Proxy Statement (definitive) (def 14a)

Date : 05/24/2019 @ 1:01PM
Source : Edgar (US Regulatory)
Stock : Seachange International, Inc. (SEAC)
Quote : 1.7  0.0 (0.00%) @ 1:58PM

Proxy Statement (definitive) (def 14a)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

 

SCHEDULE 14A

(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

 

Filed by the Registrant                               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))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material Pursuant to §240.14a-12

SEACHANGE INTERNATIONAL, INC.

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

No fee required.

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

1.

Title of each class of securities to which transaction applies:

 

 

2.

Aggregate number of securities to which transaction applies:

 

 

3.

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

4.

Proposed maximum aggregate value of transaction:

 

 

5.

Total fee paid:

 

Fee paid previously with preliminary materials:

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.

 

1.

Amount previously paid:

 

 

2.

Form, Schedule or Registration Statement No.:

 

 

3.

Filing Party:

 

 

4.

Date Filed:

 

 

 


SEACHANGE INTERNATIONAL, INC.

50 Nagog Park

Acton, Massachusetts 01720

NOTICE OF 2019 ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON JULY 11, 2019

The Annual Meeting of Stockholders of SeaChange International, Inc. (“SeaChange” or the “Company”) will be held at SeaChange’s offices, located at 50 Nagog Park, Acton, Massachusetts 01720, on Thursday, July 11, 2019 at 10:00 a.m., local time, to consider and act upon each of the following matters:

 

1.

To elect the nominees named in the proxy statement to the Board of Directors to serve for three-year terms as Class II Directors.

 

2.

To approve the Tax Benefits Preservation Plan, attached as Appendix A to the accompanying proxy statement.

 

3.

To conduct an advisory vote on the compensation of the Company’s named executive officers.

 

4 .

To ratify the appointment of the Company’s independent registered public accounting firm.

 

5.

To transact such other business as may properly come before the meeting and any adjournments thereof.

Stockholders entitled to notice of and to vote at the meeting shall be determined as of the close of business on May 21, 2019, the record date fixed by the Board of Directors for such purpose.

IF YOU PLAN TO ATTEND:

Please call David McEvoy at 978-889-3004 if you plan to attend. Please bring valid picture identification, such as a driver’s license or passport. Stockholders holding stock in brokerage accounts (“street name” holders) will also need to bring a copy of a brokerage statement reflecting stock ownership as of the record date. Cameras, cell phones, recording devices and other electronic devices will not be permitted at the meeting.

 

By Order of the Board of Directors,

 

 

David McEvoy

Senior Vice President, General Counsel and Secretary

Acton, Massachusetts

May 24, 2019

Whether or not you expect to attend the meeting, we encourage you to vote promptly, following the instructions in the materials you received, to ensure that your shares are represented at the meeting.

 

 

 


2019 ANNUAL MEETING OF STOCKHOLDERS

PROXY STATEMENT

TABLE OF CONTENTS

 

Information Regarding Voting and Proxies

1

OWNERSHIP OF SECURITIES

3

Securities Ownership Of Certain Beneficial Owners And Management

3

PROPOSAL NO. I — ELECTION OF DIRECTORS

6

Class II Directors (Terms Expire at 2019 Annual Meeting)

7

Class III Directors (Terms Expire at 2020 Annual Meeting)

8

Class I Directors (Terms Expire at 2021 Annual Meeting)

10

CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS

11

Determination of Director Independence

11

Stockholder Proposals

11

Availability of Corporate Governance Documents

11

Board Meetings

12

Board Leadership Structure

12

Board Nomination Rights

12

Board Oversight of Risk

12

Board Committees

12

Audit Committee

12

Compensation Committee

13

Corporate Governance and Nominating Committee

13

Qualifications of Director Candidates

13

Procedures for Stockholders to Recommend Director Candidates

14

Process for Stockholders to Communicate with Directors

14

Compensation of Directors

14

Report of the Audit Committee

15

INFORMATION CONCERNING EXECUTIVE OFFICERS

17

COMPENSATION DISCUSSION AND ANALYSIS

19

Executive Summary

19

Compensation Objectives

20

Setting Executive Compensation

20

Fiscal 2019 Executive Compensation Components

22

Fiscal 2020 Executive Compensation Components

27

Tax and Accounting Implications

29

Summary Compensation Table

30

Grants of Plan-Based Awards

31

Outstanding Equity Awards at Fiscal Year-End

32

Option Exercises and Stock Vested

33

Pension Benefits

33

Nonqualified Deferred Compensation

34

Potential Payments upon Termination or Change in Control

34

Compensation Committee Report

35

Compensation Committee Interlocks and Insider Participation

36

PROPOSAL NO. II – APPROVE THE TAX BENEFITS PRESERVATION PLAN

37

PROPOSAL NO. III — ADVISORY VOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS

42

PROPOSAL NO. IV — RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

44

Independent Registered Public Accounting Firm for Fisca l 2020

44

Principal Accountant Fees and Services

44

OTHER MATTERS

45

Expenses and Solicitation

45

Section 16(a) Beneficial Ownership Reporting Compliance

45

Certain Relationships and Related Transactions

45

A PPENDIX A

A-1

 

 

 


 

SEACHANGE INTERNATIONAL, INC.

50 Nagog Park

Acton, Massachusetts 01720

PROXY STATEMENT

FOR THE ANNUAL MEETING OF STOCKHOLDERS

July 11, 2019

May 24, 2019

This proxy statement is being furnished by the Board of Directors (the “Board”) of SeaChange International, Inc. (“SeaChange” or the “Company”) for use at the Annual Meeting of Stockholders (the “Annual Meeting”) to be held on Thursday, July 11, 2019, at 10:00 a.m., local time, at SeaChange’s offices, located at 50 Nagog Park, Acton, Massachusetts 01720.

Only stockholders of record as of the close of business on May 21, 2019 (the “Record Date”) will be entitled to vote at the Annual Meeting and any adjournments thereof.

SeaChange is pleased to take advantage of the U.S. Securities and Exchange Commission (the “SEC”) rules that allow companies to furnish their proxy materials over the Internet. We believe that this process allows SeaChange to provide its stockholders with the information they need in a timelier manner, while reducing the environmental impact and lowering the costs of printing and distributing its proxy materials.

As a result, SeaChange is mailing to most of its stockholders of record entitled to vote at the Annual Meeting on or about May 31, 2019, a Notice Regarding the Availability of Proxy Materials (sometimes referred to as the “Notice”) instead of a paper copy of this proxy statement and SeaChange’s 2019 Annual Report. The Notice contains instructions on how to access those documents over the Internet. The balance of SeaChange’s stockholders entitled to vote at the Annual Meeting will be mailed on or about May 31, 2019 a printed copy of the proxy materials.

Information Regarding Voting and Proxies

Stockholders may vote in one of the following two ways:

 

1.

if you receive a copy of the proxy materials by mail, by completing, signing and dating the enclosed proxy card and returning it in the enclosed postage paid envelope by return mail; or

 

2 .

by completing a proxy on the Internet at the address listed on the proxy card or Notice.

Any proxy may be revoked by a stockholder at any time before its exercise by either delivering written revocation or a later dated proxy to the Secretary of SeaChange, entering a new vote by Internet or telephone, or attending the Annual Meeting of Stockholders and voting in person. Only your latest dated proxy will count.

All properly completed proxy forms returned in time to be cast at the Annual Meeting will be voted. Stockholders are being asked to vote with respect to the election of Class II Directors, approval of the Company’s Tax Benefits Preservation Plan, an advisory vote on the compensation of the Company’s named executive officers and the ratification of the selection of SeaChange’s independent registered public accounting firm. Where a choice has been specified on the proxy card with respect to each proposal, the shares represented by the proxy will be voted in accordance with your specifications. If no specification is indicated on the proxy card, the shares represented by the proxy will be voted FOR the nominees named herein for election to the Board of Directors to serve as Class II Directors, FOR the approval of the Company’s Tax Benefits Preservation Plan, FOR approval of the compensation of the Company’s named executive officers, and FOR the ratification of the selection of SeaChange’s independent registered public accounting firm.

1

 


 

A majority-in-interest of the outstanding shares represented at the Annual M eeting in person or by proxy shall constitute a quorum for the transaction of business. Votes withheld from any nominee, abstentions and broker “non-votes” are counted as present or represented for purposes of determining the presence or absence of a quoru m for the meeting. A “non-vote” occurs when a nominee holding shares for a beneficial owner votes on one proposal, but does not vote on another proposal because the nominee does not have discretionary voting power and has not received instructions from the beneficial owner. On all matters being submitted to stockholders at this Annual Meeting, an affirmative vote of at least a majority of the shares present, in person or represented by proxy, and voting on that matter is required for approval or ratificatio n. An automated system administered by Broadridge Financial Solutions, Inc. tabulates the votes. The vote on each matter submitted to stockholders is tabulated separately. Abstentions, as well as broker “non-votes” are not considered to have been voted for such matters and have the practical effect of having no impact on the outcome of the vote .

The Board of Directors knows of no other matter to be presented at the Annual Meeting. If any other matter should be presented at the Annual Meeting upon which a vote properly may be taken, shares represented by all proxies received by the Board of Directors will be voted with respect thereto in accordance with the judgment of the persons named as proxies and in accordance with the SEC’s proxy rules. See “Stockholder Proposals” herein at page 11. The persons named as proxies, Peter Faubert and David McEvoy, were selected by the Board of Directors and are executive officers of SeaChange.

2

 


 

 

OWNERSHIP OF SECURITIES

Securi ties Ownership Of Certain Beneficial Owners And Management

The following table sets forth information regarding the beneficial ownership of SeaChange common stock as of May 21, 2019 by:

 

each person or entity who is known by SeaChange to beneficially own more than five percent (5%) of the common stock of SeaChange;

 

each of the directors of SeaChange and each of the executive officers of SeaChange named in the Summary Compensation Table on page 29; and

 

all of the directors and executive officers of SeaChange as a group.

Except for the named executive officers and directors, none of these persons or entities has a relationship with SeaChange, except as disclosed below under “Certain Relationships and Related Transactions.” Unless otherwise indicated, the address of each person or entity named in the table is c/o SeaChange International, Inc., 50 Nagog Park, Acton, Massachusetts 01720, and each person or entity has sole voting power and investment power (or shares such power with his or her spouse), with respect to all shares of capital stock listed as owned by such person or entity.

3

 


 

The number and percentage of shares beneficially owned is determined in accordance with the rules of the SEC and is not neces sarily indicative of beneficial ownership for any other purpose. Under these rules, beneficial ownership includes any shares as to which a person has sole or shared voting power or investment power and also any shares of common stock underlying restricted stock units (“RSUs”), performance stock units (“PSUs”), deferred stock units (“DSUs”), options or warrants that are exercisable by that person within sixty (60) days of May 2 1 , 2019 . However, these shares underlying RSUs, PSUs, DSUs, options or warrants are not treated as outstanding for the purpose of computing the percentage ownership of any other person or entity. Percentage of beneficial ownership is based on 36,607,461 shares of SeaChange’s common stock outstanding as of May 2 1 , 2 019 .

