SMARTDISK CORP, DEF 14A, 2000-04-19

SMARTDISK CORP
DEF 14A, 2000-04-19
COMPUTER PERIPHERAL EQUIPMENT, NEC

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SCHEDULE 14A
(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934

Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant to Rule 14a-12
[ ] Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))

SMARTDISK CORPORATION
(Name of Registrant as Specified in Its Charter)

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

Payment of Filing Fee (Check the appropriate box):

[x] No fee required.
[ ] Fee computed on the 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 No.:

(3) Filing Party:

(4) Date Filed:
<PAGE>

[GRAPHIC OMITTED]

----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 23, 2000
----------------

TO OUR STOCKHOLDERS:

The 2000 annual meeting of stockholders of SmartDisk Corporation will be
held at The Inn on Fifth, 699 Fifth Avenue South, Naples, Florida 34102, on
Tuesday, May 23, 2000, beginning at 10:00 a.m. local time. At the meeting,
stockholders will vote on the following matters:

(1) Election of three directors, each for a term of three years;

(2) Approval of the amendment of our 1999 Incentive Compensation Plan to
increase the number of shares available for grant from 2,500,000 to
3,000,000 and to provide for an annual increase in the number of shares
available for grant at the beginning of each year, commencing 2001 and
continuing through 2005, equal to 3% of the total number of shares of
common stock outstanding at the end of the preceding year; and

(3) Any other matters that properly come before the meeting.

Stockholders of record at the close of business on April 7, 2000 are
entitled to vote at the meeting or any postponements or adjournments of the
meeting.

Whether or not you plan to attend the annual meeting, please sign, date
and return the enclosed proxy card in the enclosed pre-addressed envelope as
promptly as possible. No postage is required if mailed in the United States.

THIS IS AN IMPORTANT MEETING AND YOU ARE INVITED TO ATTEND THE MEETING IN
PERSON. IF YOU ARE UNABLE TO ATTEND, WE URGE YOU TO EXECUTE AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. IF YOU EXECUTE A PROXY CARD, YOU
MAY NEVERTHELESS ATTEND THE MEETING, REVOKE YOUR PROXY AND VOTE YOUR SHARES IN
PERSON.

By Order of the Board of Directors,

/s/ Michael S. Battaglia
------------------------
Michael S. Battaglia
PRESIDENT AND CHIEF EXECUTIVE OFFICER

April 19, 2000
Naples, Florida
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
ABOUT THE MEETING ................................................................. 1
What is the purpose of the meeting? ............................................. 1
Who is entitled to vote at the meeting? ......................................... 1
What are the voting rights of stockholders? ..................................... 1
Who may attend the meeting? ..................................................... 1
What constitutes a quorum? ...................................................... 1
How do I vote? .................................................................. 2
Can I change my vote after I return my proxy card? .............................. 2
What are the board's recommendations? ........................................... 2
What vote is required to approve each item? ..................................... 2
What are the effects of "broker non-votes"? ..................................... 2
Who will pay for the preparation of the proxy? .................................. 3

STOCK OWNERSHIP ................................................................... 4

ITEM 1--ELECTION OF DIRECTORS ..................................................... 6
Directors Standing for Election ................................................. 6
Directors Continuing in Office .................................................. 6
Management ...................................................................... 7
Executive Officers, Directors and Key Employees ............................... 7
How are directors compensated? ................................................ 10
How often did the board meet during fiscal 1999? .............................. 10
What committees has the board established? .................................... 10
Executive Compensation .......................................................... 11
Report of the Compensation Committee .......................................... 11
Compensation Committee Interlocks and Insider Participation ................... 13
Summary Compensation Table .................................................... 13
Stock Option Grants in Fiscal 1999 ............................................ 14
Stock Option Exercises and Values for Fiscal 1999 ............................. 15
Employment Agreements ......................................................... 15
Employee Benefit Plans ........................................................ 16
Performance Graph ............................................................... 19

ITEM 2--ADOPTION OF OUR AMENDED AND RESTATED 1999 INCENTIVE COMPENSATION PLAN ..... 20
Summary of Plan Changes ......................................................... 20
Reasons for Plan Changes ........................................................ 20
Summary of our 1999 Incentive Compensation Plan, As Amended ..................... 20

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS .................................... 27

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934 .............. 29

RELATIONSHIP WITH INDEPENDENT AUDITORS ............................................ 29

OTHER MATTERS ..................................................................... 30

ADDITIONAL INFORMATION ............................................................ 30
</TABLE>

i
<PAGE>

[GRAPHIC OMITTED]

3506 MERCANTILE AVENUE
NAPLES, FLORIDA 34104

-------------------------
PROXY STATEMENT
-------------------------
April 19, 2000

This proxy statement contains information related to the annual meeting of
stockholders of SmartDisk Corporation to be held on Tuesday, May 23, 2000,
beginning at 10:00 a.m., at The Inn on Fifth, 699 Fifth Avenue South, Naples,
Florida 34102, and at any postponements and adjournments thereof.

We are first mailing this proxy statement, the foregoing notice of annual
meeting of stockholders and the enclosed proxy card to our stockholders on or
about April 19, 2000.

ABOUT THE MEETING

WHAT IS THE PURPOSE OF THE MEETING?

At our annual meeting, stockholders will act upon the matters outlined in
the notice of meeting on the cover page of this proxy statement, including the
election of directors and approval of the amendment of our 1999 Incentive
Compensation Plan. In addition, our management will report on our performance
during fiscal 1999 and respond to questions from stockholders.

WHO IS ENTITLED TO VOTE AT THE MEETING?

Only stockholders of record at the close of business on the record date,
April 7, 2000, are entitled to receive notice of the annual meeting and to vote
the shares of common stock that they held on that date at the meeting, or any
postponements or adjournments of the meeting.

WHAT ARE THE VOTING RIGHTS OF STOCKHOLDERS?

Each stockholder will be entitled to one vote on each matter to be voted
upon at the meeting for each share of our common stock held by the stockholder.

WHO MAY ATTEND THE MEETING?

All stockholders as of the record date, or their duly appointed proxies,
may attend the meeting.

WHAT CONSTITUTES A QUORUM?

The presence at the meeting, in person or by the proxy, of the holders of
a majority of the shares of common stock outstanding on the record date will
constitute a quorum, permitting the meeting to conduct its business. As of the
record date, 17,123,966 shares of our common stock were outstanding.

<PAGE>

Proxies received but marked as abstentions and broker non-votes will be
included in the calculation of the number of shares considered to be present at
the meeting.

HOW DO I VOTE?

If you complete and properly sign the accompanying proxy card and return
it to us, it will be voted as you direct. If you are a registered stockholder
and attend the meeting, you may deliver your completed proxy card in person.
Street name stockholders who wish to vote at the meeting will need to obtain a
proxy form from the institution that holds their shares.

CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?

Yes. Even after you have submitted your proxy, you may change your vote at
any time before the proxy is exercised by filing with us either a notice of
revocation or a duly executed proxy bearing a later date. The powers of the
proxy holders will be suspended if you attend the meeting in person and so
request, although attendance at the meeting will not by itself revoke a
previously granted proxy.

WHAT ARE THE BOARD'S RECOMMENDATIONS?

Unless you give other instructions on your proxy card, the persons named
as proxy holders on the proxy card will vote in accordance with the
recommendations of our board of directors. Each of the board's recommendations
is set forth together with the description of each item in this proxy
statement. In summary, the board recommends a vote:

/bullet/ FOR election of the nominated slate of directors (see page 6);
and
/bullet/ FOR approval of the amendment of our 1999 Incentive Compensation
Plan (see page 20).

With respect to any other matter that properly comes before the meeting,
the proxy holders will vote as recommended by the board of directors or, if no
recommendation is given, in their own discretion.

WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?

ELECTION OF DIRECTORS. The affirmative vote of a plurality of the votes
cast at the meeting is required for the election of directors. Stockholders are
not entitled to cumulative votes in the election of directors. A properly
executed proxy marked "WITHHOLD AUTHORITY" with respect to the election of one
or more directors will not be voted with respect to the director or directors
indicated and will have no effect on the outcome of the vote, although it will
be counted for purposes of determining whether there is a quorum.

OTHER ITEMS. For each other item, the affirmative vote of the holders of a
majority of the shares represented in person or by proxy and entitled to vote
on the item will be required for approval. A properly executed proxy marked
"ABSTAIN" with respect to any such matter will not be voted, although it will
be counted for purposes of determining whether there is a quorum. Accordingly,
an abstention will have the effect of a negative vote.

WHAT ARE THE EFFECTS OF "BROKER NON-VOTES"?

If you hold your shares in street name through a broker or other nominee,
your broker or nominee may not be permitted to exercise voting discretion with
respect to some of the matters to be acted upon. Thus, if you do not give your
broker or nominee specific instructions, your shares may not be voted on those
matters and will not be counted in determining the number of shares necessary
for approval. Accordingly, such "broker non-votes" will not be included in vote
totals and will have no effect on the outcome of any votes. Shares represented
by such "broker non-votes" will, however, be counted in determining whether
there is a quorum.

2
<PAGE>

WHO WILL PAY FOR THE PREPARATION OF THE PROXY?

We will pay the cost of preparing, assembling and mailing the proxy
statement, notice of meeting and enclosed proxy card. In addition to the use of
mail, our employees may solicit proxies personally and by telephone. Our
employees will receive no compensation for soliciting proxies other than their
regular salaries. We may request banks, brokers and other custodians, nominees
and fiduciaries to forward copies of the proxy material to the beneficial
owners of our common stock and to request authority for the execution of
proxies and we may reimburse such persons for their expenses incurred in
connection with these activities.

Our principal executive offices are located at 3506 Mercantile Avenue,
Naples, Florida 34104, and our telephone number is (941) 436-2500. A list of
shareholders entitled to vote at the annual meeting will be available at our
offices for a period of ten days prior to the meeting and at the meeting itself
for examination by any shareholder.

3
<PAGE>

STOCK OWNERSHIP

The table below sets forth information regarding the beneficial ownership
of our common stock as of March 31, 2000, by the following individuals or
groups:

/bullet/ each person or entity who is known by us to own beneficially more
than 5.0% of our outstanding stock;

/bullet/ each of the executive officers named in the Summary Compensation
Table below;

/bullet/ each of our directors; and

/bullet/ all directors and executive officers as a group.

Unless otherwise indicated, the address of each of the individuals listed
in the table is c/o SmartDisk Corporation, 3506 Mercantile Avenue, Naples,
Florida 34104. Except as otherwise indicated, and subject to community property
laws where applicable, the persons named in the table have sole voting and
investment power with respect to all shares of common stock held by them.

Percentage ownership in the following table is based on 17,123,966 shares
of common stock outstanding as of March 31, 2000. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission and generally includes voting or investment power with respect to
securities. Shares of our common stock subject to options that are presently
exercisable or exercisable within 60 days of March 31, 2000 are deemed to be
outstanding and beneficially owned by the person holding the options for the
purpose of computing the percentage of ownership of that person, but are not
treated as outstanding for the purpose of computing the percentage of any other
person.

<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED SHARES OUTSTANDING
- ------------------------------------------------------- -------------------- -------------------
<S> <C> <C>
DIRECTORS, NAMED EXECUTIVE OFFICERS AND 5% STOCKHOLDERS
Phoenix House Investments, LP(1) ...................... 7,382,917 43.1%
Toshiba Corporation(2) ................................ 2,537,500 14.8
Michael S. Battaglia(3) ............................... 417,886 2.4
D. James Bidzos(4) .................................... 29,140 *
Vincent Fedele(5) ..................................... 262,721 1.5
Addison M. Fischer(6) ................................. 7,961,685 46.5
James M. Giarrusso(7) ................................. 90,710 *
Anthony A. Ibarguen(8) ................................ 8,550 *
Douglas R. Kraul ...................................... 676 *
Michael R. Mattingly(9) ............................... 8,332 *
Shigeki Morita ........................................ -- --
Robert Protheroe(10) .................................. 10,756 *
Daniel E. Reed(11) .................................... 6,679 *
Quresh Sachee(12) ..................................... 52,596 *
Timothy Tomlinson(13) ................................. 31,074 *
Joseph M. Tucci(14) ................................... 7,050 *
Hatim Tyabji(15) ...................................... 11,550 *
Yoshiaki Uchida(16) ................................... 14,620 *
All directors and executive officers
as a group (16 persons)(17) .......................... 8,913,665 50.9
</TABLE>

- ----------------
* Less than one percent.

(1) The address for Phoenix House is Phoenix House Investments, LP, 101
Convention Center Drive, Suite 850, Las Vegas, Nevada 89109. Phoenix House
is controlled by Addison M. Fischer, the Chairman of our board of
directors.

(2) The address for Toshiba Corporation is 1-1 Shibaura 1-Chome, Minato-ku,
Tokyo 105, Japan.

4
<PAGE>

(3) Includes 6,750 shares subject to options either currently exercisable or
exercisable by Mr. Battaglia within 60 days of March 31, 2000.

(4) Includes 360 shares subject to options either currently exercisable or
exercisable by Mr. Bidzos within 60 days of March 31, 2000. Excludes
shares held by Phoenix House, in which Mr. Bidzos owns a 2.5% ownership
interest. Mr. Bidzos disclaims beneficial ownership of the shares held by
Phoenix House.

(5) Includes 220,947 shares subject to options either currently exercisable or
exercisable by Mr. Fedele within 60 days of March 31, 2000 and 20,887
shares owned by Mr. Fedele's wife and minor children, as to which Mr.
Fedele disclaims beneficial ownership.

(6) Includes 7,382,917 shares held of record by Phoenix House and 150,000
shares held by Fischer International. Mr. Fischer effectively controls
both entities.

(7) Includes 80,200 shares subject to options either currently exercisable or
exercisable by Mr. Giarrusso within 60 days of March 31, 2000 and 5,255
shares owned by Mr. Giarrusso's wife and 5,225 held by Mr. Giarrusso as
custodian for his minor son, as to which 10,510 shares Mr. Giarrusso
disclaims beneficial ownership.

(8) Includes 3,550 shares subject to options either currently exercisable or
exercisable by Mr. Ibarguen within 60 days of March 31, 2000.

(9) Includes 7,813 shares subject to options either currently exercisable or
exercisable by Mr. Mattingly within 60 days of March 31, 2000.

(10) Includes 10,000 shares subject to options either currently exercisable or
exercisable by Mr. Protheroe within 60 days of March 31, 2000.

(11) Includes 6,250 shares subject to options either currently exercisable or
exercisable by Mr. Reed within 60 days of March 31, 2000.

(12) Includes 21,954 shares subject to options either currently exercisable or
exercisable by Mr. Sachee within 60 days of March 31, 2000.

(13) Includes 1,500 shares held by trusts for which Mr. Tomlinson and his wife
are the sole trustees. Mr. Tomlinson disclaims beneficial ownership of
those shares. Also includes 7,417 shares held by an investment fund of
which Mr. Tomlinson is a general partner. Mr. Tomlinson disclaims
beneficial ownership of such shares except to the extent of his pecuniary
interest therein.

(14) Includes 3,550 shares subject to options either currently exercisable or
exercisable by Mr. Tucci within 60 days of March 31, 2000.

(15) Includes 3,550 shares subject to options either currently exercisable or
exercisable by Mr. Tyabji within 60 days of March 31, 2000.

(16) Includes 13,283 shares subject to options either currently exercisable or
exercisable by Mr. Uchida within 60 days of March 31, 2000.

(17) See footnotes (3) through (16) above.

5
<PAGE>

ITEM 1--ELECTION OF DIRECTORS

DIRECTORS STANDING FOR ELECTION

Our bylaws provide that our board of directors shall consist of not less
than three members. Our board of directors currently has eight members and is
divided into three classes, having three year terms that expire in successive
years. The current term of office of Class I Directors expires at the 2000
annual meeting. The board of directors proposes that the nominees described
below, all of whom are currently serving as Class I Directors, be re-elected
for a new three year terms and until their successors are duly elected and
qualified. If a nominee becomes unavailable to serve as a director, the board
may designate a substitute nominee.

CLASS I DIRECTORS. The three Class I Directors are to be elected at the
2000 Annual Meeting. The board of directors has nominated the following
individuals, all of whom are currently serving as Class I Directors, to stand
for re-election and proxies representing our common stock will be voted for
them absent contrary instructions.

Michael S. Battaglia
Timothy Tomlinson
Joseph M. Tucci

For additional information regarding Messrs. Battaglia, Tomlinson and
Tucci, including a description of their business experience, please see
"Management--Executive Officers, Directors and Key Employees" beginning on page
7.

The board of directors has no reason to believe that any nominee will
refuse to act or be unable to accept election; however, in the event that a
nominee for a directorship to be elected is unable to accept election or if any
other unforeseen contingencies should arise, it is intended that proxies will
be voted for the remaining nominee and for such other person as may be
designated by the board of directors, unless directed by a proxy to do
otherwise.

DIRECTORS CONTINUING IN OFFICE

CLASS II DIRECTORS. The terms of the following Class II Directors expire
at the annual meeting of stockholders in 2001:

Shigeki Morita
D. James Bidzos

CLASS III DIRECTORS. The terms of the following Class III Directors expire
at the annual meeting of stockholders in 2002:

Addison M. Fischer
Anthony A. Ibarguen
Hatim Tyabji

For additional information regarding the Class II Directors and Class III
Directors, including a description of their business experience, please see
"Management--Executive Officers, Directors and Key Employees" beginning on page
7.

