<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. __)
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 Rule 14a-11(c) or Rule 14a-12
Box Hill Systems Corp.
------------------------------------------------------------------------
(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)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[BOX HILL LOGO]
Dear Fellow Stockholders,
You are cordially invited to attend the Annual Meeting of Stockholders on
May 6, 1998 at 10 a.m., at the offices of The Financial Relations Board, Inc.,
675 Third Avenue, New York, New York 10017.
At this year's Annual Meeting you will be asked to approve the election of
directors for a term of one year and the appointment of Arthur Andersen LLP as
auditors for 1998. Your vote on these matters is important and we appreciate
your continued support.
Please sign, date, and return the enclosed Proxy Card in the envelope
provided as soon as possible so that your shares can be voted at the meeting in
accordance with your instructions. If you plan to attend the meeting, please
mark the box where indicated on the Proxy Card. If you will need special
assistance at the meeting because of a disability, please contact Doug DeLieto
of The Financial Relations Board, Inc. at (212) 661-8030.
Very truly yours,
/s/ Philip Black
Philip Black
Chief Executive Officer
YOUR VOTE IS IMPORTANT
Please Sign, Date, and Return Your Proxy Card
<PAGE>
Box Hill Systems Corp.
161 Avenue of the Americas
New York, New York 10013
March 31, 1998
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS/MAY 6, 1998
The Annual Meeting of Stockholders of Box Hill Systems Corp. will be held on May
6, 1998, at 10 a.m., at the offices of The Financial Relations Board, Inc., 675
Third Avenue, New York, New York 10017. The items of business are:
1. Election of directors for a term of one year.
2. Ratification of the appointment of auditors.
3. Such other matters as may properly come before the meeting.
These items are more fully described in the following pages, which are hereby
made a part of this Notice. Only stockholders of record at the close of business
on March 20, 1998, are entitled to vote at the meeting. Stockholders are
reminded that shares cannot be voted unless the signed Proxy Card is returned or
other arrangements are made to have the shares represented at the meeting.
By order of the Board of Directors
Mark A. Mays, Secretary
This Proxy Statement and the accompanying form of Proxy Card are being mailed
beginning on or about March 31, 1998, to stockholders entitled to vote. The Box
Hill Systems Corp. 1997 Annual Report, which includes financial statements, is
being mailed with this Proxy Statement. Kindly notify American Stock Transfer &
Trust Company, 6201 15th Avenue, Brooklyn, NY 11219, telephone (718) 921-8247,
if you did not receive a report, and a copy will be sent to you.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. Election of Directors for a Term of One Year
General Information
o Board of Directors
o Committees of the Board
o Other Relationships
o Directors' Compensation
o Section 16(a) Beneficial Ownership Reporting Compliance
o Ownership of Securities
- Security Ownership of Certain Beneficial Owners
- Common Stock and Total Stock-based Holdings of Management
Report of Executive Compensation
o Summary Compensation Table
o Performance Graph
2. Ratification of Appointment of Auditors
3. Stockholder Proposals
Other Business
Proxies and Voting at the Meeting
</TABLE>
2
<PAGE>
1. ELECTION OF DIRECTORS FOR A TERM OF ONE YEAR
The Board proposes the election of the following directors of the Company
for a term of one year. Following is information about each nominee, including
biographical data for the last five years. Should one or more of these nominees
become unavailable to accept nomination or election as a director the
individuals named as Proxies on the enclosed Proxy Card will vote the shares
that they represent for the election of such other persons as the Board may
recommend, unless the Board reduces the number of directors.
Philip Black, 43, has been Chief Executive Officer and a Director of the
Company since May 1995. From 1976 to 1991 Mr. Black held a number of positions,
including Vice President, President, Chief Executive Officer and Vice Chairman
of the Board at Tekelec, Inc., a publicly traded company, of which he was the
founder, engaged in the design, manufacturing and marketing of diagnostics
systems and network switching solutions. From March 1990 until August 1991 Mr.
Black served as Managing Director of Echelon Europe, of which he was a
co-founder. In September 1991 Mr. Black became the Chief Executive Officer and
Treasurer of Avalon Control Technologies, a company specializing in products and
services related to Echelon's LONWorks technology, and served in those
capacities until June 1994. In April 1994 Mr. Black became President and Chief
Executive Officer of Chevry, a backup software company, and served in those
capacities until he joined the Company.
