are not entitled to cumulative
voting rights in the election of directors. On the March 22, 1994 record date,
13,669,205 shares of Control Data Common Stock were outstanding. A quorum (a
majority of the outstanding shares) must be represented at the Meeting in person
or by proxy to transact business.
STOCKHOLDINGS OF CERTAIN OWNERS AND MANAGEMENT
CERTAIN BENEFICIAL OWNERS. The following table shows information concerning
each person who to the best of Control Data's knowledge, was the beneficial
owner of more than 5% of Control Data Common Stock as of March 22, 1994.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS
- -------------------------------------------------------------------------------------- --------------- -------------
<S> <C> <C>
Ark Asset Management Co., Inc. 1,270,988(1) 9.3%
One New York Plaza
New York, NY 10004
Silicon Graphics, Inc. 1,185,224(2) 8.7%
2011 North Shoreline Boulevard
Mountain View, CA 94309
State of Wisconsin Investment Board 1,140,000(3) 8.3%
PO Box 7842
Madison, WI 53707
Harris Associates Investment Trust 1,014,000(4) 7.4%
Series Designated The Oakmark Fund
Two North LaSalle Street, Suite 500
Chicago, IL 60602
<FN>
- ------------------------
(1) Represents sole power to vote 952,763 shares and sole power to dispose of
1,228,388 shares.
(2) Represents sole power to vote and dispose of all 1,185,224 shares.
(3) Represents sole power to vote and dispose of all 1,140,000 shares.
(4) Represents shared power to vote and dispose of all 1,014,000 shares.
</TABLE>
2
<PAGE>
MANAGEMENT STOCKHOLDINGS. The following table shows the Control Data Common
Stock beneficially owned by each Control Data director, each executive officer
named in the Summary Compensation Table and by all directors and executive
officers (including the named individuals) as a group as of March 22, 1994.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT
BENEFICIAL OF
NAME OF BENEFICIAL OWNER OWNERSHIP (1) CLASS
- ----------------------------------------------------------------------------------------- ------------- ------------
<S> <C> <C>
W. Donald Bell........................................................................... 8,332 *
Grant A. Dove............................................................................ 8,332 *
Marcelo A. Gumucio....................................................................... 8,332 *
W. Douglas Hajjar........................................................................ 8,332 *
Keith A. Libbey.......................................................................... 8,582 *
James E. Ousley.......................................................................... 133,194 1.0 %
Mark W. Perry............................................................................ -0- (2) *
Jerry J. Johnson......................................................................... 45,082 0.3 %
Joseph F. Killoran....................................................................... 30,293 0.2 %
Dieter Porzel............................................................................ 27,465 0.2 %
Roger D. Shober.......................................................................... 37,399 0.3 %
All directors and executive officers as a group
(13 persons) (2)....................................................................... 355,805 2.6 %
<FN>
- ------------------------
* Less than 0.1%
(1) Except as otherwise noted, each person or group named in the table has
sole power to vote and dispose of all shares listed for such person or
group. Shares not currently outstanding but deemed beneficially owned by
virtue of the right of the person to acquire them as of March 22, 1994, or
within 60 days of such date (on or before May 21, 1994), are treated as
also outstanding only when determining the amount and percent owned by
such person or by the group. Such additional shares so considered
outstanding are as follows: Mr. Bell, 8,332 shares; Mr. Dove, 8,332
shares; Mr. Gumucio, 8,332 shares; Mr. Hajjar, 8,332 shares, Mr. Libbey,
8,332 shares; Mr. Ousley, 133,178 shares; Mr. Johnson, 42,582 shares; Mr.
Killoran, 28,700 shares; Mr. Porzel, 27,465 shares; Mr. Shober, 37,399
shares; all directors and executive officers as a group, 350,514 shares.
(2) Does not include the 1,185,224 shares owned by Silicon Graphics, Inc.
("SGI"). Mr. Perry is Vice Chairman and a director of SGI and disclaims
beneficial ownership of these shares owned by SGI.
</TABLE>
3
<PAGE>
ITEM NUMBER 1
ELECTION OF DIRECTORS
GENERAL INFORMATION
In accordance with the Company's Bylaws, the Board of Directors has set the
number of directors at seven. The Board has nominated six of its current members
as the slate recommended for election at the 1994 Annual Meeting. A seventh
member, Mark W. Perry, has notified the Company that he will not seek reelection
due to the decision by Silicon Graphics, Inc. ("SGI") to relinquish its right to
designate a director pursuant to the Stock Purchase Agreement between SGI and
the Company dated July 31, 1992. The Board is currently in the process of
selecting a seventh nominee, although it does not expect the selection process
to be completed before the Annual Meeting. Following the Annual Meeting, the
Board will elect a new member to fill the vacancy left by Mr. Perry's departure
following the end of his term. THE BOARD RECOMMENDS THAT YOU VOTE "FOR" ALL OF
THE NOMINEES LISTED BELOW. The election of directors is decided by a plurality
of the votes cast.
Directors elected at the 1994 Meeting will hold office until the next Annual
Meeting and until their successors are duly chosen and qualify, or until their
earlier resignations or removal. The Board of Directors has inquired of each
nominee and has ascertained that each will serve if elected. In the event that
any of these nominees should become unavailable for election, the Board of
Directors may designate substitute nominees, in which event the shares
represented by the Proxy Cards returned will be voted for such substitute
nominees unless an indication to the contrary is noted on the Proxy Card.
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION AND OTHER INFORMATION AGE SINCE
- -------------------------- --------------------------------------------------------------------- --- ---------
<S> <C> <C> <C>
W. DONALD BELL W. Donald Bell is the founder, President and Chief Executive Officer 56 August
of Bell Microproducts, Inc., a distribution company specializing in 1992
semiconductors, computer products, and manufacturing services. Mr.
Bell founded Microproducts, Inc. in 1988.
GRANT A. DOVE Grant A. Dove is a Managing Partner of Technology Strategies & 65 August
Alliances, a strategic planning and investment banking firm. Mr. 1992
Dove joined TS&A in 1991. From 1987-1992, Mr. Dove served as
Chairman of the Board and Chief Executive Officer of
Microelectronics and Computer Technology Corporation (MCC). He is
Chairman of the Board and a director of OPTEK Technology, Inc. Mr.
