<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
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
SEQUOIA SYSTEMS, INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
SEQUOIA SYSTEMS, INC.
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________________
[_] 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>
(ART)
NOTICE OF 1995 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD TUESDAY, MARCH 12, 1996
The Annual Meeting of Stockholders of Sequoia Systems, Inc. (the "Company")
will be held at the Radisson Inn, 75 Felton Street, Marlborough,
Massachusetts, on Tuesday, March 12, 1996 at 9:00 a.m., local time, to
consider and act upon the following matters:
1. To elect three Class II Directors for the ensuing three years.
2. To approve the Company's 1996 Long-Term Incentive Plan.
3. To ratify the appointment of Coopers & Lybrand L.L.P. as the Company's
independent accountants for the 1996 fiscal year.
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on January 19, 1996
as the record date for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting and any adjournment or postponement thereof.
The Company's 1995 Annual Report was mailed to all stockholders on or about
November 3, 1995.
You are cordially invited to attend the Annual Meeting in person. However,
to ensure your representation at the Annual Meeting, you are urged to review
the enclosed Proxy Statement and to sign and return the enclosed proxy card in
the enclosed prepaid envelope as promptly as possible. If you attend the
meeting and desire to revoke your proxy and vote in person, you may, of
course, do so. In all cases, a proxy may be revoked at any time before its
exercise in the manner specified herein.
Sincerely,
Jeremy F. Swett
Secretary
Marlborough, Massachusetts
January 31, 1996
<PAGE>
SEQUOIA SYSTEMS, INC.
400 NICKERSON ROAD
MARLBOROUGH, MASSACHUSETTS 01752
PROXY STATEMENT FOR THE 1995 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 12, 1996
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Sequoia Systems, Inc. (the
"Company" or "Sequoia") for use at the Annual Meeting to be held on Tuesday,
March 12, 1996, at the Radisson Inn, 75 Felton Street, Marlborough,
Massachusetts 01752, commencing at 9:00 a.m., local time, and at any
adjournment or postponement thereof (the "Annual Meeting"). All proxies will
be voted in accordance with the instructions therein, and, if no choice is
specified, the proxies will be voted in favor of the matters set forth in the
accompanying Notice of Meeting. If any other matters are properly presented at
the Annual Meeting for consideration the persons named in the enclosed form of
proxy and acting thereunder will have discretion to vote on such matters in
accordance with their best judgment. Any proxy may be revoked by a stockholder
at any time before it is exercised by delivery of written revocation to the
Secretary of the Company.
On January 19, 1996, the record date for the determination of stockholders
entitled to vote at the Annual Meeting, there were outstanding and entitled to
vote 15,469,142 shares of common stock, par value $.40 per share, of the
Company ("Common Stock"), each share of which is entitled to one vote on each
of the matters to be voted upon at the meeting.
This Proxy Statement and Notice of Annual Meeting and the accompanying form
of proxy are first being mailed to stockholders on or about the date of this
Proxy Statement.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of December 15, 1995
with respect to the beneficial ownership of Common Stock by: (i) each person
known by the Company to own beneficially more than 5% of the outstanding
shares of Common Stock; (ii) each director; (iii) each executive officer named
in the Summary Compensation Table under the heading "Executive Compensation;"
and (iv) all directors and executive officers as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF COMMON
NAME AND ADDRESS OF 5% BENEFICIAL OWNER BENEFICIALLY OWNED(1)(2) STOCK OUTSTANDING(2)
--------------------------------------- ------------------------ --------------------
<S> <C> <C>
W. Wayne Patterson.............. 1,952,800(3) 12.7%
101 Westcott 1503C
Houston, Texas 77007
DIRECTORS AND EXECUTIVE OFFICERS
--------------------------------
Francis J. Hughes, Jr........... 308,071(4) 2.0
Dean C. Campbell................ 50,504(5) *
A. Theodore Engkvist............ 22,000(6) *
Dennis M. Malloy................ 18,500(7) *
John F. Smith................... 17,000(8) *
Cornelius P. McMullan........... 96,655(9) *
Richard B. Goldman.............. 57,321(10) *
William C. Gould................ 43,550(11) *
J. Michael Stewart.............. 1,993,117(12) 12.9
Jack J. Stiffler................ 130,528(13) *
Ronald J. Gellert............... -- (14) *
All Directors and Executive
Officers as a group
(13 persons)................... 2,793,982(15) 18.1
</TABLE>
- --------
* Less than 1%
<PAGE>
(1) The inclusion herein of any shares of Common Stock deemed beneficially
owned does not constitute an admission of beneficial ownership of those
shares by the respective stockholders. Unless otherwise indicated, each
stockholder referred to above has sole voting and investment power with
respect to the shares listed.
(2) For purposes of this table, the number of shares of Common Stock of the
Company owned by each director or executive officer is determined under
the rules of the Securities and Exchange Commission (the "Commission")
and the information is not necessarily indicative of beneficial ownership
for any other purpose. Under such rules, beneficial ownership includes
any shares of Common Stock as to which each director or executive officer
has sole or shared voting or investment power and also any shares of
Common Stock with respect to which any options held by such director or
executive officer are exercisable within 60 days after December 15, 1995.
(3) Includes 1,725,480 shares owned directly or indirectly by Mr. Patterson
and 227,320 shares belonging to Mr. Patterson's children under the Texas
Uniform Gift to Minors Act, as to which he disclaims beneficial
ownership.
(4) Includes (i) 178,571 shares owned by American Research and Development
II, L.P. ("ARD") of which Mr. Hughes is a general partner (or a general
partner of a general partner), and (ii) 37,500 shares issuable pursuant
to stock options which are exercisable by ARD within 60 days after
December 15, 1995, as to each of which Mr. Hughes disclaims beneficial
ownership. Also includes 1,500 shares held by Mr. Hughes and 90,500
shares issuable pursuant to stock options which are exercisable by Mr.
Hughes within 60 days after December 15, 1995.
(5) Comprised of 25,504 shares owned by Mr. Campbell and 25,000 shares
issuable pursuant to stock options which are exercisable by Mr. Campbell
within 60 days after December 15, 1995.
(6) Comprised of 5,000 shares owned by Mr. Engkvist and 17,000 shares
issuable pursuant to stock options which are exercisable by Mr. Engkvist
within 60 days after December 15, 1995.
(7) Comprised of 4,000 shares owned by Mr. Malloy and 14,500 shares issuable
pursuant to stock options which are exercisable by Mr. Malloy within 60
days after December 15, 1995.
(8) Comprised of 17,000 shares issuable pursuant to stock options which are
exercisable by Mr. Smith within 60 days after December 15, 1995.
(9) Comprised of 44,384 shares owned by Mr. McMullan and 52,271 shares
issuable pursuant to stock options which are exercisable by Mr. McMullan
within 60 days after December 15, 1995.
(10) Comprised of 57,321 shares issuable pursuant to stock options which are
exercisable by Mr. Goldman within 60 days after December 15, 1995.
(11) Comprised of 3,000 shares owned by Mr. Gould and 40,550 shares issuable
pursuant to stock options which are exercisable by Mr. Gould within 60
days after December 15, 1995.
(12) Includes 959,043 shares owned by Mr. Stewart's wife and 113,574 shares
owned by his children under the Texas Uniform Gift to Minors Act (as to
which children's' shares he disclaims beneficial ownership) and 11,457
shares issuable pursuant to stock options which are exercisable by Mr.
Stewart within 60 days after December 15, 1995.
(13) Comprised of 42,562 shares held by Mr. Stiffler, 390 shares owned by Mr.
Stiffler's wife (as to which Mr. Stiffler disclaims beneficial ownership)
and 87,576 shares issuable pursuant to stock options which are
exercisable by Mr. Stiffler within 60 days after December 15, 1995.
(14) Mr. Gellert resigned from the Company September 29, 1995.
(15) Includes an aggregate of 505,411 shares which all executive officers and
directors have the right to acquire under outstanding stock options
exercisable within 60 days after December 15, 1995. Also includes those
shares listed above the beneficial ownership of which is disclaimed.
VOTES REQUIRED
The presence, in person or by properly executed proxy, of the holders of a
majority of the outstanding shares of Common Stock entitled to vote at the
Annual Meeting is necessary to constitute a quorum at the Annual Meeting.
2
<PAGE>
Shares of Common Stock represented in person or by proxy at the Annual
Meeting (including shares which abstain or do not vote with respect to one or
more of the matters presented at the meeting) will be tabulated by the
inspectors of election appointed for the Annual Meeting and will determine
whether or not a quorum is present. The inspectors of election will treat
abstentions as shares that are present and entitled to vote with respect to
any particular matter, but such abstentions will not be counted as a vote in
favor of such matter. Accordingly, an abstention from voting on a matter by a
stockholder present in person or represented by proxy at the Annual Meeting
has the same legal effect as a vote "against" the matter. If a broker holding
Common Stock in "street name" indicates on the proxy that it does not have
discretionary authority as to certain shares to vote on a particular matter,
those shares will not be considered as present and entitled to vote with
respect to that matter. Therefore, a "broker non-vote" on a matter has no
effect on the voting on such matter.
Assuming that a quorum is present, the votes required at the Annual Meeting
are as follows: The approval of the Director Proposal will require the
affirmative vote of a plurality of the votes cast for the election of
directors. The approval of the 1996 Long Term Incentive Plan Proposal and the
Accountants Proposal will require the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock present or represented by
proxy at the Annual Meeting.