Benjamin Monderer, Eng.Sc.D., 39, a co-founder of the Company, has been
President and a Director of the Company since its incorporation in 1988 and
became Chairman of the Board in July 1997. He is also Chief Technical Officer
and has served as Manager of Operations of the Company. Dr. Monderer had been a
member of the technical staff at Hewlett-Packard in 1980 and 1981 and was a
Research Scientist at Columbia University from 1986 to 1989. Dr. Monderer holds
a Bachelor of Science in Electrical Engineering degree from Princeton University
and a Master of Science degree in Electrical Engineering and a Doctor of
Engineering Science from Columbia University. Dr. Monderer is married to Carol
Turchin.
Carol Turchin, 36, a co-founder of the Company, has been an executive
officer and a Director of the Company since its incorporation in 1988 and, in
July 1997, became Executive Vice President of the Company. She has also served
as the Company's Vice President of Sales and Vice President of Marketing. Ms.
Turchin holds a Bachelor of Arts degree from Vassar College. Ms. Turchin is
married to Benjamin Monderer.
Mark A. Mays, 34, a co-founder of the Company, has been Vice President,
Technical Consultant and a Director of the Company since its incorporation in
1988 and was appointed Secretary of the Company in July 1997. From 1985 to 1988,
Mr. Mays served as Associate Research Scientist at Columbia University. Mr. Mays
holds a Bachelor of Science degree and a Master of Science degree in Electrical
Engineering from Columbia University.
Finis F. Conner, 54, was elected a Director of the Company in July 1997.
Mr. Conner was until 1996 Chairman of the Board and Chief Executive Officer of
Conner Peripherals, Inc. which he founded in 1986. A leading manufacturer of
3 1/2" Winchester disk drives used in personal computers, Conner Peripherals was
merged with Seagate in February 1996. Mr. Conner was a co-founder of Seagate,
and served as its Vice-Chairman from 1979 to 1985. From 1996 to the present, Mr.
Conner has been Chairman of the Board of Golf Media, Inc., a company engaged in
the design of internet web sites for the promotion of golf products, and since
February 1996, Mr. Conner has been a principal of the Conner Group, an
independent consulting organization.
Robert C. Miller, 53, was elected a Director of the Company in August 1997.
Mr. Miller has been Chairman of the Board and Chief Executive Officer of
NeTpower, which is engaged in the development and manufacture of systems for the
Windows NT market, since he founded the company in February 1993. Prior thereto,
he was Chairman, President and Chief Executive Officer of MIPS Technologies
Inc., since its acquisition by Silicon Graphics Inc. in June 1992 and during the
five-year period prior to such acquisition. Mr. Miller had been Senior Vice
President of the Information Systems Group of Data General and had held several
positions with IBM, the last of which was Director of IBM's Boulder, Colorado
laboratory. A senior member of the Institute of Electrical and Electronic
Engineers ('IEEE') Society, Mr. Miller holds six United States patents and has
authorized a number of publications related to computer architecture. He holds a
Bachelor's degree in Mechanical Engineering from Bucknell University, an M.S. in
Thermodynamics from Stanford University and is a registered Professional
Engineer.
3
<PAGE>
Mischa Schwartz, Ph.D., 71, was elected a Director in July 1997. Dr.
Schwartz is the Charles Batchelor Professor Emeritus of Electrical Engineering
at Columbia University. He was Professor of Electrical Engineering and Computer
Science at Columbia University from 1974 until retirement in July 1996. Prior to
1974, he served as Professor of Electrical Engineering at the Polytechnic
Institute of Brooklyn for 24 years, during a portion of which period he served
as Head of the Electrical Engineering Department. During his tenure at Columbia
University he served, in 1980 as a Visiting Scientist with IBM Research, from
1985 to 1988 as Director of the Columbia University Center for
Telecommunications, one of the six National Engineering Research Centers
established in 1985 under major grants of the National Science Foundation, and
during 1986 as a Resident Consultant with NYNEX Science and Technology. He has
also served as a part time consultant on wireless communication systems for IBM
Research during 1994 and for AT&T Bell Laboratories during 1995. Dr. Schwartz,
the author or co-author of nine books and more than 150 technical publications
on communication theory, systems signal processing and computer communication
networks, is a member of the National Academy of Engineering, a Fellow and
former Director of the IEEE and former Chairman of its Information Theory Group
and Past President of the Communications Society. He serves on the editorial
board of several communication journals including Networks and Telecommunication
Systems. In 1984, he was cited by IEEE as one of the ten all-time outstanding
Electrical Engineering educators.
