SCHEDULE 14 A 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 Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[x] Definitive Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
nSTOR TECHNOLOGIES, INC.
-----------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Payment of filing fee (check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11:
(1) Title of each class of securities to which transaction applies:
---------------------------------------------
(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.
<PAGE>
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
--------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
nSTOR TECHNOLOGIES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 5, 2000
----------------------------------------
To the Stockholders of
nStor Technologies, Inc.
The Board of Directors of nStor Technologies, Inc. invites you to attend
the 2000 Annual Meeting of Stockholders of nStor to be held on June 5, 2000, at
10:00 a.m., local time, at La Grande Salle, The Peninsula Hotel, 700 Fifth
Avenue at 55th Street, New York, New York for the following purposes:
1. To elect five persons to nStor's Board of Directors to hold office
until nStor's next Annual Meeting of Stockholders or until their
successors are duly elected and qualified;
2. To ratify the reappointment of BDO Seidman, LLP, certified public
accountants, as nStor's independent auditors for the fiscal year
ending 2000; and
3. To transact such other business as may properly come before the Annual
Meeting and any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on Wednesday, April 19,
2000 as the record date for determining those stockholders entitled to notice
of, and to vote at, the Annual Meeting and any adjournments or postponements
thereof.
Whether or not you expect to be present, please promptly mark, sign and date the
enclosed proxy and return it in the enclosed pre-addressed envelope. No postage
is required if mailed in the United States.
By Order of the Board of Directors
Orilla F. Floyd, Secretary
West Palm Beach, Florida
April 26, 2000
ALL STOCKHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. THOSE STOCKHOLDERS
WHO ARE UNABLE TO ATTEND ARE RESPECTFULLY URGED TO EXECUTE AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. STOCKHOLDERS WHO EXECUTE A PROXY
CARD MAY NEVERTHELESS ATTEND THE MEETING, REVOKE THEIR PROXY AND VOTE THEIR
SHARES IN PERSON.
<PAGE>
General Information About The Annual Meeting and Voting
Why did you send me this proxy statement?
We sent you this proxy statement and the enclosed proxy card because nStor's
Board of Directors is soliciting your proxy to vote at the 2000 Annual Meeting
of Stockholders. This proxy statement summarizes the information you need to
know to vote at the Annual Meeting on June 5, 2000, and at any adjournment of
the meeting, for the purposes indicated in the accompanying Notice of 2000
Annual Meeting of Stockholders. However, you do not need to attend the Annual
Meeting to vote your shares. Instead, you may simply complete, sign and return
the enclosed proxy card.
This proxy statement and the accompanying proxy card will be mailed to
stockholders on or about April 26, 2000.
Who can vote?
You can vote your shares of common stock if our records show that you owned the
shares at the close of business on April 19, 2000. A total of 31,406,728 shares
of common stock and 9,436 shares of convertible preferred stock, which are
convertible into 6,478,699 shares of common stock, can vote at the Annual
Meeting. You get one vote for each share of common stock you own or one vote for
each share of common stock into which your convertible preferred stock can be
converted.
How do I vote by proxy?
Follow the instructions on the enclosed proxy card to vote on each proposal to
be considered at the Annual Meeting. Sign and date the proxy card and mail it
back to us in the enclosed envelope. The proxyholders named on the proxy card
will vote your shares as you instruct. If you sign and return the proxy card but
do not vote on a proposal, the proxyholders will vote for you on that proposal.
Unless you instruct otherwise, the proxyholders will vote FOR each of the five
director nominees, FOR the ratification of the reappointment of BDO Seidman, LLP
as our independent auditors for 2000, and will use their judgment to vote FOR or
AGAINST any other proposals to be considered at the meetings.
What if other matters come up at the Annual Meeting?
The matters described in this proxy statement are the only matters we know will
be voted on at the Annual Meeting. If other matters are properly presented at
the meeting, the proxyholders will vote your shares as they see fit.
Can I change my vote after I return my proxy card?
Yes. At any time before the vote on a proposal, you can change your vote either
by giving our corporate secretary a written notice revoking your proxy card,
signing, dating and returning to us a new proxy card, or by attending the Annual
Meeting and voting in person. We will honor the proxy card with the latest date.
Can I vote in person at the Annual Meeting rather than by completing the proxy
card?
Although we encourage you to complete and return the proxy card to ensure that
your vote is counted, you can attend the Annual Meeting and vote your shares in
person.
What do I do if my shares are held in "street name"?
If your shares are held in the name of your broker or other nominee, that party
should give you instructions for voting your shares.
<PAGE>
How are votes counted?
We will hold the Annual Meeting if holders of a majority of the shares of common
stock entitled to vote either sign and return their proxy cards or attend the
Annual Meeting. If you sign and return your proxy card, your shares will be
counted to determine whether we have a quorum even if you abstain or fail to
vote on any of the proposals listed on the proxy card. A majority of the
outstanding shares will constitute a quorum at the meeting.
Who will count the votes?
ChaseMellon Shareholder Services, our transfer agent, will tabulate the returned
proxy votes by mail and the independent inspector of the election will tabulate
the votes at the meeting. The election inspector will treat shares represented
by properly signed and returned proxies that reflect abstentions from voting as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum on all matters.
The election inspector will treat shares referred to as "broker non-votes" (i.e.
shares held by brokers or nominees as to which voting instructions have not been
received from the beneficial owners) as shares that are present and entitled to
vote for purposes of determining the presence of a quorum. Abstentions and
"broker non-votes" will not affect the outcome of the director elections or the
ratification of the reappointment of BDO Seidman, LLP.