6
<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES

Our executive officers, directors and key employees, and their ages as of
March 31, 2000, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- ----- --------
<S> <C> <C>
Addison M. Fischer ............ 51 Chairman of the Board of Directors
Michael S. Battaglia .......... 55 President, Chief Executive Officer and Director
Vincent Fedele ................ 44 Chief Technology Officer
James M. Giarrusso ............ 49 Senior Vice President and General Manager, Personal
Storage Systems
Douglas R. Kraul .............. 44 Vice President, Audio/Video Products
Michael R. Mattingly .......... 51 Chief Financial Officer
Robert Protheroe .............. 43 Senior Vice President, Research and Development
Daniel E. Reed ................ 32 Vice President, Corporate Development and Legal Affairs
Quresh Sachee ................. 37 Vice President, Sales and Marketing
Yoshiaki Uchida ............... 57 Senior Vice President and General Manager,
Japanese Operations
D. James Bidzos ............... 45 Director
Anthony A. Ibarguen ........... 40 Director
Shigeki Morita ................ 55 Director
Timothy Tomlinson ............. 50 Director
Joseph M. Tucci ............... 52 Director
Hatim Tyabji .................. 55 Director
Other Key Employees:

NAME AGE POSITION
- ---- --- --------
O. Lee Drennan ................ 42 Director of Product Engineering
Kazuhisa Fukatsu .............. 58 Senior Manager, Production Control and Assistant to the
President of SmartDisk International
Kazuhiro Iwata ................ 53 Vice President, Engineering of SmartDisk International
Jon Kaplan .................... 41 Vice President, Software Development
Konosuke Nakamura ............. 52 Vice President, Marketing of SmartDisk International
</TABLE>

ADDISON M. FISCHER has served as Chairman of the Board of Directors since
our inception in 1997. Mr. Fischer has been an investor in numerous emerging
technology companies as his principal occupation for at least the past five
years. Many of these companies are involved in the fields of computer security
and office automation. He also serves on the board of directors of a number of
companies, including Fischer International Systems Corporation, a
privately-held software company which he controls. He was also a long-time
board member of and significant investor in RSA Data Security, Inc., a leader
in cryptographic software, until its merger in 1996 with Security Dynamics
Technologies, Inc., a network security company. Mr. Fischer also controls
Phoenix House Investments, LP, one of our principal stockholders. In addition,
Mr. Fischer was one of the founders of VeriSign, Inc., a publicly-held
electronic credentials/digital certificate company. Mr. Fischer is a member of
committees that set U.S. standards for computer security and electronic
commerce. He has addressed the U.S. Congress, by invitation, on several topics,
including digital signature standards, proposed FBI digital telephony
legislation, and global U.S. competitiveness. Mr. Fischer holds numerous U.S.
and international patents, and is a lifetime member of the Association of
Former Intelligence Officers.

MICHAEL S. BATTAGLIA has served as our President and Chief Executive
Officer since January 1998 and as a director since October 1998. From May 1995
to December 1998, Mr. Battaglia was President and Chief Executive Officer of
Fischer International Systems Corporation, a company controlled by

7
<PAGE>

Addison Fischer, our Chairman of the Board of Directors and holder of a
majority interest in Phoenix House Investments, LP, one of our principal
stockholders. During 1998, Mr. Battaglia also served as an officer of Fischer
International. From August 1992 to December 1994, Mr. Battaglia was President
of Mosler Inc., a provider of electronic security systems and security
equipment. For the 25-year period prior to his Mosler tenure, Mr. Battaglia
held various senior management positions in the computer and information
systems industry. He spent most of his professional career at Sperry
Corporation in New York City and Philadelphia. Mr. Battaglia also serves on the
board of directors of Fischer International and Xcert International, which are
privately-held.

VINCENT FEDELE has served as our Chief Technology Officer since March
2000. Mr. Fedele was the founder of VST Technologies, Inc., which we acquired
on March 6, 2000. He served as Chairman of the Board of Directors of VST from
its inception until joining us. In addition, from June 1993 until October 1998,
he served as President and Chief Executive Officer of VST. Most recently, Mr.
Fedele managed new business development, strategic marketing and new product
development for VST.

JAMES M. GIARRUSSO has served as our Senior Vice President and General
Manager, Personal Storage Systems, since March 2000. Mr. Giarrusso served as
Chief Operating Officer of VST from July 1998 until July 1999 and as Chief
Executive Officer from July 1999 until joining us in March 2000. He also served
as a director of VST from July 1993 to July 1995. For the ten years prior to
joining VST, he served in various senior management positions for Data General
Corporation, a computer storage and server developer and manufacturer, most
recently as Director--Customer Fulfillment.

DOUGLAS R. KRAUL has served as our Vice President, Audio/Video Products
since July 1999. From February 1997 to June 1999, Mr. Kraul was President and
Chairman of Harmony Systems, Inc., a developer of Internet desktop client
software and applications for information management and electronic musical
products. From October 1993 until February 1997, Mr. Kraul served in several
positions with Motorola, Inc., an electronic and communications company, most
recently as Vice President, General Manager, Motorola Platform Software
Division and Vice President, General Manager, Personal Communicator Systems &
Software Division.

MICHAEL R. MATTINGLY has served as our Chief Financial Officer since May
1999 and was our Corporate Controller from February 1999 to May 1999.
Previously, Mr. Mattingly was employed by Mosler Inc., a provider of electronic
security systems and security equipment. During a 20-year career at Mosler, Mr.
Mattingly held various positions in finance and accounting, most recently Cost
Controller and Company Controller. Prior to his service with Mosler, Mr.
Mattingly served in various financial and accounting positions with American
Standard, Inc., a public company whose shares are traded on the New York Stock
Exchange. His professional background includes 28 years of general accounting,
cost accounting, planning and budgeting, as well as management of those
functions.

ROBERT PROTHEROE has served as our Senior Vice President, Research and
Development since March 1999. From November 1995 to March 1999, Mr. Protheroe
held senior management positions, most recently Vice President of Engineering,
at IVI/Checkmate Electronics, Inc., an Atlanta-based designer and manufacturer
of point-of-sale payment systems. Prior to joining IVI/Checkmate, Mr. Protheroe
was employed by Electronic Power Technologies, Inc., AT&T Global Information
Systems and by NCR Corporation in various engineering and engineering
management positions.

DANIEL E. REED has served as our Vice President, Corporate Development and
Legal Affairs since May 1999. From August 1994 to May 1999, Mr. Reed was an
attorney with the law firm of Greenberg Traurig, P.A., Miami, Florida, where he
concentrated his law practice in the areas of mergers and acquisitions, public
offerings and private financings, representing both public and private
companies. From August 1989 to April 1991, Mr. Reed served as a senior auditor
with Ernst & Young, LLP, New York City, New York, concentrating his practice in
the financial services and electronics industries.

QURESH SACHEE has served as our Vice President, Sales and Marketing, since
May 1998. From 1993 to May 1998, Mr. Sachee was employed by IVI/Checkmate
Electronics, Inc., a designer and

8
<PAGE>

manufacturer of point-of-sale systems, in various positions, including
Executive Vice President, Senior Vice President of Product Management, and
prior to that, Vice President, International Sales. Prior to that time, Mr.
Sachee was employed by VeriFone Inc., a Hewlett Packard company, in various
product development and marketing management positions, and by Unisys
Corporation.

YOSHIAKI UCHIDA has served as our Senior Vice President and General
Manager, Japanese Operations, since February 2000, and previously served as our
Vice President and General Manager, Asian Operations, since November 1998.
Prior to that time, Mr. Uchida spent 33 years with Toshiba Corporation in
various management positions. He served as Deputy General Manager of Toshiba's
OME manufacturing and development facility, and most recently was Senior
Executive Vice President of MediaServe Corporation, a Toshiba affiliate.

D. JAMES BIDZOS has served as a director since May 1998. Since March 1999,
Mr. Bidzos has served as Vice Chairman of the Board of Directors of RSA
Security, Inc., a network security company, and served as its Executive Vice
President from July 1996 to February 1999. From 1986 to February 1999, Mr.
Bidzos served as President, Chief Executive Officer and a director of RSA Data
Security, Inc., an encryption software company that was acquired by Security
Dynamics Technologies, which subsequently changed its name to RSA Security, in
July 1996. Mr. Bidzos has served as Chairman of the Board of Directors of
VeriSign, Inc., a publicly-held electronic credentials/digital certificate
company, since its inception in April 1995, and was Chief Executive Officer of
that company from April 1995 to July 1995.

ANTHONY A. IBARGUEN has served as a director since August 1999. Since
December 1999, Mr. Ibarguen has served as a Managing Director, Operations and
as President of Professional Services of Internet Capital Group, an Internet
holding company. In addition, from September 1996 through December 1999, Mr.
Ibarguen served in varying capacities at Tech Data Corp., a manufacturer of
micro-computer hardware and software, including President and Chief Operating
Officer since March 1997. From August 1993 to August 1996, he was employed by
ENTEX Information Services, Inc., an information technology company, as
Executive Vice President of Sales and Marketing. Mr. Ibarguen is also a
director of eMerge Interactive, Inc., a publicly-held provider of an online
marketplace for the cattle industry.

SHIGEKI MORITA has served as a director since April 1999. Since 1994, Mr.
Morita has served in various capacities with Toshiba Corporation, including his
current position as Technology Executive, Semiconductor Company, which he has
held since November 1998.

TIMOTHY TOMLINSON has served as a director since our inception in 1997. He
co-founded Tomlinson Zisko Morosoli & Maser LLP, a law firm, in 1983, and has
been a partner there since that time. Mr. Tomlinson also serves on the board of
directors of VeriSign, Inc., Oak Technology, Inc. and Portola Packaging, Inc.,
which are publicly-held, as well as other, privately-held companies, including
Fischer International where he has served since April 1999.

JOSEPH M. TUCCI has served as a director since August 1999. Since January
2000, Mr. Tucci has served as President and Chief Operating Officer of EMC
Corporation, a publicly-held company that designs and manufactures
storage-related hardware and software products. Prior to joining EMC, Mr. Tucci
served as Deputy Chief Executive Officer of Getronics N.V., a provider of
information and communication technology services, from June 1999 through
December 1999. From August 1990 through June 1999, Mr. Tucci was employed by
Wang Laboratories, Inc., a provider of information technology services and
solutions, initially as Executive Vice President, Operations, and, from January
1993 until June 1999, as President and Chief Executive Officer. Mr. Tucci
served as Chairman of the Board of Directors of Wang Laboratories from October
1993 until June 1999. Getronics acquired Wang in June 1999, and Wang
Laboratories is currently a subsidiary of Getronics. Mr. Tucci is also a
director of Telecom Italia, S.p.A. and Paychex, Inc., a company engaged in
providing computerized payroll accounting services, which are publicly-held.

HATIM TYABJI has served as a director since August 1999. Since September
1998, Mr. Tyabji has been Chairman and Chief Executive Officer of Saraide,
Inc., a provider of Internet and wireless data

9
<PAGE>

services. From 1986 until 1998, Mr. Tyabji served as President and Chief
Executive Officer of VeriFone, Inc., a company which designs systems for
automated payment transactions. He also served as Chairman of Verifone from
1992 until 1998. Mr. Tyabji is also a director of Best Buy Co., Inc.,
PubliCARD, Inc., Deluxe Corporation and Ariba, Inc., which are publicly-held.

O. LEE DRENNAN has served as our Director of Product Engineering since
January 1998. From March 1991 to January 1998, he served in a number of
positions for Fischer International and SmartDisk Security Corporation, most
recently as Director of Product Engineering for Fischer International.

KAZUHISA FUKATSU has served as Senior Manager, Production Control and
Assistant to the President of SmartDisk International since June 1998. From
July 1996 to May 1998, he served in the position of Director of Akia
Corporation, a computer and electronics company. From September 1992 to July
1996, he served as Controller for Serano Japan Co., Ltd., a pharmaceutical
company.

KAZUHIRO IWATA has served as Vice President, Engineering of SmartDisk
International since April 1999. Prior to that time, Mr. Iwata spent almost 28
years with Toshiba Corporation where he held a number of management positions,
most recently Chief Specialist, Engineering Administration.

JON KAPLAN has served as our Vice President, Software Development since
January 1998. Prior to that time, he spent 8 years with Fischer International
as Vice President, Product Development.

KONOSUKE NAKAMURA has served as Vice President, Marketing of SmartDisk
International since March 1999. Prior to that time, Mr. Nakamura spent nearly
29 years with Toshiba Corporation in various management positions. Most
recently, he served as a Senior Manager, International Sales & Marketing,
Storage Device Division for Toshiba.

HOW ARE DIRECTORS COMPENSATED?

OPTIONS. Our 1999 Incentive Compensation Plan includes an automatic grant
program for non-employee directors. Under the plan, non-employee directors are
automatically granted options to purchase 15,000 shares of common stock upon
their initial election to our board of directors and 500 shares upon
appointment to any committee and upon appointment as chairman of a committee.
Thereafter, the directors are granted options to purchase an additional 7,500
shares in January of each year that they serve on the board and 2,000 each year
that they serve as a member, and 1,000 each year that they serve as a chairman,
of a committee. For fiscal 1999, Messrs. Battaglia, Tomlinson, Tucci, Bidzos,
Fischer, Ibarguen and Tyabji received grants under the plan. Each option
granted under the automatic grant program vests 2% a month for each month after
the grant and permits the holder to purchase shares of common stock at their
fair market value on the date of the grant.

HOW OFTEN DID THE BOARD MEET DURING FISCAL 1999?

The board of directors met seven times during fiscal 1999. Each director,
other than Messrs. Tyabji and Tucci, attended more than 75% of the total number
of meetings of the board and committees on which he served. Messrs. Tucci and
Tyabji, who were appointed directors in August 1999, were unable to attend the
sole board meeting (and related committee meetings on the same day) held in
1999 following their appointment.

WHAT COMMITTEES HAS THE BOARD ESTABLISHED?

The board of directors has a compensation committee and an audit
committee.

10
<PAGE>

BOARD COMMITTEE MEMBERSHIP

<TABLE>
<CAPTION>
NAME COMPENSATION COMMITTEE AUDIT COMMITTEE
- ---- ------------------------ ----------------
<S> <C> <C>
Addison M. Fischer ............
Michael S. Battaglia ..........
D. James Bidzos ............... **
Anthony A. Ibarguen ........... *
Shigeki Morita ................
Timothy Tomlinson ............. **
Joseph M. Tucci ............... *
Hatim Tyabji .................. *
</TABLE>

- ----------------
* Member.

** Chair.

COMPENSATION COMMITTEE. The compensation committee of the board of
directors reviews and makes recommendations to the board regarding all forms of
compensation provided to our executive officers and directors and those of our
subsidiaries including stock compensation and loans. In addition, the
compensation committee reviews and makes recommendations on stock compensation
arrangements for all of our employees. The compensation committee also
administers our 1998 Employee Stock Option Plan, 1998 Directors and Consultants
Stock Option Plan, 1999 Incentive Compensation Plan and 1999 Employee Stock
Purchase Plan. In fiscal 1999, the compensation committee met three times.

AUDIT COMMITTEE. The audit committee of the board of directors reviews and
monitors our corporate financial reporting and our external audit, including,
among other things, our internal control structure, the results and scope of
the annual audit and other services provided by our independent auditors and
our compliance with legal requirements that have a significant impact on our
financial reports. The audit committee also consults with our management and
our independent auditors regarding the preparation of financial statements and,
as appropriate, initiates inquiries into aspects of our financial affairs. In
addition, the audit committee has the responsibility to consider and recommend
the appointment of, and to review fee arrangements with, our independent
auditors. In fiscal 1999, the audit committee met four times.

EXECUTIVE COMPENSATION

THE FOLLOWING REPORT OF THE COMPENSATION COMMITTEE AND THE PERFORMANCE
GRAPH INCLUDED ELSEWHERE IN THIS PROXY STATEMENT DO NOT CONSTITUTE SOLICITING
MATERIAL AND SHOULD NOT BE DEEMED FILED OR INCORPORATED BY REFERENCE INTO ANY
OF OUR OTHER FILINGS UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
EXCHANGE ACT OF 1934, EXCEPT TO THE EXTENT WE SPECIFICALLY INCORPORATE THIS
REPORT OR THE PERFORMANCE GRAPH BY REFERENCE THEREIN.

REPORT OF THE COMPENSATION COMMITTEE

The compensation committee has responsibility for matters related to
compensation, including compensation policy, approval of salaries, bonuses and
other compensation for our officers and administration of our various stock
option plans.

WHAT IS OUR POLICY REGARDING EXECUTIVE OFFICER COMPENSATION?

Our executive compensation policy is designed to enable us to attract,
motivate and retain highly qualified executive officers. The key components of
our compensation program are

/bullet/ base salary;

/bullet/ annual incentive bonus awards; and

/bullet/ equity participation in the form of stock options.

11
<PAGE>

In arriving at specific levels of compensation for executive officers, the
committee has relied on

/bullet/ the recommendations of management;

/bullet/ benchmarks provided by generally available compensation surveys;
and

/bullet/ the experience of committee members and their knowledge of
compensation paid by other similar technology companies.

The committee also seeks to ensure that an appropriate relationship exists
between executive pay and corporate performance. Executive officers are also
entitled to customary benefits generally available to all our employees,
including group medical, dental, and life insurance and our 401(k) plan and
employee stock purchase plan. We have long-term employment agreements with
certain of our executive officers to provide them with the employment security
and severance deemed necessary by the committee to retain them.

WHAT ARE THE COMPONENTS OF EXECUTIVE COMPENSATION?

BASE SALARY. In addition to complying with the executive compensation
policy and to the requirements of applicable employment agreements,
compensation for each of the executive officers for 1999 was based on the
executive's duties and responsibilities, the performance of SmartDisk, both
financial and otherwise, and the success of the executive in developing and
executing our research and development, sales and marketing, financing and
strategic plans, as appropriate.

BONUS. Executive officers received cash bonuses for fiscal 1999 ranging
from approximately 5% to 47% of base salary based on the degree of our
achievement of our financial and other objectives and the degree of achievement
by each such officer of his or her individual objectives as approved by the
committee.

STOCK OPTIONS. Equity participation is a key component of our executive
compensation program. Stock options are granted to executive officers primarily
based on the officer's actual and expected contribution to our development.
Options are designed to retain executive officers and motivate them to enhance
shareholder value by aligning their financial interests with those of our
shareholders. Stock options provide an effective incentive for management to
create shareholder value over the long term since the option value depends on
appreciation in the price of our common stock over a number of years.

HOW ARE WE ADDRESSING INTERNAL REVENUE CODE LIMITS ON DEDUCTIBILITY OF
COMPENSATION?

Section 162(m) of the U.S. Internal Revenue Code limits the tax
deductibility by a corporation of compensation in excess of $1 million paid to
the Chief Executive Officer and any other of its four most highly compensated
executive officers. However, compensation which qualifies as "performance-based"
is excluded from the $1 million limit if, among other requirements, the
compensation is payable only upon attainment of pre-established, objective
performance goals under a plan approved by shareholders. The compensation
committee does not presently expect total cash compensation payable for
salaries to exceed the $1 million limit for any individual executive. Having
considered the requirements of Section 162(m), the compensation committee
believes that stock option grants to date meet the requirement that such grants
be "performance-based" and are, therefore, exempt from the limitations on
deductibility. The compensation committee will continue to monitor the
compensation levels potentially payable under our cash compensation programs,
but intends to retain the flexibility necessary to provide total cash
compensation in line with competitive practice, our compensation philosophy,
and our best interests.

