<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
STORAGE COMPUTER CORPORATION
................................................................................
(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
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1) or Item 22(a)(2) of
Schedule 14A.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
.............................................................................
2) Aggregate number of securities to which transaction applies:
.............................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
............................................................................
4) Proposed maximum aggregate value of transaction:
............................................................................
5) Total fee paid:
............................................................................
/ / Fee paid previously by written 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> 2
STORAGE COMPUTER CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 17, 1999
You are hereby notified that the annual meeting of stockholders (the
"Annual Meeting") of Storage Computer Corporation (the "Company") will be held
on May 17, 1999 at 10:00 a.m. at Storage Computer Corporation, 11 Riverside
Street, Nashua, New Hampshire (Route 3, Exit 5W):
1. To elect three (3) directors for the ensuing year.
2. To ratify the action of the Board of Directors in appointing BDO Seidman,
LLP as the Company's auditors for 1999.
3. To approve the 1999 Employee Stock Option Plan.
4. To consider and act upon any other business as may properly come before the
Annual Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on April 5, 1999 as the
record date for the Annual Meeting. Only stockholders on the record date are
entitled to notice of and to vote at the Annual Meeting and at any adjournment
thereof.
By order of the Board of Directors,
THOMAS A. WOOTERS
SECRETARY
IMPORTANT: IN ORDER TO SECURE A QUORUM AND TO AVOID THE EXPENSE OF ADDITIONAL
PROXY SOLICITATION, PLEASE MAIL YOUR PROXY PROMPTLY IN THE ENCLOSED ENVELOPE
EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING PERSONALLY. YOUR COOPERATION IS
GREATLY APPRECIATED.
<PAGE> 3
STORAGE COMPUTER CORPORATION
EXECUTIVE OFFICES
11 Riverside Street
Nashua, New Hampshire 03062
PROXY STATEMENT
SOLICITATION AND VOTING OF PROXIES
This Proxy Statement, the accompanying proxy card, and 10-K are being mailed by
Storage Computer Corporation to the holders of record of the Company's
outstanding shares of Common Stock, $.001 par value ("Common Stock"), commencing
on or about April 18, 1999. The accompanying proxy is solicited by the Board of
Directors of the Company for use at the Annual Meeting of stockholders to be
held on May 17, 1999 and at any adjournments of that meeting. The Company will
bear the cost of solicitation of proxies. Directors, officers, and employees may
assist in the solicitation of proxies by mail, telephone, telegraph, telefax,
telex, in person or otherwise, without additional compensation.
When a proxy is returned, prior to or at the Annual Meeting, properly signed,
the shares represented by that proxy will be voted by the proxies named in
accordance with the stockholder's instructions indicated on the proxy card. You
are urged to specify your choices on the enclosed proxy card. If the proxy is
signed and returned without specifying choices, the shares will be voted FOR the
election of directors as set forth in this Proxy Statement, FOR ratification of
the appointment of BDO Seidman, LLP as the Company's auditors for the upcoming
year, FOR the approval of the 1999 Employee Stock Option Plan, and in the
discretion of the proxies as to other matters that may properly come before the
Annual Meeting. Sending in a proxy will not affect a stockholder's right to
attend the Annual Meeting and vote in person. A proxy may be revoked by notice
in writing delivered to the Secretary of the Company at any time prior to its
use, by a written revocation submitted to the Secretary of the Company at the
Annual Meeting, by a duly-executed proxy bearing a later date, or by voting in
person by ballot at the Annual Meeting. A stockholder's attendance at the Annual
Meeting will not by itself revoke a proxy.
VOTING SECURITIES AND RECORD DATE
The only outstanding class of stock of the Company is its Common Stock. Each
share of Common Stock is entitled to one vote per share. The Board of Directors
has fixed April 5, 1999 as the record date for the Annual Meeting. Only
stockholders of record on the record date are entitled to notice of and to vote
at the Annual Meeting and any adjournment of that meeting. On April 5, 1999,
there were issued and outstanding 11,360,032 shares of Common Stock.
<PAGE> 4
The Company's Restated Certificate of Incorporation and Restated By-laws provide
that a quorum shall consist of the representation in person or by proxy at the
Annual Meeting of stockholders entitled to cast a majority of the votes that are
entitled to be cast at the Annual Meeting. The election of directors is by
plurality of the votes cast at the Annual Meeting either in person or by proxy.
The approval of a majority of the votes properly cast at the Annual Meeting,
either in person or by proxy, is required for adoption of the proposal to ratify
the appointment of BDO Seidman, LLP as the Company's auditors for 1999, the 1999
Stock Option Plan, and the approval of any other business which may properly be
brought before the Annual Meeting or any adjournments.
With regard to the election of directors, votes may be left blank, cast in favor
or withheld; votes that are left blank will be counted in favor of the election
of the directors named on the proxy and votes that are withheld will have the
effect of a negative vote. Abstentions may be specified on all proposals other
than the election of directors and will be counted as present for purposes of
determining the presence or absence of a quorum for the proposal on which the
abstention is noted. With respect to the proposal to approve BDO Seidman, LLP as
auditors for the Company for 1999, abstentions will not be counted for or
against the proposal. With respect to the proposal to approve the 1999 Stock
Option Plan, abstentions will not be counted for or against the proposal. Broker
non-votes, if any, will not be counted in determining a quorum for, or the
outcome of, any proposal. A "non vote" occurs when a broker holding shares for a
beneficial owner does not vote on a proposal because the broker does not have
discretionary voting power and has not received instructions from the beneficial
owner.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
One of the purposes of the meeting is to elect three (3) directors to serve
until the next Annual Meeting of Stockholders or until their successors will
have been properly elected and qualified. It is intended that the proxies
solicited by the Board of Directors will be voted in favor of the three (3)
nominees named below, unless otherwise specified on the proxy card. All of the
nominees are currently members of the Board. There are no family relationships
between any directors or executive officers of the Company. The Board knows of
no reason why any of the nominees will be unavailable or unable to serve as a
Director, but in that event, proxies solicited by this mailing will be voted for
the election of another person or persons to be designated by the Board of
Directors.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF EACH NOMINEE LISTED BELOW.
The following are summaries of the background, business experience, and
description of the principal occupations of the nominees.
Theodore J. Goodlander, 55, founded the Company and has been Chairman of the
Board of Directors, President and Chief Executive Officer since the Company's
inception. Mr. Goodlander served as President of Cab-Tek, Inc., a computer
accessories manufacturing company, from 1981 to 1991. From 1978 to 1981, he was
a private investor, and from 1968 to 1978 Mr. Goodlander held various management
positions at Wang Laboratories, Inc., including Vice President International and
Far East Marketing Manager. Mr. Goodlander attended Syracuse University and is a
graduate of the Program for Management Development at Harvard Business School.
-2-
<PAGE> 5
Shigeho Inaoka, 56, has been a director of the Company since September 1993. Mr.
Inaoka has served as President of TechnoGraphy, Inc., a manufacturer of
multimedia computer systems and an exclusive distributor of the Company's
products in Japan since 1992. From 1989 to 1992, Mr. Inaoka was President and
Chief Executive Officer of Sony Computer Systems, Inc. He received a business
degree from Meiji University in 1967 and a Masters degree in Computer Systems
Engineering from Tokyo Computer Academy in 1968.
Steven S. Chen, 53, has been a director of the Company since May, 1996. Mr. Chen
is also the Chairman and Chief Executive Officer of Applitone.net. Mr. Chen was
previously the Executive Vice President and Chief Technology Officer of Sequent
Computer Systems, Inc. Prior to that, Mr. Chen was the Founder and Senior Vice
President of Chen Systems, Inc., a high performance computer server
manufacturer, which was acquired by Sequent Computer Systems, Inc. in 1996.