GENERAL INFORMATION
Board of Directors
The Board of Directors is responsible for supervision of the overall
affairs of the Company. To assist it in carrying out its duties, the Board has
delegated certain authority to two committees. Three of the seven current
directors are outside directors who are neither officers nor employees of Box
Hill or its Subsidiaries. In the opinion of the Board, each of the outside
directors is independent of management and free of any relationship with the
Company that would interfere with his or her exercise of independent judgment in
enforcing the duties of a director.
The Audit Committee and the Compensation Committee are composed entirely of
outside directors. The committees of the Board, as well as the full Board, have
access to outside consultants and experts as needed in connection with their
deliberations.
The Board of Directors held one meeting during 1997, at which each director
was present. Following the Annual Meeting, the Board will consist of seven
directors. In the interim between Annual Meetings, the Board has the authority
under the By-laws to increase or decrease the size of the Board and fill
vacancies.
Committees of the Board
The Audit Committee and the Compensation Committee are the standing
committees of the Board of Directors.
<TABLE>
<CAPTION>
Audit Compensation
- ----------------------- -----------------------
<S> <C>
Finis F. Conner Finis F. Conner
Robert C. Miller Robert C. Miller
Mischa Schwartz, Ph.D. Mischa Schwartz, Ph.D.
</TABLE>
Audit Committee
The Audit Committee is responsible for reviewing reports of the Company's
financial results and internal controls. The committee recommended to the Board
of Directors the selection of the Company's outside auditors and reviews their
procedures for ensuring their independence with respect to the services
performed for the Company.
The Audit Committee is composed of outside directors who are not officers
or employees of Box Hill or its subsidiaries. In the opinion of the Board, these
directors are independent of management and free of any
4
<PAGE>
relationship that would interfere with their exercise of independent judgment is
members of this committee. The committee held one meeting in 1997 at which all
members were present.
Compensation Committee
The Compensation Committee has responsibility for administering and
approving all elements of compensation for elected corporate officers and
certain other senior management positions. It also approves, by direct action or
through delegation, participation in and all awards, grants, and related actions
under the provisions of the 1995 Incentive Program and the Employee Stock
Purchase Plan. The committee reports to stockholders on executive compensation
items as required by the Securities and Exchange Commission (page 7). The
committee has responsibility for reviewing the Company's management resources
programs and for recommending qualified candidates to the Board for election as
officers.
Members of this committee are outside directors who are not officers or
employees of Box Hill or its subsidiaries. In the opinion of the Board, these
directors are independent of management and free of any relationship that would
interfere with their exercise of independent judgment as members of this
committee. The committee held one meeting in 1997 at which all members were
present.
Other Relationships
The Company and its subsidiaries purchase services, supplies and equipment
in the normal course business from many suppliers and similarly sell Box Hill
products and services to many customers. In some instances, these transactions
occur between Box Hill and other companies for whom members of Box Hill's Board
serve as executive officers. In 1997, none of these transactions was
individually significant or reportable.
The Company has purchased directors and officers indemnification insurance
coverage. This insurance covers directors and officers individually where
exposures exist other than those for which the Company is able to provide direct
indemnification. These policies run from September 16, 1997, through September
16, 1998, at a total cost of $230,000. The primary carrier is CHUBB Group of
Insurance Companies.
Dr. Monderer, Ms. Turchin and Mr. Mark Mays are the sole shareholders of
Box Hill Systems Europe, Ltd. ('Box Hill Europe'), which they formed in 1995 to
provide marketing and technical support services to the Company in connection
with European sales. They, along with Mr. Philip Black, are its directors. The
Company pays the operating expenses of Box Hill Europe's operations, which
consist solely of salaries for its employees and related expenses, plus a fee of
10% of total operating expenses, which fee is principally used to pay applicable
United Kingdom taxes. No sales of the Company's products or services are
effected through Box Hill Europe. None of Box Hill Europe's employees is an
officer or director or an affiliate of an officer or director of the Company.
For the years ended December 31, 1996 and 1997, the Company expensed $316,000,
and $395,000, respectively, in connection with such operation. In addition, the
Company had accounts payable to Box Hill Europe of $55,000 and $94,000 as of
December 31, 1996 and 1997, respectively. The Company is considering the
purchase of Box Hill Europe from the current shareholders.