MEMBERS OF THE COMPENSATION COMMITTEE
D. JAMES BIDZOS (CHAIRMAN)
HATIM TYABJI
JOSEPH M. TUCCI

12
<PAGE>

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The compensation committee of the board of directors consisted in 1999 of
Timothy Tomlinson, D. James Bidzos and Hatim Tyabji. There were no compensation
committee interlocks during fiscal 1999.

SUMMARY COMPENSATION TABLE

The following table sets forth information concerning total compensation
earned or paid to our Chief Executive Officer and our four most highly
compensated executive officers who served in such capacities as of December 31,
1999, collectively referred to below as the "named executive officers," for the
fiscal years ended December 31, 1998 and 1999:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------- -------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
- ---------------------------- ------ ---------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Michael S. Battaglia 1999 $ 275,000 $ 109,500 200,000 --
Chief Executive Officer 1998 100,440(1) 45,000(1) 426,136 --
and President
Quresh Sachee 1999 146,667 69,304 50,000 --
Vice President, 1998 89,306 47,500 50,000 --
Marketing and Sales
Robert L. Protheroe 1999 142,500 25,000 100,000 --
Senior Vice President,
Research and Development
Yoshiaki Uchida 1999 168,800 39,475 50,000 --
Senior Vice President 1998 25,000 -- 25,000 --
and General Manager,
Japanese Operations
Michael R. Mattingly 1999 105,972 14,750 75,000 --
Chief Financial Officer
</TABLE>

- ----------------
(1) In addition, Mr. Battaglia received $100,440 in salary and $60,000 in bonus
from Fischer International for services rendered to Fischer International
in 1998. Commencing January 1, 1999, Mr. Battaglia became our full-time
employee.

13
<PAGE>

STOCK OPTION GRANTS IN FISCAL 1999

The following table sets forth each grant of stock options during the
fiscal year ended December 31, 1999 to each of the named executive officers. No
stock appreciation rights were granted to these individuals during that year.

OPTION GRANTS IN FISCAL 1999

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF
------------------------------------------------------------------------ STOCK PRICE APPRECIATION
NUMBER OF SECURITIES % OF TOTAL OPTIONS EXERCISE OR FOR OPTION TERM(1)
UNDERLYING OPTIONS GRANTED TO EMPLOYEES BASE PRICE EXPIRATION -------------------------
NAME GRANTED IN FISCAL YEAR ($)(SH)(2) DATE(2) 5%($) 10%($)
- ---------------------- ---------------------- ---------------------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Michael S. Battaglia 87,500 8.5% $ 4.80 2/11/09 $264,136 $ 669,372
112,500 11.0% 8.00 5/13/09 563,490 1,427,993
Quresh Sachee 6,250 0.6% 4.80 2/11/09 18,867 47,812
43,750 4.3% 8.00 5/13/09 220,113 557,810
Robert L. Protheroe 40,000 3.9% 4.80 3/16/09 120,748 305,999
60,000 5.9% 8.00 5/13/09 301,869 764,996
Yoshiaki Uchida 12,500 1.2% 4.80 2/11/09 37,734 95,625
37,500 3.7% 8.00 5/13/09 188,668 478,123
Michael R. Mattingly 25,000 2.4% 4.80 2/14/09 75,467 191,249
50,000 4.9% 8.00 5/13/09 251,558 637,497
</TABLE>

- ----------------
(1) Potential realizable value is based on the assumption that the common stock
price appreciates at the annual rate shown, compounded annually, from the
date of grant until the end of the option term. The amounts have been
calculated based on the requirements promulgated by the Securities and
Exchange Commission. The actual value, if any, a named executive officer
may realize will depend on the excess of the stock price over the exercise
price on the date the option is exercised, if the executive were to sell
the shares on the date of exercise, so there is no assurance that the
value realized will be equal to or near the potential realizable value as
calculated in this table.

(2) Prior to our initial public offering on October 6, 1999, there was no
public market for our common stock. The exercise price of each of these
options granted prior to that time is equal to the fair market value of
our common stock on the date of grant as determined by our board of
directors.

(3) Each of the options granted has a term of ten years from the date of grant,
subject to acceleration upon a change of control of our company.

14
<PAGE>

STOCK OPTION EXERCISES AND VALUES FOR FISCAL 1999

The table below sets forth the following information with respect to
option exercises during fiscal 1999 by each of the named executive officers and
the status of their options at December 31, 1999:

/bullet/ the number of shares of common stock acquired upon exercise of
options during fiscal 1999;
/bullet/ the aggregate dollar value realized upon the exercise of such
options;
/bullet/ the total number of exercisable and non-exercisable stock options
held at December 31, 1999; and
/bullet/ the aggregate dollar value of in-the-money exercisable options at
December 31, 1999.

AGGREGATE OPTION EXERCISES IN 1999 AND YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1999(#) DECEMBER 31, 1999($)
ACQUIRED VALUE ----------------------------- ----------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------ ---------------- ------------ ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Michael S. Battaglia ......... -- -- -- 200,000 -- 5,230,000
Quresh Sachee ................ -- -- 20,000 50,000 575,000 1,257,500
Robert L. Protheroe .......... -- -- -- 100,000 -- 2,603,000
Yoshiaki Uchida .............. -- -- -- 75,000 -- 1,996,250
Michael R. Mattingly ......... -- -- -- 75,000 -- 1,936,250
</TABLE>

- ----------------
(1) In accordance with SEC rules, values are calculated by subtracting the
exercise price from the fair market value of the underlying common stock.
For purposes of this table, fair market value is deemed to be $32.75 the
closing sales price per share of common stock as reported by the NASDAQ
National Market on December 31, 1999.

EMPLOYMENT AGREEMENTS

MICHAEL S. BATTAGLIA. Mr. Battaglia's employment agreement has a
three-year term ending December 31, 2002. His annual base salary is $275,000
and he is eligible for annual merit increases at the discretion of our board of
directors and an annual bonus of $125,000 for 2000 if we achieve specific
revenue and profitability goals. Bonuses for the remaining years in the term
are at the discretion of the compensation committee of our board of directors.
If we terminate Mr. Battaglia without cause, we must pay him severance of six
months' base salary plus fifty percent of his bonus, if any, for the year in
which he was terminated. Mr. Battaglia has agreed not to compete with us for
one year after his employment if he resigns and for six months after his
employment if we terminate him.

ROBERT PROTHEROE. Mr. Protheroe's employment agreement has a three-year
term ending March 15, 2002. His annual base salary is $190,000 and he is
eligible for a bonus of $60,000 for 2000 if we achieve specific revenue and
profitability goals. Bonuses for the remaining years are at the discretion of
the compensation committee of our board of directors. If we terminate Mr.
Protheroe without cause, we must pay him severance of six months' base salary.
Mr. Protheroe has agreed not to compete with us for one year after termination
of his employment.

QURESH SACHEE. Mr. Sachee's employment agreement has a two-year term
ending May 3, 2000. His annual base salary is $150,000 and he is eligible for a
bonus of $50,000 for 2000 if we achieve specific revenue and profitability
goals. If we terminate Mr. Sachee without cause, we must pay him severance of
three months' base salary. Mr. Sachee has agreed not to compete with us for one
year after termination of his employment if he resigns and for six months after
his employment if we terminate him.

VINCENT FEDELE. Mr. Fedele's employment agreement with our subsidiary,
SmartDisk Personal Storage Systems Corporation (formerly known as VST
Technologies, Inc.), has a two year term ending March 6, 2002. His annual base
salary is $200,000 and he is eligible for a bonus of $60,000 if we achieve
specific revenue and profitability goals. If we elect not to renew his
employment agreement

15
<PAGE>

upon its expiration, we must pay Mr. Fedele severance of his pro rata portion
of any bonus compensation to which he is entitled. In addition, if we terminate
him without cause, we must pay him severance of three months' base salary and
his pro rata portion of any bonus compensation to which he is entitled. Mr.
Fedele has agreed not to compete with us for two years after termination of his
employment if we terminate him for cause and for the later of one year
following the termination date or March 6, 2002 if he resigns or we terminate
him without cause.

JAMES M. GIARRUSSO. Mr. Giarrusso's employment agreement with our
subsidiary, SmartDisk Personal Storage, has a two year term ending March 6,
2002. His annual base salary is $200,000 and he is eligible for a bonus of
$60,000 if we achieve specific revenue and profitability goals. If we elect not
to renew his employment agreement upon its expiration, we must pay Mr.
Giarrusso severance of three months' base salary. In addition, if we terminate
him without cause, we must pay him severance of three months' base salary and
his pro rata portion of any bonus compensation to which he is entitled. Mr.
Giarrusso has agreed not to compete with us for two years after termination of
his employment if we terminate him for cause and for the later of one year
following the termination date or March 6, 2002 if he resigns or we terminate
him without cause.

EMPLOYEE BENEFIT PLANS

1999 INCENTIVE COMPENSATION PLAN. Our board of directors adopted our 1999
Incentive Compensation Plan in July 1999 and our stockholders approved the
adoption of the plan in July 1999. We have reserved 2,500,000 shares of common
stock for issuance under the plan, of which options to purchase 1,532,998
shares were outstanding as of March 31, 2000. There remain 967,002 shares of
common stock available for issuance under the plan. Under the plan, officers,
employees, members of the board of directors and consultants are eligible to
receive awards. The types of awards that may be made under the plan are options
to purchase shares of common stock, stock appreciation rights, restricted
shares, deferred shares, bonus shares, dividend equivalents and other
stock-based awards. Options may be either incentive stock options that qualify
for favorable tax treatment for the optionee under Section 422 of the Internal
Revenue Code of 1986 or nonstatutory stock options not designed to qualify for
favorable tax treatment. If shares awarded under the plan are forfeited, then
those shares will again become available for new awards under the plan. Annual
cash awards are limited to $10,000,000 per person, and annual cash performance
awards are limited to $20,000,000 per person.

The compensation committee of our board of directors administers the plan.
The committee has complete discretion to make all decisions relating to the
interpretation and operation of the plan, including the discretion to determine
which eligible individuals are to receive any award, and to determine the type,
number, vesting requirements and other features and conditions of each award.

The exercise price for incentive stock options granted under the plan may
not be less than 100% of the fair market value of the common stock on the
option grant date. The exercise price may be paid in cash or by other means,
including a cashless exercise method as determined by the compensation
committee.

The plan includes an automatic grant program for our non-employee
directors. Under the plan, non-employee directors are automatically granted
options to purchase 15,000 shares of common stock upon their initial election
to the board of directors and 500 shares upon appointment to any committee of
the board and upon appointment as chairman of a committee. Prior to January 1,
2000, directors were granted options to purchase an additional 6,000 shares in
January of each year that they served on the board and 500 each year that they
served as a member, and 500 each year that they served as chairman, of a
committee. Pursuant to an amendment to the plan adopted by the board of
directors effective January 1, 2000, directors are granted options to purchase
an additional 7,500 shares in January of each year that they serve on the board
and 2,000 each year that they serve as a member, and 1,000 each year that they
serve as chairman, of a committee. All options granted under the automatic
grant program vest 2% a month for each month after the grant. Directors who
were serving on the board on the date that the plan was adopted are eligible to
participate in the program in 2001. Otherwise, directors are eligible upon
election.

16
<PAGE>

Our board of directors may amend or terminate our plan at any time. If the
board amends the plan, stockholder approval of the amendment will be sought
only if required by an applicable law. The plan will continue in effect
indefinitely unless the board decides to terminate the plan earlier.

On March 24, 2000 the board of directors adopted an amendment to the plan,
subject to the approval of our stockholders at the 2000 Annual Meeting. If the
amendment is approved by our stockholders, the amended plan will differ from
our current plan as follows:

/bullet/ the number of shares of common stock reserved and available for
delivery in connection with awards under the plan will be increased
to 3,000,000 shares from 2,500,000 shares; and

/bullet/ the number of shares of common stock reserved and available for
delivery in connection with awards under the plan will automatically
increase on the first trading day of each calendar year, commencing
2001 and continuing through 2005, by an amount equal to 3% of the
total number of shares of our common stock outstanding on the last
trading day of the immediately preceding calendar year.

1999 EMPLOYEE STOCK PURCHASE PLAN. Our board of directors adopted our 1999
Employee Stock Purchase Plan in July 1999, and our stockholders approved the
adoption of the plan in July 1999. We have reserved 465,000 shares of common
stock for issuance under the plan, of which 15,411 shares have been issued as
of March 31, 2000. There remain 449,589 shares of common stock available for
issuance under the plan. Once an employee enters the plan, on the first day of
each offering period he or she is granted an option to purchase shares of our
common stock, up to a maximum of 1,000 shares, on June 30 and December 31 of
each offering period. The plan, which is intended to qualify under Section 423
of the Internal Revenue Code of 1986, is implemented through successive twelve-
month offering periods, generally commencing the first of January each year.
The initial offering period commenced on October 6, 1999, the date of the
initial public offering of our common stock, and runs through December 31,
2000. Each succeeding offering period commences on the first trading day of
January and runs until the end of the year. The plan is administered by the
compensation committee. Employees become eligible to participate when they have
been employed for more than five (5) months in a calendar year, working at
least 20 hours a week. The plan permits eligible employees to purchase common
stock through payroll deductions, which may not exceed 15% of an employee's
compensation. The price of stock purchased under the plan will be 85% of the
lower of the fair market value of the common stock at either the beginning of
the offering period or the day that the employee became eligible under the plan
(if after the beginning of such period), whichever is higher, or the end of
each six-month exercise period. Employees may not be granted shares under the
plan if immediately following a grant they would hold stock and/or options to
acquire stock possessing more than 5% of the total voting power of the shares
of our company. In addition, employees may be granted options to purchase a
maximum of $21,250 worth of stock per year under the plan. Employees may end
their participation at any time and participation ends automatically upon
termination of employment with us. Our board of directors may amend or
terminate the plan at any time. If the board amends the plan, stockholder
approval of the amendment will be sought only if required by an applicable law.

1998 EMPLOYEE STOCK OPTION PLAN. Our board of directors adopted a 1998
Employee Stock Option Plan in January 1998, and our stockholders approved the
adoption of the plan in March 1998. Although we terminated this plan in July
1999, options to purchase 814,592 shares were outstanding as of March 31, 2000.

The plan required that the exercise price for incentive stock options
granted under the plan may not be less than 100% of the fair market value of
the common stock on the option grant date. The exercise price may be paid in
cash or, at the discretion of the compensation committee, in outstanding shares
of common stock, by delivery of a promissory note, or by any combination of
cash, shares of common stock or promissory notes. At the discretion of the
compensation committee, the exercise price may also be paid by using a cashless
exercise method.

17
<PAGE>

If a merger or other reorganization occurs, and our stockholders before
the transaction hold a majority of the voting securities of the acquiring or
surviving corporation after the transaction, outstanding options under the plan
shall become exercisable for securities of the acquiring or surviving
corporation. If our stockholders before the transaction hold less than a
majority of the voting securities of the acquiring or surviving corporation
after the transaction, outstanding options shall generally be canceled unless
the merger or reorganization agreement provides otherwise.

1998 DIRECTORS AND CONSULTANTS STOCK OPTION PLAN. Our board of directors
adopted a 1998 Directors and Consultants Stock Option Plan in January 1998, and
our stockholders approved the adoption of the plan in March 1998. Although we
terminated this plan in July 1999, options to purchase 142,093 shares were
outstanding as of March 31, 2000.

The plan required that the exercise price for stock options granted under
the plan shall be determined by the compensation committee at the time of
grant. The exercise price may be paid in cash or, at the discretion of the
committee, in outstanding shares of common stock, by delivery of a promissory
note, or by any combination of cash, shares of common stock or promissory
notes. At the discretion of the committee, the exercise price may also be paid
by using a cashless exercise method.

18
<PAGE>

PERFORMANCE GRAPH

The following graph compares the performance of our common stock with the
NASDAQ Stock Market (U.S. Companies) Index and the Chase H&Q Technology Index
between October 6, 1999, the date of the initial public offering of our common
stock and December 31, 1999. The graph assumes that $100 was invested on
October 6, 1999 in our common stock, the NASDAQ Stock Market (U.S. Companies)
Index and the Chase H&Q Technology Index, and that all dividends were
reinvested.

COMPARISON OF 3-MONTH CUMULATIVE TOTAL RETURNS FROM OCTOBER 6, 1999 TO
DECEMBER 31, 1999.

SMARTDISK CORP

Cumulative Total Return
10/6/99 12/31/99

SMARTDISK CORPORATION 100.00 251.92
NASDAQ STOCK MARKET (U.S.) 100.00 141.52
CHASE H & Q TECHNOLOGY 100.00 153.77

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<PAGE>

ITEM 2--APPROVAL OF THE AMENDMENT OF OUR
1999 INCENTIVE COMPENSATION PLAN

Our board of directors and stockholders initially adopted our 1999
Incentive Compensation Plan in July 1999 to assist us and our subsidiaries in
attracting, motivating, retaining and rewarding employees, officers, directors
and independent contractors by enabling such persons to acquire or increase a
proprietary interest in us in order to strengthen the mutuality of interests
between such persons and our stockholders, and providing such persons with
annual and long term performance incentives to expend their maximum efforts in
the creation of stockholder value. On March 24, 2000 the board of directors
adopted a resolution amending the plan, subject to the approval of our
stockholders at the 2000 Annual Meeting.

SUMMARY OF PLAN CHANGES

If the resolution is adopted by our stockholders, the amended plan will
differ from our current plan in that:

/bullet/ the number of shares of common stock reserved and available for
delivery in connection with awards under the plan will be increased
to 3,000,000 shares from 2,500,000 shares; and

A copy of the plan, as amended, is attached to this proxy statement as
Appendix A.

REASONS FOR PLAN CHANGES

Our board of directors believes that the number of shares currently
available under the plan may be insufficient in light of the continued growth
in our operations, including potential increases in the number of employees if
and to the extent we complete acquisitions of other companies or businesses.
Since the inception of the plan, we have granted options to purchase an
aggregate of 1,532,998 shares of common stock under the plan, including options
to purchase approximately 322,000 shares granted to VST option holders in
connection with the VST acquisition. As a result, the Board has determined that
it is in our best interests to increase the number of shares available for
issuance under the plan, so that we will be able to continue to use stock
options and other equity awards to attract and retain the services of key
individuals essential to our long-term growth and success.

