<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] 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
ANCOR COMMUNICATIONS, INCORPORATED
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
ANCOR COMMUNICATIONS, INCORPORATED
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
May 12, 1999
TO THE SHAREHOLDERS OF ANCOR COMMUNICATIONS, INCORPORATED:
Notice is hereby given that the Annual Meeting of Shareholders of Ancor
Communications, Incorporated will be held at 3:30 p.m. on Wednesday, May 12,
1999, at the Minneapolis Marriott City Center, 30 South Seventh Street,
Minneapolis, Minnesota, for the following purposes:
1. To elect two directors to serve on the Board of Directors.
2. To vote upon a proposal to amend the Ancor Communications,
Incorporated 1995 Employee Stock Purchase Plan to increase the number
of shares of Common Stock authorized for issuance thereunder.
3. To ratify the selection of the Company's independent public
accountants for the fiscal year ending December 31, 1999.
4. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on March 26, 1999 as
the record date for the determination of shareholders entitled to notice of and
to vote at the meeting.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING, PLEASE COMPLETE DATE AND SIGN THE ENCLOSED PROXY AND RETURN
IT PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN THE
UNITED STATES. ALTERNATIVELY, YOU MAY WISH TO SUBMIT YOUR PROXY BY TOUCH-TONE
PHONE OR THE INTERNET AS INDICATED ON THE PROXY.
By Order of the Board of Directors,
/s/ Steven E. Snyder
------------------------
Steven E. Snyder
Secretary
Dated: April 7, 1999
<PAGE>
ANCOR COMMUNICATIONS, INCORPORATED
PROXY STATEMENT
For
ANNUAL MEETING OF SHAREHOLDERS
May 12, 1999
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Ancor Communications, Incorporated (the
"Company") for use at the Annual Meeting of Shareholders of the Company to be
held on May 12, 1999, at 3:30 p.m. at the Minneapolis Marriott City Center, 30
South Seventh Street, Minneapolis, Minnesota, and at any adjournment thereof. A
shareholder giving the enclosed proxy may revoke it at any time before the vote
is cast at the annual meeting. Shares represented by a proxy will be voted in
the manner directed by a shareholder. If no direction is made, the proxy will be
voted for the election of the nominees for director named in this Proxy
Statement and for the other proposals set forth in this Proxy Statement. This
Proxy Statement and the accompanying form of proxy are being sent or given to
shareholders beginning on or about April 7, 1999 along with the Company's 1998
Annual Report to Shareholders.
Only shareholders of record at the close of business on March 26, 1999 are
entitled to notice of and to vote at the meeting or at any adjournment thereof.
On March 26, 1999 there were 24,056,140 shares of Common Stock of the Company
outstanding. Generally, the affirmative vote of a majority of the shares of
Common Stock present and entitled to vote on each matter is required for the
election of each director nominee and the approval of each other matter to be
acted upon. However, if the shares present and entitled to vote on that item of
business would not constitute a quorum for the transaction of business at the
meeting, then the item must be approved by a majority of the voting power of the
minimum number of shares that would constitute such a quorum. Each share is
entitled to one vote. Cumulative voting is not permitted. Shares voted as
abstentions on any matter (or a "withhold vote for" as to a director) will be
counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum at the meeting and as unvoted, although
present and entitled to vote, for purposes of determining the approval of each
matter as to which the shareholder has abstained. Consequently, abstentions and
withheld votes have the same effect as a no vote. If a broker submits a proxy
that indicates the broker does not have discretionary authority as to certain
shares to vote on one or more matters, those shares will be counted as shares
that are present and entitled to vote for purposes of determining the presence
of a quorum at the meeting, but will not be considered as present and entitled
to vote with respect to such matters.
The Board of Directors knows of no matters other than those that are
described in this Proxy Statement that may be brought before the meeting.
However, if any other matters are properly brought before the meeting, persons
named in the enclosed proxy or their substitutes will vote in accordance with
their best judgment on such matters.
All expenses in connection with the solicitation of proxies will be paid by
the Company. In addition to solicitation by mail, officers, directors and
regular employees of the Company, who will receive no extra compensation for
their services, may solicit proxies by telephone, facsimile or personal calls.
Shareholders voting through the Internet should understand that there may be
costs associated with electronic access, such as usage charges from Internet
service providers and telephone companies, that must be borne by the
shareholder.
The Company's principal executive offices are located at 6130 Blue Circle
Drive, Minnetonka, Minnesota 55343.
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
The Articles of Incorporation of the Company provide that directors of the
Company shall be divided into three classes, as nearly equal in number as
reasonably possible. The term of office of the first class of directors will
expire at the annual meeting of shareholders in 1999, the term of the second
class of directors will expire at the annual meeting of shareholders in 2000 and
the term of the third class of directors will expire at the annual meeting of
shareholders in 2001. Directors elected at each annual meeting of shareholders
will be of the same class as the directors whose terms expire at such annual
meeting of shareholders, and shall be elected to hold office for a term expiring
at the third succeeding annual meeting of shareholders and until their
successors are elected and shall qualify.
Vacancies and newly created directorships resulting from an increase in the
number of directors may be filled by a majority of the directors then in office
and the directors so chosen will hold office until the next election of the
class for which such directors shall have been chosen.
At the Annual Meeting of Shareholders to be held May 12, 1999, the term of
office of Amyl Ahola and Thomas F. Hunt, Jr. will expire. Messrs. Ahola and Hunt
(the "Nominees") have been nominated to be elected to the Board of Directors for
additional three year terms which will expire at the annual meeting of
shareholders in 2002. The Board of Directors recommends that the shareholders
elect the Nominees as directors of the Company for the ensuing three year
period. It is intended that the persons named as proxies in the enclosed form of
proxy will vote the proxies received by them for the election of the Nominees,
unless otherwise directed. The Nominees have indicated a willingness to serve,
but in case either of them is not a candidate at the meeting, which is not
presently anticipated, the proxies named in the enclosed form of proxy may vote
for a substitute nominee in their discretion.
Information regarding the directors of the Company is set forth below:
Name Age Expiration of Term
---- --- ------------------
Amyl Ahola+ 54 1999
Thomas F. Hunt, Jr.+ 49 1999
Kenneth E. Hendrickson 58 2000
John F. Carlson* 60 2000
Gerald M. Bestler+ 69 2001
Paul F. Lidsky* 45 2001
Michael L. Huntley* 58 2001
--------------------
*Denotes a member of the Audit Committee.
+Denotes a member of the Compensation Committee.
Amyl Ahola has served as a director of the Company since October 1997. Mr.
Ahola has been the President and Chief Operating Officer of TeraStor Corporation
since 1997 and prior thereto served as its Executive Vice President, Marketing.
From 1992 to 1996, Mr. Ahola was Vice President of Seagate Technology, a disk
drive company, initially responsible for corporate development, then marketing,
product line management and corporate strategy.
Thomas F. Hunt, Jr. has been a director of the Company since May 1993. Mr.
Hunt has served as President of Medallion Capital, Inc. (formerly Capital
Dimensions, Inc), a venture capital investment company, since 1987. Prior to
co-founding Capital Dimensions, Mr. Hunt served as President of Control Data
Community Venture Fund, Inc. and served as Assistant General Counsel for Control
Data Corporation.