Dove is also a director of Western Company of North America, US
West, Inc., Merit Technology, Inc. and MCC.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION AND OTHER INFORMATION AGE SINCE
- -------------------------- --------------------------------------------------------------------- --- ---------
<S> <C> <C> <C>
MARCELO A. GUMUCIO Marcelo A. Gumucio is the President, Chairman and Chief Executive 56 August
Officer of Memorex Telex, N.V., an international organization 1992
engaged in the development, manufacture, distribution and servicing
of plug compatible computer peripheral products, personal computers
and computer media products. Mr. Gumucio joined Memorex Telex, N.V.
in 1992. Prior to joining Memorex Telex, N.V., Mr. Gumucio was
President of Gumucio, Burke & Associates, a private investment firm
he founded in 1990. Mr. Gumucio was President, Chief Operating
Officer and member of the Board of Directors of Cray Research, Inc.
from March 1988 to July 1990. Mr. Gumucio is also a director of
Memorex Telex, N.V.
W. DOUGLAS HAJJAR W. Douglas Hajjar is Vice Chairman of Cadence Design Systems, Inc., 46 August
an electronic design automation vendor. Mr. Hajjar has been Vice 1992
Chairman since December 1991 when Cadence Design Systems, Inc.
completed its merger with Valid Logic Systems Inc. From September
1987 through December 1991, Mr. Hajjar was Chairman and Chief
Executive Officer of Valid Logic Systems, Inc. Mr. Hajjar is also a
director of Cadence Design Systems, Inc. and Frame Technology
Corporation.
KEITH A. LIBBEY Keith A. Libbey is a member and Chairman of the Board of Fredrikson & 56 August
Bryon, P.A., a law firm in Minneapolis, Minnesota. 1992
JAMES E. OUSLEY James E. Ousley has been President and Chief Executive Officer of the 48 August
Company since the spin-off of the Company from Ceridian effective 1992
July 31, 1992. Mr. Ousley was President of Ceridian's Computer
Products business since April 1989 and was Executive Vice President
of Ceridian from February 1990 until the spin-off of the Company.
From January 1989 to April 1989, Mr. Ousley was Vice President,
Marketing and Sales for Ceridian's Computer Products business and
prior thereto he held various positions with Ceridian. Mr. Ousley is
also a director of Memorex-Telex N.V.
</TABLE>
Any stockholder who intends to make a nomination at an annual meeting must
deliver, not less than 50 nor more than 75 days prior to the particular annual
meeting, a notice to Control Data's Corporate Secretary setting forth: the name
and address of the stockholder who intends to make the nomination; the class and
number of shares of stock of the Company which are beneficially owned by the
stockholder; the name, age, business address and residence address of each
nominee being proposed by the stockholder; the principal occupation or
employment of each nominee; the class and number of shares of stock of the
Company which are beneficially owned by each nominee; such other information
concerning each nominee that would be required, under the rules of the
Securities and
5
<PAGE>
Exchange Commission, in a proxy statement soliciting proxies for the election of
such nominee; and a signed consent of each nominee to serve as a director of the
Company if so elected. The Company may require any proposed nominee to furnish
such other information as may reasonably be required by the Company to determine
the eligibility of such proposed nominee to serve as a director of the Company.
BOARD AND BOARD COMMITTEE MEETINGS
The Company's Board of Directors held five Board meetings in fiscal year
1993, including two by teleconference. The standing committees of the Board of
Directors include the Audit Committee and the Compensation Committee. No
director missed more than one meeting of the Board of Directors and none missed
meetings of Board committees on which the director served. The Board does not
have a standing nominating or similar committee.
AUDIT COMMITTEE. The Audit Committee held two meetings in fiscal year 1993.
Committee members are Mr. Libbey (Chair), Mr. Dove and Mr. Perry. The Committee
reviews Control Data's annual financial statements; makes recommendations
regarding Control Data's independent auditors and scope of auditor services;
reviews the adequacy of accounting and audit policies, compliance assurance
procedures and internal controls; reviews nonaudit services performed by
auditors to maintain auditors' independence; and reports to the Board of
Directors on disclosure adequacy and adherence to accounting principles. The
Audit Committee also appoints the Company's Retirement Committee which is
responsible for administering the Company's qualified U.S. retirement plans.
COMPENSATION COMMITTEE. The Compensation Committee held two meetings in
fiscal year 1993. Committee members are Mr. Hajjar (Chair) and Mr. Bell. The
Committee reviews compensation philosophy and major compensation and benefits
programs for executives; administers certain stock plans; and approves executive
officers' and directors' compensation.
DIRECTOR COMPENSATION
Officers of the Company do not receive any additional compensation for
serving as members of the Board of Directors or any of its committees. Directors
who are not employees of the Company or one of its equity partners receive an
annual retainer fee of $16,000 ($17,000 if Chair of a Board committee) and
$1,000 for each Board or Board committee meeting attended.
Under the Company's 1992 Equity Incentive Plan, directors who are not
employees of the Company or one of its equity partners are also eligible for
stock options. As specified in the Plan, an option for 25,000 shares of the
Company's Common Stock is granted to each such non-employee-director when such
director first assumes office as a director. As described in Item Number 3
below, the Plan has been amended to provide for the annual grant of an option
for 5,000 shares to each non-employee director upon the director's reelection to
the Board. The terms and conditions for all options granted to non-employee
directors are explained in more detail below.
CERTAIN BUSINESS RELATIONSHIPS
Mr. Libbey is a member and Chairman of the Board of Fredrikson & Byron, P.A.
Fredrikson & Byron, P.A. is regularly retained to provide legal services to the
Company.
6
<PAGE>
ITEM NUMBER 2
APPROVAL OF SELECTION OF AUDITORS
Upon recommendation of its Audit Committee, the Company's Board has selected
KPMG Peat Marwick, certified public accountants, as independent auditors for the
Company for the current fiscal year ending December 31, 1994. That firm has
acted as independent auditors for the Company and its former parent company,
Ceridian Corporation, for more than 30 years, and the Board considers it highly
qualified. Although it is not required to do so, the Board of Directors wishes
to submit the selection of KPMG Peat Marwick for shareholders' approval at the
1994 Annual Meeting. If the stockholders do not give approval, the Board will
reconsider its selection.
Representatives of KPMG Peat Marwick will be present at the 1994 Annual
Meeting, will have the opportunity to make a statement if they desire and will
be available to respond to appropriate questions.
THE BOARD RECOMMENDS A VOTE "FOR" RATIFICATION OF THIS APPOINTMENT.
