SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SCC COMMUNICATIONS CORP.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Not Applicable
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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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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(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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SCC COMMUNICATIONS CORP.
NOTICE OF 2001 ANNUAL MEETING OF STOCKHOLDERS
Dear Stockholder:
We invite you to attend our 2001 Annual Meeting of Stockholders, which
is being held as follows:
DATE: Tuesday, June 26, 2001
TIME: 8:30 A.M.
LOCATION: The Ritz-Carlton Atlanta
181 Peachtree Street NE
Atlanta, Georgia
At the Annual Meeting, we will ask you and our other stockholders to:
o elect two directors, each for a term of three years;
o ratify the appointment of Arthur Andersen LLP as our independent
auditors; and
o consider any other business properly presented at the Annual Meeting.
You may vote on these matters in person or by proxy. Whether or not you
plan to attend the Annual Meeting, we ask that you complete and return the
enclosed proxy card promptly in the enclosed addressed, stamped envelope, so
that your shares will be represented and voted at the meeting in accordance with
your wishes. If you attend the Annual Meeting, you may withdraw your proxy and
vote your shares in person. Only stockholders of record at the close of business
on May 7, 2001 may vote at the Annual Meeting.
By order of the board of directors,
/s/ George K. Heinrichs
George K. Heinrichs
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Boulder, Colorado
May 15, 2001
SCC COMMUNICATIONS CORP.
6285 LOOKOUT ROAD
BOULDER, COLORADO 80301
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 26, 2001
This proxy statement contains information related to the Annual Meeting of
Stockholders (the "Annual Meeting") of SCC Communications Corp. to be held on
Tuesday, June 26, 2001, beginning at 8:30 a.m. (local time) at the Ritz-Carlton
Atlanta, 181 Peachtree Street NE, Atlanta, Georgia and at any postponements or
adjournments thereof.
ABOUT THE ANNUAL MEETING
WHAT IS THE PURPOSE OF THE MEETING?
At our Annual Meeting, stockholders will act upon the matters outlined in the
accompanying notice of meeting. In addition, management will report on our
performance during fiscal 2000 and respond to questions from stockholders.
WHO IS ENTITLED TO VOTE?
Only stockholders of record at the close of business on the record date, May 7,
2001, are entitled to receive notice of the Annual Meeting and to vote the
shares of common stock that they held on that date at the meeting, or any
postponement or adjournment of the meeting. Each outstanding share entitles its
holder to cast one vote on each matter to be voted upon.
WHO CAN ATTEND THE MEETING?
All stockholders as of the record date, or their duly appointed proxies, may
attend the meeting. Seating, however, is limited. Admission to the meeting will
be on a first-come, first-served basis. Registration and seating will begin at
8:00 a.m. (local time) and the meeting will begin at 8:30 a.m. (local time).
Each stockholder may be asked to present valid picture identification, such as a
driver's license or passport. Cameras, recording devices, and other electronic
devices will not be permitted at the meeting.
Many of you hold your shares in "street name," that is, through a broker or
other nominee. If you hold your shares in street name, you will need to bring a
copy of a brokerage statement reflecting your stock ownership as of the record
date and check in at the registration desk at the meeting.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a majority
of the shares of common stock outstanding on the record date will constitute a
quorum, permitting the meeting to conduct its business. As of the record date,
11,544,500 shares of common stock were outstanding and entitled to vote at the
meeting. Thus, the presence of the holders of common stock representing at least
5,772,251 shares will be required to establish a quorum.
Proxies received but marked as abstentions and broker non-votes will be included
in the calculation of the number of shares considered to be present at the
meeting.
HOW DO I VOTE?
If you complete and properly sign the accompanying proxy card and return it to
us, it will be voted as you direct. If you are a registered stockholder and
attend the meeting, you may deliver your completed proxy card in person. "Street
name" stockholders who wish to vote at the meeting will need to obtain a proxy
form from the institution that holds their shares.
CAN I VOTE BY TELEPHONE OR ELECTRONICALLY?
You may vote by telephone, or electronically through the Internet, by following
the instructions included with your proxy card.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy, you may change your vote at any
time before the proxy is exercised by filing with our Corporate Secretary either
a notice of revocation or a duly executed proxy bearing a later date. The powers
of the proxy holders will be suspended if you attend the meeting in person and
so request, although attendance at the meeting will not by itself revoke a
previously granted proxy.
WHAT ARE THE BOARD'S RECOMMENDATIONS?
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF THE NOMINATED SLATE OF
DIRECTORS AND FOR EACH OF THE PROPOSALS IN THIS PROXY STATEMENT.
The Board's recommendation is also set forth together with the description of
each item in this proxy statement. Unless you give other instructions on your
proxy card, the persons named as proxy holders on the proxy card will vote in
accordance with the recommendations of the Board of Directors.
With respect to any other matter that properly comes before the meeting, the
proxy holders will vote as recommended by the Board of Directors or, if no
recommendation is given, in their own discretion.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
For each item, the affirmative vote of the holders of a majority of the shares
represented in person or by proxy and entitled to vote on the matter is required
for approval. A properly executed proxy marked:
o "WITHHOLD AUTHORITY" with respect to the election of one or more
directors; or
o "ABSTAIN" with respect to any other matters
will not be voted, although it will be counted for purposes of determining
whether there is a quorum. Accordingly, such a proxy will have the effect of a
negative vote. A properly executed, but unmarked proxy will be voted FOR the
election of the nominated slate of two directors and FOR each of the proposals.
WHAT ARE "BROKER NON-VOTES" AND HOW WILL THEY BE COUNTED?
