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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 [ ]
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Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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 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:
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4) Date Filed:
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STORAGE COMPUTER CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AUGUST 7, 2000
You are hereby notified that the annual meeting of stockholders (the
"Annual Meeting") of Storage Computer Corporation (the "Company") will be held
on August 7, 2000 at 10:00 a.m. at the Nashua Marriott Hotel, 2200 Southwood
Drive, Nashua, New Hampshire (Route 3, Exit 8):
1. To elect four (4) 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 the fiscal year ending
December 31, 2000.
3. To approve the issuance of shares of the Company's Common Stock upon
conversion of the Company's Series A 8% Convertible Preferred Stock.
4. To approve an amendment to the Company's 1999 Stock Incentive Plan.
5. To consider and act upon such 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 July 3, 2000 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,
WILLIAM E. KELLY
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.
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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 Annual Report on Form
10-K/A are being mailed by Storage Computer Corporation (the "Company") to the
holders of record of the Company's outstanding shares of Common Stock, $.001 par
value ("Common Stock"), commencing on or about July 11, 2000. 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 August 7, 2000 (the "Annual
Meeting") and at any adjournment or adjournments thereof. The cost of
solicitation of proxies will be borne by the Company. 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 thereby 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 current
year, FOR approval of the issuance of shares of Common Stock upon conversion of
Series A Preferred Stock, FOR approval of an amendment to the 1999 Stock
Incentive 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 voting 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 July 3, 2000 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 or adjournments thereof. On July
3, 2000 there were issued and outstanding [11,989,434] shares of Common Stock.
The Company's 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 2000, approval of the issuance of Common Stock
upon conversion of Series A shares of Preferred Stock, approval of the amendment
to 1999 Stock Incentive Plan and the approval of any other business which may
properly be brought before the Annual Meeting or any adjournment thereof.
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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, but 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 four (4) directors to serve
until the next Annual Meeting of Stockholders or until their successors shall
have been duly elected and qualified. It is intended that the proxies solicited
by the Board of Directors will be voted in favor of the four (4) 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
such event, proxies solicited hereby 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 OF THE NOMINEES LISTED
BELOW.
The following are summaries of the background, business experience and
description of the principal occupations of the nominees.
THEODORE J. GOODLANDER, 56, founded the Company and has been Chairman of
the Board of Directors, Chief Executive Officer since the Company's inception.
Until May 8, 2000, Mr. Goodlander served as the Company's President. 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.
STEVEN S. CHEN, 54, has been a director of the Company since May 1996. Mr.
Chen has been the Chairman and Chief Executive Officer of Applitone.net. since
1998. During 1996 and 1997, Mr. Chen was the Executive Vice President and Chief
Technology Officer of Sequent Computer Systems, Inc. Prior to 1996, 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. Prior to that, Mr. Chen founded Supercomputing Systems, Inc., with
partial funding from IBM. He had previously been Senior Vice President of Cray
Research, with responsibility for development of the Cray XMP and YMP
Supercomputers.
EDWARD A. GARDNER, 53, has been the President, Chief Operating Officer and
a director of the Company since May 8, 2000. Mr. Gardner served as Chief
Executive Officer and a director of Hampshire Hospitality Holdings, Inc., a
company that owns and operates businesses in the hospitality and tourism
industry from 1992 to 2000. From 1983 to 1992, he held various positions,
including president, of a national industrial gas and welding supply company.
Previously, Mr. Gardner served as controller for Fidelity Management and
Research Company and was a certified public accountant while at the accounting
firm of Deloitte and Touche (formerly Haskins and Sells). He received his
business degree from Northeastern University and a masters degree from Suffolk
University.
ROGER E. GAULD, 53, has been a director of the Company since May 8, 2000.
Since 1995, Mr. Gauld has also been a director and Chief Financial Officer of
Hampshire Holdings, Inc. Mr. Gauld was previously co-founder and Chief Financial
Officer of several manufacturing and distribution firms. Earlier, he was founder
and President of The Phoenix Consulting Group, Inc., which specialized in
financial planning and controls, risk management, data processing, mergers and
acquisitions. In addition, he is a certified public accountant, served as an
audit manager with Ernst & Young (formerly Arthur Young) and was an officer in
the U.S. Army for four years.
