<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
(CONTROL DATA LOGO)
NOTICE OF 1997 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 14, 1997
To Our Stockholders:
The 1997 Annual Meeting of Stockholders of Control Data Systems, Inc., will
be held on Wednesday, May 14, 1997, at the Corporate Headquarters of the Company
(4201 Lexington Avenue North, Arden Hills, Minnesota) at 10:00 a.m. Central
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 17, 1997, will be
entitled to vote at the Meeting and any adjournments of the Meeting.
By Order of the Board of Directors,
[SIGNATURE]
Ruth A. Rich
SECRETARY
Dated: April 3, 1997
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 14, 1997
------------------------
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 tier of the Nasdaq Stock Market under the symbol CDAT. This
Proxy Statement is being furnished in connection with the fifth 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 14, 1997, 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 3, 1997.
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; if no instructions are indicated, such shares
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
<PAGE>
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.
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 17, 1997. Holders are not entitled to cumulative
voting rights in the election of directors. On the March 17, 1997 record date,
12,919,468 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 17, 1997.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- -------------------------------------------------- ---------------------- -------------
<S> <C> <C>
Massachusetts Financial Services Company (1) .....
500 Boylston Street
Boston, MA 02116 887,755 6.9%
First Bank Systems, Inc. (2) .....................
601 2nd Avenue South
Minneapolis, MN 55402 752,414 5.8%
Leon G.Cooperman (3) .............................
c/o Omega Advisors, Inc.
88 Pine Street, 31st Floor
New York, NY 10005 730,000 5.7%
</TABLE>
- ------------------------
(1) Represents sole power to vote 731,155 shares and sole power to dispose of
887,755 shares.
(2) Represents sole power to vote 725,665 shares and sole power to dispose of
505,365 shares.
(3) Represents sole power to vote 583,600 shares and sole power to dispose of
583,600 shares.
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 17, 1997.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- -------------------------------------------------- ---------------------- -------------
<S> <C> <C>
W. Donald Bell.................................... 33,331 0.3%
Grant A. Dove..................................... 33,331 0.3%
Marcelo A. Gumucio................................ 33,331 0.3%
W. Douglas Hajjar................................. 58,331 0.5%
Keith A. Libbey................................... 33,581 0.3%
James E. Ousley................................... 401,906 3.1%
Joseph F. Killoran................................ 104,206 0.8%
Dieter Porzel..................................... 41,667 0.3%
Ruth A. Rich...................................... 100,839 0.8%
Arnold Rutgers.................................... 33,144 0.3%
All directors and executive officers as a group
(12 persons)...................................... 946,028 7.3%
</TABLE>
- ------------------------
(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. Of
the total number of Mr. Ousley's shares, 16,668 are shares over which Mr.
Ousley has sole voting power but which are subject to restrictions on
disposition. Shares not currently outstanding but deemed beneficially owned
by virtue of the right of the person to acquire them as of March 17, 1997,
or within 60 days of such date (on or before May 16, 1997), 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, 33,331 shares; Mr. Dove, 33,331 shares; Mr. Gumucio,
33,331 shares; Mr. Hajjar, 33,331 shares; Mr. Libbey, 33,331 shares; Mr.
Ousley, 351,677 shares; Mr. Killoran, 102,400 shares; Mr. Porzel, 41,667
shares; Ms. Rich, 99,896 shares; Mr. Rutgers, 31,849 shares; all directors
and executive officers as a group, 863,483 shares.
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 1997 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 1997 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 of 59 August
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 & 68 August
Alliances, a strategic planning and investment banking firm. Mr. Dove 1992
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 direc-
tor of OPTEK Technology, Inc. Mr. Dove is also a director of US West,
Inc., Cooper Cameron Corporation, Intervoice, Inc., The Fore Front
Group, Inc., and MCC.
MARCELO A. GUMUCIO Marcelo A. Gumucio is the President and Chief Executive Officer of 59 August
Micro Focus Inc., an international software organization engaged in 1992
the design of software. Mr. Gumucio joined Micro Focus in 1996 and is
currently a member of its Board of Directors. From 1992 to 1996, Mr.