"Broker non-votes" occur when you hold your shares in "street name" through a
broker or other nominee, and you do not give your broker or nominee specific
instructions on your proxy card. If you fail to complete your proxy card:
o your broker or nominee may not be permitted to exercise voting
discretion with respect to some of the matters to be acted upon;
and
o your shares may not be voted on those matters and will not be
counted in determining the number of shares necessary for
approval.
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Broker non-votes will have the effect of a negative vote; shares represented by
"broker non-votes" will be counted in determining whether there is a quorum.
WHO WILL BEAR THE COST OF SOLICITING PROXIES?
SCC will bear the cost of soliciting proxies, including expenses in connection
with preparing and mailing this Proxy Statement. In addition, we will reimburse
brokerage firms and other persons representing you for their expenses in
forwarding proxy material to you. Our directors, officers, and employees may
also solicit you by telephone and other means, but they will not receive any
additional compensation for the solicitation.
STOCK OWNERSHIP
HOW MUCH STOCK DO DIRECTORS AND EXECUTIVE OFFICERS OWN AND HOW DO THEY INTEND TO
VOTE?
The following table shows the amount of common stock of beneficially owned
(unless otherwise indicated) by: (1) the directors and executive officers named
in the Summary Compensation Table below and (2) the directors and executive
officers as a group. The officers and directors have indicated that they intend
to vote FOR election of the nominated slate of directors and FOR each of the
proposals in this proxy statement. All information is as of April 24, 2001.
Shares Beneficially Owned (1)
-------------------------------
Name and Address of Beneficial Owner Number Percent
- -------------------------------------- -------------------------------
David Kronfeld (2).................................................................... 1,501,721 13.0%
George A. Heinrichs (3)............................................................... 529,025 4.5
Lawrence P. Jennings.................................................................. 44,000 *
Philip B. Livingston (5).............................................................. 23,041 *
Winston J. Wade (4)................................................................... 22,889 *
Stephen O. James (4).................................................................. 21,871 *
Mary Beth Vitale (4).................................................................. 12,739 *
Darrell A. Williams (6)............................................................... 12,467 *
Carol Nelson.......................................................................... 4,900 *
All directors and executive officers as a group (10 persons) (7)...................... 2,172,653 18.3
* Less than one percent.
- ----------------
(1) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934, a
person is deemed to be the beneficial owner, for purposes of this table, of
any shares of common stock if such person has or shares voting power or
investment power with respect to such security, or has the right to acquire
beneficial ownership at any time within 60 days from April 24, 2001. For
purposes of this table, "voting power" is the power to vote or direct the
voting of shares and "investment power" is the power to dispose or direct
the disposition of shares.
(2) Includes 1,219,626 shares held by Boston Capital Ventures III Limited
Partnership, 171,223 shares held by JK&B Capital Limited Partnership,
85,611 shares held by JK&B Capital II Limited Partnership and 25,261 shares
held by Mr. Kronfeld. The shares held by Mr. Kronfeld include 10,800 shares
of common stock exercisable within 60 days of April 24, 2001. The general
partner of Boston Capital Ventures III Limited Partnership is BD Partners
Limited Partnership. David Kronfeld, a director of SCC, is a general
partner of certain of the entities associated with the Boston Capital
Ventures entities. The general partner of JK&B Capital Limited Partnership
and of JK&B Capital II Limited Partnership is JK&B Management LLC and Mr.
Kronfeld is the manager of JK&B Management LLC. Mr. Kronfeld disclaims
beneficial ownership of any of the shares owned by Boston Capital Ventures
III Limited Partnership, JK&B Capital Limited Partnership and JK&B Capital
II Limited Partnership, except to the extent of his pecuniary interest in
certain of such entities.
(3) Includes options to purchase 231,991 shares of common stock exercisable
within 60 days of April 24, 2001. Includes 1,539 shares held by Mr.
Heinrichs' minor daughter and 1,539 shares held by Mr. Heinrichs' minor
son.
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(4) Includes options to purchase 10,800 shares of common stock exercisable
within 60 days of April 24, 2001.
(5) Includes options to purchase 8,400 shares of common stock exercisable
within 60 days of April 24, 2001.
(6) Includes options to purchase 10,200 shares of common stock exercisable
within 60 days of April 24, 2001.
(7) Includes options to purchase 337,791 shares of common stock which are
exercisable within 60 days of April 24, 2001. See Notes (2), (3), (4), (5),
and (6).
WHO ARE THE LARGEST OWNERS OF OUR STOCK?
As of April 24, 2001, we are not aware of any persons or entities that
beneficially own more than five percent of our common stock other than David
Kronfeld and his affiliates, as disclosed in the stockholder table on page 3.
PROPOSAL 1
ELECTION OF DIRECTORS
The board of directors is divided into three classes, as nearly equal in number
as possible. Each class serves three years, with the terms of office of the
respective classes expiring in successive years. The term of office of directors
in Class A expires at the 2001 annual meeting. The board of directors proposes
that Stephen James and Mary Beth Vitale, both of whom are currently serving as
Class A directors, be re-elected as Class A directors for a new term of three
years and until their successors are duly elected and qualified. Information
about the nominees, including their biographies, meeting attendance, committee
participation and compensation, is available under the caption "Information
About Directors," which begins on page 5. Information about the nominees' stock
ownership is available on page 3.
The board of directors has no reason to believe that any of the nominees will
not serve if elected, but if any of them should become unavailable to serve as a
director, and if the board designates a substitute nominee, the persons named as
proxies will vote for the substitute nominee designated by the board.
Directors will be elected by a plurality of the votes cast at the annual
meeting. If elected, all nominees are expected to serve until the annual meeting
in the year 2004 and until their successors are duly elected and qualified.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF EACH OF THE
NOMINEES NAMED ABOVE.
