<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
SPSS Inc.
- --------------------------------------------------------------------------------
(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:
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(4) Date filed:
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<PAGE> 2
SPSS LOGO
SPSS INC.
444 NORTH MICHIGAN AVENUE
CHICAGO, ILLINOIS 60611
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 18, 1997
The 1997 Annual Meeting of Stockholders of SPSS Inc. (the "Company") will
be held at the headquarters of the Company at 444 North Michigan Avenue,
Chicago, Illinois, on Wednesday, June 18, 1997 at 1:00 p.m. (Chicago time), for
the following purposes:
(1) To elect a director of the Company to serve until the 2000 Annual
Meeting of Stockholders;
(2) To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors of the Company for the fiscal year 1997; and
(3) To transact any other business as may be properly brought before the
Annual Meeting or any adjournment thereof.
Only stockholders of record as of April 25, 1997, are entitled to notice
of, and to vote at, the Annual Meeting and any adjournment or postponement
thereof. Whether or not you plan to attend the Annual Meeting, please complete,
sign, date and return the enclosed proxy card in the accompanying envelope as
promptly as possible to ensure that your shares are represented and voted in
accordance with your wishes.
By Order of the Board of Directors
Edward Hamburg
Edward Hamburg
Secretary of SPSS Inc.
Chicago, Illinois
May 20, 1997
<PAGE> 3
SPSS INC.
444 NORTH MICHIGAN AVENUE
CHICAGO, ILLINOIS 60611
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 18, 1997
The enclosed proxy is solicited by the Board of Directors of SPSS Inc. (the
"Company") for use at the Annual Meeting of Stockholders on June 18, 1997 (the
"Annual Meeting"). Shares of the Company's common stock, par value $0.01 per
share (the "Common Stock"), represented by a properly executed proxy in the
accompanying form, will be voted at the Annual Meeting. If no specific
instructions are given with regard to matters being voted upon, the shares
represented by a signed proxy card will be voted according to the
recommendations of the Board of Directors (the "Board"). The proxy may be
revoked at any time before its exercise by sending written notice of revocation
to Edward Hamburg, Secretary, SPSS Inc., 444 North Michigan Avenue, Chicago,
Illinois 60611, by signing and delivering a subsequently dated proxy card or by
attending the Annual Meeting in person and giving notice of revocation to the
Inspector of Election. This Proxy Statement and the accompanying Notice of
Annual Meeting of Stockholders and proxy card are being mailed to stockholders
beginning on or about May 20, 1997.
April 25, 1997 was the record date for the determination of stockholders
entitled to notice of, and to vote at, the Annual Meeting. On that date, there
were outstanding and entitled to vote 7,738,899 shares of Common Stock, which is
the Company's only class of voting securities. Each stockholder is entitled to
one vote for each share of Common Stock held of record. For a period of at least
ten days prior to the Annual Meeting, a complete list of stockholders entitled
to vote at the Annual Meeting will be available for examination by stockholders
during regular business hours at the Company's headquarters, 444 North Michigan
Avenue, Chicago, Illinois.
One inspector of election, from Harris Trust and Savings Bank, appointed by
the Board of Directors will determine the shares represented at the Annual
Meeting and the validity of proxies and count all votes. Abstentions and broker
non-votes will be included when determining whether a quorum is present at the
Annual Meeting. An abstention has the effect of voting against a matter since an
abstention is counted as a share "entitled to vote," but is not included as a
vote for or against such matter. Broker non-votes have no effect since they are
not counted as shares "entitled to vote" and are not included as votes for or
against any proposal.
A plurality of the shares of Common Stock present in person or represented
by proxy at the Annual Meeting is required for the election of directors. An
affirmative vote of a majority of the shares of Common Stock present in person
or represented by proxy and entitled to vote at the Annual Meeting is required
for the approval of all other matters being submitted to the stockholders for
their consideration.
PROPOSAL 1
ELECTION OF DIRECTORS
In accordance with the By-Laws of the Company, the Board of Directors has
at present fixed the number of directors constituting the Board at five. In
accordance with the Company's Restated Certificate of Incorporation, the
directors have been divided into three classes. The class of directors whose
term expires at the 1997 Annual Meeting consists of one (1) person. The Company
proposes to elect one (1) director, whom will hold office for a term of three
years and until his successor has been duly elected and qualified. Unless
otherwise instructed by the stockholder, the persons named in the enclosed form
of proxy will vote the shares represented by such proxy for the election of the
nominee named in this Proxy Statement.
The Company has no reason to believe that the nominee named herein will be
unavailable to serve as a director. However, if such nominee for any reason is
unable to serve or for good cause will not serve, the proxy
<PAGE> 4
may be voted for such substitute nominee as the persons appointed in the proxy
may in their discretion determine. Stockholders may not cumulate their votes in
the election of directors.
The following nominee is currently a director of the Company:
JACK NOONAN has served as Director and President and Chief Executive
Officer since joining the Company in January 1992. Mr. Noonan was President and
Chief Executive Officer of Microrim Corp., a developer of database software
products, from 1990 until December 1991. Mr. Noonan served as Vice President of
the Product Group of Candle Corporation, a developer of IBM mainframe system
software, from 1985 to 1990. Mr. Noonan is a Director of ShowCase Corporation
and NAPERSOFT, Inc. Mr. Noonan holds an engineering degree from the Rockford
School of Business and Engineering in Rockford, Illinois.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
THE ELECTION OF THE DIRECTOR NOMINEE NAMED ABOVE.