ITEM NUMBER 3
APPROVAL OF AMENDMENTS TO THE 1992 EQUITY INCENTIVE PLAN
In February 1994, the Board of Directors approved a number of changes to the
1992 Equity Incentive Plan (the "Plan"), subject to stockholder approval. The
Board believes that the Plan has been, and will continue to be important for
attracting, retaining and providing incentives for those officers, employees and
nonemployee-directors who can have a significant effect on the success of the
Company. Specifically, the Board approved the following amendments:
1. Increasing the number of shares of the Company's Common Stock for
issuance pursuant to awards under the Plan from 2,400,000 shares to
2,900,000 shares;
2. Limiting the number of shares of the Company's Common Stock
available to any one employee through the grant of stock options to 300,000
shares per calendar year;
3. Providing for the automatic grant of nonqualified stock options in
the amount of 5,000 shares of the Company's Common Stock to each
non-employee director on an annual basis, with the first such option granted
upon the non-employee director's reelection to the Board at each annual
meeting of the stockholders thereafter, beginning with the Annual Meeting
for which this Proxy is being solicited.
The affirmative vote of a majority of the shares of the Company's Common
Stock represented and voting on this proposal at the 1994 Annual Meeting of
Stockholders is required for approval of the above amendments.
DESCRIPTION OF 1992 EQUITY INCENTIVE PLAN
A general description of the material features of the 1992 Equity Incentive
Plan follows, but this description is qualified in its entirety by reference to
the full text of the Plan, a copy of which may be obtained without charge upon
written request to the Secretary of the Company:
GENERAL. In July, 1992, the Company adopted the 1992 Equity Incentive Plan
(the "Plan"). Under the Plan, the Compensation Committee may award nonqualified
or incentive stock options, restricted stock and performance units to those
officers and employees of the Company (including its
7
<PAGE>
subsidiaries and affiliates) whose performance, in the judgment of the
Compensation Committee, can have a significant effect on the success of the
Company. In addition, as described below, non-employee directors are also
eligible for the grant of nonqualified stock options.
SHARES AVAILABLE. Assuming the stockholders approve the proposed amendment,
2,900,000 shares of the Company's Common Stock will be available for issuance
pursuant to options and restricted stock awards granted under the Plan. However,
under the terms of the Plan as proposed to be amended, any one employee may not,
in any calendar year, receive stock options which, in the aggregate, would
permit the employee to purchase more than 300,000 shares of the Company's Common
Stock. If any options granted under the Plan expire or terminate prior to
exercise, the shares subject to the portion of the option not exercised will be
available for subsequent option grants.
The total number of shares and the exercise price per share of Common Stock
that may be issued pursuant to outstanding stock options or restricted stock
awards will be subject to adjustment by the Board of Directors upon the
occurrence of stock dividends, stock splits or other recapitalizations, or
because of mergers, consolidations, reorganizations, or similar transactions in
which the Company receives no consideration. The Board may also provide for the
protection of optionees or recipients of restricted stock awards and performance
units in the event of a merger, liquidation, reorganization, divestiture
(including a spin-off) or similar transaction after which the Company is not the
surviving corporation.
ADMINISTRATION AND TYPES OF AWARDS. With the exception of the
nonemployee-director stock options, the features of which are established by the
director option provisions specified in the Plan, the Plan will be administered
by the Compensation Committee of the Board of Directors, which shall consist of
at least two disinterested directors who are not employees of the Company, and
which must approve options and awards granted under the Plan. The Committee has
broad powers to administer and interpret the Plan, including the authority: (i)
to establish rules for the administration of the Plan; (ii) to select the
participants in the Plan; (iii) to determine the types of awards to be granted
and the number of shares covered by such awards; and (iv) to set the terms and
conditions of such awards. All determinations and interpretations of the
Committee will be binding on all interested parties.
OPTIONS. Options granted under the Plan may be either "incentive stock
options" within the meaning of Section 422 of the Internal Revenue Code
("I.R.C."), or "nonqualified" stock options that do not qualify for special tax
treatment under Section 422 or similar provisions of the I.R.C. No incentive
stock option may be granted with a per share exercise price less than the fair
market value of a share of the underlying Common Stock on the date the incentive
stock option is granted. The exercise price for nonqualified stock options
granted under the Plan also will not generally be less than the fair market
value of a share of the Company's Common Stock on the date the nonqualified
stock option is granted. The fair market value of the Company's Common Stock was
$9.375 per share on March 22, 1994. The exercise price generally must be paid in
cash unless the Compensation Committee permits payment in shares of Company
stock.
An option will generally expire ten years after the date it is granted, and
will ordinarily become exercisable as to one-third of the shares subject to the
option on each of the three succeeding anniversaries of the date of grant. The
Compensation Committee may modify the exercisability of an option in its
discretion. Following a "change of control termination," as described below, all
options
8
<PAGE>
granted under the Plan will become immediately exercisable. Except for the
annual grants of nonqualified stock options to non-employee directors described
below, the grants of stock options under the Plan are subject to the
Compensation Committee's discretion. Consequently, future grants to eligible
optionees cannot be determined at this time.
Directors who are not employees of the Company are also eligible for
nonqualified stock options. As specified in the Plan, a stock option for 25,000
shares of the Company's Common Stock is granted to each non-employee director
when such director first assumes office as a director. Under the proposed
amendment, each nonemployee-director elected to the Board of Directors would be
granted a stock option to purchase 5,000 shares of the Company's Common Stock
each year upon his or her reelection to the Board, beginning with Annual Meeting
of Stockholders to be held May 18, 1994. The exercise price for all options
granted to a non-employee director will equal the fair market value of a share
of the Common Stock as of the date the option is granted. Each option will be a
nonqualified stock option, will expire ten years after the date it is granted
and will become exercisable as to one-third of the shares subject to the option
on each of the succeeding three anniversaries of the option grant. If a
non-employee director ceases to be a director to the Company for reasons other
than death or disability, any portion of the option not yet exercisable at such
time will be forfeited, and the portion of the option then exercisable will
remain exercisable for 90 days.
RESTRICTED STOCK AWARDS AND PERFORMANCE UNITS. The Plan also provides for
shares of the Company's Common Stock to be issued in the form of restricted
stock awards, and for performance units, but the Company has not granted either
of these forms of incentives. Because future grants of restricted stock awards
and performance units are subject to the discretion of the Compensation
Committee, future awards to eligible participants cannot be determined at this
time.