 

Name

 

Amount and

Nature of

Beneficial

Ownership (1)

(#)

 

 

Percent of

Common

Stock

Outstanding

 

Edward Terino (2)

 

 

278,959

 

 

*

 

Peter Faubert

 

 

150,235

 

 

*

 

Marek Kielczewski (3)

 

 

491,532

 

 

 

1.3

%

Mark Bonney (4)

 

 

81,947

 

 

*

 

William F. Markey, III

 

 

135,460

 

 

*

 

Robert Pons (5)

 

 

32,680

 

 

*

 

Andrew Sriubas

 

 

95,997

 

 

*

 

Jeffrey Tuder (6)

 

 

55,680

 

 

*

 

Royce E. Wilson

 

 

160,360

 

 

*

 

Karen Singer/TAR Holdings LLC (7)

212 Vaccaro Drive

Cresskill, NJ  07626

 

 

6,067,616

 

 

 

16.6

%

Footprints Asset Management & Research, Inc. (8)

11422 Miracle Hills Drive, Suite 208

Omaha, NE  68154

 

 

3,054,458

 

 

 

8.3

%

Dimensional Fund Advisors, LP (9)

Building One

6300 Bee Cave Road

Austin, TX 78746

 

 

2,196,463

 

 

 

6.0

%

Neuberger Berman Investment Advisors LLC (10)

1290 Avenue of the Americas

New York, NY 10104

 

 

1,993,259

 

 

 

5.4

%

The Vanguard Group (11)

100 Vanguard Blvd.

Malvern, PA  19355

 

 

1,798,652

 

 

 

4.9

%

All Executive Officers and Directors as a group (11 persons) (12)

 

 

1,630,860

 

 

 

4.5

%

 

*

Less than 1%

(1)

Includes shares of Common Stock which have not been issued but are subject to options which either are presently exercisable or will become exercisable within sixty (60) days of May 21, 2019, as follows: Mr. Faubert: 136,647 shares and Mr. Kielczewski: 137,075 shares. Includes RSUs and DSUs that will have vested within sixty (60) days of May 21, 2019, as follows: Mr. Bonney: 31,250 DSUs; Mr. Markey: 31,250 DSUs; Mr. Pons: 32,680 DSUs; Mr. Sriubas: 31,250 DSUs; Mr. Tuder: 32,680 DSUs and Mr. Wilson: 31,250 DSUs.

(2)

Mr. Terino resigned as the Chief Executive Officer and director of the Company on February 24, 2019 as previously reported on a Form 8-K filed with the SEC on February 26, 2019.

( 3 )

Mr. Kielczewski was appointed Chief Technology Officer on November 29, 2018.

( 4 )

Mr. Bonney was appointed Executive Chair on April 4, 2019 as previously reported on a Form 8-K filed with the SEC on April 5, 2019.

( 5 )

Mr. Pons was elected as a director to the Board of Directors on February 28, 2019 pursuant to the terms of the Cooperation Agreement, dated as of February 28, 2019 with TAR Holdings LLC and Karen Singer as previously reported on a Form 8-K filed with the SEC on March 1, 2019.

4

 


 

( 6 )

Mr. Tuder was elected as a director to the Board of Directors on February 28, 2019 pursuant to the terms of the Cooperation Agreement , dated as of February 28, 2019 with TAR Holdings LLC and Karen Singer as previously reported on a Form 8-K filed with the SEC on March 1, 2019 .

( 7 )

According to a Schedule 13D/A filed on March 1, 2019, Karen Singer, TAR Holdings LLC, CCUR Holdings, Inc. and Wayne Barr Jr., (i) Ms. Singer and TAR Holdings LLC may be deemed to have sole dispositive power and sole voting power over the above-mentioned 6,067,616 shares and (ii) CCUR Holdings, Inc. and Mr. Barr may be deemed to have sole dispositive power and sole voting power over an additional 1,284,910 shares. Ms. Singer and TAR Holdings LLC are parties to a Cooperation Agreement dated February 28, 2019, as previously reported on Form 8-K filed with the SEC on March 1, 2019.

( 8 )

According to a Schedule 13G filed on February 14, 2019, Footprints Asset Management and Research, Inc. may be deemed to have sole dispositive power and sole voting power over the above-mentioned 3,054,458 shares.

( 9 )

According to an amended Schedule 13G/A filed on February 8, 2019, Dimensional Fund Advisors LP may be deemed to have sole dispositive power with respect to all 2,196,463 of the above-mentioned shares and sole voting power over 2,042,705 of the above-mentioned shares. Dimensional Fund Advisors LP serves as investment advisor to four investment companies and serves as investment manager to certain other commingled group trusts and investment accounts, which own the above-mentioned shares. Dimensional Fund Advisors LP disclaims beneficial ownership of such shares.

( 1 0 )

According to a Schedule 13G filed on May 3, 2019, Neuberger Berman Group LLC and Neuberger Berman Investment Advisors LLC, (i) Neuberger Berman Group LLC may be deemed to have shared dispositive power with respect to all 1,993,259 the above-mentioned shares and shared voting power over 1,571,901 of the above-mentioned shares; and (ii) Neuberger Berman Investment Advisors LLC may be deemed to have shared dispositive power with respect to all 1,993,259 the above-mentioned shares and shared voting power over 1,571,901 of the above-mentioned shares.

(1 1 )

According to a Schedule 13G filed on February 12, 2019, The Vanguard Group, Inc. may be deemed to have sole dispositive power with respect to 1,790,189 of the above-mentioned shares, shared dispositive power with respect to 8,463 of the above-mentioned shares, and sole voting power over 8,463 of the above-mentioned shares. Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of the 8,463 shares as a result of its serving as investment manager of collective trust accounts.

( 1 2 )

This group is comprised of those individuals named in the Summary Compensation Table on page 29 and those persons who were directors of SeaChange as of May 21, 2019. Includes an aggregate of 464,082 shares of Common Stock which the directors and executive officers, as a group, have the right to acquire by exercise of stock options or will acquire upon vesting of RSUs or DSUs within sixty (60) days of May 21, 2019.

 

5

 


 

PROPOSAL NO. I

ELECTION OF DIRECTORS

SeaChange’s Board of Directors currently consists of six members, five of whom are independent, non-employee directors. The Board of Directors is divided into three classes. Each class is elected for a term of three years, with the terms of office of the directors in the respective classes expiring in successive years.

The present term of the current Class II Directors, Mr. Pons, Mr. Sriubas and Mr. Wilson, expires at the Annual Meeting. Mr. Wilson has decided not to stand for re-election due to other business that is requiring more of Mr. Wilson’s time.  The Board of Directors, based on the recommendation of the Corporate Governance and Nominating Committee, has nominated Mr. Pons and Mr. Sriubas for re-election as Class II Directors. The nomination of Mr. Pons is consistent with the obligations of the Company pursuant to the Cooperation Agreement entered into on February 28, 2019 with TAR Holdings LLC and Karen Singer, as described herein.  The Board of Directors knows of no reason why either of these nominees should be unable or unwilling to serve, but if that should be the case, proxies may be voted for the election of some other person selected by the Board.  Mr. Pons and Mr. Sriubas have each consented to being named in this proxy statement as a nominee to be a Class II Director and to serving in that capacity, if elected.

The Board of Directors unanimously recommends a vote “FOR” the Nominees listed below.

The following table sets forth, for the Class II nominees to be elected at the Annual Meeting and each of the other current directors, the year the nominee or director was first appointed or elected a director, the principal occupation of the nominee or director during at least the past five years, any other public company boards on which the nominee or director serves or has served in the past five years, the nominee’s or director’s qualifications to serve on the Board and the age of the nominee or director. In addition, included in the information presented below is a summary of each nominee’s or director’s specific experience, qualifications, attributes and skills that led the Board to the conclusion that he or she should serve as a director.

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Class II Directors (Terms Ex pire at 2019 Annual Meeting)

 

Nominee’s Name
and Year First
Became Director

  

Position and Principal Occupation and Business Experience During the Past Five Years

Robert M. Pons

(2019)

  

Director

 

Robert Pons, 63, has served as a Director of SeaChange since February 2019 and was appointed to the Board at that time pursuant to the terms of the Cooperation Agreement dated February 28, 2019 with TAR Holdings LLC and Karen Singer. Mr. Pons was also originally appointed to the board of directors of Novatel Wireless, Inc. in October 2014 pursuant to the terms of the Investors’ Rights Agreement and became a member of the board of Inseego Corporation (NASDAQ: INSG) in connection with the internal reorganization that was completed in November 2016. Mr. Pons also serves as a director of Alaska Communications (NASDAQ: ALSK) since May 2018.  Mr. Pons is the President and Chief Executive Officer of Spartan Advisors Inc., a management consulting firm specializing in telecom and technology companies, since 2011. From May 2014 until January 2017, he was Executive Vice President of Business Development and from September 2011 until June 2016 was on the board of directors, of HC2 Holdings, Inc. (f/k/a PTGi Holding Inc.) (NYSE MKT: HCHC), a publicly traded diversified holding company with a diverse array of operating subsidiaries, including telecom/infrastructure, construction, energy, technology, gaming and life sciences. From February 2011 to April 2014, Mr. Pons was Chairman of Live Micro Systems, Inc. (formerly Livewire Mobile) (OTCMKTS: LMSC), a comprehensive one-stop digital content solution for mobile carriers. From January 2008 until February 2011, Mr. Pons was Senior Vice President of TMNG Global (now Cartesian) (OTC: CRTN), a leading provider of professional services to the telecommunications industry and the capital formation firms that support it. From January 2003 until April 2007, Mr. Pons served as President and Chief Executive Officer of Uphonia, Inc. (previously SmartServ Online, Inc.), a wireless applications service provider. From March 1999 to August 2003, Mr. Pons was President of FreedomPay, Inc., a wireless device payment processing company. During the period January 1994 to March 1999, Mr. Pons was President of Lifesafety Solutions, Inc., a software company catering to 911 call centers. Mr. Pons previously served on the boards of directors of  MRV Communications, Inc. (formerly NASDAQ: MRVC) from 2012 until its acquisition by ADVA Optical Networking (FSE: ADV) in August 2017, DragonWave-X (formerly PINX: DRWIQ) from June 2014 until April 2015, CCUR Holdings, Inc. (OTCQB: CCUR) from 2012 until December 2017, Network-1 Technologies, Inc. (AMEX: NTIP) from 2003 until 2012, Arbinet Corporation (NASDAQ: ARBX) from 2009 until 2011, and Proxim Wireless Corporation (formerly PINX: PRXM) from 2011 to 2012. Mr. Pons holds a Bachelor of Arts degree from Rowan University with Honors. Mr. Pons has over 30 years of management experience with telecommunications companies including MCI, Inc., Sprint, Inc. and Geotek, Inc. Mr. Pons’s experience serving on public company boards of directors, his knowledge and expertise as a pioneer in the telecommunications industry and his experience as a senior level executive working in the telecommunications industry provide a relevant and informed background for him to serve as a member of our Board.

 

 

 

7

 


 

Andrew Sriubas (2017)

  

Director

 

Andrew Sriubas, 50, has served as a Director of SeaChange since August 2017. In addition, Mr. Sriubas serves as Chief Commercial Officer of Outfront Media since August 2017, and previously served as Executive Vice President of Strategic Planning & Development since July 2014. Mr. Sriubas began his career with Citibank in media and tech investment banking and held managing director roles at other firms including Donaldson Lufkin Jenrette, UBS, and JP Morgan, before joining Sonifi as Chief Strategist and Head of Corporate Development. Mr. Sriubas is a member of the Advisory Committee of Palisades Growth Capital, and also serves as an advisor to Secure Mobile Contact System Co. and Tout Inc. Mr. Sriubas is also a director of the Jack Kemp Foundation. Mr. Sriubas holds a BS in Finance from the Carroll School of Management at Boston College. Mr. Sriubas has been an advisor to the SeaChange board since May 2016 and has chaired the Company’s Advisory Board that had worked with the management team on strategic and technology matters.  Mr. Sriubas contributes his experience as a former telecom, media and technology banker; his experience developing new technologies to advance innovative business models as he has for the digital theatre industry, hospitality industry and now in his capacity redrawing the out of home/location media landscape.