2
<PAGE>
Kenneth E. Hendrickson has served as the Company's Chief Executive Officer
and as a director of the Company since August 1997 and has served as the
Chairman of the Board of Directors since September 1997. Mr. Hendrickson was an
independent consultant from 1996 to August 1997. Prior thereto, Mr. Hendrickson
was Executive Vice President and General Manager of the Microcomputer Products
Group of Western Digital Corporation, a disk drive company, from 1993 to 1996.
Mr. Hendrickson was Vice President of Operations and Quality of Overland Data
Corp., a tape drive company from 1992 to 1993 and was President of Archive
Technology, another tape drive company, from 1990 to 1992. Mr. Hendrickson is
also a director of TechMar Technologies, Inc.
John F. Carlson has served as a director of the Company since September
1997. Mr. Carlson has been the Chairman and Chief Financial Officer of Excorp
Medical, Inc., a medical technology company, since 1996. Prior thereto, Mr.
Carlson was with Cray Research, Inc., a supercomputer manufacturer from 1976 to
1995, serving as Chairman and Chief Executive Officer from 1993 to 1995,
President and Chief Operating Officer from 1991 to 1993 and Chief Financial
Officer from 1984 to 1991. Mr. Carlson is also on the Board of Directors of TSI,
Incorporated and Ultradata Corporation.
Gerald M. Bestler has been a director of the Company since May 1990. Mr.
Bestler is retired. He was formerly Executive Vice President of BMC Industries
Inc., an optical and electronic components manufacturer. Mr. Bestler is also a
director of Innovex, Inc., a precision electromagnetic products and
photo-processing equipment manufacturer.
Paul F. Lidsky has served as a director of the Company since October 1997.
Mr. Lidsky has been the President and Chief Executive Officer of OneLink
Communications, Inc., a telecommunications company, since 1997. Prior thereto,
Mr. Lidsky was Executive Vice President of Strategy and Business Development of
Norstan, Inc., a comprehensive technology services company, from 1992 to 1997.
Mr. Lidsky is also a director of OneLink Communications, Inc.
Michael L. Huntley has served as a director of the Company since December
1998. Since March 1999, Mr. Huntley has been a consultant to Seagate Technology,
Inc. From July 1997 to December 1998 Mr. Huntley served as Seagate's Senior Vice
President of Worldwide Sales during which he was responsible for management of
all Seagate disk drive sales worldwide. Prior to that role, Mr. Huntley served
as Senior Vice President and General Manager of Seagate Removable Storage
Solutions from April 1996 to June 1997 and Vice President of Americas Sales with
Seagate Technology, Inc. from May 1993 to March 1996.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR MESSRS. AHOLA AND HUNT.
MEETINGS OF THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES
During the fiscal year ended December 31, 1998, the Board of Directors met
seven times. All of the directors attended more than 75% of the aggregate of all
meetings of the Board of Directors and meetings of the committees on which they
served. The Board of Directors and its committees also act from time to time by
written consent in lieu of meetings.
The Board of Directors of the Company has standing audit and compensation
committees which have a current membership as indicated in the foregoing
section. The Board of Directors has no standing nominating committee.
The audit committee makes recommendations as to the selection of auditors
and their compensation, and reviews with the auditors the scope of the annual
audit, matters of internal control and procedure and the adequacy thereof, the
audit results and reports and other general matters relating to the Company's
accounts, records, controls and financial reporting. During fiscal 1998, the
audit committee held one meeting.
The compensation committee reviews and recommends to the Board of Directors
the compensation guidelines for executive officers and other key personnel and
the composition and levels of participation in incentive compensation plans,
fringe benefits and retirement benefits for all employees. During fiscal 1998,
the compensation committee held one meeting.
3
<PAGE>
EXECUTIVE OFFICERS
Name Age Position
---- --- --------
Kenneth E. Hendrickson 58 Chief Executive Officer
Calvin G. Nelson 46 President
Steven E. Snyder 42 Chief Financial Officer and Secretary
See the biographical information on Mr. Hendrickson under "Election of
Directors."
Calvin G. Nelson was named President of the Company effective April 16,
1997 and prior to such time served as the Company's Vice President, Engineering
since July 1995. Prior to joining Ancor, Mr. Nelson was employed by ADC
Telecommunications, Inc. since 1979, serving as Vice President - Engineering
since 1990.
Steven E. Snyder has been the Chief Financial Officer and Secretary of the
Company since October 1997. Prior to joining the Company, Mr. Snyder was the
Director of Finance, from 1996 to 1997, and the Controller, from 1995 to 1996,
of Cray Research, Inc., which was acquired by Silicon Graphics Inc. in April
1996.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires executive
officers and directors and persons who beneficially own more than ten percent of
the Company's Common Stock to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission ("SEC").
Executive officers, directors, and greater than ten percent beneficial owners
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company and written representations from the executive officers, directors and
holders of ten percent or more of the Company's Common Stock, the Company
believes that all Section 16(a) filing requirements applicable to its executive
officers, directors and ten percent shareholders were satisfied except that one
change in beneficial ownership for each of Calvin G. Nelson and Kenneth E.
Hendrickson was not timely reported, and an initial statement of beneficial
ownership was not timely filed for Michael L. Huntley.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
OVERVIEW
The Compensation Committee is responsible for establishing compensation policies
for all executive officers of the Company, including the executive officers
named in the accompanying tables (the "Named Executives Officers"). The members
of the Compensation Committee are Messrs. Ahola, Bestler and Hunt. The
Compensation Committee establishes the total compensation for the executives
officers in light of these policies. The Compensation Committee is composed
entirely of outside Directors.
The objectives of the Company's executive compensation program are:
1. to attract, retain and motivate superior talent and reward individual
performance;
2. to support the achievement of the Company's financial and strategic goals;
and
4
<PAGE>
3. through stock based compensation, align the executive officers' interests
with those of the shareholders of the Company.
The following report addresses the Company's executive compensation policies and
discusses factors considered by the Compensation Committee in determining the
compensation of the Company's Chief Executive Officer and other executive
officers for the year ended December 31, 1998.
COMPENSATION POLICIES FOR EXECUTIVE OFFICERS
The Compensation Committee's executive compensation policies are designed to
provide competitive levels of compensation that integrate pay with the Company's
annual and long term performance goals, reward the achievement of corporate
goals, recognize individual initiative and achievements, and assist the Company
in attracting and retaining qualified executives. The Company's executive
officers are paid base salaries that are subject to merit increases, along with
periodic adjustments to make such salaries competitive with other similar sized
companies in the high-technology industry. The Company's executive officers are
also given the opportunity to participate in certain other broad-based employee
benefit plans. The Company's use of stock option grants as a key component of
its executive compensation plans reflects the Compensation Committee's position
that stock ownership by management and stock based compensation arrangements are
beneficial in aligning management's and shareholders' interests to enhance
shareholder value. The Compensation Committee believes that a greater reliance
on stock-based incentives is appropriate for the Company's current stage of
development.
EXECUTIVE INCENTIVE PROGRAM
In 1997, the Company established an executive incentive program which sets forth
guidelines for awarding discretionary executive incentive pay. The executive
incentive program is comprised of two components: (1) a group incentive based on
Company revenue goals and (2) individual incentives based upon pre-defined
personal goals. The Company and individual goals and the bonus amounts are
determined by the Compensation Committee annually. Although the executive
incentive program sets forth certain Company revenue and individual goals,
payments under the executive incentive program are within the Company's sole
discretion and do not represent any contractual or other obligation on the part
of the Company to pay any bonus. Bonus payments under the executive incentive
program are based on all aspects of an executive employee's performance and the
Company's overall financial ability to pay any such bonuses. No payments were
made based on the Company's 1998 performance, and a payment of $10,686 was paid
to one of the Named Executive Officers other than the Chief Executive Officer
based on achievement of individual performance goals during fiscal 1998.