ITEM 1 ELECTION OF DIRECTORS
Sequoia has a classified Board consisting of two Class I Directors, three
Class II Directors and two Class III Directors. Pursuant to Sequoia's bylaws,
directors are elected for terms ending on the date of the third annual meeting
following the annual meeting at which any given director is elected.
The persons named in the enclosed proxy will vote to elect as Class II
Directors Francis J. Hughes, Jr., A. Theodore Engkvist and Dennis M. Malloy
(the "Nominees"), unless the proxy is marked otherwise. Each Nominee is
currently a director of the Company. Sequoia has no nominating committee and
all nominations are made by the Sequoia Board. The Nominees have indicated
their willingness to serve, if elected; however, if any Nominee should be
unable to serve, the proxies may be voted for a substitute nominee designated
by the Board.
There are no family relationships between or among any officers or directors
of Sequoia.
The following table sets forth the name, age, length of service as a
director of each member of the Board, including the Nominees, information
given by each concerning all positions he has held with the Company, his
principal occupation and business experience for the past five years and the
names of other publicly held companies of which he serves as a director:
NOMINEES FOR TERM EXPIRING IN 1998 (CLASS II DIRECTORS)
FRANCIS J. HUGHES, JR.
Mr. Hughes, age 45, has been a director of the Company since 1987. He is
President of American Research & Development Corporation, a venture capital
firm, and has been associated with that firm and its predecessors since 1982.
Mr. Hughes is also a director of Ceramics Process Systems Corporation and R.
F. Monolithics, Inc.
A. THEODORE ENGKVIST
Mr. Engkvist, age 60, has been a director of the Company since 1994. He has
been President of ENJO Consulting, a management consulting company, since
1992. He is a retired officer of NYNEX Corporation where he held a number of
executive positions during a lengthy career. Mr. Engkvist is also a director
of Cycare Systems, Inc.
DENNIS M. MALLOY
Mr. Malloy, age 47, first became a director of the Company effective March
31, 1995. He has been President of Malloy's Cash Register Company since 1984.
3
<PAGE>
DIRECTORS WHOSE TERMS EXPIRE IN 1996 (CLASS III DIRECTORS)
J. MICHAEL STEWART
Mr. Stewart, age 48, became a director of the Company on March 31, 1995. He
is President and Chief Executive Officer of the Company; from March 31, 1995
until January 30, 1996, he was Executive Vice President of the Company and
President and Chief Operating Officer of Texas Microsystems, Inc., a wholly-
owned subsidiary of the Company.
A vacancy exists in Class III as the result of the resignation of Cornelius P.
McMullan on January 30, 1996.
DIRECTORS WHOSE TERMS EXPIRE IN 1997 (CLASS I DIRECTORS)
DEAN C. CAMPBELL
Mr. Campbell, age 45, has been a director of the Company since 1989. He is
General Partner of Campbell Venture Management, L.P. and has been associated
with that firm and its predecessors since 1982. Mr. Campbell is also a
director of Telco Systems Corp. and R. F. Monolithics, Inc.
JOHN F. SMITH
Mr. Smith, age 60, has been a director of the Company since 1993. He is
President of Mycos International, Inc., a real estate development company,
and, since 1993, the retired Senior Vice President and Chief Operating Officer
of Digital Equipment Corporation where he held a number of executive positions
over many years. Mr. Smith is also a director of Instron Corporation, Hadco
Corporation and PerSeptive Biosystems, Inc.
BOARD AND COMMITTEE MEETINGS
The Company has standing Audit and Compensation Committees. The Audit
Committee provides the opportunity for direct contact between the Company's
independent accountants and the Board. The Audit Committee has responsibility
for recommending the appointment of Sequoia's independent accountants,
reviewing the scope and results of audits and reviewing the Company's internal
accounting control policies and procedures. During the fiscal year ended June
30, 1995, the Audit Committee consisted of Messrs. Campbell, Engkvist, Hughes
and Smith and held six meetings.
The Compensation Committee is responsible for establishing and administering
the policies which govern both annual compensation and, in conjunction with
the full Sequoia Board, equity ownership. During the fiscal year ended June
30, 1995, the Compensation Committee consisted of Messrs. Campbell, Hughes and
Smith and held five meetings.
The Board held eight meetings during the fiscal year ended June 30, 1995.
During fiscal 1995, each director attended at least 75% of the total number of
meetings of the Sequoia Board and all committees of the Sequoia Board on which
he served.
EXECUTIVE OFFICERS
Executive officers are elected by the Board annually at its meeting
immediately following the Annual Meeting of Stockholders and hold office until
the next annual meeting unless they sooner resign or are removed from office.
4
<PAGE>
The following table lists the name, age and position of the current
executive officers of Sequoia.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
J. Michael Stewart.. 48 President and Chief Executive Officer
Richard B. Goldman.. 49 Executive Vice President and Chief Financial
Officer
William C. Gould.... 57 Executive Vice President, General Manager,
Enterprise Systems
Jack J. Stiffler.... 61 Executive Vice President, Chief Technical Officer
and General Manager, Technology Business Unit
David A. Butler..... 51 Vice President and Treasurer
Jeremy F. Swett..... 52 Vice President, General Counsel and Secretary
</TABLE>
Mr. Stewart is a co-founder of Texas Microsystems, Inc. and served as its
President and Chief Operating Officer from 1975 until his election on January
30, 1996 as President and Chief Executive Officer of the Company.
Mr. Goldman joined Sequoia in October 1992 as Vice President, Finance, and
Chief Financial Officer and was elected to his present office in August 1995.
He also served as Co-Chief Executive Officer from October 1992 until December
1992 and Secretary from March 1993 until December 1994. Mr. Goldman was Senior
Vice President and Chief Financial Officer of Connell Limited Partnership, a
diversified manufacturing group of companies, from May 1991 until he joined
Sequoia and was Vice President of Finance, Treasurer and Chief Financial
Officer of Alliant Computer Systems, Inc. from May 1990 until May 1991. On May
26, 1992, Alliant filed for protection under Federal bankruptcy laws. Before
his association with Alliant, Mr. Goldman was employed for more than ten years
by Prime, most recently as Vice President of Finance, Administration and
Planning and Chief Financial Officer from January 1988 to October 1989.
Mr. Gould joined Sequoia in July 1991 as Vice President of Software
Engineering and served as Vice President, Customer Service from April 1993 to
July 1995 when he assumed his current position. Prior to joining Sequoia, Mr.
Gould was Vice President, Software Engineering at Apollo Computer, Inc. from
1988 to 1991.
Dr. Stiffler, a co-founder of Sequoia, has served as Chief Technical Officer
since Sequoia's formation in 1981 and has served as Executive Vice President
since October 1987 and General Manager, Technology Business Unit since July
1993. Dr. Stiffler is an inventor under ten patents for error-control coding
and computer technology.
Mr. Butler joined Sequoia in January 1988 as Vice President, Finance, Chief
Financial Officer and Treasurer and has served as Vice President and Treasurer
since August 1990.
Mr. Swett joined Sequoia as General Counsel in June 1994 and was elected
Vice President, General Counsel and Secretary in December 1994. Prior to
joining Sequoia, Mr. Swett was employed by Wyman-Gordon Company, a
manufacturer of aerospace components, as Associate General Counsel from 1992
to 1994 and as Corporate Counsel from 1980 to 1992.
DIRECTORS' COMPENSATION
Sequoia's non-employee directors are paid a fee of $1,750 for each meeting
attended (up to a maximum of six meetings per year) and are reimbursed for
out-of-pocket expenses incurred in attending Board and Committee meetings.
Each non-employee director then serving as a director also received an option
to purchase 2,500 shares of Sequoia Common Stock on July 1, 1994 at an
exercise price of $3.6875 per share under Sequoia's 1990 Outside Directors'
Stock Option Plan (the "1990 Directors' Plan"). The 1990 Directors' Plan has
expired and was replaced by the 1995 Outside Directors' Stock Option Plan,
which provides substantially similar benefits.
5
<PAGE>
Under a consulting agreement with the Company, Francis J. Hughes, Jr.,
Chairman of the Board, is eligible to receive $1,000 per day for consulting
services (up to a maximum of $7,500 per month). Mr. Hughes did not provide any
consulting services or receive any payments under this agreement during fiscal
1995.
Under a consulting agreement with the Company, John F. Smith, a director of
the Company, is eligible to receive $2,500 per day for consulting services.
Mr. Smith did not provide any consulting services or receive any payments
under this agreement during fiscal 1995.
Directors who are officers or employees of Sequoia do not receive any
additional compensation for their services as directors.