INFORMATION CONCERNING EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information as of March 14, 1997
with respect to each person who is an executive officer or director of the
Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Norman Nie........................... 53 Chairman of the Board of Directors
Jack Noonan.......................... 49 Director, President and Chief Executive Officer
Edward Hamburg....................... 45 Senior Vice President, Corporate Operations, Chief
Financial Officer and Secretary
Louise Rehling....................... 53 Senior Vice President, Product Development
Mark Battaglia....................... 37 Vice President, Corporate Marketing
Ian Durrell.......................... 54 Vice President, International
Susan Phelan......................... 40 Vice President, Domestic Sales and Services
Bernard Goldstein(1)(2).............. 66 Director
Fredric Harman(1)(2)................. 36 Director
Merritt Lutz(1)...................... 54 Director
</TABLE>
- -------------------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
Norman Nie, Chairman of the Board and co-founder of the Company, designed
the Company's original statistical software beginning in 1967 and has been a
Director and Chairman of the Board since the Company's inception in 1975. He
served as Chief Executive Officer of the Company from 1975 to 1991. In addition
to his current responsibilities as Chairman of the Board, Dr. Nie is a professor
in, and has previously chaired the Political Science Department at the
University of Chicago, where his research specialties include public opinion,
voting behavior and citizen participation. He has received two national awards
for his books in these areas. Dr. Nie received his Ph.D. from Stanford
University.
Edward Hamburg, Senior Vice President, Corporate Operations, Chief
Financial Officer and Secretary, was elected Senior Vice President, Corporate
Operations in July 1992, Chief Financial Officer in June 1993 and Secretary in
June 1994. Dr. Hamburg previously served as Senior Vice President, Business
Development, and was responsible for product and technology acquisitions as well
as joint venture opportunities. Dr. Hamburg first joined the Company in 1978 and
served in a variety of marketing and product management capacities. He joined
the faculty at the University of Illinois at Chicago in 1982, and returned to
the Company in 1986. Dr. Hamburg received his Ph.D. from the University of
Chicago.
2
<PAGE> 5
Louise Rehling, Senior Vice President, Product Development, oversees
management of all stages of product development and is responsible for corporate
computer networks. Ms. Rehling joined SPSS in 1982 as Vice President of
Development and Services and has served in her current position since 1987. Ms.
Rehling received her B.S. in Mathematics from the University of Illinois and her
M.S. in Information Sciences and her M.A. in Psychology from the University of
Chicago.
Mark Battaglia, Vice President, Corporate Marketing, joined SPSS in October
1988. Mr. Battaglia served as Vice President of Marketing at London House, a
publisher in the Maxwell Communications family, from June 1987 until joining the
Company. Mr. Battaglia received his M.B.A. in 1984 from the University of
Chicago.
Ian Durrell has served as Vice President, International, since February
1991. Prior to that time, he served as head of European marketing for Unify
Corporation, a supplier of relational database management systems, and was a
partner of Partner Development International, a strategic partnering firm from
1987 to 1989. Mr. Durrell graduated from the Royal Military Academy, Sandhurst,
in the United Kingdom.
Susan Phelan, Vice President, Domestic Sales and Services, joined SPSS in
1980 as a sales representative. She assumed her current position in 1987. Ms.
Phelan received her M.B.A. from the University of Illinois at Chicago.
Bernard Goldstein has been a Director of the Company since 1987. He is a
Director of Broadview Associates, LLC ("Broadview"), which he joined in 1979. He
is a past President of the Information Technology Association of America
("ITAA"), the industry trade association of the computer service industry, and
past Chairman of the Information Technology Foundation. Mr. Goldstein is a
Director of Apple Computer Inc., Franklin Electronic Publishers, Inc., Sungard
Data Systems, Inc., Enterprise Systems Inc., and several privately held
companies. He is a graduate of both the Wharton School of the University of
Pennsylvania and the Columbia University Graduate School of Business.
Fredric Harman has been a Director of the Company since October 1990. Since
June 1994 he has been a General Partner of Oak Investment Partners, a venture
capital firm. He was formerly a General Partner of Morgan Stanley Venture
Partners L.P. ("MSVP"), the General Partner of Morgan Stanley Venture Capital
Fund L.P. ("MSVCF"). Mr. Harman joined Morgan Stanley in 1987 as an Associate of
Morgan Stanley Venture Capital Inc. ("MSVC") and was named a Vice President of
MSVC in 1992. He is also a Director of ILOG S.A. and several privately held
companies. He received his M.B.A. from the Harvard University Graduate School of
Business and his M.S. in Electrical Engineering from Stanford University.
Merritt Lutz has been a Director of the Company since 1988. He is currently
a Managing Director of Morgan Stanley & Co. Incorporated ("Morgan Stanley"),
managing the firm's internal strategic technology investments. Previously, he
was President of Candle Corporation, a worldwide supplier of systems software
from 1989 to November 1993. Mr. Lutz is a Director of Interlink Electronics
(Nasdaq) and Algorithmics, Inc., a privately held company. He also is a member
of technology advisory boards for Nasdaq and the Chairman's Committee for the
Computerworld Smithsonian Awards organization. He holds a bachelors and masters
degree from Michigan State University.
Guy de Chazal was a Director of the Company from October 1990 through the
end of 1996. He is currently a Managing Director of Morgan Stanley. He joined
Morgan Stanley in 1986 as a Vice President of MSVC and was named President of
MSVC in 1991. Mr. de Chazal is a General Partner of MSVP, the General Partner of
MSVCF. Mr. de Chazal is a Director of PageMart Nationwide, Inc., Cytyc, Inc. and
several privately held companies. Mr. de Chazal received his M.B.A. from Harvard
Graduate School of Business.