STOCK OPTIONS
Stock options awarded under the Company's 1994 Incentive and Stock Option Plan
are intended as incentive compensation and have historically been granted to
officers and other key employees to attract, retain and motivate the talent
necessary to the Company to achieve its objectives. The Company's policy is to
not grant stock options annually, but to review each individual's stock option
position, at which point the Compensation Committee may or may not grant
additional options in its discretion. Original stock option grants totaling
1,398,591 and 850,000 were granted to 81 employees and three executive officers,
respectively, during 1998 in connection with the hiring of new employees and as
a reward for individual contributions to the Company. In addition to these new
grants, the Company repriced certain outstanding options. See "Report on Option
Repricing."
CHIEF EXECUTIVE OFFICER'S COMPENSATION
Kenneth E. Hendrickson has served as the Company's Chief Executive Officer since
August 1997. Compensation for Mr. Hendrickson during 1998, as reflected in the
Summary Compensation Table set forth herein, consisted of base compensation,
bonus, and the grant of stock options. Mr. Hendrickson's annual base
compensation was equal to $160,000 until November 1, 1998, and currently is
$180,000. Mr. Hendrickson's annual base compensation may be increased to
$200,000 in the event certain value-driven milestones are achieved during 1999.
In setting Mr. Hendrickson's annual base salary, the Compensation Committee
considered the salaries paid to Chief Executive Officers
5
<PAGE>
of other development stage, high-technology companies, the Company's resources
and the Compensation Committee's philosophy that stock options should be a
significant element of the compensation package in order to align the
executive's interests with those of the Company and its shareholders. Therefore,
Mr. Hendrickson was granted stock options to purchase 350,000 shares of the
Company's Common Stock in 1998. In addition to the new option grants, the
Company repriced Mr. Hendrickson's option to purchase 200,000 shares of the
Company's Common Stock which was originally granted in 1997. See "Report on
Option Repricing."
Mr. Hendrickson is also eligible to participate in the Company's Executive
Incentive Program described above.
At this time the Committee has no formal written plan for CEO compensation
separate and apart from the Company's general compensation philosophy and the
executive incentive program. Until a plan specific to the CEO is developed, CEO
compensation will be based on corporate and individual performance, consistent
with guidelines applicable to all key employees.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE COMPANY'S BOARD OF DIRECTORS:
Amyl Ahola Gerald M. Bestler Thomas F. Hunt, Jr.
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation awarded to or earned during
the last three fiscal years by the Company's Chief Executive Officer and each
other executive officer who earned salary and bonus in excess of $100,000 during
the fiscal year ended December 31, 1998.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
---------------------------- ---------------
Fiscal
Name and Principal Position Year Salary Bonus Options(4)
- ---------------------------------------- --------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
Kenneth E. Hendrickson (1) 1998 $170,277 $ 0 550,000
Chief Executive Officer 1997 59,692 0 200,000
Calvin G. Nelson (2) 1998 $160,277 $10,686 550,000
President 1997 142,482 20,044 100,000
1996 110,000 31,500 30,000
Steven E. Snyder (3) 1998 $126,539 $ 0 210,000
Chief Financial Officer and Secretary 1997 26,442 0 60,000
</TABLE>
- ------------------------
(1) Mr. Hendrickson joined the Company in August, 1997. In 1998 Mr. Hendrickson
was granted 350,000 options and had a total of 200,000 options repriced.
See "Report on Option Repricing."
(2) In 1998 Mr. Nelson was granted 350,000 options and had a total of 200,000
options repriced. See "Report on Option Repricing."
(3) Mr. Snyder joined the Company in October, 1997. In 1998 Mr. Snyder was
granted 150,000 options and had a total of 60,000 options repriced. See
"Report on Option Repricing."
(4) No restricted stock was held by the Named Executive Officers as of December
31, 1998.
6
<PAGE>
STOCK OPTIONS
The following table summarizes stock options granted to the executive
officers named in the Summary Compensation Table above during the Company's
Fiscal Year ended December 31, 1998.
OPTION GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
Individual Grants(1)
---------------------------------------------------------- Potential Realizable
% of Total Value at Assumed
Number of Options Annual Rates of Stock
Securities Granted to Price Appreciation
Underlying Employees in Exercise for Option Term(2)
Options Fiscal Price Per Expiration -----------------------
Name Granted 1998(3) Share Date 5% 10%
- ---------------------------- -------------- -------------- ----------- ------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Mr. Hendrickson 200,000(4) 6.2% $1.78 8/14/04 $117,293 $264,922
50,000(5) 1.5 5.31 5/20/08 167,066 423,378
300,000(6) 9.2 1.78 10/21/08 336,066 851,656
Mr. Nelson 70,000(4) 2.2% $1.78 7/26/02 $ 25,034 $ 53,569
5,000(4) 0.2 1.78 1/5/03 2,008 4,342
25,000(4) 0.8 1.78 6/18/03 11,386 24,944
100,000(4) 3.1 1.78 4/16/04 54,827 122,749
50,000(5) 1.5 5.31 5/20/08 167,066 423,378
300,000(6) 9.2 1.78 10/21/08 336,066 851,656
Mr. Snyder 60,000(4) 1.8% $1.78 10/22/04 $ 36,348 $ 82,461
30,000(5) 0.9 5.31 5/20/08 100,240 254,027
120,000(6) 3.7 1.78 10/21/08 134,426 340,662
</TABLE>
- ----------
(1) All options were granted pursuant to the 1994 Long-Term Incentive and Stock
Option Plan. The options are nontransferable and become immediately
exercisable in full upon a change of control of the Company.
(2) The 5% and 10% assumed annual compound rates of stock price appreciation
are mandated by the rules of the SEC and do not represent the Company's
estimate or projection of future Common Stock prices.
(3) Percent calculations based on 3,250,924 total options granted to officers
and employees in 1998 consisting of 2,248,591 original grants and 1,002,333
repriced options.
(4) Represents repricing of options originally granted prior to 1998. On
October 21, 1998 the Company amended options granted prior to May 20, 1998
to provide for a decrease in the exercise price to $1.78, which represented
the closing price of the Common Stock on October 21, 1998 as reported on
the Nasdaq Small Cap Market. The repriced options may not be exercised
prior to October 21, 1999 and thereafter may be exercised in accordance
with the vesting schedules contained in the original option grants. See
"Report on Option Repricing."
(5) Option vests 25% per year, over four years beginning May 20, 1999.
(6) Option vests 50% on October 21, 1999, and an additional 25% on October 21,
2000 and October 21, 2001.
7
<PAGE>
YEAR-END OPTION TABLE
The following table summarizes the value of the options held at the end of
fiscal 1998 by the executive officers named in the Summary Compensation Table
above.
