<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 17, 1998
The 1998 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 17, 1998 at 1:00 p.m. (Chicago time), for
the following purposes:
(1) To elect two directors of the Company to serve until the 2001 Annual
Meeting of Stockholders;
(2) To adopt the Second Amended and Restated 1995 Equity Incentive Plan;
(3) To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors of the Company for the fiscal year 1998; and
(4) 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 30, 1998, 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
/s/ Edward Hamburg
Edward Hamburg
Secretary of SPSS Inc.
Chicago, Illinois
May 19, 1998
<PAGE> 3
SPSS INC.
444 NORTH MICHIGAN AVENUE
CHICAGO, ILLINOIS 60611
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 17, 1998
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 17, 1998 (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 19, 1998.
April 30, 1998 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 8,908,672 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 six. 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 1998 Annual Meeting consists of two (2) persons. The Company
proposes to elect two (2) directors, whom will hold office for a term of three
years and until their successors have 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
nominees named in this Proxy Statement.
The Company has no reason to believe that the nominees named herein will be
unavailable to serve as directors. However, if such nominees for any reason are
unable to serve or for good cause will not serve, the
<PAGE> 4
proxy may be voted for such substitute nominees 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 nominees are currently directors of the Company:
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., International Manufacturing
Services, Inc., 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
Senior Advisor of Morgan Stanley Dean Witter & Co. managing the Firm's strategic
technology investments and partnerships. 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, Inc. and three privately
held software companies -- Algorithmics, Persistence Software, and MicroFrame
Technologies. Mr. Lutz serves on the prestigious Board of Managers at the
University of Rochester-Eastman School of Music and Michigan State University
College of Arts and Letters National Advisory Council. He is a former Director
of the Information Technology Association of American and the NASD Industry
Advisory Committee. He holds a bachelors and masters degree from Michigan State
University.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
THE ELECTION OF EACH OF THE DIRECTOR NOMINEES NAMED ABOVE.
INFORMATION CONCERNING EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information as of March 16, 1998
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 (2)....................... 54 Chairman of the Board of Directors
Jack Noonan.......................... 50 Director, President and Chief Executive Officer
Edward Hamburg....................... 46 Executive Vice President, Corporate Operations, Chief
Financial Officer and Secretary
Louise Rehling....................... 54 Executive Vice President, Product Development
Mark Battaglia....................... 38 Executive Vice President, Corporate Marketing
Ian Durrell.......................... 55 Executive Vice President, International
Susan Phelan......................... 41 Executive Vice President, Domestic Sales and Services
Bernard Goldstein (1)(2)............. 67 Director
Fredric Harman (1)(2)................ 37 Director
Merritt Lutz (1)..................... 55 Director
Michael Blair........................ 53 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 three national awards
for his books
2
<PAGE> 5
in these areas. During the past year, he has become a technology partner in Oak
Investment Partners. Dr. Nie received his Ph.D. from Stanford University.
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,
Napersoft, Inc., and Repository Technologies, Inc. Mr. Noonan holds an
engineering degree from the Rockford School of Business and Engineering in
Rockford, Illinois.
Edward Hamburg, Executive 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.
Louise Rehling, Executive Vice President, Product Development, oversees
management of all stages of product development. 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, Executive 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, Executive Vice President, International, joined SPSS in
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, Executive 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 was a
Director of Apple Computer Inc. until August 1997, and is currently a Director
of Franklin Electronic Publishers, Inc., Sungard Data 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.
Michael D. Blair has been a Director of the Company since July 1997. Since
April 1974, he has been Chairman, Chief Executive and founder of Cyborg Systems,
Inc., a human resource management software company. Mr. Blair is a Director of
Praxis International, Computer Corporation of America and Repository
Technologies, Inc. He is a board member of ITAA, President of the Chicago
Software Association, a board member of the American Software Association and a
board member of Benefits & Compensation Magazine. Mr. Blair holds a bachelors
degree in mathematics and physics from the University of Missouri.
The Company's Board of Directors is divided into three classes serving
staggered three-year terms. 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. Mr. Noonan and Mr. Blair
are
3
<PAGE> 6
serving three-year terms expiring at the 2000 annual meeting. For a discussion
of the nomination rights granted to certain stockholders of the Company, see
"Related Transactions-Stockholders Agreement."
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 seven meetings during 1997. The Board of
Directors has two standing committees -- the Audit Committee and the
Compensation Committee. During 1997, no Director attended fewer than 75% of the
aggregate of all meetings of the Board of Directors (other than Mr. Harman), or
all meetings of the Compensation Committee, held while serving as a Director.
Audit Committee. In 1997, the Audit Committee consisted of Messrs.
Goldstein, Nie 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 1997, the Board of Directors
met as a whole with the Company's independent auditors, KPMG Peat Marwick LLP,
during 1997 to discuss audit and accounting matters.
Compensation Committee. In 1997, the Compensation Committee consisted of
Messrs. Goldstein, Harman and Lutz, 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 one meeting during 1997.
COMPENSATION OF DIRECTORS
For the year ended December 31, 1997, non-employee directors of the Company
were entitled to receive 5,000 conditional options, except for Messr. Blair who
received 10,000 options upon joining the Board in July 1997. Each director was
also reimbursed by the Company for reasonable expenses incurred in connection
with services provided as a director. During 1997, Dr. Nie received compensation
of $80,800 for consultant work on a part-time basis.