The Company's Board of Directors is divided into three classes serving
staggered three-year terms. Mr. Noonan is serving a three-year term expiring at
the 1997 Annual Meeting. Messrs. Harman and Lutz are serving three-year terms
expiring at the 1998 Annual Meeting. Mr. Goldstein and Dr. Nie are serving
three-year terms expiring at the 1999 Annual Meeting. For a discussion of the
nomination rights granted to certain stockholders of the Company, see "Related
Transactions -- Stockholders Agreement."
3
<PAGE> 6
KEY EMPLOYEE
In addition to the executive officers and directors named above, Leland
Wilkinson is a key employee of the Company. Dr. Wilkinson joined SPSS in
September 1994 as part of the Company's acquisition of SYSTAT. Dr. Wilkinson was
the founder of SYSTAT and from its inception served as its President and Chief
Executive Officer. He is a recognized authority in statistical analysis
generally and the graphical display of data in particular. Dr. Wilkinson was a
member of the faculty of the University of Illinois at Chicago and currently
serves on the faculty of Northwestern University. He received his Ph.D. from
Yale University.
INFORMATION ABOUT THE BOARD OF DIRECTORS
The Board of Directors held nine meetings during 1996. The Board of
Directors has two standing committees -- the Audit Committee and the
Compensation Committee. During 1996, no Director attended fewer than 75% of the
aggregate of all meetings of the Board of Directors (other than Mr. de Chazal),
or all meetings of the Compensation Committee (other than Mr. de Chazal and Mr.
Harman), held while serving as a Director.
Audit Committee. In 1996, the Audit Committee consisted of Messrs.
Goldstein and Harman each a non-employee director. Among the Committee's
functions are making recommendations to the Board of Directors regarding the
continued engagement of independent auditors, reviewing with the independent
auditors and the Company's financial management the financial statements and
results of the audit engagement, reviewing the adequacy of the Company's system
of internal accounting controls, and reviewing and approving audit and nonaudit
fees. Although the Audit Committee did not meet in 1996, the Board of Directors
met as a whole with the Company's independent auditors, KPMG Peat Marwick LLP,
during 1996 to discuss audit and accounting matters.
Compensation Committee. In 1996, the Compensation Committee consisted of
Messrs. Goldstein, Harman, Lutz and de Chazal, until his resignation, each a
non-employee director. The Committee's primary functions are to make
recommendations to the Board of Directors concerning remuneration arrangements
for senior management and to review and make recommendations concerning the
administration of certain Company benefit plans. The Compensation Committee held
two meetings during 1996.
COMPENSATION OF DIRECTORS
For the year ended December 31, 1996, non-employee directors of the Company
were entitled to receive 10,000 conditional options. Each director was also
reimbursed by the Company for reasonable expenses incurred in connection with
services provided as a director. During 1996, Dr. Nie received compensation of
$70,000 per year for product development work on a part-time basis.
4
<PAGE> 7
EXECUTIVE COMPENSATION
The following tables set forth (a) the compensation paid or accrued by the
Company to the Chief Executive Officer ("CEO"), and each of the five most highly
compensated officers of the Company, other than the CEO, serving on December 31,
1996 (the "named executive officers") for services rendered to the Company in
all capacities during 1994, 1995, and 1996, (b) certain information relating to
option grants made to the named executive officers in 1996 and (c) certain
information relating to options held by the named executive officers. The
Company made no grants of freestanding stock appreciation rights ("SARs") in
1994, 1995, or 1996, nor did the Company make any awards in 1994, 1995 or 1996
under any long-term incentive plan.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------------------------- -----------------------------------------
AWARDS PAYOUTS
----------------------- -------
SECURITIES
RESTRICTED UNDERLYING
SALARY OTHER ANNUAL STOCK OPTIONS/ LTIP ALL
COMPENSATION BONUS COMPENSATION AWARD(S) SARS PAYOUTS OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($)(1) (#)(2) ($) ($)
--------------------------- ---- ------------ ----- ------------ ---------- ---------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jack Noonan, 1996 $235,000 $185,147 none none 70,000 none none
President and Chief 1995 $235,000 $167,973 none none 55,000 none none
Executive Officer................ 1994 $235,000 $ 73,920 none none 20,000 none none
Ian Durrell, 1996 $197,000 $ 51,401 none none 25,000 none none
Vice President, 1995 $197,000 $ 46,070 none none 25,000 none none
International(3)................. 1994 $197,000 $ 38,110 none none 10,000 none none
Edward Hamburg,
Senior Vice President, 1996 $156,000 $ 90,578 none none 25,000 none none
Corporate Operations and 1995 $156,000 $ 73,952 none none 25,000 none none
Chief Financial Officer.......... 1994 $156,000 $ 36,420 none none 10,000 none none
Louise Rehling, 1996 $135,200 $ 64,808 none none 25,000 none none
Senior Vice President, 1995 $135,200 $ 65,180 none none 25,000 none none
Product Development.............. 1994 $135,200 $ 25,370 none none 10,000 none none
Mark Battaglia, 1996 $110,000 $ 88,432 none none 25,000 none none
Vice President, 1995 $100,000 $ 81,750 none none 25,000 none none
Corporate Marketing.............. 1994 $100,000 $ 44,120 none none 10,000 none none
Susan Phelan, 1996 $100,000 $ 76,387 none none 25,000 none none
Vice President, 1995 $100,000 $ 78,024 none none 25,000 none none
Domestic Sales and Services...... 1994 $ 85,000 $ 39,160 none none 10,000 none none
</TABLE>
- -------------------------
(1) On December 31, 1996, Dr. Hamburg, Ms. Rehling and Ms. Phelan held 10,000,
4,180 and 1,925 shares, respectively, of restricted Common Stock having a
market value, based on the closing price of the Common Stock on such date,
of $278,750, $116,518 and $53,659, respectively.
