SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
SEACHANGE INTERNATIONAL, INC.
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(Name of Registrant as Specified in Its Charter)
The Board of Directors of SeaChange International, Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(4) Date Filed:
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SEACHANGE INTERNATIONAL, INC.
124 Acton Street
Maynard, Massachusetts 01754
NOTICE OF 2001 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 17, 2001
The Annual Meeting of Stockholders of SeaChange International, Inc. will be
held at the offices of Testa, Hurwitz & Thibeault, LLP, High Street Tower, 125
High Street, Boston, Massachusetts 02110, on Tuesday, July 17, 2001 at 9:30
a.m., local time, to consider and act upon each of the following matters:
1. To elect two (2) members to the Board of Directors, each to serve for a
three-year term as a Class II Director.
2. To approve an increase in the number of shares of Common Stock, $.01 par
value, available for issuance under the Amended and Restated 1995 Stock
Option Plan of SeaChange from 4,800,000 to 9,200,000 shares.
3. To transact such other business as may properly come before the meeting
and any adjournments thereof.
Stockholders entitled to notice of and to vote at the meeting shall be
determined as of the close of business on May 25, 2001, the record date fixed
by the Board of Directors for such purpose.
By Order of the Board of Directors
William L. Fiedler
Chief Financial Officer, Secretary,
Treasurer and Vice President,
Finance and Administration
Maynard, Massachusetts
May 31, 2001
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN
ORDER TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF
THE PROXY CARD IS MAILED IN THE UNITED STATES.
SEACHANGE INTERNATIONAL, INC.
124 Acton Street
Maynard, Massachusetts 01754
----------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 17, 2001
----------------
May 31, 2001
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of SeaChange International, Inc. for use at
the Annual Meeting of Stockholders to be held at the offices of Testa, Hurwitz
& Thibeault, LLP, High Street Tower, 125 High Street, Boston, Massachusetts
02110 on Tuesday, July 17, 2001 at 9:30 a.m. and at any adjournments thereof.
All proxies will be voted in accordance with the stockholders' instructions,
and if no choice is specified, the enclosed proxy card (or any signed and
dated copy thereof) will be voted in favor of the matters set forth in the
accompanying Notice of Meeting. Any proxy may be revoked by a stockholder at
any time before its exercise by: (i) delivering written revocation or a later
dated proxy to the President or Assistant Secretary of SeaChange; or (ii)
attending the Annual Meeting and voting in person.
Only stockholders of record as of the close of business on May 25, 2001, the
record date fixed by the Board of Directors, will be entitled to vote at the
Annual Meeting and at any adjournments thereof. As of May 25, 2001, there were
an aggregate of 22,839,055 shares of common stock, par value $.01 per share,
of SeaChange outstanding and entitled to vote. Each share is entitled to one
vote.
The persons named as proxies, William C. Styslinger, III and William L.
Fiedler, were selected by the Board of Directors and are officers of
SeaChange. All properly executed proxies returned in time to be counted at the
Annual Meeting will be voted as stated below under "Voting Procedures." Any
stockholder giving a proxy has a right to withhold authority to vote for any
individual nominee to the Board of Directors by so marking the proxy in the
space provided therein.
The Board of Directors knows of no other matter to be presented at the
Annual Meeting. If any other matter upon which a vote may properly be taken
should be presented at the Annual Meeting, shares represented by all proxies
received by the Board of Directors will be voted with respect thereto in
accordance with the judgment of the persons named as attorneys in the proxies.
SeaChange's Annual Report containing financial statements for the fiscal
year ended January 31, 2001 is being mailed together with this Proxy Statement
to all stockholders entitled to vote. It is anticipated that this proxy
statement and the accompanying proxy will be first mailed to stockholders on
or about June 13, 2001.
PROPOSAL I
ELECTION OF DIRECTORS
Pursuant to SeaChange's Amended and Restated By-Laws, as amended, the Board
of Directors of SeaChange is divided into three classes. There is one director
currently serving in each of Class I and Class III, and two directors serving
in Class II. Each director serves for a three-year term, with one class of
directors being elected at each Annual Meeting. Each of the Class II
Director's term will expire at this Annual Meeting. All directors will hold
office until their successors have been duly elected and qualified. Prior to
the Annual Meeting, William C. Styslinger, III was the Class I Director;
Martin R. Hoffmann and Thomas F. Olson were the Class II
Directors; and Carmine Vona was the Class III Director. The nominees for the
Class II Directors are Martin R. Hoffmann and Thomas F. Olson, both of whom
are currently serving as the Class II Directors of SeaChange. Shares
represented by all proxies received by the Board of Directors and not so
marked as to withhold authority to vote for the nominees will be voted for
their election. The Board of Directors knows of no reason why the nominees
should be unable or unwilling to serve, but if that should be the case,
proxies will be voted for the election of some other person or persons, or for
fixing the number of directors at a lesser number.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE "FOR" THE NOMINEES LISTED BELOW
The following table sets forth, for the nominees to be elected at the
meeting and for each director whose term of office will extend beyond the
meeting, the year each such nominee or director was first elected a director,
the positions currently held by each nominee or director with SeaChange, the
year each nominee's or director's term will expire and the class of director
of each nominee or director.
Nominee's or Director's
Name and Year
Nominee or Director Year Term Class of
First Became Director Position(s) Held Will Expire Director
----------------------- ---------------- ----------- --------
Nominees:
Martin R. Hoffmann (1995)... Director 2004(1) II
Thomas F. Olson (2001)...... Director 2004(1) II
Continuing Directors:
William C. Styslinger, III President, Chief Executive Officer, 2003 I
(1993)..................... Chairman of the Board and Director
Carmine Vona (1995)......... Director 2002 III
- --------
(1) Assumes election of the Class II Director at the Annual Meeting.
Board of Directors' Meetings and Committees
The Board of Directors of SeaChange held five (5) meetings and acted by
unanimous written consent one (1) time during the fiscal year ended January
31, 2001. Each of the directors, other than Mr. Olson who was elected as a
director in May 2001, attended at least 75% of the aggregate of all meetings
of the Board of Directors and of all committees of the Board of Directors on
which he then served held during fiscal year 2001.
SeaChange has a standing Compensation and Option Committee and an Audit
Committee. The Compensation and Option Committee, of which Messrs. Hoffmann,
Vona and Olson are members, determines the compensation, including stock
options, of SeaChange's management and key employees and administers and makes
recommendations concerning SeaChange's stock option plans. The Compensation
and Option Committee held two (2) meetings and acted by unanimous written
consent thirteen (13) times during fiscal year 2001. The Audit Committee of
which Messrs. Hoffmann, Vona and Olson are members, oversees financial results
and internal controls of SeaChange, including matters relating to the
appointment and activities of SeaChange's independent accountants. The Audit
Committee held four (4) meetings during fiscal year 2001.
2
Report of the Audit Committee
The Audit Committee currently consists of Messrs. Hoffmann, Vona and Olson.
In addition, prior to his resignation on December 14, 2000 as one of
SeaChange's directors, Mr. Paul Saunders also served as a member of the Audit
Committee.
The functions of the Audit Committee are focused on the following areas:
. the soundness of SeaChange's internal controls;
. the reliability and integrity of SeaChange's accounting and financial
reporting practices;
. the quality and integrity of SeaChange's financial reports;
. SeaChange's compliance with legal and regulatory requirements and
internal policies; and
. the independence and performance of SeaChange's internal auditors and
independent auditors.
The Audit Committee meets with management periodically to consider the
adequacy of SeaChange's internal controls and the objectivity of its financial
reporting. The Audit Committee discusses these matters with SeaChange's
independent auditors and with appropriate company financial personnel and
internal auditors.
The Audit Committee regularly meets privately with the independent auditors
who have unrestricted access to the Audit Committee.
The Audit Committee met four (4) times during fiscal year 2001.
The Audit Committee also recommends to the Board of Directors the
appointment of the independent auditors and review periodically their
performance and independence from management.
In addition, the Audit Committee reviews the financing plans of SeaChange
and reports recommendations to the full Board of Directors for approval and to
authorize action.
The Directors who serve on the Audit Committee are all "Independent" for
purposes of Section 4200(a)(15) of the National Association of Securities
Dealers' listing standards. That is, the Board of Directors has determined
that none of the members of the Audit Committee has a relationship to
SeaChange that may interfere with his independence from SeaChange and its
management.
The Board of Directors has adopted a written charter setting out the
functions the Audit Committee is to perform. A copy of the Audit Committee
Charter is attached to this proxy statement as Appendix A.
Management has primary responsibility for SeaChange's consolidated financial
statements and the overall reporting process, including the SeaChange's system
of internal controls.
The independent auditors audit the annual consolidated financial statements
prepared by management, express an opinion as to whether those consolidated
financial statements fairly present the financial position, results of
operations and cash flows of SeaChange in conformity with generally accepted
accounting principles and discuss with us any issues they believe should be
raised with SeaChange.
For fiscal year 2001, the Audit Committee reviewed the audited consolidated
financial statements of SeaChange and met with both management and
PricewaterhouseCoopers LLP, the company's independent auditors, to discuss
those consolidated financial statements. Management has represented to the
Audit Committee that the consolidated financial statements were prepared in
accordance with generally accepted accounting principles.
The Committee has received from and discussed with PricewaterhouseCoopers
LLP the written disclosure and the letter required by Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committee). These
items relate to PricewaterhouseCoopers LLP's independence from SeaChange. The
3
Committee also discussed with PricewaterhouseCoopers LLP the matters required
to be discussed by Statement on Auditing Standards No. 61 (Communication with
Audit Committees).
Based on these reviews and discussions, the Audit Committee recommended to
the Board of Directors that the audited consolidated financial statements of
SeaChange be included in its Annual Report on Form 10-K for the fiscal year
ended January 31, 2001. The Audit Committee also recommended that
PricewaterhouseCoopers LLP be retained as SeaChange's independent accountants
for the 2002 fiscal year.
Respectfully submitted by the Audit Committee of the Board of Directors
Carmine Vona, Chairperson
Martin R. Hoffmann
Thomas F. Olson
4
Occupations of Directors and Executive Officers
The following table sets forth for each Class I Director, each Class II
Director, each Class III Director and the executive officers of SeaChange,
their ages and the positions currently held by each such person with
SeaChange:
Name Age Position
---- --- --------
William C. Styslinger,
III.................... 55 President, Chief Executive Officer, Chairman of the Board and Director
William L. Fiedler...... 56 Chief Financial Officer, Treasurer, Secretary and Vice President,
Finance and Administration
Scott Blais............. 42 Vice President, Customer Services
Jeffrey M. Boone........ 37 Vice President, Software Engineering
Edward J. Delaney,
Jr. ................... 41 Vice President, Marketing
Ira Goldfarb............ 43 Vice President, Worldwide Sales
Bruce E. Mann........... 53 Vice President, Network Storage Engineering
Martin R.
Hoffmann(1)(2)......... 69 Director
Thomas F. Olson(1)(2)... 52 Director
Carmine Vona(1)(2)...... 63 Director
- --------
(1) Member of Compensation and Option Committee.
(2) Member of Audit Committee.
Nominees for Election at the Annual Meeting
Martin R. Hoffmann has served as Director of SeaChange since January 1995.
