<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Overland Data, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
OVERLAND DATA, INC.
8975 BALBOA AVENUE
SAN DIEGO, CALIFORNIA 92123-1599
--------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 11, 1997
--------------------------------
The Annual Meeting of Shareholders (the "Meeting") of Overland Data, Inc.,
a California corporation (the "Company"), will be held at the principal
executive offices of the Company at 8975 Balboa Avenue, San Diego, California
92123-1599 on November 11, 1997, at 9:00 a.m., for the following purposes:
1. To elect five (5) directors of the Company to hold office until the
1998 Annual Meeting of Shareholders or until their respective
successors are duly elected and qualified;
2. To approve an amendment to the Company's Bylaws to provide that the
authorized number of directors of the Company shall be not less than
five (5) nor more than seven (7), with the exact number of directors
to be set at five (5);
3. To approve an amendment to the Company's 1995 Stock Option Plan, as
amended, to increase the number of shares of Common Stock authorized
for issuance thereunder by 200,000;
4. To approve the Company's 1997 Executive Stock Option Plan, which plan,
as set forth in Exhibit A to the Proxy Statement, authorizes the
issuance thereunder of 550,000 shares of Common Stock;
5. To ratify the selection of Price Waterhouse LLP as the independent
auditors of the Company for the fiscal year ending June 30, 1998; and
6. To transact such other business as may properly come before the
Meeting or any adjournment or postponement of the Meeting.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
<PAGE>
Only shareholders of record at the close of business on October 10, 1997
will be entitled to vote at the Meeting. Each of these shareholders is
cordially invited to be present and vote at the Meeting in person.
By Order of the Board of Directors
MARTIN D. GRAY
SECRETARY
San Diego, California
October 13, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND DATE THE ENCLOSED
PROXY CARD AND RETURN IT PROMPTLY. THIS IS IMPORTANT BECAUSE A MAJORITY OF THE
SHARES MUST BE REPRESENTED, EITHER IN PERSON OR BY PROXY, TO CONSTITUTE A QUORUM
AT THE MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON EVEN THOUGH
YOU SEND IN YOUR PROXY NOW. IN ADDITION, YOU MAY REVOKE THE PROXY AT ANY TIME
BEFORE IT IS VOTED.
<PAGE>
OVERLAND DATA, INC.
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 11, 1997
TABLE OF CONTENTS
Page
----
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SHARES OUTSTANDING AND VOTING RIGHTS. . . . . . . . . . . . . . . . . . . 2
PROPOSAL ONE --ELECTION OF DIRECTORS. . . . . . . . . . . . . . . . . . . 3
PROPOSAL TWO--AMENDMENT TO BYLAWS . . . . . . . . . . . . . . . . . . . .20
PROPOSAL THREE--AMENDMENT TO 1995 STOCK OPTION PLAN . . . . . . . . . . .21
PROPOSAL FOUR--APPROVAL OF 1997 EXECUTIVE STOCK OPTION PLAN . . . . . . .26
PROPOSAL FIVE--RATIFICATION OF INDEPENDENT AUDITORS . . . . . . . . . . .27
OTHER BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
<PAGE>
OVERLAND DATA, INC.
8975 BALBOA AVENUE
SAN DIEGO, CALIFORNIA 92123-1599
--------------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 11, 1997
--------------------------------
GENERAL INFORMATION
Your proxy in the enclosed form is solicited by the Board of Directors (the
"Board") of Overland Data, Inc., a California corporation (the "Company"), for
use at the Annual Meeting of Shareholders to be held at the principal executive
offices of the Company at 8975 Balboa Avenue, San Diego, California 92123-1599
on November 11, 1997 at 9:00 a.m. (the "Meeting"), for the purposes set forth in
the accompanying notice and at any adjournment or postponement of the Meeting.
The mailing of this Proxy Statement and the accompanying form of proxy (the
"Proxy") to the shareholders of the Company is expected to commence on or about
October 14, 1997.
The shares of the Company's Common Stock ("Common Stock") represented by
proxy will be voted in accordance with the instructions given on the Proxy,
subject to the proper execution of the Proxy and its receipt by the Company
prior to the close of voting at the Meeting or any adjournment or postponement
thereof. Proxies received by the Company on which no contrary instruction has
been given will be voted FOR the election of the directors to the Board
nominated by management, FOR approval of an amendment to the Company's Bylaws
(the "Bylaws") to change the authorized number of directors, FOR approval of an
amendment to the Company's 1995 Stock Option Plan to increase the number of
shares of Common Stock authorized for issuance thereunder, FOR approval of the
Company's 1997 Executive Stock Option Plan and FOR ratification of the selection
of independent auditors for the fiscal year ending June 30, 1998. A shareholder
giving a proxy has the power to revoke it at any time before it is exercised by
filing with the Secretary of the Company an instrument revoking it or a duly
executed proxy bearing a later date. The powers of the proxy holders will be
suspended if the person executing the Proxy is present at the Meeting and votes
in person.
Copies of solicitation material will be furnished to brokerage houses,
fiduciaries and custodians holding shares of Common Stock in their names which
are beneficially owned by others ("record holders") to forward to such
beneficial owners. In addition, the Company may reimburse such persons for
their cost of forwarding the solicitation material to such beneficial owners.
Original solicitation of proxies by mail may be supplemented, if deemed
desirable or
1
<PAGE>
necessary, by either telephone, telegram, facsimile or personal solicitation by
directors, officers or employees of the Company. No additional compensation
will be paid for any such services. The Company reserves the right, if deemed
desirable or necessary, to retain a proxy solicitation firm to deliver
solicitation material to record holders for distribution by them to their
principals and to assist the Company in collecting proxies from such holders.
The costs of these services to the Company, exclusive of out-of-pocket costs, is
not expected to exceed $20,000. Except as described above, the Company does not
intend to solicit proxies other than by mail.
SHARES OUTSTANDING AND VOTING RIGHTS
Only holders of shares of Common Stock of record as of the close of
business on October 10, 1997 (the "Record Date"), are entitled to vote at the
Meeting. On the Record Date, [________________] shares of Common Stock
(collectively, the "Shares") were issued and outstanding. Each of the Shares is
entitled to one vote on all matters to be voted upon at the Meeting. The
presence, in person or by proxy duly authorized, of the holders of a majority of
the Shares will constitute a quorum for the transaction of business at the
Meeting and any continuation or adjournment thereof. Broker non-votes (i.e.,
shares of Common Stock held by a broker or nominee which are represented at the
Meeting, but with respect to which such broker or nominee is not empowered to
vote on a particular purpose) will be counted in determining whether a quorum is
present at the Meeting. Directors will be elected by a plurality of votes of
the Shares present in person or represented by proxy at the Meeting. Any of the
Shares not voted (whether by abstention, broker non-votes or otherwise) will
have no impact on the election of directors, except to the extent that the
failure to vote for one director nominee results in another nominee receiving a
larger portion of votes. The proposals submitted to the Company's shareholders
in the Proxy must be approved by the vote of the holders of a majority of the
Shares represented in person or by proxy and entitled to vote at the Meeting.
In determining whether such proposals have been approved, abstentions and broker
non-votes are not counted as votes for or against the proposal.
Your execution of the enclosed proxy will not affect your right as a
shareholder to attend the Meeting and to vote in person. Any shareholder giving
a proxy has a right to revoke it at any time by either (i) a later-dated proxy,
(ii) a written revocation sent to and received by the Secretary of the Company
prior to the Meeting, or (iii) attendance at the Meeting and voting in person.
2
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
(ITEM 1 ON THE PROXY CARD)
Five directors are to be elected to the Board at the 1997 Annual Meeting.
Each director nominee elected at the 1997 Annual Meeting will hold office until
the 1998 Annual Meeting, or until his successor is duly elected and qualified,
unless he resigns or his seat on the Board becomes vacant due to his death,
removal or other cause in accordance with the Bylaws of the Company. Management
knows of no reason why any of these nominees would be unable or unwilling to
serve; but, in the event that any director nominee is unable or unwilling to
serve, the proxies will be voted for the election of such other person(s) for
the office of director as management may recommend in the place of such nominee.
THE BOARD UNANIMOUSLY RECOMMENDS VOTING "FOR" THE FIVE NOMINEES BELOW LISTED.
Any votes so cast may be distributed among the director nominees voted for
in such proportions as the person named in the Proxy shall in his or her sole
judgment determine. The Company's shareholders have cumulative voting rights
with respect to the election of the director nominees to the Board. The Bylaws
provide that no shareholder is entitled to cumulate votes (i.e., cast for any
candidate a number of votes greater than the number of the shareholder's shares)
unless such candidate or candidates' names have been placed in nomination prior
to commencement of the voting and a shareholder has given notice of the
shareholder's intention to cumulate votes prior to commencement of the voting.
If any shareholder has given such notice, then every shareholder entitled to
vote may cumulate such shareholder's votes for candidates in nomination and give
one candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which such shareholder's shares are
entitled, or distribute the shareholder's votes on the same principle among as
many candidates as the shareholder shall think fit. The candidates receiving
the highest number of votes of the shares entitled to be voted for them, up to
the number of directors to be elected by such shares are elected. If voting for
directors is conducted by cumulative voting, the person named on the Proxy will
have discretionary authority to cumulate votes among the director nominees
named.
3
<PAGE>
INFORMATION REGARDING DIRECTOR NOMINEES
The following table sets forth the names, ages, principal occupations for
the periods indicated and other directorships of the five (5) director nominees
at the Meeting, each of whom is currently a director of the Company.
NAME AGE PRINCIPAL OCCUPATION FOR THE DIRECTOR SINCE
PAST FIVE YEARS AND OTHER
DIRECTORSHIPS
-------------------------------------------------------------------------------
Scott McClendon 58 Mr. McClendon has served as 1991
President, Chief Executive Officer
and a director since joining the
Company in October 1991. Prior
thereto, he was employed by
Hewlett-Packard, a global
manufacturer of computing,
communications and measurement
products and services, for over 32
years in various positions in
engineering, manufacturing, sales
and marketing, and last served as
the General Manager of the San
Diego Technical Graphics Division
and Site Manager of
Hewlett-Packard in San Diego,
California. Mr. McClendon holds
B.S. and M.S. degrees in
Electrical Engineering from
Stanford University.
Martin D. Gray 49 Mr. Gray, one of the co-founders 1980
of the Company, has served as
Secretary and a director since the
Company's inception in September
1980. He has served as staff
engineer at the Company since
January 1986. From January 1977
to July 1985, Mr. Gray was Manager
of Research and Development at
Cipher Data Products, Inc.
("Cipher"), a tape drive
manufacturer. Mr. Gray has
several patents in the tape drive
industry and holds a B.S. degree
in Electrical Engineering from the
California Institute of
Technology.
4
<PAGE>
NAME AGE PRINCIPAL OCCUPATION FOR THE DIRECTOR SINCE
PAST FIVE YEARS AND OTHER
DIRECTORSHIPS
-------------------------------------------------------------------------------
William W. 67 Mr. Otterson has served as a 1982
Otterson director of the Company since
1982. Since March 1986, he has
been the Director of the UCSD
CONNECT program. He holds a B.S.
degree in Engineering from Stanford
University and an M.B.A. from the
Stanford Graduate School of Business.