(2) Amounts reflected in this column are for grants of stock options for the
Common Stock of the Company. No SARs have been issued by the Company.
(3) Payments and options set forth in the table for Mr. Durrell reflect payments
and option grants to Valletta Investments Limited ("Valletta"), a consulting
company controlled by Mr. Durrell. Mr. Durrell does not receive any personal
benefits or perquisities, payments of salary and bonus, awards of options or
other compensation from the Company in his individual capacity.
5
<PAGE> 8
The following table sets forth the number of options to purchase Common
Stock granted to each of the named executive officers during 1996.
1996 OPTION/SAR GRANTS
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED ANNUAL
NUMBER OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS/SARS LATEST APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE OR POSSIBLE TERM (1)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ------------------------
NAME GRANTED (#) 1996 ($/SH) DATE 5% ($) 10% ($)
---- ------------ ------------ ----------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Jack Noonan........... 70,000 20.26% $14.625 02/14/06 $687,853 $1,743,156
Ian Durrell(2)........ 25,000 7.24% $14.625 02/14/06 $245,662 $ 622,556
Edward Hamburg........ 25,000 7.24% $14.625 02/14/06 $245,662 $ 622,556
Louise Rehling........ 25,000 7.24% $14.625 02/14/06 $245,662 $ 622,556
Mark Battaglia........ 25,000 7.24% $14.625 02/14/06 $245,662 $ 622,556
Susan Phelan.......... 25,000 7.24% $14.625 02/14/06 $245,662 $ 622,556
</TABLE>
- -------------------------
(1) In satisfaction of applicable SEC regulations, the table sets forth the
potential realizable values of such options, upon their latest possible
expiration date, at arbitrarily assumed annualized rates of stock price
appreciation of five and ten percent over the term of the options. The
potential realizable value columns of the table illustrate values that might
be realized upon exercise of the options at the end of the ten-year period
starting with their vesting commencement dates, based on the assumptions set
forth above. Because actual gains will depend upon, among other things, the
actual dates of exercise of the options and the future performance of the
Common Stock in the market, the amounts reflected in this table may not
reflect the values actually realized. No gain to the named executive
officers is possible without an increase in stock price which will benefit
all stockholders proportionately. Actual gains, if any, on option exercises
and Common Stock holdings are dependent on the future performance of the
Common Stock and general stock market conditions. There can be no assurance
that the potential realizable values shown in this table will be achieved,
or that the stock price will not be lower or higher than projected at five
and ten percent assumed annualized rates of appreciation.
(2) Options reflected in the table for Mr. Durrell are options granted to
Valletta.
6
<PAGE> 9
AGGREGATED OPTION/SAR EXERCISES IN 1996 AND
YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FISCAL YEAR-END FISCAL YEAR-END
SHARES (#)(1) ($)(1)(2)
ACQUIRED ON VALUE --------------- ---------------------
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($)(1)(4) UNEXERCISABLE UNEXERCISABLE
---- ----------- --------- ------------- -------------
<S> <C> <C> <C> <C>
Jack Noonan..................... 20,000 $479,000 153,748/109,919 $4,285,726/$3,063,992
Ian Durrell(3).................. None N/A 45,707/43,626 $1,274,083/$1,216,075
Edward Hamburg.................. None N/A 80,707/43,626 $2,249,708/$1,216,075
Louise Rehling.................. None N/A 74,040/43,626 $2,063,865/$1,216,075
Mark Battaglia.................. None N/A 60,707/43,626 $1,692,208/$1,216,075
Susan Phelan.................... None N/A 59,010/43,657 $1,644,904/$1,216,939
</TABLE>
- -------------------------
(1) All information provided is with respect to stock options. No SARs have been
issued by the Company.
(2) These amounts have been determined by multiplying the aggregate number of
options by the difference between $27.875, the closing price of the Common
Stock on the Nasdaq National Market on December 31, 1996, and the exercise
price for that option.
(3) Options reflected in the table for Mr. Durrell are options granted to
Valletta.
(4) These amounts have been determined by multiplying the aggregate number of
options exercised by the difference between the closing price of the Common
Stock on the Nasdaq National Market on the date of exercise and the exercise
price for that option.
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Jack Noonan on
January 14, 1992. This employment agreement provides for a one-year term with
automatic one-year extensions unless Mr. Noonan or the Company gives a written
termination notice at least 90 days prior to the expiration of the initial term
or any extension thereof. It also provides for a base salary of $225,000 during
the initial term, together with the same benefits provided to other employees of
the Company. Mr. Noonan's base compensation is subject to annual review by the
Board of Directors and was increased to $235,000 for 1993, 1994, 1995 and 1996.