NAMED EXECUTIVE OFFICERS' COMPENSATION
The following table sets forth all cash and non-cash compensation for each
of the last three fiscal years awarded to or earned by the President and Chief
Executive Officer, the four other most highly compensated executive officers
of Sequoia whose cash compensation exceeded $100,000 during the fiscal year
ended June 30, 1995 and J. Michael Stewart as Executive Vice President and
President and Chief Operating Officer of Texas Microsystems, Inc. (such six
executive officers are collectively referred to herein as the "named executive
officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------------------- -----------------------------
AWARDS PAYOUTS
--------------------- -------
OTHER RESTRICTED SECURITIES
NAME AND ANNUAL STOCK UNDERLYING LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARD(S) OPTIONS PAYOUT COMPENSATION
------------------ ---- ----------- -------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cornelius P. 1995 $216,922 $ 90,828 N/A N/A 50,000 N/A $3,048(1)
McMullan(9)............ 1994 $206,511 $ 84,000 N/A N/A 120,000 N/A $2,690(2)
President and Chief 1993 $123,076(3) $ 36,000 N/A N/A 60,000 N/A $1,345(2)
Executive Officer
Richard B. Goldman...... 1995 $190,438 $ 51,156 N/A N/A 15,000 N/A $1,343(2)
Executive Vice 1994 $177,384 $ 93,875 N/A N/A 20,000 N/A $2,391(2)
President and Chief 1993 $128,776(4) $ 37,500 $ 1,128(5) N/A 100,000 N/A $ 712(2)
Financial Officer
William C. Gould........ 1995 $136,892 $ 38,141 N/A N/A 15,000 N/A $2,466(2)
Executive Vice 1994 $130,210 $ 65,000 N/A N/A 15,000 N/A $1,232(2)
President, and General 1993 $113,586 N/A $ 1,773(5) N/A 24,700 N/A $1,232(2)
Manager, Enterprise
Systems
J. Michael Stewart(10).. 1995 $ 43,269(7) $ 22,156 N/A N/A 50,000 N/A N/A
Executive Vice 1994 N/A(7) 0 N/A N/A N/A N/A N/A
President; President 1993 N/A(7) 0 N/A N/A N/A N/A N/A
and Chief Operating
Officer, Texas
Microsystems
Jack J. Stiffler........ 1995 $183,749 $ 42,715 N/A N/A 0 N/A $5,167(2)
Executive Vice 1994 $177,384 $ 78,750 N/A N/A 25,000 N/A $1,043(2)
President, General 1993 $168,942 N/A $13,426(5) N/A 16,000 N/A $3,589(6)
Manager Technology
Business Unit and Chief
Technical Officer
Ronald J. Gellert (11).. 1995 $159,692 $ 76,786 N/A N/A N/A $1,914(8)
Vice President, General 1994 $139,326 $103,302 N/A N/A 15,000 N/A $1,352(2)
Manager Systems 1993 $105,000 $ 55,500 N/A N/A 35,700 N/A $1,092(2)
Business
</TABLE>
- --------
(1) Represents $2,419, the value of group term life insurance paid by the
Company, and $629 for tax services.
(2) Represents the value of group term life insurance paid by the Company.
6
<PAGE>
(3) Mr. McMullan's salary figure includes $28,461 earned as Vice President,
Worldwide Sales and Strategic Accounts from November 16, 1992 through
January 8, 1993. Mr. McMullan's 1993 annual salary as President and Chief
Executive Officer was $200,000.
(4) Mr. Goldman's 1993 annual salary was $175,000.
(5) Represents vacation buy-out amount.
(6) Represents $3,089, the value of group term life insurance paid by the
Company, and $500 for tax services.
(7) Represents salary paid to Mr. Stewart by the Company subsequent to the
March 31, 1995 merger with Texas Microsystems, Inc. during the period
March 31, 1995 through June 30, 1995, based on an annual salary of
$187,500. Prior to such merger, Mr. Stewart was compensated in the form of
a fee paid pursuant to an Operating and Management Agreement with Texas
Microsystems Inc. which terminated on the effective date of the Merger.
(8) Represents $1,114, the value of group term life insurance paid by the
Company, and $800 for tax services.
(9) Mr. McMullan resigned from the Company effective January 30, 1996.
(10) Mr. Stewart was elected President and Chief Executive Officer of the
Company effective January 30, 1996.
(11) Mr. Gellert resigned from the Company effective September 29, 1995.
OPTION GRANTS AND EXERCISES
The following tables summarize (i) option grants and exercises during fiscal
1995 to or by the named executive officers, and (ii) the value of the options
held by such persons at the end of fiscal 1995. No stock appreciation rights
("SARs") were granted during fiscal 1995.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------
POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED ANNUAL RATE OF
SECURITIES TOTAL OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM (3)
OPTIONS EMPLOYEES BASE PRICE EXPIRATION ---------------------------
NAME GRANTED (1) IN FISCAL YEAR PER SHARE (2) DATE 5% 10%
---- ----------- -------------- ------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Cornelius P. McMullan... 50,000 10% $3.8125 10/24/04 $119,883 $303,807
Richard B. Goldman...... 15,000 3% $3.625 11/8/04 $ 34,196 $ 86,660
J. Michael Stewart...... 50,000 10% $4.00 3/31/05 $125,779 $318,748
William C. Gould........ 15,000 3% $3.6875 7/1/04 $ 34,786 $ 88,154
Jack J. Stiffler........ -- -- -- -- -- --
Ronald J. Gellert....... 15,000 3% $3.6875 7/1/04 $ 34,786 $ 88,154
</TABLE>
- --------
(1) Options generally become exercisable at the rate of 1/48th of the shares
subject to the option commencing on the first day of the first month
immediately following the month of grant and the first of each month
thereafter.
(2) The exercise price of each option grant was equal to the fair market value
of the Common Stock on the date of grant.
(3) Amounts represent hypothetical gains that could be achieved for the
options if exercised at the end of the option terms. These gains are based
on assumed rates of stock appreciation of 5% and 10% compounded annually
from the date the respective options were granted and are not intended to
forecast future appreciation of the price of the Common Stock. The named
executive officers will realize no gain upon the exercise of these options
without an increase in the price of the Common Stock, which increase will
benefit all Sequoia stockholders proportionately.
7
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED VALUE AT FISCAL YEAR-END AT FISCAL YEAR-END
NAME ON EXERCISE REALIZED(1) EXERCISABLE / UNEXERCISABLE EXERCISABLE / UNEXERCISABLE
---- ----------- ----------- --------------------------- ---------------------------
<S> <C> <C> <C> <C>
Cornelius P. McMullan... -- -- 107,790 / 122,210 $194,917 / $165,708
Richard B. Goldman...... -- -- 37,202 / 53,155 $ 58,103 / $ 69,486
J. Michael Stewart...... -- -- 4,165 / 45,835 $ 1,041 / $ 11,459
William C. Gould........ -- -- 34,880 / 19,820 $ 65,716 / $ 24,934
Jack J. Stiffler........ -- -- 90,280 / 19,489 $229,662 / $ 27,683
Ronald J. Gellert....... -- -- 43,999 / 27,826 $ 86,735 / $ 40,946
</TABLE>
- --------
(1) On January 25, 1996, the last reported sales price of Sequoia Common Stock
on the Nasdaq National Market was $4.375 per share.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board (the "Compensation Committee") is
composed of non-employee directors of Sequoia. The Compensation Committee is
responsible for establishing and administering the policies which govern both
annual compensation and, in conjunction with the full Board, equity ownership.
This report is submitted by the Compensation Committee and addresses
Sequoia's policies for the fiscal year ended June 30, 1995 as they apply to
Cornelius P. McMullan, the President and Chief Executive Officer of Sequoia
during such fiscal year, and all of Sequoia's executive officers other than
Mr. McMullan.
Executive Compensation Philosophy
The Compensation Committee uses its compensation program to achieve the
following objectives:
. To attract and retain superior talent and reward performance.
. To align management's interest with the success of Sequoia in resolving
Sequoia's most critical strategic and operational issues by placing a
portion of cash compensation at risk in relation to management's
resolution of such issues and Sequoia's performance.
. To align management's interests with Sequoia stockholders by including
long-term equity incentives.
. To increase profitability of Sequoia and, accordingly, increase
stockholder value.
The Compensation Committee believes that the executive compensation program
provides an overall level of compensation that is competitive within the
computer industry and among companies of comparable size and complexity. For
fiscal year 1995, the key goal facing the Compensation Committee was
maintaining a level of profitability consistent with the long term strategic
development of the corporation. The at-risk elements of compensation, which
include the annual incentive and stock option plans, provided an additional
incentive to the executive officers to attain this goal in fiscal 1995.
Procedure for Establishing Compensation
Each fiscal year the Compensation Committee establishes an annual salary
plan for Sequoia's senior executive officers based on recommendations by
Sequoia's Chief Executive Officer and Director of Human Resources. In
addition, the Compensation Committee proposes an annual compensation plan for
Sequoia's Chief Executive Officer and submits it for approval to the Sequoia
Board.
The Compensation Committee believes that, based on its review of computer
industry compensation data, the base salaries of Sequoia's senior executive
officers are comparable to base salaries of senior executive officers
8
<PAGE>
of similar companies in the computer industry and that the Company's overall
compensation policy must remain competitive in order for it to attract,
motivate and retain its key individuals. In determining the size and relative
mix of incentive based compensation, the Compensation Committee retained a
consultant to assist in the assessment of the best means of (i) maintaining
competitive compensation policies and (ii) helping the Company attain certain
performance and strategic goals through the use of incentives.
Executive Officer Compensation
Sequoia's executive officers' compensation consists of base salary, annual
incentive compensation, long-term incentives in the form of stock options, and
certain benefits such as term life insurance and other plans which are
generally available to all employees of the Company.
Base Salary. Base salary compensation is set within the range of salaries of
executive officers with comparable qualifications, experience and
responsibilities at other companies in the same or similar businesses and of
comparable size and complexity as determined by the Compensation Committee
after a review of computer industry compensation data. The Compensation
Committee believes that base salary is not the primary compensation tool used
to motivate the Company's executives.