Mr. Hoffmann currently engages in consulting activities and is pursuing pro
bono opportunities. Mr. Hoffmann served as Of Counsel to the Washington D.C.
office of Skadden, Arps, Slate, Meagher & Flom LLP from January 1996 until
July 2000. From April 1995 to January 1996, Mr. Hoffmann maintained a law
practice and business consulting practice. He was a Visiting Senior Fellow at
the Center for Policy, Industry and Industrial Development at Massachusetts
Institute of Technology from May 1993 to April 1995, prior to which, from
April 1989, he served as Vice President and General Counsel for Digital
Equipment Corporation. Mr. Hoffmann is a member of the Boards of Directors of
Castle Energy Corporation, an oil and gas exploration and production company,
and Mitretek Systems, a non-profit technology and services company.
Thomas F. Olson has served as a Director of SeaChange since May 2001. Mr.
Olson has been Chief Executive Officer of National Cable Communications, a
company specializing in cable television advertising time sales, since January
1999. From January 1995 to May 1998, Mr. Olson was Managing Partner of
National Cable Communications and Chief Executive Officer of Katz Media Group,
a radio, broadcast television and cable television national sales
representation firm. Mr. Olson was with Katz Media Group for 23 years.
Directors Whose Terms Extend Beyond The Meeting
William C. Styslinger, III, a founder of SeaChange, has served as the
President, Chief Executive Officer and a Director since the inception of
SeaChange in July 1993 and as Chairman of the Board since January 1995. Prior
to forming SeaChange in 1993, Mr. Styslinger was employed at Digital Equipment
Corporation since March 1978, most recently as manager of the Cable Television
Business Unit from October 1991 to May 1993. Mr. Styslinger is a member of the
Board of Directors of Omtool, Inc., a provider of enterprise client/server
facsimile software solutions.
Carmine Vona has served as a Director of SeaChange since January 1995. Mr.
Vona has been President and Chief Executive Officer of Vona Information
Systems, Inc., a consulting firm, since June 1996. Prior to that, Mr. Vona was
Executive Vice President and Senior Managing Director for worldwide technology
at Bankers Trust Co. from November 1969 to June 1996. From August 1986 to June
1996 Mr. Vona was Chairman of BT-FSIS, a software development company and a
wholly owned subsidiary of Bankers Trust Co. Mr. Vona is
5
also a member of the Board of Directors of METROSOFT and Intesa E-Lab.
METROSOFT is a New Jersey based technology company specializing in
applications for the financial industry. Intesa E-Lab is a company based in
Milan, Italy, and is responsible for the development of advanced services for
Banca Intesa, the largest Italian bank and one of the largest in Europe.
Executive Officers
Scott Blais has served as Vice President, Customer Services since October
1998. Prior to joining SeaChange, Mr. Blais spent three years holding various
positions including Vice President and General Manager at Adra Systems, Inc.,
a software company. Prior to that, Mr. Blais held the position of Director of
Customer Services and Quality Assurance for Keyfile Corporation, a software
company.
Jeffrey M. Boone has served as Vice President, Software Engineering since
January 1998. Prior to that, Mr. Boone served as Engineering Manager from June
1996 to December 1997, and as a member of the technical staff of SeaChange
from September 1995 to June 1996. Prior to joining SeaChange, Mr. Boone was a
Systems Architect at Logica North American, a software consulting company,
from June 1994 to September 1995.
Edward J. Delaney, Jr. joined SeaChange in February 1994 as Vice President,
Sales and Marketing and Mr. Delaney has served as Vice President, Marketing
since January 1998. Prior to joining SeaChange, Mr. Delaney spent 12 years
with Digital Equipment Corporation in a variety of positions, including
Marketing and Operations Manager for Digital's Cable Television Business Unit,
marketing manager of media products for the Asia/Pacific region, executive
assistant to the Vice President of United States Sales, and sales manager.
William L. Fiedler has served as Chief Financial Officer, Treasurer and Vice
President, Finance and Administration since September 1998 and as Secretary
since May 2000. Prior to joining SeaChange, Mr. Fiedler served from July 1984
to June 1998 as the Chief Financial Officer, Treasurer and Senior Vice
President, Finance and Administration of Matrix One, Inc., a developer of
product data management systems. Prior to that, Mr. Fiedler served as the
Chief Financial Officer of Hendrix Electronics Inc., a developer of text
processing and graphics publishing systems, and had also held controllership
positions at Bose Corporation and GTE Sylvania.
Ira Goldfarb has served as Vice President, Worldwide Sales since January
1998. Prior to that, Mr. Goldfarb served as Vice President, U.S. Systems Sales
from August 1997 to January 1998, as Vice President, Eastern Region from
January 1997 to August 1997, and as Vice President, Central Region, from
August 1994 to January 1997. Prior to joining SeaChange, Mr. Goldfarb held
several sales management positions at Digital Equipment Corporation from
September 1983 to July 1994.
Bruce E. Mann joined SeaChange in September 1994 as Vice President, Network
Storage Engineering. Mr. Mann is also President of SeaChange Systems, Inc., a
subsidiary of SeaChange which develops and manufactures video server-based
products. Prior to joining SeaChange, Mr. Mann served as Director of
Engineering at Ungermann-Bass, Inc., a subsidiary of Tandem Computers Inc.,
from March 1993 to September 1994. Prior to that, from September 1976 to March
1993, Mr. Mann was an engineer at Digital Equipment Corporation, most recently
as Senior Consulting Engineer.
Executive officers of SeaChange are appointed by, and serve at the
discretion of, the Board of Directors, and serve until their successors have
been duly elected and qualified. There are no family relationships among any
of the executive officers or directors of SeaChange.
Certain Relationships and Related Transactions
SeaChange has adopted a policy that all transactions between SeaChange and
its officers, directors, principal stockholders and affiliates will be
approved by a majority of the Board of Directors, including a majority of the
independent and disinterested outside directors on the Board of Directors, and
will be on terms no less favorable to SeaChange than could be obtained from
unaffiliated third parties.
6
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of SeaChange common stock as of May 25, 2001 by:
. each person or entity who is known by SeaChange to beneficially own more
than 5% of the common stock of SeaChange;
. each of the directors and named executive officers of SeaChange; and
. all of the directors and executive officers of SeaChange as a group.
Except as indicated below, none of these entities has a relationship with
SeaChange. Unless otherwise indicated, the address of each person or entity
named in the table is c/o SeaChange International, Inc., 124 Acton Street,
Maynard, Massachusetts 01754, and each person or entity has sole voting power
and investment power (or shares such power with his or her spouse), with
respect to all shares of capital stock listed as owned by such person or
entity.
The number and percentage of shares beneficially owned is determined in
accordance with the rules of the Securities and Exchange Commission, and is
not necessarily indicative of beneficial ownership for any other purpose.
Under these rules, beneficial ownership includes any shares as to which a
person has sole or shared voting power or investment power and also any shares
of common stock underlying options or warrants that are exercisable by that
person within 60 days of May 25, 2001. However, these shares underlying
options or warrants are not treated as outstanding for the purpose of
computing the percentage ownership of any other person or entity. Unless
otherwise indicated in the footnotes, each person has sole voting and
investment power, (or shares such powers with his or her spouse,) with respect
to the shares shown as beneficially owned. Percentage of beneficial ownership
is based on 22,839,055 shares of SeaChange common stock outstanding as of May
25, 2001 and assumes the conversion of all outstanding shares of our
convertible preferred stock into shares of common stock.
Amount and Percent of
Nature of Common
Beneficial Stock
Name Ownership Outstanding
---- ---------- -----------
William C. Styslinger, III(1)............................ 2,238,275 8.9%
William L. Fiedler(2).................................... 71,522 *
Scott Blais(3)........................................... 19,052 *
Jeffrey M. Boone(4)...................................... 91,652 *
Edward J. Delaney, Jr.(5)................................ 1,364,742 5.6%
Ira Goldfarb(6).......................................... 122,461 *
Martin R. Hoffmann(7).................................... 203,334 *
Bruce E. Mann(8)......................................... 371,247 1.6%
Thomas F. Olson.......................................... 0 *
Carmine Vona(9).......................................... 30,306 *
Credit Suisse Asset Management, LLC
466 Lexington Avenue
New York,New York 10017................................. 1,202,255 5.0%
All executive officers and directors as a group
(10 persons)(10)........................................ 4,512,591 16.5%
- --------
* Less than 1%
(1) Includes 225,000 shares of Common Stock owned by Merrill Lynch, Trustee
f/b/o William C. Styslinger, III, IRA. Excludes (i) 96,429 shares of
Common Stock owned by Thomas and Emily Franeta as Trustees of The
Styslinger Family Trust; (ii) 10,417 shares of Common Stock held by
Thomas Franeta as Custodian for Kimberly J. Styslinger; and (iii) 75,000
shares of Common Stock owned by his wife, Joyce Styslinger. Mr.
Styslinger disclaims beneficial ownership of the shares held by The
Styslinger Family Trust, by Thomas Franeta as Custodian for Kimberly J.
Styslinger and by his wife, Joyce Styslinger. Includes 2,750 shares of
Common Stock issuable pursuant to outstanding stock options that may be
exercised within 60 days of May 25, 2001.
7
(2) Includes 6,524 shares of Common Stock issuable pursuant to outstanding
options that may be exercised within 60 days of May 25, 2001.
(3) Includes 699 shares of Common Stock issuable pursuant to outstanding
options that may be exercised within 60 days of May 25, 2001.
(4) Includes 1,685 shares of Common Stock issuable pursuant to outstanding
options that may be exercised within 60 days of May 25, 2001.
(5) Includes (i) 540,000 shares of Common Stock held by The Delaney Family
Limited Partnership of which Mr. Delaney is both a general and a limited
partner; and (ii) 1,599 shares of Common Stock issuable pursuant to
outstanding stock options that may be exercised within 60 days of May
25, 2001. Excludes (i) 206,760 shares of Common Stock held by Merrill
Lynch, Trustee f/b/o Kathryn H. Delaney, IRA; (ii) 1,700 shares of
Common Stock owned by Mr. Delaney's son, Joseph; and (iii) 1,700 shares
of Common Stock owned by Mr. Delaney's daughter, Mary. Mr. Delaney
disclaims beneficial ownership of the shares held by Merrill Lynch and
his children.
(6) Includes 1,626 shares of Common Stock issuable pursuant to outstanding
stock options that may be exercised within 60 days of May 25, 2001.
(7) Includes 1,254 shares of Common Stock issuable pursuant to outstanding
stock options that may be exercised within 60 days of May 25, 2001.
(8) Includes (i) 1,599 shares of Common Stock issuable pursuant to
outstanding stock options that may be exercised within 60 days of May
25, 2001. Excludes an aggregate of 23,824 shares of Common Stock held by
Mr. Mann's three children. Mr. Mann disclaims beneficial ownership of
those shares held by his children.
(9) Includes 1,254 shares of Common Stock issuable pursuant to outstanding
stock options that may be exercised within 60 days of May 25, 2001.
(10) Includes 18,990 shares of Common Stock issuable pursuant to outstanding
stock options that may be exercised within 60 days of May 25, 2001.