AGGREGATE VALUE OF OPTIONS HELD AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
Number of Unexercised Options Held at Value of Unexercised In-the-Money
December 31, 1998 Options Held at December 31, 1998(1)
-------------------------------------- --------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- --------------------- ------------- ---------------- ------------ --------------
<S> <C> <C> <C> <C>
Mr. Hendrickson 0 550,000 $ 0 $ 1,109,375
Mr. Nelson 0 600,000 $ 0 $ 1,220,313
Mr. Snyder 0 210,000 $ 0 $ 399,375
</TABLE>
- --------------------
(1) Value based on the difference between the closing price of the Company's
Common Stock as reported by the Nasdaq Small Cap Market on December 31,
1998 ($4.00) and the option exercise price per share multiplied by the
number of shares subject to the option.
8
<PAGE>
REPORT ON OPTION REPRICING
In October 1998, after a significant decrease in the price of the Common
Stock, the Compensation Committee determined that options granted by the Company
prior to May 20, 1998 no longer provided a meaningful incentive to employees and
directors as initially intended. The Company believes that the market for
skilled employees in the high-technology field is highly competitive, and
believes that stock options with meaningful incentives are an important measure
in retaining its employees and directors, which is critical to the Company's
success. In light of the Compensation Committee's desire to provide meaningful
incentives to existing active employees and directors, on October 21, 1998, the
options to purchase shares of Common Stock granted to existing active employees
and directors prior to May 20, 1998 were amended to reduce the exercise price
thereunder to $1.78 which was the Common Stock's closing price on the Nasdaq
Small Cap Market on October 21, 1998. In connection with the repricing, the
exercisability of the repriced options was tolled for a period of one year in
order to increase the incentives to employees and directors to remain with the
Company.
The following table provides information concerning the repricings on
October 21, 1998 of options held by executive officers.
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
Number of
Securities Market Price Length of
Underlying of Common Original Option
Options Stock at Exercise Price Term Remaining
Repriced Time of at Time of New at Date of
Date of or Amended Repricing or Repricing or Exercise Repricing or
Name Repricing (#) Amendment ($) Amendment ($) Price ($) Amendment
- ------------------------ ----------- ------------ -------------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Hendrickson 10/21/98 200,000 1.78 9.88 1.78 70 months
Chief Executive
Officer
Mr. Nelson 10/21/98 70,000 1.78 4.88 1.78 45 months
President 10/21/98 5,000 1.78 5.75 1.78 51 months
10/21/98 25,000 1.78 13.25 1.78 56 months
10/21/98 100,000 1.78 5.13 1.78 66 months
Mr. Snyder 10/21/98 60,000 1.78 7.75 1.78 72 months
Chief Financial
Officer and
Secretary
</TABLE>
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE COMPANY'S BOARD OF DIRECTORS:
Amyl Ahola Gerald M. Bestler Thomas F. Hunt, Jr.
COMPENSATION OF DIRECTORS
Directors receive no cash compensation for their attendance at meetings.
Pursuant to the Non-Employee Director Stock Option Plan (the "Director Plan"),
each non-employee director is entitled to receive an option to purchase
9
<PAGE>
6,000 shares of Common Stock on the first business day of each fiscal year in
which such director remains a director. In addition, the Director Plan provides
for an automatic grant of an option to purchase 12,000 shares on the date any
new director is first elected to the Board of Directors. However, on October 21,
1998, each Non-Employee Director was granted an option to purchase 18,000 shares
of Common Stock at an exercise price equal to the fair market value of the
Common Stock on that day ($1.78). Such options were granted to the Non-Employee
Directors in lieu of the automatic grant of options that would have occurred on
the first business day of 1999. On the day of his appointment to the Board of
Directors, Director Michael L. Huntley was granted an option to purchase 12,000
shares of Common Stock at an exercise price equal to the fair market value of
the Common Stock on that day ($3.50). Such option granted to Mr. Huntley was in
addition to the Director Plan's automatic grant of an option to purchase 12,000
shares and in lieu of the automatic grant of options that would have occurred on
the first business day of 1999.
Directors who are also employees of the Company do not receive any
additional compensation for serving on the Board of Directors.
EMPLOYMENT AGREEMENTS
The Company and Kenneth E. Hendrickson are parties to a letter agreement
dated July 25, 1997, pursuant to which the Company agreed to employ Mr.
Hendrickson as the Company's Chief Executive Officer. Pursuant to the terms of
the letter agreement, Mr. Hendrickson is entitled to a severance payment equal
to one year's salary and to full vesting of any stock options in the event his
employment with the Company is terminated without cause.
The Company and Steven E. Snyder are parties to a letter agreement dated
September 23, 1997, pursuant to which the Company agreed to employ Mr. Snyder as
the Company's Chief Financial Officer. Pursuant to the terms of the letter
agreement, Mr. Snyder is entitled to a severance payment equal to six month's
salary in the event his employment with the Company is terminated without cause
and, in such an event, any stock options held by Mr. Snyder would continue to
vest pursuant to their terms during the six months following such termination.
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total shareholder return on the
Company's Common Stock since the Company's initial public offering on May 3,
1994 with the cumulative total return on the Total Return Index for the Nasdaq
Stock Market (U.S. Companies) and the Total Return Index for Nasdaq
Non-Financial Stocks over the same period (assuming the investment of $100 in
each on May 3, 1994 and the reinvestment of all dividends).
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
5/3/94 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Ancor Communications $100 $129 $154 $320 $ 99 $ 91
Total Return Index for the
Nasdaq Stock Market
(U.S. Companies) $100 $103 $145 $178 $219 $308
Total Return Index for
Nasdaq Non-Financial Stocks $100 $103 $143 $174 $203 $299
</TABLE>
10
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock as of March 31, 1999 by: (i)
each director of the Company, (ii) each executive officer of the Company named
in the Summary Compensation Table, (iii) all directors and executive officers of
the Company as a group, and (iv) each person or entity known by the Company to
own beneficially more than five percent of the Company's Common Stock. The
address of each of the following shareholders is the same as the Company.
Beneficial Ownership(1)
Name Shares Percent
- ---- ------ -------
Kenneth E. Hendrickson (2) 47,541 *
Calvin G. Nelson (3) 44,263 *
Steven E. Snyder (4) 11,325 *
Amyl Ahola 0 0%
Gerald M. Bestler 1,000 *
John F. Carlson 0 0
Thomas F. Hunt, Jr. 0 0
Michael L. Huntley 0 0
Paul F. Lidsky 0 0
All executive officers
and directors as a group (nine 104,129 *
persons)(5)
- --------------------
* Less than 1%
(1) Beneficial ownership is determined in accordance with rules of the SEC, and
includes generally voting power and/or investment power with respect to
securities. Shares of Common Stock subject to options or warrants currently
exercisable or exercisable within 60 days of March 31, 1999 are deemed
outstanding for computing the beneficial ownership percentage of the person
holding such options but are not deemed outstanding for computing the
beneficial ownership percentage of any other person. Except as indicated by
footnote, the persons named in the table above have the sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
(2) Includes 12,500 shares of Common Stock issuable upon exercise of
outstanding options for Mr. Hendrickson. Excludes shares owned by Mr.
Hendrickson's adult children, for which he disclaims beneficial ownership.
(3) Includes 12,500 shares of Common Stock issuable upon exercise of
outstanding options for Mr. Nelson. Includes 300 shares owned by Mr.
Nelson's children.
(4) Includes 7,500 shares of Common Stock issuable upon exercise of outstanding
options for Mr. Snyder.