If the Company terminates Mr. Noonan's employment without cause, the Company
must pay Mr. Noonan an amount equal to 50% of Mr. Noonan's annual base salary in
effect at the time of termination. This amount is payable in 12 equal monthly
installments, and the obligation to make these payments ceases if Mr. Noonan
finds other employment at a comparable salary. The employment agreement requires
Mr. Noonan to refrain from disclosing confidential information of the Company
and to abstain from competing with the Company during his employment and for a
period of one year thereafter. Except for the employment agreements with Mr.
Noonan and Dr. Wilkinson, and a management services agreement with Valletta
described below (pursuant to which Ian Durrell has been engaged to act as Vice
President, International and to head the Company's non-Western Hemisphere
operations), none of the senior management or key technical employees of the
Company are subject to employment or similar agreements, although the Company
does have confidentiality and work-for-hire agreements with many of its key
management and technical personnel.
The Company entered into an employment agreement with Leland Wilkinson on
September 23, 1994 to be employed by SPSS as Senior Vice President, SYSTAT
Products. The employment agreement continues through December 31, 1999 and
provides for a base annual salary of $135,000 plus a bonus and other fringe
benefits customarily received by other SPSS senior executives. In addition, he
was granted options to purchase an aggregate of 135,000 shares of Common Stock
at a price of $9.00 per share. The vesting of these options shall occur on the
same schedule as options granted under the Amended 1991 Stock Option Plan. Each
year
7
<PAGE> 10
Dr. Wilkinson shall be reviewed by the Board of Directors with regard to salary
and bonus and shall participate in the bonus plan to the same extent as
comparable SPSS executives. The employment agreement may be terminated prior to
its expiration by Dr. Wilkinson or the Company effective 45 days after written
notice by either party. If the employment agreement is terminated by Dr.
Wilkinson, he shall receive a pro-rata share of his salary and bonus earned
through the date of termination. In the event the employment agreement is
terminated by the Company without cause, Dr. Wilkinson is entitled to receive
his annual base salary and bonus until the expiration date of the employment
agreement. The employment agreement requires that Dr. Wilkinson refrain from
disclosing any confidential information of the Company and that he shall have no
right, title or interest in any of the confidential property, including
confidential property that Dr. Wilkinson has developed or develops during his
employment with SPSS. The employment agreement also requires that Dr. Wilkinson
abstain from competing with the Company during his employment and for a period
of six months thereafter.
MANAGEMENT SERVICES AGREEMENT
The Company has entered into a management services agreement with Valletta,
pursuant to which Ian Durrell's services are provided to the Company. Either
Valletta or the Company may terminate the agreement at any time upon 30 days'
written notice; provided that, if the Company terminates the agreement under the
30-day notice provision without cause, Valletta is entitled to termination
payments equal to 50% of its annual compensation then in effect in six equal
monthly installments. The Agreement provides that Valletta is to receive annual
compensation at a rate established by the Board of Directors plus incentive
compensation if specified performance standards are satisfied. For 1996,
Valletta's aggregate compensation, including bonus, was $248,401. The management
services agreement requires Valletta to refrain from disclosing confidential
information about the Company and to abstain from competing with the Company
during the term of the management services agreement and for a period of
eighteen months thereafter. Mr. Durrell has agreed to be bound by the terms and
conditions of the management services agreement.
8
<PAGE> 11
REPORT OF THE COMPENSATION COMMITTEE
To: The Board of Directors
The Compensation Committee of the Board of Directors (the "Committee") is
composed entirely of directors who have never served as officers of the Company.
The Committee develops and administers the compensation programs for the
Company's executive officers. After consideration of the Committee's
recommendations, the entire Board of Directors reviews and approves the base
salaries, bonuses and the stock option and benefit programs for the Company's
executive officers. In 1996, the Board approved the Committee's recommendations
in all material respects.
Compensation Philosophy. The Company has three principal objectives in its
executive compensation programs:
1. It strives to relate its total compensation for senior management
to the achievement of financial benchmarks designed to build shareholder
value.
2. It rewards outstanding individual performance.
3. It strives to structure its entire compensation package in a manner
which is competitive with other executive compensation packages in the
software industry, so that it will attract and retain highly capable key
executives responsible for the success of the Company and provide fair
compensation for the responsibilities undertaken by those executives.
These goals are met through a combination of salary, bonuses, stock options and
other benefits. The Company is committed to increasing the proportion of the
senior executives' compensation which is performance-based, and therefore
variable, and to focus on building shareholder value as the primary measure of
performance. To the extent practicable, the Committee's objective is to align
the executive officers' financial interests with those of shareholders by
focusing on specific financial objectives that the Committee believes will
enhance shareholder value and through the grant of additional options pursuant
to the Company's option plan, the opportunity for management to purchase
additional shares on advantageous terms under the Company's Employee Stock
Purchase Plan and through present stock ownership and options.
The Committee focuses principally on the Company's financial
performance -- specifically operating and net income -- in determining the
amount of bonuses for the executive officers. Therefore, bonuses for these
officers are a function of the Company's overall financial performance relative
to budgeted goals. In keeping with the Company's commitment to increasing the
proportion of the senior executives' compensation which is performance-based,
base salary levels are designed to increase in comparatively small amounts and
bonus compensation is designed so that it can increase or decrease significantly
depending on the Company's overall financial performance.
The Committee works with the Chief Executive Officer (the "CEO") to
determine the base salary of the other executive officers, to establish targets
for the annual bonus program and to allocate the bonus pool among the executive
officers. Consistent with the Committee's philosophy of shifting the proportion
of compensation away from fixed to variable types of compensation, the Committee
has targeted growth in total compensation to come from the bonus and other
incentive forms of compensation. At the beginning of each year, the Committee
establishes certain budgeted objectives for operating income. The total amount
allocated to the annual bonus pool is dependent upon the degree to which
budgeted goals are achieved.
