<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 (S)240.14a-11(c) or (S)240.14a-12
SEACHANGE INTERNATIONAL, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
The Board of Directors of SeaChange International, Inc.
(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: _______
(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>
SEACHANGE INTERNATIONAL, INC.
124 ACTON STREET
MAYNARD, MASSACHUSETTS 01754
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 29, 1997
The Annual Meeting of Stockholders of SeaChange International, Inc. (the
"Company") will be held at the offices of Testa, Hurwitz & Thibeault, LLP,
High Street Tower, 125 High Street, Boston, Massachusetts 02110, on Thursday,
May 29, 1997 at 9:30 a.m., local time, to consider and act upon each of the
following matters:
1. To elect one member to the Board of Directors to serve for a three-year
term as a Class I Director.
2. To transact such other business as may properly come before the meeting
and any adjournments thereof.
Stockholders entitled to notice of and to vote at the meeting shall be
determined as of the close of business on April 10, 1997, the record date
fixed by the Board of Directors for such purpose.
By Order of the Board of Directors
Edward J. McGrath
Secretary
Maynard, Massachusetts
April 29, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN
ORDER TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF
THE PROXY CARD IS MAILED IN THE UNITED STATES.
<PAGE>
SEACHANGE INTERNATIONAL, INC.
124 ACTON STREET
MAYNARD, MASSACHUSETTS 01754
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 29, 1997
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of SeaChange International, Inc. (the
"Company") for use at the Annual Meeting of Stockholders to be held at the
offices of Testa, Hurwitz & Thibeault, LLP, High Street Tower, 125 High
Street, Boston, Massachusetts 02110 on Thursday, May 29, 1997 at 9:30 a.m. and
at any adjournments thereof (the "Annual Meeting"). ALL PROXIES WILL BE VOTED
IN ACCORDANCE WITH THE STOCKHOLDERS' INSTRUCTIONS, AND IF NO CHOICE IS
SPECIFIED, THE ENCLOSED PROXY CARD (OR ANY SIGNED AND DATED COPY THEREOF) WILL
BE VOTED IN FAVOR OF THE MATTERS SET FORTH IN THE ACCOMPANYING NOTICE OF
MEETING. Any proxy may be revoked by a stockholder at any time before its
exercise by: (i) delivering written revocation or a later dated proxy to the
President or Secretary of the Company; or (ii) attending the Annual Meeting
and voting in person.
Only stockholders of record as of the close of business on April 10, 1997,
the record date fixed by the Board of Directors, will be entitled to vote at
the Annual Meeting and at any adjournments thereof. As of April 10, 1997,
there were an aggregate of 12,878,408 shares of common stock, par value $.01
per share (the "Common Stock"), of the Company outstanding and entitled to
vote. Each share is entitled to one vote.
The Board of Directors knows of no other matter to be presented at the
Annual Meeting. If any other matter upon which a vote may properly be taken
should be presented at the Annual Meeting, shares represented by all proxies
received by the Board of Directors will be voted with respect thereto in
accordance with the judgment of the persons named as attorneys in the proxies.
The Company's Annual Report containing financial statements for the fiscal
year ended December 31, 1996 is being mailed together with this Proxy
Statement to all stockholders entitled to vote. It is anticipated that this
proxy statement and the accompanying proxy will be first mailed to
stockholders on or about April 29, 1997.
ELECTION OF DIRECTORS
Pursuant to the Company's Amended and Restated By-Laws, as amended, the
Board of Directors of the Company is divided into three classes. There is one
director currently serving in Class I and two directors currently serving in
each of Class II and Class III. Each director serves for a three-year term,
with one class of directors being elected at each Annual Meeting. The Class I
Director's term will expire at this Annual Meeting. All directors will hold
office until their successors have been duly elected and qualified. Prior to
the Annual Meeting, William C. Styslinger, III was the Class I Director;
Martin R. Hoffmann and Edward J. McGrath were the Class II Directors; and Paul
H. Saunders and Carmine Vona were the Class III Directors. The nominee for the
Class I Director is William C. Styslinger, III who is currently serving as the
Class I Director of the Company. Shares represented by all proxies received by
the Board of Directors and not so marked as to withhold authority to vote for
this nominee will be voted for his election. The Board of Directors knows of
no reason why this nominee should be unable or unwilling to serve, but if that
should be the case, proxies will be voted for the election of some other
person, or for fixing the number of directors at a lesser number.
BOARD OF DIRECTORS' MEETINGS AND COMMITTEES
The Board of Directors of the Company held nine (9) meetings during the
fiscal year ended December 31, 1996. Each of the directors attended at least
75% of the aggregate of all meetings of the Board of Directors and of all
committees of the Board of Directors on which he then served held during
fiscal 1996.
<PAGE>
The Company has a standing Compensation and Option Committee and an Audit
Committee. The Compensation and Option Committee, of which Messrs. Hoffmann,
Saunders and Vona are members, determines the compensation, including stock
options, of the Company's management and key employees and administers and
makes recommendations concerning the Company's stock option plans. The
Compensation and Option Committee held eight (8) meetings during fiscal 1996.
The Audit Committee of which Messrs. Hoffmann, Saunders and Vona are members,
oversees financial results and internal controls of the Company, including
matters relating to the appointment and activities of the Company's
independent accountants. The Audit Committee held three (3) meetings during
fiscal 1996.
OCCUPATIONS OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth for each Class I Director, each Class II
Director, each Class III Director and the executive officers of the Company,
their ages and present positions with the Company as of the date of the Annual
Meeting:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
William C. Styslinger, III.. 51 President, Chief Executive Officer, Chairman
of the Board and Director
Edward J. McGrath........... 45 Vice President, Engineering, Chief Technical
Officer, Secretary and Director
Edward J. Delaney, Jr....... 37 Vice President, Sales and Marketing
Thomas Franeta.............. 42 Vice President, Business Development
Alan R. Lathrop............. 44 Vice President, Software Engineering
Bruce E. Mann............... 49 Vice President, Network Storage Engineering
Beat Marti.................. 51 Vice President, Customer Services
Joseph S. Tibbetts, Jr...... 44 Vice President, Finance and Administration,
Chief Financial Officer and Treasurer
Robert W. Puffer............ 56 Vice President
Richard Poulsen............. 62 Vice President, Operations
Martin R. Hoffmann (1)(2)... 65 Director
Paul H. Saunders (1)(2)..... 42 Director
Carmine Vona (1)(2)......... 59 Director
</TABLE>
- - --------
(1) Member of Compensation and Option Committee.
(2) Member of Audit Committee.
