<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 /X/
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
CONTROL DATA SYSTEMS, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
RALPH W. BEHA
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
(CONTROL DATA LOGO)
NOTICE OF 1995 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
FRIDAY, MAY 12, 1995
To Our Stockholders:
The 1995 Annual Meeting of Stockholders of Control Data Systems, Inc., will
be held on Friday, May 12 , 1995, at the Waldorf-Astoria Hotel, 301 Park Avenue,
New York, NY, at 10:00 a.m. Eastern Daylight Time, for the following purposes:
1. Elect six Directors.
2. Approve appointment of KPMG Peat Marwick LLP as Company's independent
auditors.
These items are more fully described in the following pages of the Proxy
Statement. Stockholders of record at the close of business on March 14, 1995,
will be entitled to vote at the Meeting and any adjournments of the Meeting.
By Order of the Board of Directors,
[SIGNATURE]
Ralph W. Beha
GENERAL COUNSEL AND SECRETARY
Dated: March 27, 1995
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 12, 1995
------------------------
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 third 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 12, 1995, 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 March 27, 1995.
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 14, 1995. Holders are not entitled to cumulative
voting rights in the election of directors. On the March 14, 1995 record date,
12,653,502 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 14, 1995.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
------------------------------------------------------------------------------- --------------------- -------------
<S> <C> <C>
State of Wisconsin Investment Board (1)........................................ 1,255,000 9.9%
PO Box 7842
Madison, WI 53707
Harris Associates Investment Trust (2)......................................... 1,014,000 8.0%
Series Designated The Oakmark Fund
Two North LaSalle Street, Suite 500
Chicago, IL 60602
Ark Asset Management Co., Inc. (3)............................................. 903,388 7.1%
One New York Plaza
New York, NY 10004
Peter Cundill & Associates (Bermuda) Ltd. (4).................................. 691,300 5.5%
15 Alton Hill
Southampton SN 01
Bermuda
<FN>
------------------------
(1) Represents sole power to vote and dispose of all 1,255,000 shares.
(2) Represents sole power to vote and dispose of all 1,014,000 shares.
(3) Represents sole power to vote 702,163 shares and sole power to dispose of
867,988 shares.
(4) Peter Cundill & Associates (Bermuda) Ltd. ("PCA"), an investment advisor,
has advised the Company that all of the shares listed are held by
investment advisory clients, none of which has an interest in more than 5%
of the Company's outstanding stock. PCA has shared voting and sole
dispositive power over such shares. Peter Cundill Holdings (Bermuda) Ltd.
("Holdings"), which owns a controlling portion of the outstanding stock of
PCA, and F. Peter Cundill, who owns a controlling portion of the
outstanding stock of Holdings, may be deemed to share voting and
dispositive power over all of such shares.
</TABLE>
2
<PAGE>
MANAGEMENT STOCKHOLDINGS. The following table shows the Control Data Common
Stock beneficially owned by each current Control Data director, each current or
former executive officer named in the Summary Compensation Table and by all
current directors and executive officers as a group as of March 14, 1995.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
---------------------------------------- ----------------------- ----------
<S> <C> <C>
W. Donald Bell.......................... 16,664 0.1%
Grant A. Dove........................... 16,664 0.1%
Marcelo A. Gumucio...................... 16,664 0.1%
W. Douglas Hajjar....................... 41,664 0.3%
Keith A. Libbey......................... 16,914 0.1%
James E. Ousley......................... 251,693 2.0%
Michael Caglarcan....................... -0- *
Joseph F. Killoran...................... 62,326 0.5%
Dieter Porzel........................... 54,933 0.4%
Ruth A. Rich............................ 69,160 0.5%
All current directors and executive
officers as a group (9 persons)....... 546,682 4.3%
<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 14, 1995, or within 60
days of such date (on or before May 13, 1995), 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, 16,664 shares; Mr. Dove, 16,664 shares; Mr.
Gumucio, 16,664 shares; Mr. Hajjar, 16,664 shares, Mr. Libbey, 16,664
shares; Mr. Ousley, 251,677 shares; Mr. Killoran, 60,733 shares; Mr.
Porzel, 54,933 shares; Ms. Rich, 68,230 shares; all current directors and
executive officers as a group, 518,893 shares.
</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 six. The Board has nominated the six current members as
the slate recommended for election at the 1995 Annual Meeting. 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 1995 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 57 August
of Bell Microproducts, Inc., a distribution company specializing in 1992
semiconductors, computer products, and manufacturing services. Mr.