Gumucio held positions as the President, Chairman and Chief Executive
Officer of Memorex Telex, N.V. Prior to that time Mr. Gumucio was
President of Gumucio, Burke & Associates, a private investment firm he
founded in 1990. Mr. Gumucio was the President, Chief Operating
Officer and member of the Board of Directors of Cray Research, Inc.
from March 1988 to July 1990.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION AND OTHER INFORMATION AGE SINCE
- ----------------------- ----------------------------------------------------------------------- --- ---------
<S> <C> <C> <C>
W. DOUGLAS HAJJAR W. Douglas Hajjar is Chairman of Control Data Systems, Inc. He was Vice 49 August
Chairman of Cadence Design Systems, Inc., an electronic design 1992
automation vendor, from December 1991, when 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 also
serves on the Board of Platinum Software Corporation.
KEITH A. LIBBEY Keith A. Libbey is a member and Chairman Emeritus of the Board of 59 August
Fredrikson & Byron, P.A., a law firm with principal offices in 1992
Minneapolis, Minnesota.
JAMES E. OUSLEY James E. Ousley has been President and Chief Executive Officer of the 51 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 from 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 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 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 four Board meetings in fiscal year
1996. The standing committees of the Board of Directors include the Audit
Committee and the Compensation Committee. No director missed a meeting of the
Board of Directors or a meeting of any Board committee 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 1996.
Committee members are Mr. Libbey (Chair) and Mr. Hajjar. 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 U.S. qualified retirement plans.
COMPENSATION COMMITTEE. The Compensation Committee held two meetings in
fiscal year 1996. Committee members are Mr. Dove (Chair), Mr. Bell and Mr.
Gumucio. 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. The Chairman of the Company receives $25,000 per
calendar quarter, with no additional fees for Board or Board committee meetings
attended. If there is a "change of control" of the Company as defined in the
Company's 1992 Equity Incentive Plan, then the Chairman shall, upon a "change of
control termination" as defined in such Plan, be paid an amount equal to three
times the Chairman's annual fee.
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 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 non-employee director's reelection
to the Board. The exercise per share 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.
CERTAIN BUSINESS RELATIONSHIPS
Mr. Libbey is a member and Chairman Emeritus 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 LLP, certified public accountants, as independent auditors for
the Company for the current fiscal year ending December 31, 1997. 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 LLP for stockholders' approval at
the 1997 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 1997 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.
7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the fiscal year 1996 annual and long-term
compensation for the Company's Chief Executive Officer and the next four highest
paid executive officers, as well as the total compensation paid to each such
individual during fiscal years 1994 and 1995:
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------
AWARDS PAYOUTS
---------------------- ------------
ANNUAL COMPENSATION NUMBER OF
---------------------------------- SECURITIES
OTHER RESTRICTED UNDERLYING
ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
NAME AND FISCAL SALARY BONUS COMPENSATION AWARD(S) SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR (1) ($) ($) ($) (2) ($) (#) ($) (3) ($)
- ------------------------- --------- ---------- -------- ------------ ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
JAMES E. OUSLEY 1996 398,846 320,000 0 0 0 0 3,750
President and Chief 1995 385,000 383,000 0 318,750 0 0 3,750
Executive Officer 1994 380,944 77,000 0 0 0 0 0
DIETER PORZEL (4) 1996 239,320 47,864 0 0 0 0 0
Vice President, 1995 262,458 67,160 0 0 0 0 0
Europe/Middle East 1994 239,432 29,929 0 0 25,000 0 0
and Africa
JOSEPH F. KILLORAN 1996 198,077 100,000 0 0 0 0 3,750
Vice President and 1995 175,000 137,500 0 0 0 0 3,750
Chief Financial 1994 173,269 21,875 0 0 25,000 0 0
Officer
ARNOLD (NOL) RUTGERS 1996 133,846 52,500 15,000 3,750
Vice President, Sales 1995 102,426 65,000 0 0 10,000 0 3,750
and Operations USA 1994 98,709 10,573 0 0 25,000 0 0
and Asia
RUTH A. RICH 1996 129,231 65,000 0 0 0 0 3,750
Vice President, Human 1995 120,000 60,000 0 0 0 0 3,750
Resources/ 1994 120,000 15,000 0 0 10,000 0 0
Administration and
Secretary
</TABLE>
- ----------------------------------
(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 Sections 401(a) and 401(k) of the Internal
Revenue Code, for the period indicated.