PROPOSAL 2
RATIFICATION OF INDEPENDENT AUDITORS
The board of directors has appointed the firm of Arthur Andersen LLP, our
current independent auditors, to serve in the same capacity for the year ending
December 31, 2001, and is asking the stockholders to ratify this appointment.
The affirmative vote of a majority of the shares represented and voting at the
Annual Meeting is required to ratify the selection of Arthur Andersen LLP.
In the event the stockholders fail to ratify the appointment, the board of
directors will reconsider its selection. Even if the selection is ratified, the
board in its discretion may direct the appointment of a different independent
auditing firm at any time during the year if the board of directors believes
that such a change would be in the best interests of SCC and our stockholders.
Fees for professional services provided by Arthur Andersen LLP during 2000 were
$72,000 for audit-related services and $101,000 for non-audit services. Audit
related services include services rendered for the audit of the financial
statements included in our Annual Report on Form 10-K and the reviews of our
financial statements included in our
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Quarterly Reports on Form 10-Q. Non-audit services include fees for due
diligence procedures associated with mergers and acquisitions and accounting
consultations.
A representative of Arthur Andersen LLP is expected to be present at the Annual
Meeting, will have the opportunity to make a statement if he or she desires to
do so, and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF THE
SELECTION OF ARTHUR ANDERSEN LLP TO SERVE AS OUR INDEPENDENT AUDITORS FOR THE
YEAR ENDING DECEMBER 31, 2001.
OTHER MATTERS
Neither we nor the board of directors intends to propose any matters at the
Annual Meeting other than the election of directors and the ratification of our
independent auditors. Neither we nor our board knows of any matters to be
proposed by others at the Annual Meeting.
INFORMATION ABOUT DIRECTORS
BACKGROUND INFORMATION ABOUT DIRECTORS
Our directors and their ages as of April 24, 2001 are as follows:
STEPHEN O. JAMES Mr. James has served as one of our directors since October 1999. His current term
as a director expires at the 2001 Annual Meeting of Stockholders, but he has been
nominated to serve a new three-year term. Mr. James has been an independent executive
business consultant since 1993. Mr. James is 56 years old.
DAVID KRONFELD Mr. Kronfeld has served as one of our directors since March 1998, and previously
served as one of our directors from February 1992 to June 1996. His current term as
a director expires at the 2002 Annual Meeting of Stockholders. Mr. Kronfeld is the
founder and Manager of JK&B Capital L.L.C. since its founding in October 1995.
Since 1989, Mr. Kronfeld has been a general partner of Boston Capital Ventures
Limited Partnership, Boston Capital Ventures II Limited Partnership, Boston Capital
Ventures III L.P. and Boston Capital Ventures, all of which are venture capital
funds. Mr. Kronfeld currently serves as a director of MPower Communications, Inc.
and MediaCom, Inc. Mr. Kronfeld is 53 years old.
PHILIP B. LIVINGSTON Mr. Livingston has served as one of our directors since April 2000. His current
term as a director expires at the 2002 Annual Meeting of Stockholders. Since
January 1999, Mr. Livingston has been the President and Chief Executive Officer of
Financial Executives International. From August 1995 to November 1998, Mr.
Livingston was the Senior Vice President and Chief Financial Officer for Catalina
Marketing Corporation. From March 1993 to July 1995, Mr. Livingston was the Vice
President and Chief Financial Officer for Celestial Seasonings, Inc. Mr. Livingston
is 44 years old.
MARY BETH VITALE Ms. Vitale has served as one of our directors since October 1999. Her current term
as a director expires at the 2001 Annual Meeting of Stockholders, but she has been
nominated to serve a new three-year term. From March 2000 through November 2000,
Ms. Vitale was the CEO and President of Westwind Media. Ms. Vitale was the
President and Chief Operating Officer of RMI.NET from December 1998 through
February 2000. Ms. Vitale was the President-Western States for AT&T in 1997 and
held several positions, including Vice President and Corporate Officer, Local
Service Organization, Western Region for AT&T from 1994 to 1996. Ms. Vitale is 47
years old.
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WINSTON J. WADE Mr. Wade has served as one of our directors since October 1999. His current term as
a director expires at the 2003 Annual Meeting of Stockholders. Mr. Wade was the
Chief Executive Officer of MediaOne Malaysia from 1997 to 1999 and the Managing
Director of MediaOne India, BPL/US West from 1996 to 1997. From 1981 through 1995,
Mr. Wade held several positions with US West, including Vice President-Network
Operations, Vice President-Network Infrastructure, Vice President-Technical
Services and President-Information Technologies Group. Mr. Wade currently serves as
a director of Transcrypt International, Inc. Mr. Wade is 62 years old.
DARRELL A. WILLIAMS Mr. Williams has served as one of our directors from February 1998 to December 2,
1999 and from January 18, 2000 to the present. His current term as a director
expires at the 2003 Annual Meeting of Stockholders. Since January 2000, Mr.
Williams has been Chief Investment Officer of the Telecommunications Development
Fund. From 1992 to December 1999, Mr. Williams was with Ameritech Development
Corporation, last serving as Vice President, Venture Capital. Mr. Williams is 41
years old.
For biographical information about George K. Heinrichs, our Chief Executive
Officer, President and Chairman of the Board of Directors, refer to "Information
about Executive Officers" on page 7.
MEETINGS OF THE BOARD OF DIRECTORS
The board of directors held four meetings during 2000. Each director attended
more than 75% of the total number of meetings of the board and committees on
which he or she served.
BOARD COMMITTEES
The board of directors has appointed an audit committee, a compensation
committee and an executive staffing committee. It has not appointed a standing
nominating committee.