Bell founded Bell Microproducts, Inc. in 1988.
GRANT A. DOVE Grant A. Dove is a Managing Partner of Technology Strategies & 66 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), and is
currently Chairman and a director of 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.,
Pinpoint Communications, Inc. and Networth, Inc.
MARCELO A. GUMUCIO Marcelo A. Gumucio is the President, Chairman and Chief Executive 57 August
Officer of Memorex Telex, N.V., an international organization 1992
engaged in the development and distribution of computer networks,
storage products and related support services as part of integrated
solutions. 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.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION AND OTHER INFORMATION AGE SINCE
-------------------------- --------------------------------------------------------------------- --- ---------
<S> <C> <C> <C>
W. DOUGLAS HAJJAR W. Douglas Hajjar was Vice Chairman of Cadence Design Systems, Inc., 47 August
an electronic design automation vendor, from December 1991, when 1992
Cadence Design Systems, Inc. completed its merger with Valid Logic
Systems Inc., to May 1994. 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 Frame
Technology Corporation.
KEITH A. LIBBEY Keith A. Libbey is a member and Chairman of the Board of Fredrikson & 57 August
Bryon, P.A., a law firm with principal offices in Minneapolis, 1992
Minnesota.
JAMES E. OUSLEY James E. Ousley has been President and Chief Executive Officer of the 49 August
Company since the establishment of the Company as an independent 1992
public company through the transfer of Ceridian Corporation's
Computer Products business to the Company and subsequent immediate
spin-off of the Company from Ceridian effective 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 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 by 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
1994. 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.
5
<PAGE>
AUDIT COMMITTEE. The Audit Committee held two meetings in fiscal year 1994.
Committee members are Mr. Libbey (Chair) and Mr. Dove. 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 three meetings in
fiscal year 1994. 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 receive an annual retainer fee of $16,000
($17,000 if chairman 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 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. The Plan also provides 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 exercise price for an option granted to a non-employee director is
the fair market value of a share of the Common Stock as of the date the option
is granted. Each option is a nonqualified stock option, expires ten years after
the date it is granted and becomes 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 of the Company
for reasons other than death or disability, any portion of an option not yet
exercisable at such time will be forfeited, and the portion of the option then
exercisable will remain exercisable for 90 days.
In November 1994, Mr. Hajjar entered into a consulting agreement with the
Company pursuant to which he may be called upon, at mutually agreed times, to
advise the Company on various matters related to the Company's business plans
and restructuring plans. Mr. Hajjar receives $2,000 per day for such consulting.
During fiscal 1994, $2,000 was paid to Mr. Hajjar under this agreement.
CERTAIN BUSINESS RELATIONSHIPS
Mr. Libbey is a member and Chairman of the Board of Fredrikson & Byron, P.A.
Fredrikson & Byron, P.A. is regularly retained to provide legal services to the
Company.
ITEM NUMBER 2
APPROVAL OF SELECTION OF AUDITORS
Upon recommendation of its Audit Committee, the Company's Board has selected
KPMG Peat Marwick LLP, certified public accountants, as independent auditors for
the Company for the current fiscal year ending December 30, 1995. That firm has
acted as independent auditors for the Company
6
<PAGE>
and its former parent company, Ceridian Corporation, for more than 30 years, and
the Board considers it highly qualified. Although it is not required to do so,
the Board of Directors wishes to submit the selection of KPMG Peat Marwick LLP
for shareholders' approval at the 1995 Annual Meeting. If the stockholders do
not give approval, the Board will reconsider its selection.
Representatives of KPMG Peat Marwick LLP will be present at the 1995 Annual
Meeting, will have the opportunity to make a statement if they desire and will
be available to respond to appropriate questions.