William C. Styslinger, III, a founder of the Company, has served as the
President, Chief Executive Officer and a Director since the Company's
inception in July 1993 and as Chairman of the Board since January 1995. Prior
to forming the Company in 1993, Mr. Styslinger was employed at Digital
Equipment Corporation since March 1978, most recently as manager of the Cable
Television Business Unit from October 1991 to May 1993.
Edward J. McGrath, a founder of the Company, has served as Secretary since
the Company's inception in July 1993, and as Vice President, Engineering,
Chief Technical Officer and a Director since August 1993. Mr. McGrath served
as the Treasurer of the Company from its inception to June 1996. Prior to
forming the Company in 1993, Mr. McGrath was employed in various positions at
Digital Equipment Corporation since November 1976, most recently as Director
of Engineering of the Cable Television Business Unit from March 1992 to May
1993, and prior to that, from March 1989 to March 1992, as Group Manager--
Silicon Systems Engineering.
Edward J. Delaney, Jr. joined the Company in February 1994 as Vice
President, Sales and Marketing. Prior to joining the Company, Mr. Delaney
spent 12 years with Digital Equipment Corporation in a variety of positions,
including Marketing and Operations Manager for Digital's Cable Television
Business Unit, marketing manager of media products for the Asia/Pacific
region, executive assistant to the Vice President of United States Sales, and
sales manager.
2
<PAGE>
Thomas Franeta has served as Vice President, Business Development of the
Company since June 1996. Prior to that, Mr. Franeta served as Vice President--
Eastern Region Sales from March 1994 to June 1996. Before joining the Company,
from November 1981 to February 1994, Mr. Franeta held several management
positions at Digital Equipment Corporation, most recently as a Corporate
Account Manager in the Financial Industry Business.
Alan R. Lathrop joined the Company in October 1993 as Vice President,
Software Engineering. Prior to joining the Company, Mr. Lathrop served as
Technical Director for Logica North America, Northeast Division, a software
consulting company, from January 1993 to October 1993. Prior to that, from
August 1991 to January 1993, Mr. Lathrop was a Consulting Software Engineer at
Digital Equipment Corporation.
Bruce E. Mann joined the Company in September 1994 as Vice President,
Network Storage Engineering. Mr. Mann is also President of SeaChange Systems,
Inc., a subsidiary of the Company which develops and manufactures video
server-based products. Prior to joining the Company, Mr. Mann served as
Director of Engineering at Ungermann-Bass, Inc., a subsidiary of Tandem
Computers Inc., from March 1993 to September 1994. Prior to that, from
September 1976 to March 1993, Mr. Mann was an engineer at Digital Equipment
Corporation, most recently as Senior Consulting Engineer.
Beat Marti joined the Company in July 1994 as Vice President, Customer
Services. Prior to joining the Company, Mr. Marti held various positions at
Digital Equipment Corporation from January 1973 to July 1994, most recently as
an engineering manager of various software development groups.
Joseph S. Tibbetts, Jr. joined the Company in June 1996 as Vice President,
Finance and Administration, Chief Financial Officer and Treasurer. Prior to
joining the Company, Mr. Tibbetts held various positions at Price Waterhouse
LLP from July 1976 to June 1996, most recently serving as Partner from July
1986 to June 1996 and the National Director of the Software Services Group
from July 1989 to June 1996. Mr. Tibbetts is a member of the Board of
Directors of Great Plains Software, Inc., a software development company.
Robert W. Puffer joined the Company in January 1997 as Vice President. Mr.
Puffer is also the Vice President and General Manager of SeaChange Systems,
Inc., a subsidiary of the Company which develops and manufactures video
server-based products. Prior to joining the Company, Mr. Puffer was Vice
President, Manufacturing at Avid Technology, Inc., a software development
company, from December 1993 to December 1996. From August 1991 to October
1993, Mr. Puffer was Vice President, Manufacturing at XRE Corporation, an x-
ray systems development company.
Richard Poulsen joined the Company in March 1997 as Vice President,
Operations. Prior to joining the Company in his present capacity, from October
1996 to March 1997, he was a consultant to the Company and from October 1994
to October 1996, Mr. Poulsen was a retired executive. From June 1985 to
September 1994, Mr. Poulsen was a Vice President of Digital Equipment
Corporation and President, Digital Equipment Corporation, International. From
July 1979 to June 1985, he was Vice President, Field Services at Digital
Equipment Corporation.
Martin R. Hoffmann has served as Director of the Company since January 1995.
Mr. Hoffmann has served as Of Counsel to Skadden, Arps, Slate, Meagher & Flom
since January 1996. From April 1995 to January 1996, Mr. Hoffmann maintained a
law practice and business consulting practice. He was a Visiting Senior Fellow
at the Center for Policy, Industry and Industrial Development at Massachusetts
Institute of Technology from May 1993 to April 1995, prior to which, from
April 1989, he served as Vice President and General Counsel for Digital
Equipment Corporation. Mr. Hoffmann is a member of the Board of Directors of
Castle Energy Corporation, an oil and gas refining and exploration company.
Paul H. Saunders has served as a Director of the Company since July 1995.
Mr. Saunders has been the Chairman and Chief Executive Officer of James River
Capital Corporation, a money management firm, from January 1995 to the
present. Prior to that, Mr. Saunders was Managing Director of the Managed
Futures
3
<PAGE>
Department at Kidder Peabody & Co. Incorporated from April 1983 to January
1995. Mr. Saunders is a director of Centaur, a company involved in the
development and manufacturing of veterinary diagnostic and therapeutic
healthcare products.
Carmine Vona has served as a Director of the Company since January 1995. Mr.
Vona has been President and Chief Executive Officer of Vona Information
Systems, Inc., a consulting firm, since June 1996. Prior to that Mr. Vona was
Executive Vice President and Senior Managing Director for worldwide technology
at Bankers Trust Co. from November 1969 to June 1996. From August 1986 to June
1996 Mr. Vona was Chairman of BT-FSIS, a software development company and a
wholly-owned subsidiary of Bankers Trust Co.
Executive officers of the Company are appointed by, and serve at the
discretion of, the Board of Directors, and serve until their successors have
been duly elected and qualified. There are no family relationships among any
of the executive officers or directors of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January 1996, the Company repurchased shares of Common Stock and Series A
Convertible Preferred Stock from stockholders at a purchase price of $4.195
and $419.50 per share, respectively, including the following executive
officers, directors and holders of more than 5% of the Company's outstanding
Common Stock (all of the following share numbers representing the number of
shares of Common Stock repurchased or the number of shares of Common Stock
into which the shares of Series A Preferred Stock repurchased were
convertible): Mr. Delaney--150,000 shares; Mr. Lathrop--112,500 shares; Mr.