(5) Includes 32,500 shares of Common Stock issuable upon exercise of
outstanding options.
11
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PROPOSAL TWO
TO APPROVE AMENDMENT TO THE
1995 EMPLOYEE STOCK PURCHASE PLAN
On September 1, 1998, the Board of Directors approved an amendment to the
Ancor Communications, Incorporated 1995 Employee Stock Purchase Plan (the
"Plan"), subject to shareholder approval, to provide that the number of shares
of the Company's Common Stock available for issuance under the Plan be increased
from 75,000 shares of Common Stock of the Company to 375,000 shares of Common
Stock of the Company. The shares available under the Plan prior to the Amendment
were fully used as of September 30, 1999.
The Company continues to recruit key personnel and believes that the
incentives available under the Plan are an important element in attracting
highly skilled and qualified individuals. As such, the Company believes that the
amendment to the Plan can help it meet the competitive demands of attracting and
retaining a productive work force. Therefore, the Board of Directors believes
that it is desirable to amend the Plan to change the number of shares of the
Company's Common Stock which is authorized for issuance thereunder. A
description of the Plan is set forth below.
THE 1995 EMPLOYEE STOCK PURCHASE PLAN
The Plan was approved by the Board of Directors and the shareholders of the
Company in 1995. The Plan reserves shares of the Company's Common Stock for sale
to participating employees at the lower of 85% of the fair market value of the
Company's Common Stock on the first day, or the last day, of the applicable
purchase period. Under the terms of the Plan, the purchase period may be for any
number of months as determined by the committee of the Board of Directors
administering the Plan (the "Committee") up to a maximum of twelve months. The
Committee has determined that each purchase period will commence on the first
business day of each calendar quarter and end on the last day of the calendar
quarter, unless changed by the Board of Directors
Participating employees may direct the Company to make payroll deductions
from one percent to ten percent of their compensation during the purchase period
for the purchase of shares under the Plan and may withdraw from the Plan at any
time (although no employee may enroll again after a withdrawal until
commencement of the next purchase period). No participant may purchase more than
10,000 shares or shares having a market value exceeding $25,000 under the Plan
(and any other plan qualifying under Section 423(b)(8) of the Internal Revenue
Code of 1986, as amended) during any purchase period. The number of shares of
Common Stock purchased by the Named Executive Officers during fiscal 1998 are as
follows: Kenneth E. Hendrickson, 8,896 shares; Calvin G. Nelson, 8,379 shares;
and Steven E. Snyder, 0 shares.
Any employee of the Company who works 20 hours or more per week is eligible
to participate in the Plan, provided that no employee who holds more than five
percent of the Company's outstanding common stock may participate. As of March
31, 1999, there were approximately 80 employees of the Company eligible to
participate in the Plan. The Committee, currently the Company's Compensation
Committee, must consist of two or more directors who are not employees and are
"independent" within the meaning of Section 16b-3 of the Securities Exchange Act
of 1934.
Upon a participant's termination of employment with the Company for any
reason other than approved retirement or death, participation in the Plan will
cease and the balance of the participant's share purchase account will be paid,
in cash, to the participant within 30 days. Upon the death or approved
retirement of a participant, no further contributions will be made to the
participant's share purchase account and the balance in the account will either
be used to purchase shares of Common Stock at the end of the current purchase
period or be paid in cash if requested.
The Plan may be amended by the Board of Directors at any time, except that
the Board of Directors cannot, without shareholder approval, adopt any amendment
that (i) would cause Rule 16b-3 under the Exchange Act to become unavailable
absent such shareholder approval, (ii) requires shareholder approval under any
rules or regulations of the National Association of Securities Dealers, Inc. or
any other exchange applicable to the Company, or (iii) permits the issuance of
common stock before payment therefor in full.
12
<PAGE>
The Board of Directors adopted the amendment to the Plan in order to allow
the Company to continue to provide a convenient and advantageous way for all
employees of the Company to make systematic purchases of the Company's Common
Stock and therefore to develop a stronger incentive to work for the continued
success of the Company. The amendment to the Plan is being submitted to the
shareholders for approval in order to comply with the requirements of the
Internal Revenue Code of 1986, as amended.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO INCREASE THE
NUMBER OF SHARES OF THE COMPANY'S COMMON STOCK WHICH ARE AUTHORIZED FOR ISSUANCE
UNDER THE PLAN.
PROPOSAL THREE
RATIFICATION OF INDEPENDENT AUDITORS
KPMG Peat Marwick LLP ("KPMG") served as the Company's independent auditors
for the year ended December 31, 1998. McGladrey & Pullen, LLP ("McGladrey")
served as the Company's independent auditors for the years ended December 31,
1996 and 1997. On September 18, 1998 the Company received notice that McGladrey
was terminating the client-auditor relationship between the Company and
McGladrey. Such termination was effective September 18, 1998. The Company
subsequently engaged KPMG as the Company's independent public accountants on
September 25, 1998. The decision to engage KPMG was unanimously approved by the
Board of Directors of the Company upon the recommendation of its Audit
Committee.
The reports of McGladrey on the financial statements of the Company for its
fiscal years ended December 31, 1997 and December 31, 1996 did not contain any
adverse opinion or disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope or accounting principles. During the fiscal years
1996 and 1997 and the subsequent interim period through September 18, 1998, (i)
there were no disagreements between the Company and McGladrey on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure which, if not resolved to the satisfaction of McGladrey,
would have caused McGladrey to make reference to the subject matter of the
disagreement in connection with its reports, and (ii) there were no reportable
events as defined in Item 304(a)(1)(v) of Regulation S-K of the Securities and
Exchange Commission.
The Board of Directors has appointed KPMG as the Company's independent
auditors for the year ending December 31, 1999 and recommends that the
shareholders ratify that appointment. KPMG has no relationship with the Company
other than that arising from its employment as independent auditors.
Representatives of KPMG will be present at the Annual Meeting. They will have an
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions from shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFYING THIS APPOINTMENT.
PROPOSALS FOR THE NEXT ANNUAL MEETING
In order to be eligible for inclusion in the Company's proxy solicitation
materials for its next annual meeting of shareholders, any shareholder proposal
to be considered at such meeting must be received at the Company's principal
executive offices, 6130 Blue Circle Drive, Minnetonka, Minnesota 55343, not
later than December 6, 1999. Pursuant to the Company's Bylaws, in order for
business to be properly brought before the next annual meeting by a shareholder,
the shareholder must give written notice of such shareholder's intent to bring a
matter before the annual meeting no later than December 6, 1999. Each such
notice should be sent to the Secretary, and must set forth certain information
with respect to the shareholder who intends to bring such matter before the
meeting and the business desired to be conducted, as set forth in greater detail
in the Company's Bylaws. Any such proposal will be subject to the requirements
of the proxy rules adopted under the Securities Exchange Act of 1934.
Management may use discretionary authority to vote against any shareholder
proposal presented at the 2000 annual meeting if: (1) such proposal has been
properly omitted from the Company's proxy materials under federal
13
<PAGE>
securities law; (2) notice of such proposal was not submitted to the Secretary
of the Company at the address listed above by December 6, 1999; or (3) the
proponent has not solicited proxies in compliance with federal securities laws
from the holders of at least the percentage of the Company's voting shares
required to carry the proposal.