Joseph D. Rizzi 55 Mr. Rizzi has served as a director 1989
of the Company since May 1989.
Since March 1986, he has been a
general partner of Matrix
Partners, a venture capital firm.
Currently, he is a director of
Veritas Software Corporation and
Sandisk Corporation. Mr. Rizzi
holds B.S. and M.S. degrees in
Electrical Engineering from the
University of New Hampshire.
5
<PAGE>
NAME AGE PRINCIPAL OCCUPATION FOR THE DIRECTOR SINCE
PAST FIVE YEARS AND OTHER
DIRECTORSHIPS
-------------------------------------------------------------------------------
John A. Shane 64 Mr. Shane has served as a director 1992
of the Company since July 1992.
He is the founder and has served
as President of Palmer Service
Corporation since 1972.
Mr. Shane has been a General
Partner of Palmer Partners L.P.
since 1981. He is a director of
Arch Communications Group, Inc.,
Gensym Corporation, Summa Four,
Inc. and United Asset Management
Corporation, each of which is a
public corporation. Mr. Shane
holds a B.A. degree in Economics
from Princeton University and an
M.B.A. from Harvard Business School.
VOTE REQUIRED
An affirmative vote by the holders of a majority of the Shares present in
person or represented by proxy at the Meeting is required for the election of
each director to the Board nominated by management. THE BOARD UNANIMOUSLY
RECOMMENDS A VOTE "FOR" THE NOMINEES ABOVE LISTED.
6
<PAGE>
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
Information concerning the Company's current directors and executive
officers is set forth below.
NAME AGE POSITION WITH THE COMPANY
-------------------------------------------------------------------------------
Scott McClendon 58 President, Chief Executive Officer
and Director
Martin D. Gray 49 Vice President, Secretary and
Director
Frank D. Kirchhoff 54 Vice President of Sales
Steven E. Richardson 46 Vice President of Marketing
Robert J. Scroop 49 Vice President of Engineering
Vernon A. LoForti 44 Vice President, Chief Financial
Officer and Assistant Secretary
William W. Otterson(1) 67 Director
Joseph D. Rizzi(1) 55 Director
John A. Shane(1) 64 Director
--------------------------
(1) Member of the Compensation and Audit Committees.
A description of the background of each of the Company's current
directors has been provided above under "Information Concerning Director
Nominees." A description of the background of each of the Company's other
executive officers follows:
FRANK R. KIRCHHOFF. Mr. Kirchhoff has served as Vice President of
Sales since joining the Company in July 1993. From June 1987 to June 1993,
he served in various sales and marketing capacities at Western Digital
Corporation, an information storage products and services provider including
Vice President of International Marketing from June 1987 to June 1988, Vice
President of Domestic Sales from July 1988 to August 1990 and Vice President
of European Operations from September 1990 to June 1993. From October 1983
to June 1987, Mr. Kirchhoff was Vice President of Sales for Cipher. He holds
a B.S. degree in Marketing from Hofstra University, New York and an M.B.A.
from Pepperdine University.
7
<PAGE>
STEVEN E. RICHARDSON. Mr. Richardson has served as Vice President of
Marketing since joining the Company in August 1997. From March 1997 to July
1997, he was Vice President of Marketing for Proxima Corporation. From
December 1987 to March 1997, he served in various marketing capacities at
Compression Labs, Inc., a provider of video communications solutions, most
recently as Vice President of Marketing. From June 1976 to December 1987, he
served in various capacities at Hewlett-Packard, most recently as Product
Marketing Manager for the Information Networks Division in Cupertino,
California. Mr. Richardson holds a B.S. degree in Electrical Engineering from
the Massachusetts Institute of Technology and an M.B.A. from Harvard Business
School.
ROBERT J. SCROOP. Mr. Scroop has served as Vice President of
Engineering since joining the Company in February 1993. From April 1990 to
February 1993, he was Vice President of Engineering of the Cipher Division of
Archive Corporation. From December 1985 to April 1990, he was Director of
Engineering for Cipher. Mr. Scroop holds a First Class Honours degree in
Electrical Engineering from Brunel University, England.
VERNON A. LOFORTI. Mr. LoForti has served as Vice President, Chief
Financial Officer and Assistant Secretary since joining the Company in December
1995. From August 1992 to December 1995, he was the Chief Financial Officer for
Priority Pharmacy, a privately held pharmacy company. From 1981 to 1992, Mr.
LoForti was Vice President of Finance for Intermark, Inc., a publicly held
conglomerate. He holds a B.S. degree in Accounting from Brigham Young
University.
There are no family relationships among any of the Company's directors and
executive officers.
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended June 30, 1997 ("Fiscal 97"), the Board held
ten (10) regular meetings and one (1) special meeting. Each director attended
at least 75% of the meetings held during Fiscal 97 which occurred on or after
the initiation of his term as a director.
During Fiscal 97, the Board had an Audit Committee and a Compensation
Committee. The Company does not have a Nominating Committee nor a committee
that performs equivalent functions of a Nominating Committee. The Audit
Committee, composed of Messrs. Otterson, Rizzi and Shane, is responsible for
reviewing financial statements, accounting and financial policies and internal
controls and reviewing the scope of the independent auditor's activities and
fees. The Audit Committee held two (2) meetings during Fiscal 97. The
Compensation Committee, composed of Messrs. Otterson, Rizzi and Shane, is
responsible for reviewing and approving, within its authority, compensation,
benefits, training and other human resource
8
<PAGE>
policies. The Compensation Committee held six (6) meetings during Fiscal 97.
Each director who served on the Audit Committee or the Compensation Committee
attended at least 75% of such respective committee's meetings held during Fiscal
97 which occurred on or after the initiation of his term as a director, with the
exception of Mr. Otterson, who was unable to attend one of the two Audit
Committee meetings.
LEGAL PROCEEDINGS
On May 2, 1997, a purported class action lawsuit, RANDY WARMAN V. OVERLAND
DATA, INC., ET AL., was filed in the U.S. District Court, Southern District of
California against the Company, its directors and certain of its officers. On
September 16, 1997, Mr. Warman was appointed as the lead plaintiff in the
lawsuit. The complaint alleges certain violations of the Securities Act of
1933, as amended (the "Securities Act"), in connection with the Company's
initial public offering and its registration statement on Form S-1 filed with
the Securities and Exchange Commission (the "SEC") on February 21, 1997 (the
"Registration Statement").
In particular, the complaint alleges that the Company failed to disclose in
the Registration Statement a component supply problem relating to one of the
Company's product lines. The plaintiff, a shareholder holding 500 shares of the
Common Stock, seeks for himself and the purported class (purchasers of shares of
Common Stock during the period from February 21, 1997 to March 14, 1997)
rescission of their share purchases or rescissory damages if their shares have
been sold, as well as attorneys' fees and other costs and expenses. The Company
believes that it has meritorious defenses and intends to vigorously defend
itself against this lawsuit.
9
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of August 31, 1997 by (i) each person who is
known by the Company to own beneficially more than five percent (5%) of the
issued and outstanding shares of Common Stock, (ii) each of the Company's
directors and director nominees, (iii) the Company's Chief Executive Officer and
the other five (5) most highly compensated executive officers of the Company
whose total annual salary and bonus exceeded $100,000 during Fiscal 97
(collectively, the "Named Executive Officers"), and (iv) all current directors
and executive officers as a group. The table is based upon information supplied
by directors, officers and principal shareholders of the Company.
NAME AND ADDRESS SHARES BENEFICIALLY OWNED
---------------- ---------------------------
NUMBER PERCENT(1)
------------ -----------
Martin D. Gray(2) . . . . . . . . . . . . . . . 1,759,757 16.80%
3236 Caminito Ameca
La Jolla, CA 92037
Seagate Technology, Inc. . . . . . . . . . . . 1,136,747 10.88%
920 Disc Drive
Scotts Valley, CA 95066
Matrix Partners II, L.P.(3) . . . . . . . . . . 960,074 9.18%
1000 Winter Street, Suite 4500
Waltham, MA 02154
William W. Otterson(4). . . . . . . . . . . . . 556,624 5.32%
6119 Vista de la Mesa
La Jolla, CA 92037
Scott McClendon(5) . . . . . . . . . . . . . . 474,730 4.53%
1 East Roseland Drive
La Jolla, CA 92037
The Palmer Organization III L.P.(6) . . . . . . 339,571 3.25%
200 Unicorn Park Drive
Woburn, MA 01801
Frank R. Kirchhoff(7) . . . . . . . . . . . . . 142,368 1.36%
Charles R. Earnhart(8) . . . . . . . . . . . . 77,054 *
Robert J. Scroop(9) . . . . . . . . . . . . . . 72,317 *
Vernon A. LoForti(10) . . . . . . . . . . . . . 15,204 *
All current directors and officers as a group
(9 persons)(11) . . . . . . . . . . . . . . . . 4,397,699 41.41%
- -------------------------
* Indicates ownership of less than one percent.
10
<PAGE>
(1) Except as otherwise indicated, each beneficial owner has the sole power to
vote and, as applicable, dispose of all shares of Common Stock owned by
such beneficial owner, subject to community property laws where applicable.
Amounts shown for each shareholder include all shares of Common Stock
issuable upon the exercise of options which are exercisable as of, or will
become exercisable within 60 days of August 31, 1997.
(2) Includes 25,717 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days of August 31, 1997.
(3) Joseph D. Rizzi, a director of the Company, is affiliated with Matrix
Partners II, L.P. Includes 6,000 shares of Common Stock issuable pursuant
to stock options exercisable by Mr. Rizzi within 60 days of August 31,
1997.
(4) Consists of 398,864 shares of Common Stock held by Anne S. Otterson, spouse
of Mr. Otterson, Trustee, Otterson Family Trust u/t/d February 8, 1980,
over which Mrs. Otterson holds voting and dispositive power, and 56,760,
50,000 and 45,000 shares held by Eric Otterson, John Otterson and Helen Ann
Otterson, respectively, children of Mr. Otterson. Mr. Otterson is a
director of the Company. Includes 6,000 shares of Common Stock issuable
pursuant to stock options exercisable by Mr. Otterson within 60 days of
August 31, 1997.
(5) Includes 223,261 shares of Common Stock held by Scott McClendon, Trustee,
McClendon Trust u/t/d December 31, 1991, over which Mr. McClendon holds
voting and dispositive power, 1,000 shares held by Fred Clifton, Trustee,
for FTC/ESC Trust u/t/d January 4, 1988, 100 shares held by Phillip
McClendon, 1,000 shares held by Financial Services Corp. for the benefit of
Elizabeth McClendon, and 25,619 shares issuable pursuant to stock options
exercisable within 60 days of August 31, 1997.
(6) John A. Shane, a director of the Company, is affiliated with The Palmer
Organization III L.P. Includes 5,000 shares of Common Stock owned directly
by Mr. Shane and 6,000 shares of Common Stock issuable pursuant to stock
options exercisable by Mr. Shane within 60 days of August 31, 1997.
(7) Includes 27,586 shares of Common Stock held by Frank and JoAnne Kirchhoff
and 35,560 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days of August 31, 1997.