 

Class III Directors (Terms Expire at 2020 Annual Meeting)

 

Director’s Name
and Year First
Became Director

  

Position and Principal Occupation and Business Experience During the Past Five Years

William Francis

Markey, III

(2016)

  

Director

 

William Francis Markey, III, 53, has served as a member of our Board of Directors since March 2016, and was Chairman of the Board from August 2017 through April 2019. Since October 2002, Mr. Markey has been the Founder and President of the Relevant C Business Group (RCBG), a private consulting firm that assists companies with strategy and execution, often around emerging technologies, in the areas of telecom, media and technology. Prior to that Mr. Markey was a co-founder of Ucentric Systems, a software company that provided connected home software solutions to television operators, that was acquired by Motorola, and also held various management positions at 3Com, Motorola, Pacific Telesis and Preview Media. Mr. Markey holds a BA from Georgetown University, an MS from Columbia University and an MA from Johns Hopkins University. Mr. Markey is a member of various advisory boards and is a trustee of Lake Forest Academy in Illinois. Mr. Markey has extensive experience in corporate development, business strategy, and mergers and acquisitions in technology and media.

 

 

 

8

 


 

Jeffrey Tuder

(2019)

 

Director

 

Jeffrey Tuder, 46, has served as a Director of SeaChange since February 2019 and was appointed to the Board at that time pursuant to the terms of the Cooperation Agreement dated February 28, 2019 with TAR Holdings LLC and Karen Singer.  Mr. Tuder was appointed as a Director to the Board of Inseego Corporation (NASDAQ: INSG) in June 2017. Mr. Tuder is a Partner of Ambina Partners, a private investment firm that makes private equity and credit investments and is the Founder and Managing Member of Tremson Capital Management, LLC (“Tremson”), a private investment firm focused on identifying and investing in securities of undervalued publicly-traded companies. Prior to founding Tremson, he held positions at SEC-registered investment advisors that primarily invest in undervalued securities of publicly traded companies, including serving as the Director of Research for KSA Capital Management, LLC from 2012 until 2015 and as a Senior Analyst at JHL Capital Group, LLC during 2011. From 2007 until 2010, Mr. Tuder was a Managing Director of CapitalSource Finance, LLC, a publicly-traded commercial finance company, where he analyzed and underwrote special situation credit investments in the leveraged loan and securitized bond markets. From 2005 until 2007, Mr. Tuder was a member of the investment team at Fortress Investment Group, LLC (“Fortress”), where he analyzed, underwrote and managed private equity investments for several of Fortress’s private equity investment vehicles. Mr. Tuder began his career in various investment capacities at Nassau Capital, a privately-held investment firm that managed the private portion of Princeton University’s endowment and ABS Capital Partners, a private equity firm affiliated with Alex Brown & Sons. Mr. Tuder served on the Board of Directors of MRV Communications, Inc. (MRVC) until August 2017, where he also served as Chairman of the Audit Committee prior to its sale to Adva Optical Networking. Mr. Tuder also serves as a Director of a number of privately held companies. Mr. Tuder received a Bachelor of Arts degree from Yale University. Mr. Tuder’s private equity and hedge fund investment experience, his expertise in evaluating both public and private investment opportunities across numerous industries, and his ability to think creatively in considering ways to maximize long-term shareholder value provide a valuable background for him to serve as a member of our Board.

9

 


 

 

Class I Directors (Terms Expire at 2021 Annual Meeting)

 

 

 

 

Director’s Name
and Year First
Became Director

  

Position and Principal Occupation and Business Experience During the Past Five Years

Mark Bonney (2017)

  

Executive Chair

 

Mark Bonney, 65, has served as a Director of SeaChange since August 2017 and was appointed Executive Chair on April 4, 2019. Mr. Bonney most recently served as President, Chief Executive Officer and a Director of RhythmOne plc (RHTM:London) from May 2018 to April 1, 2019, at which time Mr. Bonney resigned in connection with the sale of RhythmOne to Taptica International Ltd.  Mr. Bonney also served as the Interim Chief Financial Officer of RhythmOne from February 4, 2019 to April 1, 2019.  Previously, Mr. Bonney has served as President and Chief Executive Officer of MRV Communications, Inc. (NASDAQ: MRVC) from December 2014 until its sale in August 2017 and as a Director of MRV Communications, Inc. from April 2013 to August 2017.  Mr. Bonney has served as a Director of Zix Corporation (NASDAQ: ZIXI) since January 2013 and serves as a member of the Audit Committee and the Nominating & Corporate Governance Committee. Mr. Bonney also serves as a Director of Community eConsult Network, Inc., a not-for-profit corporation engaged in medical consultative services, and is Chairman Emeritus of Community Health Centers, Inc.  Mr. Bonney has held senior financial and management roles at Black & Decker, Zygo Corporation, Axsys Technologies, Inc., American Bank Note Holographics, Inc. and Direct Brands leading up to Chief Financial Officer, President and Chief Executive Officer. In addition to his current directorships he has previously served as a director of Axsys, American Bank Note Holographics, Threecore, Inc., ASearch LLC and Sigma Designs.  Mr. Bonney also founded and served as former Chairman of the Angel Investor Forum. Mr. Bonney holds a BS in Business Administration from Central Connecticut State University and an MBA in Finance from the University of Hartford.  Mr. Bonney brings more than 35 years of senior financial and operational experience with middle-market high tech companies in the U.S. and abroad.  

 

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CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS

Determination of Director Independence

The Board of Directors has determined that Messrs. Markey, Pons, Sriubas, Tuder and Wilson are “independent” directors, meeting all applicable independence requirements of the SEC, including Rule 10A-3(b)(1) pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Marketplace Rules of The NASDAQ Stock Market (“NASDAQ”). In making this determination, the Board of Directors affirmatively determined that none of such directors has a relationship that, in the opinion of the Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.  With respect to Mr. Wilson, the Board determined that neither the identification in 2015 of Mr. Wilson as a director nominee by the former equityholders of TLL, LLC, the terms of the Agreement and Plan of Merger dated December 22, 2014 for the acquisition of TLL, LLC nor Mr. Wilson’s prior management positions with TLL, LLC precluded a determination that Mr. Wilson qualified as “independent.”  With respect to Messrs. Pons and Tuder, the Board determined that neither the identification of each as a director nominee by TAR Holdings LLC and Karen Singer, nor the terms of Cooperation Agreement, dated as of February 28, 2019, by and among the Company, TAR Holdings LLC and Karen Singer precluded a determination that each of Messrs. Pons and Tuder qualified as “independent”.

Upon Mr. Bonney becoming an employee of the Company as part of being appointed Executive Chair, Mr. Bonney ceased to be “independent”.

Stockholder Proposals

Proposals of stockholders intended to be presented at the 2020 Annual Meeting of Stockholders must be received no later than the close of business on January 25, 2020 at SeaChange’s principal executive offices in order to be included in the SeaChange proxy statement for that meeting. Any such stockholder proposals should be submitted to SeaChange International, Inc., 50 Nagog Park, Acton, Massachusetts, 01720, Attention: Secretary. Under the By-Laws of SeaChange, stockholders who wish to make a proposal at the 2020 Annual Meeting — other than one that will be included in SeaChange’s proxy materials — must notify SeaChange no earlier than December 26, 2020, and no later than January 25, 2020. If a stockholder who wishes to present a proposal fails to notify SeaChange by January 25, 2020, the stockholder will not be entitled to present the proposal at the meeting. If, however, notwithstanding the requirements of the By-Laws of SeaChange, the proposal is brought before the meeting, then under the SEC’s proxy rules the proxies solicited by management with respect to the 2020 Annual Meeting will confer discretionary voting authority with respect to the stockholder’s proposal on the persons selected by management to vote the proxies. If a stockholder makes a timely notification, the proxies may still exercise discretionary voting authority under circumstances consistent with the SEC’s proxy rules.

In order to curtail controversy as to the date on which a proposal will be marked as received by SeaChange, it is suggested that stockholders submit their proposals by Certified Mail — Return Receipt Requested.

Availability of Corporate Governance Documents

SeaChange’s Code of Ethics and Business Conduct (“Ethics Policy”) for all directors and all employees of SeaChange, including executive officers, and the charters for the Audit, Compensation, and Corporate Governance and Nominating Committees of the Board of Directors are available on SeaChange’s website at www.seachange.com under the “Corporate Governance” section of the “Investor Relations” link. SeaChange will ensure that amendments, if any, to these documents are disclosed and posted on this website within four (4) business days of any such amendment.

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Board Me etings

The Board of Directors of SeaChange met sixteen (16) times and acted by written consent two (2) times during the fiscal year ended January 31, 2019. During the fiscal year ended January 31, 2019, each then director attended at least seventy-five percent (75%) of the total number of meetings of the Board of Directors and meetings of all the committees of the Board on which they serve. SeaChange has a policy that its Board of Directors attends SeaChange’s Annual Meeting of Stockholders. Last year, all of the directors attended the Annual Meeting of Stockholders that was held on July 12, 2018.

Board Le adership Structure

Since April 4, 2019, Mr. Bonney has served as the Company’s Executive Chair.  In connection with that appointment, Mr. Bonney fulfills the duties of Chairman of the Board and as the Company’s principal executive officer.  In this capacity, Mr. Bonney sets the agenda for Board meetings and serves to facilitate and improve communication between the independent directors and the Company’s senior management.  

Board Nomination Rights

Pursuant to the terms of the Cooperation Agreement entered into on February 28, 2019 by the Company with TAR Holdings LLC and Karen Singer (collectively, “TAR”), TAR was granted the right to cause the Board to appoint Robert Pons as a Class II Director, to appoint Jeffrey Tuder as a Class III Director, and, subject to the terms of the Cooperation Agreement, nominate, recommend, support and solicit proxies for Mr. Pons at the 2019 annual meeting.  The foregoing summary of the Cooperation Agreement is qualified in its entirety by reference to the complete text of the Cooperation Agreement that is attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 1, 2019.

Board Oversight of Risk

The Board oversees the business and strategic risks of SeaChange, including risks related to cybersecurity. The Audit Committee oversees financial reporting, internal controls and compliance risks confronting SeaChange. The Compensation Committee oversees risks associated with SeaChange’s compensation policies and practices, including performance-based compensation and change in control plans. The Corporate Governance and Nominating Committee oversees risks relating to corporate governance and the process governing the nomination of members of the Board. SeaChange provides a detailed description of the risk factors impacting its business in its Annual Report on Form 10-K and if necessary, its Quarterly Reports on Form 10-Q filed with the SEC.

Board Committees

The Board has a standing Audit Committee, Compensation Committee, and Corporate Governance and Nominating Committee. The members of each committee are appointed by the Board based on the recommendation of the Corporate Governance and Nominating Committee. The members are set forth below in this proxy statement. Actions taken by any committee of the Board are reported to the Board, usually at the next Board meeting following a committee meeting. Each of these standing committees is governed by a committee-specific charter that is reviewed periodically by the applicable committee pursuant to the rules set forth in each charter. The Board annually conducts a self-evaluation of each of its committees. All members of all committees are independent directors.