Previously, Mr. Chen founded Supercomputing Systems, Inc., with partial funding
from IBM and had been Senior Vice President of Cray Research, with
responsibility for development of the Cray XMP and YMP Supercomputers.
All directors hold office until the next annual meeting of stockholders and
until their successors are elected and qualified. All officers of the Company
are elected annually by the Board of Directors and serve at the Board's
discretion.
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board met formally two times during 1998. The Board of Directors has a
Compensation Committee, which makes recommendations concerning salaries and
incentive compensation for employees of, and consultants to, the Company. It met
two times during 1998. Its members are Theodore J. Goodlander, Steven S. Chen,
and Shigeho Inaoka; while serving on the Compensation Committee, Mr. Goodlander
served as Chief Executive Officer of the Company. The Board also has an Audit
Committee, which reviews the results and scope of the audit and other services
provided by the Company's independent auditors. It met two times during 1998.
Its members are Theodore J. Goodlander, Steven S. Chen, and Shigeho Inaoka. Each
of the Directors attended all meetings of the Board and the meetings of the
committees of the Board on which they serve.
DIRECTOR COMPENSATION
Members of the Board of Directors do not receive any cash compensation for their
service on the Board of Directors but are entitled to reimbursement of expenses
related to attending Board of Directors meetings. The Company has compensated
its directors who are not employees through the grant of stock options. Upon
initial appointment, each of Messrs. Inaoka and Chen was granted an option to
purchase 30,000 shares of Common Stock at the fair market value on the date of
grant. Directors who are employees of the Company are not paid any additional
compensation for serving as directors.
-3-
<PAGE> 6
OTHER EXECUTIVE OFFICERS
Keith C. Perry, 43, has served as the Company's Senior Vice President of Sales
and Worldwide Marketing since September 1998. Prior to joining Storage Computer,
Perry was Senior Director, Marketing/Business Development at Amdahl Corporation.
He holds a BS in Computer Science from the University of Manitoba, a Certificate
of Data Process (CDP) from the Institute for Certification of Computer
Professionals USA, and is an Information Systems Professional (ISP) from the
Canadian Information Processing Society.
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
The following table lists certain information required by section 13(d)(3) of
the Securities Exchange Act of 1934 to be disclosed as of the April 5, 1999
record date with respect to the voting securities of the Company owned by:
(1) any person (including any "group" as that term is defined in section
13(d)(3) who is known to the Company to be the beneficial owner of more
than 5% of the outstanding shares of a class of voting securities of the
Company,
(2) each director or nominee for director of the Company,
(3) each of the executive officers named in the Summary Compensation Table on
page 7,
(4) all directors and executive officers of the Company as a group.
As defined by Rule 13(d)(3) under the Securities Exchange Act of 1934, a person
is deemed to be the beneficial owner, for purposes of this table, of any voting
securities of the Company if he or she has or shares voting power or investment
power with respect to such securities or has the right to acquire beneficial
ownership of those shares at any time within 60 days of April 5, 1999. "Voting
power" is the power to vote or direct the voting of shares and "investment
power" is the power to dispose of or direct the disposition of shares. Except as
indicated in the notes following the table below, each person named has sole
voting and investment power with respect to the shares listed as being
beneficially owned by that person.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK BENEFICIALLY OWNED
DIRECTORS, OFFICERS AND 5% STOCKHOLDERS NUMBER PERCENT
- --------------------------------------- ------ -------
<S> <C> <C>
Theodore J. Goodlander 4,002,000(1) 35.15%
c/o Storage Computer Corporation
11 Riverside Street
Nashua, New Hampshire 03062
Goodlander 1990 Family Trust 3,290,000 28.90%
Jeanne McCready, Trustee
c/o Storage Computer Corporation
11 Riverside Street
Nashua, New Hampshire 03062
</TABLE>
-4-
<PAGE> 7
<TABLE>
SHARES OF COMMON STOCK BENEFICIALLY OWNED
DIRECTORS, OFFICERS AND 5% STOCKHOLDERS NUMBER PERCENT
- --------------------------------------- ------ -------
<S> <C> <C>
Shigeho Inaoka 453,600(2) 3.98%
2-16-7 Iwataminani
Komae-shi
Tokyo, Japan 182
Steven S. Chen 30,000(3) *
c/o Sequent Computer Systems, Inc.
15450 S.W. Koll Parkway
Beaverton, OR 97806
Keith C. Perry 75,000(4) *
c/o Storage Computer Corporation
11 Riverside Street
Nashua, New Hampshire 03062
All directors and executive officers as a group 4,560,600(5) 40.06%
</TABLE>
* less than 1%
(1) Does not include 3,290,000 shares of Common Stock held by the Goodlander
1990 Trust established for the exclusive benefit of Mr. Goodlander's
children and Mr. Goodlander exercises no voting control or has no power to
dispose of the shares and disclaims beneficial ownership.
(2) Includes 212,000 shares of Common Stock held by TechnoGraphy, Inc. for
which Mr. Inaoka is an executive officer and in which he owns a controlling
interest. Includes 30,000 shares of Common Stock issuable upon exercise of
options granted under the Company's Amended and Restated Stock Incentive
Plan. Does not include 30,000 shares held by family members.
(3) Includes 30,000 shares of Common Stock issuable upon the exercise of
options granted under the Company's Amended and Restated Stock Incentive
Plan.
(4) Includes 75,000 options pursuant to the Company's Amended and Restated
Stock Incentive Plan.
(5) See footnotes (1)-(4) above.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires directors,
executive officers, and persons who own more than 10% of the outstanding Common
Stock of the Company to file with the Securities and Exchange Commission ("SEC")
and the American Stock Exchange reports of ownership and changes in ownership of
voting securities of the Company and to furnish copies of such reports to the
Company. Based solely on review of the copies of such reports furnished to the
Company or written representations from certain persons that no reports were
required for those persons, the Company believes that all Section 16(a) filing
requirements were satisfied.
-5-
<PAGE> 8
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
STOCK PERFORMANCE GRAPH
Dec. 94 Dec. 95 Dec. 96 Dec. 97 Dec. 98
------- ------- ------- ------- -------
SOS 100 257 375 179 95
Peers 100 187 163 208 143
S&P 500 100 134 161 211 268
This graph assumes that the value of investment in Storage Computer Common Stock
and each index to be $100 on December 31, 1994 and that any and all dividends
were reinvested. This graph compares Storage Computer's cumulative total return
with the S&P 500 Stock Index (a performance indicator of the overall stock
market) and a peer group. The Company's peer group consists of Auspex Systems,
Box Hill Systems, Ciprico, Data General, MTI Tech, and Mylex. These companies
are viewed as similar in size to the Company and represent its competitors in
certain geographic areas and markets.
-6-
<PAGE> 9
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information with respect to the
compensation paid or accrued by the Company for services rendered to the Company
in all capacities for the fiscal years ended on the last day of December for
1998, 1997, and 1996, respectively, by its Chief Executive Officer and each of
the Company's other executive officers whose total salary and bonus exceeded
$100,000 during each year for which they qualified for inclusion (collectively,
"the Named Executive Officers"):
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------
AWARDS
OTHER ANNUAL SECURITIES ALL OTHER
NAME AND FISCAL SALARY BONUS COMPENSATION UNDERLYING/ COMPENSATION
PRINCIPAL POSITION YEAR(1) $ $ ($)(2) STOCK OPTIONS (#) ($)(2)
------------------ ------- ----- ----- ------------ ----------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Theodore J.
Goodlander,
President and 1998 $150,000 --- --- --- ---
Chief Executive 1997 $150,000 --- --- --- ---
Officer............ 1996 $150,000 --- --- --- ---
James P. Nolan 1998 $ 49,701(3) --- --- --- ---
Senior Vice 1997 $ 46,763(4) --- --- 75,000(6) ---
President 1996 --- --- --- --- ---
Research and
Development........