The audit committee met five times during 2000. The audit committee:
o reviews the scope and results of the annual audit of our consolidated
financial statements conducted by our independent accountants;
o reviews the scope of other services provided by independent auditors;
o reviews proposed changes in our financial and accounting standards and
principles and in our policies and procedures for our internal
accounting, auditing and financial controls; and
o makes recommendations to the board of directors on the engagement of
the independent accountants.
The audit committee currently consists of Philip Livingston, Darrell Williams,
Winston Wade and Mary Beth Vitale. The audit committee's report can be found on
page 11.
The compensation committee met twice during 2000. The compensation committee:
o reviews and acts on matters relating to compensation levels and
benefits plans for our executive officers and key employees; and
o is responsible for granting stock options and other awards under our
existing incentive compensation plans.
The compensation committee currently consists of George Heinrichs, Darrell
Williams, Winston Wade and Mary Beth Vitale. The compensation committee's report
on executive compensation can be found on pages 9-10.
The executive staffing committee was created on December 2, 1999. The
executive staffing committee:
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o reviews and acts on matters relating to executive staffing issues.
o gives executive management guidance on executive management
requirements and qualifications.
o assists executive management in the recruitment and selection of
qualified individuals.
The executive staffing committee currently consists of Winston Wade, Mary Beth
Vitale and Stephen James. This committee did not meet in 2000.
DIRECTOR COMPENSATION
We reimburse our directors for all reasonable and necessary travel and other
incidental expenses incurred in connection with their attendance at meetings of
the board and committees of the board. In addition, all board members are
eligible for compensation equal to $1,000 for each board meeting attended in
person and $500 for each telephonic board meeting. Such compensation is payable
in cash or stock at the director's discretion. Board members may be paid
additional amounts for consulting services that extend beyond their normal board
duties, although no such payments were made to date.
Under the Discretionary Option Grant Program, each individual who first becomes
a non-employee Board member will automatically be granted an option to purchase
30,000 shares of Common Stock on the date such individual joins the Board,
provided such individual has not been in the prior employ of the Company. In
addition, each non-employee Board member will be granted an annual option to
purchase 30,000 shares of Common Stock at the beginning of each fiscal year.
INFORMATION ABOUT EXECUTIVE OFFICERS
BACKGROUND INFORMATION ABOUT EXECUTIVE OFFICERS
Our executive officers and their ages as of April 24, 2001 are as follows:
GEORGE K. HEINRICHS A co-founder of SCC, Mr. Heinrichs has served as our President and one of our
directors since 1979 and as our Chief Executive Officer since 1995. His current
term as a director expires at the 2003 Annual Meeting of Stockholders. Mr.
Heinrichs is 43 years old.
MICHAEL D. DINGMAN, JR. Mr. Dingman has served as our Chief Financial Officer since September 2000. From
March 1999 to August 2000, he was Chief Financial Officer/Treasurer for RMI.NET.
From January 1997 through February 1999, Mr. Dingman was the President of Qwon
Investment Consultants, Inc. From March 1994 through December 1996, Mr. Dingman
was President of Owen-Joseph Companies. Mr. Dingman is 47 years old.
LAWRENCE P. JENNINGS Mr. Jennings has served as our Vice President of Business Operations since
December 1999. Mr. Jennings joined SCC in June 1999 as our Vice President of
Sales. From 1995 through June 1999, Mr. Jennings served as Vice President of
Operations and Vice President of Sales for Teletrac, Inc. Mr. Jennings is 46
years old.
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned during the year ended
December 31, 2000 by our "Named Officers," who consist of our chief executive
officer and two other executive officers who earned more than $100,000 in
combined salary and bonus in 2000.
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SUMMARY COMPENSATION TABLE
Long-Term
Compensation
------------
Awards
------------
Annual Compensation Securities
----------------------------- Underlying
Name and Principal Position Year Salary ($) Bonus ($) Option (#)
- --------------------------------------------------------------------------------------------------------------------
George K. Heinrichs 2000 $245,000 $ 190,440 (3) --
PRESIDENT AND CHIEF EXECUTIVE OFFICER 1999 245,000 120,000 (2) 66,667
1998 233,333 84,812 (1) --
Lawrence P. Jennings 2000 185,000 143,815 (3) --
VICE PRESIDENT BUSINESS OPERATIONS 1999 107,323 49,940 100,000
1998 -- -- --
Carol Nelson 2000 130,000 84,161 (3) --
CHIEF FINANCIAL OFFICER 1999 106,750 1,052 (2) 61,766
1998 91,315 10,000 8,234
(1) Bonuses included in 1998 were earned in 1998 but paid in 1999.
(2) Bonuses included in 1999 were earned in 1999 but paid in 2000.
(3) A portion of the bonuses included in 2000 were earned in 2000 but
paid in 2001.
Options listed in the table were granted under the 1998 Stock Option Plan.
OPTION GRANTS DURING LAST FISCAL YEAR
We did not grant any options to the Named Officers during the year ended
December 31, 2000.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information regarding exercises of stock options
during the year ended December 31, 2000 and exercisable and unexercisable
options held as of December 31, 2000 by each of the named officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options
Acquired Options at Fiscal Year-End (#) at Fiscal Year-End ($)
on Value ------------------------------ -----------------------------
NAME Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ ------------ ----------- ------------- ----------- -------------
George K. Heinrichs 125,643 $ 558,169 296,567 106,399 $1,254,813 $84,696
The value realized by each option exercised equals the total market price of the
shares purchased, based on the last sale price of the common stock on the Nasdaq
National Market on the exercise date, minus the total exercise price paid for
those shares.
The value of each unexercised option is based on the excess, if any, of $4.5625
per share, the last sale price of the common stock on the Nasdaq National Market
on December 29, 2000 (the last trading day of the year), over the per share
exercise price of each outstanding option.