Under the Company's Amended and Restated 1995 Equity Incentive Plan, the
Committee is authorized to make grants of stock options to executive officers.
The Committee normally approves grants once a year and occasionally in
connection with significant corporate events. During 1996, the Committee awarded
incentive stock options to executive officers. In determining the size of the
option grants, the Committee considers the impact of the grants on existing
shareholders' stock ownership positions and the prospective value of the options
as a performance incentive. The number of options previously awarded to and held
by executive officers is reviewed and is one factor in determining the size of
current option grants.
9
<PAGE> 12
The Committee has established an incentive stock option program for which
only policy-making senior executives of the Company are eligible. Vesting of the
incentive options granted to the executive officers as of February, 1996 was
contingent upon the Company achieving certain 1996 revenue and profit levels
established by the Board of Directors. Such options are customarily granted in
the first half of the calendar year after budgetary targets have been
established. Such options are earned only if the Company exceeds, by a
significant percentage established by the Committee, the budgeted performance
goals for Company operating and net income approved by the Board. In the event
of a major corporate event, the Committee may change these goals.
In addition to Company performance, the Committee also takes into account
exceptional individual performance in determining bonus awards, although it does
not assign a specified percentage of senior executive bonus compensation to
this.
Chief Executive Officer Compensation. The Committee also determines the
CEO's base salary and bonus, employing largely the same principles described
above, except that the amount of the CEO's bonus is purely a function of the
financial performance of the Company measured against the operating and net
income goals established by the Committee and approved by the Board at the
beginning of each year. The Committee believes that it has established a total
compensation package which compares favorably to industry standards. The
Committee considers the total salary and incentive compensation provided to
chief executives of similar companies, although it does not target a specific
percentile range within this group of similar companies' chief executive
compensation in determining the CEO's compensation.
The Committee recommends stock option grants and incentive stock option
grants reflecting the importance of Mr. Noonan's contribution to the Company and
the importance of aligning Mr. Noonan's interest in the Company with that of
stockholders. In 1996, Mr. Noonan received more than twice the number of
incentive stock options received by the other policy-making senior executives.
The Committee recommended grants to Mr. Noonan of incentive stock options to
acquire 70,000 shares of Common Stock at $14.625 per share effective February
15, 1996. These options vest in the same manner as the stock options or
incentive stock options, as the case may be, for the other senior executives.
Mr. Noonan's bonus is determined in the same manner as the other
policy-making senior executives, except that no portion of Mr. Noonan's bonus is
based on exceptional individual performance. It is the Committee's view that the
CEO's compensation should be based solely on the financial performance of the
Company and that, for the CEO, exceptional individual performance is so closely
aligned with Company financial performance that the CEO's bonus should be based
solely on overall Company financial performance.
Tax Considerations. To the extent readily determinable and as one of the
factors in its consideration of compensation matters, the Committee considers
the anticipated tax treatment to the Company and to the executive officers of
various payments and benefits. Some types of compensation payments and their
deductibility (e.g., the spread on exercise of non-qualified options) depend
upon the timing of an executive's vesting or exercise of previously granted
rights. Interpretations of and changes in the tax laws and other factors beyond
the Committee's control also affect the deductibility of compensation For these
and other reasons, the Company will not necessarily and in all circumstances
limit executive compensation to the amount which is permitted to be deductible
as an expense of the Company under Section 162(m) of the Internal Revenue Code.
The Committee will consider various alternatives to preserving the deductibility
of compensation payments and benefits to the extent reasonably practicable and
to the extent consistent with its other compensation objectives.
Compensation Committee of SPSS Inc.
Bernard Goldstein
Fredric Harman
Merritt Lutz
10
<PAGE> 13
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Goldstein, Harman, Lutz and de Chazal, until his resignation, were
directors and members of the Compensation Committee during 1996. None of the
members of the Compensation Committee has ever been an officer or employee of
the Company or any of its subsidiaries.
EQUITY INCENTIVE PLAN
The Company has previously established its Amended and Restated 1995 Equity
Incentive Plan (the "1995 Equity Incentive Plan") pursuant to which it can award
stock options and a variety of other equity incentives to directors, officers,
other key executives, employees and independent contractors of the Company and
any of its subsidiaries. The Board is authorized to delegate to the Compensation
Committee the administration of the Plan. The purpose of the 1995 Equity
Incentive Plan is to further the success of the Company by attracting and
retaining key management and other talent and providing to such persons
incentives and rewards tied to the Company's business success.
Currently, the maximum number of shares of Common Stock that may be issued
or transferred to such persons under the 1995 Equity Incentive Plan may not
exceed 1,050,000.
PERFORMANCE GRAPH
The following graph shows the changes in the value of $100 invested since
August 18, 1993 (the date of the Company's initial public equity offering) in
its Common Stock, the Nasdaq 100 Stock Index and S&P Computer Software &
Services Index, a specialized industry focus group.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD SPSS (NASDAQ: NASDAQ 100 S&P COMPUTER
(FISCAL YEAR COVERED) SPSS) STOCK INDEX SOFTWARE &
SERVICES INDEX
<S> <C> <C> <C>
8/18/93 100.00 100.00 100.00
12/31/93 114.06 105.98 111.62
12/31/94 160.94 107.57 131.62
12/31/95 243.75 153.32 184.67
12/31/96 348.50 286.85 218.56
</TABLE>
- -------------------------
NOTES
(1) Assumes that all dividends were reinvested.