8
COMPENSATION AND OTHER INFORMATION
CONCERNING DIRECTORS AND OFFICERS
Executive Compensation Summary
The following table sets forth summary information concerning the
compensation SeaChange paid for services rendered during the fiscal year ended
January 31, 2001, the one-month period ended January 31, 2000, and the
preceding two fiscal years ended December 31, 1999 and 1998, respectively, by
its chief executive officer and each of its four other most highly compensated
executive officers who serve as of January 31, 2001. This presentation
reflects the change on April 14, 2000 in SeaChange's fiscal year-end from
December 31 to January 31. In addition, the disclosure regarding Mr. Fiedler
for the fiscal year ended December 31, 1998 reflects the fact that he began
employment with SeaChange in September 1998.
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation(2)
Compensation(1) Awards
----------------------- ---------------
Securities
Underlying
Name and Principal Position Period Salary Bonus Options(#)
--------------------------- ------ -------- ------- ---------------
William C. Styslinger, III............. 2001 $217,372 -- 41,000
President and Chief Executive Officer 2000 15,545 -- --
1999 184,108 -- 30,000
1998 174,509 -- 6,000
William L. Fiedler..................... 2001 $194,258 $22,862 32,400
Chief Financial Officer, Treasurer and 2000 15,750 7,291 --
Vice President, Finance and 1999 179,398 20,000 15,000
Administration 1998 55,080 -- 112,500
Edward J. Delaney, Jr.................. 2001 $169,820 $19,800 32,400
Vice President, Marketing 2000 13,736 2,088 --
1999 154,071 -- 7,500
1998 147,388 -- 6,000
Bruce E. Mann.......................... 2001 $188,858 $30,329 78,000
Vice President, Network Storage 2000 15,580 -- --
Engineering 1999 173,852 15,739 7,500
1998 165,674 -- 6,000
Ira Goldfarb........................... 2001 $298,510 $ -- 32,400
Vice President, Worldwide Sales 2000 10,417 -- --
1999 232,373 -- 7,500
1998 216,384 -- 16,050
- --------
(1) The compensation described in this table does not include medical and
group life insurance or other benefits received by the Named Officers
which are available generally to all salaried employees of SeaChange and
certain perquisites and other personal benefits, securities or property
received by the Named Officers which do not exceed the lesser of $50,000
or 10% of any such officer's salary disclosed in this table.
(2) Represents stock options granted under SeaChange's Amended and Restated
1995 Stock Option Plan. SeaChange did not grant any restricted stock
awards or stock appreciation rights or make any long-term incentive plan
payouts during fiscal years 2001, 1999 and 1998.
9
Option Grants in Last Fiscal Year
OPTION GRANTS IN 2001
The following table sets forth information as to stock options granted to
each of our named executive officers during the fiscal year ended January 31,
2001 under SeaChange's Amended and Restated 1995 Stock Option Plan. No stock
options were granted in the one month period ending January 31, 2000 to our
named executive officers. All options listed below were granted under
SeaChange's Amended and Restated 1995 Stock Option Plan and vest 20% on the
first anniversary of the date of grant and 5% each quarter thereafter.
The percentage of total options granted to SeaChange employees in the fiscal
year ended January 31, 2001 is based on options granted during that period to
purchase an aggregate of 1,022,717 shares.
Amounts that may be realized upon exercise of the options immediately before
the expiration of their term, assuming the specified compound rates of
appreciation (5% and 10%) on the market value of the common stock on the date
of option grant over the term of the options. These numbers are calculated
based on rules promulgated by the Securities and Exchange Commission and do
not reflect SeaChange's estimate of future stock price growth. Actual gains,
if any, on stock option exercises and common stock holdings are dependent on
the timing of exercise and the future performance of the common stock.
However, the rates of appreciation assumed in this table may not be realized
or the amounts reflected may not be received by the individuals.
Potential Realizable
Value At Assumed
Annual Rates of
No. of Percent of Stock Price
Securities Total Options Exercise Appreciation for
Underlying Granted to or Base Option Term
Options Employees Price Per Expiration ---------------------
Name Granted in Year Share Date 5% 10%
---- ---------- ------------- --------- ---------- --------- -----------
William C. Styslinger, 41,000 4.01% $26.75 5/24/10 $690,953 $1,743,833
III....................
William L. Fiedler...... 7,668 0.75% $34.00 4/14/10 $ 164,249 $ 414,532
10,332 1.01% $26.75 5/24/10 $174,120 $ 439,446
14,400 1.41% $23.31 11/30/10 $211,468 $ 533,706
Edward J. Delaney, Jr... 7,668 0.75% $34.00 4/14/10 $164,249 $ 414,532
10,332 1.01% $26.75 5/24/10 $174,120 $ 439,446
14,400 1.41% $23.31 11/30/10 $211,468 $ 533,706
Bruce E. Mann........... 7,668 0.75% $34.00 4/14/10 $164,249 $ 414,532
10,332 1.01% $26.75 5/24/10 $174,120 $ 439,446
60,000 5.87% $23.31 11/30/10 $881,118 $2,223,774
Ira Goldfarb............ 7,668 0.75% $34.00 4/14/10 $164,249 $ 414,532
10,332 1.01% $26.75 5/24/10 $174,120 $ 439,446
14,400 1.41% $23.31 11/30/10 $211,468 $ 533,706
10
Option Exercises and Fiscal Year-End Values
The following table sets forth as of January 31, 2001 information with
respect to options to purchase common stock granted under SeaChange's Amended
and Restated 1995 Stock Option Plan to its named executive officers.
The value of unexercised in-the-money options as of January 31, 2001 is
based on the difference between the option exercise price and the fair market
value of SeaChange's common stock at January 31, 2001, the company's fiscal
year-end ($26.453 per share as quoted on the Nasdaq National Market),
multiplied by the number of shares underlying the option.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
Number of Securities Value of
Underlying Unexercised Unexercised
Shares Options at In-the-Money Options
Acquired on Value January 31, 2001 at January 31, 2001
Name Exercise Realized Exercisable/ Unexercisable Exercisable/ Unexercisable
---- ----------- ---------- -------------------------- ---------------------------
William C. Styslinger,
III.................... 40,500 $1,007,438 28,597/56,403 $ 316,159.70/$ 427,880.35
William L. Fiedler...... 11,500 410,500 69,784/99,486 $1,469,409.31/$1,601,406.01
Edward J. Delaney, Jr... 31,575 785,428 7,049/37,776 $ 51,838.35/$ 205,066.13
Bruce E. Mann........... -- -- 13,499/18,501 $ 181,441.58/$ 348,272.93
Ira Goldfarb............ -- -- 19,456/42,494 $ 269,256.00/$ 258,865.00
11
Compensation and Option Committee Report
To Our Stockholders:
SeaChange's executive compensation program is administered by the
Compensation and Option Committee of the Board of Directors, which is
comprised entirely of non-employee directors. Pursuant to authority delegated
by the Board of Directors, the Compensation and Option Committee is
responsible for reviewing and administering the company's stock ownership
plans and reviewing and approving compensation for the executive officers of
SeaChange.
SeaChange's executive compensation program is designed to provide levels of
compensation that assist the company in attracting, motivating and retaining
qualified executive officers and aligning the financial interests of the
executive officers and other employees of SeaChange with those of its
stockholders by providing a competitive compensation package based on
corporate and individual performance. Compensation under the executive
compensation program is comprised of cash compensation in the form of base
salary and long-term incentive awards in the form of stock option grants.
SeaChange has not historically awarded annual cash incentive bonuses. The
compensation program is also comprised of various benefits, including medical
and insurance plans, and the 1996 Employee Stock Purchase Plan and 401(k)
profit sharing plan, which plans are generally available to all employees of
SeaChange.
Base Salary
Base salary compensation levels for each of the executive officers of
SeaChange, including the Chief Executive Officer, are generally set within the
range of base salaries that the Compensation and Option Committee believes are
paid to executive officers with comparable qualifications, experience and
responsibilities at comparable companies. In setting compensation levels, the
Compensation and Option Committee generally takes into account such factors as
(i) the company's past operating and financial performance and future
expectations, (ii) individual performance and experience and (iii) past salary
levels. The Compensation and Option Committee does not assign relative weights
or rankings to these factors, but instead makes determinations based upon the
consideration of all of these factors as well as the progress made with
respect to the long-term goals and strategies of SeaChange.
Incentive Compensation
SeaChange has not historically awarded annual cash bonuses to its executive
officers. However, in fiscal year 2001, SeaChange awarded a bonus in the
aggregate amount of $98,328 to its executive officers.
Stock Options
Stock options are the principal vehicle used by SeaChange to provide long-
term incentive-based compensation to improve its operating and financial
performance and to support the recruitment, motivation and retention of key
professional and managerial personnel. SeaChange's stock option plans are
administered by the Compensation and Option Committee. To date, the
Compensation and Option Committee has not granted stock options at less than
fair market value.
Stock options are granted from time to time to eligible employees based upon
SeaChange's overall financial performance and their contribution thereto.
Stock options are designed to align the interests of SeaChange's executive
officers and other employees with those of its stockholders by encouraging
them to enhance the value of the company, the price of the Common Stock and,
hence, the stockholders' return. In addition, the vesting of stock options
over a period of time is designed to defer the receipt of compensation by the
option holder, thus creating an incentive for the individual to remain with
SeaChange. SeaChange periodically grants new options to provide continuing
incentives for future performance.
During the fiscal year ended January 31, 2001, options to purchase an
aggregate of 109,000 shares of Common Stock were granted to the executive
officers of SeaChange, including the Chief Executive Officer. Such
12
grants were made in recognition of the executive officers' contributions to
fiscal year 2001 company performance and as an incentive for future
performance.
Other Benefits
SeaChange also has various broad-based employee benefit plans. Executive
officers participate in these plans on the same terms as eligible, non-
executive employees, subject to any legal limits on the amounts that may be
contributed or paid to executive officers under these plans. SeaChange offers
a stock purchase plan, under which employees may purchase Common Stock at a
discount, and a 401(k) profit sharing plan, which permits employees to invest
in a choice of mutual funds on a pre-tax basis. SeaChange also maintains
medical, disability and life insurance plans and other benefit plans for its
employees.
Tax Deductibility of Executive Compensation
In general, under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), SeaChange cannot deduct, for federal income tax
purposes, compensation in excess of $1,000,000 paid to certain executive
officers. This deduction limitation does not apply, however, to compensation
that constitutes "qualified performance-based compensation" within the meaning
of Section 162(m) of the Code and the regulations promulgated thereunder. The
Compensation and Option Committee has considered the limitations on deductions
imposed by Section 162(m) of the Code, and it is the Compensation and Option
Committee's present intention that, for so long as it is consistent with its
overall compensation objective, to structure executive compensation to
minimize application of the deduction limitations of Section 162(m) of the
Code.