Keith C. Perry 1998 $ 50,000(5) --- --- 75,000(7) ---
Senior Vice 1997 --- --- --- --- ---
President 1996 --- --- --- --- ---
Sales and
Worldwide
Marketing..........
</TABLE>
-7-
<PAGE> 10
(1) The Company's fiscal year ends on the last day of December.
(2) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of perquisites and other personal benefits
has been omitted because such perquisites and other personal benefits
constituted less than the lesser of $50,000 or ten percent of the total
annual salary and bonus reported for the executive officer during the
fiscal year ended December 31, 1998.
(3) Mr. Nolan left the Company on May 15, 1998, amount shown reflects
compensation for partial year.
(4) Mr. Nolan joined the Company on September 1, 1997, amount shown reflects
compensation for partial year.
(5) Mr. Perry joined the Company on September 1, 1998, amount shown reflects
compensation for partial year.
(6) Includes 75,000 options at $5.00 per share.
(7) Includes 75,000 options at $2.50 per share.
The following table sets forth certain information concerning the Awards
Securities Underlying/Stock Options (#) shown in the Annual Compensation table
above.
<TABLE>
<CAPTION>
OPTIONS GRANT TABLE
Name Grant Date # Shares Exercise Price Vesting Date Expiration Date
---- ---------- -------- -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
James P. Nolan 12/23/97 75,000(1) $5.00 12/23/01 12/23/07
Keith C. Perry 10/17/98 75,000 $1.25 10/17/02 10/17/08
</TABLE>
(1) Mr. Nolan left the Company on May 15, 1998 at which time these options
became null and void.
The following table sets forth certain information concerning exercisable and
unexercisable stock options held by the Named Executive Officers as of December
31, 1998:
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
Number of Securities Underlying Value of Unexercised In-the-Money
Unexercised Options at Year-End(1) Options at Year-End(2)
---------------------------------- ---------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Theodore J. Goodlander 0 0 0 $0
James P. Nolan 0 0 0 $0
Keith C. Perry 0 75,000 0 $154,500
</TABLE>
(1) No options were exercised during the year ended December 31, 1998 by the
Named Executive Officers.
(2) Based on the difference between closing price of the underlying shares of
Common Stock on December 31, 1998 as reported by the American Stock
Exchange ($3.31) and the option exercise price.
-8-
<PAGE> 11
REPORT OF THE COMPENSATION COMMITTEE
During the fiscal year 1998, the Committee was responsible for establishing and
administering the compensation policies which govern annual salary, bonuses, and
stock-based incentives (currently stock options).
The Committee determined to keep salaries competitive with the industry and
allow for increases in the cost of living.
On August 12, 1998, the Committee approved repricing outstanding employee
options to the current market value of its underlying stock. The decision was
based upon the belief that key employees were disadvantaged by a decline in
stock value not attributable to the performance of the affected employees.
Further, the options had exercise prices so far above market prices that they
did not serve to motivate and retain key employees.
REPRICING OF STOCK OPTIONS
During the third quarter of 1998, the Company's Board of Directors approved a
voluntary common stock option repricing program. On August 25, 1998, Storage
Computer Corporation extended an offer to option holders to reprice their
options. All employees, officers, and directors were given the option to reprice
to $2.50, the fair market value on August 24, 1998. None of the Named Executive
Officers were affected by the repricing.
The Company's stock option plan is an integral part of its compensation plan.
Original option prices ranged from $.10 to 19.00. This repricing will serve as a
means to retain and attract talented personnel.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
KRISTIANIA CORP.
SCC currently leases, as a tenant-at-will under a triple-net lease, a 35,000 sq.
ft. facility which is occupied by its light manufacturing, research and
development, and office operations in Nashua, New Hampshire. The lease is with
an affiliated entity owned by Mr. Goodlander and members of his family. The
Company paid annual rentals of $200,400, $187,200, and $195,600 in 1998, 1997
and 1996, respectively.
RELATED PARTY DEBT
Since the inception of the Company, Mr. Goodlander and Cab-Tek, Inc. have made
unsecured cash loans to the Company at interest rates of prime plus 1%. In
December of 1994, the Cab-Tek note payable was assigned to Mr. Goodlander. The
aggregate amount owing to Mr. Goodlander under his own note and the note
assigned to him by Cab-Tek, Inc. at the end of fiscal years 1998, 1997, and 1996
was $710,000, $710,000, and $710,000, respectively.
-9-
<PAGE> 12
RELATED PARTIES
Mr. Inaoka is a member of the board of directors of the Company and is president
of one of the Company's major customers. (see Note M of Form 10-K).
PROPOSAL NO. 2 - RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors of the Company has appointed BDO Seidman, LLP as auditors
of the Company for the fiscal year ending December 31, 1998 and further directed
that management submit the selection of auditors for ratification by the
stockholders. Richard A. Eisner & Company, LLP was the Company's auditor for the
years ended December 31, 1997 and 1996.
Representatives of BDO Seidman, LLP are expected to be present at the Annual
Meeting, with the opportunity to make a statement if they desire to do so, and
are expected to be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO RATIFY
THE CHOICE OF BDO SEIDMAN, LLP AS THE COMPANY'S AUDITORS FOR THE YEAR ENDED
DECEMBER 31, 1999.
PROPOSAL NO. 3 - APPROVAL OF 1999 EMPLOYEE STOCK OPTION PLAN
The Board of Directors proposes the 1999 Employee Stock Option Plan (the
"Plan"). This Plan is in addition to the 1992 Stock Incentive Plan with 303,384
SCC Common Stock shares available for issuance at April 5, 1999. The 1999 Plan
is materially identical to the 1992 Plan except that the total number of shares
of SCC Common Stock available for issuance under the 1999 Plan will be
1,000,000.
This "Plan" is intended to promote the long-term interests of the Company and
its shareholders by providing directors, consultants, officers, and other
employees of the Company with an additional incentive arising from capital stock
ownership to promote financial success of and to provide future services to the
Company. By offering these individuals an ownership interest in SCC, the best
interest of the Company will be served for the benefit of all shareholders.
The "Plan" shall be administered by two or more members of the Board (the
"Committee"), each of whom shall be a "disinterested person" as defined in Rule
16b-3 (or successor provision) promulgated by the SEC. The Committee has full
authority and power to: o construe and interpret the provisions of the Plan and
make rules and regulations for the administration of the
* Plan not inconsistent with the Plan;
* decide all questions of eligibility for Plan participation and for the
grant of Awards;
-10-
<PAGE> 13
* adopt forms of Awards and other documents consistent with the Plan;
* engage agents to perform legal, accounting, and other such professional
services as it may deem proper for administering the Plan; and
* take such other actions as may be reasonable, required, or appropriate to
administer the Plan or to carry out the Committee activities contemplated
by other sections of the Plan.
The plan will be available to all employees, officers, and directors of the
Company. The number of options granted will be at the discretion of the Board.
The options will become void immediately upon voluntary resignation by the
employee or termination by the Company with cause. The options will become void
after 90 days in the event of termination by the Company without cause. Grants
will consist of Non-Qualified Stock Options (NSOs) only. Upon exercise of
options, an employee may chose to hold or sell their shares. In either
situation, the Company will withhold 28% Federal Income Tax, 6.2% Social
Security Tax, 1.45% Medicare Tax, and any applicable State Income Tax from the
employee's gain on the sale.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE 1999
EMPLOYEE STOCK OPTION PLAN.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Any stockholder proposal intended to be presented at the Company's 2000 annual
meeting of stockholders must be received at the executive offices of the Company
not later than December 11, 1999 in order to be considered for inclusion in the
Company's proxy statement and form of proxy for that meeting.