EMPLOYMENT AND SEVERANCE ARRANGEMENTS
Until her resignation in September 2000, Carol Nelson was employed as our Chief
Financial Officer. Pursuant to an employment agreement dated August 11, 2000,
Ms. Nelson is working as a part-time employee of SCC until April 2001, in
exchange for the continuation of her base salary and benefits.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee currently consists of Darrell Williams, Winston Wade
and Mary Beth Vitale. Mr. Williams, Mr. Wade and Ms. Vitale have never been
officers or employees of SCC.
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None of the named officers have ever served as a member of the board of
directors or compensation committee of any other entity that has or has had one
or more executive officers serving as a member of our board or compensation
committee.
MANAGEMENT INCENTIVE COMPENSATION PLAN
During 2000, the executive officers bonuses were paid based on achieving certain
quarterly revenue and operating income targets.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation committee reviews and acts on matters relating to compensation
levels and benefits plans for our executive officers and key employees. The
compensation committee also provides for grants of stock awards, stock options,
stock appreciation rights and other awards to be made under our existing
incentive compensation plans.
GENERAL COMPENSATION POLICY. The fundamental policy of the compensation
committee is to provide our executive officers with competitive compensation
opportunities based upon their contribution to our development and financial
success and their personal performance. The compensation committee's objective
is to have a portion of each executive officer's compensation contingent on our
performance as well as on the executive officer's own level of performance.
Accordingly, the compensation package for each executive officer is comprised of
three elements: (1) base salary, which principally reflects an executive
officer's performance and is designed primarily to be competitive with salary
levels in the industry; (2) bonus, which principally reflects our performance;
and (3) long-term incentive compensation, which strengthens the mutuality of
interests between our executive officers and stockholders.
FACTORS. The principal factors that the compensation committee considered in
ratifying the components of each executive officer's compensation package for
2000 are summarized below. The compensation committee may apply entirely
different factors in advising the chief executive officer and the board of
directors with respect to executive compensation for future years.
O BASE SALARY. The suggested base salary for each executive officer is
determined on the basis of experience, personal performance, the salary
levels in effect for comparable positions within and without the
industry, and internal base salary comparability considerations. The
weight given to each of these factors differs from individual to
individual, as the compensation committee deems appropriate.
O BONUS. The compensation committee may suggest a bonus for each
executive officer determined on the basis of our performance, personal
performance, and the bonus levels in effect for comparable positions
within and without the industry. The compensation committee
establishes annual bonus amounts for each executive officer based on
the bonus levels for comparable positions, and earned bonus amounts
are based on performance results. The weight given to each of these
factors differs from individual to individual, as the compensation
committee deems appropriate. In addition, the compensation committee
may from time to time award additional cash bonuses when it determines
those bonuses to be in our best interest.
O LONG-TERM INCENTIVE COMPENSATION. Long-term incentives are provided
primarily through grants of stock options under our 1998 Incentive
Stock Plan. The grants are designed to align the interests of each
executive officer with those of the stockholders and to provide each
individual with a significant incentive to manage SCC from the
perspective of an owner with an equity stake. Each option grant allows
the executive officer to acquire shares of the common stock at a fixed
price per share, typically equal to the market price on the grant
date, over a specified period of time of up to ten years. Options
generally become exercisable in installments over a 50-month period,
contingent upon an executive officer's continued employment with SCC.
Accordingly, an option grant generally provides a return to the
executive officer only if the executive officer remains employed by us
during the vesting period, and then only if the market price of the
underlying shares appreciates. The number of shares subject to each
option grant is set at a level intended to create a meaningful
opportunity for stock ownership based on the executive officer's
current position, the base salary associated with that position,
the size of comparable awards made to individuals in similar positions
within the industry, the executive officer's potential for increased
responsibility and promotion over the option term, and the executive
officer's personal performance in recent
9
periods. The compensation committee also considers the number of
unvested options held by the executive officer in order to maintain an
appropriate level of equity incentive for that executive officer. The
compensation committee does not adhere to any specific guidelines as
to the relative option holdings of our executive officers.
CEO COMPENSATION. SEC regulations require the board of directors to disclose
the basis for compensation paid to George Heinrichs, our President and Chief
Executive Officer, in 2000 and to discuss the relationship between our
performance factors and Mr. Heinrichs' performance in 2000. In advising the
board with respect to Mr. Heinrichs' compensation, the compensation committee
seeks to establish a level of base salary competitive with that paid by
companies of comparable size within the industry and by companies outside of the
industry with which we compete for executive talent. The base salary established
for Mr. Heinrichs for 2000 on the basis of the foregoing criteria was intended
to provide a level of stability and certainty each year. Accordingly, this
element of compensation was not affected to any significant degree by our
performance factors.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m). As a result of Section
162(m) of the Internal Revenue Code, we are not allowed a federal income tax
deduction for compensation paid to certain executive officers to the extent that
compensation exceeds $1,000,000 per officer in any year. This limitation applies
to all compensation paid to the covered executive officers that is not
considered to have been performance based. The management incentive compensation
plan contains provisions intended to ensure that any compensation deemed paid in
connection with the exercise of stock options granted under the plan with an
exercise price equal to the market price of the common stock on the grant date
will qualify as performance-based compensation. The compensation committee does
not expect that the compensation that will be paid to any of our executive
officers during 2001 will exceed $1,000,000.
COMPENSATION COMMITTEE
Mary Beth Vitale
Winston J. Wade
Darrell A. Williams
10
AUDIT COMMITTEE REPORT
During fiscal 2000, the Audit Committee of the Board of Directors developed an
updated charter for the Committee. The complete text of the new charter, which
reflects standards set forth in new SEC regulations and Nasdaq Stock Market
rules, is reproduced in the appendix to this proxy statement.