If your shares are held in the name of a nominee, and you do not tell the
nominee by May 22, 2000 how to vote your shares (so called "broker non-votes"),
the nominee can vote them as it sees fit only on matters that are deemed to be
routine, and not on any other proposal. If a broker indicates on the proxy that
it does not have discretionary authority as to certain shares to vote on a
particular matter, those shares will not be considered as present and entitled
to vote with respect to that matter.
Who pays for this proxy solicitation?
nStor. In addition to sending you these materials, some of our employees may
contact you by telephone, by mail, or in person. None of these employees will
receive any extra compensation for doing this. We may request persons holding
shares in their names for others to forward soliciting materials to our
principals to obtain authorization for the execution of proxies, and we will
reimburse such persons for their expenses in so doing.
You are requested, regardless of the number of shares you hold, to sign the
proxy and return it promptly in the enclosed envelope.
<PAGE>
2000 ANNUAL MEETING OF STOCKHOLDERS
OF
nSTOR TECHNOLOGIES, INC.
-----------------------------
PROXY STATEMENT
----------------------
This Proxy Statement is furnished in connection with the solicitation by our
Board of Directors, of proxies from the holders of our common stock, par value
$.05 per share, for use at our 2000 Annual Meeting of our Stockholders to be
held at 10:00 a.m., local time, on Monday, June 5, 2000, at La Grande Salle, The
Peninsula Hotel, 700 Fifth Avenue at 55th Street, New York, New York or at any
adjournment(s) or postponement(s), pursuant to the enclosed Notice of Annual
Meeting.
The approximate date that this Proxy Statement and the enclosed proxy are first
being sent to stockholders is April 26, 2000. Stockholders should review the
information provided in this Proxy Statement in conjunction with our Annual
Report on Form 10-K for the year ended December 31, 1999, a copy of which
accompanies this Proxy Statement. Our executive offices are located at 10140
Mesa Rim Road, San Diego, California 92121, and our telephone number is (858)
453-9191.
INFORMATION CONCERNING PROXY
The enclosed proxy is solicited on behalf of our Board of Directors. The giving
of a proxy does not preclude the right to vote in person should any stockholder
giving the proxy so desire. Stockholders have an unconditional right to revoke
their proxy at any time prior to exercise, either in person at the Annual
Meeting or by filing with our Secretary at our headquarters a written revocation
or duly executed proxy bearing a later date; however, no such revocation will be
effective until we receive written notice of the revocation at or prior to the
Annual Meeting.
We will bear the cost of preparing, assembling and mailing this Proxy Statement,
the Notice of Annual Meeting of Stockholders and the enclosed proxy. 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
their principals and to request authority for the execution of proxies. We may
reimburse such persons for their expenses in so doing.
<PAGE>
PURPOSES OF THE MEETING
At the Annual Meeting, our stockholders will consider and vote upon the
following matters:
(1) The election of five (5) persons to our Board of Directors to hold
office until our next Annual Meeting of Stockholders or until their
successors are duly elected and qualified;
(2) The ratification of the reappointment of BDO Seidman, LLP, certified
public accountants, as our independent auditors for 2000; and
(3) Such other business as may properly come before the Annual Meeting and
any adjournments or postponements. We are not aware of any other
business.
Unless contrary instructions are indicated on the enclosed proxy, all shares
represented by valid proxies received pursuant to this solicitation (and which
have not been revoked in accordance with the procedures set forth above) will be
voted FOR the election of the five nominees for director named below and FOR the
ratification of the reappointment of BDO Seidman, LLP, as our independent
auditors for 2000. In the event a stockholder specifies a different choice by
means of the enclosed proxy, his/her shares will be voted in accordance with the
specification so made.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Board of Directors has set the close of business on April 19, 2000 as the
Record Date for determining our stockholders entitled to notice of and to vote
at the Annual Meeting. As of the Record Date, there were 31,406,728 shares of
common stock issued and outstanding, all of which are entitled to be voted at
the Annual Meeting. Each share of common stock is entitled to one vote on each
matter submitted to stockholders for approval at the Annual Meeting. In
addition, as of the Record Date, there were an aggregate of 9,436 shares of our
Convertible Preferred Stock (together with the common stock, referred to as
Capital Stock) issued and outstanding, which shares are entitled to an aggregate
of 6,478,699 votes on each matter submitted to stockholders for approval at the
Annual Meeting. All of the shares of Capital Stock vote as a single class.
The attendance, in person or by proxy, of the holders of a majority of the
outstanding shares of Capital Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum. The affirmative vote of a plurality of the
shares of Capital Stock present in person or represented by proxy and entitled
to vote at the Annual Meeting is required for the election of directors. The
affirmative vote of the majority of the outstanding shares of Capital Stock will
be required for approval of any other matter that may be submitted to a vote of
the stockholders, unless the matter is one for which a greater vote is required
by law or by our Certificate of Incorporation or By-laws. Under our Certificate
of Incorporation, By-Laws and applicable Delaware law, abstentions and broker
non-votes will not have the effect of votes in opposition to the election of a
director, but on all other matters, abstentions will be treated as votes against
the proposal.
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of March 31, 2000, information with respect
to the beneficial ownership of our common stock by (i) each person known by us
to beneficially own more than 5% of the outstanding shares of common stock, (ii)
each of our directors and (iii) all of our directors and executive officers as a
group.