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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 twice during 1999. 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
twice during 1999. Its current members are Theodore J. Goodlander, Steven S.
Chen, Edward A. Gardner and Roger E. Gauld. 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 twice during 1999. Its
current members are Roger E Gauld (currently chairman of the Audit Committee),
Edward A. Gardner, Theodore J. Goodlander and Steven S. Chen. Due to scheduling
conflicts, during 1999 Mr. Chen was able to attend less than 75% of the meetings
of the Board and the meetings of the committees of the Board on which he served.
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. Chen, Gardner, and Gauld, 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, except for the grant
to Mr. Gardner to purchase 30,000 shares as described above.
OTHER EXECUTIVE OFFICERS
Peter N. Hood, 59, has been the Company's Chief Financial Officer since May
16, 2000. Mr. Hood was previously owner and Chief Executive Officer of Phoenix
Custom Molders, Inc., a custom manufacturer of plastic parts from 1993 to 2000
and was co-founder and Vice President of Phoenix Distributors, Inc., a business
involved in consolidating independent distributors from 1985 to 1993. From 1965
to 1985, he was with the accounting firm of Ernst & Young, becoming a partner in
1976. He received his business degree from Northeastern University and is a
certified public accountant.
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
The following table sets forth certain information, as of July 3, 2000,
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) of the
Securities Exchange Act of 1934) 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 elsewhere herein, and (4) all directors and executive officers of the
Company as a group . In accordance with Rule 13d-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 thereof at any time within 60 days of July 3, 2000.
As used herein "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 such person.
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<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED
----------------------
DIRECTORS, OFFICERS AND 5% STOCKHOLDERS NUMBER PERCENT
--------------------------------------- ------ -------
<S> <C> <C>
Theodore J. Goodlander
c/o Storage Computer Corporation 4,002,000(1) 33.36%
11 Riverside Street
Nashua, New Hampshire 03062
Theodore Jay Goodlander II Trust 822,500 6.86%
Paige Boer, Trustee
c/o Storage Computer Corporation
11 Riverside Street
Nashua, New Hampshire 03062
Jeanne McCready, Trustee 2,467,500(2) 20.58%
c/o Storage Computer Corporation
11 Riverside Street
Nashua, New Hampshire 03062
Steven S. Chen 30,000(3) *
c/o Storage Computer Corporation
11 Riverside Street
Nashua, New Hampshire 03062
Edward A. Gardner 230,000(4) 1.92%
c/o Storage Computer Corporation
11 Riverside Street
Nashua, New Hampshire 03062
Peter N. Hood 0(5) *
c/o Storage Computer Corporation
11 Riverside Street
Nashua, New Hampshire 03062
Roger E. Gauld 0(6) *
c/o Storage Computer Corporation
11 Riverside Street
Nashua, New Hampshire 03062
All directors and executive officers as a group(6) 4,262,000(7) 35.53%
</TABLE>
----------
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* less than 1%.
(1) Does not include 3,290,000 shares of Common Stock held by the Goodlander
children's trusts established for the exclusive benefit of Mr. Goodlander's
children, and as to which Mr. Goodlander exercises no voting or dispositive
control and disclaims beneficial ownership.
(2) Jeanne McCready is the Trustee of three separate trusts established
for each of the following of Mr. Goodlander's minor children: Christine
Marian Goodlander, Margaret Vivian Goodlander and John Samuel
Goodlander.
(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 230,000 options pursuant to the Company's Amended and Restated
Stock Incentive Plan.
(5) Excludes 30,000 options pursuant to the Company's Amended and Restated
Stock Incentive Plan, which are not currently exercisable.
(6) Excludes 30,000 options pursuant to the Company's Amended and Restated
Stock Incentive Plan 1994, which are not currently exercisable.
(7) See footnotes (1) and (2)-(6) above.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
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.
COMPARISON OF FIVE YEAR CUMULATIVE RETURN STOCK PERFORMANCE GRAPH
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG STORAGE COMPUTER CORP., THE S&P 500 INDEX
AND A PEER GROUP
[LINE GRAPH]
<TABLE>
<CAPTION>
Storage Computer Corp. Peer Group S&P 500
<S> <C> <C> <C>
12/94 100 100 100
12/95 255 210 140
12/96 375 160 160
12/97 175 240 240
12/98 100 100 290
12/99 145 405 350
</TABLE>
* $100 INVESTED ON 12/31/94 IN STOCK OR INDEX
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
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, Ciprico, Dot Hill Systems and MTI Tech. These companies are
viewed as similar in size to the Company and represent its competitors in
certain geographic areas and markets.