Audit Committee

The current Audit Committee members are Mr. Tuder (Chairman, effective April 4, 2019), Mr. Markey and Mr. Sriubas, each of whom meet the independence requirements of the SEC and NASDAQ, as described above. Mr. Bonney had previously been the Audit Committee Chairman from May 1, 2018 until his appointment as Executive Chair on April 4, 2019, and Ms. Cotton served on the Audit Committee until her resignation on May 5, 2019.  In addition, SeaChange’s Board has determined that each member of the Audit Committee is financially literate and that Mr. Tuder satisfies the requirement of the Marketplace Rules applicable to NASDAQ-listed companies that at least one member of the Audit Committee possess financial sophistication and that Mr. Tuder is an “audit committee financial expert” as defined in the rules and regulations promulgated under the Exchange Act. The Audit Committee’s

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oversight responsibilities include matters relating to SeaChange’s financial disclosure and reporting process, including the system of internal controls, the performance of SeaChange’s internal audit function, complian ce with legal and regulatory requirements, and the appointment and activities of SeaChange’s independent auditors. The Audit Committee met ten (1 0 ) times and acted by written consent two (2 ) time s during fiscal 2019 . The responsibilities of the Audit Committee and its activities during fiscal 2019 are more fully described under the heading “Report of the Audit Committee” contained in this proxy statement.

Compensation Committee

The current Compensation Committee members are Mr. Sriubas (Chairman, effective April 4, 2019) and Mr. Pons, each of whom meet the independence requirements of the SEC and NASDAQ, as described above. Mr. Bonney had previously been the Compensation Committee Chairman from August 17, 2017 until his appointment as Executive Chair on April 4, 2019, and Ms. Cotton served on the Compensation Committee until her resignation on May 5, 2019.  Among other things, the Compensation Committee determines the compensation, including stock options, RSUs and other equity compensation, of SeaChange’s management and key employees, administers and makes recommendations concerning SeaChange’s equity compensation plans, and ensures that appropriate succession planning takes place for all levels of management, department heads and senior management. The Compensation Committee met nine (9) times and acted by unanimous written consent eleven (11) times during fiscal 2019. The responsibilities of the Compensation Committee and its activities during fiscal 2019 are more fully described in this proxy under the heading, “COMPENSATION DISCUSSION AND ANALYSIS.”

Corporate Governance and Nominating Committee

The current Corporate Governance and Nominating Committee members are Mr. Markey (Chairman), Mr. Pons and Mr. Wilson, each of whom meet the independence requirements of the SEC and NASDAQ, as described above. Ms. Cotton served on the Corporate Governance and Nominating Committee until her resignation on May 5, 2019.  The Corporate Governance and Nominating Committee is responsible for oversight of corporate governance at SeaChange, recommending to the Board of Directors persons to be nominated for election or appointment as directors of SeaChange and monitoring compliance with SeaChange’s Code of Ethics and Business Conduct. The Corporate Governance and Nominating Committee identifies Board candidates through numerous sources, including recommendations from existing Board members, executive officers, and stockholders of SeaChange. Additionally, the Corporate Governance and Nominating Committee may identify candidates through engagements with executive search firms. The Corporate Governance and Nominating Committee met six (6) times and acted by unanimous written consent one (1) time during fiscal 2019.

Qualifications of Director Candidates

In evaluating the suitability of individuals for Board membership, the Corporate Governance and Nominating Committee takes into account many factors, including whether the individual meets the requirements for independence, his or her professional expertise and educational background, and the potential to contribute to the diversity of viewpoints, backgrounds or experiences of the Board as a whole including diversity of experience, gender, race, ethnicity and age. The Corporate Governance and Nominating Committee evaluates each individual in the context of the entire Board, with the objective of recommending nominees who can best further the success of SeaChange’s business and represent stockholder interests. The Corporate Governance and Nominating Committee assigns specific weights to particular criteria for prospective nominees. SeaChange believes that the backgrounds and qualifications of directors, considered as a group, should provide a significant composite mix of experience, knowledge and abilities that will allow the Board of Directors to fulfill its responsibilities. As part of the consideration in fiscal 2019 by the Corporate Governance and Nominating Committee of candidates for election to the Board, these criteria were reviewed. No changes to these criteria were recommended as a result of such review.

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Procedures for Stockholders to Recommend Director Candida tes

Stockholders wishing to suggest candidates to the Corporate Governance and Nominating Committee for consideration as potential director nominees may do so by submitting the candidate’s name, experience, and other relevant information to the SeaChange Corporate Governance and Nominating Committee, 50 Nagog Park, Acton, Massachusetts 01720. SeaChange stockholders wishing to nominate directors may do so by submitting a written notice to the Secretary of SeaChange at the same address in accordance with the nomination procedures set forth in SeaChange’s By-Laws. The procedures are summarized in this proxy statement under the heading “Stockholder Proposals.” The Secretary will provide the notice to the Corporate Governance and Nominating Committee. The Corporate Governance and Nominating Committee does not distinguish between nominees recommended by stockholders and other nominees. All nominees must meet, at a minimum, the qualifications described in “Qualifications of Director Candidates” above.

Process for St ockholders to Communicate with Directors

Stockholders may write to the Board or a particular Board member by addressing such communication to the Chairman of the Board, if directed to the Board as whole, or to an individual director, if directed to that particular Board member, care of SeaChange’s Secretary, at SeaChange’s offices at 50 Nagog Park, Acton, Massachusetts 01720. Unless such communication is addressed to an individual director, SeaChange will forward any such communication to each of the directors. Communication sent in any other manner, including but not limited to email, text messages or social media will be forwarded to the entire Board of Directors. The Executive Chair will determine the appropriate response to such communication.

Compensati on of Directors

Directors who are employees of SeaChange receive no compensation for their services as directors, except for reimbursement of expenses incurred in connection with attending meetings.

Non-employee directors received the following cash compensation in fiscal 2019:

 

A cash retainer of $45,000;

 

The Chairman of the Board received additional cash compensation of $25,000;

 

Each member of the Audit Committee received additional cash compensation of $7,500, other than the Chairman, who received additional cash compensation of $15,000;

 

Each member of the Compensation Committee received additional cash compensation of $6,000, other than the Chairman, who received additional cash compensation of $12,000; and

 

Each member of the Corporate Governance and Nominating Committee received additional cash compensation of $5,000, other than the Chairman, who received additional cash compensation of $10,000.

In addition, each non-employee director is entitled to receive an annual grant of RSUs valued at $100,000, granted on the date of our Annual Meeting and which vests in full one year from the grant date, subject to acceleration in the event of a Change in Control. Our non-employee directors have the option to receive DSUs in lieu of RSUs, and the shares underlying the DSU are not issued until the earlier of the director ceasing to be a member of the Board or immediately prior to consummation of a Change in Control.

Newly appointed non-employee directors receive an initial grant of RSUs valued at $100,000, granted on the date of the director’s appointment or election to the Board of Directors, which vest annually in three (3) equal tranches over a three (3) year period, subject to acceleration in the event of a Change in Control. Newly appointed non-employee directors also receive (i) 100% of the annual grant of RSUs valued at $100,000 if their appointment/election is within six (6) months of the Company’s last Annual Meeting or (ii) 50% of the annual grant of RSUs valued at $50,000 if their appointment/election is within six (6) months of the Company’s next Annual Meeting.  New non-employee directors have the option to receive their initial grant in the form of DSUs rather than RSUs (as described above with respect to the annual awards).

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Director Compensation Fiscal 2019

 

Name

 

Fees Earned or

Paid in Cash

($)

 

 

Stock Awards  (1)

($)

 

 

Total

($)

 

Mark Bonney (2)

 

 

70,125

 

 

 

100,000

 

 

 

170,125

 

Mary Palermo Cotton

 

 

65,375

 

 

 

100,000

 

 

 

165,375

 

William F. Markey, III

 

 

87,500

 

 

 

100,000

 

 

 

187,500

 

Andrew Sriubas

 

 

58,500

 

 

 

100,000

 

 

 

158,500

 

Royce E. Wilson

 

 

50,000

 

 

 

100,000

 

 

 

150,000

 

 

 

(1)

The grant date fair value for each of these awards, aggregated in the above table, is as follows:

 

Name

 

Date of Grant

 

Stock Awards

(#DSUs, except as

noted)

 

 

Total Grant

Date Fair Value ($)

 

Mark Bonney (2)

 

7/12/2018

 

 

31,250

 

 

 

100,000

 

Mary Palermo Cotton

 

7/12/2018

 

 

31,250

 

 

 

100,000

 

William F. Markey, III

 

7/12/2018

 

 

31,250

 

 

 

100,000

 

Andrew Sriubas

 

7/12/2018

 

 

31,250

 

 

 

100,000

 

Royce E. Wilson

 

7/12/2018

 

 

31,250

 

 

 

100,000

 

 

 

(2)

Effective April 4, 2019 Mr. Bonney will no longer receive non-employee Director compensation in his new role as Executive Chair.

The table below shows the aggregate number of unvested stock awards and options for each non-employee director as of January 31, 2019. Stock awards consist of DSUs (except as otherwise noted below) for which the minimum one-year service period has not been satisfied.

 

Name

 

Aggregate Stock

Awards Outstanding

(#)

 

 

Aggregate Stock

Options Outstanding

(#)

 

Mark Bonney (1)

 

 

56,599

 

 

 

 

Mary Palermo Cotton

 

 

31,250

 

 

 

 

William F. Markey, III

 

 

37,589

 

 

 

 

Andrew Sriubas

 

 

56,598

 

 

 

 

Royce. E. Wilson

 

 

31,250

 

 

 

 

 

 

(1)

For Mr. Bonney, 25,349 of the 56,599 stock awards outstanding are RSUs, with the remaining 31,250 stock awards outstanding being DSUs.

 

Report of the Audit Committee

The Audit Committee currently consists of Mr. Tuder (Chairman), Mr. Markey and Mr. Sriubas.

The Audit Committee’s primary duties and responsibilities are to:

 

Appoint, compensate and retain SeaChange’s independent registered public accounting firm, and oversee the work performed by the independent registered public accounting firm;

 

Assist the Board of Directors in fulfilling its responsibilities by reviewing the financial reports provided by SeaChange to the SEC and SeaChange’s stockholders;

 

Monitor the integrity of SeaChange’s financial reporting process and systems of internal controls regarding finance, accounting, and legal compliance;


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Recommend, establish and monitor procedures designed to improve the quality and reliability of the disclosure of SeaChange’s financial condition and results of operations; and

 

Provide an avenue of communication among the independent registered public accounting firm, management and the Board of Directors.

The Board of Directors has adopted a written charter setting out the functions the Audit Committee is to perform. A copy of this may be found on SeaChange’s website at www.seachange.com under the “Corporate Governance” section of the “Investor Relations” link.

Management has primary responsibility for SeaChange’s consolidated financial statements and the overall reporting process, including SeaChange’s system of internal controls.

The independent registered public accounting firm audits the annual consolidated financial statements prepared by management, expresses an opinion as to whether those consolidated financial statements fairly present, in all material respects, the financial position, results of operations and cash flows of SeaChange in conformity with accounting principles generally accepted in the United States of America, expresses an opinion on the effectiveness of internal control over financial reporting and discusses with the Audit Committee any issues the independent registered public accounting firm believes should be raised with SeaChange.

For fiscal 2019, the Audit Committee reviewed the audited consolidated financial statements of SeaChange and met with both management and Grant Thornton LLP, SeaChange’s independent registered public accounting firm, to discuss those consolidated financial statements.