Annual and Long-term Incentive Compensation. Annual incentive compensation
and long-term incentive compensation are more closely tied to the Company's
success in achieving financial performance and strategic goals and represent a
substantial portion of the total compensation available to its executives.
Annual Incentive Compensation. Annual incentive compensation relating to
Sequoia's executive officers for the fiscal year ended June 30, 1995 was
generally tied to the achievement of (i) critical financial goals related to
profitability and, in certain cases, sales and cash position, and (ii)
specific goals related to the individual executive's functional
responsibility.
Stock Options. The Compensation Committee considers an executive's past
performance in determining an award on an annual basis, and, in addition, the
Compensation Committee believes that the retention of an individual is of
paramount importance in the determination of stock option grants. Stock
options are granted at an option price equal to the fair market value of
Sequoia's Common Stock on the date of grant and generally vest over a four-
year period. The Compensation Committee believes that stock options provide
the most significant compensation opportunity for executives.
Benefits. Sequoia's executive officers are entitled to receive medical and
term life insurance benefits and to participate in Sequoia's 401(k) savings
plan on the same basis as other full-time employees of Sequoia, with the
exception that they are provided at no cost with additional life insurance in
an amount equal to twice their base salary. Sequoia's 1993 Employee Stock
Purchase Plan, which is generally available to all employees, including
executive officers, allows participants to purchase up to a maximum of 500
shares of Common Stock per offering period at a discount of 15% from the fair
market value of such Common Stock at the beginning or end of the applicable
offering period.
The amount of perquisites provided to executive officers, as determined in
accordance with the rules of the Commission relating to executive
compensation, did not exceed 10% of salary of any executive officer for the
fiscal year ended June 30, 1995.
Chief Executive Officer Compensation
During the fiscal year ended June 30, 1995, the Company's President and
Chief Executive Officer, Cornelius P. McMullan, participated in the programs
discussed above. The performance criteria for his annual incentive program
stressed the maintenance of profitability while posturing Sequoia for
significant future growth. Mr. McMullan received salary and bonus compensation
of $307,750, including base salary of $216,922 and a bonus of $90,828.
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<PAGE>
In conformance with the compensation program specified herein, and in light
of Sequoia's performance, the Compensation Committee awarded Mr. McMullan
options to acquire 50,000 shares of Sequoia Common Stock in fiscal year 1995.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally disallows a tax deduction to public companies for
compensation over $1 million paid to a corporation's chief executive officer
and four other most-highly-compensated executive officers. Qualifying
compensation will not be subject to the deduction limit if certain
requirements are met. Although Sequoia has not paid any of its executive
officers compensation over $1 million and has no plans to do so, it intends to
establish a limit on option grants to employees in a manner that complies with
the provisions of the statute.
The Compensation Committee
Francis J. Hughes, Jr., Chairman
Dean C. Campbell
John F. Smith
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COMPARATIVE STOCK PERFORMANCE
The cumulative stock performance graph below compares the cumulative
shareholder return on Common Stock for the period from June 30, 1990 through
the fiscal year ended June 30, 1995 with the cumulative return on the Nasdaq
National Market (U.S. Companies) (the "Nasdaq Composite Index") and (ii) a
group consisting of publicly-traded United States companies in Sequoia's line
of business (the "Peer Group") for the same period (assuming an investment of
$100 in Common Stock, the Nasdaq Composite Index and the Peer Group on June
30, 1990 and reinvestment of all dividends). Measurement points are June 30,
1990 and the last trading days of Sequoia's fiscal years ended June 30, 1991,
1992, 1993, 1994 and 1995.
The Peer Group* consists of the following companies:
Tandem Computers Incorporated
Stratus Computer, Inc.
Sequent Computer Systems, Inc.
* Pyramid Technology Corporation is no longer included in the Peer Group as
its shares are no longer publicly-traded.
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG SEQUOIA SYSTEMS INC., THE NASDAQ STOCK MARKET-US INDEX AND A PEER GROUP
<TABLE>
<CAPTION>
Measurement period
(Fiscal Year Covered) Sequoia System Peer Group NASDAQ Stock
- --------------------- -------------- ---------- ------------
<S> <C> <C> <C>
FYE 6/30/90 $ 100 $ 100 $ 100
FYE 6/30/91 $ 107 $ 63 $ 106
FYE 6/30/92 $ 94 $ 67 $ 127
FYE 6/30/93 $ 20 $ 64 $ 160
FYE 6/30/94 $ 37 $ 55 $ 162
FYE 6/30/95 $ 41 $ 73 $ 215
</TABLE>
* $100 INVESTED ON 06/30/90 IN STOCK OR INDEX-INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING JUNE 30.
11
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ITEM 2--APPROVAL OF 1996 LONG TERM INCENTIVE PLAN
The Company's 1986 Incentive Stock Option Plan and 1986 Supplemental Stock
Option Plan (the "1986 Option Plans"), which have been used to attract,
motivate and retain both executive and non-executive employees, expire in
October 1996. So that the Company may continue to be able to encourage equity
ownership among its employees and be better able to compete for well-qualified
individuals, the Board proposes the adoption of the 1996 Long Term Incentive
Plan (the "Plan") described herein. The Board believes that the Plan will
promote the interests of the Company and its stockholders by, among other
things, providing incentives and rewards to those employees of the Company and
its subsidiaries who contribute to the Company's growth in earnings.
The Board adopted the Plan on November 6, 1995 subject to the approval of
the Company's stockholders. If the Plan is approved by the stockholders, it
will take effect immediately and no further grants will be made under the 1986
Option Plans. At December 15, 1995, options to purchase in the aggregate
approximately 460,000 shares of Common Stock remained authorized for issuance
under such 1986 Option Plans.
The text of the proposed Plan is published in its entirety as Appendix A
hereto. The following summary is qualified by reference to the full text of
the Plan.
If approved by the stockholders, the proposed Plan will be effective
immediately and will terminate ten years thereafter. The Plan will be
administered in all respects by the Compensation Committee of the Board (the
"Committee"). The Committee has plenary authority to interpret the Plan and
may adopt rules and regulations relating to the Plan.
The Committee will select the employees, including executive officers and
employees who are also directors, to whom grants will be made; determine the
number, frequency and timing of awards as well as the type of award and its
exercise or purchase price, if any; prescribe any performance criteria to be
met and any restrictions on exercise of awards or receipt of shares of Common
Stock or cash, and determine any other terms or conditions applicable to any
awards, including exercise or vesting schedules and the conditions under which
exercisability or vesting may be accelerated, such as in the event of death or
disability. A participant may receive more than one grant of awards under the
Plan, and awards may be exercisable independently of, jointly with, or in the
alternative with respect to other awards, all as the Committee may determine.
A total of 600,000 shares of Sequoia Common Stock ("Shares") may be issued
under the Plan, subject to adjustments for stock splits, stock dividends, or
other changes in capital stock of the Company. To the extent that awards under
the Plan do not vest or otherwise revert to the Company, the Shares
represented by such awards may be the subject of future awards. The Plan
provides that a maximum of 120,000 stock options or Stock Appreciation Rights
("SARs") may be granted to any one participant in any one calendar year. On
January 25, 1996 Sequoia's Common Stock closed at $4.375 on the Nasdaq
National Market.
The Committee may grant awards in the form of non-qualified stock options or
incentive stock options (as defined in Section 422(b) of the Code). The
exercise price of a non-qualified stock option may not be less than 65% of the
fair market value of such Shares on the date of grant, and the exercise price
of an incentive stock option may not be less than the fair market value of
such Shares on the date of grant. Each grant of an incentive stock option will
not be exercisable more than ten years after grant, and will include any other
provisions necessary to comply with Section 422 of the Code. Awards of SARs
may also be granted either in tandem with grants of stock options (and
exercisable as an alternative to the exercise of the stock options) or
separately. SARs allow the grantee to receive without payment and upon
surrender of the SARs and tandem options, or of the separate SARs an amount
payable in cash, Shares or a combination thereof, as determined by the
Committee, not exceeding the value of the exercise date of the number of
Shares for which the SARs are exercised over the exercise price of the SARs.
The exercise price of an SAR may not be less than the fair market value of a
Share on the date of grant, or in the case of an SAR granted in relation to an
option, not less than the option exercise price.
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<PAGE>
In addition, the Committee may in its discretion grant other awards that
consist of or are denominated in or payable in Shares, or that are valued by
reference to or are otherwise based on or related to Shares. Such awards may
include, for example, restricted Shares (limited in amount, as described
below) that are forfeitable upon termination of employment or failure to
achieve specified performance goals or that require no consideration other
than services rendered, phantom shares, performance bonus awards or other
awards payable in cash, Shares or a combination thereof. All awards are
nontransferable (other than by will or by the laws of descent and
distribution) and may be exercised during the grantee's lifetime only by the
grantee. The Committee may subject the awards to vesting or earnout
provisions, restrictions on transfer or in incidence of ownership, and other
conditions. A maximum of 100,000 restricted Shares may be granted in the
aggregate under the Plan, no more than 25,000 of which may be granted to any
one Plan participant in any calendar year.