ADDITIONAL MATTERS
The Board of Directors of the Company do not presently know of any matters
to be presented for consideration at the Annual Meeting of Shareholders other
than the matters described in the Notice of Annual Meeting of Shareholders
mailed together with this Proxy Statement, but if other matters are presented,
it is the intention of the persons named in the accompanying proxy to vote on
such matters in accordance with their best judgement. The proxy confers
discretionary authority to vote only with respect to matters that the Board of
Directors of the Company did not know, prior to December 21, 1998, were to be
presented at the Annual Meeting of Shareholders.
By Order of the Board of Directors,
/s/ Steven E. Snyder
---------------------------
Steven E. Snyder
Secretary
Dated: April 7, 1999
14
<PAGE>
Appendix A
ANCOR COMMUNICATIONS, INCORPORATED
1995 EMPLOYEE STOCK PURCHASE PLAN
(as amended effective September 1, 1998)
ARTICLE I. INTRODUCTION
Section 1.01 Purpose. The purpose of the Ancor Communications, Incorporated
1995 Employee Stock Purchase Plan (the "Plan") is to provide employees of Ancor
Communications, Incorporated, a Minnesota corporation (the "Company"), with an
opportunity to share in the ownership of the Company by providing them with a
convenient means for regular and systematic purchases of the Company's Common
Stock, $.01 par value, and, thus, to develop a stronger incentive to work for
the continued success of the Company.
Section 1.02 Rules of Interpretation. It is intended that the Plan be an
"employee stock purchase plan" as defined in Section 423(b) of the Internal
Revenue Code of 1986, as amended (the "Code"), and Treasury Regulations
promulgated thereunder. Accordingly, the Plan shall be interpreted and
administered in a manner consistent therewith if so approved. All Participants
in the Plan will have the same rights and privileges consistent with the
provisions of the Plan.
Section 1.03 Definitions. For purposes of the Plan, the following terms
will have the meanings set forth below:
(a) "Acceleration Date" means the earlier of the date of shareholder
approval or approval by the Company's Board of Directors of (i) any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which Company Common Shares
would be converted into cash, securities or other property, other than a merger
of the Company in which shareholders of the Company immediately prior to the
merger have the same proportionate share ownership in the surviving corporation
immediately after the merger; (ii) any sale, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company; or (iii) any plan of liquidation or dissolution of
the Company.
(b) "Affiliate" means any subsidiary corporation of the Company, as defined
in Section 424(f) of the Code, whether now or hereafter acquired or established.
(c) "Committee" means the committee described in Section 10.01.
<PAGE>
(d) "Company" means Ancor Communications, Incorporated, a Minnesota
corporation, any subsidiary of the Company and any successors to the Company by
merger or consolidation as contemplated by Article XI herein.
(e) "Current Compensation" means all regular wage, salary and commission
payments paid by the Company to a Participant in accordance with the terms of
his or her employment, including bonus payments, overtime pay and all other
forms of special compensation.
(f) "Fair Market Value" as of a given date means the closing sale price of
the Common Stock as reported by the Nasdaq Small-Cap Market or such other value
as reasonably determined by the Committee in a manner consistent with Section
423 of the Code.
(g) "Participant" means an Eligible Employee who is eligible to participate
in the Plan under Section 2.01 and who has elected to participate in the Plan.
(h) "Participating Affiliate" means an Affiliate which has been designated
by the Committee in advance of the Purchase Period in question as a corporation
whose Eligible Employees may participate in the Plan.
(i) "Eligible Employee" means an employee of the Company or a Participating
Affiliate who has completed 90 days of employment with the Company as of the
first day of a Purchase Period, including an officer or director who is also an
employee, but excluding employees whose customary employment is less than an
average of 20 hours per week.
(j) "Plan" means the Ancor Communications, Incorporated 1995 Employee Stock
Purchase Plan, as amended, the provisions of which are set forth herein.
(k) "Purchase Period" means a period beginning on such business day as may
be designated by the Committee prior thereto and ending on the earlier of such
business day as may be designated by the Committee prior to the first business
day of such Purchase Period or any Acceleration Date; provided, however, that in
no event shall the Committee designate a Purchase Period which is less than one
month or more than twelve months in duration.
(l) "Common Shares" means the Company's Common Stock, $.01 par value, as
such Shares may be adjusted for changes in the Shares or the Company as
contemplated by Article XI herein.
(m) "Share Purchase Account" means the account maintained on the books and
records of the Company recording the amount received from each Participant
through payroll deductions made under the Plan and from the Company through
matching contributions.
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<PAGE>
ARTICLE II. ELIGIBILITY AND PARTICIPATION
Section 2.01 Eligible Employees. All Eligible Employees shall be eligible
to participate in the Plan beginning on the first day of the first Purchase
Period to commence after such person becomes an Eligible Employee. Subject to
the provisions of Article VI, each such employee will continue to be eligible to
participate in the Plan so long as he or she remains an Eligible Employee.
Section 2.02 Election to Participate. An Eligible Employee may elect to
participate in the Plan for a given Purchase Period by filing with the Company,
in advance of that Purchase Period and in accordance with such terms and
conditions as the Committee in its sole discretion may impose, a form provided
by the Company for such purpose (which authorizes regular payroll deductions
from Current Compensation beginning with the first payday in that Purchase
Period and continuing until the employee withdraws from the Plan or ceases to be
eligible to participate in the Plan).
Section 2.03 Limits on Shares Purchase. No employee shall be granted any
right to purchase Common Shares hereunder if such employee, immediately after
such a right to purchase is granted, would own, directly or indirectly, within
the meaning of Section 423(b)(3) and Section 424(d) of the Code, Common Shares
possessing 5% or more of the total combined voting power or value of all the
classes of the capital shares of the Company or of all Affiliates.
Section 2.04 Voluntary Participation. Participation in the Plan on the part
of a Participant is voluntary and such participation is not a condition of
employment nor does participation in the Plan entitle a Participant to be
retained as an employee.
ARTICLE III. PAYROLL DEDUCTIONS, COMPANY
CONTRIBUTIONS AND SHARE PURCHASE ACCOUNT
Section 3.01 Deduction from Pay. The form described in Section 2.02 will
permit a Participant to elect payroll deductions of not less than 1% and not
more than 10% of such Participant's Current Compensation for each pay period,
subject to such other limitations as the Committee in its sole discretion may
impose.
Section 3.02 Interest. No interest will be paid with respect to
contributions to a Participant's Share Purchase Account.
Section 3.03 Credit to Account. Payroll deductions will be credited to the
Participant's Share Purchase Account on each payday.
-3-
<PAGE>
Section 3.04 Nature of Account. The Share Purchase Account is established
solely for accounting purposes, and all amounts credited to the Share Purchase
Account will remain part of the general assets of the Company or the
Participating Affiliate (as the case may be).
Section 3.05 No Additional Contributions. A Participant may not make any
payment into the Share Purchase Account other than the payroll deductions made
pursuant to the Plan and may not change the level of participation during any
Purchase Period except that an employee who is on an approved leave of absence
may make cash payments to the Company in lieu of payroll deductions to the
extent necessary to maintain such Participant's participation at the level of
participation elected at the beginning of each Purchase Period.