CHANGE OF CONTROL PROVISIONS. Following a "change of control termination,"
all options granted under the Plan, except those granted to non-employee
directors, will become immediately exercisable and all restrictions on
restricted stock awards, if any, under the Plan will immediately lapse. Within
30 days following a change of control termination, a participant in the Plan may
require the Company to purchase any shares of stock awarded to the participant
under the Plan as to which the restrictions on transfer lapsed because of the
change of control termination. The purchase price will equal the fair market
value of the shares on the day prior to the "change of control." These
provisions also provide that all change of control compensation to a participant
must be less than the amount which would be considered a "parachute payment"
under Section 280G of the I.R.C. To the extent that change of control
compensation would exceed this amount with respect to a participant, the
participant must designate which payments would be reduced or eliminated so as
to avoid receipt of a parachute payment.
For purposes of these provisions, a "change of control termination" refers
to either of the following if it occurs within two years of a "change of
control" of the Company: (i) termination of the individual's employment by the
Company for reasons other than a willful failure to perform his or her
employment duties or conduct constituting a felony involving moral turpitude or
(ii) the individual terminates employment with the Company for "good reason."
"Good reason" is generally defined as an adverse change in the individual's
responsibilities, authority, compensation or working conditions, or a material
breach of an employment agreement by the Company. "Change of control" is defined
as: (i) a merger or consolidation involving the Company if less than 50% of the
Company's voting stock after the business combination is held by persons who
were stockholders before the business combination; (ii) a sale of the assets of
the Company substantially as an entirety; (iii) ownership by a person or
9
<PAGE>
group of at least 20% of the Company's voting securities; (iv) approval by the
stockholders of a plan for the liquidation of the Company; and (v) certain
changes in the composition of the Company's Board of Directors.
AMENDMENT. Except for the provisions of the Plan relating to the grant of
nonqualified stock options to non-employee directors, the Board of Directors or
the Compensation Committee may terminate or amend the Plan at any time prior to
a "change of control," except that the terms of option or award agreements then
outstanding may not be adversely affected without the consent of the individual.
The provisions relating to the nonqualified stock options granted to the
non-employee directors may not be amended more frequently than once every six
months, unless the amendment is required to comply with changes in the Employee
Retirement Income Security Act of 1974 ("ERISA") or the I.R.C. After a change of
control, neither the Board of Directors nor the Compensation Committee may
terminate or amend the Plan to deny participants the change of control benefits
stated in the Plan. Neither the Board nor the Compensation Committee may amend
the Plan without the approval of the Company's stockholders if the amendment
would materially increase the total number of shares of Common Stock available
for issuance under the Plan, materially increase the benefits accruing to any
individual or materially modify the requirements as to eligibility for
participation in the Plan.
FEDERAL INCOME TAX MATTERS. "Nonqualified" stock options granted under the
Plan are not intended to and do not qualify for the favorable tax treatment
available to "incentive" stock options under I.R.C. Section 422. Generally, no
income is taxable to the optionee (and the Company is not entitled to any
deduction) upon the grant of a nonqualified stock option. When a nonqualified
stock option is exercised, the optionee generally must recognize compensation
taxable as ordinary income equal to the difference between the option price and
the fair market value of the shares on the date of exercise. The Company
normally will receive a deduction equal to the amount of compensation the
optionee is required to recognize as ordinary income if the Company complies
with applicable federal withholding requirements.
"Incentive" stock options granted under the Plan are intended to qualify for
favorable tax treatment under I.R.C. Section 422. Under Section 422, an optionee
realizes no taxable income when an incentive stock option is granted. Further,
the optionee generally will not realize any taxable income when the incentive
stock option is exercised if he or she has at all times from the date of the
option's grant until three months before the date of exercise been an employee
of the Company. The Company ordinarily is not entitled to any deduction upon the
grant or exercise of an incentive stock option. Certain other favorable tax
consequences may be available to the optionee if he or she does not dispose of
the shares acquired upon the exercise of an incentive stock option for a period
of two years from the granting of the option and one year from the receipt of
the shares.
NEW PLAN BENEFITS AND TABLE
The Company's management and the Board of Directors believe that adoption of
the proposed amendments will enable the Company to continue to attract and
retain a strong management and employee base, and will further underpin the
philosophy that directors and key employees should be linked to, incented by,
and rewarded as a result of increasing shareholder value.
10
<PAGE>
The table below shows the total number of stock options that have been
received by the following individuals and groups under the Plan:
1992 EQUITY INCENTIVE PLAN
<TABLE>
<CAPTION>
TOTAL NUMBER OF
NAME AND POSITION/GROUP OPTIONS RECEIVED(1)
- --------------------------------------------------------------------------------------------- -------------------
<S> <C>
JAMES E. OUSLEY
President and Chief Executive Officer 376,677
ROGER D. SHOBER
Executive Vice President 180,070
DIETER PORZEL
Vice President, Europe/Middle East and Africa 87,608
JERRY J. JOHNSON
Vice President, Secretary and Treasurer 139,324
JOSEPH F. KILLORAN
Vice President and Controller 93,682
Current Executive Group (5 persons) 794,068
Non-Executive Director Group (6 persons) 125,000(2)
Non-Executive Officer Employee Group (151 persons) 1,272,002
<FN>
- ------------------------
(1) This table reflects only the total stock options granted in prior fiscal
years including options granted during the 1993 fiscal year. Because
future grants of stock options are subject to the Compensation Committee's
discretion, the future benefits that may be received by these individuals
or groups, under the Plan as amended, cannot be determined at this time.
(2) The Non-Executive Director Group would have received annual option grants
totalling 25,000 shares if the Plan, as amended, had been in effect during
1993. Mr. Perry would not have been granted the annual option due to his
relationship with an equity partner of the Company. In future fiscal
years, each Non-Executive Director will receive an annual option grant for
5,000 shares upon reelection to the Board of Directors. Because grants of
stock options to all other individuals and groups under the Plan, as
originally adopted and as amended, are subject to the discretion of the
Compensation Committee, the benefits that these individuals and groups
could have received or may receive in the future cannot be determined at
this time.
</TABLE>
VOTE REQUIRED
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" APPROVAL
OF THE AMENDMENTS TO THE 1992 EQUITY INCENTIVE PLAN. The affirmative vote of a
majority of the shares represented in person or by proxy on this item of
business at the 1994 Annual Meeting is required for approval of the proposed
amendments to the Plan.