SUMMARY OF OUR 1999 INCENTIVE COMPENSATION PLAN, AS AMENDED

The terms of the plan provide for grants of stock options, stock
appreciation rights, called SARs, restricted stock, deferred stock, other
stock-related awards and performance or annual incentive awards that may be
settled in cash, stock or other property. The following is a summary of certain
principal features of the amended plan. This summary is qualified in its
entirety by reference to the complete text of the plan, as amended, which is
attached to this proxy statement as Appendix A. Stockholders are urged to read
the actual text of the plan in its entirety.

SHARES AVAILABLE FOR AWARDS; ANNUAL PER-PERSON LIMITATIONS. Under the
plan, as amended, the total number of shares of common stock that may be
subject to the granting of awards under the plan

20
<PAGE>

at any time during the term of the plan shall be equal to 3,000,000 shares,
plus the number of shares with respect to which awards previously granted under
the plan that terminate without being exercised, and the number of shares that
are surrendered in payment of any awards or any tax withholding requirements,
plus an annual increase to be added on the first trading day in January of each
year, commencing 2001 and continuing through 2005, equal to 3% of the total
number of shares of common stock outstanding on the last trading day in
December of the immediately preceding calendar year.

The plan limits the number of shares which may be issued pursuant to
incentive stock options to 500,000 shares.

In addition, the plan imposes individual limitations on the amount of
certain awards in part to comply with Internal Revenue Code Section 162(m).
Under these limitations, during any fiscal year the number of options, SARs,
restricted shares of common stock, deferred shares of common stock, shares as a
bonus or in lieu of our other obligations, and other stock-based awards granted
to any one participant may not exceed 100,000 shares, subject to adjustment in
certain circumstances. The maximum amount that may be paid out as an annual
incentive award or other cash award in any fiscal year to any one participant
is $10,000,000, and the maximum amount that may be earned as a performance
award or other cash award in respect of a performance period by any one
participant is $20,000,000.

The compensation committee is authorized to adjust the limitations
described in the two preceding paragraphs and is authorized to adjust
outstanding awards, including adjustments to exercise prices of options and
other affected terms of awards, in the event that a dividend or other
distribution, whether in cash, shares of common stock or other property,
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, share exchange or other
similar corporate transaction or event affects the common stock so that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of participants. The compensation committee is also authorized to adjust
performance conditions and other terms of awards in response to these kinds of
events or in response to changes in applicable laws, regulations or accounting
principles.

ELIGIBILITY. The persons eligible to receive awards under the plan are our
officers, directors, employees and independent contractors. Independent
contractors are not eligible to receive incentive stock options, called ISOs,
under the plan. An employee on leave of absence may be considered as still in
our employ or the employ of our subsidiary for purposes of eligibility for
participation in the plan. As of March 31, 2000, approximately 105 persons were
eligible to participate in the plan.

ADMINISTRATION. The plan is to be administered by the compensation
committee, each member of which must be a "non-employee director" as defined
under Rule 16b-3 under the Securities Exchange Act and an "outside director"
for purposes of Section 162(m) of the Internal Revenue Code. However, except as
otherwise required to comply with Rule 16b-3 of the Securities Exchange Act, or
Section 162(m) of the Internal Revenue Code, the board may exercise any power
or authority granted to the compensation committee. Subject to the terms of the
plan, the compensation committee or the board is authorized to select eligible
persons to receive awards, determine the type and number of awards to be
granted and the number of shares of common stock to which awards will relate,
specify times at which awards will be exercisable or settleable, including
performance conditions that may be required as a condition thereof, set other
terms and conditions of awards, prescribe forms of award agreements, interpret
and specify rules and regulations relating to the plan, and make all other
determinations that may be necessary or advisable for the administration of the
plan.

AUTOMATIC GRANT PROGRAM FOR NON-EMPLOYEE DIRECTORS. The plan includes an
automatic grant program for our non-employee directors. Under the plan,
non-employee directors are automatically granted options to purchase 15,000
shares of common stock upon their initial election to the board of directors
and 500 shares upon appointment to any committee of the board and upon
appointment as chairman of a committee. Thereafter, the directors are granted
options to purchase an additional 7,500

21
<PAGE>

shares in January of each year that they serve on the board and 2,000 each year
that they serve as a member, and 1,000 each year that they serve as chairman,
of a committee. All options granted under the automatic grant program vest 2% a
month for each month after the grant. Directors who were serving on the board
on the date that the plan was originally adopted are eligible to participate in
the program in 2001. Otherwise, directors are eligible upon election.

STOCK OPTIONS AND SARS. The compensation committee or the board is
authorized to grant (i) stock options, including (a) ISOs which can result in
potentially favorable tax treatment to the participant, and (b) non-qualified
stock options, and (ii) SARs entitling the participant to receive the amount by
which the fair market value of a share of common stock on the date of exercise
(or defined "change in control price" following a change in control) exceeds
the grant price of the SAR. The exercise price per share subject to an option
and the grant price of a SAR are determined by the compensation committee, but
in the case of an ISO must not be less than the fair market value of a share of
common stock on the date of grant. For purposes of the plan, the term fair
market value means the fair market value of common stock, awards or other
property as determined by the compensation committee or the board or under
procedures established by the compensation committee or the board. Unless
otherwise determined by the compensation committee or the board, the fair
market value of common stock as of any reference date shall be the closing
sales price per share of common stock on the business day immediately preceding
the date of reference as reported on the NASDAQ National Market on the date as
of which such value is being determined or, if there is no sale on that date,
then on the last previous day on which a sale was reported. The maximum term of
each option or SAR, the times at which each option or SAR will be exercisable,
and provisions requiring forfeiture of unexercised options or SARs at or
following termination of employment generally are fixed by the compensation
committee or the board, except that no option or SAR may have a term exceeding
ten years. Options may be exercised by payment of the exercise price in cash,
shares that have been held for at least six months, outstanding awards or other
property having a fair market value equal to the exercise price, as the
compensation committee or the board may determine from time to time. Methods of
exercise and settlement and other terms of the SARs are determined by the
compensation committee or the board. SARs granted under the plan may include
limited SARs, which are exercisable for a stated period of time following a
change in control, as discussed below.

RESTRICTED AND DEFERRED STOCK. The compensation committee or the board is
authorized to grant restricted stock and deferred stock. Restricted stock is a
grant of shares of common stock which may not be sold or disposed of, and which
may be forfeited in the event of certain terminations of employment, prior to
the end of a restricted period specified by the compensation committee or the
board. A participant granted restricted stock generally has all of the rights
of a stockholder, unless otherwise determined by the compensation committee or
the board. An award of deferred stock confers upon a participant the right to
receive shares of common stock at the end of a specified deferral period,
subject to possible forfeiture of the award in the event of certain
terminations of employment prior to the end of a specified restricted period.
Prior to settlement, an award of deferred stock carries no voting or dividend
rights or other rights associated with share ownership, although dividend
equivalents may be granted, as discussed below.

DIVIDEND EQUIVALENTS. The compensation committee or the board is
authorized to grant dividend equivalents conferring on participants the right
to receive, currently or on a deferred basis, cash, shares of common stock,
other awards or other property equal in value to dividends paid on a specific
number of shares of common stock or other periodic payments. Dividend
equivalents may be granted alone or in connection with another award, may be
paid currently or on a deferred basis and, if deferred, may be deemed to have
been reinvested in additional shares of common stock, awards or otherwise as
specified by the committee or the board.

BONUS STOCK AND AWARDS IN LIEU OF CASH OBLIGATIONS. The compensation
committee or the board is authorized to grant shares of common stock as a bonus
free of restrictions, or to grant shares

22
<PAGE>

of common stock or other awards in lieu of our obligations to pay cash under
the plan or other plans or compensatory arrangements, subject to such terms as
the compensation committee or the board may specify.

OTHER STOCK-BASED AWARDS. The compensation committee or the board is
authorized to grant awards that are denominated or payable in, valued by
reference to, or otherwise based on or related to shares of common stock. Such
awards might include convertible or exchangeable debt securities, other rights
convertible or exchangeable into shares of common stock, purchase rights for
shares of common stock, awards with value and payment contingent upon our
performance or any other factors designated by the compensation committee or
the board, and awards valued by reference to the book value of shares of common
stock or the value of securities of or the performance of specified
subsidiaries or business units. The compensation committee or the board
determines the terms and conditions of such awards.

PERFORMANCE AWARDS, INCLUDING ANNUAL INCENTIVE AWARDS. The right of a
participant to exercise or receive a grant or settlement of an award, and the
timing thereof, may be subject to such performance conditions, including
subjective individual goals, as may be specified by the compensation committee
or the board. In addition, the plan authorizes specific annual incentive
awards, which represent a conditional right to receive cash, shares of common
stock or other awards upon achievement of certain preestablished performance
goals and subjective individual goals during a specified fiscal year.
Performance awards and annual incentive awards granted to persons whom the
compensation committee expects will, for the year in which a deduction arises,
be covered employees which include our chief executive officer and each other
person whose compensation is required to be disclosed in our filings with the
SEC by reason of that person being among our four highest compensated officers
as of the end of a taxable year, will, if and to the extent intended by the
compensation committee, be subject to provisions that should qualify such
awards as performance-based compensation not subject to the limitation on tax
deductibility by us under Internal Revenue Code Section 162(m). If and to the
extent required under Section 162(m) of the Internal Revenue Code, any power or
authority relating to a performance award or annual incentive award intended to
qualify under Section 162(m) of the Internal Revenue Code is to be exercised by
the compensation committee and not the board.

Subject to the requirements of the plan, the compensation committee or the
board will determine performance award and annual incentive award terms,
including the required levels of performance with respect to specified business
criteria, the corresponding amounts payable upon achievement of such levels of
performance, termination and forfeiture provisions and the form of settlement.
In granting annual incentive or performance awards, the compensation committee
or the board may establish unfunded award pools, the amounts of which will be
based upon the achievement of a performance goal or goals based on one or more
of certain business criteria described in the plan, including, for example,
total stockholder return, net income, pretax earnings, EBITDA, earnings per
share, and return on investment. During the first 90 days of a fiscal year or
performance period, the compensation committee or the board will determine who
will potentially receive annual incentive or performance awards for that fiscal
year or performance period, either out of the pool or otherwise.

After the end of each fiscal year or performance period, the compensation
committee or the board will determine (i) the amount of any pools and the
maximum amount of potential annual incentive or performance awards payable to
each participant in the pools and (ii) the amount of any other potential annual
incentive or performance awards payable to participants in the plan. The
compensation committee or the board may, in its discretion, determine that the
amount payable as an annual incentive or performance award will be reduced from
the amount of any potential award.

OTHER TERMS OF AWARDS. Awards may be settled in the form of cash, shares
of common stock, other awards or other property, in the discretion of the
compensation committee or the board. The compensation committee or the board
may require or permit participants to defer the settlement of all or part of an
award in accordance with such terms and conditions as the compensation
committee or

23
<PAGE>

the board may establish, including payment or crediting of interest or dividend
equivalents on deferred amounts, and the crediting of earnings, gains and
losses based on deemed investment of deferred amounts in specified investment
vehicles. The compensation committee or the board is authorized to place cash,
shares of common stock or other property in trusts or make other arrangements
to provide for payment of our obligations under the plan. The compensation
committee or the board may condition any payment relating to an award on the
withholding of taxes and may provide that a portion of any shares of common
stock or other property to be distributed will be withheld, or previously
acquired shares of common stock or other property be surrendered by the
participant, to satisfy withholding and other tax obligations. Awards granted
under the plan generally may not be pledged or otherwise encumbered and are not
transferable except by will or by the laws of descent and distribution, or to a
designated beneficiary upon the participant's death, except that the
compensation committee or the board may, in its discretion, permit transfers
for estate planning or other purposes subject to any applicable restrictions
under Rule 16b-3.

Awards under the plan are generally granted without a requirement that the
participant pay consideration in the form of cash or property for the grant, as
distinguished from the exercise, except to the extent required by law. The
compensation committee or the board may, however, grant awards in exchange for
other awards under the plan, awards under our other plans, or other rights to
payment from the us, and may grant awards in addition to and in tandem with
such other awards, rights or other awards.

ACCELERATION OF VESTING; CHANGE IN CONTROL. The compensation committee or
the board may, in its discretion, accelerate the exercisability, the lapsing of
restrictions or the expiration of deferral or vesting periods of any award, and
such accelerated exercisability, lapse, expiration and if so provided in the
award agreement, vesting shall occur automatically in the case of a change in
control, including the cash settlement of SARs and limited SARs, which may be
exercisable in the event of a change in control. In addition, the compensation
committee or the board may provide in an award agreement that the performance
goals relating to any performance based award will be deemed to have been met
upon the occurrence of any change in control. Upon the occurrence of a change
in control, if so provided in the award agreement, stock options, limited SARs
and other SARs which so provide may be cashed out based on a defined change in
control price, which will be the higher of (i) the cash and fair market value
of property that is the highest price per share paid, including extraordinary
dividends, in any reorganization, merger, consolidation, liquidation,
dissolution or sale of substantially all of our assets, or (ii) the highest
fair market value per share, which is generally based on market prices, at any
time during the 60 days before and 60 days after a change in control. For
purposes of the plan, the term change in control generally means (a) approval
by stockholders of any reorganization, merger or consolidation or other
transaction or series of transactions if persons who were stockholders
immediately prior to such reorganization, merger or consolidation or other
transaction do not, immediately thereafter, own more than 50% of the combined
voting power of the reorganized, merged or consolidated company's then
outstanding, voting securities, or our liquidation or dissolution or the sale
of all or substantially all of our assets, unless the reorganization, merger,
consolidation or other corporate transaction, liquidation, dissolution or sale
is subsequently abandoned, or (b) a change in the composition of the board such
that the persons constituting the incumbent board on the date the award is
granted, and subsequent directors approved by the incumbent board, or approved
by such subsequent directors, cease to constitute at least a majority of the
board, or (c) the acquisition by any person, entity or group, within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act, of more
than 30% of either the then outstanding shares of our common stock or the
combined voting power of our then outstanding voting securities entitled to
vote generally in the election of directors, hereinafter referred to as the
ownership of a controlling interest excluding, for this purpose, any
acquisitions by (1) us or our subsidiaries, (2) any person, entity or group
that as of the date on which the award is granted owns beneficial ownership,
within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act,
of a controlling interest, (3) Addison Fischer and/or any entities owned and/or
controlled by Addison Fischer or (4) any of our or our subsidiaries' employee
benefit plans.

24
<PAGE>

AMENDMENT AND TERMINATION. Our board of directors may amend, alter,
suspend, discontinue or terminate the plan or the compensation committee's
authority to grant awards without further stockholder approval, except
stockholder approval must be obtained for any amendment or alteration if such
approval is required by law or regulation or under the rules of the NASDAQ
National Market. Thus, stockholder approval may not necessarily be required for
every amendment to the plan which might increase the cost of the plan or alter
the eligibility of persons to receive awards. Stockholder approval will not be
deemed to be required under laws or regulations, such as those relating to
ISOs, that condition favorable treatment of participants on such approval,
although the board may, in its discretion, seek stockholder approval in any
circumstance in which it deems such approval advisable. Unless earlier
terminated by the board, the plan will terminate at such time as no shares of
common stock remain available for issuance under the plan and we have no
further rights or obligations with respect to outstanding awards under the
plan.

SECURITIES ACT REGISTRATION. We have registered the shares of common stock
available under the current plan, and we intend to register the additional
shares of common stock available for awards under the plan, as amended and
restated, pursuant to a registration statement on Form S-8 filed with the SEC.

FEDERAL INCOME TAX CONSEQUENCES OF AWARDS OF OPTIONS. The following is a
brief description of the federal income tax consequences generally arising with
respect to awards of options under the plan.

The grant of an option will create no tax consequences for us or the
participant. A participant will not have taxable income upon exercising an ISO,
except that the alternative minimum tax may apply. Upon exercising an option
other than an ISO, the participant must generally recognize ordinary income
equal to the difference between the exercise price and the fair market value of
the freely transferable and non-forfeitable shares of common stock acquired on
the date of exercise.

Upon a disposition of shares of common stock acquired upon exercise of an
ISO before the end of the applicable ISO holding periods, the participant must
generally recognize ordinary income equal to the lesser of (i) the fair market
value of the shares of common stock at the date of exercise of the ISO minus
the exercise price, or (ii) the amount realized upon the disposition of the ISO
shares of common stock minus the exercise price. Otherwise, a participant's
disposition of shares of common stock acquired upon the exercise of an option,
including an ISO for which the ISO holding periods are met, generally will
result in short-term or long-term capital gain or loss measured by the
difference between the sale price and the participant's tax basis in such
shares of common stock, the tax basis generally being the exercise price plus
any amount previously recognized as ordinary income in connection with the
exercise of the option.

We generally will be entitled to a tax deduction equal to the amount
recognized as ordinary income by the participant in connection with an option.
We generally are not entitled to a tax deduction relating to amounts that
represent a capital gain to a participant. Accordingly, we will not be entitled
to any tax deduction with respect to an ISO if the participant holds the shares
of common stock for the ISO holding periods prior to disposition of the shares.

The Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to the
Internal Revenue Code, which generally disallows a public company's tax
deduction for compensation to covered employees in excess of $1 million in any
tax year beginning on or after January 1, 1994. Compensation that qualifies as
performance-based compensation is excluded from the $1 million deductibility
cap, and therefore remains fully deductible by the company that pays it. As
discussed above, we intend that options and certain other awards granted to
employees whom the compensation committee expects to be covered employees at
the time a deduction arises in connection with such awards, qualify as such
performance-based compensation, so that such awards will not be subject to the
Section 162(m) deductibility cap of $1 million. Future changes in Section
162(m) or the regulations thereunder may adversely affect our ability to ensure
that options or other awards under the amended plan will qualify as
performance-based compensation that is fully deductible by us under Section
162(m).

