def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
|
|
|
Filed by the Registrant
þ |
|
Filed by a Party other than the Registrant o |
|
|
Check the appropriate box: |
|
|
|
o Preliminary Proxy Statement |
|
o
Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)) |
|
þ Definitive Proxy Statement |
|
o Definitive Additional Materials |
|
o
Soliciting Material Pursuant to §240.14a-12 |
Dot Hill Systems Corp.
(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):
|
|
|
þ No fee required. |
|
o
Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11. |
|
|
|
1) Title of each class of securities to which transaction applies: |
|
|
|
2) Aggregate number of securities to which transaction applies: |
|
|
|
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): |
|
|
|
4) Proposed maximum aggregate value of transaction: |
|
|
|
o Fee paid previously with preliminary materials. |
|
|
|
o 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.: |
|
|
SEC 1913 (11-01) |
Persons who are to respond to the collection of information
contained in this form are not required to respond unless the form displays a currently valid
OMB control number. |
DOT HILL
SYSTEMS CORP.
2200 Faraday Avenue,
Suite 100
Carlsbad, California 92008
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 8,
2006
Dear Stockholder:
You are cordially invited to attend the 2006 Annual Meeting of
Stockholders of Dot Hill Systems Corp., a Delaware corporation.
The meeting will be held on May 8, 2006 at 8:30 a.m.
local time at our headquarters located at 2200 Faraday Avenue,
Suite 100, Carlsbad, California 92008, for the following
purposes:
1. To elect one director to hold office until the 2009
Annual Meeting of Stockholders.
2. To approve an amendment to our 2000 Non-Employee
Directors Stock Option Plan to, among other things,
increase the aggregate number of shares of our common stock
authorized for issuance under the plan by 500,000.
3. To ratify the selection by the Audit Committee of our
Board of Directors of Deloitte & Touche LLP,
independent registered public accounting firm, as our
independent auditors for the fiscal year ending
December 31, 2006.
4. To conduct any other business properly brought before
the meeting.
These items of business are more fully described in the proxy
statement accompanying this notice.
The record date for the annual meeting is March 23, 2006.
Only stockholders of record at the close of business on that
date may vote at the meeting or any adjournment or postponement
thereof.
By Order of the Board of Directors
Dana W. Kammersgard
President and Chief Executive Officer
Carlsbad, California
April 11, 2006
Our 2005 Annual Report, which includes financial statements,
is being mailed with the proxy statement accompanying this
notice. Kindly notify American Stock Transfer & Trust
Company, 59 Maiden Lane, New York, New York 10038, telephone
(877) 777-0800,
if you did not receive a report, and a copy will be sent to
you.
You are cordially invited to attend the meeting in person.
Whether or not you expect to attend the meeting, please
complete, date, sign and return the enclosed proxy card as
instructed in the proxy statement accompanying this notice as
promptly as possible in order to ensure your representation at
the meeting, or you may vote by telephone or on the Internet by
following the instructions in the proxy statement accompanying
this notice and on your proxy card. A return envelope (which is
postage prepaid if mailed in the United States) is enclosed for
your convenience. Even if you have voted by proxy, you may still
vote in person if you attend the meeting. Please note, however,
that if your shares are held of record by a broker, bank or
other agent and you wish to vote at the meeting, you must
request and obtain a proxy card issued in your name from that
record holder.
DOT HILL
SYSTEMS CORP.
2200 Faraday Avenue,
Suite 100
Carlsbad, California 92008
PROXY
STATEMENT
FOR THE ANNUAL MEETING OF
STOCKHOLDERS
TO BE HELD ON MAY 8,
2006
Questions
and Answers
Why am I
receiving these proxy materials?
We sent you this proxy statement and the accompanying proxy card
because the Board of Directors of Dot Hill Systems Corp. is
soliciting your proxy to vote at its 2006 Annual Meeting of
Stockholders. You are invited to attend the annual meeting to
vote on the proposals described in this proxy statement.
However, you do not need to attend the meeting to vote your
shares. Instead, you may simply complete, sign and return the
accompanying proxy card, or follow the instructions below to
submit your proxy over the telephone or on the Internet.
We intend to mail this proxy statement and the accompanying
proxy card on or about April 11, 2006 to all stockholders
of record entitled to vote at the annual meeting.
Who can
vote at the annual meeting?
Only stockholders of record at the close of business on
March 23, 2006, the record date for the annual meeting,
will be entitled to vote at the annual meeting. At the close of
business on the record date, there were 44,589,699 shares
of common stock outstanding and entitled to vote.
Stockholder
of Record: Shares Registered in Your Name
If at the close of business on the record date, your shares were
registered directly in your name with our transfer agent,
American Stock Transfer & Trust Company, then you are a
stockholder of record. As a stockholder of record, you may vote
in person at the meeting or vote by proxy using the accompanying
proxy card, the telephone or the Internet. Whether or not you
plan to attend the meeting, we urge you to fill out and return
the accompanying proxy card, or vote by proxy over the telephone
or on the Internet as instructed below, to ensure your vote is
counted.
Beneficial
Owner: Shares Registered in the Name of a Broker, Bank or
Other Agent
If at the close of business on the record date, your shares were
held, not in your name, but rather in an account at a brokerage
firm, bank or other agent, then you are the beneficial owner of
shares held in street name and these proxy materials
are being forwarded to you by your broker, bank or other agent.
The broker, bank or other agent holding your account is
considered to be the stockholder of record for purposes of
voting at the annual meeting.
As a beneficial owner, you have the right to direct your broker,
bank or other agent on how to vote the shares in your account.
You are also invited to attend the annual meeting. However,
since you are not the stockholder of record, you may not vote
your shares in person at the meeting unless you request and
obtain a valid proxy issued in your name from your broker, bank
or other agent. Alternatively, you may vote by telephone or over
the Internet as instructed by your broker, bank or other agent.
What am I
voting on?
There are three matters scheduled for a vote at the annual
meeting:
|
|
|
|
|
the election of one director to hold office until our 2009
Annual Meeting of Stockholders,
|
|
|
|
the approval of an amendment to our 2000 Non-Employee
Directors Stock Option Plan to, among other things,
increase the aggregate number of shares of our common stock
authorized for issuance under the plan by 500,000, and
|
1
|
|
|
|
|
the ratification of the selection by the Audit Committee of our
Board of Directors of Deloitte & Touche LLP,
independent registered public accounting firm, as our
independent auditors for the fiscal year ending
December 31, 2006.
|
How do I
vote?
For the election of directors, you may either vote
For the nominee or you may Withhold your
vote for the nominee. For any other matter to be voted on, you
may vote For or Against or abstain from
voting. The procedures for voting are as follows:
Stockholder
of Record: Shares Registered in Your Name
If you are a stockholder of record, you may vote in person at
the annual meeting or vote by proxy using the accompanying proxy
card, the telephone or the Internet. Whether or not you plan to
attend the meeting, we urge you to vote by proxy to ensure your
vote is counted. You may still attend the meeting and vote in
person if you have already voted by proxy.
|
|
|
|
|
To vote in person, come to the annual meeting and we will give
you a ballot when you arrive.
|
|
|
|
To vote using the proxy card, simply complete, sign and date the
accompanying proxy card and return it promptly in the envelope
provided. If you return your signed proxy card to us before the
annual meeting, we will vote your shares as you direct.
|
|
|
|
To vote over the telephone, dial toll-free
(800) 690-6903
using a touch-tone phone and follow the recorded instructions.
You will be asked to provide the company number and control
number from the accompanying proxy card. Your vote must be
received by 11:59 p.m., Eastern Time on May 7, 2006 to
be counted.
|
|
|
|
To vote on the Internet, go to http:/ /www.proxyvote.com
to complete an electronic proxy card. You will be asked to
provide the company number and control number from the
accompanying proxy card. Your vote must be received by
11:59 p.m., Eastern Time on May 7, 2006 to be counted.
|
We provide Internet proxy voting to allow you to vote your
shares on line, with procedures designed to ensure the
authenticity and correctness of your proxy vote instructions.
However, please be aware that you must bear any costs associated
with your Internet access, such as usage charges from Internet
access providers and telephone companies.
Beneficial
Owner: Shares Registered in the Name of Broker, Bank or
Other Agent
If you are a beneficial owner of shares registered in the name
of your broker, bank or other agent, you should have received a
proxy card and voting instructions with these proxy materials
from that organization rather than from us. Simply complete and
mail the proxy card to ensure that your vote is counted.
Alternatively, you may vote by telephone or over the Internet as
instructed by your broker, bank or other agent. To vote in
person at the annual meeting, you must obtain a valid proxy from
your broker, bank or other agent. Follow the instructions from
your broker, bank or other agent included with these proxy
materials, or contact your broker, bank or other agent to
request a proxy form.
How many
votes do I have?
On each matter to be voted upon, you have one vote for each
share of common stock you own as of the close of business on
March 23, 2006, the record date for the annual meeting.
What if I
return a proxy card but do not make specific choices?
If you return a signed and dated proxy card without marking any
voting selections, your shares will be voted For the
election of the nominee for director, For the
amendment of our 2000 Non-Employee Directors Stock Option
Plan and For the ratification of the selection of
Deloitte & Touche LLP as our independent auditors. If
any
2
other matter is properly presented at the meeting, one of the
individuals named on your proxy card as your proxy will vote
your shares using his or her best judgment.
Who is
paying for this proxy solicitation?
We will pay for the entire cost of soliciting proxies. In
addition to these mailed proxy materials, our directors and
employees may also solicit proxies in person, by telephone, or
by other means of communication. Directors and employees will
not be paid any additional compensation for soliciting proxies.
We may also reimburse brokerage firms, banks and other agents
for the cost of forwarding proxy materials to beneficial owners.
What does
it mean if I receive more than one proxy card?
If you receive more than one proxy card, your shares are
registered in more than one name or are registered in different
accounts. Please complete, sign and return each proxy card to
ensure that all of your shares are voted.
Can I
change my vote after submitting my proxy?