4
<PAGE> 7
EXECUTIVE COMPENSATION
The following tables set forth (a) the compensation paid or accrued by the
Company to the Chief Executive Officer ("CEO"), and each of the five most highly
compensated officers of the Company, other than the CEO, serving on December 31,
1997 (the "named executive officers") for services rendered to the Company in
all capacities during 1995, 1996, and 1997, (b) certain information relating to
option grants made to the named executive officers in 1997 and (c) certain
information relating to options held by the named executive officers. The
Company made no grants of freestanding stock appreciation rights ("SARs") in
1995, 1996, or 1997, nor did the Company make any awards in 1995, 1996 or 1997
under any long-term incentive plan.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------------------------- -----------------------------------------
AWARDS PAYOUTS
------------------------ -------
OTHER RESTRICTED SECURITIES
SALARY ANNUAL STOCK UNDERLYING LTIP ALL
COMPENSATION BONUS COMPENSATION AWARD(S) OPTIONS/SARS PAYOUTS OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($)(1) (#)(2) ($) ($)
- --------------------------- ---- ------------ -------- ------------ ---------- ------------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jack Noonan, 1997 $235,000 $132,656 none none 50,000 none none
President and Chief 1996 $235,000 $185,147 none none 70,000 none none
Executive Officer............ 1995 $235,000 $167,973 none none 55,000 none none
Ian Durrell, 1997 $197,000 $ 30,933 none none 25,000 none none
Executive Vice President, 1996 $197,000 $ 51,401 none none 25,000 none none
International(3)............. 1995 $197,000 $ 46,070 none none 25,000 none none
Edward Hamburg,
Executive Vice President, 1997 $156,000 $ 58,027 none none 25,000 none none
Corporate Operations and 1996 $156,000 $ 90,578 none none 25,000 none none
Chief Financial Officer...... 1995 $156,000 $ 73,952 none none 25,000 none none
Louise Rehling, 1997 $135,200 $ 91,357 none none 25,000 none none
Executive Vice President, 1996 $135,200 $ 64,808 none none 25,000 none none
Product Development.......... 1995 $135,200 $ 65,180 none none 25,000 none none
Mark Battaglia, 1997 $110,000 $ 54,342 none none 25,000 none none
Executive Vice President, 1996 $110,000 $ 88,432 none none 25,000 none none
Corporate Marketing.......... 1995 $100,000 $ 81,750 none none 25,000 none none
Susan Phelan, 1997 $110,300 $ 57,743 none none 25,000 none none
Executive Vice President, 1996 $100,000 $ 76,387 none none 25,000 none none
Domestic Sales and
Services................... 1995 $100,000 $ 78,024 none none 25,000 none none
</TABLE>
- ---------------
(1) On December 31, 1997, Dr. Hamburg, Ms. Rehling and Ms. Phelan held 10,000,
3,865 and 1,986 shares, respectively, of restricted Common Stock having a
market value, based on the closing price of the Common Stock on such date,
of $192,500, $74,401 and $38,230, respectively.
(2) Amounts reflected in this column are for grants of stock options for the
Common Stock of the Company. No SARs have been issued by the Company.
(3) Payments and options set forth in the table for Mr. Durrell reflect payments
and option grants to Valletta Investments Limited ("Valletta"), a consulting
company controlled by Mr. Durrell. Mr. Durrell does not receive any personal
benefits or perquisites, payments of salary and bonus, awards of options or
other compensation from the Company in his individual capacity.
5
<PAGE> 8
The following table sets forth the number of options to purchase Common
Stock granted to each of the named executive officers during 1997.
1997 OPTION/SAR GRANTS
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------- POTENTIAL REALIZABLE
PERCENT VALUE AT ASSUMED ANNUAL
NUMBER OF OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS/SARS LATEST APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR POSSIBLE OPTION TERM(1)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ------------------------
NAME GRANTED(#) 1997 ($/SH) DATE 5%($) 10%($)
---- ------------ ------------ ----------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Jack Noonan........... 50,000 13.79% $27.375 01/01/07 $860,800 $2,181,435
Ian Durrell(2)........ 25,000 6.90% $27.375 01/01/07 $430,400 $1,090,717
Edward Hamburg........ 25,000 6.90% $27.375 01/01/07 $430,400 $1,090,717
Louise Rehling........ 25,000 6.90% $27.375 01/01/07 $430,400 $1,090,717
Mark Battaglia........ 25,000 6.90% $27.375 01/01/07 $430,400 $1,090,717
Susan Phelan.......... 25,000 6.90% $27.375 01/07/07 $430,400 $1,090,717
</TABLE>
- -------------------------
(1) In satisfaction of applicable SEC regulations, the table sets forth the
potential realizable values of such options, upon their latest possible
expiration date, at arbitrarily assumed annualized rates of stock price
appreciation of five and ten percent over the term of the options. The
potential realizable value columns of the table illustrate values that might
be realized upon exercise of the options at the end of the ten-year period
starting with their vesting commencement dates, based on the assumptions set
forth above. Because actual gains will depend upon, among other things, the
actual dates of exercise of the options and the future performance of the
Common Stock in the market, the amounts reflected in this table may not
reflect the values actually realized. No gain to the named executive
officers is possible without an increase in stock price which will benefit
all stockholders proportionately. Actual gains, if any, on option exercises
and Common Stock holdings are dependent on the future performance of the
Common Stock and general stock market conditions. There can be no assurance
that the potential realizable values shown in this table will be achieved,
or that the stock price will not be lower or higher than projected at five
and ten percent assumed annualized rates of appreciation.
(2) Options reflected in the table for Mr. Durrell are options granted to
Valletta.
6
<PAGE> 9
AGGREGATED OPTION/SAR EXERCISES IN 1997 AND
YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
YEAR-END YEAR-END
SHARES (#)(1) ($)(1)(2)
ACQUIRED ON VALUE --------------- ---------------------
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($)(1)(4) UNEXERCISABLE UNEXERCISABLE
---- ----------- --------- ------------- -------------
<S> <C> <C> <C> <C>
Jack Noonan.................... 15,000 $467,375 195,616/103,051 $3,765,608/$1,983,732
Ian Durrell(3)................. None N/A 68,891/ 45,442 $1,326,152/$ 874,759
Edward Hamburg................. None N/A 103,891/ 45,442 $1,999,902/$ 874,759
Louise Rehling................. 10,000 $289,500 84,224/ 45,442 $1,679,062/$ 874,759
Mark Battaglia................. None N/A 83,891/ 45,442 $1,614,902/$ 874,759
Susan Phelan................... None N/A 82,225/ 45,442 $1,582,831/$ 874,759
</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 $19.250, the closing price of the Common
Stock on the Nasdaq National Market on December 31, 1997, 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, 1996 and
1997. 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 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
7
<PAGE> 10
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 1997,
Valletta's aggregate compensation, including bonus, was $227,933. 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.