The Audit Committee has received from and discussed with Grant Thornton LLP the written disclosure and the letter required by the applicable requirements of the Public Company Accounting Oversight Board regarding Grant Thornton LLP’s communications with the Audit Committee concerning independence and has discussed with Grant Thornton LLP their independence. The Audit Committee also discussed with Grant Thornton LLP the matters required to be discussed by Auditing Standard No. 1301, “Communications with Audit Committees” issued by the Public Company Accounting Oversight Board.

Based on these reviews and discussions, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements of SeaChange be included in its Annual Report on Form 10-K for the fiscal year ended January 31, 2019. The Audit Committee also decided to retain Grant Thornton LLP as SeaChange’s independent registered public accounting firm for the 2020 fiscal year.

RESPECTFULLY SUBMITTED BY THE AUDIT

COMMITTEE OF THE BOARD OF DIRECTORS

Jeffrey Tuder, Chairman

William F. Markey, III

Andrew Sriubas

The information contained in this Audit Committee Report shall not be deemed to be “soliciting material.” No portion of this Audit Committee Report shall be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, through any general statement incorporating by reference in its entirety the Proxy Statement in which this report appears, except to the extent that SeaChange specifically incorporates this report or any portion of it by reference. In addition, this report shall not be deemed to be filed under either the Securities Act or the Exchange Act.

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INFORMATION CONCERNING EXECUTIVE OFFICERS

In addition to Mark Bonney, SeaChange’s Executive Chair, whose biographical information is set forth above on page 10, SeaChange’s executive officers are:

 

Executive

Officer’s Name

 

Position and Principal Occupation and Business Experience During the Past Five Years

Yosef Aloni

 

Chief Commercial Officer and Senior Vice President

 

Mr. Aloni, 50, joined the Company on January 2, 2019 as Chief Commercial Officer and Senior Vice President, and from February 25, 2019 to April 4, 2019, served in the Office of the CEO.  Prior to joining SeaChange, Mr. Aloni was the Chief of Corporate Operations at ATEME from January 2015 to January 2019. Mr. Aloni served as the President, Product Management & Marketing at Magnum Semiconductor from January 2010 to January 2015. Prior to joining Magnum Semiconductor, Mr. Aloni was the Vice President, Product Management & Marketing at Optibase.  Mr. Aloni has held various other positions with Ted-Ad/MGM International and HOT.  Mr. Aloni also served as Lieutenant, Head of Video Section for the Israel Defense Forces.

 

 

Peter Faubert

 

Chief Financial Officer, Senior Vice President and Treasurer

 

Mr. Faubert, age 49, joined the Company on July 7, 2016 as Chief Financial Officer, Senior Vice President and Treasurer, and from February 25, 2019 to April 4, 2019, served in the Office of the CEO. He brings over fifteen years of extensive finance leadership for public and private software companies that focused on video service providers, mobility and enterprise computing. Prior to joining the Company, Mr. Faubert served as Chief Financial officer of This Technology, Inc. from December 2013 to August 2015, Chief Financial Officer and Treasurer of Vision Government Solutions, Inc. from October 2012 to December 2013, Chief Financial Officer of JNJ Mobile (MocoSpace) from February 2009 to July 2012 and Chief Financial Officer and Treasurer at Turbine, Inc. from August 2005 to January 2009. Prior to that Mr. Faubert held various senior finance positions with Viisage Technology Inc., Burntsand Inc. and Ariba Inc. Mr. Faubert is also a Certified Public Accountant.

 

 

Marek Kielczewski

 

Chief Technology Officer and Senior Vice President

 

Mr. Kielczewski, 42, joined the Company on May 5, 2016 as Senior Vice President CPE Software as part of SeaChange’s acquisition of DCC Labs in May 2016. He became Senior Vice President, Global Engineering in August 2017 and became the Chief Technology Officer in November 2018, and from February 25, 2019 to April 4, 2019, served in the Office of the CEO.  Prior to joining SeaChange, Mr. Kielczewski was the Chief Executive Officer of DCC Labs from December 2009 to May 2016. Mr. Kielczewski served as the Chief Operating Officer of Sentivision from March 2002 to July 2008.  Mr. Kielczewski started his career at an IT Director at 7bulls S.A.

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David McEvoy

 

General Counsel, Senior Vice President and Secretary

 

Mr. McEvoy, age 61, joined the Company on July 2, 2012 as Vice President and General Counsel. He became Senior Vice President and General Counsel on February 1, 2013; became the Secretary on May 17, 2013; and from February 25, 2019 to April 4, 2019, served in the Office of the CEO.  Prior to joining SeaChange, Mr. McEvoy was the Senior Vice President and General Counsel of Peoplefluent Inc. from June 2011 to July 2012. Mr. McEvoy served as the Senior Vice President and General Counsel of Art Technology Group, Inc. (“ATG”) from September 2005 to March 2010, which was acquired by Oracle Corporation on January 5, 2011. Prior to joining ATG, Mr. McEvoy was the Group General Counsel — Operations of Gores Technology Group, a private equity firm. Mr. McEvoy has held various General Counsel and other executive level legal positions with several companies including Aprisma Inc., Anker Systems Ltd., VeriFone Inc., Mattel Interactive, Broderbund and The Learning Company.

 

Executive officers of SeaChange are appointed by, and serve at the discretion of, the Board of Directors, and serve until their successors have been duly elected and qualified. There are no family relationships among any of the executive officers or directors of SeaChange. Each executive officer is a full-time employee of SeaChange.

 

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COMPENSATION DISCU SSION AND ANALYSIS

 

Executive Summary

We have implemented an executive compensation program that rewards performance. Our executive compensation program is designed to attract, retain and motivate the key individuals who are most capable of contributing to our success and building long-term value for our stockholders. The elements of our executives’ total compensation are base salary, incentive compensation and other employee benefits. We have designed a compensation program that makes a substantial portion of executive pay variable, subject to increase when performance targets are achieved, and subject to reduction when performance targets are not achieved.

Fiscal 2019 Business Results

In fiscal 2019, we continued to address what we see as the continuing rise of multiscreen viewing. Consumer device options are evolving rapidly and viewing habits are shifting. The primary driver of our business is enabling the delivery of video assets in the changing multiscreen television environment.  Through strategic collaborations, we have expanded our capabilities, products and services to address the delivery of content to devices other than television set-top boxes, namely PCs, tablets, smart phones and OTT streaming players.  We believe that our strategy of expanding into adjacent product lines will also position us to further support and maintain our existing service provider customer base.  Providing our customers with more scalable software platforms enables them to further reduce their infrastructure costs, improve reliability and expand service offerings to their customers.

In fiscal 2019, we have continued our corporate restructuring.  We have initiated restructuring programs in the past three years to help us improve operations and optimize our cost structure.  Our restructuring programs in 2017 included the wind down of the Timeline Labs operations, inclusive of an impairment charge of the long-lived assets related to the Timeline Labs operations, the reorganization of our engineering teams and other company-wide-cost savings initiatives resulting in annualized cost savings of $38 million.  In fiscal 2019 we began taking steps to reduce our costs further, and we expect additional annualized costs savings of over $6 million from these actions.

In addition, during fiscal 2019, we appointed a new Chief Technology Officer, Marek Kielczewski, and Chief Commercial Officer, Yosef Aloni.  We ended the fourth quarter of fiscal 2019 with cash, cash equivalents, restricted cash and marketable securities of $30.7 million and no debt outstanding.  However, our overall financial results decreased from fiscal 2018, with revenues of $62.4 million in fiscal 2019 compared to revenues of $80.3 million in fiscal 2018 and a GAAP operating loss of $40.0 million in fiscal 2019, compared to GAAP operating income of $1.2 million in fiscal 2018.   The decrease was primarily the result of the lower product and service revenue of $17.9 million and loss on impairment of long-lived assets and goodwill of $17 million.  

Pay for Performance

Payouts under our executive compensation incentive plan in recent years have reflected the variability in our financial performance.  

In both fiscal 2017 and 2019, when we did not achieve pre-established financial performance targets under our short-term incentive plan, payouts were limited to the portion of the award based on individual performance objectives.  In contrast, in fiscal 2018, when we experienced improved financial performance versus the prior fiscal year and financial performance above threshold with respect to revenue and above target with respect to non-GAAP operating income, payouts were made with respect to both financial and individual performance objectives.

With respect to the long-term incentive plan, payouts showed similar variability with respect to the performance-based stock unit (PSU) component of the awards, with the fiscal 2017 award being determined based on total shareholder return, and each of the fiscal 2018 and 2019 awards being based on financial performance compared to annually established metrics.  Vesting of these awards has demonstrated similar variability to the short-term incentive awards with no vesting for the portion of the fiscal 2018 award based on fiscal 2019 financial performance.

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We believe that the variability in these payouts indicates that our annual compensation plans effectively reward our executive officers for superior performance, while appropriately adj usting compensation downward for less-than-superior performance.

Compensation Objectives

We structure our executive compensation to reflect individual responsibilities and contributions, while providing incentives to achieve overall business and financial objectives. The Compensation Committee (the “Committee”) has the responsibility for establishing, implementing and monitoring adherence to this philosophy.

The Committee has designed an executive compensation plan that rewards the achievement of specific financial and non-financial goals through a combination of cash and stock-based compensation. This bifurcation between financial and non-financial objectives and between cash and stock-based compensation creates alignment with stockholder interests and provides a structure in which executives are rewarded for achieving results that the Committee believes will enhance stockholder value.

The Committee believes that stockholder interests are best served by compensating our executives at industry competitive rates, enabling us to attract and retain the best available talent, recognizing superior performance while providing incentives to achieve overall business and financial objectives. By doing so, we believe that our ability to achieve financial and non-financial goals is enhanced.

Setting Executive Compensation

When setting the annual compensation plan for our executive officers, the Committee begins with an analysis of each compensation component for our Chief Executive Officer. This analysis includes the dollar amount of each component of compensation payable to the Chief Executive Officer related to the relevant period, together with the related metrics for performance-based compensation. The overall purpose of this analysis is to bring together, in one place, all of the elements of fixed and contingent compensation, so that the Committee may analyze both the individual elements of compensation (including the compensation mix) as well as the aggregate amount of actual and projected compensation.

The Committee then presents this analysis to the Chief Executive Officer, who provides input to the Committee on the reasonableness, feasibility and effectiveness of the compensation components, including performance metrics, proposed by the Committee. The Chief Executive Officer then creates similar compensation component breakdowns for the other executive officers, presenting compensation recommendations of both base and performance-based compensation related to the relevant period, together with the associated performance metrics. These recommendations are then reviewed and, once agreed upon, approved by the Committee. The Committee can and has exercised its discretion in modifying any recommended compensation to executives and exercises this discretion in active consultation with the Chief Executive Officer.

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In setting executive short-term incentive compensation awards for fiscal 2019 for our then-employed executive officers, the Committee referenced the list of peer companies previously recommended in fiscal 2018 by Frederic W. Cook & Co., Inc. (“Cook”), subject to the removal of Guidance Software, Inc., Jive Software, Inc. and YuMe, Inc., each of which had been sold.  Cook is a compensation consulting firm who the Committee concluded based on the Company’s knowledge and information provided by Cook had no conflict of interest with the Company. The list of these peer companies is as follows: 

 

•    American Software, Inc.

•    BSQUARE Corporation

•    Digital Turbine, Inc.

•    Limelight Networks, Inc.

•    Marin Software Inc.

•    Remark Media, Inc.

•    Synacor, Inc.

 

•    Brightcove, Inc.

•    Concurrent Computer Corporation

•    eGain Corporation

•    Marchex, Inc.

•    RealNetworks, Inc.