As set forth in more detail in the charter, the Audit Committee's primary
responsibilities fall into the following three broad categories:
o monitoring the preparation of quarterly and annual financial
reports by management, including discussions with management and
outside auditors about draft annual financial statements and key
accounting and reporting matters;
o the relationship between management and outside auditors,
including: recommending their appointment or removal; reviewing
the scope of their audit services and related fees, as well as
any other services being provided; and determining whether the
outside auditors are independent (based in part on the annual
letter provided to management pursuant to Independence Standards
Board Standard No. 1); and
o overseeing management's implementation of effective systems of
internal controls, including review of policies relating to legal
and regulatory compliance, ethics and conflicts of interests.
The Committee has implemented procedures to ensure that during the course of
each fiscal year it devotes the attention that it deems necessary or appropriate
to each of the matters assigned to it under the Committee's charter. To carry
out its responsibilities, the Committee met five times during fiscal 2000.
In overseeing the preparation of the financial statements, the Committee met
with both management and outside auditors to review and discuss all financial
statements prior to their issuance and to discuss significant accounting issues.
Management advised the Committee that all financial statements were prepared in
accordance with generally accepted accounting principles, and the Committee
discussed the statements with both management and the outside auditors. The
Committee's review included discussion with the outside auditors of matters
required to be discussed pursuant to Statement on Auditing Standards No. 61
(Communication With Audit Committees).
With respect to the outside auditors, the Committee, among other things,
discussed with Arthur Andersen LLP matters relating to its independence,
including the disclosures made to the Committee as required by the Independence
Standards Board Standard No. 1 (Independence Discussions with Audit Committees).
On the basis of these reviews and discussions, the Committee recommended to the
Board of Directors that the Board approve the inclusion of the audited financial
statements in the Annual Report on Form 10-K for the fiscal year ended December
31, 2000, for filing with the Securities and Exchange Commission.
Respectfully submitted,
Members of the Audit Committee
Philip B. Livingston
Mary Beth Vitale
Winston J. Wade
Darrell A. Williams
11
INFORMATION ABOUT RELATED-PARTY TRANSACTIONS
We provide data management and consulting services to and lease equipment from
entities in which one of our stockholders had an ownership interest until June
2000. A member of our board of directors was a representative of the former
stockholder at the time the consulting agreement and equipment leases were
executed. We received net proceeds of approximately $7,797,000 in 2000,
$6,979,000 in 1999, and $6,735,000 in 1998, pursuant to these agreements.
Amounts due to the stockholder under the capital lease agreements net of amounts
due to us for services rendered were ($66,000), $3,262,000, and $3,962,000, as
of year-end in 2000, 1999, and 1998, respectively. The leases have interest
rates ranging from 7.75% to 9.50%, require monthly payments and have expiration
dates varying through October 2002.
We believe that the terms of the transactions described above were no less
favorable to us than would have been obtained from an unaffiliated third party.
Any further transactions between us and any of our officers, directors or
principal stockholders will be on terms no less favorable to us than could be
obtained from unaffiliated third parties and will be approved by a majority of
the independent and disinterested members of the board of directors.
COMPLIANCE WITH SECTION 16 REPORTING REQUIREMENTS
Section 16(a) of the Securities Exchange Act requires our executive officers,
our directors and persons who own more than ten percent of a registered class of
our equity securities, to file changes in ownership on Form 4 or 5 with the SEC.
These executive officers, directors and ten-percent stockholders are also
required by SEC rules to furnish us with copies of all Section 16(a) reports
they file. Based solely on our review of the copies of these forms, we believe
that all Section 16(a) reports applicable to our executive officers, directors
and ten-percent stockholders with respect to reportable transactions during the
fiscal year ended December 31, 2000 were filed on a timely basis.
12
STOCK PERFORMANCE GRAPH
The graph depicted below shows a comparison of cumulative total stockholder
returns for us, the Nasdaq Stock Market-US Index and a stock index comprised of
companies in a line of business similar to ours during the same period.
[GRAPH]
06/24/98 06/30/98 09/30/98 12/31/98 03/31/99 06/30/99 09/30/99 12/31/99 03/31/00 06/30/00 09/29/00 12/29/00
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Nasdaq
US 100.000 109.992 91.440 118.316 132.494 144.964 148.270 213.986 247.099 214.833 197.675 132.473
Nasdaq
Computer
and Data
Processing
Services
Stocks 100.000 101.615 95.820 124.219 148.859 154.894 159.998 261.564 268.760 219.611 203.230 125.745
SCCX 100.000 89.908 22.018 34.407 22.481 32.110 40.367 43.119 73.394 49.541 55.046 31.193
The graph covers the period from June 24, 1998, the initial date of the
registration of our common stock under the Securities Exchange Act, to December
31, 2000. The graph assumes that $100 was invested on June 24, 1998 in our
common stock and in each index, and that any dividends were reinvested. No cash
dividends have been declared on our common stock.
STOCKHOLDER PROPOSALS FOR 2002 ANNUAL MEETING
A stockholder who intends to present a proposal at the 2002 Annual Meeting of
Stockholders for inclusion in our 2002 proxy statement must submit the proposal
by December 1, 2001. In order for the proposal to be included in the proxy
statement, the stockholder submitting the proposal must meet certain eligibility
standards and must comply with certain procedures established by the SEC, and
the proposal must comply with the requirements as to form and substance
established by applicable laws and regulations. The proposal must be mailed to
our Secretary at our address set forth on the Notice appearing before this proxy
statement.
In addition, in accordance with our by-laws, a stockholder wishing to bring an
item of business before the 2002 Annual Meeting must deliver notice of the item
of business to us at our principal offices by no later than December 1, 2001,
even if the item is not to be included in our proxy statement.
THE BOARD OF DIRECTORS
SCC COMMUNICATIONS CORP.