(8) Includes 16,200 shares of Common Stock held by Smith Barney, Inc. Custodian
FBO Charles R. Earnhart, IRA, of which Mr. Earnhart is the beneficial
owner, and 14,904 shares issuable pursuant to stock options exercisable
within 60 days of August 31, 1997. Mr. Earnhart's employment with the
Company terminated on August 29, 1997.
11
<PAGE>
(9) Includes 5,000, 2,700 and 2,400 shares of Common Stock held by Amanda L.
Scroop, Catherine E. Scroop and Christopher D. Scroop, respectively, and
35,617 shares issuable pursuant to stock options exercisable within 60 days
of August 31, 1997.
(10) Includes 15,204 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days of August 31, 1997.
(11) Includes 170,621 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days of August 31, 1997.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT OF 1934.
Section 16(a) under the Securities Exchange Act of 1934, as amended, (the
"Exchange Act"), requires the Company's officers and directors, and persons who
own more than ten (10) percent of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership with the SEC.
Officers, directors and greater than ten-percent shareholders are required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
that they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representation that no other
reports were required, the Company's officers, directors and greater than ten
percent shareholders complied with all applicable Section 16(a) filing
requirements, except for one Form 4 statement of which the Company is aware that
was filed late by Robert J. Scroop, the Company's Vice President of Engineering.
EXECUTIVE COMPENSATION
Each Non-Employee Director (as defined below) receives cash compensation of
$3,000 per quarter and the Company reimburses such director's expenses relating
to his activities as a director. Non-Employee Directors are also eligible to
participate in the Company's stock option plans. On August 12, 1997, the
Company granted to each of the Non-Employee Directors, Messrs. Otterson, Rizzi
and Shane, fully vested stock options exercisable into 6,000 shares of Common
Stock. The Company's current compensation program provides that the Company
will grant (i) to each newly appointed Non-Employee Director fully vested stock
options exercisable into 6,000 shares of Common Stock upon such director's
appointment to the Board and (ii) to each Non-Employee Director, who has been
serving the Company for at least six (6) months, fully vested stock options
exercisable into 2,500 shares of Common Stock at the first regularly scheduled
Board meeting held subsequent to the end of each fiscal year. All stock options
to be issued to Non-Employee Directors will be exercisable at the fair market
value of the Common Stock on the date of the grant.
12
<PAGE>
1995 STOCK OPTION PLAN. In October 1995, the shareholders of the Company
approved the Company's 1995 Stock Option Plan (as amended, the "1995 Plan").
The 1995 Plan provides that directors, employees and consultants of the Company
are eligible to receive options exercisable into shares of Common Stock. The
options granted at such time are exercisable at fair market value on the date of
issuance, vest over a maximum of five (5) years and have a term of ten (10)
years. Unless sooner terminated by the Board, the 1995 Plan expires on October
10, 2005. The Board may amend, suspend, modify or terminate the 1995 Plan, but
may not without the prior written approval of shareholders make any amendment
which: (i) materially increases the number of shares available for issuance
under the 1995 Plan (except as expressly permitted); (ii) materially changes the
class of person who is eligible for the grant of incentive stock options; or
(iii) if required by Rule 16b-3 (or any successor) under the Exchange Act, would
materially increase the benefits accruing to participants under the 1995 Plan or
would materially modify the requirements as to eligibility for participation in
the 1995 Plan. As set forth in "Proposal Three--Amendment to 1995 Stock Option
Plan" of this Proxy Statement, the Company's shareholders are being asked to
approve an amendment to the 1995 Plan to increase from 372,500 to 572,500 the
number of shares of Common Stock reserved for issuance with respect to options
granted under the 1995 Plan.
1996 EMPLOYEE STOCK PURCHASE PLAN . In December 1996, the Board adopted
the 1996 Employee Stock Purchase Plan (the "Purchase Plan"), the purpose of
which is to provide an opportunity for the Company's employees to purchase
shares of Common Stock and thereby have an additional incentive to contribute to
the prosperity of the Company. The Purchase Plan allows employees to purchase
shares of Common Stock through payroll deductions. An administrative committee
appointed by the Board (the "Administrative Committee") determines periods of up
to 27 months (each an "Option Period"), during which each participant in the
Purchase Plan is granted an option to purchase that number of shares of Common
Stock which may be purchased with the payroll deductions accumulated on behalf
of such participant during each six-month period within a particular Option
Period, as approved by the Board. The Purchase Plan provides that (i) no
employee shall be entitled to accrue rights to purchase shares under the
Purchase Plan at a rate which exceeds $25,000 of the fair market value of such
stock (determined at the time the option is granted) for any calendar year in
which such option is outstanding at any time, and (ii) the maximum number of
shares subject to any option shall not exceed 1,500. Employees participating in
the Purchase Plan may purchase shares of Common Stock under each option at a
price per share equal to the lower of (x) not less than 85% of the fair market
value of the Common Stock on the date of commencement of participation in the
Purchase Plan offering period or (y) not less than 85% of the fair market value
of a share of Common Stock on the date of purchase. Generally, any employee,
including executive officers (but excluding persons who hold 5% or more of the
Company's voting stock), regularly employed on a full-time basis by the Company
or by Overland Data (Europe) Limited, a wholly owned subsidiary of the Company
("Overland Data Europe"), on the first day of each Option Period is eligible to
participate in the Purchase Plan, subject to minimum eligibility periods, if
any, as established by the Administrative Committee. Participants may authorize
payroll deductions of up to 15% of their compensation, including base, overtime
and commissions, for the purchase of shares of Common Stock under the Purchase
Plan. The Purchase Plan authorizes the Company to issue up to 250,000 shares of
Common Stock pursuant to the Purchase Plan. As of the date hereof, 31,517
13
<PAGE>
shares of Common Stock have been purchased under the Purchase Plan. The
Purchase Plan will terminate in January 2007.
401(k) PLAN. In February 1994, the Company adopted the Overland Data, Inc.
On-Track 401(k) Savings Plan (the "401(k) Plan"), that covers all eligible
employees of the Company who complete three months of service and are at least
21 years old. Employees may elect to defer up to 15% of their eligible
compensation (not to exceed the statutorily prescribed annual limit) in the form
of elective deferral contributions to the 401(k) Plan. The elective deferral
contributions are fully vested and nonforfeitable at all times and are invested
in accordance with the directions of the participants. The 401(k) Plan is
intended to qualify under Section 401 of the Internal Revenue Code, as amended
(the "IRC"), so that employee contributions and income earned on such
contributions are not taxable to employees until withdrawn. The Company
currently does not make matching contributions under the 401(k) Plan.
1997 EXECUTIVE STOCK OPTION PLAN. On August 12, 1997, the Board adopted
the 1997 Executive Stock Option Plan (the "1997 Plan") which authorizes the
issuance of 550,000 shares of Common Stock with respect to options granted under
the 1997 Plan. As set forth in "Proposal Four--Approval of 1997 Executive Stock
Option Plan" of this Proxy Statement, the Company's shareholders are being
presented with the 1997 Plan for their approval.
14
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF COMPENSATION
The following table sets forth, for the fiscal year ended June 30, 1996 and
Fiscal 97, the cash compensation for services in all capacities to the Company
of those persons who were, as of June 30, 1997, the Named Executive Officers:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-term
------------------------------------------------------------ Compensation
Fiscal Other Awards Other
Year Salary Bonus Compensation (1) # of options Compensation (2)
------ ---------- -------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Scott McClendon, 1997 $ 240,000 ----- ----- ----- $ 55
President & CEO 1996 210,000 $63,000 ----- ----- 44
Frank R. Kirchhoff, 1997 175,000 ----- ----- 40
VP of Sales 1996 165,000 24,750 ----- ----- 44
Robert J. Scroop, 1997 140,000 ----- ----- 30
VP of Engineering 1996 125,000 12,500 ----- ----- 44
Martin D. Gray, 1997 140,000 ----- ----- ----- 30
VP & Secretary 1996 125,000 18,750 ----- ----- 44
Charles R. Earnhart, 1997 140,000 ----- ----- 30
VP of Operations (3) 1996 78,077 10,500 ----- 52,150 26
Vernon A. LoForti, 1997 130,000 ----- ----- 30
VP, CFO & Asst. Secty 1996 56,058 8,625 ----- 52,150 26
</TABLE>
(1) The costs of certain benefits are not included because they did not exceed,
in the case of each Named Executive, the lesser of $50,000 or 10% of the
total annual salary and bonus reported in the above table.
(2) Consists of premiums for term life insurance with no cash surrender value.
(3) Mr. Earnhart's employment with the Company terminated on August 29, 1997.
STOCK OPTION GRANTS
There were no grants of stock options to the Named Executive Officers
during Fiscal 97.
15
<PAGE>
OPTION EXERCISES
The following table sets forth information for the Named Executive Officers
with respect to exercises of options to purchase Common Stock of the Company
during Fiscal 97 and the number and value of unexercised stock options held at
June 30, 1997.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money
Shares Options at June 30, 1997 Options at June 30, 1997(1)
Acquired on Value ----------------------------------- ---------------------------------
Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---------- ----------- ------------- ----------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Scott McClendon -- -- 13,869 7,500 $ 74,546 $ 40,313
Frank R. Kirchhoff -- -- 30,860 33,361 165,873 179,315
Robert J. Scroop -- -- 32,500 2,500 174,688 13,438
Martin D. Gray -- -- 22,800 2,500 122,550 13,438
Charles R. Earnhart -- -- 13,037 39,113 70,074 210,232
Vernon A. LoForti -- -- 13,037 39,113 70,074 210,232
_____________________
</TABLE>
(1) Based upon the closing bid price of the Common Stock of $5-3/8 as quoted on
the Nasdaq National Market System on June 30, 1997.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Seagate Technology, Inc. ("Seagate") is the owner of approximately 10.9% of
the issued and outstanding shares of Common Stock. Seagate has been a supplier
to the Company of certain components used in the production of its 18-track
products. During Fiscal 97, the Company purchased approximately $666,000 of
products from Seagate under standard purchase orders at prices and terms which
the Company believes are no less favorable than could be obtained from an
independent third party.
In addition, Overland Data Europe entered into a lease agreement in June
1996 with Seagate Distribution (UK) Limited, a subsidiary of Seagate. The lease
pertains to a facility located in Wokingham, England, which houses the
Company's European operations. The lease has a three-year term and a monthly
rent of approximately $5,250. The Company believes that the lease was obtained
at rental rates and terms which are no less favorable than could be obtained
from an independent third party.
16
<PAGE>
During Fiscal 97, the Company sold shares of Common Stock to three of its
executive officers at the then fair market value as set by the Board of
Directors of $3.00 per share. Scott McClendon, the Company's President and Chief
Executive Officer, purchased 21,000 shares for total consideration of $63,000;
Martin D. Gray, the Company's Vice President and Secretary, purchased 6,250
shares for total consideration of $18,750; and Charles R. Earnhart, the
Company's Vice President of Operations, purchased 1,500 shares for total
consideration of $4,500.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board (the "Committee") makes
recommendations to the Board regarding compensation of the Company's directors
and officers and oversees the administration of the Company's employee stock
option plans. All decisions of the Committee relating to compensation of the
Company's executive officers are reviewed and approved by the entire Board. The
policy of the Committee with respect to executive compensation is that such
compensation should (i) be effective in attracting and retaining key executives
critical to the Company's success, (ii) align the interests of the executives
with the interests of the Company's shareholders, (iii) reflect the Company's
financial performance and (iv) reward executives for their individual
performance. Executive compensation includes base salary, bonuses based on the
Company's performance and stock option grants. These programs are designed to
provide incentives for both short and long-term performance.