•    SITO Mobile, Ltd.

•    Tremor Video, Inc.

 

 

In setting the fiscal 2019 long-term incentive compensation award in January 2019 for our then-employed executive officers, the Committee engaged Meridian Compensation Partners, LLC, who again referenced the list of peer companies previously recommended in fiscal 2018 by Cook, subject to the removal of the three companies that had been sold and Tremor Video, Inc.  Meridian is a compensation consulting firm who the Committee concluded based on the Company’s knowledge and information provided by Meridian had no conflict of interest with the Company.

In each case, the Committee determined that this list of peer companies provided appropriate referenceable data points, based on our revenues, market capitalization, and industry focus relative to each of these companies. The Committee made reference to the compensation paid by these peer companies in establishing fiscal 2019 executive compensation but did not benchmark compensation to these companies.

With respect to all of the fiscal 2019 compensation programs for the Company’s named executive officers, the Committee endeavors to establish a compensation program that is internally consistent and equitable to enable our achievement of overall corporate objectives. Within this framework, the level of the Chief Executive Officer’s compensation will differ from that of the other executives because of the difference in his role and responsibilities and the compensation practices at peer companies.

In 2018, we submitted our executive compensation to an advisory vote of our stockholders and it received the support of 63% of the total votes cast on this matter at our annual meeting. We pay careful attention to any feedback we receive from our stockholders about our executive compensation, including the “Say-on-Pay” vote. While we had already approved our fiscal 2019 compensation plan by the time we held our “Say-on-Pay” vote in July 2018, we considered the stockholder advisory vote in formulating our fiscal 2020 compensation plan. This consideration included reaching out to our largest shareholders as part of the Company’s on-going outreach program.  In the past six months, the Company has actively engaged with many of its shareholders, representing nearly half of the shares outstanding, on a number of topics, including governance and compensation matters.

In addition to the process used to determine compensation for our executive officers, the Committee engaged in separate discussions with Marek Kielczewski in connection with his relocation from Warsaw, Poland to Acton, Massachusetts and elevation to Chief Technology Officer.

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With respect to Mr. Kielczewski, we entered into a letter agreement on December 10, 2018 confirming compensation on the following terms :

 

 

Annual base salary of $250,000 per year;

 

A grant of an option to purchase 100,000 shares of stock with an exercise price of $1.68 (fair market value based on the price of our stock at market close on November 29, 2018), to vest in three equal tranches on November 29, 2019, November 29, 2020 and November 29, 2021;

 

 

A fiscal 2019 performance-based compensation plan to consist of a target bonus award of fifty percent (50%) of base salary ($125,000) payable in cash and a fiscal 2020 performance-based compensation plan to consist of a target bonus award of sixty percent (60%) of base salary ($150,000) payable in cash;

 

 

Up to $155,574, plus a tax “gross-up” of this amount, for housing, travel, and associated expenses relating to Mr. Kielczewski’s relocation from Warsaw to Acton for his 16-month assignment in the U.S.; and

 

 

Eligibility for annual LTI equity awards.

 

Fiscal 2019 Executive Compensation Components

For the fiscal year ended January 31, 2019, the principal components of compensation for our named executive officers were:

 

base salary;

 

short-term performance-based incentive compensation;

 

long-term incentive equity awards;

 

discretionary equity awards;

 

change in control and termination benefits; and

 

general employee welfare benefits.

As discussed below, the Committee believed that this mix of compensation would allow us to pay our executive officers competitive levels of compensation that best reflect individual responsibilities and contributions, while providing incentives to achieve overall business and financial objectives.

Base Salary

We provide our named executive officers and other employees with base salary to compensate them for services rendered during the fiscal year. Base salary ranges for named executive officers are determined individually for each executive.

During its review of base salaries for named executive officers, the Committee primarily considers:

 

individual performance of the executive;

 

our overall past operating and financial performance and future expectations;

 

internal review of the executive’s compensation, both individually and relative to other executive officers; and

 

market data regarding peer companies.

The Committee does not give a specific weighting among these various factors but rather considers the factors collectively in setting base salary. Salary levels are typically considered on an annual basis as part of the performance review process, as well as upon a promotion or other change in job responsibility. We try to provide an allocation between base and performance-based incentive compensation that reflects market conditions and appropriately ensures alignment of individual performance with our objectives.

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In setting the executive compensation plan for fiscal 2019 , the Committee made an adjustment to the base salary of the Chief Executive Officer, Mr.  Terino , which was increased to $465,000 from $ 45 0,000 on June 1, 2018 . The Committee also mad e an adjustment to the b ase salar y of the Chief Financial Officer, Mr.  Faubert . The base salary for Mr. Faubert was increased to $310,000 from $300,000 on June 1, 2018.   The Com mittee did not make an adjustment to Mr. Kielczewski ’s base salary adjustment on his promotion to Chief Technology Officer on November 29 , 2018 , and Mr. Kielczewski continued to receive his then current base salary of $250,000.  

Performance-Based Incentive Compensation

After considering the overall cash-equity mix of the aggregate compensation paid to our named executive officers, the Committee structured awards pursuant to the fiscal 2019 performance-based compensation plan to be a mixture of cash, stock options, RSUs and PSUs. The Committee believes that including both cash and stock options, RSUs and PSUs as an element of the performance-based compensation is important as it further aligns the interests of our executive officers with those of our stockholders, increases executive ownership of our stock, discourages excessive levels of risk taking, and enhances executive retention in a challenging business environment and competitive labor market, while at the same time providing competitive current compensation and accounting for the liquidity limitations created by the Company’s stock ownership guidelines.

Starting in fiscal 2016, the Committee now provides all equity awards to the named executive officers under the performance-based Long-Term Incentive compensation plan and all cash awards to the named executive officers under the fiscal 2019 STI. The fiscal 2019 STI and fiscal 2019 Long-Term Incentive Plan (“fiscal 2019 LTI”) are described further below.

Fiscal 2019 Performance-Based Short-Term Incentive Compensation Plan

The Committee believes that performance-based incentive compensation motivates the achievement of critical annual performance objectives aimed at enhancing stockholder value. The fiscal 2019 STI established for each of Messrs. Terino, Faubert and Kielczewski provided for a cash award payable upon the satisfaction of specified targets.

Performance-based compensation for Messrs. Terino, Faubert and Kielczewski pursuant to our fiscal 2019 STI was structured as follows:

 

40% of target bonus payable based upon the achievement of certain U.S. GAAP revenue goals for fiscal 2019;

 

20% of target bonus payable based upon the achievement of certain non-GAAP operating income 1 goals for fiscal 2019; and

 

40% or target bonus payable based upon the achievement of certain individual performance-based objectives.

In determining the targets and payouts at target performance levels for each of the objectives for awards under the fiscal 2019 executive compensation plan, the Committee considered the probability of achieving that target and the corresponding level of individual and group effort that would be required to achieve that target. Within that framework, the Committee set a fiscal 2019 U.S. GAAP revenue target of $85 million, with a threshold of $80 million, and a fiscal 2019 non-GAAP operating income target of $6.5 million, with a threshold of $2.2 million. The Committee retained discretion to adjust these targets during the year. The Committee did not establish limits for itself with respect to exercise of this discretion and believes that this discretion is important in order to retain the ability to compensate executive officers in a manner that reflects overall corporate and individual performance relative to the market conditions.

 

1  

We define non-GAAP operating income as GAAP operating income plus recovery on loss contract, amortization of intangible assets, stock based compensation expenses, non-operating professional fees, severance and restructuring costs and loss on impairment of goodwill and long-lived assets.

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In establishing financial targets and potential payout targets for the named executive officers, the Committee provided for additional incentive payouts in the event that the revenue or non-GAAP operating income targets were exceeded, with a specified max imum upward adjustment of fifty percent ( 50 %) above target based upon non-GAAP operating income and a maximum upward adjustment of fifty ( 50 %) based upon revenue . The Committee also provided for a decreasing amount of cash payouts in the event that the rev enue or non-GAAP operating income target, as applicable, were not met, while establishing a threshold with respect to each objective below which no corresponding payout would be made. These provisions were established to provide incentive to our executive officers to exceed the financial targets, as well as to provide some form of payout for performance that approaches but may not meet the established targets. The Committee implemented this structure to ensure that our compensation programs support our over all compensation objectives.

Each of the named executive officers participating in our fiscal 2019 performance-based incentive compensation plan also had individual performance-based objectives as follows:

 

Mr. Terino: complete the development and introduction of PanoramiC; execute a partner expansion program that expands channel and system integrator partners globally; execute at least one OEM partnership agreement for a managed service end-to-end video solution; strengthen the global sales organization through the recruitment of a Chief Commercial Officer; and complete a strategic initiative to enhance the Company’s opportunities for revenue growth.

 

Mr. Faubert: negotiate partnership agreements, deal structure recommendations, pricing recommendations, and managed service agreements and provide financial support to facilitate and complete the development and introduction of PanoramiC; implement improvements to the sales quoting process; complete a strategic initiative to enhance the Company’s opportunities for revenue growth; improve business process and automation in the finance and accounting function to create more efficiencies; and drive cost savings across the Company through business improvements, restructuring activities and work capital management.

 

Mr. Kielczewski: complete the development of and introduction of PanoramiC; implement improvements to the sales quoting process; complete a strategic initiative to enhance the Company’s opportunities for revenue growth; execute and deliver the engineering delivery schedule for cContent, cBridge, cView,and cAds; complete the consolidation of the global engineering organization; and define and implement the capability for the professional services organization to complete cloud-based deployments.

Payouts were made under the fiscal 2019 STI based on the achievement of just individual performance objectives. No payouts were made for the financial performance objectives in fiscal 2019.  Under the fiscal 2019 STI, Mr. Faubert received a cash bonus of $65,968; Mr. Kielczewski received a cash bonus of $57,600.  Mr. Terino did not receive a fiscal 2019 STI since he resigned prior to the fiscal 2019 STI being awarded.

Long-Term Incentive Equity Awards

Fiscal 2019 Long-Term Incentive Program

In fiscal 2019, the Committee continued the Long-Term Incentive compensation plan (“fiscal 2019 LTI”) under which the named executive officers received long-term equity-based incentive awards, which are intended to align the interests of our named executive officers with the long-term interests of our stockholders and to emphasize and reinforce our focus on team success. The long-term equity-based incentive compensation awards for fiscal 2019 were made in the form of stock options, RSUs and PSUs for shares of our common stock subject to vesting based in part on the extent to which employment continues for three years.

Because the executives are able to profit from stock options only if our stock price increases relative to the stock option’s exercise price and because the value of restricted stock units is based on the price of our common stock when the RSUs vest, we believe stock options and RSUs provide meaningful incentives to executives to achieve increases in the value of our stock over time and as a result are effective tools for meeting our compensation goal of increasing long-term stockholder value.  

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In fiscal 2019, the Committee used the same stru cture for the fiscal 2019 LTIs as was used in fiscal 2018, with awarded PSUs being eligible to vest in 3 equal annual tranches subject to the executives’ achievement of both U.S. GAAP revenue and non-GAAP operating income goals that will be set annually fo r each year, and with awarded options and RSUs to vest in equal increments annually over a 3 year period.

All LTI awards are approved by the Committee. In determining the size of a stock option grant, RSU award or PSU award, the Committee takes into account individual performance (generally consisting of financial performance for the year as well as a subjective, qualitative review of each named executive officer’s contribution to the success of the business), internal pay equity considerations and the value of previously granted equity awards.