11
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the fiscal year 1993 annual and long-term
compensation for the Company's Chief Executive Officer, the next four highest
paid executive officers, as well as the total compensation paid to each
individual during fiscal year 1993 and the period from August 1, 1992 (the date
of the Company's spin-off from Ceridian Corporation) to January 1, 1993 (the
Company's 1992 fiscal year end):
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------------------
AWARDS
----------------------
ANNUAL COMPENSATION NUMBER OF
---------------------------------- SECURITIES
OTHER RESTRICTED UNDERLYING PAYOUTS
ANNUAL STOCK OPTIONS/ ------------ ALL OTHER
NAME AND SALARY (1) BONUS COMPENSATION AWARD(S) SARS LTIP PAYOUTS COMPENSATION
PRINCIPAL POSITION PERIOD ($) ($) ($) ($) (#) ($) ($)
- ------------------------- --------- ---------- -------- ------------ ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
JAMES E. OUSLEY FY 1993
President and Chief 8-1-92 $ 331,538 $ 70,000 0 0
Executive Officer to 1-1-93 133,335 153,600 300,000 $ 568
ROGER D. SHOBER FY 1993
Executive Vice 8-1-92 220,000 35,750 0 0
President to 1-1-93 91,665 85,800 150,000 151
DIETER PORZEL (3) FY 1993
Vice President, Europe 8-1-92 218,246 17,308 25,000 0
Middle East and Africa to 1-1-93 90,790 60,801 50,000 0
JERRY J. JOHNSON FY 1993
Vice President, 8-1-92 160,000 20,000 0 0
Secretary and Treasurer to 1-1-93 66,665 48,000 100,000 378
JOSEPH F. KILLORAN FY 1993
Vice President and 8-1-92 144,615 20,000 0 0
Controller to 1-1-93 $ 56,250 $ 62,050 75,000 $ 202
<FN>
- ------------------------------
(1) The amounts reflected in "Salary" include the named executive's salary
deferral contributions to the Company's Personal Investment Plan, which is
a savings plan qualified under Section 401 (a) and 401(k) of the Internal
Revenue Code, for the period indicated. The Personal Investment Plan was
amended, effective for fiscal year 1993, to provide for discretionary
profit sharing contributions; however, no profit sharing contributions
were made in 1993.
(2) "All Other Compensation" reflects the matching contributions made by the
Company on behalf of the named executive under the Company's Personal
Investment Plan for the period August 1, 1992 through January 1, 1993.
Effective for the fiscal year 1993, the Personal Investment Plan was
amended to eliminate matching contributions.
(3) All amounts for Mr. Porzel were paid in Deutsche Marks and converted to
U.S. dollar equivalents at the exchange rate prevailing on December 31,
1993 (.5882).
</TABLE>
12
<PAGE>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
The following table presents information concerning the options/SARs granted
during 1993 to the named executives:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS (1) ANNUAL RATES OF
- ----------------------------------------------------------------------------------- STOCK PRICE
NUMBER OF % OF TOTAL APPRECIATION FOR
SECURITIES OPTIONS/SARS OPTION TERM (2)
UNDERLYING GRANTED TO EXERCISE OR ------------------------
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION 5% 10%
NAME GRANTED (#) FISCAL YEAR ($/SHARE) DATE ($) ($)
- --------------------- ------------- ------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
JAMES E. OUSLEY 0
ROGER D. SHOBER 0
DIETER PORZEL 25,000 6% 10.25 2/01/03 $ 161,500 $ 407,500
JERRY J. JOHNSON 0
JOSEPH F. KILLORAN 0
<FN>
- ------------------------
(1) All are options to purchase Common Stock. No SARs were granted separately
or in tandem with the options. The options become exercisable as to
one-third of the shares subject to the option on each of the three
succeeding anniversaries of the date of grant. As described in Item Number
3 above, following a "change of control termination," all options granted
will become immediately exercisable.
(2) The potential realizable value of each option grant has been estimated
assuming the $10.25 per share market price of the Company's Common Stock
appreciates in value at annualized rates of 5% and 10% from the grant date
to the date that the option expires, net of the exercise price that the
optionee must pay for the shares underlying such option. However, actual
gains, if any, from the exercise of these options and from holding shares
of the Company's Common Stock depend on the future performance of the
Common Stock and overall stock market conditions. Whether the gains
reflected in this Table will actually be achieved cannot be assured.
</TABLE>
13
<PAGE>
AGGREGATED OPTIONS/SAR EXERCISES IN
LAST FISCAL YEAR AND FISCAL YEAR-END OPTIONS/SAR VALUES
The following table summarizes the options and SARs exercised during 1993
and presents the value of unexercised options and SARs held by the named
executives at January 1, 1994:
<TABLE>
<CAPTION>
SECURITIES
UNDERLYING
UNEXERCISED VALUE OF
OPTIONS/ UNEXERCISED
SARS AT FISCAL IN-THE-MONEY
YEAR- OPTIONS/SARS AT
END (1) (#) FY-END (2) ($)
SHARES ACQUIRED VALUE
ON EXERCISE REALIZED EXERCISABLE (E) EXERCISABLE (E)
NAME (#) ($) UNEXERCISABLE (U) UNEXERCISABLE (U)
- --------------------- --------------- ------------- ------------------- -------------------
<S> <C> <C> <C> <C>
JAMES E. OUSLEY 25,000 $ 187,154 133,178(E) $364,587(E)
218,499(U) $474,802(U)
ROGER D. SHOBER 35,270 $ 192,304 37,399(E) $96,168(E)
107,401(U) $227,428(U)
DIETER PORZEL 7,674 $ 46,480 19,132(E) $44,553(E)
60,802(U) $75,816(U)
JERRY J. JOHNSON 20,824 $ 160,298 42,582(E) $112,001(E)
75,918(U) $49,909(U)
JOSEPH F. KILLORAN 11,282 $ 92,316 28,700(E) $66,837(E)
53,700(U) $113,712(U)
<FN>
- --------------------------
(1) All are options to purchase Common Stock. No SARs were exercised or are
outstanding, whether free standing or in tandem with the options. The
number of unexercised options includes shares that may be issued upon the
exercise of replacement options which were provided to the optionee
pursuant to the provisions of the spin-off of the Company from Ceridian
Corporation to replace Ceridian stock options held by such optionee at the
time of the spin-off. The number of shares subject to the optionee's
replacement option and the exercise price were calculated to preserve the
economic value of the optionee's Ceridian stock option. In addition, the
replacement option contains the same terms and conditions as the Ceridian
option, and the replacement option's duration and exercisability is
measured according to the date that the Ceridian option was granted.