BASE SALARY
The base salary of the Company's Chief Executive Officer ("CEO") is set at
an amount which the Committee believes is competitive with the salaries paid to
the chief executive officers of other companies of comparable size in similar
industries. Salary levels of the Company's other executive officers are set in
a like manner. In evaluating salaries, the Committee utilizes information and
surveys of the compensation practices of high technology companies provided by
the management and human resource consulting firms of Watson Wyatt and Radford
Associates. The Committee also relies on information provided by the Company's
Human Resources Department and its knowledge of local pay practices.
Furthermore, the Committee considers the executives' performance of their job
responsibilities and the overall financial performance of the Company. The
Committee recognized the record revenues and earnings generated by the Company
during its fiscal year ended June 30, 1996 when establishing the salaries for
Fiscal 97.
BONUSES
The CEO and executive officers participate in the Company's executive bonus
plan. For Fiscal 97, the plan established by the Committee provided a formula
whereby no bonus was earned until the Company's income before taxes exceeded 80%
of the amount set forth in the approved annual financial plan. Executive
officers could then earn up to 15% (30% for the CEO)
17
<PAGE>
of their respective base salaries in the form of a bonus if the pretax income
reached 120% of its budgeted level, with pro rata increases above that level.
Because the actual pretax income generated by the Company for Fiscal 97 did not
reach the 80% level, no bonuses were earned or paid for Fiscal 97.
STOCK OPTION GRANTS
The Company provides its executive officers with long-term incentives
through the granting of stock options. An initial grant of options is made at
the time an executive is hired and the Committee considers on an annual basis
additional grants based on the performance of both the individual executives and
the Company as a whole. The Committee takes into account the executive's
position and level of responsibility, existing stock and unvested option
holdings and the potential reward if the stock price appreciates in the public
market. Although no options were granted to executive officers in Fiscal 97,
the Committee granted a total of 173,768 options to executive officers in August
1997, subsequent to the end of Fiscal 97. The exercise price of all options is
equal to the closing market price of the Common Stock on the date of grant and
the options generally vest over a four year period.
The Compensation Committee believes that management compensation levels
during Fiscal 97 appropriately reflect the application of the Compensation
Committees's compensation policy.
Compensation Committee:
William W. Otterson
Joseph D. Rizzi
John A. Shane
The foregoing report of the Compensation Committee shall not be deemed
incorporated by reference by any general statement incorporating by reference
the Proxy Statement into any filing under the Securities Act or the Exchange Act
except to the extent that the Company specifically incorporates this information
by reference, and shall not otherwise be deemed filed under such acts.
18
<PAGE>
PERFORMANCE GRAPH
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG OVERLAND DATA, THE NASDAQ 100 INDEX, AND
THE NASDAQ COMPUTER INDUSTRY COMPOSITE INDEX
OVERLAND DATA, INC.
PLOT POINTS FOR PERFORMANCE GRAPH
1997 PROXY STATEMENT
[GRAPH]
Industry Composite
Date Computer Composite OVRL Date Index Index OVRL
21-Feb-97 535.35 1334.32 11.375 21-Feb 100.00 100.00 100.00
24-Feb-97 544.6 1345.08 11.750 24-Feb 101.73 100.81 103.30
25-Feb-97 544.89 1347.69 12.500 25-Feb 101.78 101.00 109.89
26-Feb-97 543.29 1340.55 11.625 26-Feb 101.48 100.47 102.20
27-Feb-97 521.46 1312.66 10.813 27-Feb 97.41 98.38 95.05
28-Feb-97 522.57 1309 11.000 28-Feb 97.61 98.10 96.70
03-Mar-97 527.5 1311.18 11.250 3-Mar 98.53 98.27 98.90
04-Mar-97 530.73 1317.37 11.750 4-Mar 99.14 98.73 103.30
05-Mar-97 537.51 1329.09 11.375 5-Mar 100.40 99.61 100.00
06-Mar-97 524.19 1315.43 11.500 6-Mar 97.92 98.58 101.10
07-Mar-97 516.38 1311.8 11.000 7-Mar 96.46 98.31 96.70
10-Mar-97 523.2 1322.72 11.000 10-Mar 97.73 99.13 96.70
11-Mar-97 518.54 1316.76 11.125 11-Mar 96.86 98.68 97.80
12-Mar-97 512.87 1304.13 10.969 12-Mar 95.80 97.74 96.43
13-Mar-97 512.65 1293.28 10.625 13-Mar 95.76 96.92 93.41
14-Mar-97 511.32 1292.97 10.375 14-Mar 95.51 96.90 91.21
17-Mar-97 507.05 1279.43 6.000 17-Mar 94.71 95.89 52.75
18-Mar-97 502.99 1269.34 6.250 18-Mar 93.96 95.13 54.95
19-Mar-97 490.14 1249.29 6.125 19-Mar 91.56 93.63 53.85
20-Mar-97 496.14 1259.26 6.125 20-Mar 92.68 94.37 53.85
21-Mar-97 489.33 1254.07 6.000 21-Mar 91.40 93.99 52.75
24-Mar-97 482.35 1242.64 5.625 24-Mar 90.10 93.13 49.45
25-Mar-97 486.9 1248.06 5.063 25-Mar 90.95 93.54 44.51
26-Mar-97 506.47 1269.08 5.000 26-Mar 94.61 95.11 43.96
27-Mar-97 499.84 1249.51 4.938 27-Mar 93.37 93.64 43.41
31-Mar-97 487.68 1221.7 5.000 31-Mar 91.10 91.56 43.96
01-Apr-97 484.98 1216.93 5.125 1-Apr 90.59 91.20 45.05
02-Apr-97 478.25 1201 5.500 2-Apr 89.33 90.01 48.35
03-Apr-97 491.4 1213.76 5.500 3-Apr 91.79 90.96 48.35
04-Apr-97 504.96 1236.73 6.000 4-Apr 94.32 92.69 52.75
07-Apr-97 511.73 1251.35 6.000 7-Apr 95.59 93.78 52.75
08-Apr-97 517.43 1257.37 6.250 8-Apr 96.65 94.23 54.95
09-Apr-97 509.71 1249.43 6.125 9-Apr 95.21 93.64 53.85
10-Apr-97 498.6 1235.77 6.188 10-Apr 93.14 92.61 54.40
11-Apr-97 483.42 1206.9 5.875 11-Apr 90.30 90.45 51.65
14-Apr-97 495.03 1216.41 6.000 14-Apr 92.47 91.16 52.75
15-Apr-97 487.57 1212.88 5.875 15-Apr 91.07 90.90 51.65
16-Apr-97 486.3 1210.27 5.875 16-Apr 90.84 90.70 51.65
17-Apr-97 491.42 1217.07 5.750 17-Apr 91.79 91.21 50.55
18-Apr-97 499.88 1222.57 5.750 18-Apr 93.37 91.62 50.55
21-Apr-97 493.98 1203.95 6.000 21-Apr 92.27 90.23 52.75
22-Apr-97 500.42 1212.74 5.500 22-Apr 93.48 90.89 48.35
23-Apr-97 516.02 1227.14 5.375 23-Apr 96.39 91.97 47.25
24-Apr-97 516.67 1228.1 5.375 24-Apr 96.51 92.04 47.25
25-Apr-97 505.33 1209.29 5.375 25-Apr 94.39 90.63 47.25
28-Apr-97 511.25 1217.3 5.375 28-Apr 95.50 91.23 47.25
29-Apr-97 527.17 1242.63 5.625 29-Apr 98.47 93.13 49.45
30-Apr-97 539.85 1260.76 5.375 30-Apr 100.84 94.49 47.25
01-May-97 545.43 1270.5 5.250 1-May 101.88 95.22 46.15
<PAGE>
02-May-97 561.95 1305.33 5.250 2-May 104.97 97.83 46.15
05-May-97 577.81 1339.24 5.625 5-May 107.93 100.37 49.45
06-May-97 566.91 1328.3 5.875 6-May 105.90 99.55 51.65
07-May-97 563.34 1322.91 6.000 7-May 105.23 99.14 52.75
08-May-97 570.97 1330.83 6.000 8-May 106.65 99.74 52.75
09-May-97 572.58 1335.05 6.250 9-May 106.95 100.05 54.95
12-May-97 576.16 1344.19 6.500 12-May 107.62 100.74 57.14
13-May-97 566.58 1333.59 6.375 13-May 105.83 99.95 56.04
14-May-97 564.26 1335.55 6.188 14-May 105.40 100.09 54.40
15-May-97 577.79 1353.58 6.625 15-May 107.93 101.44 58.24
16-May-97 567.83 1340.73 6.000 16-May 106.07 100.48 52.75
19-May-97 565.55 1341.24 6.250 19-May 105.64 100.52 54.95
20-May-97 583.1 1363.88 6.250 20-May 108.92 102.22 54.95
21-May-97 591.25 1373.75 6.375 21-May 110.44 102.96 56.04
22-May-97 589.96 1372.6 6.250 22-May 110.20 102.87 54.95
23-May-97 598.4 1389.72 6.375 23-May 111.78 104.15 56.04
27-May-97 616 1409.21 6.188 27-May 115.06 105.61 54.40
28-May-97 615.68 1410.18 6.750 28-May 115.01 105.69 59.34
29-May-97 606.75 1403.04 6.375 29-May 113.34 105.15 56.04
30-May-97 594.75 1400.32 6.625 30-May 111.10 104.95 58.24
02-Jun-97 597.48 1404.79 6.625 2-Jun 111.61 105.28 58.24
03-Jun-97 578.7 1384.91 6.625 3-Jun 108.10 103.79 58.24
04-Jun-97 572.26 1379.67 6.875 4-Jun 106.89 103.40 60.44
05-Jun-97 578.07 1390.05 6.750 5-Jun 107.98 104.18 59.34
06-Jun-97 587.85 1404.84 6.750 6-Jun 109.81 105.29 59.34
09-Jun-97 593.12 1412.04 6.500 9-Jun 110.79 105.82 57.14
10-Jun-97 582.67 1401.69 6.500 10-Jun 108.84 105.05 57.14
11-Jun-97 587.44 1407.85 6.500 11-Jun 109.73 105.51 57.14
12-Jun-97 585.4 1411.32 6.750 12-Jun 109.35 105.77 59.34
13-Jun-97 594.18 1423.03 6.625 13-Jun 110.99 106.65 58.24
16-Jun-97 601.8 1431.95 6.750 16-Jun 112.41 107.32 59.34
17-Jun-97 612.48 1443.11 6.125 17-Jun 114.41 108.15 53.85
18-Jun-97 599.26 1432.43 6.375 18-Jun 111.94 107.35 56.04
19-Jun-97 603.17 1447.14 6.344 19-Jun 112.67 108.46 55.77
20-Jun-97 603.52 1447.1 6.250 20-Jun 112.73 108.45 54.95
23-Jun-97 597.24 1434.32 6.125 23-Jun 111.56 107.49 53.85
24-Jun-97 609.93 1452.43 5.750 24-Jun 113.93 108.85 50.55
25-Jun-97 604.57 1446.24 5.875 25-Jun 112.93 108.39 51.65
26-Jun-97 595.92 1436.38 5.625 26-Jun 111.31 107.65 49.45
27-Jun-97 593.97 1438.15 5.500 27-Jun 110.95 107.78 48.35
30-Jun-97 593.5 1442.07 5.375 30-Jun 110.86 108.08 47.25
The above graph assumes that $100.00 was invested in the Common Stock and in
each index on February 21, 1997, the effective date of the Company's initial
public offering. Although the Company has not declared a dividend on its Common
Stock, the total return for each index assumes the reinvestment of dividends.