Percent of
Name and Address of Amount and Nature of Outstanding
Beneficial Owner Beneficial Ownership (1) Shares
_________________________ ________________________ _____________
H. Irwin Levy 7,527,061 (2) 21.4
100 Century Blvd.
West Palm Beach, FL 33417
Bernard Marden 4,379,487 13.3
1290 South Ocean Blvd.
Palm Beach, FL 33480
Maurice Halperin 3,192,444 10.2
1460 South Ocean Blvd.
Pompano Beach, FL 33062
Michael L. Wise 766,412 (3) 2.4
285 Tanglewood Crossing
Lawrence, NY 11559
Bernard R. Green 321,348 1.0
583 North Lake Way
Palm Beach, Fl 33480
Roger H. Felberbaum 7,500 (4)
ING Baring
230 Park Avenue
New York, NY 10169
Larry Hemmerich - -
10140 Mesa Rim Road
San Diego, CA 92121
All executive officers 8,662,321 24.5
and directors as a group
(11 persons)
- ----------
(1) Unless otherwise indicated, each stockholder listed has the sole power
to vote and direct disposition of the shares of common stock shown as
beneficially owned by such stockholder. For purposes of this table, a
person or group of persons is deemed to have "beneficial ownership" of the
following shares of common stock which such person or group has the right
to acquire pursuant to options, warrants or Convertible Preferred Stock
that are exercisable or convertible within 60 days of the date hereof: Mr.
H. Irwin Levy - 3,735,000 shares of which 550,000 shares are held by a
corporation controlled by Mr. Levy; Mr. Marden - 1,616,666 shares; Mr. Wise
- 172,000 shares which are held by a general partnership controlled by Mr.
Wise's wife; Mr. Green - 40,000 shares; and all executive officers and
directors as a group - 3,972,000 shares. See "Executive Compensation".
(2) Includes 335,897 shares owned by a corporation controlled by Mr. Levy.
(3) Includes 227,410 shares owned by a retirement trust controlled by Mr.
Wise. Also includes the following shares, as to which Mr. Wise disclaims
beneficial ownership: 167,602 shares owned by Mr. Wise's wife, 65,000
shares owned by Mr. Wise's wife as custodian for child and 50,400 shares
owned jointly by Mr. Wise's wife and his mother.
(4) Less than 1%.
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our
directors and executive officers, and persons who own more than ten percent of
our outstanding common stock, to file with the Securities and Exchange
Commission (the SEC) initial reports of ownership and reports of changes in
ownership of common stock. Such persons are required by SEC regulation to
furnish us with copies of all such reports they file.
To our knowledge, based solely on a review of the copies of such reports
furnished to us and written representations that no other reports were required,
our executive officers, directors and greater than ten percent beneficial owners
have complied with all applicable Section 16(a) filing requirements except as
follows (due to administrative oversights): (i) officer Jack Jaiven did not file
an Initial Statement of Beneficial Ownership of Securities on Form 3 on a timely
basis with respect to his appointment as Vice President on July 1, 1999;
(ii)director Bernard R. Green did not file a Statement of Changes in Beneficial
Ownership on Form 4 on a timely basis on two occasions, to report his sale of
5,000 shares in March 1999 and the December 1999 sale of 5,000 shares held by
Mr. Green's mother-in-law, for which Mr. Green disclaimed beneficial ownership;
(iii) director Michael L. Wise did not file a Statement of Changes in Beneficial
Ownership on Form 4 on a timely basis to report the October 1999 annual grant to
directors of an option to purchase 20,000 shares; (iv) Bernard Marden did not
file an Initial Statement of Beneficial Ownership of Securities on Form 3 on a
timely basis to report becoming a 10% shareholder of our common stock in
February 1999 and did not timely file Statements of Changes in Beneficial
Ownership on Form 4 for six purchases of an aggregate of 93,000 shares from
August 1999 through October 1999; (v) officer Diane Wong did not file an Initial
Statement of Beneficial Ownership of Securities on Form 3 on a timely basis with
respect to her appointment as Controller in November 1999; and (vi) former
officer W. David Sykes did not file a Statement of Changes in Beneficial
Ownership on Form 4 on a timely basis to report the December 1999 conversion of
924 shares of our Series F Convertible Preferred Stock into 308,000 shares of
common stock and the sale of those shares in December 1999.
ELECTION OF DIRECTORS: NOMINEES
Our Certificate of Incorporation provides that the number of directors
constituting our Board of Directors shall be not less than three, the exact
number of which shall be fixed from time to time by our Board of Directors. The
Board of Directors has fixed at five the number of directors that will
constitute the Board for the ensuing year.
Messrs. Roger H. Felberbaum, Bernard R. Green, Larry Hemmerich, H. Irwin Levy,
Chairman of the Board, and Michael L. Wise have been nominated for election as
our directors. Each of such nominees for election as a director is a current
member of the Board of Directors.
The Board of Directors has no reason to believe that any of the nominees will
refuse to act or be unable to accept election; however, in the event that one or
more of the nominees is unable to accept election or if any other unforeseen
contingencies should arise, each proxy that does not direct otherwise will be
voted for the remaining nominees, if any, and for such other person(s) as may be
designated by the Board of Directors.