THE BOARD RECOMMENDS A VOTE "FOR" RATIFICATION OF THIS APPOINTMENT.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the fiscal year 1994 annual and long-term
compensation for the Company's Chief Executive Officer, the next four highest
paid executive officers, as well as the total compensation paid to each such
individual during fiscal year 1993 and the period from August 1, 1992 to January
1, 1993:
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------------------
AWARDS PAYOUTS
---------------------- ------------
ANNUAL COMPENSATION NUMBER OF
---------------------------------- SECURITIES
OTHER RESTRICTED UNDERLYING
ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
NAME AND SALARY (1) BONUS COMPENSATION AWARD(S) SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION PERIOD ($) ($) ($) ($) (#) ($) ($) (2)
------------------------- --------- ---------- -------- ------------ ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
JAMES E. OUSLEY FY 1994 $ 380,944 $ 77,000 0 0
President and Chief FY 1993 331,538 70,000 0 0
Executive Officer 8-1-92 133,335 153,600 300,000 $ 568
to 1-1-93
DIETER PORZEL (5) FY 1994 239,432 29,929 25,000 0
Vice President, FY 1993 218,246 17,308 25,000 0
Europe/Middle East 8-1-92 90,790 60,801 50,000 0
and Africa to 1-1-93
JOSEPH F. KILLORAN FY 1994 173,269 21,875 25,000 0
Vice President and FY 1993 144,615 20,000 0 0
Controller 8-1-92 56,250 62,050 75,000 202
to 1-1-93
MICHAEL CAGLARCAN FY 1994 132,724 23,491 100,000 153,750 (3)
Vice President, 6-3-93 118,269 32,884 $ 50,000 (4)
Americas Region to 1-2-94
RUTH A. RICH FY 1994 120,000 15,000 10,000 0
Vice President, FY 1993 120,000 15,000 0 0
Human Resources and 8-1-92 $ 50,000 $ 55,560 75,000 $ 389
Administration to 1-1-93
<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 or 1994.
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
(2) Except as otherwise indicated, "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) The amount reflects a termination payment made to Mr. Caglarcan upon his
termination of employment effective August 31, 1994.
(4) The amount reflects a relocation allowance paid to Mr. Caglarcan.
(5) All 1994 amounts for Mr. Porzel were paid in Deutsche Marks and converted
to U.S. dollar equivalents at the exchange rate prevailing on December 30,
1994 (0.6453).
</TABLE>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
The following table presents information concerning the options/SARs granted
during 1994 to the named executives:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS (1) OPTION TERM (2)
----------------------------------------------------------------------------------- ------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
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
DIETER PORZEL 25,000 $ 7.625 8/26/04 $ 120,000 $ 303,100
JOSEPH F. KILLORAN 10,000 9.750 2/2/04 61,400 155,000
15,000 7.625 8/26/04 72,060 181,860
MICHAEL CAGLARCAN 0
RUTH A. RICH 10,000 $ 7.625 8/26/04 $ 48,040 $ 121,240
<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. Following a "change of
control termination," all options granted will become immediately
exercisable. A "change of control termination" means (i) the optionee's
termination of 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 termination of employment
with the Company by the optionee for "good reason" which is generally
defined as an adverse change in the optionee's responsibilities, authority,
compensation or working conditions, or a material breach of the optionee's
employment agreement by the Company. Such termination of employment must
occur within two years of a "change of control," which 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 entity; (iii) ownership by a
person or 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.
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
(2) The potential realizable value of each option grant has been estimated
assuming the stated 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>
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 1994
and presents the value of unexercised options and SARs held by the named
executives at December 31, 1994:
<TABLE>
<CAPTION>
SECURITIES
UNDERLYING VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS/ IN-THE-MONEY
SARS AT FISCAL OPTIONS/SARS AT
YEAR-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 233,178(E) $69,258(E)
118,499(U) $39,680(U)
DIETER PORZEL 44,132(E) $5,290(E)
60,802(U) $5,294(U)
JOSEPH F. KILLORAN 53,700(E) $7,937(E)
53,700(U) $7,937(U)
MICHAEL CAGLARCAN
RUTH A. RICH 60,830(E) $30,240(E)
38,700(U) $7,937(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. Because
Mr. Caglarcan's employment was terminated on August 31, 1994, he no longer
participates in any option program of the Company.
(2) Based on the difference between $6.875 (the closing price of the Company's
Common Stock on December 30, 1994 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 Internal Revenue
Code. All current Retirement Plan participants also acquired a fully vested
interest in their pension benefits.
9
<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, $75,009; and Ms. Rich, $45,728. The years of service this
calculation represents at the time the plan was frozen in 1992 was 24.5 years
and 25.9 years, respectively.
Neither Mr. Killoran, Mr. Caglarcan 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. Mr. Caglarcan joined the
Company after the Retirement Plan was frozen and thus closed to new entrants.
The German subsidiary of the Company 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. Based upon present earnings, the estimated annual
benefit payable to Mr. Porzel under the German retirement plan at age 65 is
$74,459. Future increases in Mr. Porzel's compensation, if any, will not affect
these amounts.