CONSULTING AGREEMENT
The Company has entered into a consulting agreement, dated as of January 1,
1997, with Norman H. Nie Consulting L.L.C., an Illinois Limited Liability
Company (the "Consultant"). Pursuant to the consulting agreement, the Consultant
is to provide thirty (30) hours per month of consulting services on various
matters relating to the business of the Company. This consulting agreement
provides for a one-year term with automatic one-year extensions unless the
Consultant or the Company gives a written notice of at least 30 days prior to
the expiration of the initial term or any extension thereof. The Company may
terminate this consulting agreement for cause, in which event the Company shall
pay the Consultant all accrued but unpaid compensation. It also provides that
the Consultant is to receive annual compensation of $80,800 and reimbursement of
reasonable out of pocket expenses incurred in performing services under the
consulting agreement. The consulting agreement requires that the Consultant
refrain from disclosing confidential information about the Company during the
term of the consulting agreement and for a period of five years after the
expiration thereof. In addition, the consulting agreement requires that the
Consultant abstain from competing with the Company during his consultancy and
for a period of one-year thereafter.
CHANGE OF CONTROL AGREEMENTS
The Company has entered into change of control agreements with its named
executive officers which provide certain benefits to any one or more of them who
is terminated or constructively terminated following a change of control. The
change of control agreements provide that, if the executive is terminated
without cause or constructively terminated within two years following a change
of control, that the executive may receive benefits including a severance
package equal to the greater of (i) the aggregate cash compensation received in
the immediately preceding fiscal year or (ii) two times the executive's base
salary received in the immediately preceding fiscal year; the accelerated
vesting of all previously unvested options; and participation in the same health
and welfare benefits he or she received at any time within 120 days of the
change of control for eighteen months following that date of such termination.
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 1997, 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 1997, the Committee awarded
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 a stock option program for which only
policy-making senior executives of the Company are eligible. Vesting of the
options granted to the executive officers as of January, 1997 was contingent
upon the Company achieving certain 1997 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 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 1997, Mr. Noonan
received twice the number of stock options received by the other policy-making
senior executives. The Committee recommended grants to Mr. Noonan of stock
options to acquire 50,000 shares of Common Stock at $27.375 per share effective
January 2, 1997. These options vest in the same manner as the 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
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<PAGE> 13
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Goldstein, Harman and Lutz were directors and members of the
Compensation Committee during 1997. 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. The Company is seeking approval by shareholders of a Second
Amended and Restated 1995 Equity Incentive Plan pursuant to which the number of
shares available under the 1995 Equity Incentive Plan has been increased from
1,050,000 to 1,800,000. For a more complete discussion of the Second Amended and
Restated 1995 Equity Incentive Plan, refer to "Proposal 2" contained in this
Proxy Statement.
11
<PAGE> 14
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>
S&P
Computer
SPSS NASDAQ Software &
Measurement Period (NASDAQ: 100 Stock Services
(Fiscal Year Covered) SPSS) Index 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
12/31/97 240.63 263.64 399.47
</TABLE>
- -------------------------
NOTES
(1) Assumes that all dividends were reinvested.
RELATED TRANSACTIONS
TRANSACTIONS WITH NORMAN NIE
Dr. Nie received 5,000 conditional options for his services as Chairman of
the Board in 1997 and $80,800 for consulting work on a part-time basis. Dr. Nie
is a limited partner in the Computer Software Development Company, a research
and development limited partnership to which the Company incurred royalty
expense of $274,000 in 1995, and $255,000 in 1996 and $249,000 in 1997.
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 affiliates 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
12
<PAGE> 15
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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of March 16, 1998, 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 for Michael Blair is the office of Cyborg
Systems, Inc., Two North Riverside Plaza, 12th floor, Chicago, Illinois 60606.
The business address of Fidelity Management & Research Company is 82 Devonshire
Street, Boston, Massachusetts 02109. The business address for the Edward Sherman
Ross Trust is c/o Michael Oestreicher, Trustee, 312 Walnut Street, Suite 1400,
Cincinnati, Ohio 45202. 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, Inc.(1)....................................... 1,139,089 12.7%
Fidelity Management & Research Company(2)................... 861,500 9.7%
Edward Sherman Ross Trust, dated June 30, 1997(3)........... 445,443 5.0%
Jack Noonan(4).............................................. 213,300 2.3%
Bernard Goldstein(5)........................................ 42,956 *
Louise Rehling(6)........................................... 95,059 1.1%
Edward Hamburg(7)........................................... 125,741 1.4%
Mark Battaglia(8)........................................... 98,024 1.1%
Susan Phelan(9)............................................. 87,961 1.0%
Ian Durrell(10)............................................. 43,308 *
Merritt M. Lutz(11)......................................... 26,845 *
Fredric Harman(12).......................................... 7,560 *
Michael D. Blair............................................ 0 *
All directors and executive officers as a group (11
persons)(13).............................................. 1,879,843 19.5%
</TABLE>
13
<PAGE> 16
- ---------------
* The percentage of shares beneficially owned does not exceed 1% of the
Common Stock.