Sanders--60,000 shares; and Mr. Saunders--192,900 shares. Also in January
1996, Messrs. Styslinger and McGrath sold an aggregate of 98,946 and 135,000
shares of Common Stock, respectively, to the then holders of Series B
Convertible Preferred Stock at a purchase price of $4.195 per share pursuant
to the exercise of a call to a Put and Call Agreement between Messrs.
Styslinger and McGrath individually and the holders of Series B Convertible
Preferred Stock entered into in October 1995. The purchasers included the
following directors or holders of 5% of the Company's outstanding Common Stock
(all of the following share numbers representing the aggregate number of
shares purchased from Messrs. Styslinger and McGrath by such purchaser):
Summit Investors II and related entities--184,391 shares; Mr. Hoffmann--1,155
shares; and members of Mr. Vona's family--2,305 shares.
In October 1995, the Company made loans to employees, including to the
following executive officers, directors and holders of more than 5% of the
Company's outstanding Common Stock in the following amounts: Mr. Lathrop--
$125,000; Mr. McGrath--$200,000; Mr. Sanders--$50,000; Mr. Delaney--$160,000;
and Mr. Styslinger--$90,000. All of the loans had an annual interest rate of
5.9% and were secured by a pledge of shares of Common Stock. All of such loans
were repaid in January 1996.
In connection with Mr. Tibbetts joining the Company in June 1996, the
Company agreed that in the event the Company terminates his employment without
cause or Mr. Tibbetts terminates his employment with the Company involuntarily
(including in each case, a termination by the Company's successor after the
acquisition of the Company, its business or assets) (i) at any time prior to
June 30, 1997, the Company or its successor, as applicable, will pay Mr.
Tibbetts severance equal to 12 months salary continuation at his then current
base salary and (ii) thereafter, the Company or its successor, as applicable,
will pay Mr. Tibbetts severance equal to six months salary continuation at his
then current base salary, and in each case, vesting under his stock option
agreements will be accelerated by 12 months or six months, under (i) and (ii)
above, respectively. In addition, the Company agreed that, upon the request of
Mr. Tibbetts, it would loan him up to $50,000 at any time prior to June 30,
1997 and an additional $50,000 at any time prior to June 30, 1998. Any such
loan will have a five year term and will bear interest equal to the then
current Applicable Federal Rate determined under Section 1274(d) of the
Internal Revenue Code. No such loan has been requested or made at this time.
Prior to joining the Company, Mr. Tibbetts was a partner at Price Waterhouse
LLP, the Company's independent accountants since the inception of the Company,
and was the audit partner for the audits of the Company's 1993 and 1994
consolidated financial statements.
4
<PAGE>
The Company has adopted a policy that all transactions between the Company
and its officers, directors, principal stockholders and affiliates will be
approved by a majority of the Board of Directors, including a majority of the
independent and disinterested outside directors on the Board of Directors, and
will be on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of April 10, 1997 (unless otherwise
indicated), certain information regarding beneficial ownership of the
Company's Common Stock (i) by each person who is known to beneficially own 5%
of the outstanding Common Stock, (ii) by each director of the Company, (iii)
by each executive officer named in the Summary Compensation Table on page 9,
and (iv) by all directors and executive officers of the Company as a group.
The address of each person listed below is c/o SeaChange International, Inc.,
124 Acton Street, Maynard, Massachusetts 01754.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
NATURE OF COMMON
BENEFICIAL STOCK
NAME OWNERSHIP(1) OUTSTANDING
---- ------------ -----------
<S> <C> <C>
William C. Styslinger, III(2)........................ 1,747,724 13.6%
Edward J. Delaney, Jr.(3)............................ 1,318,500 10.2
Edward J. McGrath(4)................................. 1,158,750 9.0
Mark Sanders(5)...................................... 749,356 5.8
Paul H. Saunders(6).................................. 757,594 5.9
Alan R. Lathrop(7)................................... 633,075 4.9
Carmine Vona(8)...................................... 320,445 2.5
Bruce E. Mann(9)..................................... 300,250 2.3
Martin R. Hoffmann(10)............................... 167,736 1.3
Duncan-Hurst Capital Management(11).................. 840,250 6.5
All executive officers and directors as a group (13
persons)(12)........................................ 7,188,550 55.6
</TABLE>
- - --------
(1) Unless otherwise indicated below, to the knowledge of the Company, all
persons listed below have sole voting and investment power with respect
to their shares of Common Stock, except to the extent authority is shared
by spouses under applicable law. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission, and
includes voting and investment power with respect to shares. Shares of
Common Stock subject to options currently exercisable or exercisable
within 60 days of April 10, 1997 are deemed outstanding for computing the
percentage ownership of the person holding such options, but are not
deemed outstanding for computing the percentage of any other person.
(2) Includes 150,000 shares of Common Stock owned by Merrill Lynch, Trustee
f/b/o William C. Styslinger, III, IRA, 64,286 shares of Common Stock
owned by Thomas and Emily Franeta as Trustees of The Styslinger Family
Trust, 2,142 shares of Common Stock held by Thomas Franeta as Custodian
for Kimberly J. Styslinger, and 8,100 shares of Common Stock issuable
upon the exercise of stock options, which options are exercisable within
60 days of April 10, 1997. Mr. Styslinger disclaims beneficial ownership
of the shares held by The Styslinger Family Trust and by Thomas Franeta
as Custodian for Kimberly J. Styslinger.
(3) Includes 150,000 shares of Common Stock owned by Merrill Lynch, Trustee
f/b/o Kathryn H. Delaney, IRA, 360,000 shares of Common Stock held by The
Delaney Family Limited Partnership of which Mr. Delaney is both a general
and a limited partner, and 4,500 shares of Common Stock issuable upon the
exercise of stock options, which options are exercisable within 60 days
of April 10, 1997. Mr. Delaney disclaims beneficial ownership of the
shares held by his wife's IRA.
(4) Includes 300,000 shares of Common Stock held by The McGrath Family
Limited Partnership of which Mr. McGrath is both a general and a limited
partner, and 4,500 shares of Common Stock issuable upon the exercise of
stock options, which options are exercisable within 60 days of April 10,
1997.
5
<PAGE>
(5) Includes 1,035 shares of Common Stock issuable upon the exercise of stock
options, which options are exercisable within 60 days of April 10, 1997.
(6) Includes 64,286 shares of Common Stock owned by Richard R. Saunders, Jr.
as Trustee for The Paul H. Saunders Irrevocable Trust Agreement No. 1 For
The Benefit Of J. Brock Saunders, 64,286 shares of Common Stock owned by
Richard R. Saunders, Jr. as Trustee for The Paul H. Saunders Irrevocable
Trust Agreement No. 1 For The Benefit Of Paul H. Saunders, 2,142 shares
of Common Stock owned by Craig E. Chason as Trustee for The Paul H.