(2) Reflects a restricted stock award of 50,000 shares. Of the 50,000 shares
granted, restrictions on 16,666 shares lapsed on July 5, 1995 and
restrictions on 16,666 shares lapsed on January 2, 1997. The restrictions on
the remaining shares will lapse on January 2, 1998. Any dividends declared
by the Company on its Common Stock would be payable to Mr. Ousley on his
restricted shares. The value of the restricted stock holdings that had not
lapsed at the end of fiscal year 1996 was $733,348.
(3) "All Other Compensation" reflects, in each instance, a discretionary profit
sharing contribution made by the Company on behalf of the named executive
under the Company's Personal Investment Plan for fiscal year 1996. For
fiscal years 1995 and 1996, each U.S. employee received, upon the Company's
attainment of certain financial objectives determined by the Board of
Directors, an amount equal to two and one-half percent (2 1/2%) of annual
compensation up to $150,000, or a maximum contribution of $3,750.
Contributions for future fiscal years and any related financial objectives
will be determined by the Board of Directors.
(4) All amounts for Mr. Porzel were paid in Deutsche Marks and converted to U.S.
dollar equivalents at the exchange rates prevailing on the last day of the
applicable fiscal year. Amounts paid in fiscal year 1996 were converted at
the rate prevailing on December 31, 1996 (0.6450).
8
<PAGE>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
There were no options/SARs granted to the named executives during 1996
except the following:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS (1) VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS/SARS STOCK PRICE
UNDERLYING GRANTED TO EXERCISE OR APPRECIATION FOR
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION OPTION TERM (2)
NAME GRANTED (#) FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
- --------------------- -------------- ----------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ARNOLD RUTGERS 15,000 6.8% $18.875 7/24/06 $178,365 $450,165
</TABLE>
- ------------------------
(1) The option gives the optionee the right to purchase Common Stock. No SARs
were granted separately or in tandem with the option. 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," option 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.
(2) The potential realizable value of the 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.
9
<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 fiscal
year 1996 and presents the value of unexercised options and SARs held by the
named executives at December 31, 1996:
<TABLE>
<CAPTION>
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FISCAL YEAR-END (1) (#) FY-END (2) ($)
SHARES ACQUIRED
ON EXERCISE VALUE REALIZED EXERCISABLE (E) EXERCISABLE (E)
NAME (#) ($) UNEXERCISABLE (U) UNEXERCISABLE (U)
- ------------------------ ---------------- -------------- ----------------------- --------------------
<S> <C> <C> <C> <C>
JAMES E. OUSLEY 0 0 351,677(E) $5,015,553(E)
0(U) $0(U)
DIETER PORZEL 54,993 723,990 33,333(E) $430,206(E)
16,668(U) $217,725(U)
JOSEPH F. KILLORAN 0 0 99,066(E) $1,384,456(E)
8,334(U) $112,716(U)
ARNOLD RUTGERS 0 0 31,849(E) $441,104(E)
30,001(U) $218,346(U)
RUTH A. RICH 0 0 99,896(E) $1,440,979(E)
3,334(U) $47,926(U)
</TABLE>
- ------------------------
(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 options
and the per share exercise price were calculated to preserve the economic
value of the optionee's Ceridian stock options. In addition, the replacement
options contain the same terms and conditions as the Ceridian options, and
the replacement options' duration and exercisability are measured according
to the dates that the Ceridian options were granted.
(2) The values are based on the difference between $22.00 (the closing price of
the Company's Common Stock on December 31, 1996 as reported by the Nasdaq
National Market) and the options' exercise price.