Dated: May 15, 2001
13
APPENDIX A
SCC COMMUNICATIONS CORP.
AUDIT COMMITTEE CHARTER
I. Membership
A. NUMBER. The Audit Committee shall consist of at least three
independent, financially literate members of the board of directors
meeting the requirements set forth in Sections I.B and I.C. below.
B. INDEPENDENCE. A director is independent if he or she is not an officer
or employee of SCC Communications Corp. (the "Company") or its
subsidiaries, if he or she has no relationship which, in the opinion
of the Company's board of directors, would interfere with his or her
exercise of independent judgment in carrying out the responsibilities
of a director, and if he or she:
1. has not been an employee of the Company or any affiliate of the
Company in the current year or in any of the past three years;
2. has no immediate family member who has been employed by the
Company or an affiliate of the Company in any of the past three
years (an immediate family member includes a person's spouse,
parents, children, siblings, mother-in-law, father-in-law,
brother-in-law, sister-in-law, son-in-law, daughter-in-law, and
anyone who resides in a person's home);
3. is not employed as an executive of an entity other than the
Company having a compensation committee which includes any of the
Company's executives;
4. did not within the last fiscal year receive from the Company or
any affiliate of the Company compensation -- other than benefits
under tax qualified retirement plan, compensation for director
service or nondiscretionary compensation -- greater than $60,000;
and
5. has not in any of the past three years been a partner in, or
controlling shareholder or executive of, a for profit business
organization to which the Company made or from which the Company
received payment (other than payment arising solely from
investments in the Company's securities) that exceeds the greater
of: (i) $200,000; or (ii) more than 5% of the Company's or
business organization's consolidated gross revenues.
Under exceptional and limited circumstances, one director who has
a relationship making him or her not independent, and who is not
a Company employee or an immediate family member of a Company
employee, may serve on the Audit Committee if the board of
directors determines that the director's membership on the Audit
Committee is required by the best interests of the Company and
its shareholders, and discloses in the next annual proxy
statement after such determination the nature of the relationship
and the reasons for the determination.
C. FINANCIAL LITERACY. Each member of the Audit Committee must be able to
read and understand fundamental financial statements, including the
Company's balance sheet, income statement, and cash flow statement, or
must become able to do so within a reasonable time after his or her
appointment to the Audit Committee. At least one member of the Audit
Committee must have past employment experience in finance or
accounting, professional certification in accounting, or other
comparable experience or background which result in the member having
financial sophistication
A-1
(such as being or having been a chief executive officer, chief
financial officer or other senior officer with financial oversight
responsibilities).
D. CHAIRMAN. Unless a Chairman is elected by the board of directors, the
Audit Committee shall elect a Chairman by majority vote.
II. Responsibilities of the Audit Committee
The Audit Committee shall assist the board of directors in fulfilling
their responsibilities to shareholders concerning the Company's accounting and
reporting practices, and shall facilitate open communication between the Audit
Committee, board of directors, outside auditors, and management. The Audit
Committee shall discharge its responsibilities, and shall assess the information
provided by the Company's management and the outside auditor, in accordance with
its business judgment. The responsibilities set forth herein do not reflect or
create any duty or obligation of the Audit Committee to plan, conduct, oversee
or determine the appropriate scope of any audit, or to determine that the
Company's financial statements are complete, accurate, fairly presented, or in
accordance with Generally Accepted Accounting Principles or applicable law. In
exercising its business judgment, the Audit Committee shall rely on the
information and advice provided by the Company's management and/or its outside
auditor.
A. The Audit Committee shall review and reassess the adequacy of this
charter at least annually.
B. The outside auditor shall be accountable to the Audit Committee and
the board of directors, which together shall have the ultimate
authority and responsibility to nominate the outside auditor to be
proposed for shareholder approval in any proxy statement, and to
select, evaluate, and (where appropriate) replace the outside
auditor.
C. The Audit Committee shall ensure that they receive from the outside
auditor the written disclosures and letter from the outside auditor
required by Independence Standards Board Standard No. 1.
D. The Audit Committee shall discuss with the outside auditor its
independence, and shall actively engage in a dialogue with the
outside auditor regarding any disclosed relationships or services
that might impact the objectivity and independence of the
auditor. The Audit Committee shall take, or recommend that the
full board of directors take, appropriate action to oversee the
independence of the outside auditor.
E. The Audit Committee shall review and discuss with the Company's
management the Company's audited financial statements.
F. The Audit Committee shall discuss with the outside auditor the
matters about which Statement on Auditing Standards No. 61 requires
discussion.
G. Based upon its discharge of its responsibilities pursuant to Sections
II.C through II.F and any other information, discussion or
communication that the Audit Committee in its business judgment deems
relevant, the Audit Committee shall consider whether they will
recommend to the board of directors that the Company's audited
financial statements be included in the Company's annual reports on
Forms 10-K.
H. The Audit Committee shall prepare for inclusion where necessary in a
proxy or information statement of the Company relating to an annual
meeting of security holders at which directors are to be elected (or
special meeting or written consents in lieu of such meeting), the
report described in Item 306 of Regulation S-K.
A-2
I. The Audit Committee shall annually inform the outside auditor, the
Chief Financial Officer, the Controller, and the most senior other
person, if any, responsible for the internal audit activities, that
they should promptly contact the Audit Committee or its Chairman
about any significant issue or disagreement concerning the Company's
accounting practices or financial statements that is not resolved to
their satisfaction. Where such communications are made to the
Chairman, he or she shall confer with the outside auditor concerning
any such communications, and shall notify the other members of the
Audit Committee of any communications which the outside auditor or
the Chairman in the exercise of his or her business judgment believes
should be considered by the Audit Committee prior to its next
scheduled meeting.