In the event of a merger, reorganization, recapitalization, stock dividend,
stock split or other change in capitalization, the Committee has the
discretion to prevent dilution or enlargement of grantees' rights and benefits
such as by adjusting the aggregate number and type of Shares available for
awards, the number and type of Shares subject to outstanding awards, the time
of vesting of outstanding awards, or the purchase or exercise price of
outstanding awards. The Committee may permit the exercise or purchase price
(if any) of awards, including options, granted under the Plan to be paid in
cash or through delivery of Shares having a fair market value equal to all or
a portion of such price; by authorizing the Company to withhold Shares
comprising part of an award and having a fair market value equal to all or a
portion of such price; by payment from the grantee's broker as instructed by
the grantee; or by other means at the discretion of the Committee. In
addition, in the event of a consolidation, merger or sale of all or
substantially all the assets of the Company, the Board may, in its discretion,
provide, among other things, that stock options and SARs shall be assumed by
the acquiring or succeeding corporation, or replaced by equivalent stock
options or SARs of such corporation, or that outstanding stock options shall
become exercisable in full immediately prior to any such consolidation, merger
or sale.
The Board may at any time terminate, suspend or amend the Plan in any way,
without stockholder approval, subject to the following exceptions. The Board
may not without stockholder approval, materially increase the benefits
accruing to participants under the Plan or change (except as appropriate to
reflect a change in the capitalization of the Company) the aggregate number of
Shares available for grant or the class of persons eligible for awards under
the Plan. Further, the Board may not take any action with respect to the Plan
that would adversely affect the rights previously acquired by any grantee
without such grantee's consent.
The principal federal income tax consequences to the Company and to the
grantee of the grant and exercise of awards under the Plan under existing
applicable provisions of the Code and regulations thereunder are substantially
as outlined in summary form below:
The grant of an option will not have any tax consequences to the grantee or
the Company. If Shares purchased pursuant to the exercise of an incentive
stock option are not disposed of by the grantee for two years after the grant
of the incentive stock option and for one year after exercise, then (i) the
grantee will not recognize income upon the exercise of the incentive stock
option; (ii) any gain or loss will be recognized only upon ultimate
disposition of the Shares; (iii) assuming the Shares constitute capital assets
in the grantee's hands, the gain or loss will be treated as long-term capital
gain or loss; and (iv) the Company will not be entitled to a tax deduction.
The difference between the option price and the fair market value of the
Shares acquired upon exercise of an incentive stock option is considered an
item of adjustment included in the grantee's income for purposed of the
alternative minimum tax under the Code.
If the grantee disposes of the Shares acquired by the exercise of an
incentive stock option before the expiration of the required one and two year
holding periods described above, the grantee must treat as ordinary income in
the year of such disposition an amount equal to the difference between the
option price and the lesser of the fair market value of the Shares on the date
of exercise or the selling price. The balance of any gain or loss on such
disposition will be treated as a capital gain or loss (long-term or short-
term, depending on whether the Shares have been held for more than one year).
The Company will be entitled to a tax deduction in the year of disposition
equal to the amount of ordinary income recognized by the grantee.
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<PAGE>
In general, upon exercise of a non-qualified stock option, the grantee will
recognize ordinary income equal to the difference between the option exercise
price and the fair market value (on the date of exercise) of the Shares
purchased, and the Company will be entitled to a tax deduction in that amount.
When the grantee disposes of Shares acquired by the exercise of a non-
qualified stock option, any gain or loss on such disposition (generally, the
difference between the amount realized on disposition and the fair market
value of the Shares on the date of exercise) will be treated as capital gain
or loss (long-term or short-term, depending on whether the Shares have been
held for more than one year).
Generally, no gain or loss will be recognized by a grantee upon transfer to
the Company of previously acquired Shares of common stock in payment of all or
a portion of the incentive stock option or non-qualified stock option exercise
price.
No taxable income is recognized by a grantee of an SAR under the Plan. The
grantee must recognize as ordinary income any cash delivered and the fair
market value of any Shares delivered in payment of an amount due under an SAR.
The Company will be entitled to a business expense deduction equal to the
amount of ordinary income recognized by the grantee, subject to the
limitations of Section 162(m) of the Code. On the disposition by the grantee
of any Shares received in payment of an SAR, any additional gain or loss
recognized will be a capital gain or loss and will be a long-term gain or loss
if the Shares are held for more than one year.
The Company has the right under the Plan to collect from the grantee an
amount sufficient to satisfy any withholding tax obligation that arises in
connection with any award or to deduct a sufficient amount of cash or Shares
from other payments or transfers otherwise due to the grantee. The Committee
also may permit a grantee to satisfy the obligation by any of the methods
described above for payment of the exercise or purchase price of awards.
Substantially all employees are eligible to participate in the Plan. The
number of Shares that may be granted to executive officers and non-executive
officers is indeterminable at this time, as such grants are subject to the
discretion of the Committee.
The Plan is hereby proposed for approval by the stockholders. The
affirmative vote of the holders of a majority of the Shares present or
represented is entitled to vote at the Annual meeting will be necessary to
approve the Plan.
BOARD RECOMMENDATION
The Sequoia Board believes that the adoption of the 1996 Long Term Incentive
Plan is in the best interests of Sequoia and its stockholders and therefore
recommends a vote FOR this proposal.
ITEM 3--RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
Subject to ratification by the stockholders, the Board, on the
recommendation of its Audit Committee, has selected the firm of Coopers &
Lybrand L.L.P. as Sequoia's independent accountants for the fiscal year ending
June 30, 1996.
Representatives of Coopers & Lybrand L.L.P. are expected to be present at
the Annual Meeting. They will have the opportunity to make a statement if they
desire to do so and will also be available to respond to appropriate questions
from stockholders.
If the stockholders of Sequoia do not ratify the selection of Coopers &
Lybrand L.L.P. as Sequoia's independent accountants, the selection of such
accountants will be reconsidered by the Board.
BOARD RECOMMENDATION
The Sequoia Board believes that the ratification of the selection of Coopers
& Lybrand L.L.P. as the Company's independent accountants for the fiscal year
ending June 30, 1996 is in the best interests of the Company and its
stockholders and therefore recommends a vote FOR this proposal.
14
<PAGE>
OTHER MATTERS
The Board does not know of any other matters that may come before the Annual
Meeting. However, if any other matters are properly presented to the Annual
Meeting, it is the intention of persons named in the accompanying proxy to
vote, or otherwise act, in accordance with their judgment on such matters.
All expenses of the Company's solicitation of proxies, including the cost of
preparing and mailing this Proxy Statement, will be borne by the Company. In
addition to solicitation by use of the mails, proxies may be solicited by
directors, officers and employees of the Company in person or by telephone,
telegram or other means of communication. Such directors, officers and
employees soliciting proxies will not be additionally compensated, but may be
reimbursed for reasonable out-of-pocket expenses in connection with such
solicitation. The Company has retained Morrow & Co., Inc. for assistance in
connection with the Annual Meeting at an estimated expense of approximately
$4,000, plus reasonable out-of-pocket expenses. Arrangements will also be made
with custodians, nominees and fiduciaries for forwarding of proxy solicitation
materials to beneficial owners of shares held of record by such custodians,
nominees and fiduciaries, and the Company will reimburse such persons for
reasonable expenses incurred in connection therewith.
A copy of the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1995, as filed with the Securities and Exchange Commission, except
for exhibits, will be furnished without charge to any stockholder upon written
request of the Chief Financial Officer of the Company at 400 Nickerson Road,
Marlborough, Massachusetts 01752.
STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Exchange Act, Company stockholders may
present proper proposals for inclusion in the Company's proxy statement for
consideration at the next annual meeting of stockholders by submitting their
proposals to the Company in a timely manner. In order to be considered for
inclusion in the proxy statement for the annual meeting of stockholders to be
held after the fiscal year ending June 30, 1996, stockholder proposals must be
received by the Secretary of the Company by August 1, 1996.
By Order of the Board of Directors,
Jeremy F. Swett
Secretary
15
<PAGE>
APPENDIX A
SEQUOIA SYSTEMS, INC.
1996 LONG-TERM INCENTIVE PLAN
1. ESTABLISHMENT AND PURPOSE
(a) Sequoia Systems, Inc. hereby establishes this 1996 Long-Term Incentive
Plan.
(b) The purposes of the Plan are: (i) to further the long-term growth in
earnings of the Company by providing incentives and rewards to those employees
of the Company and its Subsidiaries who directly contribute to the achievement
of such earnings growth; (ii) to encourage such employees to obtain
proprietary interests in the Company and to remain in the employ of the
Company and its Subsidiaries; (iii) thereby to promote a closer identity of
interests between management and shareholders; and (iv) to assist the Company
and its Subsidiaries in recruiting outstanding management personnel.
2. DEFINITIONS
In this Plan document, unless the context clearly indicates otherwise, any
term used in the singular also shall refer to the plural, and the following
capitalized terms shall have the following meanings set forth in this Section
2:
(a) "Award" means any award described in Section 7 hereof.
(b) "Award Agreement" means an agreement entered into between the Company
and a Grantee, setting forth the terms and conditions applicable to the Award
granted to the Grantee.
(c) "Beneficiary" means the person or persons designated in writing by the
Grantee as his beneficiary in respect of an Award; or, in the absence of an
effective designation, or if the designated person or persons predecease the
Grantee, the Grantee's Beneficiary shall be the person or persons who acquire
by bequest or inheritance the Grantee's rights in respect of an Award. In
order to be effective, a Grantee's designation of a Beneficiary must be on
file with the Company before the Grantee's death. Any such designation may be
revoked and a new designation substituted therefor at any time before the
Grantee's death.