10
<PAGE>
PENSION PLAN AND BENEFIT EQUALIZATION PLAN
The Company maintains a defined benefit pension plan (the "Retirement Plan")
for its U.S. 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.
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 certain 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; Ms. Rich, $45,728; and Mr. Rutgers, $10,325. The years of
service this calculation represents at the time the plan was frozen in 1992 was
24.5 years, 25.9 and 10.0 years, respectively. Mr. Rutgers also participated in
an insured defined benefit plan in the Netherlands from 1967 to 1982. The amount
of the benefit payable to Mr. Rutgers from the Netherlands plan is 1/40 of
eligible salary times years of service. An estimate of his benefit under the
Netherlands plan cannot be calculated at this time because certain beneficiaries
are entitled to receive a portion of that benefit when it becomes payable.
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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 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 German 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 an amount of Deutsche Marks
equivalent to $75,295, calculated at the exchange rate prevailing on December
31, 1996. 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 meaning set forth in the Company's 1992 Equity Incentive Plan,
except the severance agreements require that the executive's termination of
employment occur 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. 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 occurs. Mr. Killoran's severance payment is
approximately one and one-half times his average annual taxable compensation
over the same 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
payable 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
payable to 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
thirty-six months' notice or upon Mr. Porzel reaching age 65, and by Mr. Porzel
upon six 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-current levels for the balance of his notice period.
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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 three members
of the Compensation Committee are non-employee directors as defined in Rule
16b-3 of the Securities Exchange Act of 1934. 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 are made by the Committee in order
for the awards under such Plan to satisfy Rule 16b-3.
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. All
of the non-employee members of the Board of Directors review compensation
actions affecting the Chief Executive Officer. This report reflects the
compensation philosophy for fiscal year 1996.
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 and restricted
stock grants. 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 performance against its
strategic initiatives. Long-term incentive is based on stock performance through
stock options and restricted stock grants. 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 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 January 1, 1994 to December 31, 1996, consisting of
the following elements: base salary, performance incentives and deferred profit
sharing contributions for such period, and stock options and restricted stock
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 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 these tax provisions.
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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 strategic objectives and
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 fiscal year
1996 for Messrs. Porzel, Rutgers, and Killoran and for Ms. Rich were
approximately 50% of annual base salary.
The performance goals established at the beginning of fiscal year 1996 were
based on several strategic and financial measurements, including a target level
of net earnings and restructure management. As noted above, the target level of
net earnings was assigned a significantly greater weight than the weight
assigned to other factors. Messrs. Porzel and Rutgers were also assigned
geographically specific financial measurements. Based on the evaluation of the
above criteria, the Compensation Committee awarded incentive payments for fiscal
1996 at 40% of the target incentive compensation level for Mr. Porzel, 70% of
the target incentive compensation level for Mr. Rutgers, and 100% of the target
incentive compensation level for Mr. Killoran and Ms. Rich.
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. Stock options have been granted to
approximately 65% of the Company's management worldwide.
OTHER COMPENSATION PLANS. Control Data has adopted certain broad-based
employee benefit plans in which all U.S. employees, including Messrs. Ousley,
Killoran, Rutgers, and Ms. Rich, 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. Under the Company's Personal Investment Plan, which is a defined
contribution plan qualified under the Internal Revenue Code Sections 401(a) and
401(k), participants, including the aforementioned executives, can contribute a
percentage of their annual compensation. Beginning in 1993, the Company
established a discretionary profit sharing contribution contingent upon the
Company reaching a target level of net earnings. The Company made a profit
sharing contribution of 2.5% of annual compensation up to a maximum of $150,000
for fiscal year 1996 to all eligible U.S. employees. Each of the U.S. named
executives received a profit sharing contribution of $3,750 to their Personal
Investment Plan accounts. The Company permits participants to invest their
salary deferral contributions and any Company matching or profit sharing
contributions in a Company Common Stock Fund in order to align the employees'
and the stockholders' interests in the enhancement of stockholder value. To
further align these interests, the Company has adopted an Employee Stock
Purchase Plan,
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approved by the stockholders in 1993, through which employees may purchase
shares of the Company's Common Stock. Other than these purchases of or
investments in Common Stock and the Company's discretionary profit sharing
contribution, benefits under the Company's broad-based benefit plans are not
tied to Company performance.