(2) Based on the difference between $10.125 (the closing price of the
Company's Common Stock on December 31, 1993 as reported by NASDAQ) and the
option's exercise price.
</TABLE>
PENSION PLAN AND BENEFIT EQUALIZATION PLAN
The Company maintains a defined benefit pension plan (the "Retirement Plan")
for its domestic employees (including executive officers and employees of U.S.
subsidiaries), which is funded by employee salary reductions and after-tax
contributions and Company contributions. However, effective December 20, 1992,
benefits under the Retirement Plan were frozen, meaning that no employees may
become participants in the plan after that date, that pension benefits for all
employees currently participating in the Retirement Plan will be computed only
on the basis of compensation paid and years of service completed to that date,
and that no future contributions will be made to the Retirement plan except to
the extent required by the funding standards of ERISA and the I.R.C. All current
Retirement Plan participants also acquired a fully vested interest in their
pension benefits.
14
<PAGE>
Generally, the amount of the annual pension benefit under the Retirement
Plan equals an annual base pension of 1.2% of the participant's average annual
compensation during the participant's highest consecutive five-year earnings
period ending on or before December 20, 1992, multiplied by the participant's
credited years of service as of such date. In addition, the participant is
entitled to an annual excess pension benefit of 0.4% of such average annual
compensation in excess of the participant's "break point" multiplied by the
participant's years of credited service as of December 20, 1992, or 30 years,
whichever is less. A participant's "annual compensation" generally consists of
salary and any annual bonus paid under the Executive Incentive Plan. The
participant's "break point" amount essentially represents an average of the
social security wage bases to which a participant has been subject over his or
her career, and has been frozen at the amount determined for the participant as
of December 20, 1992.
The Company also maintains a Benefit Equalization Plan, under which benefits
were also frozen on December 20, 1992. In 1992, the Internal Revenue Code
limited the annual benefits payable from the Retirement Plan at $112,221 and
provided that compensation in excess of $228,860 per year could not be used in
calculating benefits under the Company's Retirement Plan described above. The
Benefit Equalization Plan provides employees (including the named executive
officers) with supplemental pension benefits so that they will receive, in the
aggregate, the benefits that they would have been entitled to receive under the
frozen Retirement Plan had these limits not been imposed. The Benefit
Equalization Plan is an unfunded plan, and any amounts payable remain subject to
the claims of the Company's creditors. Any benefits payable to a participant
under the Benefit Equalization Plan commence at the same time as the pension
benefits payable under the Retirement Plan.
The estimated annual benefits payable under the Retirement Plan and Benefit
Equalization Plan upon retirement at age 65 (expressed in the form of a
single-life annuity) for each of the named executive officers are as follows:
Mr. Ousley, $111,215; Mr. Shober, $72,375; and Mr. Johnson, $77,499. The years
of service this calculation represents at the time the plan was frozen in 1992
was 24.5 years, 27.6 years and 34.7 years respectively.
Neither Mr. Killoran nor Mr. Porzel participated in the Retirement Plan. Mr.
Killoran had participated in a pension plan sponsored by Ceridian Corporation
for employees of a company acquired by Ceridian and received a distribution from
Ceridian under that plan. The German subsidiary of the Company also maintains a
defined benefit plan for its employees, including Mr. Porzel. Generally, the
amount of the benefit is 0.5% of eligible earnings up to the social security
wage base for each year of credited service, plus 2.0% of eligible earnings
above the social security wage base for each year of credited service. For
purposes of this calculation, eligible earnings are capped at three times the
current social security wage base. Based upon present earnings, and normal
indexed increases in the social security wage base, the estimated annual benefit
payable to Mr. Porzel under the German retirement plan at age 65 is $70,629.
Future increases in Mr. Porzel's compensation, if any, will not affect these
amounts.
EMPLOYMENT AGREEMENTS
The German subsidiary of the Company, Control Data GmbH, has an employment
agreement with Mr. Porzel which is terminable by Control Data GmbH upon 36
months' notice or upon Mr. Porzel reaching age 65, and by Mr. Porzel upon 6
months' notice. Under this agreement, Mr. Porzel is required to devote full time
to serve as the "Vorsitzender der Geschaeftsfuehrung" (chief executive officer)
of Control Data GmbH. As such, he is prohibited from disclosing confidential
information
15
<PAGE>
about the Company during and after the term of employment and he is required to
disclose and assign to Control Data GmbH, in accordance with applicable German
law, any intellectual property created during his employment. The agreement also
provides for remuneration at levels determined in accordance with the
compensation policies of the Company, and prescribes certain acts which require
the prior approval of the Company. Upon any termination of his employment, Mr.
Porzel will be entitled to receive remuneration at then-current levels for the
balance of his notice period.
COMPENSATION COMMITTEE REPORT
Decisions on compensation of the Company's executive officers generally are
made by the Compensation Committee of the Board of Directors. The two members of
the Compensation Committee are non-employee directors. Decisions by the
Compensation Committee relating to the compensation of the Company's executive
officers are reviewed by the full Board, except for decisions about awards under
the Company's 1992 Equity Incentive Plan which must be made solely by the
Committee in order for the grants under such Plan to satisfy Rule 16b-3 of the
Securities and Exchange Commission ("SEC").
COMPENSATION PHILOSOPHY AND RELATIONSHIP OF PERFORMANCE. This report
reflects the Compensation Committee's executive officer compensation philosophy
as endorsed by the Board of Directors. The resulting actions taken by the
Company are shown in the compensation tables supporting this report. The
Compensation Committee either approves or recommends to the Board of Directors
compensation levels and compensation components for the executive officers. With
regard to compensation actions affecting the Chief Executive Officer, all of the
non-employee members of the Board of Directors acted as the approving body. This
report reflects the compensation philosophy for fiscal year 1993.
The Compensation Committee's executive compensation policies are designed to
enhance the financial performance of the Company, and thus stockholder value, by
significantly aligning the financial interests of the key executives with those
of stockholders.
The executive compensation program is viewed in total considering all of the
component parts: base salary, annual performance incentives, benefits, and
long-term incentive opportunity in the form of stock options. The annual
compensation components consist generally of lower base salaries than those of
comparable companies combined with higher incentive plans based on the Company's
financial performance. Long-term incentive is based on stock performance through
stock options. The Compensation Committee's position is that stock ownership by
management is beneficial in aligning management's and stockholders' interests in
the enhancement of stockholder value. Overall, the intent is to have more
significant emphasis on variable compensation components and less on fixed cost
components. The Committee believes this philosophy and structure are in the best
interests of the stockholders.