25
<PAGE>

The foregoing discussion, which is general in nature and is not intended
to be a complete description of the federal income tax consequences of the
plan, is intended for the information of stockholders considering how to vote
at the annual meeting and not as tax guidance to participants in the plan. This
discussion does not address the effects of other federal taxes or taxes imposed
under state, local or foreign tax laws. Participants in the plan should consult
a tax advisor as to the tax consequences of participation.

BENEFITS UNDER THE AMENDED PLAN. The table sets forth the amount and
dollar value of awards received by the named executive officers and by certain
other groups of individuals under the plan and outstanding as of March 31,
2000.

<TABLE>
<CAPTION>
STOCK OPTIONS(1)
------------------------------------
NUMBER OF VALUE OF
NAME AND POSITION OPTIONS GRANTED OPTIONS GRANTED
- ----------------- ----------------- ----------------
<S> <C> <C>
Michael S. Battaglia ..................................................... 100,000 --
Quresh Sachee ............................................................ 25,000 --
Robert L. Protheroe ...................................................... 25,000 --
Yoshiaki Uchida .......................................................... 25,000 --
Michael R. Mattingly ..................................................... 25,000 --
All current executive officers as a group (9 persons) .................... 427,000 $4,539,103
All current directors who are not executive officers (7 persons) ......... 87,000 813,750
All employees, other than executive officers (97 persons) ................ 731,851 1,866,000
</TABLE>

- ----------------
(1) Represents options granted and outstanding under the plan. For purposes of
this table, the value of each option was deemed to be the amount, if any,
by which the closing market price of a share of common stock on March 31,
2000 ($26.50), exceeds the option's exercise price. The value is
determined without regard to whether the option is currently exercisable
or not. All options are nonqualified options with exercise prices ranging
from $9.00 to $47.25 per share (the market price on the date of grant),
become exercisable at the rate determined by the compensation committee,
and have a term of 10 years.

We believe that awards granted under the plan have been and will continue
to be granted primarily to those persons who possess a capacity to contribute
significantly to our successful performance. Because persons to whom awards may
be made are to be determined from time to time by the compensation committee in
its discretion, it is impossible at this time to indicate the precise number,
name or positions of persons who will hereafter receive awards or the nature
and terms of such awards.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE PROPOSAL TO
APPROVE AND RATIFY THE AMENDED AND RESTATED 1999 INCENTIVE COMPENSATION PLAN.

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<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

PRE-FORMATION ADVANCES

Prior to 1997, Addison Fischer and his affiliates, including Fischer
International, advanced SDSC, our predecessor, non-interest bearing loans in
the aggregate amount of approximately $9.6 million in order to fund our
operations. Of the total amount advanced to SDSC, approximately $4.6 million
was contributed to the capital stock of SDSC in 1996 and 1997. SDSC repaid the
remaining $5.0 million of advances in May 1998, of which $1,045,000 was paid to
Fischer International and $3,955,000 was paid to Addison Fischer.

In addition, from 1996 to March 1999, Addison Fischer and his affiliates,
including Fischer International, advanced SmartDiskette Limited, or SDL,
non-interest bearing loans in the aggregate amount of approximately $600,000.
In May 1999, prior to our acquisition of SDL, these advances were converted
into 96,710 shares of SDL common stock and, after the acquisition in May 1999,
these shares were in turn converted into 76,018 shares of our common stock.

FORMATION TRANSACTIONS

Although we commenced operations in January 1998, we did not receive
significant capital contributions until February of that year. In February
1998, we entered into a joint venture agreement along with Toshiba and Phoenix
House which detailed a plan of capital contribution, corporate governance and
business strategies for us. Pursuant to this agreement, each of Toshiba,
Fischer International and Phoenix House agreed to purchase shares of our common
stock and become our principal stockholders. Before the May 1998 stock
purchases described below, substantially all outstanding shares of our common
stock were owned by employees of, or consultants to, SmartDisk, as a result of
the exercise of stock options.

The joint venture agreement called for Toshiba to make an immediate loan
to us of $5.0 million in exchange for a convertible note. The note had an
interest rate of 4% per annum. The note remained outstanding until May 22,
1998. At that time, Toshiba acquired 2,487,500 shares of our common stock in
exchange for a cash payment of $4,950,000 and delivery and cancellation of the
February 1998 note, including accrued interest.

At the same time that Toshiba purchased its shares of our common stock,
both Phoenix House and Fischer International acquired shares of our common
stock. Both Phoenix House and Fischer International are controlled by Addison
Fischer, the Chairman of our board of directors. Phoenix House acquired
7,350,000 shares of our common Stock in exchange for all of the outstanding
shares of SDSC. As a result, SDSC became our wholly owned subsidiary and we
became the owner of the exclusive patent licenses owned by SDSC. Fischer
International acquired 150,000 shares of our common stock in return for
trademarks it owned relating to the SafeBoot, FlashPath and Smarty products.
Immediately after their capital contributions, Phoenix House, Toshiba and
Fischer International owned 68.8%, 23.3% and 1.4% of our outstanding common
stock.

On May 26, 1999, the shareholders of SDL, which included Addison Fischer
and Phoenix House, exchanged all of their shares of SDL for 515,500 shares of
our common stock. Of the total number of our shares issued, Addison Fischer
received 428,768 shares, Phoenix House received 32,918 shares and the other
shareholders of SDL received the remaining 53,814 shares. As a result of this
transaction, we acquired 100% of SDL, the indirect owner of its current
principal patents.

FISCHER TRANSACTIONS

In 1996 and 1997, all of the products of SDSC were sold through Fischer
International and its affiliates. Under this arrangement, Fischer International
and its affiliates received a fee of approximately 25% of the sales of SDSC.
The consolidated revenues shown in our 1997 financial

27
<PAGE>

statements, which reflect the revenue of SDSC, are net of the fees paid to
Fischer International and its affiliates. In addition, operating expenses
totaling approximately $4.0 million in 1997 were incurred by Fischer
International on behalf of SDSC.

In January 1998, SDSC entered into an operating agreement with Fischer
International and SmartDisk to provide operating services to SDSC, including
developing and marketing the SafeBoot, FlashPath and Smarty products. SDSC
agreed in return to reimburse Fischer International and us for the expenses
related to providing those services. Upon our obtaining control of SDSC in May
1998, this agreement was terminated and replaced with a new operating agreement
between Fischer International and us. Under this new agreement, as amended in
June 1999, we reimburse Fischer International for marketing, accounting and
other similar services. In addition, until recently we have shared office space
with Fischer International. We have reimbursed Fischer International for the
cost of this office space as well as other general and administrative expenses.
Our share of these expenses is based on an internal analysis of the relative
amount of time devoted to our business by employees of Fischer International as
well as the overhead charges attributable to these employees. In 1998 and 1999,
we paid Fischer International approximately $1.5 million and $300,000 under
this arrangement for the reimbursement of expenses under the operating
agreement and for the other shared services.

In May 1998, we entered into license and distribution agreements with
Fischer International. Under these agreements, we granted Fischer International
a non-exclusive license to our SafeBoot product and distribution rights to our
SafeBoot, Smarty and FlashPath products until 2001. Pursuant to this agreement,
Fischer International agreed to pay us 33.3% of the net revenue derived from
the sale of our products on a stand-alone basis and 5% of the net revenue
derived from the sale of our products which are bundled with the products of
third parties. In 1998 and 1999, we received approximately $285,000 and
$470,000 from Fischer International under these agreements in royalties related
to SafeBoot, and no royalties related to Smarty and FlashPath.

TOSHIBA TRANSACTIONS

In May 1998, we entered into a license agreement with Toshiba, which was
contemporaneously becoming one of our principal stockholders. Under this
agreement, Toshiba granted us a non-exclusive license to patents relating to
the interface with Toshiba's SmartMedia cards. We paid a one-half of 1% royalty
on the net sales price of our products that use the Toshiba license through
March 1999. This agreement was amended in September 1998 to expand the field of
use for the non-exclusive license. In April 1999, we again amended the Toshiba
license. In exchange for 50,000 shares of our common stock, Toshiba agreed to
grant us a fully-paid license as of April 1999, at which time we stopped paying
royalties. In 1998 and 1999, we paid approximately $69,000 and $25,600 to
Toshiba under this license.

In addition, we sell a number of our products to an affiliate of Toshiba
which in turn serves as sales agent to Toshiba in its role as an OEM customer.
In 1997, 1998 and 1999, we had aggregate sales to Toshiba or the sales agent of
approximately $495,000, $0 and $815,000.

Also, since September 1998, four engineers from Toshiba have worked for us
on a contract basis. In 1998 and 1999, we paid Toshiba approximately $74,296
and $474,000 for these services.

EMPLOYEE ADVANCES

On March 3, 1998, we loaned Michael Battaglia $305,114 in connection with
Mr. Battaglia's exercise of an option to purchase 426,136 shares of our common
stock. The loan bears interest at the rate of 5.47% per year and the interest
is payable quarterly. The principal balance is due on the earlier of March 3,
2003 or the end of his employment with us or an affiliate of ours.

On March 29, 1999, we loaned Robert Protheroe $60,000 in connection with
his repayment of amounts owed to his previous employer. The loan bears interest
at the rate of 4.71% per year and is

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due in four annual installments ending in 2003, unless his employment with us
ends at an earlier date, in which case the principal balance and accrued
interest are due within 30 days after termination of employment. The
outstanding principal balance of the loan as of March 31, 2000 is $45,000.

OTHER TRANSACTIONS

On May 28, 1998, we sold 28,750 shares of our common stock at a price of
$4.00 per share to First TZMM Investment Partnership, an entity affiliated with
Tomlinson Zisko Morosoli & Maser LLP. Timothy Tomlinson, one of our directors,
is a partner of Tomlinson Zisko Morosoli & Maser LLP.

On July 1, 1999, as part of a larger round of investments led by SCM
Microsystems, we sold an aggregate of 20,000 shares of common stock to Messrs.
Tomlinson and Bidzos, two of our directors, for $160,000, or $8.00 per share.
Individually, Mr. Tomlinson received 7,500 shares and Mr. Bidzos received
12,500 shares. In addition, First TZMM Investment Partnership acquired 27,500
shares for $220,000.

On January 21, 2000, we granted options to acquire 15,000 shares of common
stock to Mr. Tomlinson with an exercise price of $35.00 per share. Options to
purchase 6,000 shares vested immediately, options to purchase 6,000 shares
vested 12.5% per quarter and options to purchase 3,000 shares vested 2% per
month. On January 31, 2000, we loaned Mr. Tomlinson $209,994 in connection with
his exercise of options to purchase 6,000 shares of our common stock for $35.00
per share. The loan bears interest at the rate of 6.07% per year and the
interest is payable quarterly. The principal balance is due on January 31,
2005.

Timothy Tomlinson, one of our directors, is a partner of Tomlinson Zisko
Morosoli & Maser LLP, which provided legal services to us in 1999. Fees paid in
1999 to Mr. Tomlinson's firm did not exceed 5% of the law firm's gross revenues
for its last full fiscal year.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act requires our directors and
executive officers, and persons who own more than 10 percent of our common
stock, to file with the SEC initial reports of ownership and reports of changes
in ownership of common stock. Officers, directors and greater than 10 percent
stockholders are required by SEC regulation to furnish us with copies of all
Section 16(a) forms they file.

To our knowledge, based solely on review of the copies of such reports
furnished to us and representations that no other reports were required, we
believe that all Section 16(a) filing requirements applicable to our officers,
directors and greater than 10 percent beneficial owners were complied with
during the year ended December 31, 1999, except that each of Messrs. Tomlinson,
Tucci and Tyabji filed late in connection with a transaction.

RELATIONSHIP WITH INDEPENDENT AUDITORS

The firm of Ernst & Young LLP, independent auditors, served as our
independent auditors for the fiscal year ended December 31, 1999. Our board of
directors has selected Ernst & Young LLP as our independent auditors for 2000.
One or more representatives of Ernst & Young LLP are expected to be present at
the annual meeting and will be afforded the opportunity to make a statement if
they so desire and to respond to appropriate stockholder questions.

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OTHER MATTERS

As of the date of this proxy statement, we know of no business that will
be presented for consideration at the annual meeting other than the items
referred to above. If any other matter is properly brought before the meeting
for an action by the stockholders, proxies in the enclosed form returned to us
will be voted in accordance with the recommendation of the board of directors
or, in the absence of such a recommendation, in accordance with the judgment of
the proxy holder.

ADDITIONAL INFORMATION

ADVANCE NOTICE PROCEDURES. Under our bylaws, no business may be brought
before an annual meeting unless it is specified in the notice of meeting, which
includes stockholder proposals that we are required to include in our proxy
statement pursuant to Rule 14a-8 under the Securities and Exchange Act of 1934,
or is otherwise brought before the meeting by or at the direction of the board
or by a stockholder entitled to vote who has delivered notice to us containing
information specified in the bylaws not less than 90 or more than 120 days
prior to the first anniversary of the date of notice of the preceding year's
annual meeting of stockholders; provided, however, that in the event that the
date of the meeting is changed by more than 30 days from such anniversary date,
notice by the stockholder to be timely must be received by us not later than
the 10th day following the day on which the notice of the meeting date was
mailed or public disclosure was made. These requirements are separate from and
in addition to the SEC's requirements that a stockholder must meet in order to
have a stockholder proposal included in our proxy statement.

STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING. Stockholders interested
in submitting a proposal for inclusion in the proxy materials for our annual
meeting of stockholders in 2001 may do so by following the procedures
prescribed in SEC Rule 14a-8. To be eligible for inclusion, stockholder
proposals must be received by us no later than December 20, 2000.

By Order of the Board of Directors,

/s/ Michael S. Battaglia
------------------------
Michael S. Battaglia
PRESIDENT AND CHIEF EXECUTIVE OFFICER

April 19, 2000

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APPENDIX A

SMARTDISK CORPORATION
1999 INCENTIVE COMPENSATION PLAN
(AMENDED AND RESTATED AS OF MARCH 24, 2000)

1. PURPOSE. The purpose of this 1999 Incentive Compensation Plan (the
"Plan") is to assist SMARTDISK CORPORATION (the "Company"), its parent
corporation and its subsidiaries in attracting, motivating, retaining and
rewarding employees, officers, Directors and independent contractors by
enabling such persons to acquire or increase a proprietary interest in the
Company in order to strengthen the mutuality of interests between such persons
and the Company's stockholders, and providing such persons with annual and long
term performance incentives to expend their maximum efforts in the creation of
shareholder value. The Plan is also intended to qualify certain compensation
awarded under the Plan for tax deductibility under Section 162(m) of the Code
(as hereafter defined) to the extent deemed appropriate by the Committee (or
any successor committee) of the Board of Directors of the Company.

2. DEFINITIONS. For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to such terms defined in Section 1
hereof.

(a) "Annual Incentive Award" means a conditional right granted to a
Participant under Section 8(c) hereof to receive a cash payment, Stock or other
Award, unless otherwise determined by the Committee, after the end of a
specified fiscal year.

(b) "Award" means any Option, SAR (including Limited SAR), Restricted
Stock, Deferred Stock, Stock granted as a bonus or in lieu of another award,
Dividend Equivalent, Other Stock-Based Award, Performance Award or Annual
Incentive Award, together with any other right or interest, granted to a
Participant under the Plan.

(c) "Beneficiary" means the person, persons, trust or trusts which have
been designated by a Participant in his or her most recent written beneficiary
designation filed with the Committee to receive the benefits specified under
the Plan upon such Participant's death or to which Awards or other rights are
transferred if and to the extent permitted under Section 10(b) hereof. If, upon
a Participant's death, there is no designated Beneficiary or surviving
designated Beneficiary, then the term Beneficiary means the person, persons,
trust or trusts entitled by will or the laws of descent and distribution to
receive such benefits.

(d) "Beneficial Owner", "Beneficially Owning" and "Beneficial Ownership"
shall have the meanings ascribed to such terms in Rule 13d-3 under the Exchange
Act and any successor to such Rule.

(e) "Board" means the Company's Board of Directors.

(f) "Change in Control" means Change in Control as defined with related
terms in Section 9 of the Plan.

(g) "Change in Control Price" means the amount calculated in accordance
with Section 9(c) of the Plan.

(h) "Code" means the Internal Revenue Code of 1986, as amended from time
to time, including regulations thereunder and successor provisions and
regulations thereto.

(i) "Committee" means a committee designated by the Board to administer
the Plan; provided, however, that the Committee shall consist of at least two
directors and, after the Publicly-Traded Date, each member of the Committee
shall be (i) a "non-employee director" within the

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meaning of Rule 16b-3 under the Exchange Act, unless administration of the Plan
by "non-employee directors" is not then required in order for exemptions under
Rule 16b-3 to apply to transactions under the Plan, and (ii) an "outside
director" within the meaning of Section 162(m) of the Code, unless
administration of the Plan by "outside directors" is not then required in order
to qualify for tax deductibility under Section 162(m) of the Code.

(j) "Corporate Transaction" means a Corporate Transaction as defined in
Section 9(b)(i) of the Plan.

(k) "Covered Employee" means an Eligible Person who is a Covered
Employee as specified in Section 8(e) of the Plan.

(l) "Deferred Stock" means a right, granted to a Participant under
Section 6(e) hereof, to receive Stock, cash or a combination thereof at the end
of a specified deferral period.

(m) "Director" means a member of the Board.

(n) "Disability" means a permanent and total disability (within the
meaning of Section 22(e) of the Code), as determined by a medical doctor
satisfactory to the Committee.

(o) "Dividend Equivalent" means a right, granted to a Participant under
Section 6(g) hereof, to receive cash, Stock, other Awards or other property
equal in value to dividends paid with respect to a specified number of shares
of Stock, or other periodic payments.

(p) "Effective Date" means the effective date of the Plan, which shall
be July 21, 1999.

(q) "Eligible Person" means each Executive Officer of the Company (as
defined under the Exchange Act) and other officers, Directors and employees of
the Company, of any Parent Corporation or of any Subsidiary, and independent
contractors with the Company, any Parent Corporation or any Subsidiary. The
foregoing notwithstanding, only employees of the Company, any Parent
Corporation or any Subsidiary shall be Eligible Persons for purposes of
receiving any Incentive Stock Options. An employee on leave of absence may be
considered as still in the employ of the Company, a Parent Corporation or a
Subsidiary for purposes of eligibility for participation in the Plan.

(r) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, including rules thereunder and successor provisions and
rules thereto.

(s) "Executive Officer" means an executive officer of the Company as
defined under the Exchange Act.