Saunders Irrevocable Trust Agreement No. 2 For The Benefit Of J. Brock
Saunders, 2,142 shares of Common Stock owned by Craig E. Chason as
Trustee of The Paul H. Saunders Irrevocable Trust Agreement No. 2 For The
Benefit Of Paul H. Saunders, and 1,968 shares of Common Stock issuable
upon the exercise of stock options, which options are exercisable within
60 days of April 10, 1997. Mr. Saunders disclaims beneficial ownership of
the shares held by the various trusts noted above.
(7) Includes 1,575 shares of Common Stock issuable upon the exercise of stock
options, which options are exercisable within 60 days of April 10, 1997.
(8) Includes 1,968 shares of Common Stock issuable upon the exercise of stock
options, which options are exercisable within 60 days of April 10, 1997,
and 307,226 shares of Common Stock held by his sons Joseph C. Vona and
Salvatore Vona. Mr. Vona disclaims beneficial ownership of those shares
held by his sons.
(9) Includes an aggregate of 250 shares of Common Stock held by Mr. Mann's
three children. Mr. Mann disclaims beneficial ownership of those shares
held by his children.
(10) Includes 1,968 shares of Common Stock issuable upon the exercise of stock
options, which options are exercisable within 60 days of April 10, 1997.
(11) Information from a Form 13G filed February 12, 1997. The address of
Duncan-Hurst Capital Management is 4365 Executive Drive, Suite 1520, San
Diego, California 92121.
(12) Includes 56,154 shares of Common Stock issuable upon the exercise of
stock options, which options are exercisable within 60 days of April 10,
1997.
6
<PAGE>
COMPENSATION AND OTHER INFORMATION
CONCERNING DIRECTORS AND OFFICERS
EXECUTIVE COMPENSATION SUMMARY
The following table sets forth the annual and long-term compensation for
each of the past two fiscal years of each of (i) the Company's Chief Executive
Officer and (ii) each of the Company's four other most highly compensated
executive officers who were serving as of December 31, 1996 (collectively,
with the Chief Executive Officer, the "Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION(3)(4)
COMPENSATION(2) AWARDS
--------------- ------------------
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION (1) YEAR SALARY OPTIONS(#)
------------------------------- --------------- ------------------
<S> <C> <C> <C>
William C. Styslinger, III.................. 1996 $ 156,600 --
President and Chief Executive Officer 1995 145,000 27,000
Edward J. McGrath........................... 1996 135,000 --
Vice President, Engineering and Chief
Technology Officer 1995 124,978 18,000
Bruce E. Mann............................... 1996 132,141 --
Vice President, Network Storage Engineering 1995 121,348 --
Alan R. Lathrop............................. 1996 130,680 --
Vice President, Software Engineering 1995 121,000 5,250
Edward J. Delaney, Jr....................... 1996 129,391 --
Vice President, Sales and Marketing 1995 109,375 15,000
</TABLE>
- - --------
(1) Joseph S. Tibbetts, Jr. joined the Company as Vice President, Finance and
Administration, Chief Financial Officer and Treasurer in June 1996. Mr.
Tibbetts' annual base salary is $200,000. Through December 31, 1996, Mr.
Tibbetts was paid salary of $100,000. In addition, in June 1996 the
Company granted Mr. Tibbetts options to purchase 186,825 shares of Common
Stock at an exercise price of $7.33 per share.
(2) The compensation described in this table does not include medical and
group life insurance or other benefits received by the Named Officers
which are available generally to all salaried employees of the Company and
certain perquisites and other personal benefits, securities or property
received by the Named Officers which do not exceed the lesser of $50,000
or 10% of any such officer's salary disclosed in this table.
(3) Represents stock options granted under the Company's Amended and Restated
1995 Stock Option Plan. The Company did not grant any restricted stock
awards or stock appreciation rights or make any long-term incentive plan
payouts during fiscal years 1996 and 1995.
(4) The Company has sold stock subject to restrictions on vesting to the Named
Officers at a purchase price equal to the then fair market value of such
stock. The number and value of all unvested stock holdings by each of the
Named Officers as of the year ended December 31, 1996 are as set forth
below. The values of the unvested shares have been calculated on the basis
of the fair market value of the Company's Common Stock as of December 31,
1996. Mr. Styslinger--480,000 shares, $12,240,000; Mr. McGrath--480,000
shares, $12,240,000; Mr. Mann--210,000 shares, $5,355,000; Mr. Lathrop--
300,000 shares, $7,650,000; and Mr. Delaney--720,000 shares, $18,360,000.
OPTION GRANTS IN LAST FISCAL YEAR
The Company did not grant any stock options or any stock appreciation rights
("SARs") to the Named Officers during the fiscal year ended December 31, 1996.
However, in June 1996, the Company granted Mr. Tibbetts options to purchase
186,825 shares of Common Stock at an exercise price of $7.33 per share, which
was 39.5% of all options granted to employees in fiscal 1996, expiring June
28, 2006. The potential realizable
7
<PAGE>
value at assumed annual rates of 5% and 10% stock price appreciation for the
option term are $861,225 and $2,182,514, respectively. These potential
realizable values are calculated based on rules promulgated by the Securities
and Exchange Commission and do not reflect the Company's estimate of future
stock price growth. Actual gains, if any, on stock option exercises and Common
Stock holdings are dependent on the timing of such exercise and the future
performance of the Company's Common Stock. There can be no assurance that the
rates of appreciation assumed herein can be achieved or that the amounts
reflected will be received by Mr. Tibbetts.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information with respect to options to
purchase the Company's Common Stock to the Named Officers who are listed in
the Summary Compensation Table above, including (i) the number of shares of
Common Stock purchased upon exercise of options in the fiscal year ended
December 31, 1996; (ii) the net value realized upon such exercise; (iii) the
number of unexercised options outstanding at December 31, 1996; and (iv) the
value of such unexercised options at December 31, 1996:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE DECEMBER 31, 1996 AT DECEMBER 31, 1996 (2)
NAME (1) EXERCISE REALIZED EXERCISABLE/ UNEXERCISABLE EXERCISABLE/ UNEXERCISABLE
-------- ----------- -------- -------------------------- --------------------------
<S> <C> <C> <C> <C>
William C. Styslinger,
III.................... -- -- 5,400/21,600 $130,356/$521,424
Edward J. McGrath....... 900 $12,276 2,700/14,400 65,178/347,616
Bruce E. Mann........... -- -- -- --
Alan R. Lathrop......... -- -- 1,050/4,200 25,484/101,934
Edward J. Delaney, Jr... -- -- 3,000/12,000 72,420/289,680
</TABLE>
- - --------
(1) Mr. Tibbetts, who joined the Company in June 1996 as Vice President,
Finance and Administration, Chief Financial Officer and Treasurer, did not
exercise any options during fiscal 1996. At fiscal year-end, Mr. Tibbetts
had 30,000 exercisable and 156,825 unexercisable options and the value of
such unexercised in-the-money options at December 31, 1996 was $545,100
(exercisable) and $2,849,510 (unexercisable).