<PAGE>
MANAGEMENT
Our Directors and Executive Officers
Set forth below is the name, age, position with us, the year in which each was
first appointed or elected an officer or director, and certain other information
with respect to each director and executive officer:
Director Officer
Name Age Position Since Since
_____________ ___ _______________________ ________ _______
H. Irwin Levy ...... 73 Chairman of the Board 1995 (1) -
Roger H. Felberbaum . 57 Director 2000 (2) -
Larry Hemmerich ...... 62 Director, President and
Chief Executive Officer 2000 (3) 2000(3)
Bernard R. Green ..... 81 Director 1997 -
Michael L. Wise ...... 55 Director 1989 (4)
Jonathan Ash ......... 43 Vice President, Marketing - 2000(5)
James A. Habuda ...... 43 Vice President, OEM &
Indirect Sales - 2000(5)
Jack Jaiven .......... 53 Vice President, Chief
Financial Officer
and Treasurer - 1999(6)
David W. Tweed ........52 Vice President, Solutions
Sales - 2000(7)
Diane Wong ........... 37 Controller - 1999(8)
Thomas G. Wrightson .. 53 Vice President, Manufacturing
and Services - 2000(5)
- ----------
(1) Mr. Levy previously served as our Chairman of the Board of Directors from
1987 until July 1991.
(2) Mr. Felberbaum was appointed to the Board of Directors in February 2000.
(3) Mr. Hemmerich was appointed to the Board of Directors in January 2000,
at which time he commenced employment with us and was appointed as our
President and Chief Executive Officer. (4) Mr. Wise previously served as
our President from March 1989 until December 1990 and from October 1992
until July 1996. He served as Vice President from June 1998 to November
1999. He also served as Chairman of the Board of Directors from July 1991
until June 1998 and Vice Chairman of the Board of Directors from June 1998
until November 1999. (5) Mr. Ash, Mr. Habuda and Mr. Wrightson commenced
employment with us in March 2000.
(6) Mr. Jaiven previously served as Vice President and Chief Financial
Officer from July 1989 until June 1991 and also from January 1997 until
October 1997.
<PAGE>
(7) Mr. Tweed commenced employment with us in April 2000.
(8) Ms. Wong commenced employment with us in June 1999 and was appointed
Controller in November 1999.
H. Irwin Levy has been Chairman of the Board and Chief Executive Officer of
Hilcoast Development Corp. ("Hilcoast"), a real estate development and
management company, and certain affiliated companies, all of which are privately
held businesses, since August 1992. Since December 1997, Mr. Levy has served as
Chairman of the Board of CV Reit, Inc., a New York Stock Exchange listed Real
Estate Investment Trust ("CV Reit") and was Chairman of the Board and Chief
Executive Officer of CV Reit from 1985 until July 1992. He is currently of
counsel to the West Palm Beach law firm of Levy Kneen Mariani Curtin Kornfeld
and del Russo.
Roger H. Felberbaum was appointed to the Board in February 2000. Mr. Felberbaum
is currently Managing Director at ING Baring, and has served in this position
since September 1997. Previously, Mr. Felberbaum was Senior Managing Director of
Furman Selz from October 1983 until September 1997.
Larry Hemmerich was appointed President, Chief Executive Officer and a member of
the Board in January 2000. Mr. Hemmerich was the General Manager of the Software
and SAN Management operation of Hewlett-Packard's Enterprise Storage Business
Unit from May 1999 until January 2000. From June 1998 until May 1999, Mr.
Hemmerich was Chief Operating Officer of Transoft Networks and from November
1992 until May 1998, Mr. Hemmerich was Executive Vice President for Data General
and General Manager of its CLARIION business unit.
Bernard R. Green was for more than forty years, managing or senior partner of,
or consultant to the accounting firm of Friedman, Alpren & Green of New York,
New York and West Palm Beach, Florida. Mr. Green previously served as a director
of Hilcoast from July 1992 until February 1997 and has been a private investor
for more than twenty years.
Michael L. Wise is currently Chairman of the Board of Directors and Chief
Executive Officer of Netword, Inc., a publicly held company that provides a
utility for navigating the internet. Mr. Wise has been associated with us in
various positions since 1986 and was the founder of IMNET Corporation of
Delaware ("IMNET"), which became our subsidiary in 1988. Mr. Wise served as
President and Chairman of the Board of IMNET from July 1986 to June 1990. Mr.
Wise has a PhD in physics.
Jonathan Ash was appointed Vice President, Marketing in March 2000. Mr. Ash held
various positions with Unisys Corporation, including executive positions in
Europe, from October 1979 until March 2000, and was most recently the Director
of Storage Sales for Unisys North American Operations.
James A. Habuda was appointed Vice President, OEM & Indirect Sales in March
2000. From September 1988 until March 2000, Mr. Habuda was Vice President, OEM
Sales for Distributed Processing Technology which was recently acquired by
Adaptec.
Jack Jaiven, a certified public accountant, was appointed Treasurer, Chief
Financial Officer and Vice President on July 1, 1999. Since July 1992, Mr.
Jaiven has served as a Vice President of Hilcoast and since May 1999, as a Vice
President of Cenvill Recreation, Inc. and various affiliates (real estate
management companies). From October 1997 through April 1999, he served as
Executive Vice President and Treasurer of Avatar Retirement Communities, Inc., a
wholly owned subsidiary of Avatar Holdings, Inc., a NYSE listed real estate
development company. Mr. Jaiven previously served as our Vice President and
Chief Financial Officer from January 1997 until October 1997 and also from July
1989 until June 1991.