(1) Includes 77,456 shares which are subject to options exercisable within 60
days; 110,433 shares held of record by the Norman and Carol Nie Foundation,
Inc. (the "Nie Foundation"); and 951,200 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) Fidelity Management & Research Company ("Fidelity"), a wholly-owned
subsidiary of FMR Corp. and an investment adviser registered under Section
203 of the Investment Advisers Act of 1940, is the beneficial owner of
861,500 shares of the Common Stock as a result of acting as investment
adviser to several investment companies registered under Section 8 of the
Investment Company Act of 1940. The ownership of one investment company,
Fidelity Low-Priced Stock Fund, amounted to 861,500 shares of the Common
Stock. FMR Corp. has the power to dispose of the shares of Common Stock.
The Board of Trustees directs the voting of the shares of Common Stock.
This information was taken from FMR Corp.'s Schedule 13G, filed on February
11, 1998.
(3) Edward Sherman Ross has sole voting and investment power over these shares.
3,803 of these shares are owned of record by Mr. Ross's minor children.
(4) Includes 205,728 shares subject to options exercisable within 60 days.
(5) Includes 7,512 shares subject to options exercisable within 60 days.
(6) 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 90,974 shares subject to options exercisable within 60
days.
(7) Includes 115,741 shares subject to options exercisable within 60 days.
(8) Includes 97,641 shares subject to options exercisable within 60 days.
(9) Includes 85,975 shares subject to options exercisable within 60 days.
(10) Mr. Durrell is the beneficial owner of these shares, which consist solely
of 43,308 shares subject to options exercisable within 60 days held of
record by Valletta.
(11) Includes 7,512 shares subject to options exercisable within 60 days. Mr.
Lutz shares voting and investment power over 6,000 of these shares with
Mary C. Lutz.
(12) Includes 7,512 shares subject to options exercisable within 60 days.
(13) Includes 739,359 shares subject to options exercisable within 60 days.
PROPOSAL 2
ADOPTION OF THE SECOND AMENDED AND RESTATED 1995 EQUITY INCENTIVE PLAN
The Company is seeking shareholder approval of the adoption of the Second
Amended and Restated 1995 Equity Incentive Plan (the "Plan"). The Board has
already adopted the Plan. Shareholder approval is being sought because the
number of shares of Common Stock issuable under the Plan has been raised from a
maximum of 1,050,000 shares to a maximum of 1,800,000 shares.
Under the Plan, as adopted by the Board, the number of shares of Common
Stock that may be issued or transferred upon the exercise of Options, as
Restricted Shares and released from substantial risks of forfeiture thereof, or
otherwise has been increased to a maximum of 1,800,000. Of these shares of
Common Stock, a maximum of 1,600,000 are reserved for grants to participants who
are officers, other key executives, employees and independent contractors, and a
maximum of 200,000 are reserved for grants to directors in lieu of the annual
retainer to which directors are currently entitled. The Board remains authorized
to make appropriate adjustments to prevent dilution or enlargement of the rights
of participants that otherwise would result from specified corporate
transactions.
14
<PAGE> 17
The following is a summary of some of the provisions of the Second Amended
and Restated 1995 Equity Incentive Plan and is qualified in its entirety by the
full text thereof which is attached to this Proxy Statement as Appendix A.
ADMINISTRATION OF THE SECOND AMENDED AND RESTATED 1995 EQUITY INCENTIVE PLAN
The Plan will continue to be administered by the Board of Directors or the
Compensation Committee of the Board. Under the terms of the Plan, the Board of
Directors will be authorized to grant stock options ("Options") and shares of
restricted stock ("Restricted Shares") to directors, officers, other key
executives, employees and independent contractors of the Company and any of its
subsidiaries ("Participants"). The Board is authorized to delegate to the
Compensation Committee the administration of the Plan.
Options granted under the Second Amended and Restated 1995 Equity Incentive
Plan may be either Incentive Stock Options ("ISOs"), which are intended to meet
the requirements defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), or Nonqualified Stock Options ("NSOs"). ISOs may be
granted only to employees of the Company and its subsidiaries, and are otherwise
limited as required by the Internal Revenue Code. The price per share of Common
Stock at which each Option is exercisable (the "Option Price") is determined by
the Board of Directors at the time of grant, but may not be less than 100% of
the fair market value of the Common Stock on the date the Option is granted. The
Plan provides that the market value of Common Stock per share will be an amount
equal to the closing price of the last sale of Common Stock on the Nasdaq
National Market on the date on which the market value is to be determined (or if
the Common Stock did not trade on that date, the immediately preceding day on
which the stock traded). Options are exercisable at such time and under such
conditions as are set forth in the Option grant, but in no event may any ISO be
exercisable subsequent to the day before the tenth anniversary of the date on
which the ISO is granted.
Restricted Shares may be granted to Participants in such number and at such
times as the Board of Directors determines. Participants who receive Restricted
Shares have all the rights of stockholders with respect to such shares,
including the right to vote the shares and receive all dividends or other
distributions made or paid with respect to such shares. Restricted Shares will
be subject, at the date of grant, to a substantial risk of forfeiture, for a
period determined by the Board of Directors.
The amendments to the Plan have been approved by the Board of Directors and
will become effective upon adoption of the Second Amended and Restated 1995
Equity Incentive Plan by the shareholders. The Plan has a term of ten years. In
certain instances, the Plan may be amended by the Board without shareholder
approval, though shareholder approval is required to increase the number of
shares subject to the Plan.
FEDERAL INCOME TAX CONSEQUENCES OF THE SECOND AMENDED AND RESTATED 1995 EQUITY
INCENTIVE PLAN
The following discussion summarizes the material federal income tax
consequences of participation in the Plan. This discussion is general in nature
and does not address issues related to the tax circumstances of any particular
employee. The discussion is based on federal income tax laws in effect on the
date hereof and is, therefore, subject to possible future changes in law. This
discussion does not address state, local or foreign tax consequences.