Directors' Compensation
In July 1997, the Company adopted a compensation policy for its
non-employee directors. The policy provides that such directors shall receive an
annual fee of $25,000 payable in quarterly installments, and shall be reimbursed
for out-of-pocket expenses incurred in connection with attending meetings of the
Board of Directors or committees thereof. Directors who are employees of the
Company do not receive additional compensation for serving as directors.
The Company granted, under its Incentive Program, in connection with their
elections as Directors of the Company, options to (i) Mr. Conner in July 1997 to
purchase 346,500 shares of its Common Stock at a price of $12.73 per share, and
(ii) to Mr. Miller and Dr. Schwartz in August 1997 to purchase 173,250 and
10,000 shares, respectively, of its Common Stock at the initial public offering
price of $15.00 per share. The five-year options vest ratably over sixteen
quarters commencing on October 1, 1997.
5
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
The Company believes that during 1997 all reports for the Company's
executive officers and directors that were required to be filed under Section 16
of the Securities Exchange Act of 1934 were timely filed.
Ownership of Securities
The following tables reflect shares of Box Hill common stock beneficially
owned by the named persons, and the directors and executive officers as a group,
as of December 31, 1997. Also shown are shares which the named person could have
acquired within 60 days.
Security Ownership of Certain Beneficial Owners
The following table sets forth information as to the only persons known to
the Company, other than members of management, to be beneficial owners of more
than five percent of the Company's common stock as of December 31, 1997.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL PERCENT OF
NAME AND ADDRESS OWNERSHIP CLASS
- ------------------------------------------------------------ -------------------- ----------
<S> <C> <C>
(1) Pilgrim Baxter &
Associates, Ltd.
825 Duportail Road,
Wayne, PA 19087........................................... 1,171,400 8.3%
</TABLE>
- ------------------
(1) Based on Schedule 13G filed by Pilgrim Baxter & Associates, Ltd. with the
Securities and Exchange Commission dated January 20, 1998. The Schedule 13G
does not identify any shares with respect to which there is a right to
acquire beneficial ownership.
Common Stock and Total Stock-Based Holdings of Management
The following table sets forth the beneficial ownership of shares of the
Company's common stock as well as all other Box Hill stock-based holdings as of
December 31, 1997, by Box Hill's current directors and nominees, the executive
officers named in the Summary Compensation Table on page 8 and the directors and
officers as a group as of December 31, 1997. All persons listed have sole voting
and investment power with respect to their shares unless otherwise indicated.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME BENEFICIAL OWNERSHIP OUTSTANDING SHARES
- --------------------------------------------------- -------------------- ------------------
<S> <C> <C>
Benjamin Monderer (1).............................. 7,700,000 54.5%
Carol Turchin (1).................................. 7,700,000 54.5
Mark A. Mays (2)................................... 7,700,000 54.5
Philip Black (3)................................... 286,580 *
Finis F. Conner (3)................................ 43,312 *
Warren J. Fisher (3)............................... 5,412 *
Robert C. Miller (3)............................... 21,656 *
Mischa Schwartz (3)................................ 1,250 *
Directors and Executive Officers as a group (4).... 8,073,527 57.1%
</TABLE>
- ------------------
* Less than 1%
(Footnotes continued on next page)
6
<PAGE>
(Footnotes continued from previous page)
(1) Beneficial ownership includes 2,475,000 shares owned by such individual's
spouse and 2,750,000 shares owned by Mr. Mays, all of which shares are
subject to the voting agreement described below, as to which shares such
individual disclaims beneficial ownership.
(2) Beneficial ownership includes 4,950,000 shares owned by Dr. Monderer and Ms.
Turchin, all of which are subject to the voting agreement described below,
as to which shares Mr. Mays disclaims beneficial ownership.
(3) Beneficial ownership represents shares issuable upon exercise of options
exercisable within 60 days of December 31, 1997.
(4) Beneficial ownership includes 373,527 shares issuable upon exercise of
options exercisable within 60 days of December 31, 1997 by all directors and
executive officers as a group and by the wife of an officer who is also an
employee of the Company.