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
1999, 1998, and 1997, respectively, by its Chief Executive Officer and each of
the Company's other executive officers whose total salary and bonus exceeded
$100,000 during such year (collectively, the "Named Executive Officers"):
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<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- ----------------------
AWARDS
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND FISCAL SALARY BONUS COMPENSATION STOCK OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR(1) $ $ ($)(2) (#) ($)(2)
------------------ ------- ------ ----- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Theodore J. Goodlander 1999 $ 93,750 -- -- -- --
President and Chief 1998 $150,000 -- -- -- --
Executive Officer 1997 $150,000 -- -- -- --
Edward A. Gardner, 1999 $ 0 230,000(3)
President and Chief 1998 $ 0
Operating Officer 1997 $ 0
(as of May 8, 2000)
Peter N. Hood 1999 $ 0 30,000(4)
Chief Financial Officer 1998 $ 0
(as of May 8, 2000) 1997 $ 0
James C. Louney 1999 $ 3,750 -- -- -- --
Chief Financial Officer 1998 $ 90,000 -- -- -- --
and Treasurer 1997 $ 60,007(5) -- -- 80,000(5) --
Keith C. Perry 1999 $125,000 --
Senior Vice President Sales 1998 $ 50,000(6) 75,000(6)
And Worldwide Marketing 1997 $ 0 --
James P. Nolan 1999 $ 0 -- -- 0 --
Senior Vice President 1998 $ 49,701 -- -- -- --
Research and Development 1997 $ 46,763(7) 75,000(7)
</TABLE>
----------
(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 prerequisites and other personal benefits
has been omitted because such prerequisites 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, 1999.
(3) As of May 8, 2000, Mr. Gardner was granted options to purchase 230,000
shares of the Company's Common Stock at $6.625 per share.
(4) As of May 8, 2000, Mr. Hood was granted options to purchase 30,000 shares
of the Company's Common Stock at $6.625 per share.
(5) Mr. Louney joined the Company on May 1, 1997, amount shown reflects
compensation for partial year. Mr. Louney resigned for personal reasons on
January 12, 1999 and amounts shown reflect compensation for the partial
year in 1999 and includes 75,000 options at $5.00 per share.
(6) Mr. Perry joined the Company in September 1998 and resigned in October
1999. The amounts shown reflects compensation for the partial years 1998
and 1999.
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(7) Mr. Nolan joined the Company in September 1997 and resigned in April 1998.
The amount shown reflect compensation for the partial years 1997 and 1998.
The following table sets forth certain information concerning exercisable
and unexercisable stock options held by the Named Executive Officers as of
December 31, 1999:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
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. 0 0 0 0
Goodlander
Keith Perry(3) 0 0 0 0
</TABLE>
----------
(1) No options were exercised during the year ended December 31, 1999 by the
Named Executive Officers.
(2) Based on the difference between closing price of the underlying shares of
Common Stock on December 31, 1999 as reported by the American Stock
Exchange ($6.25) and the option exercise price.
(3) Mr. Perry resigned from the Company in October 1999, did not exercise any
options and did not retain any unexercised options.
REPORT OF THE COMPENSATION COMMITTEE
During the fiscal year ended December 31, 1999, the Compensation Committee
of the Board of Directors was responsible for establishing and administering the
compensation policies that govern annual salary, bonuses, and stock-based
incentives (currently stock options) for directors and officers.
OVERVIEW
The Company has historically established levels of executive compensation
that provide for a base salary intended to allow the Company to hire and retain
qualified management. From time to time the Company has also granted stock
options to executives and key employees to keep the management focused on the
stockholders' interests. The Compensation Committee believes that the Company's
past and present executive compensation practices provide an overall level of
compensation that is competitive with companies of similar size, complexity and
financial performance and that its executive compensation practices have allowed
it to retain key personnel whose contribution has maintained and increased the
Company's profitability.