Yes. You can revoke your proxy at any time before the applicable
vote at the meeting. If you are the record holder of your
shares, you may revoke your proxy in any one of three ways:
|
|
|
|
|
you may submit another properly completed proxy with a later
date,
|
|
|
|
you may send a written notice that you are revoking your proxy
to our Secretary at 2200 Faraday Avenue, Suite 100,
Carlsbad, California 92008, or
|
|
|
|
you may attend the annual meeting and vote in person (however,
simply attending the meeting will not, by itself, revoke your
proxy).
|
If your shares are held by your broker, bank or other agent, you
should follow the instructions provided by them.
When are
stockholder proposals due for next years annual
meeting?
To be considered for inclusion in next years proxy
materials, a stockholder proposal must be submitted in writing
by December 12, 2006, to our Secretary at 2200 Faraday
Avenue, Suite 100, Carlsbad, California 92008. If you wish
to submit a proposal that is not to be included in next
years proxy materials, your proposal generally must be
submitted in writing to the same address no later than
February 7, 2007 but no earlier than January 8, 2007.
Please review our bylaws, which contain additional requirements
regarding advance notice of stockholder proposals.
How are
votes counted?
Votes will be counted by the inspector of election appointed for
the meeting, who will separately count For and
Withhold and, with respect to any proposals other
than the election of directors, Against votes,
abstentions and broker non-votes. A broker non-vote
occurs when a nominee holding shares for a beneficial owner does
not vote on a particular proposal because the nominee does not
have discretionary voting power with respect to that proposal
and has not received instructions with respect to that proposal
from the beneficial owner, despite voting on at least one other
proposal for which it does have discretionary authority or for
which it has received instructions. Abstentions will be counted
towards the vote total for each proposal, and will have the same
effect as Against votes. Broker non-votes have no
effect and will not be counted towards the vote total for any
proposal.
If your shares are held by your broker, bank or other agent as
your nominee (that is, in street name), you will
need to obtain a proxy form from the institution that holds your
shares and follow the instructions included on that form
regarding how to instruct your broker, bank or other agent to
vote your shares. If you do not give instructions to your
broker, bank or other agent, they can vote your shares with
respect to discretionary items, but not with respect
to non-discretionary items. Discretionary items are
proposals considered routine under the rules of the New York
Stock Exchange on which your broker, bank or other agent may
vote shares held in street name in the absence of your voting
instructions. On non-discretionary items for which you do not
give instructions to your broker, bank or other agent, the
shares will be treated as broker non-votes.
3
How many
votes are needed to approve each proposal?
|
|
|
|
|
For the election of directors, the nominee receiving the most
For votes (among votes properly cast in person or by
proxy) will be elected. Only votes For or
Withheld will affect the outcome.
|
|
|
|
To be approved, the amendment to our 2000 Non-Employee
Directors Stock Option Plan must receive a For
vote from the majority of shares present and entitled to vote
either in person or by proxy.
|
|
|
|
To be approved, the ratification of the selection of
Deloitte & Touche LLP as our independent auditors must
receive a For vote from the majority of shares
present and entitled to vote either in person or by proxy.
|
What is
the quorum requirement?
A quorum of stockholders is necessary to hold a valid meeting. A
quorum will be present if at least a majority of the outstanding
shares as of the close of business on the record date are
represented by stockholders present at the meeting or by proxy.
At the close of business on the record date, there were
44,589,699 shares outstanding and entitled to vote.
Therefore, in order for a quorum to exist,
22,294,850 shares must be represented by stockholders
present at the meeting or by proxy.
Your shares will be counted towards the quorum only if you
submit a valid proxy (or one is submitted on your behalf by your
broker, bank or other agent) or if you vote in person at the
meeting. Abstentions and broker non-votes will be counted
towards the quorum requirement. If there is no quorum, a
majority of the votes present at the meeting may adjourn the
meeting to another date.
How can I
find out the results of the voting at the annual
meeting?
Preliminary voting results will be announced at the annual
meeting. Final voting results will be published in our quarterly
report on
Form 10-Q
for the second quarter of 2006.
4
Proposal 1
Election
Of Directors
Our Certificate of Incorporation provides that our Board of
Directors shall be divided into three classes. Each class
consists, as nearly as possible, of one-third of the total
number of directors, and each class has a three-year term.
Vacancies on our Board may be filled only by persons elected by
a majority of the remaining directors. A director elected by our
Board to fill a vacancy in a class shall serve for the remainder
of the full term of that class, and until the directors
successor is elected and qualified. This includes vacancies
created by an increase in the number of directors.
Our Board of Directors currently consists of five members. There
is one director in the class whose term of office expires at the
2006 Annual Meeting of Stockholders, Charles Christ.
Mr. Christ is currently a director and was previously
elected by our stockholders. If elected at the annual meeting,
Mr. Christ would serve until the 2009 annual meeting and
until his successor is elected and qualified, or until his
death, resignation or removal.
Directors are elected by a plurality of the votes present at the
meeting or by proxy and entitled to vote at the meeting. The
nominee receiving the most For votes (among votes
properly cast in person or by proxy) will be elected. If no
contrary indication is made, shares represented by executed
proxies will be voted For the election of the
nominee named above or, if the nominee becomes unavailable for
election as a result of an unexpected occurrence,
For the election of a substitute nominee designated
by our Board of Directors. The nominee has agreed to serve as a
director if elected, and we have no reason to believe that the
nominee will be unable to serve.
We invite all of our directors and nominees for director to
attend our annual meeting of stockholders. Both nominees for
election as a director at our 2005 annual meeting attended the
2005 annual meeting. The directors not standing for election did
not attend.
The
Board Of Directors Recommends A Vote For the Election of
the Nominee Named Above.
The following is biographical information as of March 1,
2006 for the nominee for director and each director whose term
will continue after the 2006 Annual Meeting of Stockholders.
|
|
|
|
|
|
|
Name
|
|
Age
|
|
|
Position
|
|
Kimberly E. Alexy
|
|
|
35
|
|
|
Director
|
Charles Christ
|
|
|
66
|
|
|
Chairman of the Board
|
Dana W. Kammersgard
|
|
|
50
|
|
|
President, Chief Executive Officer
and Director
|
Joseph D. Markee
|
|
|
52
|
|
|
Director
|
W.R. Sauey
|
|
|
78
|
|
|
Director
|
Nominee
for Election for a Three-Year Term Expiring at our 2009 Annual
Meeting of Stockholders
Charles Christ has served as our Chairman of the
Board since July 2000. Mr. Christ also is a director of
Maxtor Corporation and Agilysys, Inc. Maxtor is a supplier of
hard disk drives for servers and desktop computer systems.
Agilysys, Inc. is in the computer systems business. From 1997 to
1998, Mr. Christ served as President, Chief Executive
Officer and a director of Symbios, Inc. (acquired by LSI Logic
in 1998), a designer, manufacturer and provider of storage
systems, as well as client-server integrated circuits,
cell-based applications-specific integrated circuits and host
adapter boards. He was Vice President and General Manager of the
Components Division of Digital Equipment Corp. (DEC), where he
launched and managed StorageWorks, DECs storage division.
Mr. Christ received an M.B.A. degree from Harvard Business
School, and completed his undergraduate degree earning a
Bachelors in Industrial Engineering at General Motors Institute,
now known as Kettering University.
Directors
Continuing in Office Until the 2007 Annual Meeting of
Stockholders
Kimberly E. Alexy has served as a member of our
Board of Directors since December 2005. Ms. Alexy is
presently the Founder and Principal at Alexy Capital Management,
a family investment management business, and
5
was formerly Senior Vice President and Managing Director of
Equity Research for Prudential Securities. She served as
principal technology hardware analyst for the firm and provided
research and ratings on technology companies within the storage
industry. Additionally, she received accolades from the Wall
Street Journal as Best on the Street in the computer
sector, and was ranked for three consecutive years as a top
equity research analyst by Institutional Investor Magazine.
Prior to joining Prudential, Ms. Alexy was Vice President
of Equity Research at Lehman Brothers where she composed
research launch reports for the successful initial public
offerings of companies such as Maxtor Corp. and Network
Appliance, Inc. Prior to her tenure with Lehman Brothers,
Ms. Alexy was Assistant Vice President of Corporate Finance
at Wachovia Bank. Ms. Alexy is a Chartered Financial
Analyst, and holds an M.B.A. in Finance and Accounting from the
College of William and Mary as well as a B.A. in Psychology from
Emory University. Ms. Alexy currently serves as a member of
the Board of Directors of Maxtor.
Joseph D. Markee has served as a member of our
Board of Directors since June 2004. Mr. Markee has served
as Managing Director of Express Ventures, LLP since November
2005 and was Chief Executive Officer for Figure 8 Wireless Inc.,
a wholly owned subsidiary of Chipcon Group ASA, until May 2005.
Chipcon Group ASA is a leading provider of ZigBee ready software
and networking solutions focused on standardized wireless
communications. Prior to Figure 8, Mr. Markee was
Co-Founder and Founding Chief Executive Officer of Copper
Mountain Networks. Copper Mountain designs, develops and
delivers subscriber access and broadband remote access server
solutions for facilities-based carrier networks. From 1988 to
1995, Mr. Markee was Co-Founder and held several senior
management roles at Primary Access, a remote access server
company which was sold to 3Com Corporation in 1994.
Mr. Markee is also a member of the Board of Directors of
Metalink, Ltd., a global provider and developer of high
performance wireline and wireless broadband communication
silicon solutions. Mr. Markee graduated from the University
of California, Davis where he received a B.S. in Electrical
Engineering and Computer Science.
Directors
Continuing in Office Until the 2008 Annual Meeting of
Stockholders
Dana W. Kammersgard has served as our President
since August 2004. In March 2006, Mr. Kammersgard was
appointed as a member of our Board of Directors and our Chief
Executive Officer and President. From August 1999 to August
2004, Mr. Kammersgard served as our Chief Technical
Officer. Mr. Kammersgard was a founder of Artecon and
served as a director from its inception in 1984 until the merger
of Box Hill and Artecon in August 1999. At Artecon,
Mr. Kammersgard served in various positions since 1984,
including Secretary and Senior Vice President of Engineering
from March 1998 until August 1999 and as Vice President of Sales
and Marketing from March 1997 until March 1998. Prior to
co-founding Artecon, Mr. Kammersgard was the Director of
Software Development at CALMA, a division of General Electric
Company. Mr. Kammersgard holds a B.A. in Chemistry from the
University of California, San Diego.