ARTICLE IV. RIGHT TO PURCHASE SHARES
Section 4.01 Number of Shares. Each Participant will have the right to
purchase on the last business day of the Purchase Period all, but not less than
all, of the largest number of whole Common Shares that can be purchased at the
price specified in Section 4.02 with the entire credit balance in the
Participant's Share Purchase Account, subject to the limitations that:
(a) in accordance with Section 423 of the Code, no more than 10,000 Common
Shares may be purchased under the Plan by any one Participant for a given
Purchase Period; and
(b) in accordance with Section 423(b)(8) of the Code, no more than $25,000
in Fair Market Value (determined at the beginning of each Purchase Period) of
Common Shares and other shares may be purchased under the Plan and all other
employee share purchase plans (if any) of the Company and the Affiliates by any
one Participant for any calendar year.
Section 4.02 Purchase Price. The purchase price for any Purchase Period
shall be the lesser of (a) 85% of the Fair Market Value of the Common Shares on
the first business day of that Purchase Period or (b) 85% of the Fair Market
Value of the Common Shares on the last business day of that Purchase Period, in
each case rounded up to the next higher full cent.
ARTICLE V. EXERCISE OF RIGHT
Section 5.01 Purchase of Shares. On the last business day of a Purchase
Period, the entire credit balance in each Participant's Share Purchase Account
will be used to purchase the largest number of whole Common Shares purchasable
with such amount (subject to the limitations of Section 4.01), unless the
Participant has filed with the Company, in advance of that date and subject to
such terms and conditions as the Committee in its sole discretion may impose, a
form provided by the Company which requests the distribution of the entire
credit balance in cash.
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<PAGE>
Section 5.02 Cash Distributions. Any amount remaining in a Participant's
Share Purchase Account after the last business day of a Purchase Period will be
paid to the Participant in cash in a timely fashion after the end of that
Purchase Period unless such Participant elects, prior to the termination of such
Purchase Period, to have such amount carried over to the Participant's Share
Purchase Account for the next Purchase Period in accordance with such terms and
conditions as the Committee in its sole discretion may impose.
Section 5.03 Notice of Acceleration Date. The Company shall use its best
efforts to notify each Participant in writing at least ten days prior to any
Acceleration Date that the then current Purchase Period will end on such
Acceleration Date.
ARTICLE VI. WITHDRAWAL FROM PLAN; SALE OF SHARES
Section 6.01 Voluntary Withdrawal. A Participant may, in accordance with
such terms and conditions as the Committee in its sole discretion may impose,
withdraw from the Plan and cease making payroll deductions by filing with the
Company a form provided for this purpose. In such event, the entire credit
balance in the Participant's Share Purchase Account will be paid to the
Participant in cash within 30 days. A Participant who withdraws from the Plan
will not be eligible to reenter the Plan until the beginning of the next
Purchase Period following the date of such withdrawal.
Section 6.02 Death. Subject to such terms and conditions as the Committee
in its sole discretion may impose, upon the death of a Participant, no further
amounts shall be credited to the Participant's Share Purchase Account.
Thereafter, on the last business day of the Purchase Period during which such
Participant's death occurred and in accordance with Section 5.01, the entire
credit balance in such Participant's Share Purchase Account will be used to
purchase Common Shares, unless such Participant's estate has filed with the
Company, in advance of that day and subject to such terms and conditions as the
Committee in its sole discretion may impose, a form provided by the Company
which elects to have the entire credit balance in such Participant's Share
Purchase Account distributed in cash within 30 days after the end of that
Purchase Period or at such earlier time as the Committee in its sole discretion
may decide. Each Participant, however, may designate one or more beneficiaries
who, upon death, are to receive the Common Shares or the amount that otherwise
would have been distributed or paid to the Participant's estate and may change
or revoke any such designation from time to time. No such designation, change or
revocation will be effective unless made by the Participant in writing and filed
with the Company during the Participant's lifetime. Unless the Participant has
otherwise specified the beneficiary designation, the beneficiary or
beneficiaries so designated will become fixed as of the date of the death of the
Participant so that, if a beneficiary survives the Participant but dies before
the receipt of the payment due such beneficiary, the payment will be made to
such beneficiary's estate.
-5-
<PAGE>
Section 6.03 Termination of Employment.
(a) Subject to such terms and conditions as the Committee in its sole
discretion may impose, upon a Participant's normal or early retirement with the
consent of the Company under any pension or retirement plan of the Company or
Participating Affiliate, no further amounts shall be credited to the
Participant's Share Purchase Account. Thereafter, on the last business day of
the Purchase Period during which such Participant's approved retirement occurred
and in accordance with Section 5.01, the entire credit balance in such
Participant's Share Purchase Account will be used to purchase Common Shares,
unless such Participant has filed with the Company, in advance of that day and
subject to such terms and conditions as the Committee in its sole discretion may
impose, a form provided by the Company which elects to receive the entire credit
balance in such Participant's Share Purchase Account in cash within 30 days
after the end of that Purchase Period, provided that such Participant shall have
no right to purchase Common Shares in the event that the last day of such a
Purchase Period occurs more than three months following the termination of such
Participant's employment with the Company by reason of such an approved
retirement.
(b) In the event of any other termination of employment (other than death)
with the Company or a Participating Affiliate, participation in the Plan will
cease on the date the Participant ceases to be an Eligible Employee for any
reason. In such event, the entire credit balance in such Participant's Share
Purchase Account will be paid to the Participant in cash within 30 days. For
purposes of this Section 6.03, a transfer of employment to any Affiliate, or a
leave of absence which has been approved by the Committee, will not be deemed a
termination of employment as an Eligible Employee.
ARTICLE VII. NONTRANSFERABILITY
Section 7.01 Nontransferable Right to Purchase. The right to purchase
Common Shares hereunder may not be assigned, transferred, pledged or
hypothecated (whether by operation of law or otherwise), except as provided in
Section 6.02, and will not be subject to execution, attachment or similar
process. Any attempted assignment, transfer, pledge, hypothecation or other
disposition or levy of attachment or similar process upon the right to purchase
will be null and void and without effect.
Section 7.02 Nontransferable Account. Except as provided in Section 6.02,
the amounts credited to a Share Purchase Account may not be assigned,
transferred, pledged or hypothecated in any way, and any attempted assignment,
transfer, pledge, hypothecation or other disposition of such amounts will be
null and void and without effect.
-6-
<PAGE>
ARTICLE VIII. SHARE CERTIFICATES
Section 8.01 Delivery. Promptly after the last day of each Purchase Period
and subject to such terms and conditions as the Committee in its sole discretion
may impose, the Company will cause to be delivered to or for the benefit of the
Participant a certificate representing the Common Shares purchased on the last
business day of such Purchase Period.
Section 8.02 Securities Laws. The Company shall not be required to issue or
deliver any certificate representing Common Shares prior to registration under
the Securities Act of 1933, as amended, or registration or qualification under
any state law if such registration is required. The Company shall use its best
efforts to accomplish such registration (if and to the extent required) not
later than a reasonable time following the Purchase Period, and delivery of
certificates may be deferred until such registration is accomplished.
Section 8.03 Completion of Purchase. A Participant shall have no interest
in the Common Shares purchased until a certificate representing the same is
issued to or for the benefit of the Participant.
Section 8.04 Form of Ownership. The certificates representing Common Shares
issued under the Plan will be registered in the name of the Participant.