David W. Tweed was appointed Vice President, Solution Sales in April 2000. Mr.
Tweed has over 20 years of experience in sales and sales management and was most
recently, from January 1999 until January 2000, Director of Western Area
Solution Sales for Data General's CLARIION business unit. Previously, Mr. Tweed
was Western Regional Sales Manager for Sentryl Software and for Zitel from March
1998 until March 1999 and from January 1997 until January 1998, respectively.
Mr. Tweed was Southwest Sales Manager for EMC from January 1994 until November
1996.
<PAGE>
Diane Wong, a certified public accountant, was appointed Controller in November
1999. Since June 1997, Ms. Wong has served as Vice President of Finance of
Andataco, Inc., which we acquired in June 1999. Previously, Ms. Wong was a
Senior Audit Manager with Price Waterhouse from September 1994 until May 1997.
From September 1985 until May 1992, Ms. Wong held various positions with Price
Waterhouse, including Audit Manager.
Thomas G. Wrightson was appointed Vice President, Operations in March 2000.
Previously, Mr. Wrightson held various management positions with Storage
Technology Corporation from December 1991 until March 2000, and was most
recently Director of Support Services Development and Management. Mr. Wrightson
has in excess of 25 years of IT industry experience.
Meetings and Committees of the Board of Directors
During the fiscal year ended December 31, 1999, the Board of Directors held four
meetings and on nine occasions took action by unanimous written consent. No
director attended fewer than 75 percent of the aggregate number of meetings of
the Board of Directors held during the period he served on the Board.
The Board of Directors has an Audit Committee. The Audit Committee, which met
once during fiscal 1999, consisted of Michael L. Wise, Bernard R. Green and
Joseph D. Weingard, an outside consultant to us. The Audit Committee has adopted
a written charter and its responsibilities include overseeing the financial
reporting process and the effectiveness of our internal, accounting and
financial controls, and making recommendations to the Board, including the
designation of independent auditors on an annual basis.
EXECUTIVE COMPENSATION
The following table sets forth for the fiscal years ended December 31, 1999,
1998 and 1997, the compensation awarded to, earned by or paid to those persons
who were, during fiscal 1999, (i) our Chief Executive Officer and (ii) our
executive officer whose compensation is required to be disclosed pursuant to the
rules of the SEC (collectively referred to as the Named Officers). No
compensation was earned by the Named Officers prior to fiscal 1998.
Summary Compensation Table
All
Name and Other Annual
Principal Position Year Salary Bonus Compensation
_____________________ _____ _______ ______ ___________
Lawrence F. Steffann 1999 $253,900 - $188,750(1)
Former President and 1998 $103,007(2)
Chief Executive Officer
W. David Sykes 1999 $189,583(3) - -
Former Executive Vice
President of Marketing
and Sales of nStor
Corporation, Inc. and President
of Andataco, Inc (wholly
owned subsidiaries)
----------
(1) Represents the dollar value of the difference between the price paid for
the purchase of 150,000 shares of our common stock underlying Employee
Incentive Stock Options and the fair market value at the dates of purchase.
(2) Represents salary received by Mr. Steffann commencing June 1, 1998, the
first date we employed Mr. Steffann. Mr. Steffann resigned effective
January 26, 2000. See Employment Agreements regarding termination
compensation.
<PAGE>
(3) Represents salary received by Mr. Sykes commencing June 8, 1999, the first
date we employed Mr. Sykes. Mr. Sykes employment was terminated effective
March 7, 2000.
Option/Stock Appreciation Rights ("SAR") Grants
The following table sets forth information regarding options to purchase our
ccmmon stock that were granted during fiscal 1999 to the Named Officers. No SARs
were granted.
Individual Grants
__________________
<TABLE>
<CAPTION>
Potential Realizable Value
Number of Percent of at Assumed Annual Rates of
Securities Total Stock Price Appreciation for
Underlying Options Exercise Option Term
Options Granted to or Base ____________________________
Granted Employees in Price Expiration
(#) (1) Fiscal ($/sh) Date 5% ($) 10% ($)
__________ _____________ ________ __________ _________ _________
<S> <C> <C> <C> <C> <C> <C>
W. David
Sykes .... 1,100,000 36% $2.00 (1) (1) (1)
</TABLE>
- ----------
(1) Mr. Sykes' employment was terminated effective March 7, 2000 at which time
all of the unexercised options terminated.
Aggregated Fiscal Year-End Option Value Table
The following table sets forth certain information concerning unexercised stock
options held by the Named Officers as of December 31, 1999. No SAR's have been
granted or are outstanding.
OPTION EXERCISES DURING 1999
AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Value of Unexercised
Shares Unexercised Options at In-the-Money Options at
Acquired (1) December 31, 1999 (#) December 31, 1999($)(2)
on Value _________________________ _________________________
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
_____________ __________ ________ ___________ _____________ ___________ _____________
<S> <C> <C> <C> <C> <C> <C>
Lawrence
F. Steffann 150,000 $188,750 225,000 375,000 (3) $222,188 (3)
W. David
Sykes - - - 1,100,000 (4) - (4)
</TABLE>
________
(1) The closing price for our common stock, as reported by the American
Stock Exchange (AMEX) was $2.75 on December 20, 1999 and $2.3125 on
December 24, 1999, the dates on which Mr. Steffann exercised options to
purchase 50,000 and 100,000 shares, respectively. Value realized is
calculated by multiplying (a) the difference between $2.75 and $2.3125
and the option exercise price of $1.20 by (b) the number of shares of
common stock underlying the option.