11
<PAGE> 14
RELATED TRANSACTIONS
TRANSACTIONS WITH NORMAN NIE
Dr. Nie received 10,000 conditional options for his services as Chairman of
the Board in 1996 and $70,000 for product development work on a part-time basis.
Dr. Nie is a limited partner in CSDC, a research and development limited
partnership to which the Company incurred royalty expense of $260,000 in 1994,
$274,000 in 1995 and $255,000 in 1996.
STOCKHOLDERS AGREEMENT
In connection with the Company's initial public offering, the Company and
the individuals and entities who were stockholders prior to the initial public
offering entered into an agreement (the "Stockholders Agreement") containing
certain registration rights with respect to outstanding capital stock of the
Company and granting to each of the Nie Trust and MSVCF, so long as they own
beneficially more than 12.5% of the capital stock of the Company, the right to
designate one nominee (as part of the management slate) in each election of
directors at which directors of the class specified for such holder are to be
elected. Since the completion of the February 1995 offering, MSVCF owned less
than 12.5% and currently owns no capital stock of the Company.
Pursuant to the Stockholders Agreement, the holders of restricted
securities constituting more than seven percent of the outstanding shares at any
time may require the Company to register under the Act all or any portion of the
restricted securities held by the requesting holder or holders for sale in the
manner specified in the notice. The Company is not bound to honor the request
unless the proceeds from the registered sale can reasonably be expected to
exceed $5,000,000. The Company estimates that the cost of complying with demand
registration rights would be approximately $25,000 for a single registration.
All of the stockholders who acquired their shares prior to the initial
public offering have piggyback registration rights, which entitle them to seek
inclusion of their Common Stock in any registration by the Company, whether for
its own account or for the account of other security holders or both (except
with respect to registration on Forms S-4 or S-8 or another form not available
for registering restricted securities for sale to the public). In the event of a
request to have shares included in a Registration Statement filed by the Company
for its own account, the Company's underwriters may generally reduce, pro rata,
the amount of Common Stock to be sold by the stockholders if the inclusion of
all such securities would be materially detrimental to the Company's offering.
12
<PAGE> 15
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of March 21, 1997, the number and
percentage of shares of Common Stock beneficially owned by (i) each person known
by the Company to own beneficially more than 5% of the outstanding shares of the
Common Stock, (ii) each director of the Company, (iii) each named executive
officer of the Company and (iv) all directors and executive officers of the
Company as a group. Unless otherwise indicated in a footnote, each person
possesses sole voting and investment power with respect to the shares indicated
as beneficially owned.
The business address for Mr. Lutz is the office of Morgan Stanley at 750
Seventh Avenue, 16th floor, New York, New York 10019. The business address of
Mr. Goldstein is the office of Broadview Associates, L.P., One Bridge Plaza,
Fort Lee, New Jersey 07024. The business address of Fredric Harman is the office
of Oak Investment Partners, 525 University Avenue, Suite 1300, Palo Alto,
California 94301. The business address of Kopp Investment Advisors, Inc. is 6600
France Avenue South, Suite 672, Edina, Minnesota 55435. The business address of
each other person listed below is 444 North Michigan Avenue, Chicago, Illinois
60611.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY OWNED
-------------------
NAME NUMBER PERCENT
---- ------ -------
<S> <C> <C>
Norman H. Nie, individually, as Trustee of the Nie Trust and
as a Director and President of the Norman and Carol Nie
Foundation(1)............................................. 1,174,545 15.1%
Kopp Investment Advisors, Inc/LeRoy C. Kopp(2).............. 456,900 5.9%
Jack Noonan(3).............................................. 186,159 2.4%
Bernard Goldstein(4)........................................ 33,641 *
Louise Rehling(5)........................................... 88,517 1.1%
Edward Hamburg(6)........................................... 100,804 1.3%
Mark Battaglia(7)........................................... 71,187 *
Susan Phelan(8)............................................. 71,063 *
Ian Durrell(9).............................................. 55,804 *
Merritt M. Lutz(10)......................................... 21,751 *
Fredric Harman(11).......................................... 2,966 *
All directors and executive officers as a group (11
persons)(12).............................................. 1,806,437 21.6%
</TABLE>
- -------------------------
* The percentage of shares beneficially owned does not exceed 1% of the
Common Stock.
(1) Includes 72,912 shares which are subject to currently exercisable options;
110,433 shares held of record by the Norman and Carol Nie Foundation (the
"Nie Foundation"); and 991,200 shares held by the Nie Trust. Dr. Nie shares
voting and investment power over the 110,433 shares held by the Nie
Foundation with Carol Nie.
(2) Although Kopp Investment Advisors, Inc. ("KIA") exercises investment
discretion as to these shares, neither KIA nor LeRoy C. Kopp (100% owner of
KIA) vote the vast majority of these shares, and neither is the record
owner of them.
(3) Includes 179,740 shares subject to currently exercisable options.
(4) Includes 2,918 shares subject to currently exercisable options.
(5) Includes 200 shares held in the Stella S. Hechtman Trust (the "Trust"). Ms.
Rehling is the Trustee and has the voting and investment power over the 200
shares held in the Trust. She disclaims beneficial ownership of these
shares. Includes 84,137 shares subject to currently exercisable options.
(6) Includes 90,804 shares subject to currently exercisable options.
(7) Includes 70,804 shares subject to currently exercisable options.