ARTICLE IX. EFFECTIVE DATE, AMENDMENT AND
TERMINATION OF PLAN
Section 9.01 Effective Date. The Plan was approved by the Board of
Directors on April 7, 1995, and shall be approved by the shareholders of the
Company within twelve (12) months thereof. In the event that the Plan is not so
approved by the shareholders of the Company, for any reason, it shall then be of
no force or effect whatsoever, and no Common Shares shall be purchased hereunder
and any and all amounts credited to a Participant's Share Purchase Account for
any Purchase Period which commences prior to such shareholder approval shall be
returned. The Plan will terminate upon completion of the Purchase Period which
ends on the first business day occurring on or after April 7, 2002.
Section 9.02 Plan Commencement. The initial Purchase Period under the Plan
will commence on the first day of the first Purchase Period designated by the
Committee, provided, however, that the first Purchase Period shall not commence
prior to May 1, 1995.
Section 9.03 Powers of Board. The Board of Directors may amend or
discontinue the Plan at any time. No amendment or discontinuation of the Plan,
however, shall without shareholder approval be made that: (i) absent such
shareholder approval, would cause Rule 16b-3 under the Securities Exchange Act
of 1934, as amended (the "Act") to become unavailable with respect to the Plan,
(ii) requires shareholder approval under any rules or regulations of the
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<PAGE>
National Association of Securities Dealers, Inc. or any securities exchange that
are applicable to the Company, or (iii) permit the issuance of Common Shares
before payment therefor in full
Section 9.04 Automatic Termination. The Plan shall automatically terminate
when all of the Common Shares provided for in Section 10.03 have been sold.
ARTICLE X. ADMINISTRATION
Section 10.01 The Committee. The Plan shall be administered by a committee
(the "Committee") of two or more directors of the Company, none of whom shall be
officers or employees of the Company and all of whom shall be "disinterested
persons" with respect to the Plan within the meaning of Rule 16b-3 under the
Act. The members of the Committee shall be appointed by and serve at the
pleasure of the Board of Directors.
Section 10.02 Powers of Committee. Subject to the provisions of the Plan,
the Committee shall have full authority to administer the Plan, including
authority to interpret and construe any provision of the Plan, to establish
deadlines by which the various administrative forms must be received in order to
be effective, and to adopt such other rules and regulations for administering
the Plan as it may deem appropriate. The Committee shall have full and complete
authority to determine whether all or any part of the Common Shares acquired
pursuant to the Plan shall be subject to restrictions on the transferability
thereof or any other restrictions affecting in any manner a Participant's rights
with respect thereto but any such restrictions shall be contained in the form by
which a Participant elects to participate in the Plan pursuant to Section 2.02.
Decisions of the Committee will be final and binding on all parties who have an
interest in the Plan.
Section 10.03 Shares to be Sold. The Common Shares to be issued and sold
under the Plan shall be authorized but unissued shares. Except as provided in
Section 11.01, the aggregate number of Common Shares to be sold under the Plan
will not exceed 375,000 shares.
Section 10.04 Notices. Notices to the Committee should be addressed as
follows:
Ancor Communications, Incorporated
6130 Blue Circle Drive
Minnetonka, Minnesota 55343
ARTICLE XI. ADJUSTMENT FOR CHANGES
IN SHARES OR COMPANY
Section 11.01 Share Dividend or Reclassification. If the outstanding Common
Shares are increased, decreased, changed into or exchanged for a different
number or kind of securities of the Company, or shares of a different par value
or without par value, through reorganization,
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<PAGE>
recapitalization, reclassification, share dividend, share split, amendment to
the Company's Articles of Incorporation, reverse share split or otherwise, other
than by a sale of Common Stock by the Company, an appropriate adjustment shall
be made in the maximum numbers and kind of securities to be purchased under the
Plan with a corresponding adjustment in the purchase price to be paid therefor.
Section 11.02 Merger or Consolidation. If the Company is merged into or
consolidated with one or more corporations during the term of the Plan,
appropriate adjustments will be made to give effect thereto on an equitable
basis in terms of issuance of shares of the corporation surviving the merger or
of the consolidated corporation, as the case may be.
ARTICLE XII. APPLICABLE LAW
Rights to purchase Common Shares granted under the Plan shall be construed
and shall take effect in accordance with the laws of the State of Minnesota.
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<PAGE>
Ancor Communications, Incorporated
There are three ways to vote your Proxy
Your telephone or Internet vote authorizes the COMPANY #
Proxies to vote your shares in the same manner CONTROL #
as if you mark, sign and return your proxy
card.
VOTE BY PHONE -- TOLL FREE -- 1-800-240-6326
o Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a
week.
o You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which is located above.
o Follow the simple instructions the voice provides you.
VOTE BY INTERNET -- http://www.eproxy.com/ancr/
o Access the above Internet site to vote your proxy 24 hours a day, 7 days a
week.
o You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which is located above to obtain your records and create an
electronic ballot.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
provided.
IF YOU VOTE BY PHONE OR INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD
Please detach here
The Board of Directors Recommends a Vote FOR Items 1, 2 and 3.
1.Election of directors:
01 Amyl Ahola 02 Thomas F. Hunt, Jr.
(Instructions: To withhold [_] [_]
authority to vote for any indicated Vote Vote
nominee, write the number(s) of the FOR WITHHELD
nominee(s) in the box provided to all from all
the right.) nominees nominees
2. Proposal to amend the Ancor
Communications, Incorporated 1995 [_] [_] [_]
Employee Stock Purchase Plan to For Against Abstain
increase the number of shares of
Common Stock authorized for
issuance thereunder.
[_] [_] [_]
For Against Abstain
3. Ratification of KPMG Peat Marwick
LLP as independent auditors of
thecompany for fiscal year 1999.
4. In their discretion, the Proxies are
authorized to vote upon such other
business as may properly come before
the Annual Meeting of Shareholders.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF
NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR EACH ITEM.
Address Change? Mark Box [_]
Indicate changes below:
Date ______________________________
Signature(s) in Box
Please sign exactly as your name(s)
appear on Proxy. If held in joint ten-
ancy, all persons must sign. Trustees,
administrators, etc., should include
title and authority. Corporations
should provide full name of corpora-
tion and title of authorized officer
signing the Proxy.
<PAGE>
ANCOR COMMUNICATIONS, INCORPORATED
ANNUAL MEETING OF SHAREHOLDERS
Wednesday, May 12, 1999
3:30 p.m. local time
Minneapolis Marriott City Center
30 South Seventh Street
Minneapolis, Minnesota
Ancor Communications, Incorporated
6130 Blue Circle Drive, Minnetonka, MN 55343 Proxy
- --------------------------------------------------------------------------------
This Proxy is solicited on behalf of the Board of Directors.
The undersigned, having duly received the Notice of Annual Meeting and Proxy
Statement dated April 7, 1999, appoints Kenneth E. Hendrickson and Steven E.
Snyder proxies (each with the power to act alone and with the power of
substitution and revocation), to represent the undersigned and to vote, as
designated below, all shares of Common Stock of Ancor Communications,
Incorporated which the undersigned is entitled to vote at the Annual Meeting of
Shareholders of Ancor Communications, Incorporated to be held on May 12, 1999,
at the Minneapolis Marriott City Center 30 South Seventh Street, Minneapolis,
Minnesota at 3:30 p.m., and any adjournment thereof. Each of the matters set
forth below has been proposed by the Company.
If no choice is specified, the proxy will be voted "FOR" Items 1, 2 and 3.
See reverse for voting instructions.