The Compensation Committee determines the compensation of the executive
officers of the Company and sets policies for and reviews the compensation
awarded to the other officers of the Company. This is designed to ensure
consistency throughout the officer compensation programs. In reviewing the
individual performances of the executive officers (other than the Chief
Executive Officer and President) the Compensation Committee takes into account
the views of the Chief Executive Officer and the President. In fiscal 1999, the
Compensation Committee determined the base salary for executive officers, other
than for the Chief Executive Officer and the President, based largely on
recommendations by the Company's Chief Executive Officer and President.
The Compensation Committee expects to review annually the annual and
long-term compensation of all the Company's executives and employees to assure
that all of the Company's executives and employees continue to be properly
motivated to serve the interests of the Company's stockholders.
EXECUTIVE OFFICER COMPENSATION
BASE SALARY. Base salary is generally set within the ranges of salaries of
executive officers with comparable qualifications, experience and
responsibilities at other companies of similar size, complexity and
profitability taking into account the position involved and the level of the
executive's experience. In addition, consideration is given to other factors,
including an officer's contribution to the Company as a whole.
ANNUAL BONUS COMPENSATION. Over the past five years, the Company has generally
not awarded cash bonuses to its executive officers.
LONG TERM INCENTIVES. Currently, stock options are the Company's primary
long-term incentive vehicle. Stock option awards have been made from time to
time to persons who currently serve as middle and upper level managers,
including the Chief Executive Officer and other executive officers named in the
Summary Compensation Table. The size of awards has historically been based on
position, responsibilities, and individual performance. The compensation
Committee believes that the long-term incentives awarded by the Company in
fiscal 1995, 1996 and 1997 were generally below the levels found at the
comparable companies. In fiscal 1998 and 1999, the Company made awards to
middle and upper level managers in an effort to improve this aspect of the
Company's compensation program and will continue to monitor this aspect of
compensation.
The Compensation Committee is aware that the Company's grants of stock
options are less frequent and smaller in size than the grants of many comparable
companies, although the Board believes that the overall mix of compensation
components has been adequate. The Compensation Committee believes that this
aspect of compensation must receive more emphasis in the future to assure that
all of the Company's key employees continue to focus on the profitability of the
Company and, thus, the interests of the Company's stockholders. Accordingly, the
Compensation Committee has recommended to the Board of Directors the
authorization of additional stock options for employees.
CHIEF EXECUTIVE OFFICER COMPENSATION. In determining the compensation of the
Company's Chief Executive Officer, Mr. Goodlander, due to budgetary constraints
the Compensation Committee decreased his salary by $56,250 during fiscal 1999.
The Compensation Committee
Theodore J. Goodlander
Steven S. Chen
Edward A. Gardner
Roger A. Gauld
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Kristiania Corp.
The Company 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. The Company paid annual
rentals of $195,600, $200,400 and $224,800 in 1997, 1998 and 1999, respectively.
Related Party Debt
Since the inception of the Company, Mr. Goodlander has made cash loans to
the Company. The aggregate amount owing to Mr. Goodlander, at the end of fiscal
years 1997, 1998 and 1999 was $710,000, $710,000 and $810,000, respectively. The
debt is unsecured, and $710,000 bears interest at prime plus 1% and $100,000
bears interest a 6%. This debt is subordinated to the bank demand line of
credit.
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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, 2000, subject to
ratification of such appointment by the stockholders. BDO Seidman, LLP was the
Company's auditor for the years ended December 31, 1998 and 1999.
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 PROPOSAL NO. 2 TO
RATIFY THE CHOICE OF BDO SEIDMAN, LLP, AS THE COMPANY'S AUDITORS FOR THE YEAR
ENDING DECEMBER 31, 2000.
PROPOSAL NO. 3 - AUTHORIZATION OF ISSUANCE OF COMMON STOCK UPON CONVERSION
OF SERIES A 8% CONVERTIBLE PREFERRED STOCK
On April 19, 2000, pursuant to authority granted in the Company's Restated
Certificate of Incorporation, the Company filed with the Delaware Secretary of
State a Certificate of Designation establishing a series of preferred stock
designated as Series A 8% Convertible Preferred (the "Preferred Stock")
consisting of 90,000 shares, with a stated value of $100 per share. In April and
May of 1999, the Company issued 60,000 shares of the Preferred Stock, together
with Warrants to purchase an aggregate of 264,000 shares of Common Stock at an
exercise price of $8.6625 per share, in conjunction with certain investor
financings, pursuant to which the Company received $6,000,000. The proceeds from
the sale of Preferred Stock were used by the Company to reduce the amount of the
Company's bank debt and to provide working capital for operations. Among the
investors participating in the financings was Theodore J. Goodlander, the
Chairman of the Company's Board of Directors and the CEO of the Company.