(t) "Fair Market Value" means the fair market value of Stock, Awards or
other property as determined by the Committee or the Board, or under procedures
established by the Committee or the Board. Unless otherwise determined by the
Committee or the Board, the Fair Market Value of Stock as of any reference date
shall be the closing sale price per share on the business day immediately
preceding the date of reference, reported on a consolidated basis for stock
listed on the principal stock exchange or market on which Stock is traded on
the date as of which such value is being determined or, if there is no sale on
that date, then on the last previous day on which a sale was reported.

(u) "Incentive Stock Option" or "ISO" means any Option intended to be
designated as an incentive stock option within the meaning of Section 422 of
the Code or any successor provision thereto.

(v) "Incumbent Board" means the Incumbent Board as defined in Section
9(b)(iii) of the Plan.

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(w) "Limited SAR" means a right granted to a Participant under Section
6(c) hereof.

(x) "Option" means a right granted to a Participant under Section 6(b)
hereof, to purchase Stock or other Awards at a specified price during specified
time periods.

(y) "Other Stock-Based Awards" means Awards granted to a Participant
under Section 6(h) hereof.

(z) "Parent Corporation" means any corporation (other than the Company)
in an unbroken chain of corporations ending with the Company, if each of the
corporations in the chain (other than the Company) owns stock possessing 50% or
more of the combined voting power of all classes of stock in one of the other
corporations in the chain.

(aa) "Participant" means a person who has been granted an Award under
the Plan which remains outstanding, including a person who is no longer an
Eligible Person.

(bb) "Performance Award" means a right, granted to an Eligible Person
under Section 8 hereof, to receive Awards based upon performance criteria
specified by the Committee or the Board.

(cc) "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, and
shall include a "group" as defined in Section 13(d) thereof.

(dd) "Publicly-Traded Date" means the date on which the Stock of the
Company, or the stock of any successor company into which the Stock is
substituted or exchanged, is registered pursuant to Section 12(b) or 12(g) of
the Securities Exchange Act.

(ee) "Restricted Stock" means Stock granted to a Participant under
Section 6(d) hereof, that is subject to certain restrictions and to a risk of
forfeiture.

(ff) "Retire" or "Retirement" means termination of service as a Director
after having attained at least age 62 and having served as a Director for at
least 5 years, other than by reason of death, Disability or the Director's
willful misconduct or negligence.

(gg) "Rule 16b-3" and "Rule 16a-1(c)(3)" means Rule 16b-3 and Rule
16a-1(c)(3), as from time to time in effect and applicable to the Plan and
Participants, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act.

(hh) "Stock" means the Company's Common Stock, and such other securities
as may be substituted (or resubstituted) for Stock pursuant to Section 10(c)
hereof.

(ii) "Stock Appreciation Rights" or "SAR" means a right granted to a
Participant under Section 6(c) hereof.

(jj) "Subsidiary" means any corporation or other entity in which the
Company has a direct or indirect ownership interest of 50% or more of the total
combined voting power of the then outstanding securities or interests of such
corporation or other entity entitled to vote generally in the election of
directors or in which the Company has the right to receive 50% or more of the
distribution of profits or 50% or more of the assets on liquidation or
dissolution.

3. ADMINISTRATION.

(a) AUTHORITY OF THE COMMITTEE. The Plan shall be administered by the
Committee; provided, however, that except as otherwise expressly provided in
this Plan or in order to comply with Code Section 162(m) or Rule 16b-3 under
the Exchange Act, the Board may exercise any power or

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authority granted to the Committee under this Plan. The Committee or the Board
shall have full and final authority, in each case subject to and consistent
with the provisions of the Plan, to select Eligible Persons to become
Participants, grant Awards, determine the type, number and other terms and
conditions of, and all other matters relating to, Awards, prescribe Award
agreements (which need not be identical for each Participant) and rules and
regulations for the administration of the Plan, construe and interpret the Plan
and Award agreements and correct defects, supply omissions or reconcile
inconsistencies therein, and to make all other decisions and determinations as
the Committee or the Board may deem necessary or advisable for the
administration of the Plan. In exercising any discretion granted to the
Committee or the Board under the Plan or pursuant to any Award, the Committee
or the Board shall not be required to follow past practices, act in a manner
consistent with past practices, or treat any Eligible Person in a manner
consistent with the treatment of other Eligible Persons.

(b) MANNER OF EXERCISE OF COMMITTEE AUTHORITY. The Committee, and not
the Board, shall exercise sole and exclusive discretion on any matter relating
to a Participant then subject to Section 16 of the Exchange Act with respect to
the Company to the extent necessary in order that transactions by such
Participant shall be exempt under Rule 16b-3 under the Exchange Act. Any action
of the Committee or the Board shall be final, conclusive and binding on all
persons, including the Company, its subsidiaries, Participants, Beneficiaries,
transferees under Section 10(b) hereof or other persons claiming rights from or
through a Participant, and stockholders. The express grant of any specific
power to the Committee or the Board, and the taking of any action by the
Committee or the Board, shall not be construed as limiting any power or
authority of the Committee or the Board. The Committee or the Board may
delegate to officers or managers of the Company or any subsidiary, or
committees thereof, the authority, subject to such terms as the Committee or
the Board shall determine, (i) to perform administrative functions, (ii) with
respect to Participants not subject to Section 16 of the Exchange Act, to
perform such other functions as the Committee or the Board may determine, and
(iii) with respect to Participants subject to Section 16, to perform such other
functions of the Committee or the Board as the Committee or the Board may
determine to the extent performance of such functions will not result in the
loss of an exemption under Rule 16b-3 otherwise available for transactions by
such persons, in each case to the extent permitted under applicable law and
subject to the requirements set forth in Section 8(d). The Committee or the
Board may appoint agents to assist it in administering the Plan.

(c) LIMITATION OF LIABILITY. The Committee and the Board, and each
member thereof, shall be entitled to, in good faith, rely or act upon any
report or other information furnished to him or her by any executive officer,
other officer or employee of the Company, a Parent Corporation or a Subsidiary,
the Company's independent auditors, consultants or any other agents assisting
in the administration of the Plan. Members of the Committee and the Board, and
any officer or employee of the Company, a Parent Corporation or a Subsidiary
acting at the direction or on behalf of the Committee or the Board, shall not
be personally liable for any action or determination taken or made in good
faith with respect to the Plan, and shall, to the extent permitted by law, be
fully indemnified and protected by the Company with respect to any such action
or determination.

4. STOCK SUBJECT TO PLAN.

(a) LIMITATION ON OVERALL NUMBER OF SHARES SUBJECT TO AWARDS. Subject to
adjustment as provided in Section 10(c) hereof, the total number of shares of
Stock reserved and available for delivery in connection with Awards under the
Plan shall be the sum of (i) Three Million (3,000,000) shares, which is
comprised of (A) the Two Million Five Hundred Thousand (2,500,000) shares
reserved under the plan as originally adopted and (B) an additional Five
Hundred Thousand (500,000) shares authorized by the Board on March 24, 2000,
subject to stockholder approval at the 2000 Annual Meeting, plus (ii) the
number of shares with respect to Awards previously granted under the Plan that
terminate without being exercised, expire, are forfeited or canceled, and the
number of shares of Stock that are surrendered in payment of any Awards or any
tax withholding with regard thereto, plus (iii) an annual increase to be added
on the first trading day in January of each year,

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commencing 2001 and continuing through 2005, equal to three percent (3%) of the
total number of shares of common stock outstanding on the last trading day in
December of the immediately preceding calendar year, as authorized by the Board
on March 24, 2000, subject to stockholder approval at the 2000 Annual Meeting.
Any shares of Stock delivered under the Plan may consist, in whole or in part,
of authorized and unissued shares or treasury shares. Subject to adjustment as
provided in Section 10(c) hereof, in no event shall the aggregate number of
shares of Stock which may be issued pursuant to ISOs exceed Five Hundred
Thousand (500,000) shares.

(b) APPLICATION OF LIMITATIONS. The limitation contained in Section 4(a)
shall apply not only to Awards that are settleable by the delivery of shares of
Stock but also to Awards relating to shares of Stock but settleable only in
cash (such as cash-only SARs). The Committee or the Board may adopt reasonable
counting procedures to ensure appropriate counting, avoid double counting (as,
for example, in the case of tandem or substitute awards) and make adjustments
if the number of shares of Stock actually delivered differs from the number of
shares previously counted in connection with an Award.

5. ELIGIBILITY; PER-PERSON AWARD LIMITATIONS. Awards may be granted under
the Plan only to Eligible Persons. In each fiscal year during any part of which
the Plan is in effect, an Eligible Person may not be granted Awards relating to
more than One Hundred Thousand (100,000) shares of Stock, subject to adjustment
as provided in Section 10(c), under each of Sections 6(b), 6(c), 6(d), 6(e),
6(f), 6(g), 6(h), 8(b) and 8(c). In addition, the maximum amount that may be
earned as an Annual Incentive Award or other cash Award in any fiscal year by
any one Participant shall be $10,000,000, and the maximum amount that may be
earned as a Performance Award or other cash Award in respect of a performance
period by any one Participant shall be $20,000,000.

6. SPECIFIC TERMS OF AWARDS.

(a) GENERAL. Awards may be granted on the terms and conditions set forth
in this Section 6. In addition, the Committee or the Board may impose on any
Award or the exercise thereof, at the date of grant or thereafter (subject to
Section 10(e)), such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee or the Board shall determine,
including terms requiring forfeiture of Awards in the event of termination of
employment by the Participant and terms permitting a Participant to make
elections relating to his or her Award. The Committee or the Board shall retain
full power and discretion to accelerate, waive or modify, at any time, any term
or condition of an Award that is not mandatory under the Plan. Except in cases
in which the Committee or the Board is authorized to require other forms of
consideration under the Plan, or to the extent other forms of consideration
must be paid to satisfy the requirements of Florida law, no consideration other
than services may be required for the grant (but not the exercise) of any
Award.

(b) OPTIONS. The Committee and the Board each is authorized to grant
Options to Participants on the following terms and conditions:

(i) EXERCISE PRICE. The exercise price per share of Stock purchasable
under an Option shall be determined by the Committee or the Board,
provided that such exercise price shall not, in the case of Incentive
Stock Options, be less than 100% of the Fair Market Value of the Stock
on the date of grant of the Option and shall not, in any event, be less
than the par value of a share of Stock on the date of grant of such
Option. If an employee owns or is deemed to own (by reason of the
attribution rules applicable under Section 424(d) of the Code) more than
10% of the combined voting power of all classes of stock of the Company
or any Parent Corporation and an Incentive Stock Option is granted to
such employee, the option price of such Incentive Stock Option (to the
extent required by the Code at the time of grant) shall be no less than
110% of the Fair Market Value of the Stock on the date such Incentive
Stock Option is granted.

(ii) TIME AND METHOD OF EXERCISE. The Committee or the Board shall
determine the time or times at which or the circumstances under which an
Option may be exercised in

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whole or in part (including based on achievement of performance goals
and/or future service requirements), the time or times at which Options
shall cease to be or become exercisable following termination of
employment or upon other conditions, the methods by which such exercise
price may be paid or deemed to be paid (including in the discretion of
the Committee or the Board a cashless exercise procedure), the form of
such payment, including, without limitation, cash, Stock, other Awards
or awards granted under other plans of the Company or any subsidiary, or
other property (including notes or other contractual obligations of
Participants to make payment on a deferred basis), and the methods by or
forms in which Stock will be delivered or deemed to be delivered to
Participants.

(iii) ISOS. The terms of any ISO granted under the Plan shall comply in
all respects with the provisions of Section 422 of the Code. Anything in
the Plan to the contrary notwithstanding, no term of the Plan relating
to ISOs (including any SAR in tandem therewith) shall be interpreted,
amended or altered, nor shall any discretion or authority granted under
the Plan be exercised, so as to disqualify either the Plan or any ISO
under Section 422 of the Code, unless the Participant has first
requested the change that will result in such disqualification. Thus, if
and to the extent required to comply with Section 422 of the Code,
Options granted as Incentive Stock Options shall be subject to the
following special terms and conditions:

(A) the Option shall not be exercisable more than ten years after the
date such Incentive Stock Option is granted; provided, however, that if
a Participant owns or is deemed to own (by reason of the attribution
rules of Section 424(d) of the Code) more than 10% of the combined
voting power of all classes of stock of the Company or any Parent
Corporation and the Incentive Stock Option is granted to such
Participant, the term of the Incentive Stock Option shall be (to the
extent required by the Code at the time of the grant) for no more than
five years from the date of grant; and

(B) The aggregate Fair Market Value (determined as of the date the
Incentive Stock Option is granted) of the shares of stock with respect
to which Incentive Stock Options granted under the Plan and all other
option plans of the Company or its Parent Corporation during any
calendar year exercisable for the first time by the Participant during
any calendar year shall not (to the extent required by the Code at the
time of the grant) exceed $100,000.

(iv) FORMULA GRANTS OF OPTIONS TO NON-EMPLOYEE DIRECTORS. Subject to
adjustment as provided in the first sentence of Section 10(c) hereof,
each non-employee Director shall receive (A) on the date of his or her
appointment as a non-employee Director of the Company, an Option to
purchase 15,000 shares of Stock; (B) on the date of his or her
appointment to a committee of the Board, an Option to purchase 500
shares of Stock; (C) on the date of his or her election as a chairman of
a committee of the Board, an Option to purchase 500 shares of Stock; (D)
each year, on January 1, an Option to purchase 7,500 shares of Stock
(pro rated for non-employee Directors who are elected during that year
but subsequent to January 1, based upon the portion of the year they
serve as non-employee Directors), (E) for each committee assignment on
each January 1, an Option to purchase 2,000 shares of Stock (pro rated
for non-employee Directors who are elected during that year but
subsequent to January 1, based upon the portion of the year they serve
as non-employee Directors), and (F) for each committee chairmanship on
January 1, an Option to purchase 1,000 shares of Stock (pro rated for
non-employee Directors who are elected during that year but subsequent
to January 1, based upon the portion of the year they serve as
non-employee Directors). Options granted to non-employee Directors
pursuant to this paragraph (iv) shall be for a term of 10 years and
shall become exercisable at the rate of 2% per month commencing on the
first month immediately following the month in which the Option is
granted; provided, however, that the Options shall be fully exercisable
in the event that, while serving as a non-employee Director, the
non-employee Director dies, suffers a Disability, Retires or in the
event of a Change in Control. The per share exercise price of all

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Options granted to non-employee Directors pursuant to this paragraph
(iv) shall be equal to the Fair Market Value of a share of Stock on the
last trading day immediately preceding the January 1 on which the Option
is granted. Unless otherwise extended in the sole of the discretion of
the Committee, the unexercised portion of any Option granted pursuant to
this paragraph (iv) shall become null and void (V) three months after
the date on which such non-employee Director ceases to be a non-employee
Director of the Company for any reason other than the Director's willful
misconduct or negligence, Disability, death or Retirement, (W)
immediately in the event of the non-employee Director's willful
misconduct or negligence, (X) one year after the non-employee Director
ceases to be a non-employee Director by reason of his Disability, (Y) at
the expiration of its original term, if the non-employee Director ceases
to be a non-employee Director by reason of his Retirement, and (Z)
twelve months after the date of the non-employee Director's death in the
event that such death occurs prior to the time the Option otherwise
would become null and void pursuant to this sentence. Notwithstanding
the foregoing, with respect to those individuals who are non-employee
Directors as of the Effective Date of this Plan, this paragraph (iv)
shall apply on or after January 1, 2001. The option grants made to a
non-employee Director pursuant to this paragraph (iv) shall not preclude
the grant of other Awards to such non-employee Director under this Plan.

(c) STOCK APPRECIATION RIGHTS. The Committee and the Board each is
authorized to grant SAR's to Participants on the following terms and
conditions:

(i) RIGHT TO PAYMENT. A SAR shall confer on the Participant to whom it
is granted a right to receive, upon exercise thereof, the excess of (A)
the Fair Market Value of one share of stock on the date of exercise (or,
in the case of a "Limited SAR" that may be exercised only in the event
of a Change in Control, the Fair Market Value determined by reference to
the Change in Control Price, as defined under Section 9(c) hereof), over
(B) the grant price of the SAR as determined by the Committee or the
Board. The grant price of an SAR shall not be less than the Fair Market
Value of a share of Stock on the date of grant except as provided under
Section 7(a) hereof.

(ii) OTHER TERMS. The Committee or the Board shall determine at the
date of grant or thereafter, the time or times at which and the
circumstances under which a SAR may be exercised in whole or in part
(including based on achievement of performance goals and/or future
service requirements), the time or times at which SARs shall cease to be
or become exercisable following termination of employment or upon other
conditions, the method of exercise, method of settlement, form of
consideration payable in settlement, method by or forms in which Stock
will be delivered or deemed to be delivered to Participants, whether or
not a SAR shall be in tandem or in combination with any other Award, and
any other terms and conditions of any SAR. Limited SARs that may only be
exercised in connection with a Change in Control or other event as
specified by the Committee or the Board, may be granted on such terms,
not inconsistent with this Section 6(c), as the Committee or the Board
may determine. SARs and Limited SARs may be either freestanding or in
tandem with other Awards.

(d) RESTRICTED STOCK. The Committee and the Board each is authorized to
grant Restricted Stock to Participants on the following terms and conditions:

(i) GRANT AND RESTRICTIONS. Restricted Stock shall be subject to such
restrictions on transferability, risk of forfeiture and other
restrictions, if any, as the Committee or the Board may impose, which
restrictions may lapse separately or in combination at such times, under
such circumstances (including based on achievement of performance goals
and/or future service requirements), in such installments or otherwise,
as the Committee or the Board may determine at the date of grant or
thereafter. Except to the extent restricted under the terms of the Plan
and any Award agreement relating to the Restricted Stock, a Participant
granted

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<PAGE>

Restricted Stock shall have all of the rights of a stockholder,
including the right to vote the Restricted Stock and the right to
receive dividends thereon (subject to any mandatory reinvestment or
other requirement imposed by the Committee or the Board). During the
restricted period applicable to the Restricted Stock, subject to Section
10(b) below, the Restricted Stock may not be sold, transferred, pledged,
hypothecated, margined or otherwise encumbered by the Participant.