The Compensation and Option Committee:
Martin R. Hoffmann, Chairperson
Thomas F. Olson
Carmine Vona
13
Compensation Committee Interlocks and Insider Participation
The Compensation and Option Committee consists of Messrs. Hoffmann, Vona and
Olson. In addition, prior to his resignation on December 14, 2000 as one of
SeaChange's directors, Mr. Paul Saunders also served as a member of the
Compensation and Option Committee. No person who served as a member of the
Compensation and Option Committee was, during the past fiscal year, an officer
or employee of SeaChange or any of its subsidiaries, was formerly an officer
of SeaChange or any of its subsidiaries, or had any relationship requiring
disclosure herein. No executive officer of SeaChange served as a member of the
compensation committee of another entity (or other committee of the Board of
Directors performing equivalent functions or, in the absence of any such
committee, the entire Board of Directors), one of whose executive officers
served as a director of SeaChange.
Compensation of Directors
During the fiscal year ended January 31, 2001, directors who were employees
of SeaChange received no cash compensation for their services as directors,
except for reimbursement of expenses incurred in connection with attending
meetings. In fiscal year 2001, SeaChange paid directors who are not employees
of the company a fee of $1,000 for each meeting of the Board of Directors that
they attended in person and such directors were reimbursed for their
reasonable out-of-pocket expenses incurred in attending such meetings. Mr.
Hoffmann was paid a fee of $1,000 in fiscal year 2001 in his capacity as a
director of SeaChange. Each non-employee director is also entitled to
participate in SeaChange's 1996 Non-Employee Director Stock Option Plan. In
addition, in May 2000, each of Messrs. Hoffmann and Vona were granted an
option to purchase 10,000 shares of Common Stock and in May 2001, Mr. Olson
was granted an option to purchase 5,000 shares of Common Stock, all such
grants being under SeaChange's Amended and Restated 1995 Stock Option Plan.
14
Stock Performance Graph
The following graph compares the change in the cumulative total stockholder
return on SeaChange's Common Stock during the period from the Company's
initial public offering through January 31, 2001, with the cumulative total
return on the Center for Research in Securities Prices ("CRSP") Index for the
Nasdaq Stock Market (U.S. Companies) and a SIC Code Index based on the
Company's SIC Code. The comparison assumes $100 was invested on November 5,
1996 in the Company's Common Stock at the $12.50 closing price on the date of
the Company's initial public offering and in each of the foregoing indices and
assumes reinvestment of dividends, if any.
The following graph is not "soliciting material," is not deemed filed with
the Securities and Exchange Commission and is not to be incorporated by
reference in any filing of SeaChange under the Securities Act of 1933 or the
Securities Exchange Act of 1934, whether made before or after the date hereof
and irrespective of any general incorporation language in any such filing. The
stock price performance shown on the following graph is not necessarily
indicative of future price performance. Information used on the graph was
obtained from Media General Financial Services, Richmond, Virginia, a source
believed to be reliable, but SeaChange is not responsible for any errors or
omissions in such information.
Comparison of Cumulative Total Return
Among SeaChange International, Inc., Nasdaq
National Market Index and SIC Code Index
FISCAL YEAR ENDING
COMPANY/INDEX/MARKET 11/05/1996 12/31/1996 12/31/1997 12/31/1998 12/31/1999 1/31/2000 1/31/2001
SeaChange
International 100.00 136.00 38.00 32.67 282.86 304.85 211.52
Radio, TV
Communication Equip 100.00 118.13 115.32 124.70 472.93 413.78 271.36
NASDAQ Market Index 100.00 105.97 129.63 182.83 322.47 311.81 223.25
Notes:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
C. The Index level for all series was set to 100.0 on November 5, 1996.
15
PROPOSAL II
PROPOSAL TO APPROVE AN INCREASE IN AUTHORIZED SHARES
UNDER THE AMENDED AND RESTATED
1995 STOCK OPTION PLAN
The stockholders are being asked to approve an increase in the number of
shares of common stock available for issuance under SeaChange's Amended and
Restated 1995 Stock Option Plan (the "1995 Plan") from 4,800,000 shares to
9,200,000 shares. In May 2001, the Board of Directors approved the amendment
to the 1995 Plan to increase the aggregate number of shares of common stock
reserved for issuance thereunder by 4,400,000 shares to 9,200,000 shares.
Attached to this Proxy Statement as Appendix B is a copy of the 1995 Plan.
SeaChange's 1995 Stock Option Plan was originally adopted by the Board of
Directors in September 1995 and approved by the company's stockholders in
October 1995. The 1995 Plan was adopted by the Board in September 1996 and
approved by the stockholders in September 1996. Under the terms of the 1995
Plan, SeaChange is authorized to grant incentive stock options ("ISOs") to
employees or any present or future parent or subsidiary of SeaChange
(collectively, "Related Corporations") and non-qualified stock options to any
employee officer or director (whether or not also an employee) or consultant
of SeaChange or any Related Corporation. The aggregate number of shares of
common stock that currently may be issued pursuant to the 1995 Plan is
4,800,000.
As of May 25, 2001, options to purchase 3,528,902 shares of Common Stock
granted under the 1995 Plan were outstanding, 1,271,098 shares remained
available for future option grants and options covering 1,025,967 shares had
been exercised. The closing price of the Company's Common Stock on the Record
Date was $20.370 per share.
The following table sets forth as of the Record Date, all stock options
granted under the 1995 Plan since its inception to (i) each of the named
executive officers of SeaChange; (ii) all current executive officers as a
group, (iii) all employees, including all current officers who are not
executive officers; as a group, and (iv) each person who has received five
percent or greater of the options granted under the 1995 Plan.
Number of
Name Options
---- ---------
William C. Styslinger, III........................................... 125,500
President, Chief Executive Officer and Chairman of the Board
William L. Fiedler................................................... 159,900
Chief Financial Officer, Secretary Treasurer and Vice President,
Finance and Administration
Edward J. Delaney, Jr. .............................................. 76,400
Vice President, Marketing
Bruce E. Mann........................................................ 99,500
Vice President, Network Storage Engineering
Ira Goldfarb......................................................... 61,950
Vice President, Worldwide Sales
All Current Executive Officers as a Group (5 Persons)................ 523,250
All Employees who are not Executive Officers as a Group.............. 5,687,239
SeaChange's future performance depends to a significant extent on its
ability to recruit, retain and motivate both capable senior executives and
highly skilled technical, managerial and sales people. Competition for
qualified employees is intense and is likely to intensify further. SeaChange
relies on stock options as an essential part of the compensation packages
necessary to attract and retain experienced officers and employees and to
motivate employees to maximize stockholder value. The Board of Directors of
SeaChange believes that the
16
proposed increase in the number of shares available under the 1995 Plan is
essential to permit SeaChange to continue to provide long-term, equity-based
incentives to present and future key employees.
Approval of the proposal to increase the number of shares of Common Stock to
be reserved for issuance under the 1995 Plan from 4,800,000 shares to
9,200,000 shares will require an affirmative vote of a majority of the shares
of Common Stock of SeaChange represented in person or by proxy at the Annual
Meeting. Abstentions will be counted toward the number of shares represented
and voting at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND THE
COMPANY'S 1995 PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK AVAILABLE
FOR ISSUANCE THEREUNDER FROM 4,800,000 TO 9,200,000 SHARES.
Below is a summary description of the principal provisions of the 1995 Plan.
The description is not necessarily complete and is qualified in its entirety
by reference to the full text of the 1995 Plan, which is attached to this
Proxy Statement as Appendix B.
Description of the 1995 Plan
The purpose of the 1995 Plan is to provide incentives to officers and other
employees of SeaChange and any present or future subsidiaries of SeaChange
(collectively, "Related Corporations") by providing them with opportunities to
purchase stock of SeaChange pursuant to options which qualify as incentive
stock options ("ISO" or "ISOs") as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"). The 1995 Plan also provides for
the issuance of options to consultants, employees, officers and directors of
SeaChange and Related Corporations which do not qualify as ISOs ("Non-
Qualified Option" or "Non-Qualified Options"). ISOs and Non-Qualified Options
are sometimes referred to individually as an "Option" and collectively as
"Options."
Administration
The Compensation and Option Committee of the Board of Directors of SeaChange
administers the 1995 Plan. During the fiscal year ended January 31, 2001, the
Compensation and Option Committee was comprised of Messrs. Hoffmann and Vona,
each a non-employee director of the Company. In addition, prior to his
resignation on December 14, 2000 as one of SeaChange's directors, Mr. Paul
Saunders also served as a member of the SeaChange Compensation and Option
Committee. In May 2001, Mr. Thomas Olson became a director of SeaChange and a
member of the SeaChange Compensation and Option Committee.
Subject to the terms of the 1995 Plan, the Compensation and Option Committee
has the authority to determine the persons to whom Options shall be granted
(subject to certain eligibility requirements for grants of ISOs) and the terms
of the Options granted, including (a) the number of shares subject to each
grant, (b) when the Option becomes exercisable, (c) the per share exercise
price, (d) the duration of the Option, (e) the time, manner and form of
payment upon the exercise of an Option and (f) other terms and provisions
governing the Options. The interpretation and construction by the Compensation
and Option Committee of any provision of the 1995 Plan or of any Option
granted under the 1995 Plan shall be final unless otherwise determined by the
Board of Directors.
Eligible Employees and Others
Subject to certain limitations, ISOs under the 1995 Plan may be granted to
any employee of SeaChange or any Related Corporation. Only those officers and
directors of SeaChange who are employees may be granted ISOs under the 1995
Plan. In no event may the aggregate fair market value (determined on the date
of grant of an ISO) of Common Stock for which ISOs granted to any employee are
exercisable for the first time by such employee during any calendar year
(under all stock option plans of the Company) exceed $100,000. Non-Qualified
Options may be granted to any director, officer, employee or consultant of
SeaChange or any
17
Related Corporation. No employee of SeaChange or any Related Corporation shall
be granted Options to acquire, in the aggregate, more than 2,047,500 shares of
Common Stock under the 1995 Plan during any fiscal year of the Company. As of
the Record Date, 454 employees are eligible to participate in the 1995 Plan.
Granting of Options, Prices and Duration.
Options may be granted under the 1995 Plan at any time prior to August 24,
2005. Pursuant to the 1995 Plan, ISOs cannot be granted at prices less than
the fair market value of the Common Stock on the date of grant as determined
in good faith by the Board of Directors (or less than 110% of the fair market
value in the case of ISOs granted to an employee or officer holding 10% or
more of the voting stock of SeaChange). The exercise price per share of Non-
Qualified Options granted under the 1995 Plan cannot be less than the minimum
legal consideration required under applicable state law.
The 1995 Plan provides that each Option shall expire on the date specified
by the Compensation and Option Committee, but not more than ten years from its
date of grant in the case of ISOs and ten years and one day in the case of
Non-Qualified Options. However, to qualify as an ISO, an ISO granted to an
employee owning more than 10% of the total combined voting power of all
classes of stock of SeaChange or any Related Corporation must expire five
years from the date of grant.
Exercise of Options
Each Option granted under the 1995 Plan is exercisable as follows:
A. The Option is either fully exercisable at the time of grant or becomes
exercisable in such installments as the Compensation and Option Committee
may specify.
B. Once an installment becomes exercisable it remains exercisable until
expiration or termination of the Option, unless otherwise specified by the
Compensation and Option Committee.
C. Each Option may be exercised from time to time, in whole or in part,
up to the total number of shares with respect to which it is then
exercisable.
