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
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Filed by a Party other than the Registrant / /
Check the appropriate box:
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BY RULE 14a-6(e)(2))
/X/ Definitive Proxy Statement
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/ / Soliciting Material Pursuant to Rule 14a-11(c) or rule
14a-12
SCC COMMUNICATIONS CORP.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
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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:
- elect two directors, each for a term of three years;
- ratify the appointment of Arthur Andersen LLP as our independent auditors;
and
- 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,
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.
1
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:
- "WITHHOLD AUTHORITY" with respect to the election of one or more
directors; or
- "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:
- your broker or nominee may not be permitted to exercise voting discretion
with respect to some of the matters to be acted upon; and
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- your shares may not be voted on those matters and will not be counted in
determining the number of shares necessary for approval.
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 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)........................................... 1,506,712 13.0%
George A. Heinrichs(3)...................................... 529,025 4.5
Lawrence P. Jennings(4)..................................... 44,000 *
Philip B. Livingston(5)..................................... 28,032 *
Winston J. Wade(6).......................................... 27,880 *
Stephen O. James(6)......................................... 26,862 *
Mary Beth Vitale(6)......................................... 17,730 *
Darrell A. Williams(7)...................................... 17,458 *
Carol Nelson................................................ 4,900 *
All directors and executive officers as a group (10
persons)(8)............................................... 2,202,599 18.5
- ------------------------
* 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 30,252 shares held by
Mr. Kronfeld. The shares held by Mr. Kronfeld include 15,791 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
3
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.
(4) Includes options to purchase 44,000 shares of common stock exercisable
within 60 days of April 24, 2001.
(5) Includes options to purchase 13,391 shares of common stock exercisable
within 60 days of April 24, 2001.
(6) Includes options to purchase 15,791 shares of common stock exercisable
within 60 days of April 24, 2001.
(7) Includes options to purchase 15,191 shares of common stock exercisable
within 60 days of April 24, 2001.
(8) Includes options to purchase 367,737 shares of common stock which are
exercisable within 60 days of April 24, 2001. See Notes (2), (3), (4), (5),
(6), and (7).
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 6. 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.
4
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 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.
5
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.
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.
6
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 8.
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:
- reviews the scope and results of the annual audit of our consolidated
financial statements conducted by our independent accountants;
- reviews the scope of other services provided by independent auditors;
- 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
- 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 12.
The compensation committee met twice during 2000. The compensation
committee:
- reviews and acts on matters relating to compensation levels and benefits
plans for our executive officers and key employees; and
- 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 10-11.
The executive staffing committee was created on December 2, 1999. The
executive staffing committee:
- reviews and acts on matters relating to executive staffing issues.
- gives executive management guidance on executive management requirements
and qualifications.
- assists executive management in the recruitment and selection of qualified
individuals.
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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
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT FISCAL YEAR- IN-THE-MONEY OPTIONS
ACQUIRED 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.
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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.
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.
- 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.
- 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
10
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.
- 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 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
11
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:
- 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;
- 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
- 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
12
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.
13
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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
NASDAQ COMPUTER
AND DATA PROCESSING
NASDAQ US SERVICES STOCKS SCCX
6/24/98 100.000 100.000 100.000
6/30/98 100.992 101.615 89.908
9/30/98 91.440 95.820 22.018
12/31/98 118.316 124.219 34.407
3/31/99 132.494 148.859 22.481
6/30/99 144.964 154.894 32.110
9/30/99 148.270 159.998 40.367
12/31/99 213.986 261.564 43.119
3/31/00 247.099 268.760 73.394
6/30/00 214.833 219.611 49.541
9/29/00 197.675 203.230 55.046
12/29/00 132.473 125.745 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.
14
Dated: May 15, 2001
15
SCC COMMUNICATIONS CORP.
ANNUAL MEETING OF STOCKHOLDERS
Tuesday, June 26, 2001
8:30 a.m. Eastern Time
Ritz-Carlton Atlanta
SCC COMMUNICATIONS CORP. PROXY
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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.
SEE REVERSE FOR VOTING INSTRUCTIONS.
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COMPANY #
CONTROL #
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THERE ARE THREE WAYS TO VOTE YOUR PROXY. IF YOU WISH TO VOTE BY TELEPHONE,
INTERNET OR MAIL, PLEASE READ THE INSTRUCTIONS BELOW
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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, MN 55164-9397.
If you vote by telephone or vote using the Internet, please do not mail your
proxy.
THANK YOU FOR VOTING
| |
V Please detach here V
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF ITEMS 1, 2 AND 3.
1. To elect the following as directors to serve for three-year
terms ending in the year 2004 or until successors are / / Vote FOR / / Vote WITHHELD
duly elected and qualified; all nominees from all nominees
01 Stephen O. James 02 Mary Beth Vitale (except as marked)
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED -------------------------------------------------
NOMINEE, WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX
PROVIDED TO THE RIGHT.) -------------------------------------------------
2. To ratify the appointment of Arthur Andersen LLP as independent / / For / / Against / / Abstain
auditors of the Company for the fiscal year ending December 31,
2001.
3. In accordance with the discretion of the proxy holders, to act / / For / / Against / / Abstain
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.
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: ______________________________ Date ____________________
(Print name(s) on certificate)
-------------------------------------------------
-------------------------------------------------
Signature(s) in Box
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.