(8) Includes 69,138 shares subject to currently exercisable options.
13
<PAGE> 16
(9) Mr. Durrell is the beneficial owner of these shares, which consist solely
of 55,804 shares subject to currently exercisable options held of record by
Valletta.
(10) Includes 2,918 shares subject to currently exercisable options.
(11) Includes 2,918 shares subject to currently exercisable options.
(12) Includes 632,093 shares subject to currently exercisable options.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, upon recommendation of its Audit Committee, has
selected the accounting firm of KPMG Peat Marwick LLP to serve as independent
auditors of the Company with respect to the 1997 fiscal year and proposes the
ratification by the stockholders of such selection. KPMG Peat Marwick LLP has
served as the Company's independent auditors since 1985, is familiar with the
business and operations of the Company and has offices convenient to the
Company's offices.
Representatives of KPMG Peat Marwick LLP will be present at the Annual
Meeting. They will have the opportunity to make a statement and will be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
THE RATIFICATION OF THE APPOINTMENT OF
KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS FOR FISCAL YEAR 1997.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that during 1996 its officers, directors and owners of
more than ten percent of its Common Stock complied with all filing requirements
under Section 16(a) of the Securities and Exchange Act of 1934 except as
described below. Four reporting persons filed Form 5 reports to disclose
transactions subject to Form 4 requirements. Jack Noonan exercised 20,000
options and sold the underlying securities in the second quarter of 1996. Norman
H. Nie disposed of 65,000 shares of Common Stock held of record by the Norman H.
Nie Revocable Trust, dated March 15, 1991, in the third quarter of 1996. Louise
Rehling disposed of 10,000 shares of Common Stock in the second quarter of 1996
and 5,000 shares of Common Stock in the third quarter of 1996. Merritt Lutz
purchased 3,800 and 1,700 shares of Common Stock in the first quarter of 1996.
SOLICITATION AND EXPENSES OF SOLICITATION
The expenses of preparing and mailing this Proxy Statement and the
accompanying form of proxy and the cost of solicitation of proxies on behalf of
the Board will be paid by the Company. Proxies may be solicited by personal
interview, mail or telephone. Brokerage houses, other custodians and nominees
will be asked whether other persons are beneficial owners of the shares which
they hold of record and, if so, they will be supplied with additional copies of
the proxy materials for distribution to such beneficial owners. The Company will
reimburse parties holding stock in their names or in the names of their nominees
for their reasonable expenses in sending the proxy materials to their
principals.
SUBMISSION OF STOCKHOLDER PROPOSALS
FOR THE 1998 ANNUAL MEETING
Stockholder proposals for inclusion in the Proxy Statement to be issued in
connection with the 1998 Annual Meeting of Stockholders must be mailed to the
Secretary, SPSS Inc., 444 North Michigan Avenue, Chicago, Illinois 60611, and
must be received by the Secretary on or before January 21, 1998. The Company
will consider only proposals meeting the requirements of applicable SEC rules.
14
<PAGE> 17
ANNUAL REPORT
A copy of the Company's Annual Report on Form 10-K for the Fiscal Year
Ended December 31, 1996 is being mailed with this Proxy Statement to each
stockholder entitled to vote at the Annual Meeting. STOCKHOLDERS NOT RECEIVING A
COPY OF THE ANNUAL REPORT ON FORM 10-K MAY OBTAIN ONE BY WRITING OR CALLING
EDWARD HAMBURG, SECRETARY, SPSS INC., 444 NORTH MICHIGAN AVENUE, CHICAGO,
ILLINOIS 60611, TELEPHONE (312) 329-2400.
By order of the Board of Directors
Edward Hamburg
Edward Hamburg
Secretary of SPSS Inc.
15
<PAGE> 18
- --------------------------------------------------------------------------------
PROXY SPSS INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 18, 1997
The undersigned stockholder hereby constitutes Jack Noonan and Edward
Hamburg proxies, with full authority and hereby revoking all other proxies
heretofore given with respect to such stock, which may be exercised by either
one or both of them, with power of substitution, to vote and act for the
undersigned at the Annual Meeting of Stockholders of SPSS Inc. ("SPSS") to be
held at the offices of SPSS, 444 North Michigan Avenue, Chicago, Illinois, at
1:00 p.m. (local time) on June 18, 1997 (the "Meeting"), and at any adjournment
thereof, as designated herein, and the proxies are authorized to vote in their
discretion upon such other business as may properly come before the Meeting.
[ ] Check here for address change. [ ] Check here if you plan to attend
the meeting.
New Address:_____________________
_________________________________
_________________________________
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
(Continued and to be signed on reverse side.)
- --------------------------------------------------------------------------------
3510-SPSS INC.
- --------------------------------------------------------------------------------
SPSS INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF ALL PROPOSALS.
FOR ALL (Except
Nominee(s)
1. ELECTION OF DIRECTOR TO SERVE A TERM FOR WITHHOLD Written Below)
EXPIRING IN 2000: / / / / / /
Nominee: Jack Noonan.
_____________________________________
2. To ratify the selection of KPMG Peat Marwick LLP FOR AGAINST ABSTAIN
as independent auditors for SPSS for 1997. / / / / / /
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2.
Dated: _____________________________________, 1997
Signature(s) _____________________________________
__________________________________________________
Please sign exactly as name appears hereon. Joint
owners should each sign personally. Executors,
trustees, officers, etc., should indicate their
titles when signing.
- --------------------------------------------------------------------------------
3510-SPSS INC.