The Preferred Stock is convertible into shares of Common Stock beginning on
August 17, 2000. The price at which a share of Preferred Stock may be converted
into Common Stock varies depending on when the holder of such share elects to
convert it. The Preferred Stock may be converted, either in whole or in part,
into Common Stock at an initial conversion price per share of Common Stock
(subject to certain adjustments) equal to the lesser of (i) 110% of the market
price on April 19, 2000 ($8.6625) or (ii) 82.5% of the market price at the time
of conversion. The conversion price for Preferred Stock remaining unconverted
will be reduced in October 2000 to 78.5% of the market price and will be reduced
again in January 2001 to 75% of the market price and in April 2001 to 65% of the
market price.
Dividends on the Preferred Stock accrue at the rate of 8% per annum and are
payable semi-annually. At the option of the Company, dividends may be paid
either in cash or through the issuance of shares of Common Stock, valued at the
conversion price for Preferred Stock then in effect. Each share of Preferred
Stock has a liquidation preference equal to the sum of: (i) the stated value,
plus (ii) an amount equal to 30% of the stated value, plus (iii) the aggregate
of all accrued and unpaid dividends on the Preferred Stock. The Preferred Stock
has no voting rights, except as provided under Delaware General Corporation Law
and in the event Company desires to alter the rights of or increase the number
of shares of Preferred Stock, in which event the approval of the holders of at
least 90% of the then outstanding shares of Preferred Stock shall be required.
The terms of the Preferred Stock provide that, to the extent shareholder
approval of the issuance of Common Stock is required by the Rules of the
American Stock Exchange, the Company may not issue shares of Common Stock upon
conversion of Preferred Stock if the number of such shares (when added to the
number of shares of Common Stock previously issued by the Company upon
conversion of other shares of Preferred Stock, in payment of dividends on the
Preferred Stock and upon exercise of the Warrants) would equal or exceed 20% of
the number of shares of Common Stock issued and outstanding on April 19, 2000
or, with respect to shares issuable to officers, directors or principal
shareholders of the Company, 5% of the number of shares of Common Stock issued
and outstanding on April 19, 2000 (in either case, the "Maximum Issuable
Amount"), unless such shareholder approval has been obtained. If the issuance of
Common Stock upon conversion of the Preferred Stock has not been approved by the
shareholders of the Company at the time when a holder of Preferred Stock
exercises conversion rights, the Company will issue shares of Common Stock up to
the Maximum Issuable Amount and will be required to redeem any excess shares of
Preferred Stock at a price of $125 per share (plus all accrued and unpaid
dividends thereon).
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SHAREHOLDER APPROVAL REQUIRED UNDER THE RULES OF AMERICAN STOCK EXCHANGE
Under Section 713 of its Company Guide, the American Stock Exchange
requires shareholder approval, as a condition to the approval of applications to
list additional shares of an Exchange-traded security in connection with a
transaction involving the sale or issuance of securities convertible into common
stock equal to 20% or more of the presently outstanding stock for less than the
greater of book value or market value of the stock. In addition, under Section
711 of its Company Guide, the American Stock Exchange requires shareholder
approval, as a condition to the approval of applications to list additional
shares of an Exchange-traded security in connection with any arrangement under
which controlling shareholders, officers, directors or key employees of a
company may acquire shares of common stock equal to 5% or more of the presently
outstanding stock at a price below market price of the stock.