W.R. Sauey has served as a member of our Board of
Directors since the merger of Box Hill Systems Corp. and
Artecon, Inc. in August 1999. From August 1999 until July 2000,
Mr. Sauey served as our Chairman of the Board.
Mr. Sauey was a founder of Artecon and served as its
Chairman of the Board from Artecons inception in 1984
until the merger of Box Hill and Artecon. Mr. Sauey
founded and serves as Chairman of the Board for a number of
manufacturing companies in the Nordic Group of Companies, a
group of privately-held independent companies of which
Mr. Sauey is the principal shareholder. He is also a member
of the World Presidents Organization (WPO) and serves on the
Board of Directors of the National Association of Manufacturers
(NAM) and Baraboo Bancorporation. He has been past Trustee for
the State of Wisconsin Investment Board, serving until 2003.
Mr. Sauey holds an M.B.A. from the University of Chicago.
Executive
Officers
The following is biographical information as of March 1,
2006 for our executive officers not discussed above.
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Shad L. Burke
|
|
32
|
|
Interim Chief Financial Officer,
Vice President of Finance, and Corporate Controller and
Assistant Secretary
|
Patrick E. Collins
|
|
48
|
|
Chief Operating Officer
|
Philip A. Davis
|
|
38
|
|
Senior Vice President of Worldwide
Sales and Marketing
|
6
Shad L. Burke has served as our Chief Financial
Officer since March 2006, on an interim basis until such time as
we identify an appropriate candidate to fill the Chief Financial
Officer position on a permanent basis. Mr. Burke has also
served as our Vice President of Finance and Corporate Controller
and Assistant Secretary since March 2006 and has served as our
Corporate Controller since July 2005. From April 2004 to July
2005, Mr. Burke held the position of corporate controller
at PeopleSupport, Inc., a business process outsourcer. From July
2002 to April 2004, he was a senior manager in the assurance
practice of the Los Angeles office of Deloitte &
Touche, a public accounting firm. From September 1995 to July
2002, Mr. Burke held various assurance positions with
Arthur Andersen, a public accounting firm. Mr. Burke
received a degree in business economics from University of
California, Santa Barbara and is a C.P.A.
Patrick E. Collins has served as our Chief
Operating Officer since February 2006. Prior to joining us,
Mr. Collins was a partner in a consulting firm, LGE
Consulting, which focused on the areas of corporate growth and
operational excellence. From 1997 to 2000 and again from 2003 to
2005, Mr. Collins served as vice president of worldwide
procurement and supply chain and then vice president of product
operations at Dell, Inc. During his two tenures at Dell,
Mr. Collins was responsible for overseeing new product
introductions, coordinating worldwide fulfillment, managing
procurement and driving supply chain initiatives.
Mr. Collins served as chief executive officer of RLX
Technologies, Inc., from 2000 to 2003, and from 1993 to 1997, he
served as chief operating officer of Vixel Corporation. He also
served in various management positions at Sun Microsystems, Inc.
and Apple Computer, Inc. Mr. Collins holds a B.S. in Math
and Physics from National University of Ireland.
Philip A. Davis has served as our Senior Vice
President of Worldwide Sales and Marketing since February 2005.
Previously, Mr. Davis served as our Senior Vice President
of Sales following our acquisition of Chaparral Network Storage,
Inc. While at Chaparral, Mr. Davis served as senior vice
president worldwide sales from 2003 to 2004. From 2002 to 2003,
Mr. Davis was vice president of field operations for RLX
Technologies, Inc., a blade server provider, and from 1999 to
2002, he was senior vice president of sales and marketing and
executive vice president of corporate strategy and business
development for BetaSphere, Inc., a provider of product
lifecycle management solutions. Mr. Davis has also served
in various sales management positions at Update.com Software,
Inc., Vixel Corporation, PMC-Sierra, Inc., and Texas
Instruments, Inc. Mr. Davis holds a B.S. in Electronic
Engineering from California Polytechnic State University,
San Luis Obispo.
Independence
of the Board of Directors and its Committees
As required under Nasdaq Stock Market listing standards, a
majority of the members of a listed companys board of
directors must qualify as independent, as
affirmatively determined by the board. Our Board of Directors
consults with our counsel to ensure that the Boards
determinations are consistent with all relevant securities and
other laws and regulations regarding the definition of
independent, including those set forth in applicable
Nasdaq listing standards, as in effect from time to time.
Consistent with these considerations, after review of all
relevant transactions or relationships between each director, or
any of his or her family members, and Dot Hill, our senior
management and our independent auditors, our Board of Directors
has affirmatively determined that all of our directors are
independent directors within the meaning of the applicable
Nasdaq listing standards, except for Mr. Kammersgard, our
President and Chief Executive Officer, and Mr. Sauey, who
is the
father-in-law
of James L. Lambert, who retired as our Chief Executive Officer
and Vice Chairman in March 2006.
As required under applicable Nasdaq listing standards, our
independent directors meet in regularly scheduled executive
sessions at which only independent directors are present. All of
the committees of our Board of Directors are comprised entirely
of directors determined by the Board to be independent within
the meaning of the applicable Nasdaq listing standards.
7
Information
Regarding the Board of Directors and its Committees
Our Board of Directors has an Audit Committee, a Compensation
Committee and a Nominating and Corporate Governance Committee.
The following is a description of each committee and its
functions.
Audit Committee
The Audit Committee operates pursuant to a written charter that
is available on our website at
http://www.dothill.com. The Audit Committee met 14 times
and acted by written consent one time during the fiscal year
ended December 31, 2005 and as of December 31, 2005
consisted of Messrs. Christ and Markee and Norman R.
Farquhar, with Mr. Farquhar serving as chair of the
committee. The Audit Committee currently consists of
Ms. Alexy and Messrs. Christ and Markee. The functions
of the Audit Committee include, among other things: overseeing
our corporate accounting and financial reporting process, the
quality and integrity of our financial statements and reports
and the qualifications, independence and performance of the
certified public accountants engaged as our independent
auditors; providing oversight assistance with respect to ethical
compliance programs as established by management and our Board
of Directors; evaluating the performance and assessing the
qualifications of our independent auditors; determining the
engagement of our independent auditors; determining whether to
retain or terminate our existing independent auditors or to
appoint and engage new independent auditors; reviewing and
approving the retention of our independent auditors to perform
any proposed permissible non-audit and audit-related audit
services; monitoring the rotation of partners of our independent
auditors on our engagement team as required by law; reviewing
and approving the financial statements to be included in our
Annual Report on
Form 10-K;
and discussing with our management and our independent auditors
the results of our annual audit and the results of our quarterly
financial statements.
Our Board of Directors has determined that Ms. Alexy
qualifies as an audit committee financial expert, as
defined in applicable Securities and Exchange Commission, or
SEC, rules. The Board made a qualitative assessment of
Ms. Alexys level of knowledge and experience based on
a number of factors, including his formal education and prior
work experience.
Compensation Committee
The Compensation Committee operates pursuant to a written
charter that is available on our website at
http://www.dothill.com. The Compensation Committee met
eight times and acted by written consent one time during the
fiscal year ended December 31, 2005 and as of
December 31, 2005 consisted of Messrs. Christ,
Farquhar and Markee, with Mr. Markee serving as chair of
the committee. The Compensation Committee currently consists of
Messrs. Christ and Markee, with Mr. Markee serving as
chair of the committee. The functions of the Compensation
Committee include, among other things: reviewing and approving
our overall compensation strategy and policies; reviewing and
approving corporate performance goals and objectives relevant to
the compensation of our executive officers and other senior
management; reviewing and approving the compensation and other
terms of employment of our Chief Executive Officer; and
administering our stock option and purchase plans, deferred
compensation plans and other similar programs.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee operates
pursuant to a written charter that is available on our website
at http://www.dothill.com. The Nominating and Corporate
Governance Committee met five times during the fiscal year ended
December 31, 2005 and as of December 31, 2005
consisted of Messrs. Christ, Farquhar and Markee, with
Mr. Christ serving as chair of the committee. The
Nominating and Corporate currently consists of
Messrs. Christ and Markee, with Mr. Christ serving as
chair of the committee. The functions of the Nominating and
Corporate Governance Committee include, among other things:
overseeing all aspects of our corporate governance functions on
behalf of the Board, including procedures for compliance with
significant applicable legal, ethical and regulatory
requirements that affect corporate governance; making
recommendations to the Board regarding corporate governance
issues; identifying, reviewing and evaluating candidates to
serve as our directors; serving as a focal point for
communication between such candidates, non-committee directors
and our management; recommending candidates to the Board; and
making such other recommendations to the Board regarding affairs
relating to our directors as may be needed.
8
The Nominating and Corporate Governance Committee believes that
candidates for director should have certain qualifications,
including being able to read and understand basic financial
statements and having the highest personal integrity and ethics.
The Nominating and Corporate Governance Committee also intends
to consider such factors as possessing relevant expertise upon
which to be able to offer advice and guidance to management,
having sufficient time to devote to our affairs, demonstrated
excellence in his or her field, having the ability to exercise
sound business judgment and having the commitment to rigorously
represent the long-term interests of our stockholders. However,
the Nominating and Corporate Governance Committee retains the
right to modify these qualifications from time to time.
Candidates for director nominees are reviewed in the context of
the current composition of our Board of Directors, our operating
requirements and the long-term interests of our stockholders. In
conducting this assessment, the Nominating and Corporate
Governance Committee considers diversity, age, skills, and such
other factors as it deems appropriate given the current needs of
the Board and Dot Hill, to maintain a balance of knowledge,
experience and capability. In the case of incumbent directors
whose terms of office are set to expire, the Nominating and
Corporate Governance Committee reviews such directors
overall service to us during their term, including the number of
meetings attended, level of participation, quality of
performance, and any other relevant considerations. In the case
of new director candidates, the Nominating and Corporate
Governance Committee also determines whether the nominee must be
independent for Nasdaq purposes, which determination is based
upon applicable Nasdaq listing standards, applicable SEC rules
and regulations and the advice of counsel, if necessary. The
Nominating and Corporate Governance Committee then uses its
network of contacts to compile a list of potential candidates,
but may also engage, if it deems appropriate, a professional
search firm. The Nominating and Corporate Governance Committee
conducts any appropriate and necessary inquiries into the
backgrounds and qualifications of possible candidates after
considering the function and needs of our Board of Directors.