J. The Audit Committee shall direct the outside auditor to use its best
efforts to perform all reviews of interim financial information prior
to disclosure by the Company of such information, and to discuss
promptly with the Chairman of the Audit Committee and the Chief
Financial Officer any matters identified in connection with the
auditor's review of interim financial information which are required
to be discussed by Statement on Auditing Standards No. 61. The
Chairman of the Audit Committee shall discuss any such matters with
the outside auditor, and shall notify the other members of the Audit
Committee of any discussions which the outside auditor or the
Chairman in the exercise of his or her business judgment believes
should be considered by the Audit Committee prior to disclosure or
filing of the interim financial information, or the Audit Committee's
next scheduled meeting.
K. The Audit Committee shall direct management to advise the Audit
Committee in the event that the Company proposes to disclose or file
interim financial information prior to completion of review by the
outside auditor.
L. The Audit Committee shall meet privately at least once per year with:
(i) the outside auditor; (ii) the chief financial officer; (iii) the
controller; and (iv) the most senior person (if any) responsible for
the internal audit activities of the Company.
A-3
Company # __________
Control # __________
SCC COMMUNICATIONS CORP.
PROXY
Annual Meeting of Stockholders, June 26, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned revokes all previous proxies, acknowledges receipt of the Notice
of the 2001 Annual Meeting of Stockholders of SCC Communications Corp. ("SCC")
to be held on June 26, 2001 and the related proxy statement, and appoints George
K. Heinrichs and Michael D. Dingman, Jr., and each of them, the proxy of the
undersigned, with full power of substitution, to vote all shares of common stock
of SCC that the undersigned is entitled to vote, either on his or her own behalf
or on behalf of any entity or entities, at the 2001 Annual Meeting of
Stockholders of SCC to be held at the Ritz-Carlton Atlanta on Tuesday, June 26,
2001 at 8:30 a.m. Eastern Time and at any adjournment or postponement thereof,
with the same force and effect as the undersigned might or could do if
personally present thereat.
The shares represented by this Proxy, when properly executed, shall be voted as
specified by the undersigned. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE
VOTED, IN FAVOR OF THE ELECTION OF THE DIRECTORS LISTED ABOVE, AND IN FAVOR OF
THE RATIFICATION OF THE INDEPENDENT AUDITORS AND ACCORDING TO THE DISCRETION OF
THE PROXY HOLDERS ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING
OR ANY POSTPONEMENT OR ADJOURNMENT THEREOF.
Please date, sign exactly as your name appears on the form and mail the proxy
promptly. When signing as an attorney, executor, administrator, trustee, or
guardian, please give your full title as such. If shares are held jointly, both
owners must sign.
===========================================================================
THERE ARE THREE WAYS TO VOTE YOUR PROXY. IF YOU WISH TO VOTE BY TELEPHONE,
INTERNET OR MAIL, PLEASE READ THE INSTRUCTIONS BELOW
===========================================================================
SCC Communications Corp. encourages you to take advantage of new and
convenient ways to vote your shares for matters to be covered at the 2001
Annual Meeting of Stockholders. Please take the opportunity to use one of
the three voting methods outlined below to cast your ballot.
VOTING BY TELEPHONE: 1-800-240-6326 *** QUICK *** EASY *** IMMEDIATE
Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a
week. Have your proxy card in hand when you call. You will be prompted to
enter your 3-digit Company Number and your 7-digit Control Number, which is
located above, and then follow the simple instructions the Voice provides
you.
VOTING BY INTERNET: WWW.EPROXY.COM/SCCX/ *** QUICK *** EASY *** IMMEDIATE
Use the Internet to vote your proxy 24 hours a day, 7 days a week. Have
your proxy card in hand when you access the web site. You will be prompted
to enter your 3-digit Company Number and your 7-digit Control Number, which
is located above, to obtain your records and create an electronic ballot.
VOTING BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid
envelope we've provided or return it to SCC Communications Corp.,
c/o Shareowner Services(SM), P.O. Box 64873, St. Paul, Minnesota
55164-9397.
If you vote by telephone or vote using the Internet, please do not mail
your proxy.
THANK YOU FOR VOTING
SCC COMMUNICATIONS CORP.
The Board of Directors recommends a vote IN FAVOR OF items 1, 2 and 3.
1. To elect the following Stephen O. James and Mary Beth Vitale as directors to serve for three-year terms
ending in the year 2004 or until successors are duly elected and qualified;
/ / FOR all nominees listed above (except as marked to the contrary below).
/ / WITHHOLD AUTHORITY to vote for all nominees listed above.
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "FOR" above and
write the name of the nominee as to which you wish to withhold authority in the space below:
---------------------------------------------------------------------------------------------------------
2. To ratify the appointment of Arthur Andersen LLP as independent auditors of the Company for the fiscal year
ending December 31, 2001.
/ / FOR / / AGAINST / / ABSTAIN
3. In accordance with the discretion of the proxy holders, to act upon all matters incident to the conduct of the
meeting and upon other matters as may properly come before the meeting, or any adjournments or postponements
thereof.
/ / FOR / / AGAINST / / ABSTAIN
If you plan on attending the meeting, please check the box to the right. / /
Please print the name(s) appearing on each share
certificate(s) over which you have voting authority:
-------------------------------------------------------------------------
(Print name(s) on certificate)
Please sign your name: Date:
--------------------------------------------------------- -------------
Authorized Signature(s)
Date:
--------------------------------------------------------- -------------
Authorized Signature(s) of Joint Owners, if any
Please date, sign exactly as your name appears on the form and mail the proxy promptly. When signing as an attorney,
executor, administrator, trustee, or guardian, please give your full title as such. If shares are held jointly, both
owners must sign.