If the conversion price for the Preferred Stock were to drop to less than
$4.68 per share (and assuming that all dividends on the Preferred Stock were
paid in shares of Common Stock valued at such price), the conversion of all of
the outstanding Preferred Stock would, but for the Maximum Issuable Amount
limitation, require the Company to issue more than 2,385,951 shares of Common
Stock (which represents 20% of the total number of shares of Common Stock issued
and outstanding on April 19, 2000). In order to permit the Company to issue
shares of Common Stock upon conversion of Preferred Stock in excess of the
Maximum Issuable Amount and to list such shares for trading on the American
Stock Exchange, such issuance must be approved by the shareholders. Furthermore,
since the issuance of Common Stock to Theodore J. Goodlander, the Company's
Chairman and CEO, upon conversion of the 10,000 shares of Preferred Stock held
by him would constitute an issuance subject to the limitations of Section 711 of
the Company Guide, the issuance of more than 596,488 shares of Common Stock
(which represents 5% of the total number of shares of Common Stock issued and
outstanding on April 19, 2000) to Mr. Goodlander must be approved by the
shareholders. If shareholder approval is not obtained, the Company will be
obligated to redeem any Preferred Stock whose conversion would require the
issuance of Common Stock in excess of the Maximum Issuable Amount.
POTENTIAL DILUTIVE IMPACT
The conversion of the Preferred Stock could have a dilutive impact on the
percentage of ownership of the current holders of the Common Stock. Assuming
Proposal No. 3 is approved, the shares of Common Stock issuable upon conversion
of the Preferred Stock could represent greater than 20% the total number of
outstanding shares of Common Stock. Because holders of Preferred Stock will have
the opportunity to convert the Preferred Stock into Common Stock at less than
market rates each conversion will result in a dilution of the ownership
interests of the current holders of Common Stock. If the conversion price were
to be reduced to $2.00 per share as a result of declines in the market value of
the Common Stock (and assuming conversion of all 90,000 shares of authorized
Preferred Stock at that price), the holders of Preferred Stock would receive
4,500,000 shares of Common Stock (representing approximately 28% of the number
of shares of Common Stock issued and outstanding following such conversion);
such number of shares of Common Stock could be further increased (resulting in
greater dilution of the current holders of Common Stock) upon exercise of
Warrants associated with the Preferred Stock or as a result of issuance of
Common Stock in payment of dividends on Preferred Stock.
RIGHT OF DISSENTING SHAREHOLDERS
Under the Delaware General Corporate Law, stockholders of the Company are
not entitled to any rights of appraisal or dissenters' rights in connection with
the adoption of Proposal No. 3--Authorization of Issuance of Preferred Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL NO. 3
TO AUTHORIZE THE ISSUANCE OF COMMON STOCK UPON CONVERSION OF PREFERRED STOCK.
PROPOSAL NO. 4 - AMENDMENT TO THE 1999 INCENTIVE STOCK PLAN
The Board of Directors proposes to amend Section 4(a) of the Company's 1999
Incentive Stock Plan ("Original 1999 Plan") to increase the maximum number of
shares of Common Stock with respect to which options may be granted under the
Original 1999 Plan from 1,000,000 to 2,000,000. (The Original 1999 Plan, as
amended, is hereafter referred to as the "1999 Plan".)
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In all other respects, the 1999 Plan is unchanged from the prior version.
Accordingly, the Board of Directors proposes that the first sentence of Section
4(a) of the 1999 Plan be amended to read as follows: 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 2,000,000 shares.
The 1999 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 the financial success of, and to provide future services
to, the Company. The 1999 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:
Construe and interpret provisions of the 1999 Plan and make rules and
regulations for the 1999 Plan not inconsistent with the 1999 Plan;
Decide all questions of eligibility for 1999 Plan participation and for the
grant of awards;
Adopt forms of awards and other documents consistent with the 1999 Plan;
Engage agents to perform legal, accounting, and other such professional
services as it may deem proper for administering the 1999 Plan; and
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 the 1999 Plan.
The 1999 Plan will be available to all employees, officers, and directors
of the Company. In accordance with the 1999 Plan, the Committee shall grant
options to purchase shares of Common Stock at an exercise price per share that
shall be not less than 100% of the fair market value per share of the Common
Stock on the date of the grant. The number of options granted 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 hold 28%
Federal Income Tax, 6.2% Social Security Tax, 1.45% Medicate Tax, and any
applicable State Income Tax from the employee's gain on the sale.
Any options granted under the 1999 Plan will expire no later than ten years
from the date of the grant. The Company receives no additional consideration for
the granting of options under the 1999 Plan. As of June 26, 2000, each share of
Common Stock had a closing price of $7.125, so that the 2,000,0000 shares of
Common Stock underlying the 1999 Plan had an aggregate market value of
$14,250,000.