The Nominating and Corporate Governance Committee meets to
discuss and consider such candidates qualifications and
then selects a nominee for recommendation to the Board by
majority vote. To date, the Nominating and Corporate Governance
Committee has not paid a fee to any third party to assist in the
process of identifying or evaluating director candidates.
At this time, the Nominating and Corporate Governance Committee
has not adopted a policy to consider director candidates
recommended by stockholders, in part because to date, the
Nominating and Corporate Governance Committee has not received a
director nominee from any stockholder, including any stockholder
or stockholders holding more than five percent of our voting
stock. The Nominating and Corporate Governance Committee
believes that it is in the best position to identify, review,
evaluate and select qualified candidates for Board membership,
based on the comprehensive criteria for Board membership
approved by the Board.
Meetings
of the Board of Directors and Board and Committee Member
Attendance
Our Board of Directors met seven times (including one special
committee meeting) and acted by written consent one time during
the last fiscal year. Each Board member attended 75% or more of
the aggregate of the meetings of the Board and of the committees
on which he or she served, held during the period for which he
or she was a director or committee member, respectively.
Stockholder
Communications With The Board Of Directors
Persons interested in communicating their questions, concerns or
issues to our Board of Directors or our independent directors
may address correspondence to the Board, a particular director
or to the independent directors generally, in care of Dot Hill
Systems Corp. at 2200 Faraday Avenue, Suite 100, Carlsbad,
California 92008. If no particular director is named, letters
will be forwarded, depending on the subject matter, to the
Chairman of the Board or the Chair of the Audit, Compensation,
or Nominating and Corporate Governance Committee.
Code
of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics that
applies to all of our officers, directors and employees. The
Code of Business Conduct and Ethics is available on our website
at http://www.dothill.com. If we make any substantive
amendments to the Code of Business Conduct and Ethics or grant
any waiver from a provision of the Code of Business Conduct and
Ethics to any executive officer or director, we will promptly
disclose the nature of the amendment or waiver on our website,
as well as via any other means then required by Nasdaq listing
standards or applicable law.
9
Proposal 2
Amendment to Our 2000
Non-Employee Directors Stock Option Plan
In March 2000, the Board adopted and our stockholders
subsequently approved our 2000 Non-Employee Directors
Stock Option Plan, or the Directors Plan.
In July 2005 and April 2006, the Board amended and restated the
Directors Plan, subject to stockholder approval, to
increase the aggregate number of shares of our common stock
authorized for issuance under the plan by 500,000, to increase
the number of shares of common stock subject to each automatic
annual stock option grant from 10,000 to 20,000 and to provide
that all automatic annual stock option grants be fully vested on
the date of grant. Our Board of Directors adopted this amendment
to ensure that (i) we had sufficient shares available for
future automatic grants under the Directors Plan,
(ii) the equity compensation we provide to our non-employee
directors is commensurate with similarly situated companies and
(iii) we are able to attract and retain highly qualified
non-employee directors.
As of March 1, 2006, stock options covering an aggregate of
510,000 shares of our common stock (which includes shares
that have been returned to the Directors Plan as a result
of cancellations or expiration of stock options) had been
granted under the Directors Plan and 102,499 shares
of our common stock (plus any shares that might in the future be
returned to the Directors Plan as a result of
cancellations or expiration of stock options) remained available
for future grant under the Directors Plan.
Stockholders are requested in this Proposal 2 to approve
the amendment to the Directors Plan for the reasons
discussed above. To be approved, the amendment to the
Directors Plan must receive a For vote from
the majority of shares present and entitled to vote either in
person or by proxy. Abstentions will be counted toward the
tabulation of votes cast on proposals presented to the
stockholders and will have the same effect as negative votes.
Broker non-votes will be counted towards a quorum, but will not
be counted for any purpose in determining whether this matter
has been approved.
The
Board of Directors Recommends A Vote For the Approval of
the
Amendment to Our 2000 Non-Employee Directors Stock Option
Plan.
The material features of the Directors Plan, as amended,
are outlined below. The following description of the
Directors Plan is a summary only.
General
The Directors Plan provides for the automatic grant of
nonstatutory stock options. Options granted under the
Directors Plan are not intended to qualify as
incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as
amended, or the Code. See Federal Income Tax
Information below for a discussion of the tax treatment of
nonstatutory stock options.
Purpose
The Directors Plan was adopted to provide a means by which
our non-employee directors may be given an opportunity to
purchase our common stock, to assist in retaining the services
of such persons, to secure and retain the services of persons
capable of filling such positions and to provide incentives for
such persons to exert maximum efforts for our success. Four of
our current directors are eligible to participate in the
Directors Plan.
Administration
The Board administers the Directors Plan and may not
delegate administration of the Directors Plan to a
committee. The Board has the power to construe and interpret the
Directors Plan, subject to the terms of the
10
Directors Plan. Without limiting the foregoing, the Board
may, subject to and within the express provisions of the
Directors Plan:
|
|
|
|
|
determine the provisions of each option to the extent not
specified in the Directors Plan;
|
|
|
|
construe and interpret the Directors Plan and options
granted under it and establish, amend and revoke rules and
regulations for its administration (i.e., correct any defect,
omission, inconsistency in the Directors Plan or any
option agreement);
|
|
|
|
amend the Directors Plan subject to the limitations of the
Directors Plan; and
|
|
|
|
generally, exercise such powers and perform such acts as the
Board deems necessary or expedient to promote the best interests
of Dot Hill that are not in conflict with the Directors
Plan.
|
Eligibility
The Directors Plan provides that options may be granted
only to our non-employee directors. A non-employee
director is defined in the Directors Plan as a
director of Dot Hill who is not otherwise our employee or
affiliate.
Stock
Subject to the Directors Plan
An aggregate of 500,000 shares of our common stock is
reserved for issuance under the Directors Plan. Subject to
approval of this Proposal 2, the aggregate number of shares
of our common stock authorized for issuance under the
Directors Plan will be increased by 500,000, resulting in
an aggregate shares reserve of 1,000,000. If options granted
under the Directors Plan expire or otherwise terminate
without being exercised, the shares of common stock not acquired
pursuant to such options again become available for issuance
under the Directors Plan.
Terms
of Options
The following is a description of the terms of the options under
the Directors Plan. Individual option grants may not be
more restrictive than the terms described below.
Automatic Initial Grants. Without any further
action of the Board, each person who is duly elected or
appointed by our Board of Directors or stockholders to serve as
a non-employee director and who, for at least one year preceding
such election or appointment has at no time served as a
non-employee director, shall, effective as of the effective date
of such election or appointment, automatically be granted an
option to purchase 50,000 shares of common stock.
Automatic Annual Grants. Should this
Proposal 2 be approved, without any further action of the
Board, each person who, immediately following each of our annual
meetings of stockholders, commencing with our 2006 Annual
Meeting of Stockholders, is a non-employee director, and who has
been a non-employee director for at least four months prior to
such annual meeting shall, effective as of the date of such
annual meeting, automatically be granted an option to purchase
20,000 shares of common stock.
Exercise Price; Payment. The exercise price of
options under the Directors Plan may not be less than 100%
of the fair market value of the stock subject to the option on
the date of the grant. At March 1, 2006, the closing price
of our common stock as reported on the Nasdaq National Market
was $7.02 per share.
The exercise price of options granted under the Directors
Plan must be paid either:
|
|
|
|
|
in cash at the time the option is exercised; or
|
|
|
|
by delivery of already-owned shares of common stock either that
the optionholder has held for the period required to avoid a
charge to our reported earnings or that the optionholder did not
acquire, directly or indirectly from us; or
|
11
|
|
|
|
|
pursuant to a program developed under Regulation T as
promulgated by the Federal Reserve Board that, prior to the
issuance of common stock, results in either the receipt of cash
(or check) by us or the receipt of irrevocable instructions to
pay the aggregate exercise price to us from the sales proceeds;
or
|
|
|
|
by promissory note.
|
Option Exercise. Automatic initial grants
under the Directors Plan become exercisable in cumulative
increments, or vest, as set out in the Directors Plan
during the optionholders service as a director of Dot Hill
and any subsequent employment of the optionholder by
and/or
service by the optionholder as a consultant to Dot Hill or an
affiliate, collectively referred to as service. Automatic
initial grants under the Directors Plan permit exercise
prior to vesting, but in such event the optionholder is required
to enter into an early exercise stock purchase agreement that
allows us to repurchase unvested shares, generally at their
exercise price, should the optionholders service
terminate. Should this Proposal 2 be approved, automatic
annual grants under the Directors Plan will be fully
vested on the date of grant. To the extent provided by the terms
of an option, an optionholder may satisfy any federal, state or
local tax withholding obligation relating to the exercise of
such option by:
|
|
|
|
|
tendering a cash payment;
|
|
|
|
authorizing us to withhold shares from the shares of the common
stock otherwise issuable to the optionholder as a result of the
exercise or acquisition of stock under the option; provided,
however, that no shares of common stock are withheld with a
value exceeding the minimum amount of tax required to be
withheld by law; or
|
|
|
|
delivering to us owned and unencumbered shares of the common
stock.
|
Term. The term of options under the
Directors Plan is 10 years. Options under the
Directors Plan terminate three months after termination of
the optionholders service unless:
|
|
|
|
|
such termination is due to the optionholders permanent and
total disability (as defined in the Code), in which case the
option may be exercised (to the extent the option was
exercisable at the time of the termination of service) at any
time within 12 months of such termination; or
|
|
|
|
the optionholder dies before the optionholders service has
terminated, or within three months after termination of such
service, in which case the option may be exercised (to the
extent the option was exercisable at the time of the
optionholders death) within 18 months of the
optionholders death by the person or persons to whom the
rights to such option pass by will or by the laws of descent and
distribution.
|
An optionholder may designate a beneficiary who may exercise the
option following the optionholders death.
If the exercise of the option following the termination of the
optionholders service (other than by death or disability)
would be prohibited solely because the issuance of stock would
violate the registration requirements under the Securities Act
of 1933, as amended, then the option term will be extended and
the option will terminate on the earlier of the expiration of
the term of the option or three months after the termination of
the optionholders service during which the exercise of the
option would not be in violation of such registration
requirements.