ISOs. An optionee will not recognize any income upon either grant or
exercise of an ISO, although the exercise may subject the optionee to
alternative minimum tax liability in the year of exercise because the excess of
the fair market value of the shares at the time of exercise over the Option
Price of the shares is included in income for purposes of the alternative
minimum tax. The treatment of any gain realized upon sale or other disposition
of the Company's Common Stock received upon exercise of an ISO will depend on
the holding period. If the optionee does not dispose of the stock received
within either eighteen months after exercise of the ISO or two years after
grant, any gain realized upon disposition will be characterized as long-term
capital gain. If the optionee satisfies the holding period requirement relating
to the Option grant and holds the stock for more than one year after exercise of
the ISO but not more than eighteen months after exercise, any gain realized on
disposition will be mid-term capital gain. If neither holding period requirement
is satisfied, such disposition will be a disqualifying disposition. In such a
case, the portion of the gain realized
15
<PAGE> 18
on disposition equal to the excess of the fair market value of the shares at the
time the ISO was exercised over the Option Price will be ordinary income taxable
as compensation in the year of disposition. The balance, if any, of the gain
will be capital gain.
The Company is entitled to a deduction with respect to an ISO only in the
taxable year of the Company in which a disqualifying disposition occurs. In that
event, the deduction would be equal to the ordinary income, if any, recognized
by the optionee upon disposition of the shares, provided that the deduction is
not otherwise disallowed under the Code.
Nonqualified Stock Options. An optionee will not recognize any income upon
either grant or vesting of a NSO. Upon exercise of any part of a NSO, the
optionee will recognize ordinary income in an amount equal to the difference
between the Option Price and the then fair market value of the shares acquired,
assuming the shares are freely transferrable or are not subject to a substantial
risk of forfeiture.
In general, upon a subsequent disposition of the shares, the optionee's
basis for determining taxable gain or loss would be the amount paid for such
shares plus the amount that was includable in the optionee's income at the time
of exercise. Any gain recognized on such disposition would generally be taxed as
long-term or short-term capital gain depending on the length of time the
optionee is deemed to have held these shares and the holding period in effect at
the time.
The Company will be entitled to a deduction for federal income tax purposes
upon exercise of a NSO in an amount equal to the ordinary income recognized by
the optionee, provided that the deduction is not otherwise disallowed under the
Code. The Company must withhold taxes from the optionee's compensation with
respect to the ordinary income recognized by the optionee upon exercise.
Restricted Shares. The recipient of Restricted Shares will not be subject
to tax upon its grant, unless the recipient makes an election under Section
83(b) of the Code. Assuming no election under Section 83(b) is made, the holder
will be subject to tax at ordinary income tax rates at the time of the
expiration or earlier termination of the restriction period in an amount equal
to the fair market value of the Restricted Shares at the time that the
restriction period lapses or terminates over the amount paid for the Restricted
Shares. Any further gain would be capital gain.
If a holder makes an election under Section 83(b) of the Code, the holder
will be subject to tax at ordinary income rates based on the fair market value
of the Restricted Shares at the date of grant over the amount paid for the
Restricted Shares. Any further gain would be capital gain.
The Company must withhold taxes and will be entitled to a deduction with
respect to the amount of ordinary income recognized by the employee, unless
otherwise disallowed under the Code.
Cap on Company Deductions for Certain Compensation. Under the Omnibus
Reconciliation Act of 1993 (the "Act"), certain compensation payments in excess
of $1 million are subject to a cap on deductibility for the Company. The
limitation on deductibility applies with respect to that portion of a
compensation payment for a taxable year in excess of $1 million to either the
chief executive officer of the Company or any one of the other four highest paid
executives. Certain performance-based compensation is not subject to the cap on
deductibility. Stock options can qualify for this performance-based exception,
but only if they are granted at fair market value, the total number of shares
that can be granted to an executive for any period is stated, and shareholder
and Board approval is obtained. The Company intends to administer the ISO and
NSO portions of the Plan to comply with these performance based criteria.
Restricted Shares do not satisfy the definition of performance-based
compensation unless the granting or vesting of the Restricted Shares are based
upon the attainment of specified performance goals.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE ADOPTION
OF THE SECOND AMENDED AND RESTATED 1995 EQUITY INCENTIVE PLAN.
16
<PAGE> 19
PROPOSAL 3
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 1998 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 1998.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that during 1997 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. Five reporting persons filed either late Form 4 reports or Form
5 reports to disclose transactions subject to Form 4 requirements. Merritt Lutz
purchased 500 shares of Common Stock in November 1997. Norman H. Nie disposed of
60,000 shares of Common Stock, in a series of transactions, held of record by
the Norman H. Nie Revocable Trust, dated March 15, 1991, in January 1997. Louise
Rehling exercised 7,000 options and sold the underlying securities in April
1997. Merritt Lutz, Fredric Harman, Norman Nie and Bernard Goldstein reported
the grant of options which were granted as of January 2, 1996 and became
exercisable on January 2, 1997.
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 1999 ANNUAL MEETING
Stockholder proposals for inclusion in the Proxy Statement to be issued in
connection with the 1999 Annual Meeting of Stockholders must be mailed to the
Secretary, SPSS Inc., 233 South Wacker Drive, Chicago, Illinois 60606, and must
be received by the Secretary on or before January 19, 1999. The Company will
consider only proposals meeting the requirements of applicable SEC rules.
17
<PAGE> 20
ANNUAL REPORT
A copy of the Company's Annual Report on Form 10-K for the Fiscal Year
Ended December 31, 1997 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
/s/ Edward Hamburg
Edward Hamburg
Secretary of SPSS Inc.
18
<PAGE> 21
APPENDIX A
SECOND AMENDED AND RESTATED 1995 EQUITY INCENTIVE PLAN
1. PURPOSE. The purpose of this Second Amended and Restated 1995 Equity
Incentive Plan (the "Plan") is to further the success of SPSS Inc., a Delaware
corporation (hereinafter called the "Company") by attracting and retaining
directors, officers, and other key executives, employees and independent
contractors of the Company and its subsidiaries and to provide to such persons
incentives and rewards relating to the Company's business plans.