(2) Value is based on the difference between the option exercise price and the
fair market value of the Company's Common Stock at December 31, 1996, the
fiscal year-end ($25.50 per share as quoted on the Nasdaq National
Market), multiplied by the number of shares underlying the option.
8
<PAGE>
COMPENSATION AND OPTION COMMITTEE REPORT
To Our Stockholders:
The Company's executive compensation program is administered by the
Compensation and Option Committee of the Board of Directors, which is
comprised entirely of non-employee directors. Pursuant to authority delegated
by the Board of Directors, the Compensation and Option Committee is
responsible for reviewing and administering the Company's stock ownership
plans and reviewing and approving compensation for the executive officers of
the Company.
The Company's executive compensation program is designed to provide levels
of compensation that assist the Company in attracting, motivating and
retaining qualified executive officers and aligning the financial interests of
the Company's executive officers and other employees with those of its
stockholders by providing a competitive compensation package based on
corporate and individual performance. Compensation under the executive
compensation program is comprised of cash compensation in the form of base
salary and long-term incentive awards in the form of stock option grants. The
Company has not historically awarded annual cash incentive bonuses. The
compensation program is also comprised of various benefits, including medical
and insurance plans, and the Company's 1996 Employee Stock Purchase Plan and
401(k) profit sharing plan, which plans are generally available to all
employees of the Company.
Base Salary
Base salary compensation levels for each of the Company's executive
officers, including the Chief Executive Officer, are generally set within the
range of base salaries that the Compensation and Option Committee believes are
paid to executive officers with comparable qualifications, experience and
responsibilities at comparable companies. In setting compensation levels, the
Compensation and Option Committee generally takes into account such factors as
(i) the Company's past operating and financial performance and future
expectations, (ii) individual performance and experience and (iii) past salary
levels. The Compensation and Option Committee does not assign relative weights
or rankings to these factors, but instead makes determinations based upon the
consideration of all of these factors as well as the progress made with
respect to the Company's long-term goals and strategies. Joseph S. Tibbetts,
Jr., Vice President, Finance and Administration, Chief Financial Officer and
Treasurer, joined the Company in June 1996. The base salary for Mr. Tibbetts
was determined at the time of his hiring through negotiations between the
Board of Directors and Mr. Tibbetts.
Incentive Compensation
The Company has not historically awarded annual cash bonuses to its
executive officers, although it may do so in the future.
Stock Options
Stock options are the principal vehicle used by the Company to provide long-
term incentive-based compensation to improve the Company's operating and
financial performance and to support the recruitment, motivation and retention
of key professional and managerial personnel. The Company's stock option plans
are administered by the Compensation and Option Committee. To date, the
Compensation and Option Committee has not granted stock options at less than
fair market value.
Stock options are granted from time to time to eligible employees based upon
the Company's overall financial performance and their contribution thereto.
Stock options are designed to align the interests of the Company's executive
officers and other employees with those of its stockholders by encouraging
them to enhance the value of the Company, the price of the Common Stock and,
hence, the stockholders' return. In addition, the vesting of stock options
over a period of time is designed to defer the receipt of compensation by the
option holder, thus creating an incentive for the individual to remain with
the Company. The Company periodically grants new options to provide continuing
incentives for future performance.
9
<PAGE>
During the fiscal year ended December 31, 1996, options to purchase an
aggregate of 186,825 shares of Common Stock were awarded to Mr. Tibbetts in
connection with his joining the Company. No other stock options were granted
to the Company's executive officers, including the chief executive officer,
during fiscal 1996. In January 1997, however, options to purchase an aggregate
of 4,000 shares of Common Stock were granted to Mr. Styslinger and options to
purchase an aggregate of 28,000 shares of Common Stock were granted to the
Company's other executive officers. Such grants were made in recognition of
the executive officers' contributions to fiscal year 1996 Company performance.
Other Benefits
The Company also has various broad-based employee benefit plans. Executive
officers participate in these plans on the same terms as eligible, non-
executive employees, subject to any legal limits on the amounts that may be
contributed or paid to executive officers under these plans. The Company
offers a stock purchase plan, under which employees may purchase Common Stock
at a discount, and a 401(k) profit sharing plan, which permits employees to
invest in a choice of mutual funds on a pre-tax basis. The Company also
maintains medical, disability and life insurance plans and other benefit plans
for its employees.
Tax Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended, limits the
tax deduction to $1 million for compensation paid to any of the executive
officers unless certain requirements are met. The Compensation and Option
Committee has considered these requirements. It is the Compensation and Option
Committee's present intention that, so long as it is consistent with its
overall compensation objectives, not to exceed the deduction limitations of
Section 162(m).
The Compensation and Option
Committee:
Martin R. Hoffmann
Paul H. Saunders
Carmine Vona
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to January 1995, the Company had no separate compensation or stock
option committee or other board committee performing equivalent functions, and
these functions were performed by the Company's Board of Directors. No stock
options were granted prior to the formation of the Compensation and Option
Committee of the Board of Directors. The Compensation and Option Committee
consists of Messrs. Hoffmann, Saunders and Vona. No person who served as a
member of the Compensation and Option Committee was, during the past fiscal
year, an officer or employee of the Company or any of its subsidiaries, was
formerly an officer of the Company or any of its subsidiaries, or had any
relationship requiring disclosure herein. No executive officer of the Company
served as a member of the compensation committee of another entity (or other
committee of the Board of Directors performing equivalent functions or, in the
absence of any such committee, the entire Board of Directors), one of whose
executive officers served as a director of the Company.
COMPENSATION OF DIRECTORS
During the fiscal year ended December 31, 1996, directors who were employees
of the Company received no cash compensation for their services as directors,
except for reimbursement of expenses incurred in connection with attending
meetings. In fiscal 1996, the Company paid directors who are not employees of
the Company a fee of $1,000 for each meeting of the Board of Directors that
they attended in person and such directors were reimbursed for their
reasonable out-of-pocket expenses incurred in attending such meetings. Messrs.
Hoffmann, Saunders and Vona were each paid $1,000 in fiscal 1996. Each non-
employee director is also entitled to participate in the Company's 1996 Non-
Employee Director Stock Option Plan.