The following LTI awards were approved by the Committee effective as of January 31, 2019:

 

PSUs. An award of PSUs for the amount based on the target number of shares of SeaChange’s common stock set forth opposite the applicable executive’s name below:

 

Executive

 

Target Award #

of PSUs

 

Edward Terino

 

 

50,000

 

Peter Faubert

 

 

25,000

 

Marek Kielczewski

 

 

50,000

 

 

The PSUs will vest ratably on an annual basis over three (3) years, if at all, on January 31, 2020, January 31, 2021 and January 31, 2022 (each a “Vesting Date”), respectively, based on SeaChange’s achievement of target financial goals set each year, with the metrics for the tranche eligible to vest on January 31, 2020 being revenue and non-GAAP operating income at the same level as the then to-be established fiscal 2020 STI awards.

 

 

RSUs. An award of RSUs for the number of shares of SeaChange’s common stock set forth opposite the applicable executive’s name below, to be vested ratably on an annual basis over the three years following January 31, 2019:

 

Executive

 

RSUs Awarded

 

Edward Terino

 

 

50,000

 

Peter Faubert

 

 

25,000

 

Marek Kielczewski

 

 

50,000

 

 

 

Stock Options. An award of options to purchase the number of shares of SeaChange’s common stock set forth opposite the applicable executive’s name below at an exercise price equal SeaChange’s closing stock price on January 31, 2019, to be vested ratably on an annual basis over the three years following January 31, 2019:

 

Executive

 

Options Awarded

 

Edward Terino

 

 

200,000

 

Peter Faubert

 

 

100,000

 

Marek Kielczewski

 

 

150,000

 

 

Additional Fiscal 2019 LTI Terms

If a Change in Control of the Company occurs prior to prospective Vesting Date(s) of the fiscal 2019 LTI stock option, RSU and PSU awards, then fifty percent (50%) of the stock option, RSU and target PSU awards to vest in those prospective periods shall vest immediately prior to such Change in Control, subject to the executive being an employee of that Company as of such date.

25

 


 

Clawback Policy; Stock Ownership Guidelines; Hedging and Pledging Restrictions

Compensation paid to our named executive officers is subject to a policy regarding compensation reimbursement, or a “clawback” policy, as described in our Code of Ethics and Business Conduct, a copy of which is available on our website of www.seachange.com under the “Corporate Governance” section of the “Investor Relations” link. The policy provides that in the event that our financial results are significantly restated, the Board of Directors will review any compensation, other than base salary, paid or awarded to any executive officer found to be personally responsible for the fraud or intentional misconduct that caused the need for the restatement. The Board will, to the extent permitted by law, require the executive officer to repay any such compensation if:

 

the amount of such compensation was calculated based upon the achievement of certain financial results that were subsequently the subject of the restatement;

 

the executive officer engaged in fraud or intentional misconduct that caused the need for the restatement; and

 

such compensation would have been lower than the amount actually awarded had the financial results been properly reported.

Compensation paid to our named executive officers in the form of equity is also subject to our stock retention and ownership guidelines that apply to our directors and senior officers, as described in our Corporate Governance Guidelines, a copy of which is available on our website at www.seachange.com under the “Corporate Governance” section of the “Investor Relations” link. These guidelines provide that by the later of six (6) years following appointment to office or four (4) years following election to the board, as applicable:

 

each non-employee director is expected to retain ownership of vested shares of SeaChange stock in a minimum amount equal to lesser of 40,000 shares or $250,000 worth of shares;

 

the Chief Executive Officer is expected to retain ownership of vested shares of SeaChange stock in a minimum amount equal to 250,000 shares;

 

the Chief Financial Officer is expected to retain ownership of vested shares of SeaChange stock in a minimum amount equal to 75,000 shares; and

 

each Senior Vice President that is an executive officer is expected to retain ownership of vested shares of SeaChange stock in a minimum amount equal to 50,000 shares.

Prior to meeting the stock ownership targets, each non-employee director and senior executive officer is encouraged, but is not required, to retain a meaningful portion of all shares of stock acquired by the non-employee director or officer (whether through equity awards by SeaChange, purchases on the open market or otherwise) in order to progress toward the stock ownership targets, other than shares of stock sold to pay taxes and/or applicable exercise price with respect to an equity award. Upon meeting the stock ownership targets, each non-employee director and senior executive officer is required thereafter to retain not less than twenty-five percent (25%) of all shares of stock acquired by the non-employee director or officer (whether through equity awards by SeaChange, purchases on the open market or otherwise), other than shares of stock sold to pay taxes and/or the applicable exercise price with respect to an equity award. In addition, upon any termination of service for a non-employee director and upon voluntary termination of service for a senior executive officer, such director or officer must wait at least ninety (90) days before selling any shares. In the case of hardship or other compelling personal requirements, the stock ownership targets may be waived to permit the sale of shares by the affected person.

In addition, our Insider Trading and Tipping Policy prohibits our insiders, which includes our employees and directors, from engaging in hedging transactions and requires the prior written consent of our compliance officer to pledge securities of SeaChange owned by the insider. We have not received any requests pursuant to our Insider Trading and Tipping Policy to permit pledges of SeaChange stock.

26

 


 

We have made, and from time to time continue to make, grants of stock options and RSUs to eligible employees based upon our overall financial performance and their individual contributions. Stock options and R SUs are designed to align the interests of our executives and other employees with those of our stockholders by encouraging them to enhance the value of SeaChange. In addition, the vesting of stock options and RSUs over a period of time is designed to defe r the receipt of compensation by the recipient, creating an incentive for the individual to remain an employee. We do not have a program, plan or practice to select equity grant dates in connection with the release of favorable or negative news.

Change in Control and Termination Benefits

Each named executive officer is party to a Change in Control Severance Agreement with SeaChange (the “Change in Control Agreements”).

The Change in Control Agreements provide for benefits upon termination of employment following a change in control or sale of SeaChange (commonly referred to as “double trigger”) and do not contain any tax gross-up provisions. SeaChange entered into these agreements to reflect current best pay practices, while continuing to provide an incentive for each executive to remain with SeaChange leading up to and following a Change in Control.

Under the Change in Control Agreements, if an executive’s equity award, other than a performance-based equity award (such as PSUs or market-based stock options), is continued, assumed or substituted following a Change in Control and the executive’s employment is terminated within two years after the Change in Control by the employer without cause or by the executive for good reason (a “Covered Termination”), then such equity award would be accelerated in full. Performance-based equity awards would continue to be governed by their existing terms. In addition, if a Covered Termination occurs, the executive would be entitled to receive a cash amount as severance equal to the sum of (a) one times his base salary, plus (b) 150% of the executive’s target annual bonus for the fiscal year in which the Covered Termination occurs, plus (c) $62,000, being an amount corresponding to medical and other benefits during the post-employment period.

The specific terms of these arrangements, as well as an estimate of the compensation that would have been payable had they been triggered as of fiscal 2019 year-end, are described in detail on page 34 under the heading entitled “ Potential Payments Upon Termination or Change in Control .”

General Employee Welfare Benefits

We also have various broad-based employee benefit plans. Executive officers participate in these plans on the same terms as eligible, non-executive employees, subject to any legal limits on the amounts that may be contributed or paid to executive officers under these plans. We offer a 401(k) retirement plan, which permits employees to invest in a choice of mutual funds on a pre-tax basis. We also maintain medical, disability and life insurance plans and other benefit plans for our employees.

Fiscal 2020 Executive Compensation Components

Mr. Terino resigned as the Company’s Chief Executive Officer on February 24, 2019, and Mr. Mark Bonney was appointed as the Company’s Executive Chair serving as the Company’s Chairman of the Board and principal executive officer effective April 4, 2019.  In the interim period between Mr. Terino’s resignation and the appointment of Mr. Bonney, the Committee created the Office of the CEO.  The Office of the CEO was made up of the four remaining executive officers: Mr. Aloni, the Chief Commercial Officer; Mr. Faubert, the Chief Financial Officer; Mr. Kielczewski, the Chief Technology Officer; and Mr. McEvoy, the General Counsel.  No additional compensation was paid to the members of the Office of the CEO while it was in existence.   The Office of the CEO was dissolved with the appointment of Mr. Bonney as the Executive Chair.

27

 


 

In establishing the Company’s fiscal 2020 executive compensation plan, the Committee made reference to the list of peer companies previously provided to it by Cook , subject to the updates p reviously provided, but did not benchmark compensation to these companies.

 

Employment Offer Letter with New Executive Chair, Mark Bonney

In connection with the hiring of our new Executive Chair, Mark Bonney, effective as of April 4, 2019, we entered into an employment offer letter with Mr. Bonney, dated as of April 4, 2019.

In establishing the terms of Mr. Bonney’s employment, the Committee was advised by Meridian.  Meridian did not conduct a survey of our peers or industry competitors, but rather advised on market practices based on its consulting experience and Meridian’s understanding of the high level of commitment that would be required by Mr. Bonney as Executive Chair.

Based on the foregoing, we entered into an employment offer letter containing the following material compensation terms:

 

Base compensation of $425,000 per year ($35,416.67 per month) based on full-time employment;

 

A fiscal 2020 performance-based short-term incentive bonus with a target payout of $255,000, payable in cash; and

 

A $300,000 award of RSUs to vest annually over 2 years.

As summarized in the table below, the Committee structured each of Mr. Bonney’s inducement award and target annual compensation to have a substantial performance-based element.

Fiscal 2020 Executive Chair Target Pay Mix

 

Inducement Award

Target Annual Compensation

(37.5% Performance-Based)

       $300,000 award of RSUs to vest annually over 2 years

       62.5% or $425,000 base salary

 

       37.5% or $255,000 target performance-based cash bonus on achievement of fiscal 2020 goals

 

The Committee believed that the overall compensation mixture, including both base and performance-based components, would incentivize an effective alignment of the interests of our newly hired Executive Chair with those our stockholders.  

The principal components of fiscal 2020 executive compensation are as follows, the same as existed for fiscal 2019 executive compensation:

 

base salary;

 

short-term performance-based incentive compensation;

 

long-term incentive equity awards;

 

discretionary equity awards;

 

change in control and termination benefits; and

 

general employee welfare benefits.

Within this framework, the Committee established the specific compensation programs for our named executive officers.

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In setting executive compensation for fiscal 20 20 , the Committee reviewed the updated list of peer companies previously recommended by Cook in fiscal 201 8 and determined not to make any changes , other than accounting for companies that had been previously sold and the exclusion of Tremor Video, Inc.

The Committee determined that this list of peer companies provided appropriate referenceable data points, based on our revenues, market capitalization, and industry focus relative to each of these companies. The Committee made reference to the compensation paid by these peer companies in establishing fiscal 2020 executive compensation but did not benchmark compensation to these companies.

Mr. Bonney’s base salary remained at the rate set in April 2019, being $425,000.  Mr. Faubert’s and Mr. Kielczewski’s base salary remains the same as in fiscal 2019 at $310,000 and $250,000, respectively.

Similar to previous years, in fiscal 2020 no equity awards will be made to the named executive officers under the fiscal 2020 Short-Term Incentive bonus plan (“fiscal 2020 STI”). Instead, any incentive equity awards to the named executive officers during fiscal 2020 are intended to be made under the fiscal 2020 Long-Term Incentive compensation plan (“fiscal 2020 LTI”) subject to vesting based in part on the extent to which employment continues for three (3) years. Under the fiscal 2020 STI, Mr. Bonney will be eligible for a target cash bonus of $255,000; Mr. Faubert will be eligible for a target cash bonus of 60% of his base salary; and Mr. Kielczewski will be eligible for a target cash bonus of 60% of his base salary.  