2. DEFINITIONS. As used in this Plan, in addition to the terms defined
elsewhere herein, the following terms have the following meanings when used
herein with initial capital letters:
(a) "Board" means the Board of Directors of the Company or, pursuant
to any delegation by the Board to the Compensation Committee pursuant to
Section 10, the Compensation Committee.
(b) "Change in Control" shall have the meaning set forth by the Board.
(c) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(d) "Common Shares" means shares of Common Stock of the Company or any
security into which such Common Shares may be changed by reason of any
transaction or event of the type referred to in Section 7.
(e) "Compensation Committee" means a committee appointed by the Board
consisting of at least three Non-Employee Directors, each of whom will be a
disinterested person within the meaning of Rule 16b-3.
(f) "Date of Grant" means the date determined in accordance with the
Board's authorization on which a grant of Option Rights or a grant of
Restricted Shares, becomes effective.
(g) "Form of Option Right Grant" means the form adopted by the Board
for the granting of Option Rights pursuant to Section 4 hereof, which form
may be amended by the Board from time to time.
(h) "Form of Restricted Share Grant" means the form adopted by the
Board for the transfer or issuance of Restricted Shares pursuant to Section
5 hereof, which form may be amended by the Board from time to time.
(i) "Incentive Stock Options" means Option Rights that are intended to
qualify as "incentive stock options" under Section 422 of the Code or any
successor provision.
(j) "Market Value per Share", as applied to any date, means the price
per share of the Common Shares in an amount equal to the closing price of
the last sale of the Common Shares as reported by the Nasdaq National
Market or the principal securities exchange or automated quotation system
on which Common Shares were sold on the date when the Market Value per
Share is to be determined or, if the date is a date on which the Common
Shares did not trade, the closing price on the immediately preceding day on
which the stock traded.
(k) "Non-Employee Director" means a Director of the Company who is not
a full-time employee of the Company or any Subsidiary.
(l) "Nonqualified Stock Option" means Option Rights other than
Incentive Stock Options.
(m) "Optionee" means the optionee named in an agreement with the
Company evidencing an outstanding Option Right.
(n) "Option Price" means the purchase price payable on exercise of an
Option Right.
(o) "Option Right" means the right to purchase Common Shares upon
exercise of an option granted pursuant to Section 4.
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(p) "Participant" means a person who is approved by the Board to
receive benefits under this Plan and who is at the time an officer,
executive, director or other employee or independent contractor of the
Company or any one or more of its Subsidiaries, or who has agreed to
commence serving in any of such capacities.
(q) "Restricted Shares" means Common Shares issued pursuant to Section
5 as to which neither the substantial risk of forfeiture nor the
prohibition on transfers referred to in Section 5 has expired.
(r) "Rule 16b-3" means rule 16b-3 promulgated under the Securities
Exchange Act of 1934 (the "Exchange Act") (or any successor rule
substantially to the same effect), as in effect from time to time.
(s) "Spread" means the excess of the Market Value per Share of the
Common Shares on the date when Option Rights are surrendered in payment of
the Option Price of other Option Rights, over the Option Price provided for
in the related Option Right.
(t) "Subsidiary" means any corporation with respect to which the
Company directly or indirectly owns stock possessing 50% or more of the
voting power as described in Section 424(f) of the Code.
3. SHARES AVAILABLE UNDER THE PLAN. Subject to adjustment as provided in
Section 7, the number of Common Shares that may be issued or transferred under
this Plan upon the exercise of Option Rights or as Restricted Shares and
released from substantial risks of forfeiture thereof, may not exceed a maximum
of 1,800,000. Of these Common Shares, a maximum of 1,600,000 are reserved for
grants to Participants who are officers, executives or other employees or
independent contractors, and a maximum of 200,000 are reserved for grants to
directors in lieu of the annual retainer to which directors are currently
entitled. Common Shares issued under this Plan may be shares of original
issuance or treasury shares or a combination of the foregoing.
4. OPTION RIGHTS. The Board may from time to time authorize the grant to
Participants of options to purchase Common Shares upon such terms and conditions
as it may determine in accordance with the following provisions:
(a) Each grant will specify the number of Common Shares to which it
pertains and the term during which the rights granted thereunder will
exist.
(b) Each grant will specify an Option Price per share, which may not
be less than the Market Value per Share as of the Date of Grant.
(c) Each grant will specify whether the Option Price is payable (i) in
cash, (ii) by the actual or constructive transfer to the Company of
nonforfeitable, unrestricted Common Shares already owned by the Optionees
(or other consideration authorized pursuant to Section 4(d)) having an
actual or constructive value as of the time of exercise as determined by
the Board or in accordance with the applicable agreement referred to in
Section 4(i), equal to the total Option Price, (iii) by having the Company
reduce the number of Common Shares distributed to the Optionee by a number
of Common Shares with a Market Value per Share, as of the date of exercise,
equal to the Option Price of the Common Shares, or (iv) by a combination of
such methods of payment.
(d) The Board may determine, at or after the Date of Grant, that
payment of the Option Price of any option (other than an Incentive Stock
Option) may also be made in whole or in part in the form of Restricted
Shares or other Common Shares that are forfeitable or subject to
restrictions on transfer, or other Option Rights (based on the Spread on
the date of exercise). Unless otherwise determined by the Board at or after
the Date or Grant, whenever any Option Price is paid in whole or in part by
means of any of the forms of consideration specified in this paragraph, the
Common Shares received upon the exercise of the Option Rights will be
subject to such risks of forfeiture or restrictions on transfer as may
correspond to any that apply to the consideration surrendered, but only to
the extent of (i) the number of shares surrendered in payment of the Option
Price or (ii) the Spread of any unexercisable portion of Option Rights
surrendered in payment of the Option Price.