The approval of the Company's shareholders to increase the number of shares
of Common Stock with respect to which options may be granted under the 1999 Plan
is required pursuant to Section 422 of the Internal Revenue Code and Rule 16b-3
of the Exchange Act.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL NO. 4
TO AMEND THE 1999 INCENTIVE STOCK PLAN
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Any stockholder proposal intended to be presented at the Company's 2001
annual meeting of stockholders must be received at the executive offices of the
Company not later than January 1, 2001 in order to be considered for inclusion
in the Company's proxy statement and form of proxy for that meeting.
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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
such other business as may properly be brought before the Annual Meeting, in
their best judgment.
APPENDIX TO PROXY STATEMENT
---------------------------
STORAGE COMPUTER CORPORATION 1999 STOCK INCENTIVE PLAN
EFFECTIVE MAY 17, 1999
1. PURPOSE OF PLAN
The 1999 Stock Incentive Plan (the "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 the financial success
of, and to provide future services to, the Company. Those provisions of the 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 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 Plan.
(c) "Award": The grant of an Option under the 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.
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(h) "Company": Storage Computer Corporation, a Delaware corporation.
(i) "Effective Date": The date on which the 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) "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.
(m) "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.
(n) ""NQSO": An Option not intended to be an ISO and designated to
Nonqualified Stock Option by the Committee.
(o) "Option": Any ISO or NQSO granted under the Plan.
(p) "Participant": A non-employee, director, officer, consultant or other
key employee of the Company who has been granted an Award under the Plan.
(q) "Plan": This Storage Computer Corporation 1999 Stock Incentive Plan
adopted by the Board of Directors on May 17, 1999, as the same may be amended
from time to time.
(r) "Reporting Person": Such persons as are required to file reports under
Section 16(a) of the Exchange Act.
(s) "SEC": Securities and Exchange Commission.
(t) "Shares": Shares of the Company's authorized but unissued 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.
3. PARTICIPANT
The class of persons eligible to receive Awards under the 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 aggregate maximum number of Shares with respect to which Options may
be granted under the Plan is 1,000,000 shares. The Shares with
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<PAGE> 16
respect to which Options may be granted under the 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
Plan with respect to an Option to the extent that it terminates without being
exercised, and new Awards may be granted under the 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 this 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 Plan and to Awards granted
hereunder; provided, however that fractional Shares may be deleted from any such
adjustment or substitution.
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 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 Plant 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.
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6. EXERCISE OF OPTIONS
(a) General Exercise Rights. An Option granted under the Plan shall be
exercisable during the lifetime of the Participant to whom such Option was
granted only by such Participant and, except as provided in Section 6(c), 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 employee, 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, 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 the 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 receive as a result of the exercise as
soon as practicable after the notice has been received; or (b) 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, policy 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.
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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 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
in the exercise of one or more Options granted to such Participant under the
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
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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 of 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 Plan under
Rule 16b-3. In the case of any Option which by the 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 Plan,
the Participant may exercise the Option(s) with respect to all or any part of
the number of such shares then 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(d) 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 Plan.
7. SPECIAL PROVISIONS FOR ISOs
Any provision of the Plan to the contrary notwithstanding, the following
special provisions shall apply to all ISOs granted under the Plan:
(i) the Option must be expressly designated as an ISO by the Committee
and in an Award;
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(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;
(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 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 Plan in any instrument evidencing any Option under the 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 Plan, the granting of Awards under this
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 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
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 Plan, and the obligations of the Company under
the Plan shall be conditional on payment
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<PAGE> 21
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 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 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 sole discretion, to accomplish such withholding, or make
such other arrangements as it deems satisfactory. Notwithstanding any other
provisions of this 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 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 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 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,
conlcusive and binding upon all Participants and upon all persons claiming any
rights under the Plan with respect to any Options. Members of the Board of
Directors and members of the Committee acting under the 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 Plan and make rules
and regulations for the administration of the Plan not inconsistent with the
Plan;
(ii) decide all questions of eligibility for Plan participation and
for the grant of Awards;
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(iii) adopt forms of Awards and other documents consistent with the
Plan;
(iv) engage agents to perform legal, accounting and other such
professional services as it may deem proper for administering the Plan; and
(v) 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 this Plan.