(d) "Board of Directors" or "Board" means the Board of Directors of the
Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended from time to
time, including regulations and other administrative guidance thereunder.
(f) "Committee" means the Compensation Committee of the Board or any other
committee appointed by the Board that satisfies such legal requirements as may
be imposed by Rule 16b-3 and all other applicable laws. Each member of the
Committee shall be an "outside director" within the meaning of Section 162(m)
of the Code and the regulations promulgated thereunder.
(g) "Common Stock" means the common stock, par value $.40, of the Company.
(h) "Company" means Sequoia Systems, Inc.
(i) "Covered Employee" means an employee of the Company or its Subsidiaries
who is a "Covered Employee" within the meaning of Section 162(m) of the Code.
(j) "Fair Market Value" means, when used in connection with the Shares on a
certain date, the fair market value of a Share by reference to the closing
price quotation, or, if none, the mean of the bid and asked prices, reported
as of the most recent available date with respect to the Shares on any stock
exchange on which the Company's Common Stock is then listed or any quotation
system approved by the National Association of Securities Dealers then
reporting such information.
A-1
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(k) "Grantee" means a person to whom an Award has been granted under the
Plan.
(l) "Incentive Stock Option" means an option that complies with the terms
and conditions set forth in Section 422(b) of the Code and is designated by
the Committee as an Incentive Stock Option.
(m) "Minimum Price" means sixty-five percent (65%) of the Fair Market Value
of the Shares covered by the Award, determined on the date as of which the
Award is granted.
(n) "Non-qualified Stock Option" means an Option granted under the Plan that
is not an Incentive Stock Option and that is not intended to satisfy any
requirements for other statutory-qualified stock options that may be provided
for by law from time to time.
(o) "Option" means any option to purchase Shares pursuant to the provisions
of the Plan. Unless the context clearly indicates otherwise, the term "Option"
shall include all types of options that may be granted under the Plan,
including both Incentive Stock Options and Non-qualified Stock Options.
(p) "1934 Act" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor thereto.
(q) "Right" means a Stock Appreciation Right, as described in Section 7(b).
(r) "Plan" means the 1996 Long-Term Incentive Plan, as set forth herein and
as it may be amended from time to time.
(s) "Rule 16b-3" means Rule 16b-3 of the General Rules and Regulations under
the 1934 Act, as amended from time to time, or any successor thereto (or rule
of similar import), including any official Securities and Exchange Commission
staff interpretations thereunder.
(t) "Section 16 Person" means an officer or director of the Company within
the meaning of Section 16(a) or (b) of the 1934 Act.
(u) "Shares" means shares of Common Stock.
(v) "Stock Appreciation Right" or "Right" means a right that provides for
payment in accordance with Section 7(b) hereof.
(w) "Subsidiary" means a corporation or other entity of which the Company
owns, at any time while the Plan is in effect, directly or indirectly, at
least 50% of the voting power of the voting equity securities or voting
interests.
3. ADOPTION AND DURATION OF THE PLAN
(a) The Plan shall become effective upon its approval by the holders of a
majority of the outstanding Shares present in person, or represented by proxy,
and entitled to vote, at a meeting of the shareholders of the Company duly
called and held in accordance with applicable law prior to June 30, 1996 and
shall terminate ten years after such effective date, unless it is sooner
terminated in accordance with Section 14 hereof.
(b) Awards may be granted at any time prior to the earlier of the expiration
of the ten-year term of the Plan, as described in subsection 3(a) above, or
the termination of the Plan pursuant to Section 14 below. An Award outstanding
at the time the Plan expires or is otherwise terminated shall not cease to be
or cease to become exercisable pursuant to its terms merely because of the
expiration or other termination of the Plan.
4. NUMBER AND SOURCE OF SHARES SUBJECT TO THE PLAN
(a) The Company may grant Awards (including, without limitation, Incentive
Stock Options) under the Plan with respect to not more than 600,000 Shares,
subject, however, to the limitations provided in Section 7(a) and
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<PAGE>
(c) and adjustment as provided in Section 12 hereof. Shares shall be provided
from Shares in the Company's treasury, by the issuance of Shares authorized
but unissued, or from outstanding Shares purchased in the open market or in
private transactions.
(b) If and to the extent that all or part of an Award previously granted is
surrendered, lapses, expires, is forfeited, or is terminated, in whole or in
part, without being exercised, for any reason other than the exercise of a
related Award or of another portion of the Award, in such manner that all or
some of the Shares that are the subject of the Award are not issued to a
Grantee (and cash, Shares, or any other form of payment is not paid in lieu
thereof), then such Shares shall immediately be restored to the aggregate
maximum number of Shares (specified in subsection 4(a) above) with respect to
which Awards may be granted under the Plan and thus shall become again
available for the granting of Awards under the Plan.
(c) If a Grantee exercises a Stock Appreciation Right, any Shares covered by
the Stock Appreciation Right in excess of the number of Shares issued (or, in
the case of a settlement in cash or any other form of property, in excess of
the number of Shares equal in value to the amount of such settlement, based on
the Fair Market Value of such Shares on the date of such exercise) shall
immediately be restored to the aggregate maximum number of Shares (specified
in subsection 4(a) above) with respect to which Awards may be granted under
the Plan and thus shall become again available for the granting of Awards
under the Plan.
5. ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by the Committee.
(b) The Committee may adopt, amend and rescind rules and regulations
relating to the Plan as it may deem proper, shall make all other
determinations necessary or advisable for the administration of the Plan, and
may provide for conditions and assurances deemed necessary or advisable to
protect the interests of the Company, to the extent not contrary to the
express provisions of the Plan; provided, however, that the Committee may take
action only upon the agreement of a majority of its members then in office.
Notwithstanding the provisions of the preceding sentence, no action or
determination by the Committee may adversely affect any right acquired by any
Grantee or Beneficiary under the terms of any Award granted before the date
such action or determination is taken or made, unless the affected Grantee or
Beneficiary shall expressly consent; but it shall be conclusively presumed
that any adjustment pursuant to Section 12 does not adversely affect any such
right. Any action that the Committee may take through a written instrument
signed by all of its members then in office shall be as effective as though
taken at a meeting duly called and held. All actions, determinations,
interpretations, and decisions of the Committee pursuant to the provisions of
the Plan shall be final, conclusive, and binding for all purposes and upon all
persons, unless (in the case where the parties concerned are not Section 16
Persons) otherwise determined by the Board.
(c) The powers of the Committee shall include plenary authority to interpret
the Plan. Subject to the provisions of the Plan, the Committee shall have the
authority, in its sole discretion, from time to time to select the employees
to whom Awards shall be granted; to determine the frequency with which Awards
shall be granted and the date on which each Award shall be granted; to
prescribe the number of Shares subject to each Award; to determine the type of
each Award; to determine the exercise price (if any) or purchase price (if
any) of each Award; to determine the term of each Award; to determine the
periods during which Awards may be exercised, the restrictions and limitations
upon exercise of Awards or receipt of Shares, other property, or cash
thereunder; to accelerate the exercisability of outstanding Awards; to
prescribe any performance criteria pursuant to which Awards may be granted or
may become exercisable or payable; to impose any restriction or condition or
take any action that it deems advisable or necessary to comply with the 1934
Act or Rule 16b-3; and to determine the other terms and conditions applicable
to each Award and the provisions of each Award Agreement, including any
amendments thereto.
(d) The Committee may delegate its authority, as described in subsections
5(b) and 5(c), above, to persons other than its members to exercise such
authority, except that (i) the authority to administer Awards with respect
A-3
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to Grantees who are Section 16 Persons shall not be delegated by the
Committee, and (ii) any such delegation shall satisfy any other applicable
requirements of Rule 16b-3 or applicable law.
(e) The Company shall indemnify the Committee and each member thereof
against any and all liabilities occasioned by any act or omission in good
faith, but such indemnification shall not be in any way inconsistent with or
in conflict with the Restated Certificate of Incorporation or bylaws of the
Company or the laws of the State of Delaware. No bond or other security shall
be required of the Committee, or any member thereof, for the performance of
their respective duties hereunder.
6. INDIVIDUALS ELIGIBLE TO RECEIVE AWARDS
Awards (including, without limitation, Incentive Stock Options) may be
granted under the Plan to employees of the Company or Subsidiaries (including
Covered Employees, executive officers and employees who are also directors).
All determinations by the Committee as to the identity of the employees to
whom Awards shall be granted hereunder shall be conclusive. A Grantee may
receive more than one Award.
7. AWARDS
Awards may be granted under the Plan singly or in combination or in tandem
with other Awards (or with awards under other plans of the Company or a
Subsidiary), and may be exercisable independently of, jointly with, or in the
alternative with respect to, other Awards, all as the Committee may determine.
All Awards shall be in a form determined by the Committee, provided that the
Award may not be inconsistent with the terms of the Plan or applicable law.