Stockholder returns over the period presented should not be considered
indicative of future returns. Pursuant to SEC regulations, the graph shall not
be deemed to be "soliciting material" or to be "filed" with the SEC, nor shall
it be incorporated by reference into any filing under the Securities Act or the
Exchange Act.
19
<PAGE>
PROPOSAL TWO
AMENDMENT TO BYLAWS
(ITEM 2 ON THE PROXY CARD)
The Bylaws currently provide that the authorized number of directors of the
Company shall be not less than six (6) and not more than seven (7), with the
exact number of directors to be set at six (6). On September 26, 1997 the Board
authorized an amendment to the Bylaws (the "Amendment") to provide that the
authorized number of directors of the Company shall be not less than five (5)
and not more than seven (7), with the exact number of directors to be set at
five (5). Under California law, the Amendment can only be adopted by the
shareholders, and the Company's shareholders are being asked to approve the
Amendment at the Meeting. Upon approval of the Amendment, Article III, Section
2 of the Bylaws would be amended to read as follows:
"The authorized number of directors shall be not less than five (5)
and not more than seven (7). The exact number of directors shall be
five (5) until changed, within the limits specified herein, by
resolution duly adopted by the Board of Directors or by the
shareholders.
Any amendment to these bylaws whereby the minimum number of authorized
directors is set at less than five (5) shall not take effect if votes
cast against it exceed 16-2/3% of the outstanding shares entitled to
vote.
Should any portion of this Section 2 of Article III be found invalid
by a court of competent jurisdiction, the whole of this Section shall
be revoked, and the authorized number of directors shall be seven (7)."
The Company believes that it is in its best interest to effect the
Amendment. There are currently five directors and only five director nominees
for the Board listed in Proposal One: Election of Directors. The Company (i)
believes that each of the director nominees is well-qualified and (ii) currently
does not intend to expand the size of the Board. If the proposed Amendment is
not approved, two (2) seats on the Board will remain vacant. The Amendment will
provide the Board or the shareholders with the flexibility to expand the size of
the Board to up to seven (7) directors by retaining the services of additional,
well-qualified persons to serve on the Board in the future. These additional
directors may be Non-Employee Directors or employees of the Company. The
Company intends, however, to have a majority of its directors continue to be
Non-Employee Directors.
VOTE REQUIRED
An affirmative vote by the holders of a majority of the Shares present in
person or represented by proxy at the Meeting is required for approval of the
Amendment. THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE AMENDMENT.
20
<PAGE>
PROPOSAL THREE
AMENDMENT TO 1995 STOCK OPTION PLAN
(ITEM 3 ON THE PROXY CARD)
The Company's 1995 Stock Option Plan (the "1995 Plan") became effective
upon its approval by the Board on October 10, 1995, subject to shareholder
approval. The general purpose of the 1995 Plan is to assist the Company in the
recruitment, retention and motivation of employees, directors and consultants
who are in a position to make contributions to the Company's progress. The 1995
Plan offers a significant incentive to the employees, directors and consultants
of the Company by enabling such persons to acquire shares of Common Stock,
thereby increasing their proprietary interest in the growth and success of the
Company.
On September 26, 1997, the Board approved an amendment to the Company's
1995 Plan to increase from 372,500 to 572,500 the number of shares of Common
Stock reserved for issuance with respect to options granted under the 1995 Plan.
This amendment is being presented to the Company's shareholders for their
approval. In the event that this amendment is approved by the Company's
shareholders, the Board also resolved that no more options would be issued under
the Company's earlier option plans, pursuant to which options exercisable into
an aggregate of 150,775 shares of Common Stock remain available for issuance. In
such case, the net increase in the number of shares of Common Stock available
for issuance under the Company's option plans, excluding the proposed 1997
Executive Stock Option Plan, will be 49,225.
SHARES SUBJECT TO THE 1995 PLAN
Currently, there are 372,500 shares of Common Stock reserved for issuance
with respect to options granted under the 1995 Plan, of which 201,000 options
have been granted and 171,500 options are available for grant as of September
15, 1997.
In the event of a subdivision of the outstanding shares of Common Stock, or
a combination or consolidation of the outstanding Common Stock (by
reclassification of otherwise) into a lesser number of shares, or a similar
occurrence, or declaration of a divided payable in shares of Common Stock or, if
in an amount that has a material effect on the price of the shares, in cash, the
Compensation Committee will make adjustments in the number and/or exercise price
of options and/or the number of shares available under the 1995 Plan, as
appropriate.
If this proposal is approved, the aggregate number of shares of Common
Stock that will be available for issuance under the 1995 Plan will be increased
from 372,500 to 572,500.
ADMINISTRATION
The 1995 Plan is administered by the Compensation Committee of the Board
(the "Compensation Committee"), composed of at least two "Non-Employee
Directors," as such term
21
<PAGE>
is defined in Rule 16b-3 and further defined below. Subject to the limitations
set forth in the 1995 Plan, the Compensation Committee has the authority to
determine to whom options will be granted (including initial grants to incoming
directors), the term during which an option may be exercised and the rate at
which an option may be exercised (including acceleration of vesting upon a
change of control). In general terms, a "Non-Employee Director" within the
meaning of Rule 16b-3 is a member of the Board who (i) is not currently an
officer or employee of the Company or a parent or subsidiary of the Company,
(ii) does not receive compensation, either directly or indirectly, from the
Company or a parent or subsidiary of the Company, for services rendered as a
consultant or in any other non-director capacity except for an amount that does
not exceed the dollar amount for which disclosure would be required pursuant to
Item 404(a) of Regulation S-K, (iii) does not possess an interest in any other
transaction for which disclosure would be required pursuant to Item 404(a) under
Regulation S-K, and (iv) is not engaged in a business relationship for which
disclosure would be required pursuant to Item 404(b) of Regulation S-K.
The 1995 Plan provides for the grant of both incentive stock options
("ISOs") intended to qualify as such under Section 422(b) of the IRC and
nonstatutory stock options ("NSOs"). ISOs may be granted only to employees
(including officers and directors who are also employees) of the Company. NSOs
may be granted to employees (including officers and directors who are also
employees), directors and consultants of the Company. If any options granted
under the 1995 Plan for any reason expire or are canceled or otherwise
terminated without having been exercised in full, the shares allocable to the
unexercised portion of such options again become available for issuance under
the 1995 Plan. Options granted pursuant to the 1995 Plan will vest at the times
determined by the Compensation Committee (generally over a five-year period).
The maximum term of each stock option granted under the 1995 Plan is ten
years. Stock options granted under the 1995 Plan must be exercised by the
optionee during the earlier of his or her term or within 30 days after
termination of the optionee's employment, except that the period may be extended
on certain events, including death and termination due to disability, but not
beyond the maximum ten-year term.
The exercise price of all ISOs granted under the 1995 Plan must be no less
than 100% of the fair market value per share of Common Stock on the date of
grant. In the case of NSOs, the per share exercise price may be no less than
85% of the fair market value per share of Common Stock on the date of grant.
With respect to an employee who owns more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any of its
subsidiaries, the exercise price of any option granted must be no less than 110%
of the fair market value per share of Common Stock on the date of grant. In
addition to payment in cash, the 1995 Plan permits an optionee to pay the
exercise price of an option, all or in part, with Shares which have already been
owned by the Optionee or his or her representative for more than 12 months and
which are surrendered to the Company in good form for transfer. Such Shares
shall be valued at their Fair Market Value on the date when the new Shares are
purchased under the 1995 Plan. Payment may also be made by delivery (on a form
prescribed by the Company) of an irrevocable direction to a securities broker
approved by the Company to sell the optionee's shares and deliver all or a part
of the sales proceeds to the Company in payment of all or part of the
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exercise price and any withholding taxes or by delivery (on a form prescribed by
the Company) of an irrevocable direction to pledge the optionee's shares to a
securities broker or lender approved by the Company, as security for a loan, and
to deliver all or part of the loan proceeds to the Company in payment of all or
part of the exercise price and any withholding taxes.
Based upon the closing price of the Company's shares of Common Stock on the
Nasdaq National Market System on September 15, 1997 ($7.00 per share), the
maximum aggregate value of the underlying securities to be issued under the 1995
Plan, if the 1995 Plan is amended as proposed, is $1.9 million. The actual
value of the securities to be issued under the 1995 Plan will be determined by
the fair market value of the underlying securities on the date(s) such
securities are issued.
NONTRANSFERABILITY
During an optionee's lifetime, such optionee's option(s) shall be
exercisable only by him or her and shall not be transferable. In the event of
an optionee's death, such optionee's option(s) shall not be transferable other
than by will or by the laws of descent and distribution.
DURATION, AMENDMENT AND TERMINATION
The Board may amend, suspend or terminate the 1995 Plan at any time, except
that any amendment, suspension or termination shall not affect any option
previously granted. Any amendment of the 1995 Plan, however, which (i)
materially increases the number of shares of Common Stock available for
issuance, (ii) materially changes the class of persons who are eligible for the
grant of ISOs or, (iii) if required by Rule 16b-3 (or any successor to such
rule) under the Exchange Act, would materially increase the benefits accruing to
participants under the 1995 Plan or would materially modify the requirement as
to eligibility for participation in the 1995 Plan, shall be subject to approval
of the Company's shareholders by the affirmative vote of the holders of a
majority of the securities of the Company present or represented and entitled to
vote at a duly held shareholders' meeting. Shareholder approval is not required
for any other amendment of the 1995 Plan. Unless sooner terminated by the
Board, the 1995 Plan will terminate on October 10, 2005, and no further options
may be granted or stock sold pursuant to the 1995 Plan following the termination
date.
FEDERAL INCOME TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS
Under federal income tax law, a grant of an ISO under the 1995 Plan is not
a taxable event for the Company or the recipient. Generally, the exercise of an
ISO also will not result in any federal income tax consequences to the Company
or the recipient except in circumstances where the alternative minimum tax
applies. In calculating alternative minimum taxable income ("AMTI"), the excess
of the fair market value of the shares of Common Stock acquired upon exercise of
the ISO, generally determined at the time of exercise, over the amount paid for
the shares of Common Stock by the taxpayer is included. However, if such shares
are disposed of in
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a "disqualifying disposition," as defined below, in the year of exercise, the
maximum amount included as AMTI is the gain on the disposition of such shares.