D. The Compensation and Option Committee has the right to accelerate the
date of exercise of any installment (subject to the $100,000 per year limit
on the fair market value of Common Stock subject to ISOs granted to any
employee that become exercisable in any calendar year).
Exercise of an Option under the 1995 Plan is effected by a written notice of
exercise delivered to SeaChange at its principal office together with payment
for the shares in full in cash or by check, or at the discretion of the
Compensation and Option Committee, (a) through delivery of shares of Common
Stock having fair market value equal as of the date of exercise to the cash
exercise price of the Option, (b) by delivery of the optionee's personal
recourse note, or (c) by delivery of a sufficient amount of the proceeds from
the sale of the Common Stock acquired upon exercise of the option by the
optionee's broker or selling agent. Such written notice will also identify the
Option being exercised and specify the number of shares as to which the Option
is being exercised.
Effect of Termination of Employment, Death or Disability
If an ISO optionee ceases to be employed by the Company other than by reason
of death or disability, no further installments of his or her ISOs will become
exercisable, and the ISOs will terminate after the passage of 3 months from
the date of termination of employment (but not later than their specified
expiration dates), except to the extent that such ISOs have been converted
into Non-Qualified Options. Employment will be considered as continuing
uninterrupted during any bona fide leave of absence (including illness,
military obligations or governmental service) provided that such leave does
not exceed 90 days or, if longer, any period during which the employee's right
to re-employment is guaranteed by statute or by contract.
If an optionee dies, any ISO held by the optionee may be exercised, to the
extent exercisable on the date of death, by the optionee's estate, personal
representative or beneficiary who acquires the ISO by will or by the
18
laws of descent and distribution, at any time within 180 days from the date of
the optionee's death (but not later than the specified expiration date of the
ISO). If an ISO optionee ceases to be employed by SeaChange by reason of his or
her disability (as defined in Section 22(e)(3) of the Code), the optionee may
exercise any ISO held by him or her on the date of termination of employment,
to the extent exercisable on that date, at any time within 180 days from the
date of termination of employment (but not later than the specified expiration
date of the ISO).
Non-Qualified Options are subject to such termination and cancellation
provisions as may be determined by the Compensation and Option Committee.
Non-Assignability of Options
No ISO shall be assignable or transferable by an optionee except by will, or
by the laws of descent and distribution, and during his or her lifetime only
the optionee may exercise such option. Options other than ISOs shall be
transferable to the extent set forth in the agreement relating to such Option.
Miscellaneous
Optionees are protected against dilution in the event of a stock dividend,
recapitalization, stock split, merger or similar transaction. The Board of
Directors may from time to time adopt amendments, certain of which are subject
to shareholder approval, and may terminate the 1995 Plan at any time (although
such action shall not affect Options previously granted). Unless terminated
sooner, the 1995 Plan will expire on August 24, 2005.
The proceeds received by SeaChange from the sale of shares pursuant to the
1995 Plan are to be used for general corporate purposes. SeaChange's obligation
to deliver shares is subject to the approval of any governmental authority
required in connection with the sale or issuance of such shares. The exercise
of Non-Qualified Options for less than fair market value may require the holder
to recognize ordinary income and pay additional withholding taxes in respect of
such income, and the Compensation and Option Committee may condition the grant
or exercise of an Option on the payment to SeaChange of such taxes. An employee
is required to notify SeaChange in the event that he or she disposes of shares
acquired on the exercise of an ISO prior to the later of two years from the
date of grant or one year from the date of exercise of the ISO.
Federal Income Tax Consequences
The following discussion of United States federal income tax consequences of
the issuance and exercise of Options granted under the 1995 Plan, and of
certain other rights granted under the 1995 Plan, is based upon the provisions
of the Code as in effect on the date of this Proxy Statement, current
regulations, and existing administrative rulings of the Internal Revenue
Service. It is not intended to be a complete discussion of all of the federal
income tax consequences of the 1995 Plan or of the requirements that must be
met in order to qualify for the described tax treatment.
A. Incentive Stock Options. The following general rules are applicable under
current Federal income tax law for ISOs granted under the 1995 Plan.
1. In general, no taxable income results to the optionee upon the grant
of an ISO or upon the issuance of shares to him or her upon the exercise of
the ISO, and no corresponding Federal tax deduction is allowed to SeaChange
upon either grant or exercise of an ISO.
2. If shares acquired upon exercise of an ISO are not disposed of within
(i) two years following the date the option was granted or (ii) one year
following the date the shares are issued to the optionee pursuant to the
ISO exercise (the "Holding Periods"), the difference between the amount
realized on any subsequent disposition of the shares and the exercise price
will generally be treated as capital gain or loss to the optionee.
3. If shares acquired upon exercise of an ISO are disposed of before the
Holding Periods are met (a "Disqualifying Disposition"), then in most cases
the lesser of (i) any excess of the fair market value of
19
the shares at the time of exercise of the ISO over the exercise price or
(ii) the actual gain on disposition will be treated as compensation to the
optionee and will be taxed as ordinary income in the year of such
disposition.
4. In any year that an optionee recognizes compensation income as the
result of a Disqualifying Disposition of stock acquired by exercising an
ISO, SeaChange generally should be entitled to a corresponding deduction
for Federal income tax purposes.
5. Any excess of the amount realized by the optionee as the result of a
Disqualifying Disposition over the sum of (i) the exercise price and (ii)
the amount of ordinary income recognized under the above rules will be
treated as capital gain.
6. Capital gain or loss recognized by an optionee upon a disposition of
shares will be long-term capital gain or loss if the optionee's holding
period for the shares exceeds one year.
7. An optionee may be entitled to exercise an ISO by delivering shares of
SeaChange's Common Stock to SeaChange in payment of the exercise price, if
the optionee's ISO agreement so provides. If an optionee exercises an ISO
in such fashion, special rules will apply.
8. In addition to the tax consequences described above, the exercise of
an ISO may result in additional tax liability to the optionee under the
alternative minimum tax rules. The Code provides that an alternative
minimum tax (at a maximum rate of 28%) will be applied against a taxable
base which is equal to "alternative minimum taxable income," reduced by a
statutory exemption. In general, the amount by which the value of the
Common Stock received upon exercise of the ISO exceeds the exercise price
is included in the optionee's alternative minimum taxable income. A
taxpayer is required to pay the higher of his or her regular tax liability
or the alternative minimum tax. A taxpayer that pays alternative minimum
tax attributable to the exercise of an ISO may be entitled to a tax credit
against his or her regular tax liability in later years.
9. Special rules apply if the stock acquired is subject to vesting, or is
subject to certain restrictions on resale under federal securities laws
applicable to directors, officers or 10% stockholders.
B. Non-Qualified Options. The following general rules are applicable under
current federal income tax law to Non-Qualified Options granted under the 1995
Plan:
1. The optionee generally does not realize any taxable income upon the
grant of a Non-Qualified Option, and SeaChange is not allowed a federal
income tax deduction by reason of such grant.
2. The optionee generally will recognize ordinary compensation income at
the time of exercise of a Non-Qualified Option in an amount equal to the
excess, if any, of the fair market value of the shares on the date of
exercise over the exercise price. SeaChange may require the optionee to
make appropriate arrangements for the withholding of taxes on this amount.
3. When the optionee sells the shares acquired pursuant to a Non-
Qualified Option, he or she generally will recognize a capital gain or loss
in an amount equal to the difference between the amount realized upon the
sale of the shares and his or her basis in the shares (generally, the
exercise price plus the amount taxed to the optionee as compensation
income). If the optionee's holding period for the shares exceeds one year,
such gain or loss will be a long-term capital gain or loss.
4. SeaChange generally should be entitled to a corresponding tax
deduction for federal income tax purposes when the optionee recognizes
compensation income.
5. An optionee may be entitled to exercise a Non-Qualified Option by
delivering shares of SeaChange's Common Stock to SeaChange in payment of
the exercise price. If an optionee exercises a Non-Qualified Option in such
fashion, special rules will apply.
6. Special rules apply if the stock acquired is subject to vesting, or is
subject to certain restrictions on resale under federal securities laws
applicable to directors, officers or 10% stockholders.
20
ACCOUNTANTS
The Board of Directors has selected the firm of PricewaterhouseCoopers LLP,
independent accountants, to serve as auditors for the fiscal year ending
January 31, 2002. PricewaterhouseCoopers LLP has served as the Company's
independent accountants since 1993. It is expected that a member of
PricewaterhouseCoopers LLP will be present at the meeting with the opportunity
to make a statement if so desired and will be available to respond to
appropriate questions.
The following table details aggregate fees billed for fiscal year 2001 to
SeaChange for (i) professional services rendered for the audit of the annual
consolidated financial statements of SeaChange for fiscal year 2001 and the
reviews of SeaChange's quarterly consolidated financial statements; (ii)
financial information systems design and implementation; and (iii) all other
services.
Services Aggregate Fees Billed
-------- ---------------------
Audit................................................ $186,500
Financial Information System Design and
Implementation...................................... $ --
Other*............................................... $398,200
- --------
* Includes fees billed for the audit of SeaChange's pensions and savings
plans, tax services and SeaChange's equity offering and related SEC filings.
The Audit Committee of the Board of Directors has considered whether the
provision of the services by PricewaterhouseCoopers LLP covered by the caption
"Other" in the above-table is compatible with PricewaterhouseCoopers LLP
independence and has concluded that it is.
VOTING PROCEDURES
The presence, in person or by proxy, of at least a majority of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to establish a quorum for the transaction of business. Shares
represented by proxies pursuant to which votes have been withheld from any
nominee for director, or which contain one or more abstentions or broker "non-
votes," are counted as present for purposes of determining the presence or
absence of a quorum for the Annual Meeting. A "non-vote" occurs when a broker
or other nominee holding shares for a beneficial owner votes on one proposal,
but does not vote on another proposal because the broker does not have
discretionary voting power and has not received instructions from the
beneficial owner.
Election of Directors. Directors are elected by a plurality of the votes
cast, in person or by proxy, at the Annual Meeting. The two (2) nominees
receiving the highest number of affirmative votes of the shares present or
represented and voting on the election of directors at the Annual Meeting will
be elected as Class II Directors for a three-year term. Only shares that are
voted in favor of a particular nominee will be counted toward such nominee's
achievement of a plurality. Shares present at the Annual Meeting that are not
voted for a particular nominee or shares present by proxy where the
stockholder properly withholds authority to vote for such nominee will not be
counted toward such nominee's achievement of a plurality.
Other Matters. For all other matters being submitted to the stockholders at
the Annual Meeting, the affirmative vote of the majority of shares present, in
person or represented by proxy, and voting on that matter is required for
approval. Abstentions, as well as broker "non-votes" are not considered to
have been voted for this matter and have the practical effect of reducing the
number of affirmative votes required to achieve a majority for such matter by
reducing the total number of shares from which the majority is calculated.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 2002 Annual
Meeting of Stockholders must be received no later than the close of business
on February 14, 2002 at the Company's principal executive offices in
21
order to be included in the SeaChange proxy statement for that meeting. Under
the By-Laws of SeaChange, stockholders who wish to make a proposal at the 2002
Annual Meeting--other than one that will be included in SeaChange's proxy
materials--must notify SeaChange no earlier than April 19, 2002 and no later
than May 19, 2002. If a stockholder who wishes to present a proposal fails to
notify SeaChange by May 19, 2002, the stockholder would not be entitled to
present the proposal at the meeting. If, however, notwithstanding the
requirements of the by-laws of SeaChange, the proposal is brought before the
meeting, then under the SEC's proxy rules the proxies solicited by management
with respect to the 2002 Annual Meeting will confer discretionary voting
authority with respect to the stockholder's proposal on the persons selected
by management to vote the proxies. If a stockholder makes a timely
notification, the proxies may still exercise discretionary voting authority
under circumstances consistent with the SEC's proxy rules.