(ii) FORFEITURE. Except as otherwise determined by the Committee or the
Board at the time of the Award, upon termination of a Participant's
employment during the applicable restriction period, the Participant's
Restricted Stock that is at that time subject to restrictions shall be
forfeited and reacquired by the Company; provided that the Committee or
the Board may provide, by rule or regulation or in any Award agreement,
or may determine in any individual case, that restrictions or forfeiture
conditions relating to Restricted Stock shall be waived in whole or in
part in the event of terminations resulting from specified causes, and
the Committee or the Board may in other cases waive in whole or in part
the forfeiture of Restricted Stock.

(iii) CERTIFICATES FOR STOCK. Restricted Stock granted under the Plan
may be evidenced in such manner as the Committee or the Board shall
determine. If certificates representing Restricted Stock are registered
in the name of the Participant, the Committee or the Board may require
that such certificates bear an appropriate legend referring to the
terms, conditions and restrictions applicable to such Restricted Stock,
that the Company retain physical possession of the certificates, and
that the Participant deliver a stock power to the Company, endorsed in
blank, relating to the Restricted Stock.

(iv) DIVIDENDS AND SPLITS. As a condition to the grant of an Award of
Restricted Stock, the Committee or the Board may require that any cash
dividends paid on a share of Restricted Stock be automatically
reinvested in additional shares of Restricted Stock or applied to the
purchase of additional Awards under the Plan. Unless otherwise
determined by the Committee or the Board, Stock distributed in
connection with a Stock split or Stock dividend, and other property
distributed as a dividend, shall be subject to restrictions and a risk
of forfeiture to the same extent as the Restricted Stock with respect to
which such Stock or other property has been distributed.

(e) DEFERRED STOCK. The Committee and the Board each is authorized to
grant Deferred Stock to Participants, which are rights to receive Stock, cash,
or a combination thereof at the end of a specified deferral period, subject to
the following terms and conditions:

(i) AWARD AND RESTRICTIONS. Satisfaction of an Award of Deferred Stock
shall occur upon expiration of the deferral period specified for such
Deferred Stock by the Committee or the Board (or, if permitted by the
Committee or the Board, as elected by the Participant). In addition,
Deferred Stock shall be subject to such restrictions (which may include
a risk of forfeiture) as the Committee or the Board may impose, if any,
which restrictions may lapse at the expiration of the deferral period or
at earlier specified times (including based on achievement of
performance goals and/or future service requirements), separately or in
combination, in installments or otherwise, as the Committee or the Board
may determine. Deferred Stock may be satisfied by delivery of Stock,
cash equal to the Fair Market Value of the specified number of shares of
Stock covered by the Deferred Stock, or a combination thereof, as
determined by the Committee or the Board at the date of grant or
thereafter. Prior to satisfaction of an Award of Deferred Stock, an
Award of Deferred Stock carries no voting or dividend or other rights
associated with share ownership.

(ii) FORFEITURE. Except as otherwise determined by the Committee or the
Board, upon termination of a Participant's employment during the
applicable deferral period thereof to which forfeiture conditions apply
(as provided in the Award agreement evidencing the

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<PAGE>

Deferred Stock), the Participant's Deferred Stock that is at that time
subject to deferral (other than a deferral at the election of the
Participant) shall be forfeited; provided that the Committee or the
Board may provide, by rule or regulation or in any Award agreement, or
may determine in any individual case, that restrictions or forfeiture
conditions relating to Deferred Stock shall be waived in whole or in
part in the event of terminations resulting from specified causes, and
the Committee or the Board may in other cases waive in whole or in part
the forfeiture of Deferred Stock.

(iii) DIVIDEND EQUIVALENTS. Unless otherwise determined by the
Committee or the Board at date of grant, Dividend Equivalents on the
specified number of shares of Stock covered by an Award of Deferred
Stock shall be either (A) paid with respect to such Deferred Stock at
the dividend payment date in cash or in shares of unrestricted Stock
having a Fair Market Value equal to the amount of such dividends, or (B)
deferred with respect to such Deferred Stock and the amount or value
thereof automatically deemed reinvested in additional Deferred Stock,
other Awards or other investment vehicles, as the Committee or the Board
shall determine or permit the Participant to elect.

(f) BONUS STOCK AND AWARDS IN LIEU OF OBLIGATIONS. The Committee and the
Board each is authorized to grant Stock as a bonus, or to grant Stock or other
Awards in lieu of Company obligations to pay cash or deliver other property
under the Plan or under other plans or compensatory arrangements, provided
that, in the case of Participants subject to Section 16 of the Exchange Act,
the amount of such grants remains within the discretion of the Committee to the
extent necessary to ensure that acquisitions of Stock or other Awards are
exempt from liability under Section 16(b) of the Exchange Act. Stock or Awards
granted hereunder shall be subject to such other terms as shall be determined
by the Committee or the Board.

(g) DIVIDEND EQUIVALENTS. The Committee and the Board each is authorized
to grant Dividend Equivalents to a Participant entitling the Participant to
receive cash, Stock, other Awards, or other property equal in value to
dividends paid with respect to a specified number of shares of Stock, or other
periodic payments. Dividend Equivalents may be awarded on a free-standing basis
or in connection with another Award. The Committee or the Board may provide
that Dividend Equivalents shall be paid or distributed when accrued or shall be
deemed to have been reinvested in additional Stock, Awards, or other investment
vehicles, and subject to such restrictions on transferability and risks of
forfeiture, as the Committee or the Board may specify.

(h) OTHER STOCK-BASED AWARDS. The Committee and the Board each is
authorized, subject to limitations under applicable law, to grant to
Participants such other Awards that may be denominated or payable in, valued in
whole or in part by reference to, or otherwise based on, or related to, Stock,
as deemed by the Committee or the Board to be consistent with the purposes of
the Plan, including, without limitation, convertible or exchangeable debt
securities, other rights convertible or exchangeable into Stock, purchase
rights for Stock, Awards with value and payment contingent upon performance of
the Company or any other factors designated by the Committee or the Board, and
Awards valued by reference to the book value of Stock or the value of
securities of or the performance of specified subsidiaries or business units.
The Committee or the Board shall determine the terms and conditions of such
Awards. Stock delivered pursuant to an Award in the nature of a purchase right
granted under this Section 6(h) shall be purchased for such consideration, paid
for at such times, by such methods, and in such forms, including, without
limitation, cash, Stock, other Awards or other property, as the Committee or
the Board shall determine. Cash awards, as an element of or supplement to any
other Award under the Plan, may also be granted pursuant to this Section 6(h).

7. CERTAIN PROVISIONS APPLICABLE TO AWARDS.

(a) STAND-ALONE, ADDITIONAL, TANDEM, AND SUBSTITUTE AWARDS. Awards
granted under the Plan may, in the discretion of the Committee or the Board, be
granted either alone or in addition to,

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<PAGE>

in tandem with, or in substitution or exchange for, any other Award or any
award granted under another plan of the Company, any subsidiary, or any
business entity to be acquired by the Company or a subsidiary, or any other
right of a Participant to receive payment from the Company or any subsidiary.
Such additional, tandem, and substitute or exchange Awards may be granted at
any time. If an Award is granted in substitution or exchange for another Award
or award, the Committee or the Board shall require the surrender of such other
Award or award in consideration for the grant of the new Award. In addition,
Awards may be granted in lieu of cash compensation, including in lieu of cash
amounts payable under other plans of the Company or any subsidiary, in which
the value of Stock subject to the Award is equivalent in value to the cash
compensation (for example, Deferred Stock or Restricted Stock), or in which the
exercise price, grant price or purchase price of the Award in the nature of a
right that may be exercised is equal to the Fair Market Value of the underlying
Stock minus the value of the cash compensation surrendered (for example,
Options granted with an exercise price "discounted" by the amount of the cash
compensation surrendered).

(b) TERM OF AWARDS. The term of each Award shall be for such period as
may be determined by the Committee or the Board; provided that in no event
shall the term of any Option or SAR exceed a period of ten years (or such
shorter term as may be required in respect of an ISO under Section 422 of the
Code).

(c) FORM AND TIMING OF PAYMENT UNDER AWARDS; DEFERRALS. Subject to the
terms of the Plan and any applicable Award agreement, payments to be made by
the Company or a subsidiary upon the exercise of an Option or other Award or
settlement of an Award may be made in such forms as the Committee or the Board
shall determine, including, without limitation, cash, Stock that have been held
for at least 6 months, other Awards or other property, and may be made in a
single payment or transfer, in installments, or on a deferred basis. The
settlement of any Award may be accelerated, and cash paid in lieu of Stock in
connection with such settlement, in the discretion of the Committee or the
Board or upon occurrence of one or more specified events (in addition to a
Change in Control). Installment or deferred payments may be required by the
Committee or the Board (subject to Section 10(e) of the Plan) or permitted at
the election of the Participant on terms and conditions established by the
Committee or the Board. Payments may include, without limitation, provisions
for the payment or crediting of a reasonable interest rate on installment or
deferred payments or the grant or crediting of Dividend Equivalents or other
amounts in respect of installment or deferred payments denominated in Stock.

(d) EXEMPTIONS FROM SECTION 16(B) LIABILITY. It is the intent of the
Company that this Plan comply in all respects with applicable provisions of
Rule 16b-3 or Rule 16a-1(c)(3) to the extent necessary to ensure that neither
the grant of any Awards to nor other transaction by a Participant who is
subject to Section 16 of the Exchange Act is subject to liability under Section
16(b) thereof (except for transactions acknowledged in writing to be non-exempt
by such Participant). Accordingly, if any provision of this Plan or any Award
agreement does not comply with the requirements of Rule 16b-3 or Rule
16a-1(c)(3) as then applicable to any such transaction, such provision will be
construed or deemed amended to the extent necessary to conform to the
applicable requirements of Rule 16b-3 or Rule 16a-1(c)(3) so that such
Participant shall avoid liability under Section 16(b). In addition, the
purchase price of any Award conferring a right to purchase Stock shall be not
less than any specified percentage of the Fair Market Value of Stock at the
date of grant of the Award then required in order to comply with Rule 16b-3.

8. PERFORMANCE AND ANNUAL INCENTIVE AWARDS.

(a) PERFORMANCE CONDITIONS. The right of a Participant to exercise or
receive a grant or settlement of any Award, and the timing thereof, may be
subject to such performance conditions as may be specified by the Committee or
the Board. The Committee or the Board may use such business criteria and other
measures of performance as it may deem appropriate in establishing any
performance conditions, and may exercise its discretion to reduce the amounts
payable under any Award subject to performance conditions, except as limited
under Sections 8(b) and 8(c) hereof in the

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<PAGE>

case of a Performance Award or Annual Incentive Award intended to qualify under
Code Section 162(m). If and to the extent required under Code Section 162(m),
any power or authority relating to a Performance Award or Annual Incentive
Award intended to qualify under Code Section 162(m), shall be exercised by the
Committee and not the Board.

(b) PERFORMANCE AWARDS GRANTED TO DESIGNATED COVERED EMPLOYEES. If and
to the extent that the Committee determines that a Performance Award to be
granted to an Eligible Person who is designated by the Committee as likely to
be a Covered Employee should qualify as "performance-based compensation" for
purposes of Code Section 162(m), the grant, exercise and/or settlement of such
Performance Award shall be contingent upon achievement of preestablished
performance goals and other terms set forth in this Section 8(b).

(i) PERFORMANCE GOALS GENERALLY. The performance goals for such
Performance Awards shall consist of one or more business criteria and a
targeted level or levels of performance with respect to each of such
criteria, as specified by the Committee consistent with this Section
8(b). Performance goals shall be objective and shall otherwise meet the
requirements of Code Section 162(m) and regulations thereunder including
the requirement that the level or levels of performance targeted by the
Committee result in the achievement of performance goals being
"substantially uncertain." The Committee may determine that such
Performance Awards shall be granted, exercised and/or settled upon
achievement of any one performance goal or that two or more of the
performance goals must be achieved as a condition to grant, exercise
and/or settlement of such Performance Awards. Performance goals may
differ for Performance Awards granted to any one Participant or to
different Participants.

(ii) BUSINESS CRITERIA. One or more of the following business criteria
for the Company, on a consolidated basis, and/or specified subsidiaries
or business units of the Company (except with respect to the total
stockholder return and earnings per share criteria), shall be used
exclusively by the Committee in establishing performance goals for such
Performance Awards: (1) total stockholder return; (2) such total
stockholder return as compared to total return (on a comparable basis)
of a publicly available index such as, but not limited to, the Standard
& Poor's 500 Stock Index or the S&P Specialty Retailer Index; (3) net
income; (4) pretax earnings; (5) earnings before interest expense,
taxes, depreciation and amortization; (6) pretax operating earnings
after interest expense and before bonuses, service fees, and
extraordinary or special items; (7) operating margin; (8) earnings per
share; (9) return on equity; (10) return on capital; (11) return on
investment; (12) operating earnings; (13) working capital or inventory;
and (14) ratio of debt to stockholders' equity. One or more of the
foregoing business criteria shall also be exclusively used in
establishing performance goals for Annual Incentive Awards granted to a
Covered Employee under Section 8(c) hereof that are intended to qualify
as "performance-based compensation" under Code Section 162(m).

(iii) PERFORMANCE PERIOD; TIMING FOR ESTABLISHING PERFORMANCE
GOALS. Achievement of performance goals in respect of such Performance
Awards shall be measured over a performance period of up to ten years,
as specified by the Committee. Performance goals shall be established
not later than 90 days after the beginning of any performance period
applicable to such Performance Awards, or at such other date as may be
required or permitted for "performance-based compensation" under Code
Section 162(m).

(iv) PERFORMANCE AWARD POOL. The Committee may establish a Performance
Award pool, which shall be an unfunded pool, for purposes of measuring
Company performance in connection with Performance Awards. The amount of
such Performance Award pool shall be based upon the achievement of a
performance goal or goals based on one or more of the business criteria
set forth in Section 8(b)(ii) hereof during the given performance
period, as specified by the Committee in accordance with Section
8(b)(iii) hereof. The Committee may

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<PAGE>

specify the amount of the Performance Award pool as a percentage of any
of such business criteria, a percentage thereof in excess of a threshold
amount, or as another amount which need not bear a strictly mathematical
relationship to such business criteria.

(v) SETTLEMENT OF PERFORMANCE AWARDS; OTHER TERMS. Settlement of such
Performance Awards shall be in cash, Stock, other Awards or other
property, in the discretion of the Committee. The Committee may, in its
discretion, reduce the amount of a settlement otherwise to be made in
connection with such Performance Awards. The Committee shall specify the
circumstances in which such Performance Awards shall be paid or
forfeited in the event of termination of employment by the Participant
prior to the end of a performance period or settlement of Performance
Awards.

(c) ANNUAL INCENTIVE AWARDS GRANTED TO DESIGNATED COVERED EMPLOYEES. If
and to the extent that the Committee determines that an Annual Incentive Award
to be granted to an Eligible Person who is designated by the Committee as
likely to be a Covered Employee should qualify as "performance-based
compensation" for purposes of Code Section 162(m), the grant, exercise and/or
settlement of such Annual Incentive Award shall be contingent upon achievement
of preestablished performance goals and other terms set forth in this Section
8(c).

(i) ANNUAL INCENTIVE AWARD POOL. The Committee may establish an Annual
Incentive Award pool, which shall be an unfunded pool, for purposes of
measuring Company performance in connection with Annual Incentive
Awards. The amount of such Annual Incentive Award pool shall be based
upon the achievement of a performance goal or goals based on one or more
of the business criteria set forth in Section 8(b)(ii) hereof during the
given performance period, as specified by the Committee in accordance
with Section 8(b)(iii) hereof. The Committee may specify the amount of
the Annual Incentive Award pool as a percentage of any such business
criteria, a percentage thereof in excess of a threshold amount, or as
another amount which need not bear a strictly mathematical relationship
to such business criteria.

(ii) POTENTIAL ANNUAL INCENTIVE AWARDS. Not later than the end of the
90th day of each fiscal year, or at such other date as may be required
or permitted in the case of Awards intended to be "performance-based
compensation" under Code Section 162(m), the Committee shall determine
the Eligible Persons who will potentially receive Annual Incentive
Awards, and the amounts potentially payable thereunder, for that fiscal
year, either out of an Annual Incentive Award pool established by such
date under Section 8(c)(i) hereof or as individual Annual Incentive
Awards. In the case of individual Annual Incentive Awards intended to
qualify under Code Section 162(m), the amount potentially payable shall
be based upon the achievement of a performance goal or goals based on
one or more of the business criteria set forth in Section 8(b)(ii)
hereof in the given performance year, as specified by the Committee; in
other cases, such amount shall be based on such criteria as shall be
established by the Committee. In all cases, the maximum Annual Incentive
Award of any Participant shall be subject to the limitation set forth in
Section 5 hereof.

(iii) PAYOUT OF ANNUAL INCENTIVE AWARDS. After the end of each fiscal
year, the Committee shall determine the amount, if any, of (A) the
Annual Incentive Award pool, and the maximum amount of potential Annual
Incentive Award payable to each Participant in the Annual Incentive
Award pool, or (B) the amount of potential Annual Incentive Award
otherwise payable to each Participant. The Committee may, in its
discretion, determine that the amount payable to any Participant as an
Annual Incentive Award shall be reduced from the amount of his or her
potential Annual Incentive Award, including a determination to make no
Award whatsoever. The Committee shall specify the circumstances in which
an Annual Incentive Award shall be paid or forfeited in the event of
termination of employment by the Participant prior to the end of a
fiscal year or settlement of such Annual Incentive Award.

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<PAGE>

(d) WRITTEN DETERMINATIONS. All determinations by the Committee as to
the establishment of performance goals, the amount of any Performance Award
pool or potential individual Performance Awards and as to the achievement of
performance goals relating to Performance Awards under Section 8(b), and the
amount of any Annual Incentive Award pool or potential individual Annual
Incentive Awards and the amount of final Annual Incentive Awards under Section
8(c), shall be made in writing in the case of any Award intended to qualify
under Code Section 162(m). The Committee may not delegate any responsibility
relating to such Performance Awards or Annual Incentive Awards if and to the
extent required to comply with Code Section 162(m).