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(e) Any grant may provide for deferred payment of the Option Price
from the proceeds of sale through a bank or broker on the exercise date of
some or all of the shares to which such exercise relates.
(f) Successive grants may be made to the same Participant whether or
not any Option Rights previously granted to such Participant remain
unexercised.
(g) Each grant will specify the period or periods of continuous
service by the Optionee with the Company or any Subsidiary which is
necessary before the Option Rights or installments thereof will become
exercisable and may provide for the earlier exercise of such Option Rights
in the event of a Change in Control or other event.
(h) Option Rights granted under this Plan may be (i) Incentive Stock
Options, (ii) Nonqualified Stock Options, or (iii) combinations of the
foregoing. An Incentive Stock Option may be granted only to a Participant
who, at the time the Incentive Stock Option is granted, is approved by the
Board to receive an Incentive Stock Option and, at the time, is a key
employee of the Company or of one or more of its Subsidiaries. An Incentive
Stock Option may be granted only as permitted by the Code.
(i) Each grant of Option Rights will be evidenced by an agreement
executed on behalf of the Company by any officer, director, or, if
authorized by the Board, employee of the Company and delivered to the
Optionee and containing such terms and provisions as the Board may approve,
except that in no event will any such agreement include any provision
prohibited by the express terms of this Plan. The agreement shall be
consistent with the Form of Option Right Grant adopted by the Board for the
purpose of granting Option Rights.
5. RESTRICTED SHARES. The Board may also authorize the issuance or transfer
of Restricted Shares to Participants in accordance with the following
provisions. Each such grant will be in accordance with the following provisions:
(a) Each such issuance or transfer will constitute an immediate
transfer of the ownership of Common Shares to the Participant in
consideration of the performance of services, entitling such Participant to
voting, dividend, and other ownership rights, but subject to the
substantial risk of forfeiture and restrictions on transfer provided below.
(b) Each such issuance or transfer may be made without additional
consideration.
(c) Each such issuance or transfer will provide that the Restricted
Shares covered thereby will be subject, except (if the Board so determines)
in the event of a Change in Control or other event specified in the
agreement referred to in Section 5(e), for a period to be determined by the
Board at the Date of Grant, to a "substantial risk of forfeiture" within
the meaning of Section 83 of the Code.
(d) Each such issuance or transfer will provide that during the period
for which such substantial risk of forfeiture is to continue, the
transferability of the Restricted Shares will be prohibited or restricted
in the manner and to the extent prescribed in or pursuant to the agreement
referred to in Section 5(e) (which restrictions may include, without
limitation, rights of repurchase or first refusal or provisions subjecting
the Restricted Shares to a continuing substantial risk of forfeiture in the
hands of any transferee).
(e) Each issuance or transfer of Restricted Shares will be evidenced
by an agreement executed on behalf of the Company by any officer, director,
or, if authorized by the Board, employee of the Company and delivered to
and accepted by the Participant and containing such terms and provisions as
the Board may approve except that in no event will any such agreement
include any provision prohibited by the express terms of the Plan. The
agreement shall be consistent with the Form of Restricted Share Grant
adopted by the Board for the purpose of issuing Restricted Shares. All
certificates representing Restricted Shares will be held in custody by the
Company until all restrictions thereon have lapsed, together with a stock
power executed by the Participant in whose name such certificates are
registered, endorsed in blank and covering such Restricted Shares, which
may be executed by any officer of the Company upon a determination by the
Board that an event causing the forfeiture of the Restricted Shares has
occurred.
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6. TRANSFERABILITY.
(a) No Option Right granted, issued, or transferred under this Plan
will be transferable by a Participant other than by will or the laws of
descent and distribution or pursuant to a qualified domestic relations
order, as that term is defined in the Code or the rules thereunder or Title
I of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or the rules thereunder, except (in the case of a Participant
who is not a Director or officer of the Company) to a fully revocable trust
of which the Optionee is treated as the owner for federal income tax
purposes. Option rights will be exercisable during the Optionee's life only
by him or by his guardian or legal representative. The Board may impose
additional restrictions on transfer as well.
(b) The Board may specify at the Date of Grant that part or all of the
Common Shares that are (i) to be issued or transferred by the Company upon
the exercise of Option Rights or (ii) no longer subject to the substantial
risk of forfeiture and restrictions on transfer referred to in Section 5,
will be subject to further restrictions on transfer.
7. ADJUSTMENTS. The Board may make or provide for such adjustments in the
numbers of Common Shares covered by outstanding Option Rights granted hereunder,
in the prices per share applicable to such Option Rights and in the kind of
shares covered thereby, as the Board may determine is equitably required to
prevent dilution or enlargement of the rights of Participants that otherwise
would result from (a) any stock dividend, stock split, combination of shares,
recapitalization, or other change in the capital structure of the Company, (b)
any merger, consolidation, spin-off, split-off, spin-out, split-up,
reorganization, partial or complete liquidation, or other distribution of assets
or issuance of rights or warrants to purchase securities, or (c) any other
corporate transaction or event having an effect similar to any of the foregoing;
provided, further, however, that any adjustment which by reason of this Section
7 is not required to be made currently will be carried forward and taken into
account in any subsequent adjustment. In the event of any such transaction or
event, the Board may provide in substitution for any or all outstanding awards
under this Plan such alternative consideration as it may determine to be
equitable in the circumstances and may require in connection therewith the
surrender of all awards so replaced. The Board may also make or provide for such
adjustments in the numbers of shares specified in Section 3 as the Board may
determine is appropriate to reflect any transaction or event described in this
Section 7.
8. FRACTIONAL SHARES. The Company will not be required to issue any
fractional Common Shares pursuant to this Plan. The Board may provide for the
elimination of fractions and for the settlement of fractions in cash.