EXPENSES AND SOLICITATION
All costs of solicitation of proxies will be borne by SeaChange. In addition
to solicitations by mail, certain of SeaChange's directors, officers and
regular employees, without additional remuneration, may solicit proxies by
telephone, telegraph and personal interviews. Brokers, custodians and
fiduciaries will be requested to forward proxy soliciting material to the
owners of stock held in their names, and SeaChange will reimburse them for
their reasonable out-of-pocket costs. Solicitation by officers and employees
of SeaChange may also be made of some stockholders in person or by mail,
telephone or telegraph following the original solicitation. SeaChange has
retained ChaseMellon Shareholder Services, L.L.C. of East Hartford,
Connecticut to assist in the solicitation of proxies at a cost estimated not
to exceed $7,500.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
SeaChange's directors, executive officers and holders of more than 10% of the
Company's Common Stock (collectively, "Reporting Persons") to file with the
SEC initial reports of ownership and reports of changes in ownership of Common
Stock of the Company. Such persons are required by regulations of the SEC to
furnish the Company with copies of all such filings. Based on its review of
the copies of such filings received by it with respect to the fiscal year
ended January 31, 2001 and written representations from certain Reporting
Persons, the Company believes that all Reporting Persons complied with all
Section 16(a) filing requirements in the fiscal year ended January 31, 2001,
except that Mr. Blais failed to timely report four transactions, Mr. Delaney
failed to timely report four transactions, and Mr. Styslinger failed to timely
report one transaction.
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Appendix A
SEACHANGE INTERNATIONAL, INC.
Audit Committee Charter
A. PURPOSE AND SCOPE
The primary function of the Audit Committee (the "Committee") is to assist
the Board of Directors in fulfilling its responsibilities by reviewing: (i)
the financial reports provided by the Corporation to the Securities and
Exchange Commission ("SEC"), the Corporation's shareholders or to the general
public, and (ii) the Corporation's internal financial and accounting controls.
B. COMPOSITION
The Committee shall be comprised of a minimum of three directors as
appointed by the Board of Directors, who shall meet the independence and audit
committee composition requirements under any rules or regulations of The
NASDAQ National Market, as in effect from time to time, and shall be free from
any relationship that, in the opinion of the Board of Directors, would
interfere with the exercise of his or her independent judgment as a member of
the Committee.
All members of the Committee shall either (i) be able to read and understand
fundamental financial statements, including a balance sheet, cash flow
statement and income statement, or (ii) be able to do so within a reasonable
period of time after appointment to the Committee. At least one member of the
Committee shall have employment experience in finance or accounting, requisite
professional certification in accounting, or other comparable experience or
background which results in the individual's financial sophistication,
including being or having been a chief executive officer, chief financial
officer or other senior officer with financial oversight responsibilities.
The Board may appoint one member who does not meet the independence
requirements set forth above and who is not a current employee of the
Corporation or an immediate family member of such employee if the Board, under
exceptional and limited circumstances, determines that membership on the
Committee by the individual is required in the best interests of the
Corporation and its shareholders. The Board shall disclose in the next proxy
statement after such determination the nature of the relationship and the
reasons for the determination.
The members of the Committee shall be elected by the Board of Directors at
the meeting of the Board of Directors following each annual meeting of
stockholders and shall serve until their successors shall be duly elected and
qualified or until their earlier resignation or removal. Unless a Chair is
elected by the full Board of Directors, the members of the Committee may
designate a Chair by majority vote of the full Committee membership.
C. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Committee shall:
Document Review
1. Review and assess the adequacy of this Charter periodically as
conditions dictate, but at least annually (and update this Charter if and
when appropriate).
2. Review with representatives of management and representatives of the
independent accounting firm the Corporation's audited annual financial
statements prior to their filing as part of the Annual Report on Form 10-K.
After such review and discussion, the Committee shall recommend to the
Board of Directors whether such audited financial statements should be
published in the Corporation's annual report on Form 10-K. The Committee
shall also review the Corporation's quarterly financial statements prior to
their inclusion in the Corporation's quarterly SEC filings on Form 10-Q.
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3. Take steps designed to insure that the independent accounting firm
reviews the Corporation's interim financial statements prior to their
inclusion in the Corporation's quarterly reports on Form 10-Q.
Independent Accounting Firm
4. Recommend to the Board of Directors the selection of the independent
accounting firm, and approve the fees and other compensation to be paid to
the independent accounting firm. The Committee shall have the ultimate
authority and responsibility to select, evaluate and, when warranted,
replace such independent accounting firm (or to recommend such replacement
for shareholder approval in any proxy statement).
5. On an annual basis, receive from the independent accounting firm a
formal written statement identifying all relationships between the
independent accounting firm and the Corporation consistent with
Independence Standards Board ("ISB") Standard 1. The Committee shall
actively engage in a dialogue with the independent accounting firm as to
any disclosed relationships or services that may impact its independence.
The Committee shall take, or recommend that the Board of Directors take,
appropriate action to oversee the independence of the independent
accounting firm.
6. On an annual basis, discuss with representatives of the independent
accounting firm the matters required to be discussed by Statement on
Auditing Standards ("SAS") 61, as it may be modified or supplemented.
7. Meet with the independent accounting firm prior to the audit to review
the planning and staffing of the audit.
8. Evaluate the performance of the independent accounting firm and
recommend to the Board of Directors any proposed discharge of the
independent accounting firm when circumstances warrant. The independent
accounting firm shall be ultimately accountable to the Board of Directors
and the Committee.
Financial Reporting Processes
9. In consultation with the independent accounting firm and management,
review annually the adequacy of the Corporation's internal financial and
accounting controls.
Compliance
10. To the extent deemed necessary by the Committee, it shall have the
authority to engage outside counsel and/or independent accounting
consultants to review any matter under its responsibility.
Reporting
11. Prepare, in accordance with the rules of the SEC as modified or
supplemented from time to time, a written report of the audit committee to
be included in the Corporation's annual proxy statement for each annual
meeting of stockholders occurring after December 14, 2000.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee itself to plan or
conduct audits or itself to determine that the Corporation's financial
statements are complete and accurate and are in accordance with generally
accepted accounting principles.
A-2
Appendix B
SEACHANGE INTERNATIONAL, INC.
AMENDED AND RESTATED
----------------
1995 STOCK OPTION PLAN*
----------------
1. Purpose. The purpose of this Amended and Restated 1995 Stock Option Plan
(the "Plan") is to encourage employees of SeaChange International, Inc. (the
"Company") and of any present or future parent or subsidiary of the Company
(collectively, "Related Corporations"), and other individuals who render
services to the Company or a Related Corporation, by providing opportunities
to purchase stock in the Company pursuant to options granted hereunder which
qualify as "incentive stock options" ("ISOs") under Section 422(b) of the
Internal Revenue Code of 1986, as amended (the "Code") and options which do
not qualify as ISOs ("Non-Qualified Options"). Both ISOs and Non-Qualified
Options are referred to hereafter individually as an "Option" and collectively
as "Options." As used herein, the terms "parent" and "subsidiary" mean "parent
corporation" and "subsidiary corporation," respectively, as those terms are
defined in Section 424 of the Code.
2. Administration of the Plan.
A. Board or Committee Administration. The Plan shall be administered by
the Board of Directors of the Company (the "Board") or by a committee
appointed by the Board (the "Committee").Hereinafter, all references in
this Plan to the "Committee" shall mean the Board if no Committee has been
appointed. Subject to ratification of the grant or authorization of each
Option by the Board (if so required by applicable state law), and subject
to the terms of the Plan, the Committee shall have the authority to (i)
determine to whom (from among the class of employees eligible under
paragraph 3 to receive ISOs) ISOs shall be granted, and to whom (from among
the class of individuals and entities eligible under paragraph 3 to receive
Non-Qualified Options) Non-Qualified Options may be granted; (ii) determine
the time or times at which Options shall be granted; (iii) determine the
exercise price of shares subject to each Option, which price shall not be
less than the minimum price specified in paragraph 6; (iv) determine
whether each Option granted shall be an ISO or a Non-Qualified Option; (v)
determine (subject to paragraph 7) the time or times when each Option shall
become exercisable and the duration of the exercise period; (vi) extend the
period during which outstanding Options may be exercised; (vii) determine
whether restrictions such as repurchase options are to be imposed on shares
subject to Options and the nature of such restrictions, if any; and (viii)
interpret the Plan and prescribe and rescind rules and regulations relating
to it. If the Committee determines to issue a Non-Qualified Option, it
shall take whatever actions it deems necessary, under Section 422 of the
Code and the regulations promulgated thereunder, to ensure that such Option
is not treated as an ISO. The interpretation and construction by the
Committee of any provisions of the Plan or of any Option granted under it
shall be final unless otherwise determined by the Board. The Committee may
from time to time adopt such rules and regulations for carrying out the
Plan as it may deem advisable. No member of the Board or the Committee
shall be liable for any action or determination made in good faith with
respect to the Plan or any Option granted under it.
B. Committee Actions. The Committee may select one of its members as its
chairman, and shall hold meetings at such time and places as it may
determine. A majority of the Committee shall constitute a quorum and acts
by a majority of the members of the Committee at a meeting at which a
quorum is present, or acts reduced to or approved in writing by a majority
of the members of the Committee (if consistent with applicable state law),
shall constitute the valid acts of the Committee. From time to time the
Board may increase the size of the Committee and appoint additional members
thereof, remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies however caused, or remove all members
of the Committee and thereafter directly administer the Plan.
- --------
* Numbers used herein reflect the amendment to the 1995 Plan approved by the
Board of Directors in April 2000 and May 2001.
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C. Grant of Options to Board Members. Options may be granted to members
of the Board. All grants of Options to members of the Board shall in all
respects be made in accordance with the provisions of this Plan applicable
to other eligible persons. Members of the Board who either (i) are eligible
to receive grants of Options pursuant to the Plan or (ii) have been granted
Options may vote on any matters affecting the administration of the Plan or
the grant of any Options pursuant to the Plan, except that no such member
shall act upon the granting to himself or herself of Options, but any such
member may be counted in determining the existence of a quorum at any
meeting of the Board during which action is taken with respect to the
granting to such member of Options.