Other Provisions. The option agreement may
contain such other terms, provisions and conditions not
inconsistent with the Directors Plan as determined by the
Board.
Restrictions
on Transfer
The optionholder may transfer an option by will or by the laws
of descent and distribution. In addition, an option under the
Directors Plan is transferable by instrument to an inter
vivos or testamentary trust, in a form acceptable to us, in
which the option is to be passed to beneficiaries upon the death
of the trustor, and by gift, in a form acceptable to us, to a
member of the immediate family of the optionholder. During the
lifetime of the optionholder, an option may be exercised only by
the optionholder and a permitted transferee under the
Directors Plan.
12
Adjustment
Provisions
Transactions not involving receipt of consideration by us, such
as a merger, consolidation, reorganization, stock dividend, or
stock split, may change the class and number of shares of common
stock subject to the Directors Plan and outstanding
options. In that event, the Directors Plan will be
appropriately adjusted as to the class and the maximum number of
shares of common stock subject to the Directors Plan, and
outstanding options will be adjusted as to the class, number of
shares and price per share of common stock subject to such
options.
Effect
of Certain Corporate Events
The Directors Plan provides that, in the event of a
dissolution, liquidation or sale of substantially all of our
assets, specified types of merger, or other corporate
reorganization, referred to as a change in control, then, with
respect to an optionholder whose service has not terminated, the
vesting and the time during which such option may be exercised
will be accelerated and such option will become exercisable in
full. An outstanding option will terminate if the optionholder
does not exercise it before a change in control. The
acceleration of an option in the event of an acquisition or
similar corporate event may be viewed as an anti-takeover
provision, which may have the effect of discouraging a proposal
to acquire or otherwise obtain control of Dot Hill.
Duration,
Amendment and Termination
The Board may suspend or terminate the Directors Plan at
any time. Unless sooner terminated, the Directors Plan
will terminate on the day before the 10th anniversary of
the date on which the Directors Plan was adopted by the
Board or approved by our stockholders, whichever is earlier.
The Board may also amend the Directors Plan at any time,
or from time to time. However, no amendment will be effective
unless approved by our stockholders before adoption by the Board
to the extent such modification requires stockholder approval in
order for the Directors Plan to satisfy the requirements
of
Rule 16b-3
of the Securities Exchange Act of 1934, as amended, or any
Nasdaq or securities exchange listing requirements. However, the
Board may not amend the Plan so as to impair the rights under
any option unless the optionholder consents in writing. The
Board may submit any other amendment to the Directors Plan
for stockholder approval.
Federal
Income Tax Information
The following is a summary of the principal United States
federal income taxation consequences to our non-employee
directors and us with respect to participation in the
Directors Plan. This summary is not intended to be
exhaustive, and does not discuss the income tax laws of any
city, state or foreign jurisdiction in which a participant may
reside.
No taxable income is recognized by an optionholder upon the
grant of a nonstatutory stock option. Upon exercise of a
nonstatutory stock option, the optionholder will recognize
ordinary income equal to the excess, if any, of the fair market
value of the purchased shares on the exercise date over the
exercise price paid for those shares. Generally, we will be
entitled (subject to the requirement of reasonableness, the
provisions of Section 162(m) of the Code, and the
satisfaction of a tax reporting obligation) to a corresponding
income tax deduction in the tax year in which such ordinary
income is recognized by the optionholder.
However, if the shares acquired upon exercise of the
nonstatutory stock option are unvested and subject to repurchase
by us in the event of the optionholders termination of
service prior to vesting in those shares, the optionholder will
not recognize any taxable income at the time of exercise, but
will have to report as ordinary income, as and when our purchase
right lapses, an amount equal to the excess of (i) the fair
market value of the shares on the date the repurchase right
lapses over (ii) the exercise price paid for the shares.
The optionholder may, however, elect under Section 83(b) of
the Code to include as ordinary income in the year of exercise
of the option an amount equal to the excess of (i) the fair
market value of the purchased shares on the exercise date over
(ii) the exercise price paid for such shares. If the
Section 83(b) election is made, the optionholder will not
recognize any additional income as and when the repurchase right
lapses.
Upon disposition of the stock, the optionholder will recognize a
capital gain or loss equal to the difference between the selling
price and the sum of the amount paid for such stock plus any
amount recognized as ordinary
13
income upon acquisition (or vesting) of the stock. Such gain or
loss will be long-term or short-term depending on whether the
stock was held for more than one year.
Plan
Benefits
While awards under the Directors Plan are automatic, any
of our non-employee directors may cease to be a director at any
time and additional non-employee directors may also be appointed
to the Board in the future. Accordingly, total stock options
that may be granted for the fiscal year ending December 31,
2006 under the Directors Plan are not determinable until
the completion of the fiscal year.
During the fiscal year ended December 31, 2005, stock
options covering an aggregate of 90,000 shares of common
stock were granted under the Directors Plan to all current
non-employee directors as a group. The dollar values of these
stock options cannot be determined because they depend on the
market value of the underlying shares of our common stock on the
date of exercise.
Equity
Compensation Plan Information
The following table provides certain information as of
December 31, 2005, with respect to all of our equity
compensation plans in effect on that date.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
Number of
|
|
|
|
|
|
Securities
|
|
|
|
Securities to Be
|
|
|
|
|
|
Remaining Available
|
|
|
|
Issued upon
|
|
|
Weighted-Average
|
|
|
for Issuance Under
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
Equity Compensation
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
Plans (Excluding
|
|
|
|
Options, Warrants
|
|
|
Options, Warrants
|
|
|
Securities
|
|
|
|
and Rights
|
|
|
and Rights
|
|
|
Reflected in Column (a))
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
Equity compensation plans approved
by stockholders(1)
|
|
|
4,830,811
|
|
|
$
|
6.52
|
|
|
|
2,983,369
|
|
Equity compensation plans not
approved by stockholders(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
4,830,811
|
|
|
$
|
6.52
|
|
|
|
2,983,369
|
|
|
|
|
(1) |
|
Includes our 2000 Equity Incentive Plan, the Directors
Plan and our 2000 Employee Stock Purchase Plan.
1,900,608 shares under column (c) are attributable to
our 2000 Employee Stock Purchase Plan. |
|
(2) |
|
As of December 31, 2005, we did not have any equity
compensation plans that were not approved by our stockholders. |
14
Proposal 3
Ratification Of
Selection Of Independent Auditors
The Audit Committee of our Board of Directors has engaged
Deloitte & Touche LLP as our independent auditors for
the fiscal year ending December 31, 2006 and is seeking
ratification of such selection by our stockholders at the annual
meeting. Deloitte & Touche LLP has audited our
financial statements since 1999. Representatives of
Deloitte & Touche LLP are expected to be present at the
annual meeting. They will have an opportunity to make a
statement if they so desire and will be available to respond to
appropriate questions.
Neither our Bylaws nor other governing documents or law require
stockholder ratification of the selection of Deloitte &
Touche LLP as our independent auditors. However, the Audit
Committee is submitting the selection of Deloitte &
Touche LLP to our stockholders for ratification as a matter of
good corporate practice. If our stockholders fail to ratify the
selection, the Audit Committee will reconsider whether or not to
retain Deloitte & Touche LLP. Even if the selection is
ratified, the Audit Committee in its discretion may direct the
appointment of different independent auditors at any time during
the year if they determine that such a change would be in the
best interests of Dot Hill and our stockholders.
To be approved, the ratification of the selection of
Deloitte & Touche LLP as our independent auditors must
receive a For vote from the majority of shares
present and entitled to vote either in person or by proxy.
Abstentions will be counted toward the tabulation of votes cast
on proposals presented to the stockholders and will have the
same effect as negative votes. Broker non-votes will be counted
towards a quorum, but will not be counted for any purpose in
determining whether this matter has been approved.
Principal
Accountant Fees and Services
Audit Fees. During the fiscal years ended
December 31, 2005 and 2004, the aggregate fees billed by
Deloitte & Touche LLP, the member firms of Deloitte
Touche Tohmatsu and their respective affiliates, collectively
referred to as the Deloitte Entities, for the audit of our
annual financial statements for such fiscal years, reviews of
our financial statements included in our Quarterly Reports on
Form 10-Q
and statutory and regulatory filings or engagements were
$1,140,000 and $862,250, respectively.
Audit-Related Fees. During the fiscal years
ended December 31, 2005 and 2004, the aggregate fees billed
by the Deloitte Entities for audit-related services for the
audit of our 401K plan were $19,000 and $18,140, respectively.
Tax Fees. During the fiscal years ended
December 31, 2005 and 2004, the aggregate fees billed by
the Deloitte Entities for professional services rendered for tax
compliance, tax advice and tax planning were $249,000 and
$195,674, respectively. The nature of these services was to
prepare state and federal income tax returns and extensions for
returns, to respond to requests related to various state and
city audits and tax-related notices, to investigate various
options related to international tax planning strategies, and to
assist in determining appropriate structures for foreign
branches and subsidiaries.
All Other Fees. During the fiscal years ended
December 31, 2005 and 2004, the aggregate fees billed by
the Deloitte Entities for all other services were $1,500 for
each fiscal year.
All fees described above were approved by the Audit Committee.
Pre-Approval
Policies and Procedures
The Audit Committee has adopted a policy and procedures for the
pre-approval of audit and non-audit services rendered by our
independent auditor, Deloitte & Touche LLP. The Audit
Committees approval of the scope and fees of the
engagement of the independent auditor is given on an individual
explicit
case-by-case
basis before the independent auditor is engaged to provide each
service. The pre-approval of services may be delegated to one or
more of the Audit Committees members, but the decision
must be reported to the full Audit Committee at its next
scheduled meeting.
The Audit Committee has determined that the rendering of the
services other than audit services by Deloitte & Touche
LLP is compatible with maintaining Deloitte & Touche
LLPs independence.
The
Board Of Directors Recommends A Vote For the Ratification
of the Selection of Deloitte & Touche LLP as our
Independent Auditors For the Fiscal Year Ending
December 31, 2006.