When the recipient disposes of ISO shares after the shares have been held
for at least two years from the date of grant of the ISO and one year after its
exercise ("ISO holding period"), the recipient will recognize capital gain or
loss equal to the difference between the basis in the shares (generally the
exercise price) and the amount received in such disposition. If the recipient
disposes of the ISO shares prior to the expiration of the ISO holding period, a
"disqualifying disposition" is deemed to have occurred and the recipient must
recognize compensation (ordinary) income equal to the lesser of (1) the
difference between the ISO exercise price and the stock's fair market value on
the date of exercise or (2) the recipient's actual gain, if any, on the purchase
and sale. The compensation income is then added to the basis of the ISO shares
for purposes of calculating gain or loss on the disposition of the ISO shares.
The Company is entitled to take a deduction for the compensation income
recognized on the disqualifying disposition if it has properly tracked the
disqualifying transaction.
NONSTATUTORY STOCK OPTIONS
There will be no federal income tax consequences to the Company or the
recipient as a result of a grant of an NSO under the 1995 Plan. Upon exercise
of such an option, the recipient will generally recognize ordinary income in an
amount equal to the excess of the fair market value of the shares of stock
acquired at the time of exercise over the exercise price. Upon the subsequent
disposition of the shares, the optionee will realize a capital gain or loss,
depending on whether the selling price exceeds the fair market value of the
shares on the date of exercise. The optionee's holding period in the shares,
for capital gain and loss purposes, begins on the date of exercise.
In general, the Company will be entitled to a compensation expense
deduction in connection with the exercise of an NSO granted under the 1995 Plan
for any amounts included by the recipient as ordinary income at the time the
recipient is taxed on such amounts. This compensation is subject to withholding
and the Company reports the income on a Form W-2 or 1099.
Section 162(m) of the IRC denies a deduction for taxable compensation paid
by a public company to its chief executive officer or any of its other four (4)
highest paid executives in excess of $1 million per year. Certain performance-
based compensation is not included in calculating the $1 million threshold.
Stock options may qualify for this exclusion if the plan under which they are
granted meets certain conditions. As presently administered, the 1995 Plan does
not satisfy these conditions. Accordingly, the Company may not be able to claim
a tax deduction for certain exercises of NSOs or disqualifying dispositions of
ISOs by any of the Company's top five (5) highest paid executives to the extent
that the income from such exercises or dispositions, combined with such
executive's other taxable compensation for the year, exceeds $1 million.
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OTHER TAX CONSEQUENCES
The foregoing discussion is intended to be a general summary only of the
federal income tax aspects of options granted under the 1995 Plan. Tax
consequences may vary depending on the particular circumstances at hand. In
addition, administrative and judicial interpretations of the application of the
federal income tax laws are subject to change. Furthermore, no information is
given with respect to state or local taxes that may be applicable. Participants
in the 1995 Plan who are residents of or are employed in a country other than
the United States may be subject to taxation in accordance with the tax laws of
that particular country in addition to or in lieu of United States federal
income taxes.
EXEMPTION FROM SECTION 16 OF THE EXCHANGE ACT
Section 16 of the Exchange Act ("Section 16") establishes insider liability
for profits realized from any "short-swing" trading transaction (i.e., purchase
and sale, or sale and purchase within less than six months). Grants of options
are generally viewed as purchases of the underlying securities for purposes of
Section 16. Rule 16b-3 of the Exchange Act provides that transactions by
officers and directors pursuant to an employee stock option plan, such as option
grants, are exempt from Section 16 liability provided that the plan meets
certain requirements. In general, such exemption from such rules require that
the transactions be: (i) approved by the Board, or a committee of the Board that
is composed solely of two or more Non-Employee Directors; (ii) approved or
ratified by either the affirmative votes of the holders of a majority of the
securities of the issuer present, or represented, and entitled to vote at a
meeting duly held in accordance with the applicable laws of the state or other
jurisdiction in which the Company is incorporated or the written consent of the
holders of a majority of the securities of the Company entitled to vote,
provided that such ratification occurs no later than the date of the next annual
meeting of shareholders; or (iii) equity securities of the Company so acquired
are held by the officer or director for a period of at least six months
following the date of such acquisition, provided that this condition shall be
satisfied with respect to a derivative security if at least six months elapse
from the date of acquisition of the derivative security to the date of
disposition of the derivative security (other than upon exercise or conversion)
or its underlying equity security.
The 1995 Plan is structured to comply with the above exemption requirements
of Rule 16b-3 (or its successor rule) under the Exchange Act.
VOTE REQUIRED
An affirmative vote by the holders of a majority of the Shares present in
person or represented by proxy at the Meeting is required for approval of the
amendment to the 1995 Plan. THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
AMENDMENT TO THE 1995 PLAN.
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PROPOSAL FOUR
APPROVAL OF 1997 EXECUTIVE STOCK OPTION PLAN
(ITEM 4 ON THE PROXY CARD)
The Company's 1997 Executive Stock Option Plan (the "1997 Plan") was
approved by the Board on August 12, 1997, and will become effective upon
shareholder approval. The 1997 Plan authorizes the issuance of 550,000 shares
of Common Stock with respect to options granted under the 1997 Plan. The
general purpose of the 1997 Plan is to assist the Company in the recruitment,
retention and motivation of executives who are in a position to make
contributions to the Company's progress. The 1997 Plan will offer a significant
incentive to such employees by enabling them to acquire shares of Common Stock,
thereby increasing their proprietary interest in the growth and success of the
Company. The 1997 Plan is being presented to the shareholders for their
approval.
The full text of the 1997 Plan, substantially in the form in which it will
take effect if approved by the shareholders, is set forth in Exhibit A to this
Proxy Statement. Except for the eligibility requirements set forth in the 1997
Plan, the terms and conditions of the 1997 Plan are substantially identical to
those of the 1995 Plan. Consequently, please refer to the summary description
of the 1995 Plan set forth above under "Proposal Three" for a summary
description of the 1997 Plan. Such description is subject to, and qualified in
its entirety by, the form 1997 Plan attached hereto as Exhibit A.
VOTE REQUIRED
An affirmative vote by holders of a majority of the Shares present in
person or represented by proxy at the Meeting is required for approval of the
1997 Plan. THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE AMENDMENT TO THE
1997 PLAN.
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PROPOSAL FIVE
RATIFICATION OF INDEPENDENT AUDITORS
(ITEM 5 ON THE PROXY CARD)
The Board has selected Price Waterhouse LLP as the Company's independent
auditors for the fiscal year ending June 30, 1998, and has further directed
that management submit the selection of independent auditors for ratification
by the shareholders at the Meeting. Price Waterhouse LLP has audited the
Company's financial statements annually since 1992. Its representatives are
expected to be present at the Meeting, will have the opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions. On September 18, 1997, Price Waterhouse LLP announced
a tentative agreement to merge with the firm of Coopers & Lybrand LLP.
Completion of this merger is subject to further due diligence by both
parties, negotiation of terms and conditions, and approval by the partners of
both firms.
Shareholder ratification of the selection of Price Waterhouse LLP as the
Company's independent auditors is not required by the Company's By-Laws or
otherwise. The Board is submitting the selection of Price Waterhouse LLP to the
shareholders for ratification as a matter of good corporate practice. In the
event that the shareholders fail to ratify the selection, the Board will
reconsider whether or not to retain that firm. Even if the selection is
ratified, the Board in its discretion may direct the appointment of a different
independent accounting firm at any time during the year if the Board determines
that such a change could be in the best interests of the Company and its
shareholders.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE SELECTION
OF PRICE WATERHOUSE LLP TO SERVE AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING JUNE 30, 1998.
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OTHER BUSINESS
The Company knows of no other matters to be submitted at the Meeting. If
any other matters are properly brought before the Meeting, it is the intention
of the persons named in the enclosed proxy to vote the shares they represent in
accordance with their judgment.
SHAREHOLDER PROPOSALS TO BE PRESENTED
AT NEXT ANNUAL MEETING
Proposals of shareholders intended to be presented by such shareholders at
next year's Annual Meeting of Shareholders must be received by the Company at
its principal executive offices no later than June 15, 1998, and must satisfy
the conditions established by the SEC for shareholder proposals to be included
in the Company's proxy statement for that meeting.
FORM 10-K
A copy of the Company's Annual Report for Fiscal 97 is being mailed with
this Proxy Statement to shareholders entitled to notice of the Meeting. At
any shareholder's written request, the Company will provide without charge, a
copy of the Annual Report for Fiscal 97 which incorporates the Form 10-K as
filed with the SEC, including the financial statements and a list of exhibits.
Requests should be sent to Investor Relations, Overland Data, Inc., 8975 Balboa
Avenue, San Diego, California 92123-1599.
By Order of the Board of Directors
MARTIN D. GRAY
SECRETARY
________________________
San Diego, California
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THE 1997 EXECUTIVE STOCK OPTION PLAN
OF
OVERLAND DATA, INC.
SECTION 1. ESTABLISHMENT AND PURPOSE.
This Plan was established in 1997 to offer selected members of management
of Overland Data, Inc., a California corporation (the "Company"), an opportunity
to acquire an interest in the Company or to increase such interest, by
purchasing Shares of the Company's Common Stock. This Plan provides for the
grant of Options to purchase Shares. Options granted under this Plan may
include Nonstatutory Options as well as ISOs intended to qualify under
Section 422 of the Code. This Plan is intended to comply in all respects with
Rule 16b-3 (or its successor) under the Exchange Act.
SECTION 2. DEFINITIONS.
(a) "BOARD OF DIRECTORS" shall mean the Board of Directors of the Company,
as constituted from time to time.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(c) "COMMITTEE" shall mean a committee of the Board of Directors,
consisting of Nonemployee Directors as appointed by the Board of Directors from
time to time, or, if no such committee is appointed, all members of the Board of
Directors who are not Employees of the Company, in either case, as described in
Section 3(a) of this Plan.
(d) "COMPANY" shall mean Overland Data, Inc., a California corporation.
(e) "EMPLOYEE" shall include every individual performing Service to the
Company or its Subsidiaries if the relationship between such individual and the
Company or its Subsidiaries is the legal relationship of employer and employee.
This definition of "Employee" is qualified in its entirety and is subject to the
definition set forth in Section 3401(c) of the Code and the applicable
regulations thereunder.
(f) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
(g) "EXERCISE PRICE" shall mean the amount for which one Share may be
purchased upon exercise of an Option, as specified by the Committee in the
applicable Stock Option Agreement.
(h) "FAIR MARKET VALUE" shall mean the market price of Stock, determined
by the Committee as follows:
<PAGE>
(1) If Stock was traded over-the-counter on the date in question but
was not classified as a national market issue, then the Fair Market Value shall
be equal to the mean between the last reported representative bid and asked
prices quoted by the NASDAQ system for such date;
(2) If Stock was traded over-the-counter on the date in question and
was classified as a national market issue, then the Fair Market Value shall be
equal to the last-transaction price quoted by the NASDAQ system for such date;
(3) If Stock was traded on a stock exchange on the date in question,
then the Fair Market Value shall be equal to the closing price reported by the
applicable composite-transaction report for such date; and
(4) If none of the foregoing provisions is applicable, then the Fair
Market Value shall be determined by the Committee in good faith and in
accordance with Section 260.140.50, Title 10 of the California Code of
Regulations, or with respect to the determination of Fair Market Value in
connection with the exercise of any Options granted to Nonemployee Directors
under Section 4(b) of this Plan, by an independent appraiser selected by the
Committee in its sole discretion.
In all cases, the determination of Fair Market Value by the Committee shall be
conclusive and binding on all persons.