OTHER MATTERS
As of the date of this Proxy Statement, management of the Company knows of no
matter not specifically referred to above as to which any action is expected to
be taken at the Annual Meeting. The persons named in the enclosed form of proxy,
or their substitutes, will vote the proxies, insofar as the same are not limited
to the contrary, in regard to such other matters and the transaction of any
other business as may properly be brought before the Annual Meeting, in their
best judgment.
-11-
<PAGE> 14
FORM 10-K AVAILABLE
FORM 10-K, WHICH INCLUDES CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL
STATEMENT SCHEDULES FOR THE COMPANY AND ITS SUBSIDIARIES, ACCOMPANIES THIS
MAILING AND IS ALSO AVAILABLE TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN
REQUEST TO INVESTOR RELATIONS, STORAGE COMPUTER CORPORATION, 11 RIVERSIDE
STREET, NASHUA, NEW HAMPSHIRE 03062.
YEAR 2000
Many current computer systems and software products were not designed to handle
any dates beyond the year 1999. As a result, computer systems and/or software
used by many companies may need to be modified prior to the Year 2000 in order
to remain functional. Significant uncertainty exists in the hardware and
software industry concerning the potential effects associated with such
compliance.
In mid-1998, the Company formed an internal task force to evaluate those areas
of the Company that may be affected by the Year 2000 problem and devised a plan
for the Company to become Year 2000 compliant in a timely manner (the "Plan").
The Plan focuses on three major areas; the Company's internal business
transaction systems; the products the Company sells and the business transaction
systems of its business partners, including suppliers, customers and bankers. To
date, the Company has executed approximately one-half of its Plan and
anticipates completing the remaining portions of the Plan by the end of calendar
year 1999.
Internal Business Transaction Systems
The Company has completed a review of its critical business transaction
systems, and its Year 2000 compliance related to business transaction systems is
as follows:
All of the Company's systems for processing business transactions prior to
and following 12:00am January 1, 2000 are tested for transaction integrity. This
compliance extends to the underlying hardware, operating systems, and other
software on which the Company's business system operates. This compliance
includes the following transactions and related printed documents: accepting
orders from customers, fulfilling customer orders, invoicing customers,
crediting customer accounts, applying customer payments, refunding customers,
placing orders with vendors, receiving vendor shipments, processing vendor
invoices, and paying vendors.
The Company is in the process of evaluating certain ancillary PC office
applications (e.g. word processing, spreadsheets, e-mail, etc.) and specialized
PC applications including art, drawing and other creative department
applications, hardware design and other engineering department applications,
software development systems, bank
-12-
<PAGE> 15
account management, fixed asset management, and stock option database
management. This effort will continue through 1999.
The Company has incurred to date no incremental material costs associated
with its efforts to become Year 2000 compliant, as the majority of the costs
have occurred as a result of normal upgrade procedures. Based on current
information, the Company does not expect future costs to modify its information
technology infrastructure to be material to its financial condition or results
of operations. However, there can be no assurances that there will not be
interruptions or other limitations of financial and operating systems
functionally or that the Company will not incur significant costs to avoid such
interruptions or limitations.
Products the Company Sells
The Company has also completed a review of its manufactured product line,
however, the Company is still in the process of evaluating third party products
and software sold by Storage Computer for Year 2000 compliance. The Company's
Year 2000 compliance status related to the products it sells is as follows:
Storage Computer Corporation has conducted an extensive review of its
internal and external requirements to ensure that our computer systems and
applications will continue to function properly into the Year 2000.
All StorageSuite storage products are Y2K compliant. The Company has now
completed its review and test of all products. Current and past products are Y2K
compliant as will be any future product developments. Expenditures related to
this portion of the Company's Y2K plan have been expensed as incurred and are
immaterial in their impact on the Company's operating results.
SCC is continuing to work with major vendors and suppliers to ensure that
the Company's manufacturing and infrastructure systems will not experience any
difficulties as a result of their products and services. However, there can be
no guarantee that these parties' systems, on which the Company relies, will be
timely converted. Any effects on the Company's results of operations as a result
of such parties' failures are not estimable. Management does not believe that
any individual vendor's failure to comply will have a material effect on the
Company's products, financial condition or continuing operations.
The Company's Business Partners
The Company's suppliers (particularly sole-source and long lead-time
suppliers), key customers and other key business partners (e.g. bankers) may be
adversely affected by their respective failure to address the Year 2000 issue.
Should any of the Company's suppliers encounter Year 2000 problems that cause
them to delay manufacturing or shipments of key components to Storage Computer,
the Company may be forced to delay or cancel shipments of its products, which
would have a material adverse effect on the Company's results of operations. Any
inability of Storage Computer's key customers to become Year 2000 compliant
which would cause them to delay or cancel substantial purchase orders or
delivery of Storage Computer products would also have a material adverse effect
on the Company's results of operations. Additionally, any inability of the
Company's other key business partners, including the
-13-
<PAGE> 16
Company's bank, to become Year 2000 compliant could cause them to become unable
to provide critical business services, such as to provide funding on the
Company's line of credit, and could therefore also have a material adverse
effect on the Company.
The Company is currently in the process of identifying key customers,
vendors and other significant business partners (e.g. bankers) and obtaining
Year 2000 compliance statements. The Company anticipates completion of this
effort by the end of 1999; however, there can be no assurances that any such
efforts will be successful.
The Company has incurred to date no incremental material costs associated
with the Year 2000 issue. Based on current information, the Company does not
expect future costs to execute the remainder of its Year 2000 compliance plan to
be material to its financial condition or results of operations. However, there
can be no assurances that there will not be interruptions or other limitations
of financial and operating systems functionally or that the Company will not
incur significant costs to avoid such interruptions or limitations.
Costs incurred relating to Year 2000 issue will be expensed by the Company
during the period in which they are incurred. The Company's expectations about
future costs associated with the Year 2000 issue are subject to uncertainties
that could cause actual results to have a greater financial impact than
currently anticipated. Factors that could influence the amount and timing of
future costs include but are not limited to the success of the Company's
customers and suppliers in addressing the Year 2000 issue.
-14-
<PAGE> 17
STORAGE COMPUTER CORPORATION
1999 STOCK INCENTIVE PLAN
EFFECTIVE MAY 17, 1999
SUBJECT TO SHAREHOLDERS APPROVAL
1. PURPOSE OF PLAN
The 1999 Stock Incentive Plan (the "1999 Plan") is intended to promote
the long-term interests of the Company and it shareholders by providing
directors, consultants, officers and other employees of the Company with an
additional incentive arising from capital stock ownership to promote the
financial success of, and to provide future services to, the Company. Those
provisions of the 1999 Plan which make reference to Section 422 of the Code (as
defined below) shall apply only to ISOs (as defined below).
2. DEFINITIONS
Unless otherwise required by the context, the following terms when used
in the 1999 Plan shall have the meaning set forth in this Section 2:
(a) "Affiliate": Any "parent corporation" or "Subsidiary corporation"
of the Company, as such terms are defined in Sections 424(e) and (f),
respectively, of the Code.
(b) "Agreement": An option agreement evidencing an Award in such form
as adopted by the Committee pursuant to the 1999 Plan.
(c) "Award": The grant of an Option under the 1999 Plan.
(d) "Board of Directors" or "Board": The Board of Directors of the
Company.
(e) "Change in Control": A "Change in Control" occurs if the Company
(i) ceases operations; (ii) merges or consolidates with another entity
and is not the surviving entity; (iii) sells or otherwise transfers
substantially all of its operating assets; or (iv) if more than fifty
percent (50%) of the capital stock of the Company is transferred in a
single transaction or in a series of related transactions other than a
public offering of stock of the Company.
(f) "Code": The Internal Revenue Code of 1986, as amended from time to
time.