15
Security
Ownership of Certain Beneficial Owners And Management
The following table provides information regarding the
beneficial ownership of our common stock as of March 1,
2006 by: (i) each of our directors and nominees,
(ii) each of our named executive officers, (iii) all
of our directors, nominees and executive officers as a group and
(iv) each person, or group of affiliated persons, known by
us to beneficially own more than 5% of our common stock. The
table is based upon information supplied by our officers,
directors and principal stockholders and a review of Schedules
13D and 13G, if any, filed with the SEC. Unless otherwise
indicated in the footnotes to the table and subject to community
property laws where applicable, we believe that each of the
stockholders named in the table has sole voting and investment
power with respect to the shares indicated as beneficially owned.
Applicable percentages are based on 44,565,084 shares
outstanding on March 1, 2006, adjusted as required by rules
promulgated by the SEC. These rules generally attribute
beneficial ownership of securities to persons who possess sole
or shared voting power or investment power with respect to those
securities. In addition, the rules include shares of common
stock issuable pursuant to the exercise of stock options or
warrants that are either immediately exercisable or exercisable
on April 30, 2006, which is 60 days after
March 1, 2006. These shares are deemed to be outstanding
and beneficially owned by the person holding those options or
warrants for the purpose of computing the percentage ownership
of that person, but they are not treated as outstanding for the
purpose of computing the percentage ownership of any other
person. Certain of the options in this table are exercisable at
any time but, if exercised, are subject to a lapsing right of
repurchase until the options are fully vested.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
Number of Shares
|
|
|
Shares Beneficially
|
|
Name and Address of Beneficial
Owner(1)
|
|
Beneficially Owned
|
|
|
Owned
|
|
|
Wellington Management Company,
LLP(2)
|
|
|
5,688,000
|
|
|
|
12.8
|
%
|
Becker Capital Management, Inc.(3)
|
|
|
3,254,600
|
|
|
|
7.3
|
|
Lazard Asset Management LLC(4)
|
|
|
2,923,740
|
|
|
|
6.6
|
|
ICM Asset Management, Inc.(5)
|
|
|
2,886,175
|
|
|
|
6.5
|
|
Capital Group International,
Inc.(6)
|
|
|
2,619,000
|
|
|
|
5.9
|
|
W.R. Sauey(7)
|
|
|
1,834,945
|
|
|
|
4.1
|
|
James L. Lambert(8)
|
|
|
1,698,910
|
|
|
|
3.7
|
|
Dana W. Kammersgard(9)
|
|
|
734,900
|
|
|
|
1.6
|
|
Preston Romm(10)
|
|
|
422,149
|
|
|
|
*
|
|
Charles Christ(11)
|
|
|
210,000
|
|
|
|
*
|
|
Joseph D. Markee(12)
|
|
|
70,000
|
|
|
|
*
|
|
Kimberly E. Alexy(13)
|
|
|
50,000
|
|
|
|
*
|
|
All directors, nominees and
executive officers as a group (9 persons)(14)
|
|
|
5,155,688
|
|
|
|
11.0
|
|
|
|
|
* |
|
Less than one percent. |
|
(1) |
|
Except as otherwise noted above, the address for each person or
entity listed in the table is c/o Dot Hill Systems Corp.,
2200 Faraday Avenue, Suite 100, Carlsbad, California 92008. |
|
(2) |
|
The address for Wellington Management Company, LLP is 75 State
Street, Boston, Massachusetts 02109. The shares reported herein
as beneficially owned by Wellington Management Company, LLP, in
its capacity as investment adviser, are owned of record by
clients of Wellington Management Company, LLP. Those clients
have the right to receive, or the power to direct the receipt
of, dividends from, or the proceeds from the sale of, the shares
reported herein. No such client is known to have such right or
power with respect to more than 5% of our outstanding common
stock. |
|
(3) |
|
The address for Becker Capital Management, Inc. is 1211 SW Fifth
Avenue, Suite 2185, Portland, Oregon 97204. All securities
reported herein are owned by advisory clients of Becker Capital
Management, Inc. Becker Capital Management, Inc. disclaims
beneficial ownership of all shares reported herein. |
|
(4) |
|
The address for Lazard Asset Management LLC is 30 Rockefeller
Plaza, New York, New York 10112. |
16
|
|
|
(5) |
|
The address for ICM Asset Management, Inc. is
601 W. Main Avenue, Spokane, Washington 99201. ICM
Asset Management, Inc. is a registered investment adviser whose
clients have the right to receive or the power to direct the
receipt of dividends from, or the proceeds from the sale of, the
shares reported herein. James M. Simmons is the President and
controlling shareholder of ICM Asset Management, Inc. No
individual clients holdings of the shares reported herein
are more than 5% of our outstanding common stock. |
|
(6) |
|
The address for Capital Group International, Inc. is 11100 Santa
Monica Blvd., Los Angeles, California 90025. Includes
2,308,800 shares beneficially owned by Capital Guardian
Trust Company, a bank as defined in
Section 3(a)(6) of the Securities Exchange Act of 1934, as
amended. Capital Group International, Inc. is the parent holding
company of a group of investment management companies that hold
investment power and, in some cases, voting power over the
shares reported herein, including Capital Guardian Trust
Company. Capital Group International, Inc. does not have
investment power or voting power over any of the shares reported
herein. |
|
(7) |
|
Includes 429,703 shares held by Flambeau Inc. and
33,866 shares held by Seats, Inc. Mr. Sauey is
Chairman of the Board and the principal stockholder of Flambeau
Inc. and Seats, Inc. Mr. Sauey disclaims beneficial
ownership of all the above-listed shares, except to the extent
of his pecuniary or pro rata interest in such shares. Also
includes options to purchase 170,000 shares exercisable
within 60 days of March 1, 2006. |
|
(8) |
|
Includes 935,072 shares held jointly with Pamela Lambert,
the spouse of Mr. Lambert, 1,440 shares held by Pamela
Lambert, 66 shares held by Mr. Lamberts
daughter, 1,332 shares held by the James Lambert IRA and
options to purchase 761,000 shares exercisable within
60 days of March 1, 2006. Mr. Lambert retired as
our Chief Executive Officer and Vice Chairman in March 2006. |
|
(9) |
|
Includes 218 shares held by Lisa Kammersgard, the spouse of
Mr. Kammersgard, as to which shares Mr. Kammersgard
disclaims beneficial ownership, and options to purchase
384,166 shares exercisable within 60 days of
March 1, 2006. |
|
(10) |
|
Includes 400 shares held by Joseph and Neva Romm Family
Trust, as to which Mr. Romm is co-trustee and options to
purchase 418,749 shares exercisable within 60 days of
March 1, 2006. Mr. Romm resigned as our Chief
Financial Officer, Treasurer and Secretary in March 2006. |
|
(11) |
|
Includes options to purchase 210,000 shares exercisable
within 60 days of March 1, 2006. |
|
(12) |
|
Includes options to purchase 70,000 shares exercisable
within 60 days of March 1, 2006. |
|
(13) |
|
Includes options to purchase 50,000 shares exercisable
within 60 days of March 1, 2006. |
|
(14) |
|
Includes options to purchase 2,188,915 shares exercisable
within 60 days of March 1, 2006, including options to
purchase 125,000 shares held by one of our executive
officers not otherwise required to be included in the table
above. |
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires our directors and executive officers, and
persons who own more than 10% of a registered class of our
equity securities, to file with the SEC initial reports of
ownership and reports of changes in ownership of our common
stock and other equity securities. Officers, directors and
greater than 10% stockholders are required by SEC regulation to
furnish us with copies of all Section 16(a) forms they file.
To our knowledge, based solely on a review of the copies of such
reports furnished to us and written representations that no
other reports were required, during the fiscal year ended
December 31, 2005, all Section 16(a) filing
requirements applicable to our officers, directors and greater
than 10% beneficial owners were complied with.
17
Compensation
of Directors
Effective August 2005, the Compensation Committee of our Board
of Directors amended our non-employee director compensation
policy as follows. Each of our non-employee directors excluding
the Chairman of the Board receives an annual fee of $24,000 plus
an additional $1,500 for each scheduled regular meeting of the
Board. The Chairman of the Board receives an annual fee of
$72,000 plus an additional $1,500 for each scheduled regular
meeting of the Board. Members of the Audit, Compensation and
Nominating and Corporate Governance Committees of our Board of
Directors also receive additional fees. Each Audit Committee
member receives an annual fee of $5,000, with the exception of
the Chair of the Audit Committee, who receives an annual fee of
$7,000. Each Compensation and Nominating and Corporate
Governance Committee member receives an annual fee of $3,000 for
each such committee on which they serve, with the exception of
the Chair of each of the committees, who receives an annual fee
of $4,000. Committee members also receive $1,000 for each
committee meeting attended, independent of the particular
committee. During the fiscal year ended December 31, 2005,
the total compensation paid to non-employee directors was
$231,120. All members of our Board of Directors are also
eligible for reimbursement for their expenses incurred in
connection with attendance at Board and committee meetings in
accordance with Dot Hill policy.
Each of our non-employee directors also receives stock option
grants under the Directors Plan. Only our non-employee
directors or an affiliate of such directors (as defined in the
Code) are eligible to receive options under the Directors
Plan. Options granted under the Directors Plan are
intended not to qualify as incentive stock options under the
Code.
Option grants under the Directors Plan are
non-discretionary. Each person who is elected or appointed as a
director and who, for at least one year preceding such election
or appointment, has at no time served as a non-employee
director, is automatically granted under the Directors
Plan, without further action by us, our Board of Directors or
our stockholders, an option to purchase 50,000 shares of
our common stock as of the date of such election or appointment.