On July 31, 1997, Dr. Monderer, Ms. Turchin and Mr. Mays entered into a
voting agreement with respect to the share of each owns, effective with the
consummation of the Offering. Pursuant to the agreement, such shareholders have
agreed to vote their respective shares for the election of each thereof as a
Director of the Company and will vote their shares in accordance with the
determination of the holders of a majority of their shares as to any proposal to
merge, consolidate, liquidate or sell substantially all the assets of the
Company. The agreement, which is to terminate on December 31, 2009, or upon the
deaths of Dr. Monderer and Ms. Turchin, prohibits the transfer of their shares
other than (i) to a member of the transferor's family who agrees to be bound by
the agreement, (ii) pursuant to a sale exempt from registration pursuant to Rule
144 under the Securities Act or (iii) in a merger, consolidation or sale of
substantially all the assets of the Company.
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for administering the Company's
executive compensation policies and practices, and it approves all elements of
compensation for elected corporate officers and certain other senior management
positions. In carrying out its duties, the Compensation Committee has direct
access to independent compensation consultants and outside survey data. The
Compensation Committee reports regularly to the Board of Directors.
The Compensation Committee first met on October 29, 1997 and did not adopt
compensation policies for executive officers for 1997. Compensation for Mr.
Black, the Chief Executive Officer, in 1997 was determined pursuant to his
employment contract, entered into during May of 1995, prior to Box Hill's
initial public offering. The Compensation Committee intends to establish
compensation policies applicable to executive officers for 1998.
Finis F. Conner
Robert C. Miller
Mischa Schwartz
Executive Compensation
The following table sets forth all compensation awarded to, earned by or
paid for services rendered to the Company in all capacities during the fiscal
years ended December 31, 1997 and 1996 for (i) the Company's Chief Executive
Officer and (ii) the Company's four most highly compensated other executive
officers whose salary, bonus and other compensation for such year exceeded
$100,000.
7
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION(1) COMPENSATION
-------------------------------------- AWARDS
OTHER ANNUAL (# OF ALL OTHER
NAME AND PRINCIPAL POSITIONS* YEAR SALARY BONUS COMPENSATION OPTIONS) COMPENSATION
- ---------------------------------- ---- -------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Philip Black 1997 $290,975 $ 149,065
Chief Executive Officer 1996 $282,289 $ 72,630
Benjamin Monderer 1997 $354,932 $3,063,179(2) $ 39,803(4)
Chairman of the Board; 1996 $281,910 $2,603,375(2)
President; Chief Technical
Officer
Carol Turchin 1997 $340,297 $3,063,179(2)
Executive Vice President 1996 $278,489 $2,603,375(2)
Mark A. Mays 1997 $308,668 $ 449,642(2)
Vice President, Secretary 1996 $278,489 $ 295,250(2)
Warren J. Fisher 1997 $108,692 $191,460(3)
Vice President--Sales 1996 $101,392 $135,415(3) 13,530 $ 50,000(5)
</TABLE>
- ------------------
* Reflects the position or positions of such officers as of December 31, 1997.
(1) Represents amounts paid in 1997 and 1996.
(2) 1997 and 1996 bonuses paid to Mr. Monderer, Ms. Turchin and Mr. Mays were
calculated in accordance with their compensation schemes which existed prior
to their employment contracts dated September 22, 1997.
(3) Represents commissions paid in 1997 and 1996.
(4) Represents amounts paid in 1997 prior to the initial public offering of the
Company's Common Stock in September, 1997 to two employees of the Company
who provide housekeeping and domestic services for Mr. Monderer which are
not Company related. Following the initial public offering, the Company
continues to employ these individuals and Mr. Monderer reimburses the
Company for the full amount of their salary, benefits and related expenses.
(5) Represents moving expenses paid in 1996.
EMPLOYMENT AND COMPENSATION AGREEMENTS
The Company has entered into employment agreements with Dr. Monderer, Ms.
Turchin and Mr. Mays. The agreements are for a term commencing September 22,
1997 and ending December 31, 2000 and provide for annual base compensation of
$500,000, $425,000 and $350,000, respectively, for Dr. Monderer, Ms. Turchin and
Mr. Mays, for the period ending December 31, 1998 with the compensation for the
remaining two years to be not less than the prior year's base compensation,
adjusted for increases in the Consumer Price Index. The agreements also provide
for an annual bonus of (i) 0.5% of the net revenues in excess of $100,000,000
for each of Dr. Monderer and Ms. Turchin and (ii) 4.0%, 2.5% and 1.5% of the net
pre-tax income above $20,000,000, respectively, for Dr. Monderer, Ms. Turchin
and Mr. Mays, for any year ending during the term of the agreements. The
employment agreements with Dr. Monderer and Ms. Turchin provide that the Company
is to secure term life insurance on the life of each of them in the amount of at
least $1,000,000 for the benefit of his or her spouse. Each of their employment
agreements also provides that in the event of the employee's death, the Company
will pay the employee's spouse the employee's base compensation for twelve
months following such death at the rate payable immediately prior to such death,
plus the amount of any bonus which would have been earned during the following
12 months, and that in event of termination due to disability as defined in the
agreement, the Company will pay his or her base compensation for the
twelve-month period following such termination at the rate payable immediately
prior to such termination.