This fiscal 2020 STI is earned based on the Company’s achievement of overall company financial objectives for fiscal 2020 related to total revenue and non-GAAP operating income and based on individualized performance-based objectives. These objectives will be further discussed in our proxy statement relating to our 2020 Annual Meeting of stockholders.

In fiscal 2020, the named executive officers will be eligible to receive awards under the fiscal 2020 LTI with amounts to be determined.

Tax and Accounting Implications

The financial reporting and income tax consequences to SeaChange of individual compensation elements are considered by the Committee when it is analyzing the overall level of compensation and the mix of compensation among individual elements.

Section 162(m) of the Internal Revenue Code (the “Code”) limits the amount that SeaChange may deduct from the Company’s federal taxable income for compensation paid to our named executive officers and other employees deemed “covered persons” under Section 162(m) to $1 million per executive per year.  Prior law provided exemptions to this deduction for compensation limit for compensation paid to our Chief Financial Officer, for certain “performance-based compensation” and for compensation paid after a named executive officer terminated employment.  Effective for the tax year beginning February 1, 2018 the deduction limitation will be extended to the Chief Financial Officer, the performance-based exemption will be eliminated and certain post-termination payments may no longer be deductible.  As a result, compensation paid to our named executive officers in excess of the above limit will not be deductible unless the compensation qualifies for transition relief applicable to certain arrangements in effect on November 2, 2017.  While our Compensation Committee considers the tax deductibility when making compensation decisions, the Committee believes that it should retain flexibility to exceed the limits of Section 162(m) when in furtherance of our corporate objectives and in the best interests of the Company and its shareholders.

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Summary Compen sation Table

The following table sets forth summary information regarding the compensation in fiscal 2019 and 2018 of SeaChange’s named executive officers to the extent such person was an executive officer during the applicable period.

As described above in Compensation Discussion and Analysis, final determinations regarding awards of fiscal 2019 STI compensation are made after fiscal year-end, when performance against the previously established metrics may be assessed by the Committee. With respect to equity awards under SeaChange’s performance-based LTI compensation plans, the grant date for purposes of ASC 718 is the service inception date, or the beginning of the period during which performance is measured. In accordance with ASC 718, the amounts reflected below under the headings “Stock Awards” for a given fiscal year, represent the probable outcome as of the service inception date of the performance conditions under the fiscal 2019 Long-Term Incentive compensation plan (“fiscal 2019 LTI”), which in each case is the award amount at the targets approved by the Compensation Committee. In the table below performance-based compensation paid in cash after fiscal year-end but earned in the prior fiscal year is reflected under the heading “Non-Equity Incentive Plan Compensation” or “Bonus,” as applicable, in the fiscal year in which that compensation was earned, regardless of when paid.

 

Name

 

Fiscal

Year

 

Salary

($)

 

 

Bonus

($)

 

 

Stock

Awards  (1)

($)

 

 

 

Option

Awards  (2)

($)

 

 

 

Non-Equity

Incentive Plan

Compensation  (3)

($)

 

 

All Other

Compensation  (4)

($)

 

 

Total

($)

 

Edward Terino (5)

 

2019

 

 

463,790

 

 

 

 

 

 

159,000

 

(6)

 

 

154,980

 

(7)

 

 

 

 

 

 

 

 

777,770

 

Former Chief Executive Officer, Director, and Chief Operating Officer & Executive Vice President

 

2018

 

 

447,115

 

 

 

 

 

 

250,191

 

 

 

 

285,180

 

 

 

 

341,982

 

 

 

 

 

 

1,324,468

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Peter Faubert

 

2019

 

 

307,552

 

 

 

 

 

 

79,500

 

(6)

 

 

77,490

 

(7)

 

 

65,968

 

 

 

 

 

 

530,510

 

Chief Financial Officer, Senior Vice President and Treasurer

 

2018

 

 

298,077

 

 

 

 

 

 

125,094

 

 

 

 

142,590

 

 

 

 

145,080

 

 

 

 

 

 

710,841

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marek Kielczewski (8)

 

2019

 

 

265,851

 

 

 

 

 

 

159,000

 

(6)

 

 

197,105

 

(7)

 

 

57,600

 

 

 

80,293

 

 

 

759,849

 

Chief Technology Officer and Senior Vice President

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

This expense represents the grant date fair value of the applicable RSU and target PSU awards as computed in accordance with ASC 718 disregarding any estimates of forfeitures relating to service-based vesting conditions. Performance-based RSUs and PSUs are valued at the grant date based upon the probable outcome of the performance metrics. Therefore, the amounts under the “Stock Awards” column do not reflect the amount of compensation actually received by the named executive officer during the fiscal year.

(2)

This expense represents the grant date fair value of the applicable option awards, as computed in accordance with ASC 718 disregarding any estimates of forfeitures relating to service-based vesting conditions.

(3)

The Non-Equity Incentive Plan Compensation column reflects for fiscal 2018 and 2019 cash awards under performance-based compensation plans from the satisfaction of pre-established performance criteria and permitted to be exercised pursuant to the applicable performance-based compensation plan.

(4)

The All Other Compensation column includes Company contributions to a named executive officer’s 401(k) Plan account, perquisites and other personal benefits received by a named executive officer to the extent such benefits exceeded $10,000 in the aggregate relating to the fiscal year.  For fiscal 2019, Mr. Kielczewski received an additional $80,293 relating to Mr. Kielczewski’s relocation to the U.S. for his 16-month U.S. assignment. The $80,293 includes a tax “gross-up” of $21,548 pursuant to the terms of Mr. Kielczewski’s December 10, 2018 compensation letter.

30

 


 

(5)

Mr. Terino resigned as the Chief Executive Officer and director of the Company on February 24, 2019 as previously reported on a Form 8-K filed with the SEC on February 26, 2019.  

(6)

Stock Awards in this table for fiscal 2019 consist of: For Mr. Terino, his fiscal 2019 LTI award of RSUs valued at $79,500 and PSUs valued at target at $79,500; for Mr. Faubert, his fiscal 2019 LTI award of RSUs valued at $39,750 and PSUs valued at target at $39,750; and for Mr. Kielczewski, his fiscal 2019 LTI award of RSUs valued at $79,500 and PSUs valued at target at $79,500.

(7)

Option Awards in this table for fiscal 2019 consist of: for Mr. Terino, a fiscal 2019 LTI award of stock options valued at $154,980; for Mr. Faubert, a fiscal 2019 LTI award of stock options valued at $77,490; and for Mr. Kielczewski, an award of stock options relating to his promotion as Chief Technology Officer valued at $80,870 and a fiscal 2019 LTI award of stock options valued at $116,235.

( 8)

Mr. Kielczewski was appointed Chief Technology Officer on November 29, 2018. Mr. Kielczewski’s fiscal 2019 compensation includes compensation paid to Mr. Kielczewski in fiscal 2019 prior to Mr. Kielczewski’s appointment as Chief Technology Officer.

Grants of Plan-Based Awards

The following table sets forth information concerning plan-based awards to the named executive officers during the fiscal year ended January 31, 2019.

 

 

 

 

 

 

Estimated Future Payouts under

Non-Equity Incentive Plan Awards

 

 

Estimated Future Payouts under

Equity Incentive Plan Awards  (1)

 

 

All Other

Stock

Awards:

Number

of Shares

of Stock

 

 

All Other

Option

Awards:

Number of

Securities

Underlying

 

 

Exercise

or Base

Price of

Option

 

 

Grant

Date Fair

Value of

Stock and

Option

 

 

 

Grant Date

 

 

Threshold

($)

 

 

Target

($)

 

 

Maximum

($)

 

 

Threshold

(#)

 

 

Target

(#)

 

Maximum

(#)

 

 

or Units   (2)

(#)

 

 

Options (2)

(#)

 

 

Awards

($/Sh)

 

 

Awards

($)

 

Edward Terino

 

5/23/2018

(3)

 

 

230,175

 

 

 

418,500

 

 

 

544,050

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1/31/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

50,000

 

 

 

50,000

 

 

 

50,000

 

 

 

200,000

 

 

 

1.59

 

 

 

313,980

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Peter Faubert

 

5/23/2018

(3)

 

 

102,300

 

 

 

186,000

 

 

 

241,800

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1/31/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25,000

 

 

 

25,000

 

 

 

25,000

 

 

 

100,000

 

 

 

1.59

 

 

 

156,990

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marek Kielczewski

 

5/23/2018

(3)

 

 

68,750

 

 

 

125,000

 

 

 

162,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11/29/2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100,000

 

 

 

1.68

 

 

 

80,870

 

 

 

1/31/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

50,000

 

 

 

50,000

 

 

 

50,000

 

 

 

150,000

 

 

 

1.59

 

 

 

275,235

 

 

(1)

The grants under the “ Estimated Future Payouts under Equity Incentive Plan Awards ” column represent the threshold, target and maximum number of PSUs that could be earned.

(2)

The grants under the “ All Other Stock Awards: Number of Shares of Stock or Units ” column and under the “ All Other Option Awards: Number of Securities Underlying Options ” column represent the number of RSUs and options, respectively, subject to time-based vesting.

(3)

These awards were made pursuant to the fiscal 2019 STI adopted on May 23, 2018.

 

31

 


 

Outstanding Equity Awar ds at Fiscal Year-End

The following table sets forth summary information regarding the outstanding equity awards at January 31, 2019 granted to each of SeaChange’s named executive officers:

 

 

Options Awards (1)

 

Stock Awards (2)

 

Name

 

Number of

Securities

Underlying

Unexercised

Options (#)

Exercisable

 

 

Number of

Securities

Underlying

Unexercised

Options (#)

Unexercisable

 

 

Equity

Incentive

Plan

Awards:

Number of

Securities

Underlying

Unexercised

Unearned

Options (#)

 

 

Option

Exercise

Price ($)

 

 

Option

Expiration

Date

 

Number of

Shares or

Units of

Stock That

Have Not

Vested (#)

 

 

Market

Value of

Shares or

Units of

Stock That

Have Not

Vested ($)

 

Edward Terino

 

 

 

 

 

200,000

 

 

 

 

 

 

7.25

 

 

6/3/2025

 

 

287,195

 

 

 

456,640

 

 

 

 

48,456

 

 

 

 

 

 

 

 

 

6.05

 

 

1/26/2026

 

 

 

 

 

 

 

 

 

 

 

 

 

 

600,000

 

 

 

 

 

 

5.56

 

 

4/6/2026

 

 

 

 

 

 

 

 

 

 

 

64,474

 

 

 

 

 

 

32,236

 

 

 

2.42

 

 

1/31/2027

 

 

 

 

 

 

 

 

 

 

 

66,667

 

 

 

 

 

 

133,333

 

 

 

3.33

 

 

1/31/2028

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

200,000

 

 

 

1.59

 

 

1/31/2029

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Peter Faubert

 

 

50,000

 

 

 

50,000

 

 

 

 

 

 

3.30

 

 

7/6/2026

 

 

130,205

 

 

 

207,026

 

 

 

 

28,313

 

 

 

 

 

 

14,156

 

 

 

2.42

 

 

1/31/2027

 

 

 

 

 

 

 

 

 

 

 

33,334

 

 

 

 

 

 

66,666

 

 

 

3.33

 

 

1/31/2028

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100,000

 

 

 

1.59

 

 

1/31/2029

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marek Kielczewski

 

 

50,000

 

 

 

50,000

 

 

 

 

 

 

3.50

 

 

5/5/2026

 

 

150,453

 

 

 

239,220