D. Performance-Based Compensation. The Board, in its discretion, may take
such action as may be necessary to ensure that Options granted under the
Plan qualify as "qualified performance-based compensation" within the
meaning of Section 162(m) of the Code and applicable regulations
promulgated thereunder ("Performance-Based Compensation"). Such action may
include, in the Board's discretion, some or all of the following (i) if the
Board determines that Options granted under the Plan generally shall
constitute Performance-Based Compensation, the Plan shall be administered,
to the extent required for such Options to constitute Performance-Based
Compensation, by a Committee consisting solely of two or more "outside
directors" (as defined in applicable regulations promulgated under Section
162(m) of the Code), (ii) if any Non-Qualified Options with an exercise
price less than the fair market value per share of Common Stock are granted
under the Plan and the Board determines that such Options should constitute
Performance-Based Compensation, such Options shall be made exercisable only
upon the attainment of a pre-established, objective performance goal
established by the Committee, and such grant shall be submitted for, and
shall be contingent upon shareholder approval and (iii) Options granted
under the Plan may be subject to such other terms and conditions as are
necessary for compensation recognized in connection with the exercise or
disposition of such Option or the disposition of Common Stock acquired
pursuant to such Option, to constitute Performance-Based Compensation.
3. Eligible Employees and Others. ISOs may be granted only to employees of
the Company or any Related Corporation. Non-Qualified Options may be granted
to any employee, officer or director (whether or not also an employee) or
consultant of the Company or any Related Corporation. The Committee may take
into consideration a recipient's individual circumstances in determining
whether to grant an ISO or a Non-Qualified Option. The granting of any Option
to any individual or entity shall neither entitle that individual or entity
to, nor disqualify such individual or entity from, participation in any other
grant of Options.
4. Stock. The stock subject to Options shall be authorized but unissued
shares of Common Stock of the Company, par value $0.01 per share (the "Common
Stock"), or shares of Common Stock reacquired by the Company in any manner.
The aggregate number of shares which may be issued pursuant to the Plan is
9,200,000, subject to adjustment as provided in paragraph 13. If any Option
granted under the Plan shall expire or terminate for any reason without having
been exercised in full or shall cease for any reason to be exercisable in
whole or in part or shall be repurchased by the Company, the shares subject to
such Option shall again be available for grants of Options under the Plan.
No employee of the Company or any Related Corporation may be granted Options
to acquire, in the aggregate, more than 2,047,500 shares of Common Stock under
the Plan during any fiscal year of the Company. If any Option granted under
the Plan shall expire or terminate for any reason without having been
exercised in full or shall cease for any reason to be exercisable in whole or
in part or shall be repurchased by the Company, the shares subject to such
Option shall be included in the determination of the aggregate number of
shares of Common Stock deemed to have been granted to such employee under the
Plan.
5. Granting of Options. Options may be granted under the Plan at any time
after August 25, 1995 and prior to August 24, 2005. The date of grant of an
Option under the Plan will be the date specified by the Committee at the time
it grants the Option; provided, however, that such date shall not be prior to
the date on which the Committee acts to approve the grant.
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6. Minimum Option Price; ISO Limitations.
A. Price for Non-Qualified Options. Subject to Paragraph 2D (relating to
compliance with Section 162(m) of the Code), the exercise price per share
specified in the agreement relating to each Non-Qualified Option granted
under the Plan shall in no event be less than the minimum legal
consideration required therefor under the laws of any jurisdiction in which
the Company or its successors in interest may be organized.
B. Price for ISOs. The exercise price per share specified in the
agreement relating to each ISO granted under the Plan shall not be less
than the fair market value per share of Common Stock on the date of such
grant. In the case of an ISO to be granted to an employee owning stock
possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, the
price per share specified in the agreement relating to such ISO shall not
be less than one hundred ten percent (110%) of the fair market value per
share of Common Stock on the date of grant. For purposes of determining
stock ownership under this paragraph, the rules of Section 424(d) of the
Code shall apply.
C. $100,000 Annual Limitation on ISO Vesting. Each eligible employee may
be granted Options treated as ISOs only to the extent that, in the
aggregate under this Plan and all incentive stock option plans of the
Company and any Related Corporation, ISOs do not become exercisable for the
first time by such employee during any calendar year with respect to stock
having a fair market value (determined at the time the ISOs were granted)
in excess of $100,000. The Company intends to designate any Options granted
in excess of such limitation as Non-Qualified Options.
D. Determination of Fair Market Value. If, at the time an Option is
granted under the Plan, the Company's Common Stock is publicly traded,
"fair market value" shall be determined as of the date of grant or, if the
prices or quotes discussed in this sentence are unavailable for such date,
the last business day for which such prices or quotes are available prior
to the date of grant and shall mean (i) the average (on that date) of the
high and low prices of the Common Stock on the principal national
securities exchange on which the Common Stock is traded, if the Common
Stock is then traded on a national securities exchange; or (ii) the last
reported sale price (on that date) of the Common Stock on the Nasdaq
National Market, if the Common Stock is not then traded on a national
securities exchange; or (iii) the closing bid price (or average of bid
prices) last quoted (on that date) by an established quotation service for
over-the-counter securities, if the Common Stock is not reported on the
Nasdaq National Market. If the Common Stock is not publicly traded at the
time an Option is granted under the Plan, "fair market value" shall be
deemed to be the fair value of the Common Stock as determined by the
Committee after taking into consideration all factors which it deems
appropriate, including, without limitation, recent sale and offer prices of
the Common Stock in private transactions negotiated at arm's length.
7. Option Duration. Subject to earlier termination as provided in paragraphs
9 and 10 or in the agreement relating to such Option, each Option shall expire
on the date specified by the Committee, but not more than (i) ten years from
the date of grant in the case of Options generally and (ii) five years from
the date of grant in the case of ISOs granted to an employee owning stock
possessing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Related Corporation, as determined
under paragraph 6(B). Subject to earlier termination as provided in paragraphs
9 and 10, the term of each ISO shall be the term set forth in the original
instrument granting such ISO, except with respect to any part of such ISO that
is converted into a Non-Qualified Option pursuant to paragraph 16.
8. Exercise of Option. Subject to the provisions of paragraphs 9 through 12,
each Option granted under the Plan shall be exercisable as follows:
A. Vesting. The Option shall either be fully exercisable on the date of
grant or shall become exercisable thereafter in such installments as the
Committee may specify.
B. Full Vesting of Installments. Once an installment becomes exercisable
it shall remain exercisable until expiration or termination of the Option,
unless otherwise specified by the Committee.
B-3
C. Partial Exercise. Each Option or installment may be exercised at any
time or from time to time, in whole or in part, for up to the total number
of shares with respect to which it is then exercisable.
D. Acceleration of Vesting. The Committee shall have the right to
accelerate the date on which any installment of any Option becomes
exercisable; provided that the Committee shall not, without the consent of
an optionee, accelerate the permitted exercise date of any installment of
any Option granted to any employee as an ISO (and not previously converted
into a Non-Qualified Option pursuant to paragraph 16) if such acceleration
would violate the annual vesting limitation contained in Section 422(d) of
the Code, as described in paragraph 6(C).
9. Termination of Employment. Unless otherwise specified in the agreement
relating to such ISO, if an ISO optionee ceases to be employed by the Company
and all Related Corporations other than by reason of death or disability as
defined in paragraph 10, no further installments of his or her ISOs shall
become exercisable, and his or her ISOs shall terminate after the passage of
three months from the date of termination of his or her employment, but in no
event later than on their specified expiration dates, except to the extent
that such ISOs (or unexercised installments thereof) have been converted into
Non-Qualified Options pursuant to paragraph 16. For purposes of this paragraph
9, employment shall be considered as continuing uninterrupted during any bona
fide leave of absence (such as those attributable to illness, military
obligations or governmental service) provided that the period of such leave
does not exceed 90 days or, if longer, any period during which such optionee's
right to reemployment is guaranteed by statute or by contract. A bona fide
leave of absence with the written approval of the Committee shall not be
considered an interruption of employment under this paragraph 9, provided that
such written approval contractually obligates the Company or any Related
Corporation to continue the employment of the optionee after the approved
period of absence. ISOs granted under the Plan shall not be affected by any
change of employment within or among the Company and Related Corporations, so
long as the optionee continues to be an employee of the Company or any Related
Corporation. Nothing in the Plan shall be deemed to give any optionee the
right to be retained in employment or other service by the Company or any
Related Corporation for any period of time.
10. Death; Disability.
A. Death. If an ISO optionee ceases to be employed by the Company and all
Related Corporations by reason of his or her death, any ISO owned by such
optionee may be exercised, to the extent otherwise exercisable on the date
of death, by the estate, personal representative or beneficiary who has
acquired the ISO by will or by the laws of descent and distribution, until
the earlier of (i) the specified expiration date of the ISO or (ii) 180
days from the date of the optionee's death.
B. Disability. If an ISO optionee ceases to be employed by the Company
and all Related Corporations by reason of his or her disability, such
optionee shall have the right to exercise any ISO held by him or her on the
date of termination of employment, to the extent of the number of shares
with respect to which he or she could have exercised it on that date, until
the earlier of (i) the specified expiration date of the ISO or (ii) 180
days from the date of the termination of the optionee's employment. For the
purposes of the Plan, the term "disability" shall mean "permanent and total
disability" as defined in Section 22(e)(3) of the Code or any successor
statute.
11. Assignability. No ISO shall be assignable or transferable by the
optionee except by will, or by the laws of descent and distribution, and
during the lifetime of the optionee shall be exercisable only by such
optionee. Options other than ISOs shall be transferable to the extent set
forth in the agreement relating to such Option.
12. Terms and Conditions of Options. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. The Committee may specify that any Non-
Qualified Option shall be subject to the restrictions set forth herein with
respect to ISOs, or to such other termination and
B-4
cancellation provisions as the Committee may determine. The Committee may from
time to time confer authority and responsibility on one or more of its own
members and/or one or more officers of the Company to execute and deliver such
instruments. The proper officers of the Company are authorized and directed to
take any and all action necessary or advisable from time to time to carry out
the terms of such instruments.
13. Adjustments. Upon the occurrence of any of the following events, an
optionee's rights with respect to Options granted to such optionee hereunder
shall be adjusted as hereinafter provided, unless otherwise specifically
provided in the written agreement between the optionee and the Company
relating to such Option:
A. Stock Dividends and Stock Splits. If the shares of Common Stock shall
be subdivided or combined into a greater or smaller number of shares or if
the Company shall issue any shares of Common Stock as a stock dividend on
its outstanding Common Stock, the number of shares of Common Stock
deliverable upon the exercise of Options shall be appropriately increased
or decreased proportionately, and appropriate adjustments shall be made in
the purchase price per share to reflect such subdivision, combination or
stock dividend.
B. Consolidations or Mergers. If the Company is to be consolidated with
or acquired by another entity in a merger or other reorganization in which
the holders of the outstanding voting stock of the Company immediately
preceding the consummation of such event, shall, immediately following such
event, hold, as a group, less than a majority of the voting securities of
the surviving or successor entity, or in the event of a sale of all or
substantially all of the Company's assets or otherwise (each, an
"Acquisition"), the Committee or the board of directors of any entity
assuming the obligations of the Company hereunder (the "Successor Board"),
shall, as to outstanding Options, either (i) make appropriate provision for
the continuation of such Options by substituting on an equitable basis for
the shares then subject to such Options either (a) the consideration
payable with respect to the outstanding shares of Common Stock in
connection with the Acquisition, (b) shares of stock of the surviving or
successor corporation or (c) such other securities as the Successor Board
deems appropriate, the fair market value of which shall not materially
exceed the fair market value of the shares of Common Stock subject to such
Options immediately preceding the Acquisition; or (ii) upon written notice
to the optionees, provide that all Options must be exercised, to the extent
then exercisable or to be exercisable as a result of the Acquisition,
within a specified number of days of the date of such notice, at the end of
which period the Options shall terminate; or (iii) terminate all Options in
exchange for a cash payment equal to the excess of the fair market value of
the shares subject to such Options (to the extent then exercisable or to be
exercisable as a result of the Acquisition) over the exercise price
thereof.