(g) "Committee": The Compensation Committee of the Board of Directors
or such other committee appointed by the Board of Directors which meets
the requirements set forth in Section 10(a) hereof.
(h) "Company": Storage Computer Corporation, a Delaware corporation.
(i) "Effective Date": The date on which the 1999 Plan shall become
effective as set forth in section 11 hereof.
(j) "Exchange Act": The Securities Exchange Act of 1934, together with
all regulations and rules issued thereunder.
(k) "Exercise Price": In the case of an Option, the price per Share at
which the Shares subject to such Option may be purchased upon exercise
of such Option.
(l) "Option Expiration Date" The final date that the right to buy
vested shares of an option
<PAGE> 18
award expires. Shares not purchased by this final date are forfeited
and cannot be purchased later.
(m) "Fair Market Value": As applied to a specific date, the closing
price, if any, of the Company's Common Stock on such date as reported
by the American Stock Exchange or such other exchange on which the
Company's Common Stock may then be traded, or, if none, the fair market
value shall be the closing price of the Company's Common Stock on the
nearest date before the grant. The Fair Market Value determined by the
Committee or the Board in good faith in such manner shall be final,
binding and conclusive on all parties.
(n) "ISO": An Option is intended to qualify as an "incentive stock
option", as defined in Section 422 of the Code or any statutory
provision that may replace such Section.
(o) ""NQSO": An Option not intended to be an ISO and designated to
Nonqualified Stock Option by the Committee.
(p) "Option": Any ISO or NQSO granted under the 1999 Plan.
(q) "Original Plan": The 1992 Stock Incentive Plan adopted by the Board
of Directors on September 1, 1992.
(r) "Participant": A non-employee director, officer, consultant or
other key employee of the Company who has been granted an Award under
the 1999 Plan.
(s) "1999 Plan": This Storage Computer Corporation 1999 Stock Incentive
Plan, as may be amended from time to time.
(t) "Reporting Person": Such persons as are required to file reports
under Section 16(a) of the Exchange Act.
(u) "SEC": The United States of Securities and Exchange Commission.
(v) "Shares": Shares of the Company's authorized but not issued or
reacquired $.001 par value Common Stock, or such other class or kind of
shares or other securities as may be applicable pursuant to the
provisions of Section 4(b) hereof.1
3. PARTICIPANT
The class of persons eligible to receive Awards under the 1999 Plan
shall be those officers, directors, consultants and other employees of the
Company as designated by the Committee from time to time.
4. SHARES SUBJECT TO PLAN
(a) Maximum Shares. Subject to adjustment by the operation of Section
4(b) hereof, the maximum number of Shares with respect to which Options may be
granted under the 1999 Plan is 1,000,000 shares. The Shares with respect to
which Options may be granted under the 1999 Plan may be either authorized and
unissued shares or issued shares heretofore or hereafter reacquired and held as
treasury shares. An award shall not be considered to have been made under the
1999 Plan with respect to an Option to the extent that it terminates without
being exercised, and new Awards may be granted under the 1999 Plan with respect
to the number of Shares as to which such termination has occurred.
(b) Adjustment of Shares and Price. In the event that the Shares are
changed into or exchanged for a different kind or number of Shares of stock or
securities of the Company as the result of any stock dividend, stock split,
combination of shares, exchange of shares, merger, consolidation,
reorganization, recapitalization or other change in capital structure, than the
number of Shares subject to
<PAGE> 19
this 1999 Plan and to Awards granted hereunder and the purchase or Exercise
Price for such Shares shall be equitably adjusted by the Committee to prevent
the dilution or enlargement of Awards, and any new stock or securities into
which the Shares are changed or for which they are exchanged shall be
substituted for the Shares subject to this 1999 Plan and to Awards granted
hereunder; PROVIDED, HOWEVER that fractional Shares may be deleted from any such
adjustment or substitution. No adjustments will be made in the event that the
Company sells new equity or convertible debt in public or private offerings
which dilutes both existing shareholders and option holders.
5. GENERAL TERMS AND CONDITIONS OF OPTIONS
(a) General Terms. The Committee shall have full and complete authority
and discretion and as otherwise expressly limited by the 1999 Plan, to grant
Options and to provide the terms and conditions (which need not be identical)
among Participants thereof. In particular, the Committee shall prescribe the
following terms and conditions with respect to any Options:
(i) the Exercise Price of any Option determined in
accordance with Section 5(b) hereof.
(ii) the number of Shares subject to and the expiration
date of any Option, PROVIDED, HOWEVER that no Option shall
have a term in excess of ten years from the date of grant of
the Option.
(iii) the manner, time and rate (cumulative or otherwise)
of exercise of such Option: PROVIDED that no Option shall be
exercisable earlier than one year from the date of grant.
(iv) the restrictions, if any to be placed upon such
Option or upon Shares which may be issued upon exercise of
such Option. The Committee may as a condition of granting any
Option require that a Participant agree not to exercise
thereafter one or more Options previously granted to such
Participant.
(v) provisions, if any, for automatic vesting of any
Option upon a "Change in Control" of the Company.
(b) Exercise Price. The exercise price of any Option shall be
determined by the Committee. With respect to an ISO, the Exercise Price of an
Optional shall not be less than 100% (or with respect to any participant owning
more than 10% of the combined voting power of all classes of the Company's or an
Affiliate's Stock, (110%) of the Fair Market Value per Share on the date of the
grant. If the Company engages in a merger or business combination with another
entity. Options may be issued under the 1999 Plan at a price lower than Fair
Market Value per share to employees of such other entity who hold employee
options to purchase securities of such entity and who become employees of the
Company or of a subsidiary of the Company, provided that the Exercise Price and
number of shares shall be determined by the Committee generally in accordance
with the principles set forth in Section 4(b) above. To the extent permitted by
the Code, the Committee may designate such options as ISO'S.
Notwithstanding the foregoing, in no event shall the Exercise Price of
an Option be less than the par value per Share.
6. EXERCISE OF OPTIONS
(a) General Exercise Rights. Except as provided in Section 6(c), an
Option granted under the 1999 Plan shall be exercisable during the lifetime of
the Participant to whom such Option was granted only by such Participant. No
such Option may be exercised unless at the time such Participant exercises such
Option, such Participant is an employee, director or consultant of, and has
continuously since the grant thereof been an employed, director or consultant of
the Company. A leave of absence by an employee at the request or with the
approval of the Company shall not be deemed an interruption or termination of
employment, so long as the period of such leave does not exceed 180 days, or, if
longer, so long as the Participant's right to re-employment with the Company is
guaranteed by contract,
<PAGE> 20
applicable law, a vote of the Board of Directors or the Company's corporate
policy in effect on the date such leave commences. An Option also shall contain
such conditions upon exercise (including, without limitation, conditions
limiting the time of exercise to specified periods) as may be required to
satisfy applicable regulatory requirements, including, without limitation, Rule
16b-3 (or any successor rule) promulgated by the SEC.
(b) Notice of Exercise. An Option may not be exercised with respect to
less than 100 Shares, unless the exercise relates to all Shares covered by the
Options at the date of exercise. An Option shall be exercised by delivery of
written notice to the Company. Such notice Shall state the election to exercise
the Option and the number of whole Shares in respect of which it is being
exercised, and shall be signed by the person or persons so exercising the
Option. In the case of an exercise of an Option such notice shall either: (a) be
accompanied by payment of the full Exercise Price and all applicable withholding
taxes, in which event the Company shall deliver any certificate(s) representing
Shares which the Participant is entitled to receive as a result of the exercise
as soon as practicable after the notice has been received; or (b) fix fix a date
(not less than 5 nor more than 15 business days from the date such notice has
been received by the Company) for the payment of the full Exercise Price and all
applicable withholding taxes, against delivery by the Company of any
certificate(s) representing Shares which the Participant is entitled to receive
as a result of the exercise. Payment of such Exercise Price and withholding
taxes shall be made as provided in Sections 6(d) and 9 hereof, respectively. In
the event the Option be exercised pursuant to Section 6(c)(i) hereof, by any
person or persons other than the Participant, such notice shall be accompanied
by appropriate proof of the right of such person or persons to exercise the
Option.