The following types of Awards may be granted, as the Committee may determine:
(a) Options
An Option is a right to purchase a specified number of Shares at a fixed
option exercise price equal to not less than the Minimum Price, during a
specified term as the Committee may determine. Options that may be granted
under the Plan include Incentive Stock Options and Non-qualified Stock
Options. The grant of an Incentive Stock Option and the terms and
conditions set forth in an Award Agreement with respect to an Incentive
Stock Option shall comply with the requirements of Section 422(b) of the
Code. Options with respect to no more than 120,000 Shares may be granted to
any individual participant during any one calendar year period, subject,
however, to adjustment as provided in Section 12 hereof.
(b) Stock Appreciation Rights
A Stock Appreciation Right is a right, denominated in Shares, to receive,
upon surrender of the Stock Appreciation Right (or of both the Stock
Appreciation Right and a related Option in the case of a tandem Stock
Appreciation Right that is related to an Option) in whole or in part, but
without payment, an amount (payable in Shares, in cash, or a combination
thereof as the Committee shall determine) that does not exceed the excess
of the value (as determined by the Committee) on the exercise date (or on
another date or dates specified by the Committee) of the number of Shares
for which the Stock Appreciation Right is exercised over the exercise price
of such Right; provided that the exercise price shall not be less than the
Minimum Price for such Shares on the date the Right was granted. Any Stock
Appreciation Right that is granted in connection with an Incentive Stock
Option shall satisfy any requirements that must be satisfied in order to
maintain the qualified status of the Incentive Stock Option. Stock
Appreciation Rights with respect to no more than 120,000 Shares may be
granted to any individual participant during any one calendar year period,
subject, however, to adjustment as provided in Section 12 hereof.
(c) Other Stock-Based Awards
The Committee may, from time to time, grant Awards (other than the Awards
described above) under the Plan that consist of or are denominated in or
payable in, valued in whole or in part by reference to, or otherwise based
on or related to, Shares, provided that such grants comply with applicable
law. The Committee may subject such Awards to such vesting or earnout
provisions, restrictions on transfer, and
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other restrictions on incidence of ownership as the Committee may
determine, provided that such restrictions are not inconsistent with the
terms of the Plan. For example, the Committee may grant restricted shares
that are temporarily nontransferable and forfeitable upon failure to
achieve specified performance goals, upon termination of employment or in
other circumstances. However, no more than 100,000 restricted shares may be
granted hereunder, and grants of restricted shares to any one individual
may not exceed 25,000 in any calendar year. The Committee may provide that
the Grantee shall have the right to beneficial ownership of Shares that are
subject to restrictions, including the right to vote such Shares. The
Committee may grant Awards under this subsection 7(c) that require no
payment of consideration by the Grantee (other than services previously
rendered or, as may be permitted by applicable law, services to be
rendered), either on the date of grant or the date any restrictions thereon
are removed. In addition, the Committee may, from time to time, grant
Awards under this subsection 7(c) that provide to the Grantee the right to
purchase Shares, provided that the purchase price or exercise price shall
in no event be less than the Minimum Price for such Shares on the date of
grant (or, if greater, the consideration required to be received by the
Company in order to comply with applicable law). Awards granted under this
Section 7(c) may also include, by way of example, phantom Shares,
performance bonus awards, and other Awards that are payable in cash, or
that are payable in cash or Shares (at the election of the Committee or, if
the Committee so provides, at the election of the Grantee), provided that
such Awards are denominated in Shares, valued in whole or in part by
reference to Shares, or otherwise based on or related to Shares.
Performance-based Awards may be determined in accordance with, for example,
the achievement of long-term performance criteria applicable to the Company
or any Subsidiary, a division, an operating unit, or an individual Grantee,
as determined by the Committee.
8. AWARD AGREEMENTS
(a) Each Award shall be evidenced by an Award Agreement setting forth the
number of Shares (if any) subject to the Award and the terms, conditions and
restrictions applicable to the Award. Award Agreements may include some or all
of the following provisions:
(i) Exercisability
A provision that prescribes the terms upon which the Award becomes
nonforfeitable or exercisable and the terms upon which the Award remains
exercisable (or is otherwise disposed of) after termination of employment.
Such provision may include (without limitation) the following: acceleration
of vesting (or exercisability or earnout) upon specified events, such as
retirement, disability, death, or change in control of the Company; the
forfeiture of the Award upon termination for cause or involvement in
competition with the Company; authorization to the Committee to accelerate
the time periods for purposes of exercising, vesting in, or realizing gains
from, any Award.
(ii) Procedures for Exercising an Award
A provision that establishes procedure for exercising or purchasing an
Award or realizing gains with respect thereto. Such provision may include
(without limitation) the method of payment of the exercise price, purchase
price, or the amount to satisfy any tax withholding.
(iii) Legal Requirements
Any provision that the Committee, in its sole discretion, determines is
necessary or advisable to comply with Rule 16b-3, the Code, the 1934 Act,
or other Federal, state or local law or regulation or interpretation
thereunder.
(iv) Other Provisions
Such other terms and conditions as are consistent with the terms of the
Plan and necessary or, in the view of the Committee, appropriate to grant
the Award.
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(b) Any Award Agreement applicable to one or more Incentive Stock Options
shall contain any other provisions that are required in order to comply with
the requirements of Section 422 of the Code, or any successor section, as it
may be amended from time to time, including without limitation, if required at
the time of grant, that the Option is intended to be an Incentive Stock
Option, that the Option shall not be exercisable after the expiration of ten
years from the date it is granted, that the Option exercise price is 100
percent of the Fair Market Value of the Shares at the time the Option is
granted (or a higher price specified by the Committee); and that Awards shall
be nontransferable except as provided in Section 16 hereof.
(c) Appropriate officers of the Company are hereby authorized to execute and
deliver Award Agreements in the name of the Company as directed from time to
time by the Committee.
9. PAYMENT FOR AWARD
The exercise price (if any) or purchase price (if any) of an Award may be
payable, and any tax withholding obligation may be satisfied, at the
discretion of the Committee, by any one or a combination of the following
methods:
(a) in U.S. dollars by personal check, bank draft or money order payable
to the order of the Company or by money transfer or direct account debit;
(b) through the delivery (or attestation to the ownership) of Shares with
a Fair Market Value equal to all or a portion of the price of the Award or
amount to be withheld for taxes; provided that, in the case of attestation,
the Shares transferred to the Grantee upon the exercise of the Award shall
be net of the number of Shares attested to;
(c) through authorization to the Company to withhold Shares, otherwise
deliverable to the Grantee pursuant to an Award, that have a Fair Market
Value equal to all or a portion of the price of the Award or the amount to
be withheld for taxes;
(d) by payment made by the Grantee's broker pursuant to the Grantee's
instructions (which may be, for example, in connection with a simultaneous
broker-assisted exercise and sale transaction or in connection with broker-
assisted financing of the exercise, and may be accompanied by the Grantee's
instructions to the Company to deliver Shares issuable upon exercise of the
Award to the broker for the Grantee's account); or
(e) by other means that the Committee determines to be consistent with
the Plan's purposes and applicable law.
10. DISTRIBUTION OF AWARDS
Subject to the provisions of Section 7 hereof, payments of Awards shall be
wholly in cash or wholly in Shares or partly in cash and partly in Shares, as
determined in the sole discretion of the Committee, including, in the case of
Shares, any restrictions on transfer and forfeiture provisions. All payments
of Awards shall be made as soon as practicable in accordance with the terms of
the Plan and the Award.
11. TAX WITHHOLDING
(a) The Company shall have the right to collect an amount sufficient to
satisfy any Federal, state or local withholding tax requirements that might
apply, in the reasonable opinion of the Company, with respect to any
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Award to a Grantee (including, without limitation, the exercise of an Option
or Right, or the grant, distribution or disposition of Shares) in the manner
specified in subsection 11(b) or 11(c) below.
(b) The Company shall have the right to require a Grantee (or, if permitted
by the Committee in its discretion, the Grantee's broker) to remit to the
Company (including remittance before or simultaneously with the Grantee's
receipt of payment or transfer of Shares under an Award) an amount sufficient
to satisfy any such withholding tax requirements. If the Committee permits, in
its discretion, such amount may be payable in the form of Shares that have a
sufficient Fair Market Value.
(c) The Company and its Subsidiaries also shall, to the extent permitted by
law, have the right to deduct from any payment or transfer of any kind
(whether of cash, Shares, or other property, and whether or not related to the
Plan) otherwise due to a Grantee any such taxes required to be withheld.
12. ADJUSTMENT FOR CHANGES IN CAPITALIZATION
Subject to the provisions of Section 13 hereof, in the event that there is
any change in the Shares through merger, consolidation, reorganization,
recapitalization, or otherwise; or if there shall be any dividend on the
Shares, payable in Shares, or an extraordinary cash dividend or other
extraordinary distribution; or if there shall be a stock split, reverse stock
split, combination of Shares, or other similar corporate transaction or event
that affects the Shares, such that an adjustment is determined by the
Committee to be appropriate in order to prevent dilution or enlargement of the
rights of the Grantees or of the potential benefits intended to be made
available under the Plan, then the aggregate number and type of Shares
available for Awards, the number and type of Shares subject to outstanding
Awards, the purchase or exercise price per Share of each outstanding Award,
and the other amounts authorized by Section 7 above, shall be adjusted by the
Committee in such manner as it may deem equitable in its absolute discretion;
provided that any fractional Shares resulting from such adjustments may be
eliminated on a uniform basis in the Committee's discretion; and provided
further that with respect to Incentive Stock Options, no such adjustment shall
be required to the extent that such adjustment would cause such Options to
violate Section 422(b) of the Code. The Committee's determination with respect
to any such adjustments shall be conclusive.