8
<PAGE>
In May 1995, the Company entered into a Compensation Plan and Agreement
(the 'Compensation Plan') with Mr. Philip Black. The Compensation Plan provides
that Mr. Black's employment with the Company is at will. The agreement provides
for an annual base salary of $275,000, plus a bonus, based on the Company's net
revenues and pre-tax income for the immediately prior calendar year, of: (i)
0.05% of the net revenues up to $100,000,000 plus 0.5% of the net revenues in
excess of $100,000,000 for the period and (ii) 1.12% of the pre-tax income, as
defined, up to $20,000,000, plus 4.0% of the pre-tax income above $20,000,000
for the period.
The Compensation Plan may be terminated at the option of either the Company
or Mr. Black for convenience and without cause at any time upon 30 days prior
written notice. If so terminated by the Company, Mr. Black is entitled to a
severance payment equal to his annual salary and aggregate bonus for the
calendar year prior to the termination, but not more than $600,000 in the
aggregate. The employment agreements and the Compensation Plan contain a
non-competition covenant for a one-year period following termination of
employment.
PERFORMANCE GRAPH
$100 invested on 9/17/97 in stock or index--including reinvestment of dividends
fiscal year ending December 31.
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
------------------------------------------------------
9/17/97 9/30/97 10/31/97 11/30/97 12/31/97
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Box Hill Sys Corp........................................ BXH 100 117 103 78 70
PEER GROUP............................................... 100 104 104 111 103
S&P 500.................................................. 100 100 97 102 103
</TABLE>
The Performance Graph compares the cumulative total return for Box Hill
Common Stock from September 17, 1997, the date of the initial public offering of
Box Hill Common Stock, through December 31, 1997, with the comparable cumulative
return of the Standard & Poors 500 Stock Index and the common stock of a group
of peer issuers. The group of peer issuers consists of fourteen companies whose
common stock is publicly traded which operate in the computer data storage
industry.
9
<PAGE>
2. RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has appointed the firm of Arthur Andersen LLP,
independent accountants, to be Box Hill's auditors for the year 1998 and
recommends to stockholders that they vote for ratification of that appointment.
Arthur Andersen LLP served in this capacity for the year 1997. Its
representatives will be present at the Annual Meeting and will have an
opportunity to make a statement and be available to respond to appropriate
questions.
On January 6, 1997, the Company engaged Arthur Andersen LLP as its
independent public accountants to audit the financial statements as of December
31, 1996 and for the year then ended. The decision to change accountants was
approved by the Board of Directors. The report of the predecessor auditor,
Perelson Weiner, on the Company's financial statements, as of December 31, 1995
and for the year ended December 31, 1995, does not contain an adverse opinion or
a disclaimer of opinion and was not qualified or modified as to uncertainty,
audit scope or accounting principles. In connection with the audit of the
Company's financial statements for the year ended December 31, 1995 and in the
subsequent interim period prior to the change, there were no disagreements with
the former auditors or any matters of accounting principles or practices,
financial statement disclosure, or auditing scope or procedures which, if not
resolved to the former auditor's satisfaction, would have caused them to make
reference to the subject matter in their report. Prior to retaining Arthur
Andersen LLP, the Company did not consult with Arthur Andersen LLP regarding the
application of accounting principles to a specified transaction, the type of
audit opinion that might be rendered on the Company's financial statements, or
any other matter.
The appointment of auditors is approved annually by the Board and
subsequently submitted to the stockholders for ratification. The decision of the
Board is based on the recommendation of the Audit Committee, which reviews and
approves in advance the audit scope, the types of nonaudit services to ensure
that they will not impair the independence of the accountants.
Before making its recommendation to the Board for appointment of Arthur
Andersen LLP, the Audit Committee carefully considered that firm's
qualifications as auditors for the Company. This included a review of its
performance in prior years, as well as its reputation for integrity and
competence in the fields of accounting and auditing. The committee has expressed
its satisfaction with Arthur Andersen LLP in all of these respects.