(c) Exercise After Termination of Employment. Subject to Section 6(a)
and except as otherwise determined by the Committee at the date of the grant of
the Option, upon termination of a Participant's employment with the Company,
such Participant (or in the case of death, the persons) to whom the Option is
transferred (by will or the laws of descent and distribution) may exercise such
Option during the following periods of time (but in no event after the normal
expiration date of such Option) to the extent that such Participant was entitled
to exercise such Options at the date of such termination:
(i) in the case of termination as a result of death,
disability or retirement of the Participant, the Option shall
remain exercisable for one year after the date of termination;
for this purpose, "disability" shall mean such physical or
mental condition affecting the Participant as determined by
the Committee in its sole discretion and "retirement" shall
mean voluntary retirement under a retirement plan or program
of the Company;
(ii) in the case of termination for cause or the
Participant's voluntary resignation, the Option shall
immediately terminate and shall no longer be exercisable; and
(iii) in the case of termination for any reason other than
those set forth in subparagraphs (i) and (ii) above, the
Option shall remain exercisable for three months after the
date of termination.
TO THE EXTENT THE OPTION IS NOT EXERCISED WITHIN A TIMELY MANNER AS SET FORTH
ABOVE, AND IN THE PROPER MANNER AS PRESCRIBED HEREIN, THE OPTION SHALL
AUTOMATICALLY TERMINATE AT THE END OF THE APPLICABLE PERIOD OF TIME.
Notwithstanding the foregoing provisions, failure to exercise an ISO within the
periods of time prescribed under Sections 421 and 422 of the Code shall cause an
ISO to cease to be treated as an "incentive stock option" for purposes of
Section 421 of the Code.
(d) Payment of Option Exercise Price. Upon the exercise of an Option,
payment of the Exercise Price shall be made either (I) in cash (by certified
check, bank draft or money order), (ii) with the consent of the Committee and
subject to Section 6(c) hereof, by delivering the Participant's duly executed
promissory note and related documents, (iii) with the consent of the Committee,
by delivering Shares already owned by the Participant valued at Fair Market
Value; provided that no shares received upon
<PAGE> 21
exercise of the Option thereafter may be exchanged to pay the Option price for
additional Shares within the following six months, or (iv) by a combination of
the foregoing forms of payment.
(e) Payment with Loan. The Committee may in its sole discretion assist
any Participant in the exercise of one or more Options granted to such
Participant under the 1999 Plan by authorizing the extension of a loan to such
Participant from the Company. Except as otherwise provided in this Section 6(e),
the terms of any loan (including the interest rate and terms of repayment) shall
be established by the Committee in its sole discretion. The maximum amount of
any loan shall not exceed 80% of the Exercise Price payable from the Shares
being purchased. Any such loan by the Company shall be with full recourse
against the Participant to whom such loan is granted, shall be secured in whole
or in part by the Shares so purchased, and shall bear interest at a rate not
less than the minimum interest rate required at the time of purchase of the
Shares in order to avoid having imputed interest or original issue discount
under Sections 483 or 1202 of the Code. In addition, any such loan by the
Company shall become immediately due and payable in full at the option of the
Company, upon termination of the Participant's employment with or service to the
Company for any reason whatsoever, or upon a sale of any shares acquired with
such loan to the extent of the cash and fair market value of any property
received by the Participants in such sale. The Committee may make arrangements
for the application of payroll deduction from compensation payable to the
Participant to amounts owing to the Company under any such loan. Until any loan
by the Company under this Section 6(e) is fully paid in cash, the Shares shall
be pledged to the Company as security for such loan and the Company shall retain
physical possession of the stock certificates evidencing the Shares so purchased
together with a duly executed stock power for such Shares. No loan shall be made
hereunder unless counsel for the Company shall be satisfied that the loan and
the issuance of Shares funded thereby, will be in compliance with all applicable
federal, state and local laws.
(f) Rights as a Shareholder. A Participant shall have no rights as a
shareholder with respect to any Shares issuable or exercise of any Option, until
the date of the issuance of a stock certificate to the Participant for such
Shares. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
for which the record date is prior to the date such stock certificate is issued,
except as provided in Section 4(b) hereof.
(g) Effect of Merger, Etc. In the event of a consolidation or merger or
sale of all or substantially all of the assets of the Company in which
outstanding shares of Common Stock are exchanged for securities, cash or other
property of any other corporation or business entity, or in the event of a
liquidation of the Company, the Board of Directors of the Company or the Board
of Directors of any Corporation assuming the obligations of the Company, may in
its discretion take any one or more of the following actions, as to outstanding
options: (i) provide that such options shall be assumed, or equivalent options
shall be substituted, by the acquiring or succeeding corporation (or an
affiliate thereof), provided that any such options substituted for ISO's shall
meet the requirements of Section 424 of the Code; (ii) upon written notice to
the optionees, provide that all unexercised options will terminate immediately
prior to the consummation of such transaction unless exercised by the optionee
within a specified period following the date for such notice; (iii) in the event
of a merger under the terms of which holders of the Common Stock of the Company
will receive upon consummation thereof, a cash payment for each share
surrendered in the merger (the "Merger Price"), make or provide for a cash
payment to the optionees equal to the difference between
(A) the Merger Price times the number of shares of Common Stock
subject to such outstanding options (to the extent then
exercisable at prices not in excess of the Merger Price) and
(B) the aggregate exercise price of all such outstanding options
in exchange for the termination of such options; and (iv) provide
that all or any outstanding options shall become exercisable in
full immediately prior to such event; PROVIDED that
notwithstanding anything to the contrary in this Section 6(g), any
action taken by the Board of Directors hereunder shall be in
compliance with Rule 16b-3 and the conditions thereof necessary to
maintain qualification of the 1999 Plan under Rule 16b-3. In the
case of any Option which by the
<PAGE> 22
terms of the grant thereof (or the agreement or instrument
governing such grant) or pursuant to a decision by the Board of
Directors under this Section 6(g) provides for such Option
becoming fully exercisable upon a Change In Control or otherwise
under this Section 6, such Option shall be deemed vested on the
day immediately prior to the day on which such Change in Control
occurs and Participants holding such Options shall be given prior
written notice of such Change in Control sufficient to permit them
to exercise such Options.
(h) Manner of Exercise. Subject to the conditions set forth in the
1999 Plan, the Participant may exercise the Option(s) with respect to
all or any part of the number of such shares then vested and
exercisable. The options evidenced by an Award, may be exercised
subject to the requirements herein set forth by:
(i) giving written notice to exercise the option with respect
to a specified number of full shares;
(ii) exercising as to not less than one hundred (100) shares
at any one time, unless the number of shares to be purchased
upon such exercise is the total number remaining under such
Option granted;
(iii) making full payment to the Company of the amount of such
Option Price for the number of shares with respect to which
the option is then exercised, in accordance with the terms and
conditions of Section 6 herein; and
(iv) executing an undertaking and such other documents as the
Company, in its sole discretion, shall deem necessary to
lawfully effectuate the transfer of shares, evidencing the
exercise of the option and/or to determine whether
registration is then required under the Securities Act of
1993, or any other laws then in effect.
(i) Exercise of Option and Termination. The right of exercise is
cumulative so that if the Option is not exercised to the maximum extent
permissible during any exercise period, it is exercisable, in whole or in part,
with respect to all shares not so purchased, at any time prior to the Expiration
Date, Last Exercise Date or earlier termination of any such Option. No Option
may be exercised at any time on or after the Expiration Date, for any reason
whatsoever. Subject to the provisions of Section 6 herein, to the extent that
any Option, in whole or in part, is not exercised in a timely manner, the Option
shall terminate and the shares shall automatically revert to the 1999 Plan.