13. EFFECTS OF MERGER OR OTHER REORGANIZATION
(a) In the event of a consolidation or merger or sale of all or
substantially all of the assets of the Company in which Shares are exchanged
for securities, cash or other property of any other corporation or business
entity or in the event of a liquidation of the Company (the "Transaction"),
the Board of Directors of the Company, or the board of directors of any
corporation assuming the obligations of the Company, may, in its discretion,
take any one or more of the following actions: (i) provide that Options and
Rights shall be assumed, or equivalent Options and Rights shall be
substituted, by the acquiring or succeeding corporation (or an affiliate
thereof) in connection with such Transaction, provided that any such options
substituted for Incentive Stock Options shall meet the requirements of Section
422(b) of the Code, (ii) provide that all or any outstanding options shall
become exercisable in full immediately prior to such Transaction or (iii) in
the event of a merger under the terms of which holders of Shares will receive
upon consummation thereof a cash payment for each Share surrendered in the
merger (the "Merger Price"), make or provide for a cash payment to the
Grantees equal to the difference between (a) the Merger Price times the number
of Shares subject to such outstanding Options (to the extent then exercisable
at prices not in excess of the Merger Price) and (b) the aggregate exercise
price of all such outstanding Options in exchange for the termination of such
Options. In the event of the substitution of equivalent Options or Rights by
an acquiring or succeeding corporation, as provided for in clause (i) above,
such substitute Options or Rights shall become immediately exercisable in full
if, within one year after completion of the Transaction, the employment of a
Grantee of such substitute Options or Rights terminates involuntarily (other
than for cause) or if such Grantee resigns his or her employment for any of
the following reasons: (v) a change is made in the Grantee's responsibilities
or status or position with the Company that, in the Grantee's reasonable
judgment, represents an adverse change from the Grantee's responsibilities or
status or position in effect immediately before the Transaction; (w) a
reduction is made by the Company in the Grantee's total compensation
A-7
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as in effect at the time of the Transaction; (x) the Grantee's place of
employment is relocated to a site more than thirty miles from the place of his
residence at the time of the Transaction; (y) in the event of any action or
inaction by the Company that would adversely affect the Grantee's continued
participation in any benefit or compensation plan on at least as favorable a
basis as was the case at the time of the Transaction, or that would materially
reduce the Grantee's benefits in the future under such plan or deprive him of
any material benefits that he enjoyed at the time of the Transaction (other
than as a result of the normal expiration of any such plan in accordance with
its terms as in effect at the time of the Transaction), except to the extent
that such action or inaction by the Company is required by the terms of the
plan as in effect immediately before the Transaction, or is necessary to
comply with applicable law or to preserve the qualification of the plan under
section 401(a) of the Internal Revenue Code, and except to the extent that the
Company provides the Grantee with substantially equivalent benefits; or (z)
the Company materially violates any agreement between it and the Grantee.
(b) The Company may grant Options under the Plan in substitution for options
held by employees of another corporation who become employees of the Company,
or a subsidiary of the Company, as the result of a merger or consolidation of
the employing corporation with the Company or a subsidiary of the Company, or
as a result of the acquisition by the Company, or one of its subsidiaries, of
property or stock of the employing corporation. The Company may direct that
substitute Options be granted on such terms and conditions as the Board of
Directors considers appropriate in the circumstances.
14. TERMINATION, SUSPENSION, OR MODIFICATION OF PLAN
The Board of Directors may at any time terminate, suspend, or modify the
Plan, except that the Board shall not, without the approval of the holders of
a majority of the Company's outstanding Shares present in person or
represented by proxy at a meeting of the shareholders of the Company duly
called for such purpose, materially increase the benefits accruing to
participants under the Plan or change (other than through adjustment for
changes in capitalization as provided in Section 12 hereof) (a) the aggregate
number of Shares with respect to which Awards may be granted; or (b) the class
of persons eligible for Awards. No termination, suspension, or modification of
the Plan shall adversely affect any right acquired by any Grantee, under the
terms of any Award granted before the date of such termination, suspension, or
modification, unless such Grantee shall consent; but it shall be conclusively
presumed that any adjustment for changes in capitalization in accordance with
Section 12 hereof does not adversely affect any such right.
15. SHAREHOLDER RIGHTS
No person shall have any rights of a shareholder by virtue of an Award
except with respect to Shares actually issued to him.
16. NON-TRANSFERABILITY
All Awards granted under the Plan shall be nontransferable other than by
will or by the laws of descent and distribution, and an Award may be exercised
during the lifetime of the Grantee only by him.
17. NO FRACTIONAL SHARES
No fractional Shares shall be issued pursuant to the Plan or any Award. The
Committee shall determine whether cash, other securities, or other property
shall be paid or transferred in lieu of fractional Shares, or whether
fractional Shares or any rights thereto shall be canceled, terminated or
otherwise eliminated.
18. RIGHT OF DISCHARGE RESERVED
Nothing in the Plan or any Award Agreement shall confer upon any employee or
other individual the right to continue in the employment or service of the
Company or any Subsidiary or affect any right that the Company or any
Subsidiary may have to terminate the employment or service of (or to demote or
to exclude from future Awards under the Plan) any such employee or other
individual at any time for any reason.
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19. APPLICATION OF PROCEEDS
The proceeds received by the Company from the sale of Shares under the Plan
shall be used for general corporate purposes.
20. UNFUNDED PLAN
The Plan shall be unfunded. Neither the Company nor any Subsidiary nor the
Board shall be required to segregate any assets that may be represented by any
Award, and neither the Company nor any Subsidiary nor the Board shall be
deemed to be a trustee of any amounts to be paid under any Award. Any
liability of the Company or any Subsidiary to any Grantee with respect to an
Award shall be based solely upon any contractual obligations created pursuant
to the provisions of the Plan and Award Agreement; no such obligation shall be
deemed to be secured by any pledge of or encumbrance on any property of the
Company or a Subsidiary.
21. GENERAL PROVISIONS
The grant of an Award in any year shall not give the Grantee any right to
similar grants in future years. References in Sections 4, 5, 9, 11, 12, 14,
16, 20 and 21 hereof to the Grantee shall be deemed to refer, in the event
that the Grantee is deceased, to the Grantee's Beneficiary.
22. GOVERNING LAW
The Plan shall be governed and its provisions construed, enforced and
administered in accordance with the laws of the State of Delaware, except to
the extent that such laws may be superseded by any Federal law.
23. NATURE OF PAYMENTS
All Awards made pursuant to the Plan are in consideration of services
performed for the Company or a Subsidiary.
24. SEVERABILITY
If any provision of the Plan shall be held unlawful or otherwise invalid or
unenforceable in whole or in part, such unlawfulness, invalidity or
unenforceability shall not affect any other provision of the Plan or part
thereof, each of which shall remain in full force and effect. If the making of
any payment or the provision of any other benefit required under the Plan
shall be held unlawful or otherwise invalid or unenforceable, such
unlawfulness, invalidity or unenforceability shall not prevent any other
payment or benefit from being made or provided under the Plan, and if the
making of any payment in full or the provision of any other benefit required
under the Plan in full would be unlawful or otherwise invalid or
unenforceable, then such unlawfulness, invalidity or unenforceability shall
not prevent such payment or benefit from being made or provided in part, to
the extent that it would not be unlawful, invalid or unenforceable, and the
maximum payment or benefit that would not be unlawful, invalid or
unenforceable shall be made or provided under the Plan.
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SEQUOIA SYSTEMS, INC.
P Proxy for the Annual Meeting of Stockholders
R To Be Held on March 12, 1996
O
X THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Y OF THE COMPANY
The undersigned, revoking all prior proxies, hereby appoint(s) J. Michael
Stewart, Richard B. Goldman and Jeremy F. Swett, and each of them, with full
power of substitution, as proxies to represent and vote as designated herein,
all shares of stock of Sequoia Systems, 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 at the Radisson Inn, 75 Felton
Street, Marlborough, Massachusetts, on Tuesday, March 12, 1996 at 9:00 a.m.,
local time, and at any adjournment or adjournments thereof.
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournment thereof.
-------------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
-------------
Please mark
[X] votes as in
this example.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1, 2 AND 3. Attendance of the undersigned at the meeting or any
adjournment thereof will not be deemed to revoke this proxy unless the
undersigned shall revoke this proxy in writing before it is exercised.
1. To elect Francis J. Hughes, Jr., A. Theodore Engkvist and Dennis M. Malloy as
Class II directors to serve for the ensuing three years.
FOR WITHHELD
[_] [_]
[_]
---------------------------------------
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. To approve the Company's 1998 Long Term
Incentive Plan as described in the Proxy
Statement. [_] [_] [_]
3. To ratify the selection of Coopers &
Lybrand L.L.P. as the Company's
Independent Accountants. [_] [_] [_]
4. To transact such other business as may properly come before the meeting or
any adjournment or adjournments of the meeting.
MARK HERE
FOR ADDRESS
CHANGE AND [_]
NOTE AT LEFT
Please sign exactly as name appears hereon. When shares are held by joint
owners, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give the full title as such. If a corporation,
please sign in full corporate name by President or other authorized officer. If
a partnership, please sign in partnership name by authorized person.
Signature: Date
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Signature: Date
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