Compensation reflected in the previous tables paid to the Company's
executive officers is from August 1, 1992 to January 1, 1994, consisting of the
following elements: base salary, performance incentive paid for such period, and
stock options granted under the Company's 1992 Equity Incentive Plan.
Recent tax law changes, effective for fiscal year 1994 and future years, may
disallow deductions for compensation paid by the Company to each of the
Company's named executive officers if the
16
<PAGE>
officer's compensation exceeds $1,000,000. Special rules apply for
"performance-based" compensation, including compensation resulting from stock
options. As described in Item Number 3 above, to comply with the requirements
relating to stock option plans, the 1992 Equity Incentive Plan has been amended
to include a per-employee limit on the options that can be granted to salaried
employees, including the named executive officers, during any calendar year. For
other performance-based compensation plans, including the Executive Incentive
Plan described below, the Company intends to take whatever steps are necessary
to comply with the deduction limits imposed by the new tax provisions.
ANNUAL INCENTIVE ARRANGEMENTS. The Company has adopted an Executive
Incentive Plan which provides annual incentive compensation to key employees,
including named executive officers, who by the nature of their positions, are
deemed sufficiently accountable to impact directly the financial results of the
Company. The Plan is approved by the Compensation Committee, whose members are
not eligible to participate in the Plan.
The Committee believes that key executives should have a significant
proportion of total cash compensation subject to specific strategic and
financial measurements. At the beginning of each fiscal year, or upon an
individual being appointed an executive officer, the Committee sets a target
bonus amount for each executive officer expressed as a percentage of the
executive's base salary. Performance goals for purposes of determining annual
incentive compensation are established which include net earnings and other
strategic and financial measurements. Generally, the target level of net
earnings is assigned a significantly greater weight than the aggregate weight
assigned to all remaining factors. Senior management, including the named
executives, have the potential to earn significantly higher levels of incentive
compensation if the Company exceeds its targets. The target incentive
compensation levels established by the Compensation Committee for 1993 expressed
as a percentage of salary for Messrs. Shober, Porzel, Johnson and Killoran were
65%, 32%, 50% and 50% respectively.
The performance goals established at the beginning of 1993 were based on
several strategic and financial measurements including a target level of net
earnings, asset management, and restructure management. The target level of net
earnings was assigned a significantly greater weight than the aggregate weight
assigned to the remaining factors. Mr. Porzel was assigned geographically
specific financial measurements as well. Based on the evaluation of the above
criteria, the Compensation Committee awarded incentive payments for fiscal 1993
at 25% of the target incentive compensation level for each named executive.
1992 EQUITY INCENTIVE PLAN. The Compensation Committee of the Board of
Directors determines stock option grants to eligible employees including the
named executives. The Committee believes that options granted to management
reinforce the Committee's philosophy that management compensation should be
closely linked with shareholder value. The 1992 Equity Incentive Plan is more
fully described in the section of this Proxy Statement soliciting approval of
certain amendments to that plan. Stock options have been granted to
approximately 20% of the Company's management worldwide.
OTHER COMPENSATION PLANS. The Company has adopted certain broad-based
employee benefit plans in which all employees, including the named executives,
are permitted to participate on the same terms and conditions relating to
eligibility and generally subject to the same limitations on the amounts that
may be contributed or the benefits payable under those plans. However, under the
Company's Personal Investment Plan, which is a defined contribution plan
qualified under I.R.C. Sections 401(a) and 401(k), participants, including the
named executives, can contribute a percentage
17
<PAGE>
of their annual compensation. Beginning in 1993, the Company did not make a
matching contribution for participants, but the Company established a profit
sharing contribution contingent upon the Company reaching a target level of net
earnings. The Company did not make a profit sharing contribution for the 1993
fiscal year. The Company permits participants to invest their salary deferral
contributions and any Company matching or profit sharing contributions in a
Company Common Stock Fund to align the employees' and the stockholders'
interests in the enhancement of stockholder value. To further align these
interests, the Company also grants employee stock options under the 1992 Equity
Incentive Plan and has adopted an Employee Stock Purchase Plan approved by the
stockholders in 1993. Other than these incentives and the Company's profit
sharing contribution, benefits under the Company's broad-based benefit plans are
not tied to Company performance.
MR. OUSLEY'S 1993 COMPENSATION. Compensation for the CEO aligns with the
philosophies and practices discussed above for executive officers in general.
All compensation determinations and stock option grants to the CEO are reviewed
by the Committee with the Board of Directors.
At the beginning of each fiscal year, the Committee sets a target bonus
amount for the CEO. The target incentive compensation level established for Mr.
Ousley for 1993, expressed as a percentage of salary, was 80%, at the same level
as 1992.
For 1993, the CEO's performance goals were established based on strategic
and financial measurements, including a target level of net earnings, asset
management and restructure management. The target level of net earnings was
assigned a significantly greater weight than the aggregate weight assigned to
the remaining factors. In evaluating Mr. Ousley's performance for the purpose of
determining his incentive compensation for such period, the Committee considered
the Company's performance against its financial and restructuring objectives in
light of the difficult worldwide economic situation, implementation of the
Company's continuing strategy shift and acquisition strategy, and his
demonstrated leadership. Based on the evaluation, the Compensation Committee
awarded an incentive payment of 25% of Mr. Ousley's target incentive
compensation level.
During 1993, the Committee reviewed Mr. Ousley's salary, considering the
compensation comparative data for CEO positions, the Committee's philosophy on
positioning Mr. Ousley's compensation as compared to market data and his overall
effectiveness in leading the Company in its first full year as a public company.
The Committee decided to increase Mr. Ousley's base salary by $30,000 per year
and to review his compensation again at the first Compensation Committee meeting
in 1994 in conjunction with a quantitative and qualitative performance
evaluation with the Board of Directors planned for the first meeting in 1994.
The Compensation Committee is satisfied that the cash compensation and
long-term incentive plans in the form of stock option awards provided to the CEO
and to the executive officers of the Company are structured and operated to
create a high degree of linkage to building profitability and shareholder value.