7. SPECIAL PROVISIONS FOR ISOS
Any provision of the 1999 Plan to the contrary notwithstanding, the
following special provisions shall apply to all ISOs granted under the 1999
Plan:
(i) the Option must be expressly designated as an ISO by the
Committee and in an Award;
(ii) no ISO shall be granted more than ten years from the
effective date of the Original Plan and no ISO shall be
exercisable more than ten years from the date such ISO is
granted;
(iii) the Exercise Price of any ISO shall not be less than the
Fair Market Value per Share on the date such ISO is granted;
PROVIDED HOWEVER, that with respect to an ISO granted to any
individual who, at the time such ISO is granted, owns stock
possessing more than 10% of the total combined voting power of
all classes of stock of the Company or any Affiliate, the
Exercise Price of such ISO shall be at least 110% of the Fair
Market Value per Share at the date of grant;
<PAGE> 23
(iv) the aggregate Fair Market Value (determined as of the
time any ISO is granted) of any Company stock with respect to
which any ISOs granted to a Participant are exercisable for
the first time by such Participant during any calendar year
(under this 1999 Plan and all other stock option plans of the
Company and any predecessor) shall not exceed $100,000 as
required under Section 422 of the Code. (To the extent
$100,000 limit is exceeded, the $100,000 in Options, measured
as described above, granted earlier in time will be treated as
ISOs), and
(v) any other terms and conditions as may be required in order
that the ISO qualifies as an "incentive stock option" under
Section 422 of the Code or successor provision.
8. RESTRICTIONS ON TRANSFERS; GOVERNMENT REGULATIONS
(a) Awards not Transferable. No Option nor any interest of a
Participant under the 1999 Plan in any instrument evidencing any Option under
the 1999 Plan may be assigned, encumbered or transferred, except, in the event
of the death of a Participant, by will or the laws of descent and distribution
or, in the case of NQSOs, pursuant to a qualified domestic relations order as
defined by the Code or Title 1 of the Employee Retirement Income Security Act or
rules thereunder.
(b) Government Regulations. This 1999 Plan, the granting of Awards
under this 1999 Plan and the issuance or transfer of Shares (and/or payments of
money) pursuant thereto, are subject to all applicable Federal and state laws,
rules and regulations and to such approvals by any regulatory or governmental
agency (including without limitation "no action" positions of the Securities and
Exchange Commission) which may, in the opinion of counsel to the Company, be
necessary or advisable in connection therewith.
Without limiting the generality of the foregoing, no Awards may be
granted under this 1999 Plan, and no Shares shall be issued by the Company, nor
cash payments by the Company, pursuant to or in connection with any such Award,
unless and until, in each such case, all legal requirements applicable to the
issuance or payment, which, in the opinion of counsel to the Company, have been
complied with in all respects. In connection with any stock issuance or
transfer, the person acquiring the Shares shall, if requested by the Company,
give assurances satisfactory to counsel to the Company, in respect of such
matters as the Company may deem desirable to assure compliance with all
applicable legal requirements. The Company shall not be required to deliver any
Shares under the 1999 Plan prior to (I) the admission of such Shares to listing
or for quotation on any stock exchange, or automated quotation system on which
such Shares may then be listed or quoted, and (ii) the completion and
effectiveness of such registration or other qualification of such Shares under
state or federal law, rule or regulation, as the Committee shall determine to be
necessary or advisable.
9. TAX WITHHOLDING
The Company shall have the right to withhold from amounts due
Participants, or to collect from Participants directly, the amount which the
Company deems necessary to satisfy any taxes required by law to be withheld at
any time by reason or participation in the 1999 Plan, and the obligations of the
Company under the 1999 Plan shall be conditional on payment of such taxes. The
Participant may, prior to the due date of any taxes, pay such amounts to the
Company, in cash, or with the consent of the Committee, in Shares (which shall
be valued at their Fair Market Value on the date of payment); provided however,
that not notwithstanding the foregoing, in the case of a Reporting Person, no
election to use Shares for the payment of withholding taxes shall be effective
unless made in compliance with any applicable requirements of Rule 16b-3 under
the Exchange Act. There is no obligation under this 1999 Plan that any
Participant be advised of the existence of the tax or the amount required to be
withheld. Without limiting the generality of the foregoing, in any case where it
determines that a tax is or will be required to be withheld in connection with
the issuance or transfer of Shares under this 1999 Plan, the Company may,
pursuant to such rules as a Committee may establish, reduce the number of such
Shares so issued or transferred by such number of Shares as the Company may deem
appropriate, in its
<PAGE> 24
sole discretion, to accomplish such withholding, or make such other arrangements
as it deems satisfactory. Notwithstanding any other provisions of this 1999
Plan, the Committee may impose such conditions on the payment of any withholding
obligation as may be required to satisfy applicable regulatory requirements
including, without limitation, Rule 16b-3 (or any successor provision)
promulgated by the Securities and Exchange Commission.
The Company makes no representation or warranty to the Participants,
their successors and/or assigns, regarding the possible tax treatment or effect
to be given to the transaction and events contemplated by an Award and the 1999
Plan, including, but not limited to, registration of an Award, Option(s) and/or
transfers of stock certificates, and the Company hereby advises and directs the
Participants to seek their own individual counsel and advice concerning these
matters. The Participants agree that they will not rely upon the advice of any
person or persons associated with the Company, including, but not limited to;
possible adverse tax consequences of this transaction, Option(s) the 1999 Plan,
or the exercise of any Option(s); and will waive any claim, that the
Participants, or their successors and assigns, may have against the Company, and
will agree to hold harmless, and will indemnify the Company against any such
claim(s) and/or liability.
10. ADMINISTRATION OF THE PLAN
(a) The Committee. Except as otherwise provided by the Board, the 1999
Plan shall be administered by the Committee, which shall be comprised of two or
more members of the Board of Directors, each of whom shall be a "disinterested
person" as defined in Rule 16b-3 (or successor provision) promulgated by the
Securities and Exchange Commission. In the absence of specific designation by
the Board of Directors, the Committee shall consist of those members of the
Board of Directors who, from time to time, shall be "disinterested persons" as
so defined.
(b) Committee Action. A majority of the members of the Committee at the
time in office, shall constitute a quorum for the transaction of business and
any determination or action may be taken at the meeting of a majority vote or
may be taken without a meeting by a written resolution signed by all members of
the Committee. All decisions and determinations of the Committee shall be final,
conclusive and binding upon all Participants and upon all persons claiming any
rights under the 1999 Plan with respect to any Options. Members of the Board of
Directors and members of the Committee acting under the 1999 Plan. shall be
fully protected in relying in good faith upon the advice of counsel and shall
incur no liability except for willful misconduct in the performance of their
duties.
(c) Committee Authority. In amplification of the Committee's power and
duties, but not by way of limitation, the Committee shall have full authority
and power to:
(i) construe and interpret the provisions of the 1999 Plan and
make rules and regulations for the administration of the 1999
Plan not inconsistent with the 1999 Plan;
(ii) decide all questions of eligibility for 1999 Plan
participation and for the grant of Awards;
(iii) adopt forms of Awards and other documents consistent
with the 1999 Plan;
(iv) engage agents to perform legal, accounting and other such
professional services as it may deem proper for administering
the 1999 Plan; and
(v) take such other actions as may be reasonable, required or
appropriate to administer the 1999 Plan or to carry out the
Committee activities contemplated by other sections of this
1999 Plan.
(d) Indemnification. In addition to such other rights of
indemnification as they may have as directors or as members of the Committee,
the Board of Directors and the members of the Committee
<PAGE> 25
shall be indemnified by the Company against the reasonable expenses, including
court costs and reasonable attorney's fees actually incurred in connection with
the defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the 1999 Plan or any Award
granted hereunder, and against all amounts paid by them in settlement thereof,
or paid by them in satisfaction of a judgment in any such action, suit or
proceeding, except where such indemnification is expressly prohibited by
applicable law.