In addition, as of the date of the annual meeting each year,
each member of our Board of Directors who is not an employee and
has served as a non-employee director for at least four months
is automatically granted under the Directors Plan, subject
to approval of Proposal 2 and without further action by us,
our Board of Directors or our stockholders, an option to
purchase 20,000 shares of our common stock. No other
options may be granted at any time under the Directors
Plan. The exercise price of options granted under the
Directors Plan may not be less than 100% of the fair
market value of the common stock subject to the option on the
date of the option grant. Initial option grants under the
Directors Plan become exercisable, or vest, over four
years during the optionholders service as a director of
the Company and any subsequent employment of the optionholder
by, and/or
service by the optionholder as a consultant to, us or an
affiliate, collectively referred to as service. With respect to
any initial grant of options, 25% of such options vest after one
year of service and the remainder vest monthly over
36 months. Initial option grants under the Directors
Plan permit exercise prior to vesting, but in such event, the
optionholder is required to enter into an early exercise stock
purchase agreement that allows us to repurchase unvested shares,
generally at their exercise price, should the
optionholders service terminate. Subject to approval of
Proposal 2, annual option grants under the Directors
Plan are fully vested on the date of grant. The term of options
granted under the Directors Plan is 10 years. In the
event of our merger with or into another corporation or a
consolidation, acquisition of assets or other change in control
transaction involving us, the vesting of each option will
accelerate and the option will terminate if not exercised prior
to the consummation of the transaction. Please see
Proposal 2 for a more detailed description of the terms of
the Directors Plan.
During 2005, we granted options under the Directors Plan
covering 10,000 shares to each of our four non-employee
directors as of the 2005 annual meeting, at an exercise price of
$5.20 per share. The fair market value of our common stock
on the date of grant was $5.20 per share (based on the
closing sales price reported on the Nasdaq National Market on
the day preceding the date of grant). During August 2005, we
also made a one-time grant of options under our 2000 Equity
Incentive Plan covering 10,000 shares to each of our four
non-employee directors at the time, at an exercise price of
$5.85 per share, which is equal to the fair market value of
our stock on the date of grant. During December 2005, we granted
a new director options to purchase 50,000 shares of common
stock under the Directors Plan at an exercise price of
$6.92 per share, which is equal to the fair market value of our
stock on the date of grant. As of December 31, 2005, 72,584
options had been exercised under the Directors Plan.
18
Compensation
of Executive Officers
Summary
of Compensation
The following table sets forth in summary form information
concerning the compensation that we paid during the fiscal years
ended December 31, 2005, 2004 and 2003 to our Chief
Executive Officer and to each of our other executive officers
earning greater than $100,000 during the fiscal year ended
December 31, 2005, including two executive officers who
left us during March 2006. We refer to these officers in this
proxy statement as the named executive officers.
Summary
Compensation Table (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Compensation
|
|
|
Long-Term Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
Restricted
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual
|
|
|
Stock
|
|
|
Underlying
|
|
|
All Other
|
|
Name and Principal
|
|
|
|
|
Salary
|
|
|
Bonus(2)
|
|
|
Compen-sation
|
|
|
Awards
|
|
|
Options
|
|
|
Compensation
|
|
Position
|
|
Year
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
|
Dana W. Kammersgard(3)
|
|
|
2005
|
|
|
$
|
350,000
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
80,000
|
|
|
|
|
|
President, Chief Executive
Officer
|
|
|
2004
|
|
|
|
349,058
|
|
|
|
125,961
|
|
|
|
|
|
|
|
|
|
|
|
300,000
|
|
|
|
|
|
and Director
|
|
|
2003
|
|
|
|
297,692
|
|
|
|
779,506
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James L. Lambert(4)
|
|
|
2005
|
|
|
|
399,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
245,000
|
|
|
|
|
|
Chief Executive Officer
and
|
|
|
2004
|
|
|
|
395,058
|
|
|
|
131,022
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
Vice Chairman
|
|
|
2003
|
|
|
|
350,000
|
|
|
|
1,270,074
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preston S. Romm(5)
|
|
|
2005
|
|
|
|
246,577
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
90,000
|
|
|
|
|
|
Chief Financial
Officer,
|
|
|
2004
|
|
|
|
232,404
|
|
|
|
54,694
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
|
|
Treasurer and
Secretary
|
|
|
2003
|
|
|
|
199,331
|
|
|
|
488,692
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
(1) |
|
In accordance with the rules of the SEC, the compensation
described in this table does not include various perquisites and
other benefits received by a named executive officer which do
not exceed the lesser of $50,000 or 10% of that officers
salary and bonus disclosed in this table. |
|
(2) |
|
These amounts represent bonuses earned during the fiscal years
ended December 31, 2005, 2004 and 2003, respectively.
Annual bonuses earned during a fiscal year are paid in the first
quarter of the subsequent fiscal year. |
|
(3) |
|
Mr. Kammersgard was appointed as a director, our President
and Chief Executive Officer in March 2006. |
|
(4) |
|
Mr. Lambert retired as our Chief Executive Officer and Vice
Chairman in March 2006. |
|
(5) |
|
Mr. Romms bonus of $100,000 was paid in February of
2006 based on achievements in 2006. Mr. Romm resigned as
our Chief Financial Officer, Treasurer and Secretary in March
2006. |
Stock
Option Grants And Exercises
We grant stock options to our executive officers under our 2000
Equity Incentive Plan, or the 2000 Plan. As of March 1,
2006, options to purchase a total of 4,854,002 shares were
outstanding under the 2000 Plan, and a total of
603,112 shares remained available for grant under the 2000
Plan.
All stock options granted to our named executive officers are
incentive stock options, to the extent permissible under the
Code. Generally, 25% of the shares subject to options vest one
year from the date of hire and the remainder of the shares vest
in equal monthly installments over the 36 months
thereafter, subject to acceleration of vesting pursuant to the
change of control agreements described in Employment,
Severance and Change of Control Agreements. Options expire
ten years from the date of grant. The exercise price per share
of each option granted to our named executive officers was equal
to the fair market value of our common stock on the date of the
grant. The fair market value of our common stock on a given date
is deemed to be equal to the closing sales price for such stock
as reported on the Nasdaq on the last market trading day prior
to such date.
19
The following table provides information regarding grants of
options to purchase shares of our common stock to the named
executive officers in the fiscal year ended December 31,
2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individual Grants
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Total
|
|
|
|
|
|
|
|
|
Potential Realizable
|
|
|
|
Number of
|
|
|
Options
|
|
|
|
|
|
|
|
|
Value at Assumed Annual
|
|
|
|
Securities
|
|
|
Granted to
|
|
|
|
|
|
|
|
|
Rates of Stock Price
|
|
|
|
Underlying Options
|
|
|
Employees in
|
|
|
Exercise or Base
|
|
|
Expiration
|
|
|
Appreciation for Option
Term(2)
|
|
Name
|
|
Granted (#)
|
|
|
Fiscal Year(1)
|
|
|
Price ($/Sh)
|
|
|
Date
|
|
|
5% ($)
|
|
|
10% ($)
|
|
|
Dana W. Kammersgard
|
|
|
80,000
|
|
|
|
6.5
|
%
|
|
$
|
6.10
|
|
|
|
1/30/15
|
|
|
$
|
306,901
|
|
|
$
|
777,746
|
|
James L. Lambert(3)
|
|
|
245,000
|
|
|
|
19.8
|
|
|
|
6.10
|
|
|
|
1/30/15
|
|
|
|
939,883
|
|
|
|
2,381,848
|
|
Preston Romm(4)
|
|
|
90,000
|
|
|
|
7.3
|
|
|
|
6.10
|
|
|
|
1/30/15
|
|
|
|
345,263
|
|
|
|
874,965
|
|
|
|
|
(1) |
|
Based on 1,238,000 options granted during the fiscal year ended
December 31, 2005 under the 2000 Plan, including grants to
named executive officers. |
|
(2) |
|
Potential realizable values are computed by (a) multiplying
the number of shares of common stock subject to a given option
by the exercise price per share, (b) assuming that the
aggregate stock value derived from that calculation compounds at
the annual 5% or 10% rate shown in the table for the entire
ten-year term of the option and (c) subtracting from that
result the aggregate option exercise price. The 5% and 10%
assumed annual rates of stock price appreciation are mandated by
the rules of the SEC and do not represent our estimate or
projection of future common stock prices. |
|
(3) |
|
Mr. Lambert retired as our Chief Executive Officer and Vice
Chairman in March 2006. |
|
(4) |
|
Mr. Romm resigned as our Chief Financial Officer, Treasurer
and Secretary in March 2006. |
Aggregate
Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table provides information regarding the number of
shares of common stock subject to exercisable and unexercisable
stock options held as of December 31, 2005 by each of our
named executive officers. Certain options listed in the table
permit early exercise of unvested shares, in which case all
unvested shares are subject to repurchase by us.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
Value of Unexercised
|
|
|
|
|
|
|
|
|
|
Underlying Unexercised
|
|
|
In-the-Money
Options at
|
|
|
|
Shares Acquired
|
|
|
Value
|
|
|
Options at Fiscal
Year-End
|
|
|
Fiscal Year-End(1)
|
|
Name
|
|
on Exercise
|
|
|
Realized
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Dana W. Kammersgard
|
|
|
|
|
|
$
|
|
|
|
|
339,165
|
|
|
|
275,835
|
|
|
$
|
956,297
|
|
|
$
|
242,226
|
|
James L. Lambert(2)
|
|
|
|
|
|
|
|
|
|
|
475,374
|
|
|
|
285,626
|
|
|
|
1,267,902
|
|
|
|
358,944
|
|
Preston Romm(3)
|
|
|
|
|
|
|
|
|
|
|
323,916
|
|
|
|
117,084
|
|
|
|
897,435
|
|
|
|
178,431
|
|
|
|
|
(1) |
|
The value of an unexercised
in-the-money
option as of December 31, 2005 is equal to the excess of
the closing price of our common stock on December 30, 2005
(the last trading day of fiscal 2005) as reported on the
Nasdaq ($6.93) over the exercise price for the option,
multiplied by the number of shares subject to the option,
without taking into account any taxes that may be payable in
connection with the transaction. |
|
(2) |
|
Mr. Lambert retired as our Chief Executive Officer and Vice
Chairman in March 2006. On March 2, 2006, we entered into a
consulting letter agreement, effective as of March 1, 2006,
with Mr. Lambert. The vesting of all of
Mr. Lamberts stock options was accelerated in full in
connection with the consulting letter agreement, and such stock
options will continue to be exercisable during the consulting
period in accordance with their terms. |
|
(3) |
|
Mr. Romm resigned as our Chief Financial Officer, Treasurer
and Secretary in March 2006. |
20
Employment,
Severance and Change of Control Agreements
In August 1999, we entered into employment contracts with James
L. Lambert and Dana W. Kammersgard that provided for base
salaries during fiscal 2005 in the amounts of $400,000 and
$350,000, respectively. These employment contracts may be
terminated at the option of either us or the employee for
cause or, upon 30 days written notice, for
convenience and without cause. If we terminate for
convenience, the employee is entitled to a severance payment
equal to the employees then-current annual base salary. In
addition, following termination of employment other than due to
death or disability, we may hire the employee as a consultant
for a period of one year at a cost of 25% of the employees
then-current annual base salary, during which period the
employee may not engage in any business activities that directly
compete with our business. The agreements also provide for
indemnification of the employees, non-disclosure of our
confidential or proprietary information and health and dental
insurance for the employee, his spouse and his children under
the age of 21. Mr. Lamberts employment agreement
terminated in accordance with its terms upon his retirement in
March 2006.