9. WITHHOLDING TAXES. To the extent that the Company is required to
withhold federal, state, local, or foreign taxes in connection with any payment
made or benefit realized by a Participant or other person under this Plan, and
the amounts available to the Company for such withholding are insufficient, it
will be a condition to the receipt of such payment or the realization of such
benefit that the Participant or such other person make arrangements satisfactory
to the Company for payment of the balance of such taxes required to be withheld,
which arrangements may include relinquishment of a portion of such benefit.
10. ADMINISTRATION OF THE PLAN.
(a) This Plan will be administered by the Board, which may from time
to time delegate all or any part of its authority under this Plan to the
Compensation Committee. Option Rights may be granted only by the
Compensation Committee.
(b) The Board will take such actions as are required to be taken by it
hereunder, may take the actions permitted to be taken by it hereunder, and
will have the authority from time to time to interpret this Plan and to
adopt, amend, and rescind rules and regulations for implementing and
administering this Plan. All such actions will be in the sole discretion of
the Board, and when taken, will be final, conclusive, and binding. Without
limiting the generality or effect of the foregoing, the interpretation and
construction by the Board of any provision of this Plan or of any
agreement, notification, or document evidencing the grant of Option Rights,
or Restricted Shares, and any determination by the Board in its sole
discretion
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pursuant to any provision of this Plan or of any such agreement,
notification, or document will be final and conclusive. Without limiting
the generality or effect of any provision of the Certificate of
Incorporation of the Company, no member of the Board will be liable for any
such action or determination made in good faith.
(c) The provisions of Sections 4 and 5 will be interpreted as
authorizing the Board, in taking any action under or pursuant to this Plan,
to take any action it determines in its sole discretion to be appropriate
subject only to the express limitations therein contained and no
authorization in any such Section or other provision of this Plan is
intended or may be deemed to constitute a limitation on the authority of
the Board.
(d) The existence of this Plan or any right granted or other action
taken pursuant hereto will not affect the authority of the Board or the
Company to take any other action, including in respect of the grant or
award of any option, security, or other right or benefit, whether or not
authorized by this Plan, subject only to limitations imposed by applicable
law as from time to time applicable thereto.
11. AMENDMENTS, ETC.
(a) This Plan may be amended from time to time by the Board, but
without further approval by a majority of the stockholders of the Company
present in person or by proxy at a meeting of the Company's stockholders
and entitled to vote generally in the election of directors, or as may be
otherwise required by Rule 16b-3, no such amendment will (i) increase the
maximum numbers of Common Shares or Restricted Shares pursuant to Section 3
(except that adjustments and additions authorized by this Plan will not be
limited by this provision) or (ii) cause Rule 16b-3 to become inapplicable
to this Plan during any period in which the Company has any class of equity
securities registered pursuant to Section 13 or 15 of the Exchange Act. The
Board may amend the Plan to set maximum limits on the number of shares with
respect to which Option Rights may be granted during a specified period to
any employee.
(b) The Board may, with the concurrence of the affected Optionee,
cancel any agreement evidencing Option Rights or any other award granted
under this Plan. In the event of such cancellation, the Board may authorize
the granting of new Option Rights or other awards hereunder (which may or
may not cover the same number of Common Shares which had been the subject
of the prior award) in such manner, at such option price, and subject to
such other terms, conditions, and discretions as would have been applicable
under this Plan had the canceled Option Rights or other award not been
granted.
(c) In case of termination of employment by reason of death,
disability, or normal or early retirement, or in the case of hardship or
other special circumstances, of a Participant who holds an Option Right not
immediately exercisable in full, or any Restricted Shares as to which the
substantial risk of forfeiture or the prohibition or restriction on
transfer has not lapsed, or who holds Common Shares subject to any transfer
restriction imposed pursuant to Section 6(b), the Board may take such
action as it deems equitable in the circumstances or in the best interests
of the Company, including without limitation waiving or modifying any other
limitation or requirement under any such award.
(d) This Plan will not confer upon any Participant any right with
respect to continuance of employment or other service with the Company or
any Subsidiary, nor will it interfere in any way with any right the Company
or any Subsidiary would otherwise have to terminate or modify the terms of
such Participant's employment or other service at any time.
(e) To the extent that any provision of this Plan would prevent any
Option Right that was intended to qualify as an Incentive Stock Option from
qualifying as such, that provision will be null and void with respect to
such Option Right, but will remain in effect for other Option Rights and
there will be no further effect on any provision of this Plan.
(f) This Plan will be governed by and constructed in accordance with
the laws of the State of Delaware, without giving effect to the principles
of conflict of laws thereof. If any provision of this Plan is held to be
invalid or unenforceable, no other provision of this Plan will be affected
thereby.
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(g) The Plan shall be effective upon adoption by the Board of
Directors, but the Plan shall be void unless it is approved by the
Company's stockholders within the earlier of the date of the Company's next
annual meeting of stockholders and twelve (12) months after the date the
Plan is adopted by the Board of Directors. Subject to the foregoing
condition, Option Rights and Restricted Shares may be granted pursuant to
the Plan from time to time within the period commencing upon adoption of
the Plan by the Board of Directors and ending ten (10) years after the
earlier of such adoption and the approval of the Plan by the stockholders.
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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 17, 1998
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 17, 1998 (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.)
<PAGE> 28
SPSS Inc.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. //
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF ALL PROPOSALS.
<TABLE>
<CAPTION>
FOR ALL (Except
Nominee(s)
FOR WITHHOLD Written Below
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS TO SERVE A TERM EXPIRING IN 2001: // // //
Nominees: Fredric Harman
Merritt Lutz
_____________________________________________
FOR AGAINST ABSTAIN
2. To adopt the Second Amended and Restated 1995 // // //
Equity Incentive Plan.
3. To ratify the selection of KPMG Peat Marwick LLP // // //
as independent auditors for SPSS for 1998.
</TABLE>
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, 2 AND 3.
Dated: ____________________________________, 1998
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.
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