(2) The closing price for our common stock, as reported by AMEX on December
31, 1999, was $2.1875. Value is calculated by multiplying (a) the
difference between $2.1875 and the option exercise price by (b) the
number of shares of common stock underlying the option.
<PAGE>
(3) Mr. Steffann's rights with respect to these options were terminated
in January 2000 in connection with the termination of his employment.
See Employment Agreements.
(4) Mr. Sykes' employment was terminated effective March 7, 2000 at which
time all of the unexercised options terminated.
Compensation Committee Interlocks and Insider Participation
Since we did not have a Compensation Committee during 1999, the entire Board of
Directors participated in deliberations concerning compensation paid to our
executive officers. Our former President and Chief Executive Officer, Lawrence
F. Steffann, was also a member of the Board of Directors.
Directors Compensation
Our non-employee directors receive $1,500 for each directors' meeting attended.
Members of our Audit Committee receive annual compensation of $3,750. Michael L.
Wise waived his Audit Committee compensation in 1999. With the exception of
Lawrence F. Steffann, none of our directors were employees in 1999. During
fiscal 1999, non-employee directors earned compensation in the form of monthly
management/consulting fees, board fees and/or committee fees, and the exercise
of stock options (represented by the excess of the market value on the date of
exercise over the exercise price) for services rendered to us in their
respective capacities as directors or officers as follows: Michael L. Wise -
$105,450 (including $87,450 from the purchase of 38,000 shares of our common
stock underlying stock options); H. Irwin Levy - $18,000; Bernard R. Green -
$53,750 (including $35,000 from the purchase of 20,000 shares our common stock
underlying stock options); and Mark F. Levy - $71,688 (including $49,688 from
the purchase of 27,500 shares of our common stock underlying stock options).
Commencing in February 1999, all directors agreed to defer receipt of all fees
earned until certain events occurred. In January 2000, all fees earned were paid
to the above named directors. Mr. Wise's compensation is payable to Yadgim
Partners, of which Mr. Wise's wife is a general partner.
Pursuant to our 1996 Stock Option Plan, each non-employee director is
automatically granted, effective each anniversary of said director's appointment
to the Board, an option to purchase 20,000 shares of common stock at the then
fair market value of the common stock.
Employment Agreements
We entered into an employment agreement with Larry Hemmerich, effective as of
January 17, 2000, pursuant to which Mr. Hemmerich was employed as our President,
Chief Executive Officer and a director. The agreement provides for the
employment of Mr. Hemmerich through January 16, 2002, at an annual base salary
of $325,000. The agreement further provides for a $125,000 cash bonus for the
first year of employment, and an undetermined bonus in year two based on the
achievement of certain objectives set by the Board of Directors. In addition,
the agreement provides for an incentive bonus to be paid based on 10% of the net
pre-tax earnings for the fiscal year ending December 31, 2001. Mr. Hemmerich was
also granted options to purchase 1,000,000 shares of our common stock at $2.50
per share, with one third vesting on January 17, 2001, one third on July 17,
2001 and the remainder on January 17, 2002. Additional terms of the grant
provide for the immediate vesting of 500,000 shares under the option should the
market price of our common stock reach $9.50 at any time prior to July 17, 2001,
and the immediate vesting of all 1,000,000 shares under the option should the
market price of our common stock reach $14.50 at any time prior to January 17,
2002. The employment agreement provides that 50% of Mr. Hemmerich's options will
vest immediately in the event we terminate his employment without cause (as
defined in the agreement). In the event Mr. Hemmerich resigns his employment or
we terminate Mr. Hemmerich for cause (as defined in the agreement), he shall be
entitled to receive his base compensation through the date of resignation or
termination. In the case of voluntary resignation, all unexercised options would
expire 30 days from the date of resignation and in the case of termination for
cause, all of the unexercised options would immediately terminate.
<PAGE>
We entered into an employment agreement with Lawrence F. Steffann, effective as
of June 1, 1998, pursuant to which Mr. Steffann was employed as our President
and Chief Executive Officer. The agreement provided for the employment of Mr.
Steffann through June 1, 2001, at an annual base salary of $200,000 (which
salary was increased to $250,000 annually effective January 1, 1999), subject to
annual increases at the discretion of the Board of Directors. Mr. Steffann was
also granted options to purchase 750,000 shares of our common stock at $1.20 per
share with 125,000 shares vesting every six months. Effective January 26, 2000,
we entered into a termination agreement with Mr. Steffann relating to the
termination of his employment. Pursuant to the agreement, we issued 43,479
shares of our common stock to Mr. Steffann and paid him $27,175 in cash.
In connection with our acquisition of Andataco, Inc. (Andataco) in June 1999, we
entered into an employment agreement with W. David Sykes, pursuant to which Mr.
Sykes was employed as President of Andataco and Executive Vice President of
Marketing and Sales of nStor Corporation, Inc., our wholly owned subsidiaries.
The agreement provided for the employment of Mr. Sykes through June 8, 2002, at
an annual base salary of $325,000, and annual bonuses based on a percentage of
certain sales, with a minimum annual bonus of $175,000. Mr. Sykes agreed to
forego the minimum annual bonus for the year ending June 8, 2000, pursuant to a
letter agreement dated December 23, 1999. Mr. Sykes was also granted options to
purchase 1,100,000 shares of our common stock at $2.00 per share which were to
vest over a three year period. Effective March 7, 2000, we terminated Mr. Sykes'
employment at which time all of the unexercised options terminated.