EMPLOYMENT AGREEMENTS
The Company has severance agreements, expiring January 4 , 1998, with
Messrs. Ousley and Killoran under which the executive will receive certain
severance payments and benefits in the event of a "change of control
termination." Such term has the same definition as is used for acceleration of
the Company's outstanding stock options, except the severance agreements require
that the executive's termination of employment must be within one year of the
change of control event in order to entitle him to the severance pay and
benefits provided by his severance agreement. See Note (1) to the
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table presented under "Options/SAR Grants in Last Fiscal Year." If a change of
control termination occurs under his severance agreement, Mr. Ousley is entitled
to receive within five days of such termination a severance payment equal to
approximately three times his average annual taxable compensation for the five
tax years preceding the year in which the change of control event occured. Mr.
Killoran's severance payment is approximately one and one-half times his average
annual taxable compensation over the five-year period. In the event of a change
of control termination, the Company is also required to continue for thirty-six
months the executive's life, health, dental and disability benefits at a level
comparable to the benefits he was receiving before the change of control
termination. The severance agreements also provide that all change of control
compensation pertaining to the executive must be less than the amount which
would be considered a "parachute payment" under Section 280G of the Internal
Revenue Code. To the extent that the severance payment to which the executive is
entitled under his severance agreement, together with any other change of
control compensation for him, would exceed this amount, the executive must
designate which payments or change of control compensation should be reduced or
eliminated so as to avoid receipt of a parachute payment.
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 reacing 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 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-curent
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, the
Compensation Committee reviews and approves such actions after discussion and
input from the Board of Directors. This report reflects the compensation
philosophy for fiscal year 1994.
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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 and strategic initiatives. 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 December 31, 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 Comany to each of the Company's
named executive officers if the officer's compensation exceeds $1,000,000.
Special rules apply for "performance-based" compensation, including compensation
resulting from stock options. The 1992 Equity Incentive Plan includes 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 1994 expressed
as a percentage of salary for Messrs. Caglarcan, Porzel, Killoran and Ms. Rich
were 55%, 50%, 50% and 50% respectively.
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The performance goals established at the beginning of 1994 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 1994
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, whose performance can have a significant effect on the success
of the Company. The Committee believes that options granted to management
reinforce the Committee's philosophy that management compensation should be
closely linked with shareholder value. Stock options have been granted to
approximately 30% 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 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 1994 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 investments 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 1994 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 1994, expressed as a percentage of salary, was 80%, at the same level
as 1993.
For 1994, 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,
implementation of the Company's
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continuing strategy shift, business growth, 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 1994, 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 this transition period. As a result of
this review, the Committee decided to increase Mr. Ousley's annual base salary
by $35,000.
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
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PERFORMANCE GRAPH
The following performance graph compares the cumulative stockholder return
on the Company's Common Stock with the S&P 500 Composite Stock Index and the
Nasdaq Computer and Data Processing Stock Index. The comparison assumes $100 was
invested as of August 1, 1992 (the date of the spin-off of the Company from
Ceridian Corporation) 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 the Nasdaq National Market.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
COMPANY, S&P 500 AND PEER GROUP
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
8/3/92 12/31/92 3/31/93 6/30/93 9/30/93 12/31/93 3/31/94 6/30/94 9/30/94 12/31/94
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Control Data 100.00 110.61 163.64 150.00 150.00 122.73 103.03 110.61 81.06 83.33
S&P 500 100.00 104.01 108.43 108.92 111.58 113.98 109.63 110.07 115.51 115.47
NASDAQ 100.00 117.64 123.28 123.35 123.91 124.56 126.32 123.62 137.92 151.71
</TABLE>
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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 up to
$6,000 and reimbursement of certain out-of-pocket expenses.
STOCKHOLDER PROPOSALS FOR 1996 MEETING. Any stockholder proposals for the
Company's 1996 Annual Meeting of Stockholders (anticipated date May 15, 1996)
must be received by the Company by January 1, 1996 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 1994 Annual Stockholders' Report,
including financial statements, is being sent to stockholders of record on March
14, 1995, 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 DECEMBER 31, 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 1995 Annual Meeting. If any other business properly comes
before the 1995 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,
[SIGNATURE]
Ralph W. Beha
GENERAL COUNSEL AND SECRETARY
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(CONTROL DATA LOGO)
4201 LEXINGTON AVENUE NORTH
ARDEN HILLS, MINNESOTA 55126