11. EFFECTIVE DATE
The effective date of the 1999 Plan shall be May 17, 1999 (the date it
was approved by the Shareholders vote). Nothing contained in this 1999 Plan
shall be deemed to limit or adversely amend or modify the terms of, or rights of
Participants under, Options granted UNDER THE ORIGINAL PLAN IN ANY manner which
derogates from or otherwise diminishes the terms of, or rights under, such
Options.
12. AMENDMENT AND TERMINATION
(a) The 1999 Plan.
(i) Amendment. The Board of Directors may amend the 1999 Plan
from time to time in its sole discretion; provided however,
that no such amendment shall, without the approval of the
shareholders of the Company in accordance with the laws of the
State of Delaware, Section 422 of the Code and Rule16b-3 under
the Exchange Act: (A) change the class of persons eligible to
receive Awards or otherwise materially modify the requirement
as to eligibility for participation in the 1999 Plan; (B)
increase the aggregate number of Shares with respect to which
Awards may be made under the 1999 Plan; (C) materially
increase the benefits accruing the Participants under the 1999
Plan; or (D) remove the administration of the 1999 Plan from
the Committee or render any member of the Committee eligible
to receive an Award under the 1999 Plan while serving thereon.
Any purported amendment in violation of these restrictions
shall be void and of no effect. Furthermore, no amendment
shall impair the rights of any Participant under any Award
theretofore made under the 1999 Plan, without the
Participant's consent.
(ii) Termination. The Board of Directors may suspend or
terminate the 1999 Plan at any time. Upon termination of the
1999 Plan, no additional Awards shall be granted under the
1999 Plan; PROVIDED HOWEVER, that the terms of the 1999 Plan
shall continue in full force and effect with respect to
outstanding and unexercised Options granted under the 1999
Plan and Shares issued under the 1999 Plan.
(b) Awards. Subject to the terms and conditions and the limitations of
the 1999 Plan, the Committee may, in the exercise of its sole discretion,
modify, extend or renew the terms of outstanding Awards granted under the 1999
Plan, or accept the surrender of outstanding Awards (to the extent not
theretofore exercised). Without limiting the generality of the foregoing, the
Committee may in its discretion at any time accelerate the time in which any
Option is exercisable, subject to compliance with the requirements of Rule 16b-3
(or successor provision) promulgated by the Securities and Exchange Commission.
Notwithstanding the foregoing however, no modifications of an Award shall,
without the consent of the Participant, impair any rights or obligations under
any Awards theretofore granted under the 1999 Plan.
13. MISCELLANEOUS
(a) Employment. Neither the establishment of the 1999 Plan nor any
amendments thereto, nor the granting of any Award under the 1999 Plan, shall be
construed as in any way modifying or affecting or evidencing any intention or
understanding with respect to, the terms of the employment of or service of any
Participant with, or the nomination of any Participant to stand for election as
a director, by the
<PAGE> 26
Company. No person shall have a right to be granted Awards or having been
selected as a Participant for one Award, to be so selected again.
(b) Multiple Awards. Subject to the terms and restrictions set forth in
the 1999 Plan, a Participant may hold more than one Award.
(c) Written Notice. As used herein, any notices required hereunder
shall be in writing and shall be given in the forms, if any, provided or
specified by the Committee. Written notice shall be effective upon actual
receipt by the person to whom such notice is to be given, PROVIDED HOWEVER, that
in the case of notices to Participants and their heirs, legatees, and legal
representatives, notice shall be effective upon delivery, if delivered
personally or three business days after mailing, registered first class postage
prepaid to the last known address to whom notice is given. Written notice shall
be given to the Committee and the Company at the following address, or such
other address as may be specified from time to time.
Storage Computer Corporation
11 Riverside Street
Nashua, New Hampshire 03062
Attn: Compensation Committee
(d) Applicable Law; Severability. The 1999 Plan shall be governed by
and construed in all respect in accordance with the laws of the State of
Delaware. If any provisions of the 1999 Plan shall be held by a court of
competent jurisdiction to be invalid or unenforceable, the remaining provisions
hereof shall continue to be fully effective.
(e) Compliance with SEC Regulations. It is the Company's intent that
the 1999 Plan comply in all respects with Rule 16b-3 under the Exchange Act and
any successor rule pursuant thereto. If any provision of this 1999 Plan is later
found not to be in compliance with Rule 16b-3, the provision shall be deemed
void. All Option grants to, and all exercises of Options by, Paticipants and
Reporting Persons under this 1999 Plan, shall be executed in accordance with the
requirements of Section 16 of the Exchange Act.
(f) Participant Warranty. The Participant represents and warrants to
the Company, its successors and assigns, the Committee and all other interested
persons, that he/she is of full age and that any stock purchased by him/her
hereunder, and his/her successors and/or assigns, under any Option(s), is to be,
and is being purchased for investment and not with a view to the distribution
thereof.
<PAGE> 27
STORAGE COMPUTER CORPORATION
PROXY FOR 1999 ANNUAL MEETING OF STOCKHOLDERS -- MAY 17, 1999
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned Stockholder of Storage Computer Corporation, a Delaware
corporation, revoking all prior proxies, hereby appoints Theodore J. Goodlander
and Thomas A. Wooters and each of them, proxies, with full power of
substitution, to vote all shares of Common Stock of Storage Computer Corporation
which the undersigned is entitled to vote at the 1999 Annual Meeting of
Stockholders of the Company to be held at Storage Computer Corporation, 11
Riverside Street, Nashua, New Hampshire on May 17, 1999 at 10:00 a.m., local
time, and at any adjournments, upon matters set forth in the Notice of Annual
Meeting of Stockholders and Proxy Statement dated May 17, 1999, a copy of which
has been received by the undersigned, and in their discretion upon any other
business that may properly come before the meeting or any adjournments.
Attendance of the undersigned at the meeting, or at any adjourned session, will
not revoke this proxy unless the undersigned will affirmatively indicate on the
proxy the intention of the undersigned to vote his or her shares in person.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN, WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND FOR THE
PROPOSALS IN ITEMS 2 AND 3.
<TABLE>
<S> <C> <C> <C> <C> <C>
/X/ Please mark votes as in this example.
1. To elect three (3) Directors to serve until the next Annual Meeting of Stockholders.
NOMINEES:
Theodore J. Goodlander Steven S. Chen Shigeho Inaoka
For Withheld For Withheld For Withheld
/ / / / / / / / / / / /
2. To ratify the selection of BDO Seidman, LLP as auditors for the year ending December 31, 1999.
For Against Abstain
/ / / / / /
3. To approve the 1999 Employee Stock Option Plan.
For Against Abstain
/ / / / / /
</TABLE>
MARK HERE FOR ADDRESS CHANGE AND NOTE AT RIGHT / /
THIS PROXY SHOULD BE DATED AND SIGNED BY THE STOCKHOLDER(S) EXACTLY AS HIS
OR HER NAME APPEARS AND RETURNED PROMPTLY IN THE ENCLOSED ENVELOPE. PERSONS
SIGNING IN A FIDUCIARY CAPACITY SHOULD INDICATE THAT THEY ARE SIGNING IN THAT
CAPACITY. IF SHARES ARE HELD BY JOINT TENANTS OR AS COMMUNITY PROPERTY, BOTH
SHOULD SIGN.
Signature:____________________________________ Date:______________________
Signature:____________________________________ Date:______________________