REPORT ON EXECUTIVE COMPENSATION
During fiscal 1999, our Board of Directors administered the compensation program
for executive officers.
Executive Compensation Policy - Our overall compensation philosophy is as
follows:
* Attract and retain quality talent, which is critical to both our short-term
and long-term success;
* Foster a performance-oriented environment, where compensation is based upon
corporate performance as measured by achievement of short and long-term
objectives, taking into account economic conditions and competitive
compensation levels;
* Create a mutuality of interest between executive officers and stockholders
through compensation structures that share the wards and risks of strategic
decision making; and
* Promote a cohesive, team oriented ethic among members of senior management
in order to maintain the competitive advantage of efficiently integrating
diverse business capabilities.
The Board's approach to base compensation is to offer competitive salaries in
comparison to those of other computer equipment manufacturers. Increases in base
compensation are based on the competence and performance of our executives and
take into account our performance as a company.
The Board also believes that stock ownership enhances management's focus on
maximizing stockholder value. Consequently, we have also adopted an incentive
stock option plan for our officers and employees. The administrators of that
plan allocate options to employees, including executive officers, based on an
evaluation of their relative levels of responsibility for, and contribution to,
our operating results (in relation to our other optionees) and the number of
options then owned by the employee.
Our executive compensation program for fiscal 1999 generally consisted of three
components: (i) monthly consultant/management fees for non-salaried
officers/directors, (ii) an annual salary for the Named Officers and (iii) a
long-term component consisting of grants of stock options to non-salaried
director/officers and to salaried officers. See "Directors Compensation" for
amounts paid to non-salaried directors and a discussion regarding automatic
annual option grants.
<PAGE>
The Named Officers were compensated in accordance with their respective
employment agreements. See "Employment Agreements".
Respectfully submitted,
Bernard R. Green
H. Irwin Levy
Michael L. Wise
PERFORMANCE GRAPH
The following graph compares the five-year cumulative return on our common stock
to total returns on the Standard and Poor's Smallcap 600 Index ("S&P Smallcap
600") and a component peer group of Standard and Poor's Technology-500 ("S&P
Technology-500"). The graph assumes that the value of the investment in our
common stock, the S&P Smallcap 600 and the S&P Technology-500 peer group was
$100 on October 31, 1994, and that all dividends were reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURNS
Base
Date October 31, December 31,
Oct.31, ________________ _____________________________
Company/Index 1994 1995 1996 1997 1998 1999
_________________ _______ ______ _______ ________ ________ ________
$ $ $ $ $ $
nStor Technologies,
Inc ............... 100 400.92 2,121.11 1,834.87 2,350.47 2,007.35
S&P Smallcap 600..... 100 121.16 145.95 193.72 191.19 214.91
S&P Technology-500 .. 100 151.44 183.23 261.26 451.92 791.46
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Loans Made to us by Directors
At December 31, 1998, our borrowings included $1,300,000 due to H. Irwin Levy
and a company controlled by H. Irwin Levy (collectively, "Mr. Levy"). During
1999, Mr. Levy loaned us an additional $4,775,000 of which we repaid $1,200,000
in cash, satisfied $1,500,000 by issuing 1,500 shares of our Series E
Convertible Preferred Stock (convertible into our common stock at a fixed
conversion price of $3.00 per share) and satisfied $1,790,000 through issuing
733,462 shares of our common stock, leaving an outstanding balance at December
31, 1999 of $1,585,000. In January 2000, we repaid the outstanding balance to
Mr. Levy. Borrowings from Mr. Levy were generally under revolving credit
arrangements which bore interest at 10% per annum and were due 30 days from
demand, except for $1,000,000 scheduled to mature on September 5, 2001, which
was satisfied by issuing common stock. Mr. Levy's Series E Convertible Preferred
Stock has a stated value of $1,500.000 and requires quarterly dividends at the
following annual rates: 8% from June 8, 1999 through June 7, 2000; 9% from June
8, 2000 through June 7, 2001; and 10% thereafter. During 1999 we paid $149,000
and $307,000 in interest and dividends, respectively, to Mr. Levy.
In connection with the 1,500 shares of Series E Convertible Preferred Stock
issued to Mr. Levy in satisfaction of borrowings in June 1999, we issued to Mr.
Levy warrants to purchase 50,000 shares of our common stock at a purchase price
of $3.30 per share, exercisable on the date of grant, expiring on June 8, 2002.
Effective April 12, 2000, Mr. Levy agreed to commit to a $2,000,000 revolving
line of credit facility to us. Borrowings under this facility will bear interest
at 10% per annum and mature the earlier of April 12, 2001 or upon the execution
of an amendment to our principal credit facility.
At December 31, 1999, our borrowings included $250,000 due to Bernard R. Green
which bore interest at 10% per annum and was scheduled to mature in September
2001. In December 1999, we satisfied these borrowings by issuing 84,615 shares
of our common stock to Mr. Green. During 1999, we paid $23,973 to Mr. Green in
interest expense.
<PAGE>
Hilcoast Advisory Services, Inc.