C. Recapitalization or Reorganization. In the event of a recapitalization
or reorganization of the Company (other than a transaction described in
subparagraph B above) pursuant to which securities of the Company or of
another corporation are issued with respect to the outstanding shares of
Common Stock, an optionee upon exercising an Option shall be entitled to
receive for the purchase price paid upon such exercise the securities he or
she would have received if he or she had exercised such Option prior to
such recapitalization or reorganization.
D. Modification of ISOs. Notwithstanding the foregoing, any adjustments
made pursuant to subparagraphs A, B or C with respect to ISOs shall be made
only after the Committee, after consulting with counsel for the Company,
determines whether such adjustments would constitute a "modification" of
such ISOs (as that term is defined in Section 424 of the Code) or would
cause any adverse tax consequences for the holders of such ISOs. If the
Committee determines that such adjustments made with respect to ISOs would
constitute a modification of such ISOs or would cause adverse tax
consequences to the holders, it may refrain from making such adjustments.
E. Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, each Option will terminate immediately prior
to the consummation of such proposed action or at such other time and
subject to such other conditions as shall be determined by the Committee.
F. Issuances of Securities. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no
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adjustment by reason thereof shall be made with respect to, the number or
price of shares subject to Options. No adjustments shall be made for
dividends paid in cash or in property other than securities of the Company.
G. Fractional Shares. No fractional shares shall be issued under the Plan
and the optionee shall receive from the Company cash in lieu of such
fractional shares.
H. Adjustments. Upon the happening of any of the events described in
subparagraphs A, B or C above, the class and aggregate number of shares set
forth in paragraph 4 hereof that are subject to Options which previously
have been or subsequently may be granted under the Plan shall also be
appropriately adjusted to reflect the events described in such
subparagraphs. The Committee or the Successor Board shall determine the
specific adjustments to be made under this paragraph 13 and, subject to
paragraph 2, its determination shall be conclusive.
14. Means of Exercising Options. An Option (or any part or installment
thereof) shall be exercised by giving written notice to the Company at its
principal office address, or to such transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and specify
the number of shares as to which such Option is being exercised, accompanied
by full payment of the purchase price therefor either (a) in United States
dollars in cash or by check, (b) at the discretion of the Committee, through
delivery of shares of Common Stock having a fair market value equal as of the
date of the exercise to the cash exercise price of the Option, (c) at the
discretion of the Committee, by delivery of the optionee's personal recourse
note bearing interest payable not less than annually at no less than 100% of
the lowest applicable Federal rate, as defined in Section 1274(d) of the Code,
(d) at the discretion of the Committee and consistent with applicable law,
through the delivery of an assignment to the Company of a sufficient amount of
the proceeds from the sale of the Common Stock acquired upon exercise of the
Option and an authorization to the broker or selling agent to pay that amount
to the Company, which sale shall be at the participant's direction at the time
of exercise, or (e) at the discretion of the Committee, by any combination of
(a), (b), (c) and (d) above. If the Committee exercises its discretion to
permit payment of the exercise price of an ISO by means of the methods set
forth in clauses (b), (c), (d) or (e) of the preceding sentence, such
discretion shall be exercised in writing at the time of the grant of the ISO
in question. The holder of a Option shall not have the rights of a shareholder
with respect to the shares covered by his Option until the date of issuance of
a stock certificate to such holder for such shares. Except as expressly
provided above in paragraph 13 with respect to changes in capitalization and
stock dividends, no adjustment shall be made for dividends or similar rights
for which the record date is before the date such stock certificate is issued.
15. Term and Amendment of Plan. The 1995 Stock Option Plan was adopted by
the Board on August 25, 1995 and approved by the stockholders of the Company
on October 23, 1995. This Plan was adopted by the Board on September 6, 1996
and approved by the stockholders of the Company in September 1996. This Plan
was amended by the Board of Directors on April 20, 2000 and by the
stockholders of the Company on May 24, 2000. This Plan was further amended by
the Board of Directors on May 24, 2001 and such amendment shall be effective,
provided stockholder approval thereof is obtained within one year from such
date. The Plan shall expire at the end of the day on August 24, 2005 (except
as to Options outstanding on that date). Subject to the provisions of
paragraph 5 above, Options may be granted under the Plan prior to the date of
stockholder approval of the Plan. The Board may terminate or amend the Plan in
any respect at any time, except that, without the approval of the stockholders
obtained within 12 months before or after the Board adopts a resolution
authorizing any of the following actions: (a) the total number of shares that
may be issued under the Plan may not be increased (except by adjustment
pursuant to paragraph 13); (b) the provisions of paragraph 3 regarding
eligibility for grants of ISOs may not be modified; (c) the provisions of
paragraph 6(B) regarding the exercise price at which shares may be offered
pursuant to ISOs may not be modified (except by adjustment pursuant to
paragraph 13); and (d) the expiration date of the Plan may not be extended.
Except as otherwise provided in this paragraph 15, in no event may action of
the Board or stockholders alter or impair the rights of an optionee, without
such optionee's consent, under any Option previously granted to such optionee.
16. Modifications of ISOs; Conversion of ISOs into Non-Qualified
Options. Subject to Paragraph 13D, without the prior written consent of the
holder of an ISO, the Committee shall not alter the terms of such ISO
B-6
(including the means of exercising such ISO) if such alteration would
constitute a modification (within the meaning of Section 424(h)(3) of the
Code). The Committee, at the written request or with the written consent of
any optionee, may in its discretion take such actions as may be necessary to
convert such optionee's ISOs (or any installments or portions of installments
thereof) that have not been exercised on the date of conversion into Non-
Qualified Options at any time prior to the expiration of such ISOs, regardless
of whether the optionee is an employee of the Company or a Related Corporation
at the time of such conversion. Such actions may include, but shall not be
limited to, extending the exercise period or reducing the exercise price of
the appropriate installments of such ISOs. At the time of such conversion, the
Committee (with the consent of the optionee) may impose such conditions on the
exercise of the resulting Non-Qualified Options as the Committee in its
discretion may determine, provided that such conditions shall not be
inconsistent with this Plan. Nothing in the Plan shall be deemed to give any
optionee the right to have such optionee's ISOs converted into Non-Qualified
Options, and no such conversion shall occur until and unless the Committee
takes appropriate action. Upon the taking of such action, the Company shall
issue separate certificates to the optionee with respect to Options that are
Non-Qualified Options and Options that are ISOs.
17. Application Of Funds. The proceeds received by the Company from the sale
of shares pursuant to Options granted under the Plan shall be used for general
corporate purposes.
18. Notice to Company of Disqualifying Disposition. By accepting an ISO
granted under the Plan, each optionee agrees to notify the Company in writing
immediately after such optionee makes a Disqualifying Disposition (as
described in Sections 421, 422 and 424 of the Code and regulations thereunder)
of any stock acquired pursuant to the exercise of ISOs granted under the Plan.
A Disqualifying Disposition is generally any disposition occurring on or
before the later of (a) the date two years following the date the ISO was
granted or (b) the date one year following the date the ISO was exercised.
19. Withholding of Additional Income Taxes. Upon the exercise of a Non-
Qualified Option, the transfer of a Non-Qualified Stock Option pursuant to an
arm's-length transaction, the making of a Disqualifying Disposition (as
defined in paragraph 18), the vesting or transfer of restricted stock or
securities acquired on the exercise of a Option hereunder, or the making of a
distribution or other payment with respect to such stock or securities, the
Company may withhold taxes in respect of amounts that constitute compensation
includible in gross income. The Committee in its discretion may condition (i)
the exercise of an Option, (ii) the transfer of a Non-Qualified Stock Option,
or (iii) the vesting or transferability of restricted stock or securities
acquired by exercising an Option, on the optionee's making satisfactory
arrangement for such withholding. Such arrangement may include payment by the
optionee in cash or by check of the amount of the withholding taxes or, at the
discretion of the Committee, by the optionee's delivery of previously held
shares of Common Stock or the withholding from the shares of Common Stock
otherwise deliverable upon exercise of a Option shares having an aggregate
fair market value equal to the amount of such withholding taxes.
20. Governmental Regulation. The Company's obligation to sell and deliver
shares of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.
Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required to
send tax information statements to employees and former employees that
exercise ISOs under the Plan, and the Company may be required to file tax
information returns reporting the income received by optionees in connection
with the Plan.
21. Governing Law. The validity and construction of the Plan and the
instruments evidencing Options shall be governed by the laws of the
Commonwealth of Massachusetts, or the laws of any jurisdiction in which the
Company or its successors in interest may be organized.
B-7
SEACHANGE INTERNATIONAL, INC.
Annual Meeting of Stockholders to be held on July 17, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies, hereby appoints William C.
Styslinger, III and William L. Fiedler and each of them, with full power of
substitution, as proxies to represent and vote all shares of common stock of
SeaChange International, Inc. (the "Company") which the undersigned would be
entitled to vote if personally present at the Annual Meeting of Stockholders of
the Company to be held on July 17, 2001, at 9:30 a.m. local time, at the offices
of Testa, Hurwitz & Thibeault, LLP, 125 High Street, Boston, Massachusetts
02110, and at all adjournments thereof, upon matters set forth in the Notice of
Annual Meeting of Stockholders and Proxy Statement dated May 31, 2001, a copy of
which has been received by the undersigned. The proxies are further authorized
to vote, in their discretion, upon such other business as may properly come
before the meeting or any adjournments thereof.
SEE REVERSE SIDE
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
FOR THE ELECTION OF THE DIRECTORS AND FOR THE PROPOSAL IN ITEM 2.
[X] Please mark votes as in this example
1. To elect two (2) Class II Directors to serve for a
three year term.
.
Nominee: Martin R. Hoffmann
For Withheld
[_] [_]
_______________________
For the nominee except as noted above
Nominee: Thomas F. Olson
For Withheld
[_] [_]
_______________________
For the nominee except as noted above
2. To increase the number of shares
shares of Common Stock available for issuance
under the Amended and Restated 1995 Stock
Option Plan, from 4,800,000 shares to 9,200,000 shares.
For Against Withheld
[_] [_] [_]
[_] MARK HERE FOR ADDRESS CHANGE
AND NOTE BELOW
_________________________________
_________________________________
_________________________________
Please sign exactly as name appears below. Joint owners must both sign.
Attorney, executor, administrator, trustee or guardian must give full title as
such. A Company or partnership must sign its full name by authorized person.
__________________________________________
Signature of Stockholder
Date:_________________________________, 2001
__________________________________________
Signature if held jointly
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
I/We will attend the meeting. [_] YES [_] NO