THE BOX HILL SYSTEMS CORP. BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS
PROPOSAL.
3. STOCKHOLDER PROPOSALS
Stockholder proposals may be submitted for inclusion in Box Hill's 1999
proxy material after the 1998 Annual Meeting. Proposals must be received no
later than 5 p.m. EST on November 31, 1998. Proposals must be in writing and
sent via registered, certified, or express mail to: Box Hill Systems Corp., 161
Avenue of the Americas, New York, NY 10013. Facsimile or other forms of
electronic submissions will not be accepted.
OTHER BUSINESS
Management knows of no other matters that may properly be or are likely to
be, brought before the meeting. If other proper matters are introduced, the
individuals named as Proxies on the enclosed Proxy Card will vote the shares it
represents.
PROXIES AND VOTING AT THE MEETING
The common stock, $.01 par value of the Company is its only class of
security entitled to vote at the May 6, 1998, meeting. Each stockholder of
record at the close of business on April 6, 1998, is entitled to vote for each
share held. The Proxy Card covers the number of shares to be voted. On March 2,
1998, there were 14,223,422 common shares outstanding and entitled to be voted.
Directors are elected by a majority of votes cast. A majority of the votes
cast is required to ratify the appointment of auditors. Under the law of New
York, Box Hill's state of incorporation, 'votes cast' at a meeting of
stockholders by the holders of shares entitled to vote are determinative of the
outcome of the matter
10
<PAGE>
subject to vote. Abstentions, broker non-votes, and withheld votes will not be
considered 'votes cast' based on current state law requirements and Box Hill's
Certificate of Incorporation and By-laws.
All stockholder meeting proxies, ballots and tabulations that identify
individual stockholders are kept secret, and no such document shall he available
for examination, nor shall the identity or the vote of any stockholder be
disclosed except as may be necessary to meet legal requirements under the laws
of New York, Box Hill's state of incorporation. Votes are counted by employees
of American Stock Transfer & Trust Company, Box Hill's independent transfer
agent and registrar, and certified by the Inspectors of Election who are
employees of American Stock Transfer & Trust Company.
Shares cannot be voted unless a signed Proxy Card is returned or other
specific arrangements are made to have shares represented at the meeting. Any
stockholder giving a proxy may revoke it at any time before it is voted. If a
stockholder wishes to give a proxy to someone other than the individuals named
as Proxies on the Proxy Card, he or she may cross out the names appearing on the
enclosed Proxy Card, insert the name of some other person, sign, and give the
Proxy Card to that person for use at the meeting.
Stockholders are encouraged to specify their choices by marking the
appropriate boxes on the enclosed Proxy Card. Shares will be voted in accordance
with such instructions. However, it is not necessary to mark any boxes if you
wish to vote in accordance with the Board of Directors' recommendations; merely
sign, date, and return the Proxy Card in the enclosed envelope.
Solicitation of proxies is being made by the Company through the mail, in
person, and by telecommunications. The cost thereof will be borne by the
Company.
Dated: March 31, 1998
11
<PAGE>
Proxy Card
BOX HILL SYSTEMS CORP.
161 AVENUES OF THE AMERICAS
NEW YORK, NY 10013
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Benjamin Monderer and Philip Black as
Proxies, each with power to appoint his substitute, and hereby authorizes them
to represent and to vote, as designated below, all the shares of Common Stock of
Box Hill Systems Corp. ('Box Hill') held of record by the undersigned on March
20, 1998 at the annual meeting of shareholders of Box Hill to be held on May 6,
1998 or any adjournment thereof, upon such business as may properly come before
the meeting, including the items on the reverse side of this form as set forth
in the Notice of 1998 Annual meeting and Proxy Statement dated March 31, 1998.
<PAGE>
/X/ Please mark your votes as in this example.
1. Election of directors
/ / FOR / / WITHHELD
FOR, except vote WITHHELD from the following nominees:
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NOMINEES: Philip Black, Benjamin Monderer, Carol Turchin, Mark A. Mays,
Finis F. Conner, Robert C. Miller and Mischa Schwartz
2. A proposal to ratify the appointment of Arthur Andersen LLP as auditors
for 1998
/ / FOR / / AGAINST / / ABSTAIN
Signature(s)
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Note: Please sign exactly as name appears hereon. Joint owners
should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title
as such.
Date
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