MR. OUSLEY'S 1996 COMPENSATION. In general, compensation for the CEO aligns
with the philosophies and practices discussed above for executive officers. All
compensation determinations and stock grants to the CEO are reviewed by the
Committee with the Board of Directors.
At the beginning of each fiscal year, the Committee reviews the compensation
level of the CEO. The Committee considers data on compensation history and
competitive practices in determining the CEO's total compensation, and reviews
the data in light of the Company's philosophy that the compensation of the CEO
should be influenced primarily by the financial performance of the Company. This
places a meaningful portion of the CEO's compensation at risk along with the
stockholders, as well as offering significant, market-competitive upside
opportunities based on the Company's performance. The objective is to motivate
and incent the CEO to achieve a level of Company performance consistent with the
Company's strategic business objectives.
During fiscal year 1996, 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. As a result of this
review, the Committee decided to increase Mr. Ousley's annual base salary by
$15,000.
For fiscal year 1996, the CEO's performance goals were established based on
strategic and financial measurements, including a target level of net earnings,
restructure management and sale of non-strategic assets. The target level of net
earnings was assigned a significantly greater weight than the weight assigned to
other 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, major refocusing and
restructuring objectives, implementation of the Company's continuing strategy
shift, and his demonstrated leadership. Based on this evaluation, the
Compensation Committee awarded an incentive payment of 100% of Mr. Ousley's
target incentive compensation level which was 80% of his year-end annualized
base salary.
The Compensation Committee is satisfied that the cash compensation and
long-term incentive plans in the form of stock option and restricted stock
awards provided to the CEO and to the executive officers of the Company are
structured and have operated to create a high degree of alignment with increased
profitability and shareholder value.
Grant A. Dove Marcelo A. Gumucio 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, many of which are comparable in size to the
Company.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
COMPANY, S&P 500 AND PEER GROUP
CONTROL DATA SYSTEMS, S&P 500 COMPOSITE STOCK NASDAQ COMPUTER & DATA
INC. INDEX PROCESSING STOCK INDEX
<S> <C> <C> <C>
Aug-92 $100 $100 $100
Sep-92 $112 $99 $104
Dec-92 $111 $104 $118
Mar-93 $164 $108 $123
Jun-93 $150 $109 $123
Sep-93 $150 $112 $124
Dec-93 $123 $114 $125
Mar-94 $103 $110 $126
Jun-94 $111 $110 $124
Sep-94 $81 $116 $138
Dec-94 $83 $116 $151
Mar-95 $85 $127 $170
Jun-95 $109 $139 $202
Sep-95 $147 $150 $220
Dec-95 $238 $159 $230
Mar-96 $240 $168 $241
Jun-96 $259 $176 $268
Sep-96 $280 $181 $273
Dec-96 $267 $196 $284
</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 of up
to $6,500 and reimbursement of certain out-of-pocket expenses.
STOCKHOLDER PROPOSALS FOR 1998 MEETING. Any stockholder proposals for the
Company's 1998 Annual Meeting of Stockholders (anticipated date May 15, 1998)
must be received by the Company by January 1, 1998 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 1996 Annual Stockholders' Report,
including financial statements, is being sent to stockholders of record on March
17, 1997, together with this Proxy Statement. CONTROL DATA WILL FURNISH WITHOUT
CHARGE TO STOCKHOLDERS A COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1996, 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 55126-6198.
OTHER BUSINESS. The Board of Directors knows of no other matters to be
presented at the 1997 Annual Meeting. If any other business properly comes
before the 1997 Annual Meeting or any adjournment thereof, the appointees named
in the Proxies will vote the Proxies on that business in accordance with their
best judgment.
By Order of the Board of Directors,
[SIGNATURE]
Ruth A. Rich
SECRETARY
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(CONTROL DATA LOGO)
4201 LEXINGTON AVENUE NORTH
ARDEN HILLS, MINNESOTA 55126-6198