(i) "ISO" shall mean an incentive stock option described in Section 422(b)
of the Code.
(j) "NONEMPLOYEE DIRECTOR" shall mean a member of the Board of Directors
who (i) is not currently an officer or Employee of the Company or a parent or
Subsidiary of the Company, (ii) has not received compensation for serving as a
consultant or in any other non-director capacity or had an interest in any
transaction with the Company or a parent or Subsidiary of the Company that would
exceed the $60,000 threshold for which disclosure would be required under Item
404(a) of Regulation S-K, or (iii) has not been engaged through another party in
a business relationship with the Company which would be disclosable under Item
404(b) of Regulation S-K. If the Board of Directors determines that compliance
with Section 162(m) of the Code is desirable, then the term "Nonemployee
Director" shall also be interpreted to satisfy the definition of "outside
director" under Section 162(m) and applicable regulations issued pursuant
thereto.
(k) "NONSTATUTORY OPTION" shall mean a Stock Option not described in
Sections 422(b) or 423(b) of the Code.
(l) "OPTION" shall mean an ISO or Nonstatutory Option granted under this
Plan and entitling the holder to purchase Shares.
(m) "OPTIONEE" shall mean an individual who holds an Option.
<PAGE>
(n) "PLAN" shall mean the 1997 Stock Option Plan of the Company, as
amended.
(o) "SERVICE" shall mean service as an Employee.
(p) "SHARE" shall mean one share of Stock, as adjusted in accordance with
Section 8 of this Plan (if applicable).
(q) "STOCK" shall mean the Common Stock of the Company.
(r) "STOCK OPTION AGREEMENT" shall mean the agreement between the Company
and an Optionee which contains the terms, conditions and restrictions pertaining
to his or her Option.
(s) "STOCK PURCHASE AGREEMENT" shall mean the Notice of Exercise and Stock
Purchase Agreement to be delivered by an Optionee to the Company upon exercise
of an Option.
(t) "SUBSIDIARY" shall mean any corporation, if the Company and/or one or
more other Subsidiaries own not less than 50 percent of the total combined
voting power of all classes of outstanding Stock of such corporation. A
corporation that attains the status of a Subsidiary on a date after the adoption
of this Plan shall be considered a Subsidiary commencing as of such date.
(u) "TAXES" shall mean the term defined in Section 6(d)(1) of this Plan.
(v) "TOTAL AND PERMANENT DISABILITY" shall mean that the Optionee is
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted, or can be expected to last, for a continuous period
of not less than one year.
SECTION 3. ADMINISTRATION.
(a) COMMITTEE MEMBERSHIP. This Plan shall be administered by the
Committee. The Committee shall consist only of Nonemployee Directors of the
Company and shall have at least two members. The Committee shall meet such
other requirements as may be established from time to time by the Securities and
Exchange Commission for plans intended to qualify for exemption under Rule 16b-3
(or its successor) under the Exchange Act. The Board of Directors may appoint
a separate committee of the Board of Directors, composed of one or more
directors of the Company who need not be Nonemployee Directors, who may
administer this Plan with respect to Employees who are not officers or directors
of the Company or incoming new directors of the Company, may grant Options under
this Plan to such persons and may
<PAGE>
determine the timing, number of Shares subject to such Options and other terms
of such grants.
(b) COMMITTEE PROCEDURES. The Committee shall designate one of its
members as chairman. The Committee may hold meetings at such times and places
as it shall determine. The acts of a majority of the Committee's members
present at meetings at which a quorum exists, or acts reduced to or approved in
writing by all of the Committee's members, shall be valid acts of the Committee.
(c) COMMITTEE RESPONSIBILITIES. Subject to the provisions of this Plan,
and without further approval of the Board of Directors, the Committee shall have
full authority and discretion to take the following actions:
(1) To interpret this Plan and to apply its provisions;
(2) To adopt, amend or rescind rules, procedures and forms relating
to this Plan;
(3) To authorize any person to execute, on behalf of the Company, any
instrument required to carry out the purposes of this Plan;
(4) To determine when Options are to be granted under this Plan;
(5) To select the Optionees;
(6) To determine the number of Shares to be made subject to each
Option;
(7) To prescribe the terms and conditions of each Option, including,
without limitation, the Exercise Price, to determine whether such Option is to
be classified as an ISO or as a Nonstatutory Option, and to specify the
provisions of the Stock Option Agreement relating to such Option;
(8) To amend any term of any outstanding Stock Option Agreement,
subject to applicable legal restrictions and to the consent of the Optionee who
entered into such agreement;
(9) To accelerate or defer, with the consent of the Optionee, the
exercise date of any Option;
(10) With the consent of the Optionee, to reprice, cancel and regrant,
or otherwise adjust the Exercise Price of an Option previously granted by the
Committee;
(11) To prescribe the consideration for the grant of each Option or
other right under this Plan and to determine the sufficiency of such
consideration; and
<PAGE>
(12) To take any other actions deemed necessary or advisable for the
administration of this Plan.
All decisions, interpretations and other actions of the Committee shall be final
and binding on all Optionees, and all persons deriving their rights from an
Optionee. No member of the Committee shall be liable for any action that he or
she has taken or has failed to take in good faith with respect to this Plan, any
Option, or any other right to acquire Shares under this Plan.
SECTION 4. ELIGIBILITY.
(a) GENERAL RULE. Only Employees shall be eligible to receive options
under the Plan. In addition, the following restrictions shall apply:
(b) TEN-PERCENT STOCKHOLDERS. An Employee who owns more than 10 percent
of the total combined voting power of all classes of Outstanding Stock of the
Company or any of its Subsidiaries shall not be eligible for the grant of an
Option unless (i) the Exercise Price is at least 110 percent of the Fair Market
Value of the Shares underlying such Option on the date of grant of such Option
and (ii) if such Option is an ISO, such ISO is not exercisable after the
expiration of five years from the date of grant.
(c) ATTRIBUTION RULES. For purposes of Subsection (b) above, in
determining Stock ownership, an Employee shall be deemed to own the Stock owned,
directly or indirectly, by or for such Employee's brothers, sisters, spouse,
ancestors and lineal descendants. Stock owned, directly or indirectly, by or
for a corporation, partnership, estate or trust shall be deemed to be owned
proportionately by or for its stockholders, partners or beneficiaries. Stock
with respect to which such Employee holds an Option shall be counted in the
determination of Stock ownership for purposes of the above Subsection (b).
(d) OUTSTANDING STOCK. For purposes of Subsection (b) above, "Outstanding
Stock" shall include all Stock actually issued and outstanding immediately after
the grant. "Outstanding Stock" shall not include Shares authorized for issuance
under outstanding Options held by the Employee or by any other person.
SECTION 5. STOCK SUBJECT TO THIS PLAN.
(a) BASIC LIMITATION. Shares subject to Options granted under this Plan
shall be authorized but unissued Shares. The aggregate number of Shares which
may be issued under this Plan (upon exercise of Options or other rights to
acquire Shares) shall not exceed 550,000 Shares, subject to adjustment pursuant
to Section 8 of this Plan. The number of Shares which is subject to Options or
other rights outstanding at any time under this Plan shall not exceed the number
of Shares which then remain available for issuance under this Plan. The
Company, during the term of this Plan, shall
<PAGE>
at all times reserve and keep available sufficient Shares to satisfy the
requirements of this Plan.
(b) ADDITIONAL SHARES. In the event that any outstanding Option or other
right for any reason expires or is canceled or otherwise terminated, the Shares
allocable to the unexercised portion of such Option or other right shall again
be available for the purpose of this Plan.
(c) LIMITATION ON GRANTS. The maximum number of Shares as to which
Options shall be granted to any single Optionee shall not exceed 150,000 Shares.
SECTION 6. TERMS AND CONDITIONS OF OPTIONS.
(a) STOCK OPTION AGREEMENT. Each grant of an Option under this Plan shall
be evidenced by a Stock Option Agreement between the Optionee and the Company.
Such Option shall be subject to all applicable terms and conditions of this Plan
and may be subject to any other terms and conditions which are not inconsistent
with this Plan and which the Committee deems appropriate for inclusion in a
Stock Option Agreement. The provisions of the various Stock Option Agreements
entered into under this Plan need not be identical.
(b) NUMBER OF SHARES. Each Stock Option Agreement shall specify the
number of Shares that are subject to the Option and shall provide for the
adjustment of such number in accordance with Section 8 of this Plan. The Stock
Option Agreement shall also specify whether the Option is an ISO or a
Nonstatutory Option.
(c) EXERCISE PRICE. Each Stock Option Agreement shall specify the
Exercise Price. The Exercise Price of an ISO shall not be less than 100 percent
of the Fair Market Value of a Share on the date of grant of the Option, except
as otherwise provided in Section 4(b) of this Plan. The Exercise Price of a
Nonstatutory Option shall not be less than 85 percent of the Fair Market Value
of a Share on the date of grant. Subject to the preceding two sentences, the
Exercise Price under any Option shall be determined by the Committee in its sole
discretion. The Exercise Price shall be payable in a form described in Section
7 of this Plan.
(d) WITHHOLDING TAXES. The Company's obligation to deliver Shares or cash
upon the exercise of Options shall be subject to the satisfaction of all
applicable Federal, State and local income tax and employment tax withholding
requirements.
(1) In the event that the Company or a Subsidiary determines that it
is required to withhold federal, state, foreign or local taxes or social
security/insurance amounts in connection with the grant or exercise of an Option
or the disposition of Shares pursuant to the exercise of an Option
(collectively, the "Taxes"), the Optionee or any person succeeding to the rights
of the Optionee, as a condition to such grant, exercise or disposition, may be
required to make arrangements satisfactory to the
<PAGE>
Company or such Subsidiary to enable it to satisfy such withholding
requirements. Alternatively, at its discretion, the Company may issue or
transfer Shares net of the number of Shares sufficient to satisfy the
withholding requirements, with such Shares valued as of the date the withholding
obligation is incurred.
(2) The Committee may also, in its discretion and applying relevant
law in accordance with the provisions of this Section 6(d) and such supplemental
rules as the Committee may from time to time adopt, require as a condition of
delivery of the Shares upon exercise of Options, that the Optionee remit to the
Company an amount in cash or check sufficient to satisfy the Taxes.
(e) EXERCISABILITY AND TERM. Each Stock Option Agreement shall specify
the date when all or any installment of the Option is to become exercisable.