10
<PAGE>
STOCK PLANS
The Company currently has three stock plans: the Amended and Restated 1995
Stock Option Plan, the 1996 Non-Employee Director Stock Option Plan and the
1996 Employee Stock Purchase Plan. Following is a summary of the material
features of such plans.
Amended and Restated 1995 Stock Option Plan. The Company's 1995 Stock Option
Plan was adopted by the Board in September 1995 and approved by the Company's
stockholders in October 1995. An Amended and Restated 1995 Stock Option Plan
was adopted by the Board in September 1996 and approved by the Company's
stockholders in September 1996 (the "1995 Plan"). Under the terms of the 1995
Plan, the Company is authorized to grant incentive stock options ("ISOs")
within the meaning of Section 422 of the Code and non-qualified stock options
("Non-Qualified Options," and collectively with ISOs, "Stock Options") to
employees, directors and officers of and consultants to the Company. The
aggregate number of shares of Common Stock which may be issued pursuant to the
Plan is 1,950,000.
The 1995 Plan is administered by the Compensation and Option Committee of
the Board of Directors, which currently consists of three disinterested
directors, Martin R. Hoffmann, Paul H. Saunders and Carmine Vona. Subject to
the provisions of the 1995 Plan, the Compensation and Option Committee has the
authority to select the optionees and determine the terms of the Stock Options
granted under the 1995 Plan, including: (i) the number of shares subject to
each Stock Option, (ii) when each Stock Option becomes exercisable, (iii) the
exercise price of each Stock Option, which in the case of an ISO will not be
less than the fair market value of the Common Stock as of the date of grant,
or not less than 110% of the fair market value in the case of an ISO granted
to an employee or officer holding 10% or more of the voting stock of the
Company, (iv) the duration of each Stock Option and (v) the time, manner and
form of payment upon exercise of a Stock Option. A Stock Option is not
transferable by the recipient except by will or by the laws of descent and
distribution or in the case of non-qualified stock options only to the extent
set forth in the agreement relating to such option. Generally, no ISO may be
exercised more than 90 days following termination of employment. However, in
the event that termination is due to death or disability, the Stock Option is
exercisable for a maximum of 180 days after such termination.
As of April 10, 1997, Stock Options to purchase a total of 857,386 shares of
Common Stock at a weighted average exercise price of $10.04 per share were
outstanding under the 1995 Plan of which 118,754 Stock Options were then
exercisable and Stock Options for 37,395 shares of Common Stock had been
exercised.
1996 Non-Employee Director Stock Option Plan. The 1996 Non-Employee Director
Stock Option Plan (the "Director Option Plan") was adopted by the Board of
Directors in June 1996 and approved by the Company's stockholders in June
1996. The Director Option Plan provides for the grant of options to purchase a
maximum of 30,000 shares of Common Stock of the Company to non-employee
directors of the Company. All options granted under the Director Option Plan
("Director Options") are Non-Qualified Options.
The Director Option Plan is administered by the Compensation and Option
Committee of the Board of Directors. Under the Director Option Plan, each
director who is not an employee of the Company will receive upon the later of
(i) the date of approval of the Director Option Plan by the stockholders of
the Company, (ii) the date of his or her initial election to the Board, or
(iii) the date such person first becomes a non-employee director (the "Grant
Date") an option to purchase 3,375 shares of Common Stock. Director Options
will vest as to 33 1/3% of the shares underlying the option immediately upon
the date of the grant, and will vest as to an additional 8 1/3% of the shares
underlying the option at the end of each of the next 8 quarters, provided that
the optionee remains a director at the time of vesting of the installments.
Each non-employee director will also receive, on each three-year anniversary
of such director's Grant Date, an additional option to purchase 3,375 shares
of Common Stock, vesting in accordance with the aforementioned schedule,
provided that such director continues to serve on the Board of Directors at
the time of grant. All Director Options have an exercise price equal to the
fair market value of the Common Stock on the date of grant and a term of ten
years from the date of grant. Director Options may not be transferred except
by will or by the laws of descent and distribution or
11
<PAGE>
pursuant to a domestic relations order and generally are exercisable to the
extent vested only while the optionee is serving as a director or within 90
days after the optionee ceases to serve as a director of the Company. However,
if an optionee ceases to serve as a director of the Company due to death or
disability, all of the Director Options become fully vested and are
exercisable until the scheduled expiration date of the Director Option. All
unvested Director Options shall become fully exercisable in the event of any
"Change in Control" of the Company, as defined in the Director Option Plan.
As of April 10, 1997, options to purchase a total of 10,125 shares of Common
Stock at an average exercise price of $7.33 per share were outstanding under
the Director Option Plan, of which 5,904 shares were exercisable.
1996 Employee Stock Purchase Plan. The 1996 Employee Stock Purchase Plan
(the "1996 Purchase Plan") was adopted by the Board of Directors in September
1996 and approved by the Company's stockholders in September 1996. The 1996
Purchase Plan provides for the issuance of a maximum of 300,000 shares of
Common Stock pursuant to the exercise of nontransferable options granted to
participating employees.
The 1996 Purchase Plan is administered by the Compensation and Option
Committee of the Board of Directors. All employees of the Company whose
customary employment is more than 20 hours per week and for more than five
months in any calendar year are eligible to participate in the 1996 Purchase
Plan. Employees who would immediately after the grant own 5% or more of the
total combined voting power or value of the Company's stock are not eligible
to participate in the 1996 Purchase Plan. To participate in the 1996 Purchase
Plan, an employee must authorize the Company to deduct an amount (not less
than one percent nor more than ten percent of a participant's total cash
compensation) from his or her pay during six-month periods commencing on
January 1 and July 1 of each year (each a "Plan Period"), but in no case shall
an employee be entitled to purchase more than 750 shares in any Plan Period.
The first such period commenced on January 1, 1997. The exercise price for an
option in each Plan Period is 85% of the lesser of the market price of the
Common Stock on the first or last business day of the Plan Period. If an
employee is not a participant on the last day of the Plan Period, such
employee is not entitled to exercise his or her option, and the amount of his
or her accumulated payroll deductions will be refunded. Options granted under
the 1996 Purchase Plan may not be transferred or assigned. An employee's
rights under the 1996 Purchase Plan terminate upon his or her voluntary
withdrawal from the plan at any time or upon termination of employment. No
options have been granted to date under the 1996 Purchase Plan.
Certain Federal Income Tax Information. The following discussion of United
States federal income tax consequences of the issuance and exercise of options
granted under the 1995 Plan, the 1996 Purchase Plan and the Director Option
Plan is based upon the provisions of the Code as in effect on the date of this
Proxy Statement, current regulations, and existing administrative rulings of
the Internal Revenue Service. It is not intended to be a complete discussion
of all of the federal income tax consequences of these plans or of the
requirements that must be met in order to qualify for the described tax
treatment. In addition, there may be foreign, state or local tax consequences
that are not discussed herein.