W. Douglas Hajjar W. Donald Bell
18
<PAGE>
PERFORMANCE GRAPH
The following performance graph compares the cumulative stockholder return
on the Company's Common Stock with the S&P 500 Composite Index and the NASDAQ
Computer and Data Processing Stock Index. The comparison assumes $100 was
invested as of August 3, 1992 (the date the Company's Common Stock began
trading) in Common Stock of the Company, and in each of the foregoing indices
and assumes reinvestment of dividends. The NASDAQ Computer and Data Processing
Stock Index was chosen for comparison purposes because it encompasses over 200
companies with many of the companies of a comparable size and because the
Company's stock trades on NASDAQ.
STOCK PERFORMANCE
[STOCK PERFORMANCE GRAPH]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Control Data Systems,
Inc........................ $ 100.00 $ 112.12 $ 110.61 $ 163.64 $ 150.00 $ 150.00 $ 122.73
S&P 500 Composite Stock
Index...................... $ 100.00 $ 98.54 $ 103.51 $ 108.03 $ 108.55 $ 111.36 $ 113.94
NASDAQ Computer & Data
Processing Stock Index..... $ 100.00 $ 103.82 $ 117.65 $ 123.29 $ 123.36 $ 123.93 $ 124.58
</TABLE>
19
<PAGE>
GENERAL
COSTS AND PROXY SOLICITATION. The costs of soliciting proxies will be borne
by Control Data including the reimbursement to record holders of their expenses
in forwarding proxy materials to beneficial owners. Directors, officers and
regular employees of Control Data, without extra compensation, may solicit
proxies personally or by mail, telephone, fax, telex, telegraph or special
letter.
Control Data has retained Georgeson & Co., a firm that provides professional
proxy soliciting services, to aid in the solicitation of proxies for a fee of
$6,000 and reimbursement of certain out-of-pocket expenses.
STOCKHOLDER PROPOSALS FOR 1995 MEETING. Any stockholder proposals for the
Company's 1995 Annual Meeting of Stockholders (anticipated date May 16, 1995)
must be received by the Company by January 1, 1995 in order to be included in
the Company's Proxy Statement. The proposals also must comply with all
applicable statutes and regulations.
REPORTS TO STOCKHOLDERS. Control Data's 1993 Annual Stockholders' Report,
including financial statements, is being sent to stockholders of record on March
22, 1994, together with this Proxy Statement. CONTROL DATA WILL FURNISH TO
STOCKHOLDERS WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR THE
FISCAL YEAR ENDED JANUARY 1, 1994, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, UPON RECEIPT OF WRITTEN REQUEST ADDRESSED TO: INVESTOR RELATIONS
DEPARTMENT, CONTROL DATA SYSTEMS, INC., 4201 LEXINGTON AVENUE NORTH, ARDEN
HILLS, MINNESOTA 55126.
OTHER BUSINESS. The Board of Directors know of no other matters to be
presented at the 1994 Annual Meeting. If any other business properly comes
before the 1994 Annual Meeting or any adjournment thereof, the appointees named
in the Proxies will vote on the Proxies on that business in accordance with
their best judgment.
By Order of the Board of Directors,
Ralph W. Beha
GENERAL COUNSEL AND SECRETARY
20
<PAGE>
(CONTROL DATA LOGO)
4201 LEXINGTON AVENUE NORTH
ARDEN HILLS, MINNESOTA 55126
<PAGE>
CONTROL DATA SYSTEMS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 18, 1994
The undersigned hereby appoints James E. Ousley and Ralph W. Beha, and
each of them, with full power of substitution, as Proxies to represent and vote,
as designated on the other side of this card, all shares of Common Stock of
Control Data Systems, Inc. registered in the name of the undersigned at the
Annual Meeting of Stockholders of the Company to be held at the Hotel
Intercontinental, 111 East 48th Street, New York, New York, at 10:00 a.m.
Eastern Daylight Time on Wednesday, May 18, 1994, and at any adjournment
thereof, and the undersigned hereby revokes all proxies previously given with
respect to the meeting.
(continued, and to be dated and signed on the other side)
<PAGE>
(CONTROL DATA LOGO)
4201 Lexington Avenue North
Arden Hills, Minnesota 55126-6198
Telephone: 612/482-2401
April 1, 1994
Dear Stockholder:
You are cordially invited to join us for our Annual Meeting of Stockholders
to be held this year on Wednesday, May 18, 1994, at 10:00 a.m., Eastern Daylight
Time, at the Hotel Intercontinental, 111 East 48th Street, New York, New York.
The Notice of Annual Meeting of Stockholders and the Proxy Statement that
follow describe the business to be conducted at the Meeting. We will also report
on matters of current interest to our stockholders.
Whether you own a few or many shares of stock, it is important that your
shares be represented. Whether you plan to attend personally or not, we
encourage you to make certain that you are represented at the Meeting by
signing the Proxy Card attached below and promptly returning it in the enclosed
envelope.
Sincerely,
/s/ JAMES E. OUSLEY
James E. Ousley
PRESIDENT & CHIEF EXECUTIVE OFFICER
PLEASE DETACH PROXY CARD HERE
<PAGE>
/ /
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" EACH ITEM BELOW.
Item 1. Election of Directors FOR all nominees listed below / /
WITHHOLD AUTHORITY to vote
for all nominees listed below / /
EXCEPTIONS* (as marked
to the contrary below) / /
W. Donald Bell, Grant A. Dove, Marcelo A. Gumucio,
W. Douglas Hajjar, Keith A. Libbey, James E. Ousley
INSTRUCTION: To withhold authority to vote for any individual nominee mark
the "Exceptions" box and strike a line through the nominee's name in the
list above. Your shares will be voted for all nominees not stricken.
Item 2. Approve appointment of KPMG Peat Marwick as the Company's independent
auditors.
FOR / / AGAINST / / ABSTAIN / /
Item 3. Amendments to Stock Option Plan increasing the number of shares
reserved, providing for a per-employee limit on options granted
and providing for annual grants of options to non-employee directors.
FOR / / AGAINST / / ABSTAIN / /
Item 4. Other Matters. In their discretion, the Proxies are authorized to vote
upon such other business as may properly come before the meeting.
If you made an Address Change
or Comments Mark Here / /
PROXY DEPARTMENT
NEW YORK, N.Y. 10203-0928
Sign exactly as name appears hereon.
Attorneys-in-fact, executors, trustees,
guardians, corporate officers, etc.
should give full title. If shares are
held jointly, each holder must sign.
Dated: ____________________________, 1994
_________________________________________
Signature
_________________________________________
Signature
Please Sign, Date and Return the Proxy Card Promptly.
Value MUST be indicated / /