The vesting of any Option shall be determined by the Committee in its sole
discretion; provided, however, that the Optionee's right to exercise the Option
shall be at the rate of at least 20% per year over five years from the date when
the Option is granted. A Stock Option Agreement may provide for accelerated
exercisability in the event of the Optionee's death, Total and Permanent
Disability or retirement or other events determined from time to time by the
Committee. The Stock Option Agreement shall also specify the term of the
Option, which term shall not exceed ten years from the date of grant. Subject
to the preceding sentence, the Committee in its sole discretion shall determine
when an Option is to expire. An Option shall be deemed exercised when the
Company receives from the Optionee (i) an executed Stock Purchase Agreement in
accordance with the terms of the Option by the person entitled to exercise the
Option and (ii) full payment for the Shares with respect to which the Option is
exercised. Full payment may, as authorized by the Committee, consist of any
consideration and method of payment allowable under Section 7 of this Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder of the Company shall exist with respect to the
Shares, notwithstanding the exercise of the Option. No adjustment will be made
for a dividend or other right for which the record date is prior to the date
when the stock certificate is issued, except as provided in Section 8 of this
Plan. With respect to any ISOs granted under this Plan, the aggregate Fair
Market Value (determined as of the respective date or dates of grant) of the
Shares for which one or more Options granted to any Employee under this Plan (or
any other option plan of the Company or its parent or Subsidiary corporations)
may for the first time become exercisable as ISOs during any one calendar year
shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two or more such Options which become exercisable for
the first time in the same calendar year, the foregoing limitation on the
exercisability thereof as ISOs shall be applied on the basis of the order in
which such Options are granted. To the extent such dollar limitation is
exceeded in any one calendar year, the Option shall nevertheless be exercisable
for the excess number of Shares as a Nonstatutory Option.
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(f) NONTRANSFERABILITY. During an Optionee's lifetime, such Optionee's
Option(s) shall be exercisable only by him or her and shall not be transferable.
In the event of an Optionee's death, such Optionee's Option(s) shall not be
transferable other than by will or by the laws of descent and distribution.
(g) TERMINATION OF SERVICE (EXCEPT BY DEATH). If an Optionee's Service
terminates for any reason other than such Optionee's death, then such Optionee's
Option(s) shall expire on the earliest of the following occasions:
(1) The expiration date determined pursuant to Subsection (e) above;
(2) The date which is thirty (30) days after the termination of the
Optionee's Service for any reason other than Total and Permanent Disability; or
(3) The date which is six (6) months after the termination of the
Optionee's Service by reason of Total and Permanent Disability.
The Optionee may exercise all or part of his or her Option(s) at any
time before the expiration of such Option(s) under the preceding sentence, but
only to the extent that such Option(s) had become exercisable before the
Optionee's Service terminated or became exercisable as a result of the
termination. The balance of such Option(s) shall lapse when the Optionee's
Service terminates. In the event that the Optionee dies after the termination
of the Optionee's Service but before the expiration of the Optionee's Option(s),
all or part of such Option(s) may be exercised (prior to expiration) by the
executors or administrators of the Optionee's estate or by any person who has
acquired such Option(s) directly from the Optionee by bequest or inheritance,
but only to the extent that such Option(s) had become exercisable before the
Optionee's Service terminated or became exercisable as a result of the
termination. For purposes of the foregoing provisions of this Section 6(g), the
Optionee shall be deemed to be providing Service to the Company for so long as
the Optionee renders Service on a periodic basis to the Company or a Subsidiary
in the capacity of an Employee. The Optionee shall be considered to be an
Employee for so long as the Optionee remains in the employ of the Company or a
Subsidiary.
(h) LEAVES OF ABSENCE. For purposes of Subsection (g) above, Service
shall be deemed to continue while the Optionee is on military leave, sick leave
or other bona fide leave of absence (as determined by the Committee). The
foregoing notwithstanding, in the case of an ISO granted under this Plan,
Service shall not be deemed to continue beyond the first 90 days of such leave,
unless the Optionee's reemployment rights are guaranteed by statute or by
contract.
(i) DEATH OF OPTIONEE. If an Optionee dies while he or she is providing
Service to the Company, then such Optionee's Option(s) shall expire on the
earlier of the following dates:
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(1) The expiration date determined pursuant to Subsection (e) above;
or
(2) The date which is six (6) months after the Optionee's death.
All or part of the Optionee's Option(s) may be exercised at any time before the
expiration of such Option(s) under the preceding sentence by the executors or
administrators of the Optionee's estate or by any person who has acquired such
Option(s) directly from the Optionee by bequest or inheritance, but only to the
extent that such Option(s) had become exercisable before the Optionee's death or
became exercisable as a result of the Optionee's death. The balance of such
Option(s) shall lapse when the Optionee dies.
(j) NO RIGHTS AS A STOCKHOLDER. An Optionee, or a transferee of an
Optionee, shall have no rights as a stockholder with respect to any Shares
covered by his or her Option until the date of the issuance of a stock
certificate for such Shares. No adjustments shall be made, except as provided
in Section 8 of this Plan.
(k) MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Within the
limitations of this Plan, the Committee may modify, extend or renew outstanding
Options or may accept the cancellation of outstanding Options (to the extent not
previously exercised) in return for the grant of new Options at the same or a
different Exercise Price. The foregoing notwithstanding, no modification of an
Option shall, without the consent of the Optionee, impair such Optionee's rights
or increase his or her obligations under such Option.
(l) RESTRICTIONS ON TRANSFER OF SHARES. Any Shares issued upon exercise
of an Option shall be subject to such transfer restrictions as the Committee
shall determine so long as such restrictions do not unfairly prejudice the
opportunity of the Optionee to receive the fair value of the applicable Shares
as required under Rule 260.140.8, Title 10 of the California Code of
Regulations, in addition to any general restrictions that may apply to all
holders of Stock. Options may not be transferred or assigned in any manner
other than by will or by the laws of descent or distribution.
(m) RULE 16b-3. Options granted to persons who are subject to Section 16
of the Exchange Act shall comply with the applicable provisions of Rule 16b-3
promulgated thereunder and shall contain such additional conditions or
restrictions as may be required thereunder to qualify for the maximum exemption
from Section 16 of the Exchange Act with respect to this Plan's transactions;
provided, however, that this provision shall not apply if, at the time of such
option grant, this Plan, as it relates to such grant, is not administered by a
Committee consisting solely of Nonemployee Directors.
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SECTION 7. PAYMENT FOR SHARES.
(a) GENERAL RULE. The entire Exercise Price of Shares issued under this
Plan shall be payable in lawful money of the United States of America at the
time when such Shares are purchased, except as follows:
(1) In the case of an ISO granted under this Plan, payment shall be
made only pursuant to the express provisions of the applicable Stock Option
Agreement. However, the Committee (in its sole discretion) may specify in the
Stock Option Agreement that payment may be made pursuant to Subsections (b), (c)
or (d) below; or
(2) In the case of a Nonstatutory Option granted under this Plan, the
Committee (in its sole discretion) may accept payment pursuant to
Subsections (b), (c) or (d) below.
(b) SURRENDER OF STOCK. To the extent that this Subsection (b) is
applicable, payment may be made all or in part with Shares which have already
been owned by the Optionee or his or her representative for more than 12 months
and which are surrendered to the Company in good form for transfer. Such Shares
shall be valued at their Fair Market Value on the date when the new Shares are
purchased under this Plan.
(c) EXERCISE/SALE. To the extent that this Subsection (c) is applicable,
payment may be made by the delivery (on a form prescribed by the Company) of an
irrevocable direction to a securities broker approved by the Company to sell
Shares and to deliver all or part of the sales proceeds to the Company in
payment of all or part of the Exercise Price and any Taxes.
(d) EXERCISE/PLEDGE. To the extent that this Subsection (d) is
applicable, payment may be made by the delivery (on a form prescribed by the
Company) of an irrevocable direction to pledge Shares to a securities broker or
lender approved by the Company, as security for a loan, and to deliver all or
part of the loan proceeds to the Company in payment of all or part of the
Exercise Price and any Taxes.
SECTION 8. ADJUSTMENT OF SHARES.
(a) GENERAL. In the event of a subdivision of the outstanding Stock, a
declaration of a dividend payable in Shares, a declaration of a dividend payable
in a form other than Stock in an amount that has a material effect on the value
of Stock, a combination or consolidation of the outstanding Stock (by
reclassification or otherwise) into a lesser number of Shares, a
recapitalization, a spinoff or a similar occurrence, the Committee shall make
appropriate adjustments in one or more of (i) the number of Shares available for
future grants under Section 5 of this Plan, (ii) the number of Shares
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covered by each outstanding Option or (iii) the Exercise Price under each
outstanding Option.
(b) RESERVATION OF RIGHTS. Except as provided in this Section 8, an
Optionee shall have no rights by reason of any subdivision or consolidation of
Shares of Stock of any class, the payment of any dividend or any other increase
or decrease in the number of Shares of Stock of any class. Any issue by the
Company of Shares of Stock of any class, or securities convertible into Shares
of Stock of any class, shall not affect, and no adjustment by reason thereof
shall be made with respect to, the number or Exercise Price of Shares subject to
an Option. The grant of an Option pursuant to this Plan shall not affect in any
way the right or power of the Company to make adjustments, reclassification,
reorganizations or changes of its capital or business structure, to merge or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.
SECTION 9. SECURITIES LAWS; STOCKHOLDER APPROVAL.
Shares shall not be issued under this Plan unless the issuance and delivery
of such Shares comply with (or are exempt from) all applicable requirements of
law, including, without limitation, the Securities Act of 1933, as amended, the
rules and regulations promulgated thereunder, state securities laws and
regulations, and the regulations of any stock exchange on which the Company's
securities may then be listed. All options issued pursuant to this Plan are to
be issued conditional upon approval of the Plan by the shareholders of the
Company under applicable law.
SECTION 10. NO EMPLOYMENT RIGHTS.
No provision of this Plan, nor any right or Option granted under this Plan,
shall be construed to give any person any right to become, to be treated as, or
to remain an Employee or in any way to amend, modify, waive or terminate the
Company's (or any Subsidiary's) right to terminate any person's Service at any
time and for any reason.
SECTION 11. DURATION AND AMENDMENTS.
(a) TERM OF THIS PLAN. This Plan, as set forth herein, shall become
effective August 12, 1997, the date when the Board of Directors adopted this
Plan. Notwithstanding the foregoing, no Option granted under this Plan shall
become exercisable unless and until this Plan shall have been approved by the
shareholders of the Company. This Plan shall terminate automatically on the
date which is ten (10) years after its initial adoption by the Board of
Directors, August 12, 2007, and may be terminated on any earlier date pursuant
to Subsection (b) below.
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(b) RIGHT TO AMEND OR TERMINATE THIS PLAN. The Board of Directors may
amend, suspend or terminate this Plan at any time and for any reason; provided,
however, that any amendment of this Plan which: (i) materially increases the
number of Shares available for issuance under this Plan (except as provided in
Section 8 of this Plan); (ii) materially changes the class of persons who are
eligible for the grant of ISOs; or (iii) if required by Rule 16b-3 (or any
successor thereto) under the Exchange Act, would materially increase the
benefits accruing to participants under this Plan or would materially modify the
requirements as to eligibility for participation in this Plan, shall be subject
to the approval of the Company's shareholders by the affirmative vote of the
holders of a majority of the securities of the Company present, or represented
and entitled to vote at a duly held shareholders' meeting. Shareholder approval
shall not be required for any other amendment of this Plan.
(c) EFFECT OF AMENDMENT OR TERMINATION. No Shares shall be issued or sold
under this Plan after the termination thereof, except upon exercise of an Option
granted prior to such termination. The termination of this Plan, or any
amendment thereof, shall not affect any Share previously issued or any Option
previously granted under this Plan.
SECTION 12. EXECUTION.
To record the adoption of this Plan by the Board of Directors on as of
August 12, 1997, the Company has caused its authorized officer to execute the
same.
OVERLAND DATA, INC.,
a California corporation
By: /s/ Scott McClendon
Scott McClendon, President and CEO