A. Incentive Stock Options. The following general rules are applicable under
current United States federal income tax law to ISOs granted under the 1995
Plan:
1. In general, an optionee will not recognize any income upon the grant
of an ISO or upon the issuance of shares to him or her upon the exercise of
an ISO, and the Company will not be entitled to a federal income tax
deduction upon either the grant or the exercise of an ISO.
2. If shares acquired upon exercise of an ISO are not disposed of within
(i) two years from the date the ISO was granted or (ii) one year after the
date the shares are issued to the optionee pursuant to the ISO exercise
(the "Holding Periods"), the difference between the amount realized on any
subsequent disposition of the shares and the exercise price will generally
be treated as capital gain or loss to the optionee.
3. If shares acquired upon exercise of an ISO are disposed of and the
optionee does not satisfy the Holding Periods (a "Disqualifying
Disposition"), then in most cases the lesser of (i) any excess of the fair
12
<PAGE>
market value of the shares at the time of exercise of the ISO over the
exercise price or (ii) the actual gain on disposition, will be taxed to the
optionee as ordinary income in the year of such disposition.
4. In any year that an optionee recognizes ordinary income on a
Disqualifying Disposition of shares acquired upon exercise of an ISO, the
Company generally will be entitled to a corresponding federal income tax
deduction.
5. The difference between the amount realized by an optionee as the
result of a Disqualifying Disposition and the sum of (i) the exercise price
and (ii) the amount of ordinary income recognized under the above rules
generally will be treated as capital gain or loss.
6. Capital gain or loss recognized by an optionee on a disposition of
shares will be long-term capital gain or loss if the optionee's holding
period for the shares exceeds one year.
7. An optionee may be entitled to exercise an ISO by delivering shares of
the Company's Common Stock to the Company in payment of the exercise price,
if the optionee's ISO agreement so provides. If an optionee exercises an
ISO in such fashion, special rules apply.
8. In addition to the tax consequences described above, the exercise of
an ISO may result in an "alternative minimum tax." The alternative minimum
tax rate (the maximum rate is 28%) will be applied against a taxable base
which is equal to "alternative minimum taxable income," reduced by a
statutory exemption. In general, the amount by which the value of the
shares received upon exercise of the ISO exceeds the exercise price is
included in the optionee's alternative minimum taxable income. A taxpayer
is required to pay the higher of his regular tax liability or the
alternative minimum tax. A taxpayer who pays alternative minimum tax
attributable to the exercise of an ISO may be entitled to a tax credit
against his or her regular tax liability in later years.
9. Special rules apply if the shares acquired upon the exercise of an ISO
are subject to vesting, or are subject to certain restrictions on resale
under federal securities laws applicable to directors, officers or 10%
stockholders.
B. Non-Qualified Stock Options. The following general rules are applicable
under current federal income tax law to Non-Qualified Options granted under
the 1995 Plan and the Director Option Plan:
1. In general, an optionee will not recognize any income upon the grant
of a Non-Qualified Option, and the Company will not be entitled to a
federal income tax deduction upon such grant.
2. An optionee generally will recognize ordinary income at the time of
exercise of the Non-Qualified Option in an amount equal to the excess, if
any, of the fair market value of the shares on the date of exercise over
the exercise price. The Company may be required to withhold income tax on
this amount.
3. When an optionee sells the shares acquired upon the exercise of a Non-
Qualified Option, he or she generally will recognize capital gain or loss
in an amount equal to the difference between the amount realized upon the
sale of the shares and the optionee's basis in the shares (generally, the
exercise price plus the amount taxed to the optionee as ordinary income).
If the optionee's holding period for the shares exceeds one year, such gain
or loss will be long-term capital gain or loss.
4. When an optionee recognizes ordinary income attributable to a Non-
Qualified Option, the Company generally will be entitled to a corresponding
federal income tax deduction.
5. An optionee may be entitled to exercise a Non-Qualified Option by
delivering shares of the Company's Common Stock to the Company in payment
of the exercise price. If an optionee exercises a Non-Qualified Option in
such fashion, special rules apply.
6. Special rules apply if the shares acquired upon the exercise of a Non-
Qualified Option are subject to vesting, or are subject to certain
restrictions on resale under federal securities laws applicable to
directors, officers or 10% stockholders.
13
<PAGE>
C. Options Granted under the 1996 Purchase Plan. The following general rules
are applicable under current federal income tax law to options granted under
the 1996 Purchase Plan:
1. The amounts deducted from an employee's pay under the 1996 Purchase
Plan will be included in the employee's compensation subject to federal
income tax. In general, no additional income will be recognized by the
employee either at the time options are granted pursuant to the 1996
Purchase Plan or at the time the employee purchases shares pursuant to the
1996 Purchase Plan.
2. If the employee disposes of shares purchased pursuant to the 1996
Purchase Plan more than two years after the first business day of the
Payment Period in which the employee acquired the shares, then upon such
disposition the employee will recognize ordinary income in an amount equal
to the lesser of:
(a) the excess, if any, of the fair market value of the shares at the
time of disposition over the amount the employee paid for the shares,
or
(b) the excess of the fair market value of the shares on the first
business day of the Payment Period over the option price.
In addition, the employee generally will recognize capital gain or loss
in an amount equal to the difference between the amount realized upon the
sale of shares and the employee's tax basis in the shares (generally, the
amount the employee paid for the shares plus the amount, if any, taxed as
ordinary income). If the employee's holding period for the shares is more
than one year, such gain or loss will be long-term capital gain or loss.
3. If the employee disposes of shares purchased pursuant to the 1996
Purchase Plan within two years after the first business day of the Payment
Period in which the employee acquired the shares, then upon disposition the
employee will recognize ordinary income in an amount equal to the excess,
if any, of the fair market value of the shares on the last business day of
the Payment Period over the amount the employee paid for the shares.
In addition, the employee generally will recognize capital gain or loss
in an amount equal to the difference between the amount realized upon the
sale of shares and the employee's tax basis in the shares (generally, the
amount the employee paid for the shares plus the amount, if any, taxed as
ordinary income). If the employee's holding period for the shares is more
than one year, such gain or loss will be long-term capital gain or loss.
4. If the employee disposes of shares purchased pursuant to the Purchase
Plan more than two years after the first business day of the Payment
Period, the Company will not be entitled to any federal income tax
deduction with respect to the options or the shares issued upon their
exercise. If the employee disposes of such shares prior to the expiration
of this two-year holding period, the Company generally will be entitled to
a federal income tax deduction in the amount which is treated as ordinary
income to the employee as a result of such disposition.