(e) STATUS OF SECTION 8(B) AND SECTION 8(C) AWARDS UNDER CODE SECTION
162(M). It is the intent of the Company that Performance Awards and Annual
Incentive Awards under Section 8(b) and 8(c) hereof granted to persons who are
designated by the Committee as likely to be Covered Employees within the
meaning of Code Section 162(m) and regulations thereunder shall, if so
designated by the Committee, constitute "qualified performance-based
compensation" within the meaning of Code Section 162(m) and regulations
thereunder. Accordingly, the terms of Sections 8(b), (c), (d) and (e),
including the definitions of Covered Employee and other terms used therein,
shall be interpreted in a manner consistent with Code Section 162(m) and
regulations thereunder. The foregoing notwithstanding, because the Committee
cannot determine with certainty whether a given Participant will be a Covered
Employee with respect to a fiscal year that has not yet been completed, the
term Covered Employee as used herein shall mean only a person designated by the
Committee, at the time of grant of Performance Awards or an Annual Incentive
Award, as likely to be a Covered Employee with respect to that fiscal year. If
any provision of the Plan or any agreement relating to such Performance Awards
or Annual Incentive Awards does not comply or is inconsistent with the
requirements of Code Section 162(m) or regulations thereunder, such provision
shall be construed or deemed amended to the extent necessary to conform to such
requirements.

9. CHANGE IN CONTROL.

(a) EFFECT OF "CHANGE IN CONTROL." If and to the extent provided in the
Award, in the event of a "Change in Control," as defined in Section 9(b), the
following provisions shall apply:

(i) Any Award carrying a right to exercise that was not previously
exercisable and vested may become exercisable and vested as of the time
of the Change in Control, subject only to applicable restrictions set
forth in Section 10(a) hereof, to the extent provided in the Award;

(ii) Limited SARs (and other SARs if so provided by their terms) may
become exercisable for amounts, in cash, determined by reference to the
Change in Control Price, to the extent provided in the Award;

(iii) The restrictions, deferral of settlement, and forfeiture
conditions applicable to any other Award granted under the Plan may
lapse and such Awards may be deemed fully vested as of the time of the
Change in Control, except to the extent of any waiver by the Participant
and subject to applicable restrictions set forth in Section 10(a)
hereof, to the extent provided in the Award; and

(iv) With respect to any such outstanding Award subject to achievement
of performance goals and conditions under the Plan, such performance
goals and other conditions may be deemed to be met if and to the extent
so provided by the Committee in the Award agreement relating to such
Award.

(b) DEFINITION OF "CHANGE IN CONTROL." A "Change in Control" shall be
deemed to have occurred upon:

(i) Approval by the shareholders of the Company of a reorganization,
merger, consolidation or other form of corporate transaction or series
of transactions, in each case,

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with respect to which persons who were the shareholders of the Company
immediately prior to such reorganization, merger or consolidation or
other transaction do not, immediately thereafter, own more than 50% of
the combined voting power entitled to vote generally in the election of
directors of the reorganized, merged or consolidated company's then
outstanding voting securities, or a liquidation or dissolution of the
Company or the sale of all or substantially all of the assets of the
Company (unless such reorganization, merger, consolidation or other
corporate transaction, liquidation, dissolution or sale (any such event
being referred to as a "Corporate Transaction") is subsequently
abandoned);

(ii) Approval by the shareholders of the Parent Corporation of a
reorganization, merger, consolidation or other form of corporate
transaction or series of transactions, in each case, with respect to
which persons who were the shareholders of the Parent Corporation
immediately prior to such reorganization, merger or consolidation or
other transaction do not, immediately thereafter, own more than 50% of
the combined voting power entitled to vote generally in the election of
directors of the reorganized, merged or consolidated company's then
outstanding voting securities, or a liquidation or dissolution of the
Parent Corporation or the sale of all or substantially all of the assets
of the Parent Corporation (unless such Corporate Transaction is
subsequently abandoned);

(iii) Individuals who, as of the date on which the Award is granted,
constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any person
becoming a director subsequent to the date on which the Award was
granted whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the Directors of the Company, as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Securities Exchange Act)
shall be, for purposes of this Agreement, considered as though such
person were a member of the Incumbent Board; or

(iv) the acquisition (other than from the Company) by any person,
entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act, of 30% of either the then outstanding
shares of the Company's Common Stock or the combined voting power of the
Company's then outstanding voting securities entitled to vote generally
in the election of directors (hereinafter referred to as the ownership
of a "Controlling Interest") excluding, for this purpose, any
acquisitions by (1) the Company or its Subsidiaries, (2) any person,
entity or "group" that as of the date on which the Award is granted owns
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Securities Exchange Act) of a Controlling Interest, (3) Addison
Fisher and/or any entities owned and/or controlled by Addison Fisher, or
(4) any employee benefit plan of the Company or its Subsidiaries.

(c) DEFINITION OF "CHANGE IN CONTROL PRICE." The "Change in Control
Price" means an amount in cash equal to the higher of (i) the amount of cash
and fair market value of property that is the highest price per share paid
(including extraordinary dividends) in any Corporate Transaction triggering the
Change in Control under Section 9(b)(i) hereof or any liquidation of shares
following a sale of substantially all of the assets of the Company, or (ii) the
highest Fair Market Value per share at any time during the 60-day period
preceding and the 60-day period following the Change in Control.

10. GENERAL PROVISIONS.

(a) COMPLIANCE WITH LEGAL AND OTHER REQUIREMENTS. The Company may, to
the extent deemed necessary or advisable by the Committee or the Board,
postpone the issuance or delivery of Stock or payment of other benefits under
any Award until completion of such registration or

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qualification of such Stock or other required action under any federal or state
law, rule or regulation, listing or other required action with respect to any
stock exchange or automated quotation system upon which the Stock or other
Company securities are listed or quoted, or compliance with any other
obligation of the Company, as the Committee or the Board, may consider
appropriate, and may require any Participant to make such representations,
furnish such information and comply with or be subject to such other conditions
as it may consider appropriate in connection with the issuance or delivery of
Stock or payment of other benefits in compliance with applicable laws, rules,
and regulations, listing requirements, or other obligations. The foregoing
notwithstanding, in connection with a Change in Control, the Company shall take
or cause to be taken no action, and shall undertake or permit to arise no legal
or contractual obligation, that results or would result in any postponement of
the issuance or delivery of Stock or payment of benefits under any Award or the
imposition of any other conditions on such issuance, delivery or payment, to
the extent that such postponement or other condition would represent a greater
burden on a Participant than existed on the 90th day preceding the Change in
Control.

(b) LIMITS ON TRANSFERABILITY; BENEFICIARIES. No Award or other right or
interest of a Participant under the Plan, including any Award or right which
constitutes a derivative security as generally defined in Rule 16a-1(c) under
the Exchange Act, shall be pledged, hypothecated or otherwise encumbered or
subject to any lien, obligation or liability of such Participant to any party
(other than the Company or a Subsidiary), or assigned or transferred by such
Participant otherwise than by will or the laws of descent and distribution or
to a Beneficiary upon the death of a Participant, and such Awards or rights
that may be exercisable shall be exercised during the lifetime of the
Participant only by the Participant or his or her guardian or legal
representative, except that Awards and other rights (other than ISOs and SARs
in tandem therewith) may be transferred to one or more Beneficiaries or other
transferees during the lifetime of the Participant, and may be exercised by
such transferees in accordance with the terms of such Award, but only if and to
the extent such transfers and exercises are permitted by the Committee or the
Board pursuant to the express terms of an Award agreement (subject to any terms
and conditions which the Committee or the Board may impose thereon, and further
subject to any prohibitions or restrictions on such transfers pursuant to Rule
16b-3). A Beneficiary, transferee, or other person claiming any rights under
the Plan from or through any Participant shall be subject to all terms and
conditions of the Plan and any Award agreement applicable to such Participant,
except as otherwise determined by the Committee or the Board, and to any
additional terms and conditions deemed necessary or appropriate by the
Committee or the Board.

(c) ADJUSTMENTS. In the event that any dividend or other distribution
(whether in the form of cash, Stock, or other property), recapitalization,
forward or reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase, share exchange, liquidation, dissolution or other
similar corporate transaction or event affects the Stock such that a
substitution or adjustment is determined by the Committee or the Board to be
appropriate in order to prevent dilution or enlargement of the rights of
Participants under the Plan, then the Committee or the Board shall, in such
manner as it may deem equitable, substitute or adjust any or all of (i) the
number and kind of shares of Stock which may be delivered in connection with
Awards granted thereafter, (ii) the number and kind of shares of Stock by which
annual per-person Award limitations are measured under Section 5 hereof, (iii)
the number and kind of shares of Stock subject to or deliverable in respect of
outstanding Awards and (iv) the exercise price, grant price or purchase price
relating to any Award and/or make provision for payment of cash or other
property in respect of any outstanding Award. In addition, the Committee (and
the Board if and only to the extent such authority is not required to be
exercised by the Committee to comply with Code Section 162(m)) is authorized to
make adjustments in the terms and conditions of, and the criteria included in,
Awards (including Performance Awards and performance goals, and Annual
Incentive Awards and any Annual Incentive Award pool or performance goals
relating thereto) in recognition of unusual or nonrecurring events (including,
without limitation, events described in the preceding sentence, as well as
acquisitions and dispositions of businesses and assets) affecting the Company,
any Subsidiary or any business unit, or the financial statements of the Company
or any Subsidiary, or in response to changes in applicable laws,

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<PAGE>

regulations, accounting principles, tax rates and regulations or business
conditions or in view of the Committee's assessment of the business strategy of
the Company, any Subsidiary or business unit thereof, performance of comparable
organizations, economic and business conditions, personal performance of a
Participant, and any other circumstances deemed relevant; provided that no such
adjustment shall be authorized or made if and to the extent that such authority
or the making of such adjustment would cause Options, SARs, Performance Awards
granted under Section 8(b) hereof or Annual Incentive Awards granted under
Section 8(c) hereof to Participants designated by the Committee as Covered
Employees and intended to qualify as "performance-based compensation" under
Code Section 162(m) and the regulations thereunder to otherwise fail to qualify
as "performance-based compensation" under Code Section 162(m) and regulations
thereunder.

(d) TAXES. The Company and any Subsidiary is authorized to withhold from
any Award granted, any payment relating to an Award under the Plan, including
from a distribution of Stock, or any payroll or other payment to a Participant,
amounts of withholding and other taxes due or potentially payable in connection
with any transaction involving an Award, and to take such other action as the
Committee or the Board may deem advisable to enable the Company and
Participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make cash
payments in respect thereof in satisfaction of a Participant's tax obligations,
either on a mandatory or elective basis in the discretion of the Committee.

(e) CHANGES TO THE PLAN AND AWARDS. The Board may amend, alter, suspend,
discontinue or terminate the Plan, or the Committee's authority to grant Awards
under the Plan, without the consent of stockholders or Participants, except
that any amendment or alteration to the Plan shall be subject to the approval
of the Company's stockholders not later than the annual meeting next following
such Board action if such stockholder approval is required by any federal or
state law or regulation (including, without limitation, Rule 16b-3 or Code
Section 162(m)) or the rules of any stock exchange or automated quotation
system on which the Stock may then be listed or quoted, and the Board may
otherwise, in its discretion, determine to submit other such changes to the
Plan to stockholders for approval; provided that, without the consent of an
affected Participant, no such Board action may materially and adversely affect
the rights of such Participant under any previously granted and outstanding
Award. The Committee or the Board may waive any conditions or rights under, or
amend, alter, suspend, discontinue or terminate any Award theretofore granted
and any Award agreement relating thereto, except as otherwise provided in the
Plan; provided that, without the consent of an affected Participant, no such
Committee or the Board action may materially and adversely affect the rights of
such Participant under such Award. Notwithstanding anything in the Plan to the
contrary, if any right under this Plan would cause a transaction to be
ineligible for pooling of interest accounting that would, but for the right
hereunder, be eligible for such accounting treatment, the Committee or the
Board may modify or adjust the right so that pooling of interest accounting
shall be available, including the substitution of Stock having a Fair Market
Value equal to the cash otherwise payable hereunder for the right which caused
the transaction to be ineligible for pooling of interest accounting; provided
that, without the consent of an affected Participant, no such Committee or
Board action may materially and adversely affect the rights of such Participant
under any previously granted and outstanding Award.

(f) LIMITATION ON RIGHTS CONFERRED UNDER PLAN. Neither the Plan nor any
action taken hereunder shall be construed as (i) giving any Eligible Person or
Participant the right to continue as an Eligible Person or Participant or in
the employ of the Company or a Subsidiary; (ii) interfering in any way with the
right of the Company or a Subsidiary to terminate any Eligible Person's or
Participant's employment at any time, (iii) giving an Eligible Person or
Participant any claim to be granted any Award under the Plan or to be treated
uniformly with other Participants and employees, or (iv) conferring on a
Participant any of the rights of a stockholder of the Company unless and until
the Participant is duly issued or transferred shares of Stock in accordance
with the terms of an Award.

(g) UNFUNDED STATUS OF AWARDS; CREATION OF TRUSTS. The Plan is intended
to constitute an "unfunded" plan for incentive and deferred compensation. With
respect to any payments not yet made

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<PAGE>

to a Participant or obligation to deliver Stock pursuant to an Award, nothing
contained in the Plan or any Award shall give any such Participant any rights
that are greater than those of a general creditor of the Company; provided that
the Committee may authorize the creation of trusts and deposit therein cash,
Stock, other Awards or other property, or make other arrangements to meet the
Company's obligations under the Plan. Such trusts or other arrangements shall
be consistent with the "unfunded" status of the Plan unless the Committee
otherwise determines with the consent of each affected Participant. The trustee
of such trusts may be authorized to dispose of trust assets and reinvest the
proceeds in alternative investments, subject to such terms and conditions as
the Committee or the Board may specify and in accordance with applicable law.

(h) NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by the
Board nor its submission to the stockholders of the Company for approval shall
be construed as creating any limitations on the power of the Board or a
committee thereof to adopt such other incentive arrangements as it may deem
desirable including incentive arrangements and awards which do not qualify
under Code Section 162(m).

(i) PAYMENTS IN THE EVENT OF FORFEITURES; FRACTIONAL SHARES. Unless
otherwise determined by the Committee or the Board, in the event of a
forfeiture of an Award with respect to which a Participant paid cash or other
consideration, the Participant shall be repaid the amount of such cash or other
consideration. No fractional shares of Stock shall be issued or delivered
pursuant to the Plan or any Award. The Committee or the Board shall determine
whether cash, other Awards or other property shall be issued or paid in lieu of
such fractional shares or whether such fractional shares or any rights thereto
shall be forfeited or otherwise eliminated.

(j) GOVERNING LAW. The validity, construction and effect of the Plan,
any rules and regulations under the Plan, and any Award agreement shall be
determined in accordance with the laws of the State of Delaware without giving
effect to principles of conflicts of laws, and applicable federal law.

(k) PLAN EFFECTIVE DATE AND STOCKHOLDER APPROVAL; TERMINATION OF
PLAN. The Plan became effective on the Effective Date upon adoption by the
Board and approval by the Company's stockholders. The Plan was amended on March
24, 2000 to effect the following changes, which are subject to stockholder
approval at the 2000 Annual Meeting: (i) to increase the number of shares of
Stock reserved and available for delivery in connection with Awards by an
additional Five Hundred Thousand (500,000) shares; and (ii) to implement the
automatic share increase provision in clause (iii) of Section 4(a). Awards may
be granted subject to stockholder approval, but may not be exercised or
otherwise settled in the event stockholder approval is not obtained. The Plan
shall terminate at such time as no shares of Common Stock remain available for
issuance under the Plan and the Company has no further rights or obligations
with respect to outstanding Awards under the Plan.

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<PAGE>

SMARTDISK CORPORATION
3506 MERCANTILE AVENUE
NAPLES, FLORIDA 34104

THIS PROXY IS SOLICITED ON BEHALF OF OUR BOARD OF DIRECTORS

The undersigned holder of our common stock, hereby appoints Daniel E. Reed
and Michael R. Mattingly, as proxies for the undersigned, with full power of
substitution, for and in the name of the undersigned to act for the undersigned
and to vote, as designated on the reverse side of this proxy card, all of the
shares of our stock that the undersigned is entitled to vote at our 2000 Annual
Meeting of Stockholders, to be held on Tuesday, May 23, 2000, at 10:00 a.m.,
local time, at The Inn on Fifth, 699 Fifth Avenue South, Naples, Florida 34102,
and at any adjournments or postponements thereof.

PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED

[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.

1. Election of Directors.

Vote for all Nominees Listed Below (except as written below)
[ ]

Vote Withheld from all Nominees
[ ]

OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION
OF ALL THE DIRECTOR NOMINEES LISTED IN PROPOSAL (1).

NOMINEES: Michael S. Battaglia
Timothy Tomlinson
Joseph M. Tucci

(Instruction: To withhold authority for an individual nominee, write
that nominee's name on the line provided below.)

-----------------------------------------------------------------------

2. Approval of the amendment of our 1999 Incentive Compensation Plan to
increase the number of shares available for grant from 2,500,000 to
3,000,000 and to provide for an annual increase in the number of shares
available for grant at the beginning of each year, commencing 2001 and
continuing through 2005, equal to 3% of the total number of shares of
common stock outstanding at the end of the preceding year.

[ ] For [ ] Against [ ] Abstain

3. In their discretion, upon such other business as may properly come before
the Annual Meeting or any adjournment or postponement thereof.

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" THE ELECTION OF ALL DIRECTOR NOMINEES LISTED HEREIN AND "FOR" THE
APPROVAL OF THE AMENDMENT OF OUR 1999 INCENTIVE COMPENSATION PLAN.

<PAGE>

PLEASE MARK, SIGN AND DATE THIS PROXY CARD AND PROMPTLY RETURN IT IN THE
ENVELOPE PROVIDED. NO POSTAGE IS NECESSARY IF YOU MAIL THE ENVELOPE FROM WITHIN
THE UNITED STATES.

The undersigned hereby acknowledges receipt of (i) the Notice of Annual
Meeting, (ii) the Proxy Statement, and (iii) our 2000 Annual Report to
Stockholders.

DATE__________________________________________________________________________

SIGNATURE_____________________________________________________________________

SIGNATURE (If held jointly)___________________________________________________

Note: Please sign exactly as your name appears hereon and mail this proxy
promptly even though you may plan to attend the meeting. Joint owners should
each sign this proxy. When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such. When signing for a corporation,
please have the president or other authorized officer sign with the full
corporate name. If signing for a partnership, an authorized person must sign in
the partnership name.