(d) Indemnification. In addition to such other rights of indemnifications
as they may have as directors or as members of the Committee, the Board of
Directors and the members of the Committee 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 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 Plan shall be May 17, 1999 (the date it was
approved by the Board of Directors). Nothing contained in this Plan shall be
deemed to limit or adversely amend or modify the terms of, or rights of
Participants under, Options granted prior to the Effective Date in any manner
which derogates from or otherwise diminishes the terms of, or rights under, such
Options.
12. AMENDMENT AND TERMINATION
(a) The Plan. (i) Amendment. The Board of Directors may amend the 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 Rule 16b-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 Plan; (B) increase the aggregate number of Shares with
respect to which Awards may be made under the Plan; (C) materially increase the
benefits accruing the Participants under the Plan; or (D) remove the
administration of the Plan from the Committee or render any member of the
Committee eligible to receive an Award under the 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 Plan, without the Participant's
consent.
(ii) Termination. The Board of Directors may suspend or terminate the
Plan at any time. Upon termination of the Plan, no additional Awards shall be
granted under the Plan; provided however, that the terms of the Plan shall
continue in full force and effect with respect to outstanding and unexercised
Options granted under the Plan and Shares issued under the Plan.
(b) Awards. Subject to the terms and conditions and the limitations of the
Plan, the Committee may, in the exercise of its sole discretion, modify, extend
or renew the terms of outstanding Awards granted under the 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
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<PAGE> 23
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 Plan.
13. MISCELLANEOUS
(a) Employment. Neither the establishment of the Plan nor any amendments
thereto, nor the granting of any Award under the 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
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
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 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 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
Plan comply in all respects with Rule 16b-3 under the Exchange Act and any
successor rule pursuant thereto. If any provision of this 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, Participants and Reporting
Persons under this 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.
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DOCUMENTS INCORPORATED BY REFERENCE
The following information is incorporated by referenced to the Company's Annual
Report on Form 10-K/A. Copies of the Annual Report are being sent herewith.
Item 13 (a)
(1) Reference is made to Item 14 of the Company's Form 10-K/A filed with the SEC
on June 2, 2000, included herewith and incorporated herein ("Form 10-K/A").
(2) Reference is made to Item 8 of Form 10-K/A.
(3) Reference is made to Item 7 of Form 10-K/A.
(5) Reference is made to Item 7A of Form 10-K/A.
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STORAGE COMPUTER CORPORATION
PROXY FOR 2000 ANNUAL MEETING OF STOCKHOLDERS--AUGUST 7, 2000
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 William E. Kelly and each of then, 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 2000 Annual Meeting of Stockholders of
the Company to be held at the Nashua Marriott Hotel, 2200 Southwood Drive,
Nashua, New Hampshire on August 7, 2000 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 [ ], 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 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 1, 2, 3 AND 4.
/x/ PLEASE MARK VOTES AS IN THIS EXAMPLE.
1. TO ELECT FOUR (4) DIRECTORS TO SERVE UNTIL THE NEXT ANNUAL MEETING OF
STOCKHOLDERS.
NOMINEES:
<TABLE>
<CAPTION>
THEODORE J. GOODLANDER STEVEN S. CHEN EDWARD A. GARDNER ROGER E. GAULD
<S> <C> <C> <C>
FOR WITHHELD FOR WITHHELD FOR WITHHELD FOR WITHHELD
/ / / / / / / / / / / / / / / /
</TABLE>
2. TO RATIFY THE SELECTION OF BDO SEIDMAN, LLP AS AUDITORS FOR THE YEAR
ENDING DECEMBER 31, 2000.
FOR AGAINST ABSTAIN
/ / / / / /
3. TO APPROVE THE ISSUANCE OF SHARES OF THE COMPANY'S COMMON STOCK UPON
CONVERSION OF THE COMPANY'S SERIES A 8% CONVERTIBLE PREFERRED STOCK.
FOR AGAINST ABSTAIN
/ / / / / /
4. TO APPROVE THE AMENDMENT TO THE 1999 STOCK INCENTIVE PLAN.
FOR AGAINST ABSTAIN
/ / / / / /
MARK HERE FOR ADDRESS CHANGE AND NOTE AT RIGHT / /
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THIS PROXY SHOULD BE DATED AND SIGNED BY THE SHAREHOLDER(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:________________
26