14
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the change in the cumulative total stockholder
return on the Company's Common Stock during the period from the Company's
initial public offering through December 31, 1996, with the cumulative total
return on the Center for Research in Securities Prices ("CRSP") Index for the
Nasdaq Stock Market (U.S. Companies) and a SIC Code Index based on the
Company's SIC Code. The comparison assumes $100 was invested on November 4,
1996 in the Company's Common Stock at the $15.00 initial public offering price
and in each of the foregoing indices and assumes reinvestment of dividends, if
any.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG SEACHANGE INTERNATIONAL, INC., NASDAQ
NATIONAL MARKET INDEX AND SIC CODE INDEX
11/04/96 12/31/96
-------- --------
Seachange International, Inc. $100.00 $170.00
SIC Code Index $100.00 $118.13
Nasdaq Market Index $100.00 $105.97
Notes:
A.The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
C. The Index level for all series was set to 100.0 on November 4, 1996.
- - --------
(1) Prior to November 4, 1996, the Company's Common Stock was not publicly
traded. Comparative data is provided only for the period since that date.
This graph is not "soliciting material," is not deemed filed with the
Securities and Exchange Commission and is not to be incorporated by
reference in any filing of the Company under the Securities Act of 1933 or
the Securities Exchange Act of 1934, whether made before or after the date
hereof and irrespective of any general incorporation language in any such
filing.
(2) The stock price performance shown on the graph is not necessarily
indicative of future price performance. Information used on the graph was
obtained from Media General Financial Services, Richmond, Virginia, a
source believed to be reliable, but the Company is not responsible for any
errors or omissions in such information.
15
<PAGE>
ACCOUNTANTS
The Board of Directors has selected the firm of Price Waterhouse LLP,
independent accountants, to serve as auditors for the fiscal year ending
December 31, 1997. Price Waterhouse LLP has served as the Company's
independent accountants since 1993. It is expected that a member of Price
Waterhouse LLP will be present at the meeting with the opportunity to make a
statement if so desired and will be available to respond to appropriate
questions.
VOTING PROCEDURES
The presence, in person or by proxy, of at least a majority of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to establish a quorum for the transaction of business. Shares
represented by proxies pursuant to which votes have been withheld from any
nominee for director, or which contain one or more abstentions or broker "non-
votes," are counted as present for purposes of determining the presence or
absence of a quorum for the Annual Meeting. A "non-vote" occurs when a broker
or other nominee holding shares for a beneficial owner votes on one proposal,
but does not vote on another proposal because the broker does not have
discretionary voting power and has not received instructions from the
beneficial owner.
Election of Directors. Directors are elected by a plurality of the votes
cast, in person or by proxy, at the Annual Meeting. The nominee receiving the
highest number of affirmative votes of the shares present or represented and
voting on the election of directors at the Annual Meeting will be elected as
the Class I Director for a three-year term. Only shares that are voted in
favor of a particular nominee will be counted toward such nominee's
achievement of a plurality. Shares present at the Annual Meeting that are not
voted for a particular nominee or shares present by proxy where the
stockholder properly withholds authority to vote for such nominee will not be
counted toward such nominee's achievement of a plurality.
Other Matters. For all other matters being submitted to the stockholders at
the Annual Meeting, the affirmative vote of the majority of shares present, in
person or represented by proxy, and voting on that matter is required for
approval. Abstentions, as well as broker "non-votes" are not considered to
have been voted for this matter and have the practical effect of reducing the
number of affirmative votes required to achieve a majority for such matter by
reducing the total number of shares from which the majority is calculated.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received no later than the close of business
on December 22, 1997 at the Company's principal executive offices in order to
be included in the Company's proxy statement for that meeting. Any such
proposal must comply with the rules and regulations of the Securities and
Exchange Commission ("SEC").
EXPENSES AND SOLICITATION
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, certain of the Company's directors,
officers and regular employees, without additional remuneration, may solicit
proxies by telephone, telegraph and personal interviews. Brokers, custodians
and fiduciaries will be requested to forward proxy soliciting material to the
owners of stock held in their names, and the Company will reimburse them for
their reasonable out-of-pocket costs. Solicitation by officers and employees
of the Company may also be made of some stockholders in person or by mail,
telephone or telegraph following the original solicitation.
16
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and holders of more than 10% of
the Company's Common Stock (collectively, "Reporting Persons") to file with
the SEC initial reports of ownership and reports of changes in ownership of
Common Stock of the Company. Such persons are required by regulations of the
SEC to furnish the Company with copies of all such filings. Based on its
review of the copies of such filings received by it with respect to the fiscal
year ended December 31, 1996 and written representations from certain
Reporting Persons, the Company believes that all Reporting Persons complied
with all Section 16(a) filing requirements in the fiscal year ended
December 31, 1996.
17
<PAGE>
SEACHANGE INTERNATIONAL, INC.
Annual Meeting of Stockholders to be held on May 29, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies, hereby appoints William C.
Styslinger, III and Joseph S. Tibbetts, Jr. and each of them, with full power of
substitution, as proxies to represent and vote all shares of common stock of Sea
Change International, Inc. (the "Company") which the undersigned would be
entitled to vote if personally present at the Annual Meeting of Stockholders of
the Company to be held on May 29, 1997, at 9:30 a.m. local time, at the offices
of Testa, Hurwitz & Thibeault, LLP, High Street Tower, 125 High Street, Boston,
Massachusetts 02110, and at all adjournments thereof, upon matters set forth in
the Notice of Annual Meeting of Stockholders and Proxy Statement dated April 29,
1997, a copy of which has been received by the undersigned. The proxies are
further authorized to vote, in their discretion, upon such other business as may
properly come before the meeting or any adjournments thereof.
The Board of Directors recommends a vote FOR the election of the director.
SEE REVERSE SIDE
<PAGE>
[X] Please mark votes as in this example.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDERS(S). IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
FOR THE ELECTION OF THE DIRECTOR.
1. To elect one member to the Board of Directors to serve for a three-year
term as a Class I Director:
NOMINEE: William C. Styslinger, III [_] FOR [_] WITHHOLD
2. To transact such other business as may properly come before the meeting and
any adjournment thereof.
[_] MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW
- - ---------------------------------
- - ---------------------------------
Please sign exactly as name appears below. Joint owners must both sign.
Attorney, executor, administrator, trustee or guardian must give full title as
such. A corporation or partnership must sign its full name by authorized
person.
- - ---------------------------------
Signature of Stockholder
Date:______________________, 1997
- - ---------------------------------
Signature if held jointly
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
I/We will attend the meeting. [_] YES [_] NO