Commencing October 1999, we engaged Hilcoast Advisory Services, Inc. (Advisor)
to provide certain financial consulting and administrative services including
the services of Jack Jaiven who serves as Advisor's Vice President, and Chief
Financial Officer. The monthly amount payable to Advisor is $5,000 plus
reimbursement of out-of-pocket expenses. Mr. Levy is the Chairman of the Board,
Chief Executive Officer and a majority shareholder of Advisor's parent.
Syko Properties
We currently lease our San Diego corporate office from an entity owned by W.
David Sykes. During fiscal 1999, we paid $193,000 to Syko Properties.
We believe that the terms of the foregoing transactions described above are fair
and reasonable and as favorable to us as could be obtained from unaffiliated
third parties.
PROPOSAL TO RATIFY THE REAPPOINTMENT OF
OUR INDEPENDENT AUDITORS
The firm of BDO Seidman, LLP, certified public accountants, served as our
independent auditors for the fiscal year ended December 31, 1999. BDO Seidman
has advised us that the firm does not have any direct or indirect financial
interest in us or any of our subsidiaries, nor has such firm had any such
interest in connection with us or our subsidiaries during the past year, other
than in its capacity as our independent auditors. The Board of Directors has
selected BDO Seidman as our independent auditors for the fiscal year ending
December 31, 2000. Although the Board is not required to do so, it is submitting
its selection of our independent auditors for ratification at the Annual
Meeting, in order to ascertain the views of its stockholders. The Board will not
be bound by the vote of the stockholders; however, if the selection is not
ratified, the Board would reconsider its selection. One or more representatives
of BDO Seidman may be present at the Annual Meeting, will have the opportunity
to make a statement if they desire to do so and will be available to respond to
appropriate questions from stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT OUR STOCKHOLDERS VOTE FOR RATIFICATION OF
THE REAPPOINTMENT OF BDO SEIDMAN, AS OUR INDEPENDENT AUDITORS.
OTHER BUSINESS
The Board knows of no other business to be brought before the Annual Meeting.
If, however, any other business should properly come before the Annual Meeting,
the persons named in the accompanying proxy will vote proxies as in their
discretion they may deem appropriate, unless they are directed by a proxy to do
otherwise.
INFORMATION CONCERNING STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 promulgated by the SEC, a stockholder intending to
present a proposal to be included in our proxy statement for our 2000 Annual
Meeting of Stockholders must deliver a proposal in writing to our principal
executive offices no later than December 28, 2000.
<PAGE>
If a stockholder does not seek to have a proposal included in the proxy
statement, but nevertheless wishes to present a proper proposal at the annual
meeting, and the proposal is received by us on or before March 14, 2001, we will
provide information in the proxy statement relating to that annual meeting as to
the nature of the proposal and how persons named in the proxy solicited by our
Board of Directors intend to exercise their discretion to vote on the proposal.
By Order Of The Board of Directors
Orilla F. Floyd, Secretary
West Palm Beach, Florida
April 26, 2000
<PAGE>
PROXY CARD
nSTOR TECHNOLOGIES, INC.
10140 Mesa Rim Road
San Diego, CA 92121
THIS PROXY IS SOLICITED ON BEHALF OF THE
COMPANY'S BOARD OF DIRECTORS
The undersigned holder of common stock of nStor Technologies, Inc., a Delaware
corporation (the "Company"), hereby appoints Jack Jaiven and H. Irwin Levy and
each of them, as proxies for the undersigned, each with full power of
substitution, for and in the name of the undersigned to act for the undersigned
and to vote, as designated below, all of the shares of common stock of the
Company that the undersigned is entitled to vote at the 2000 Annual Meeting of
Stockholders of the Company, to be held at 10:00 a.m., local time, on Monday,
June 5, 2000, at La Grande Salle, The Peninsula Hotel, 700 Fifth Avenue at 55th
Street, New York, New York, and at any adjournment(s) or postponement(s)
thereof.
(1) Election of directors: Roger H. Felberbaum, Bernard R. Green, Larry
Hemmerich, H. Irwin Levy and Michael L. Wise.
[ ] VOTE FOR all nominees listed above, except vote withheld for the
following nominees (if any).
______________________________________
[ ] VOTE WITHHELD for all nominees.
The Board of Directors unanimously recommends a vote FOR the election
of all the nominees for election as directors.
(2) To ratify the reappointment of BDO Seidman, LLP, certified public
accountants, as the Company's independent auditors for fiscal 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Board of Directors unanimously recommends a vote FOR this proposal.
(3) Upon such other matters as may properly come before the Annual
Meeting and any adjournments thereof. In their discretion, the
proxies are authorized to vote upon such other business as may
properly come before the Annual Meeting, and any adjournments or
postponements thereof.
<PAGE>
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 NOMINEES LISTED ABOVE. IF NO DIRECTION IS MADE,
THIS PROXY WILL ALSO BE VOTED FOR THE RATIFICATION OF THE REAPPOINTMENT OF BDO
SEIDMAN, LLP.
The undersigned hereby acknowledges receipt of (i) the Notice of Annual Meeting,
(ii) the Proxy Statement, and (iii) the Company's Annual Report on Form 10-K for
the year ended December 31, 1999.
Dated_________________________, 2000
____________________________________
(Signature)
____________________________________
(Signature if held jointly)
IMPORTANT: Please sign exactly as your name appears hereon and mail it promptly
even though you now plan to attend the meeting. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
PLEASE MARK, SIGN AND DATE THIS PROXY CARD AND PROMPTLY RETURN IT IN THE
ENVELOPE PROVIDED. NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES.