In November 1999, we entered into an employment offer letter
with Preston Romm pursuant to which Mr. Romm became our
Chief Financial Officer. Mr. Romms employment
agreement provided for a base salary of $247,000 during fiscal
2005. Mr. Romms employment agreement may be
terminated by us or Mr. Romm at will. The agreement also
provides for non-disclosure of our confidential or proprietary
information and health and dental insurance for Mr. Romm,
his spouse and his children under the age of 21.
Mr. Romms employment agreement terminated in
accordance with its terms upon his resignation in March 2006.
Effective August 23, 2001, we entered into change of
control agreements with Messrs. Lambert, Kammersgard and
Romm. Under Mr. Lamberts change of control agreement,
in the event of an acquisition of Dot Hill or similar corporate
event, Mr. Lamberts then remaining unvested stock and
options will become fully vested and he will be entitled to a
lump sum cash payment equal to 150% of his annual base salary
then in effect, reduced by any severance payments payable under
his employment agreement. Mr. Romms change of control
agreement provides that, in the event of an acquisition of Dot
Hill or similar corporate event, Mr. Romms then
remaining unvested stock and options will become fully vested
and he will be entitled to a lump sum cash payment equal to 125%
of his annual base salary then in effect.
Mr. Lamberts and Mr. Romms change of
control agreements terminated in accordance with their terms
upon Mr. Lamberts retirement in March 2006 and
Mr. Romms resignation in March 2006, respectively.
Mr. Kammersgards change of control agreement provides
that if Mr. Kammersgards employment with us is
terminated, other than for cause, in connection with an
acquisition of Dot Hill or similar corporate event,
Mr. Kammersgards then remaining unvested stock and
options will become fully vested and he will be entitled to a
lump sum cash payment equal to 125% of his annual base salary
then in effect, reduced by any severance payments payable under
his employment agreement.
On February 3, 2005, the Chairman of the Compensation
Committee approved the 2005 Executive Compensation Plans, or the
2005 Compensation Plans, for our former Chief Executive Officer,
Mr. Lambert, President, Mr. Kammersgard, and former
Chief Financial Officer, Mr. Romm. Under the 2005
Compensation Plans, our former Chief Executive Officer,
President and former Chief Financial Officer were eligible to
receive bonuses in an amount to be calculated in accordance with
the terms of their respective 2005 Compensation Plan and
dependent on the satisfaction of certain conditions relating to
our revenues. In the case of our former Chief Executive Officer,
the target bonus was 80% of our former Chief Executive
Officers base salary. In the case of our President, the
target bonus was 70% of our Presidents base salary. In the
case of our former Chief Financial Officer, the target bonus was
50% of our former Chief Financial Officers base salary. In
addition, the 2005 Compensation Plans included base annual
salary increases for Mr. Lambert, from a base annual salary
of $385,000 to $400,000, for Mr. Kammersgard, from a base
annual salary of $330,000 to $350,000, and for Mr. Romm,
from a base annual salary of $225,000 to $247,000. In March
2006, Mr. Lambert retired as our Chief Executive Officer
and Vice Chairman and Mr. Romm resigned as our Chief
Financial Officer, Treasurer and Secretary.
In February 2006, we entered into an employment offer letter
with Patrick E. Collins pursuant to which Mr. Collins
became our Chief Operating Officer. Mr. Collins
employment agreement provided for a base salary of $350,000
during fiscal 2006. Mr. Collins employment agreement
may be terminated by us or Mr. Collins at will. The
agreement also provides for non-disclosure of our confidential
or proprietary information and health and dental insurance for
Mr. Collins, his spouse and his children under the age of
21.
21
On March 2, 2006, we entered into a consulting letter
agreement, effective as of March 1, 2006, with our former
Chief Executive Officer, Mr. Lambert. The consulting letter
agreement was approved by the Compensation Committee of our
Board of Directors on March 2, 2006. Pursuant to the
consulting letter agreement, Mr. Lambert will perform
consulting services for us during a three-year period beginning
as of March 1, 2006 for a consulting fee of $16,666 per
month. The vesting of all of Mr. Lamberts stock
options was accelerated in full in connection with the
consulting letter agreement, and such stock options will
continue to be exercisable during the consulting period in
accordance with their terms. Mr. Lambert will be restricted
from competing with us during the consulting period, and the
consulting period will terminate early upon an acquisition of
us, Mr. Lamberts election or Mr. Lamberts
death or permanent disability. In the event of any such early
termination, Mr. Lambert will receive a lump sum payment
equal to the amount he would have been eligible to receive if
the consulting period continued for the full original three-year
period.
On March 3, 2006, the Compensation Committee of our Board
of Directors approved the 2006 Executive Compensation Plan.
Pursuant to the 2006 Executive Compensation Plan, our President
and Chief Executive Officer, Mr. Kammersgard, our Chief
Operating Officer, Mr. Collins, our former Chief Financial
Officer, Mr. Romm, our Senior Vice President of Sales and
Marketing, Philip A. Davis, and our Senior Vice President of
Engineering, James Kuenzel, are each eligible to receive bonuses
in an amount to be calculated in accordance with the terms of
the 2006 Executive Compensation Plan and dependent 40% on
certain quarterly management business objectives, 50% on annual
financial results relating to revenue and operating income, and
10% on revenues associated with a certain customer. The target
2006 bonuses for Messrs. Kammersgard, Collins, Romm, Davis
and Kuenzel are 80%, 70%, 60%, 50% and 40%, respectively, of
their applicable base salaries. In addition, the 2006 Executive
Compensation Plan specifies 2006 base annual salaries, effective
January 1, 2006, for Messrs. Kammersgard, Collins,
Romm, Davis and Kuenzel of $367,500, $350,000, $259,350,
$242,000 and $225,000, respectively. Mr. Romm resigned as
our Chief Financial Officer in March 2006.
On April 6, 2006, we amended Mr. Kammersgards
change of control agreement and entered into change of control
agreements with Messrs. Collins and Davis.
Mr. Kammersgards amended change of control agreement
provides that, in the event of an acquisition of Dot Hill or
similar corporate event, Mr. Kammersgards then
remaining unvested stock and options will become fully vested
and he will be entitled to a lump sum cash payment equal to 125%
of his annual base salary then in effect, reduced by any
severance payments payable under his employment agreement.
Mr. Collins change of control agreement provides that
if Mr. Collins employment with us is terminated,
other than for cause, in connection with an acquisition of Dot
Hill or similar corporate event, Mr. Collins then
remaining unvested stock and options will become fully vested
and he will be entitled to a lump sum cash payment equal to 125%
of his annual base salary then in effect. Mr. Davis
change of control agreement provides that if
Mr. Davis employment with us is terminated, other
than for cause, in connection with an acquisition of Dot Hill or
similar corporate event, Mr. Davis then remaining
unvested stock and options will become fully vested and he will
be entitled to a lump sum cash payment equal to 125% of his
annual base salary then in effect.
On April 6, 2006, we entered into a severance agreement
with Mr. Burke that provides that if, within the next two
years, we terminate Mr. Burkes employment with us,
other than for cause, or Mr. Burke terminates his
employment with us for good reason, Mr. Burke will be
entitled to a single lump sum payment equal to six months of his
base salary as in effect at the time of such termination.
Pension
and Long-Term Incentive Plans
We have no pension plans or long-term incentive plans.
22
Report
of the Compensation Committee of the Board of Directors
on Executive Compensation
The material in this report is not soliciting
material, is not deemed filed with the
Securities and Exchange Commission, and is not to be
incorporated by reference into any filing of Dot Hill under the
Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended.
Introduction
The primary purpose of the Compensation Committee is to act on
behalf of our Board of Directors in overseeing our compensation
policies, plans and programs and determining the compensation to
be paid to our executive officers. The Compensation Committee
annually evaluates the performance, and determines the
compensation of, our Chief Executive Officer and our other
executive officers based upon a mix of the achievement of
corporate goals, individual performance and comparisons with
other companies in the storage industry.
The purpose of this report is to summarize the Compensation
Committees philosophy regarding executive compensation,
explain the elements of our executive compensation structure,
and describe the basis upon which the Compensation Committee
determined the compensation of our Chief Executive Officer for
the fiscal year ended December 31, 2005.
Compensation
Philosophy
The objectives of our executive compensation arrangements are to
attract, motivate and retain the services of key management and
to align the interests of our executives with those of our
stockholders. The Compensation Committee endeavors to accomplish
these by:
|
|
|
|
|
establishing compensation arrangements that are adequate to
attract, motivate and retain the services of key management
personnel and that deliver compensation commensurate with our
performance, as measured against the achievement of operating,
financial and strategic objectives and taking into account
competitive compensation practices in the industry,
|
|
|
|
providing significant equity-based incentives for our executives
to ensure that they are motivated over the long term to respond
to our business challenges and opportunities as owners rather
than solely as employees, and
|
|
|
|
rewarding our executives if stockholders receive an
above-average return on their investment over the long term.
|
Elements
of Executive Compensation
A portion of the our annual executive compensation program is
determined on the basis of corporate performance. Our current
executive compensation mix generally consists of an annual base
salary, which in the Compensation Committees opinion is
adequate under the circumstances to retain the services of the
executive, a cash bonus based on Dot Hill and individual
performance and stock options that are intended to provide
long-term incentives tied to increases in the value of our
common stock. Executive officers are also entitled to
participate in benefit plans generally available to all
full-time employees.
Base Salary. The Compensation Committee
establishes the annual base salary for our executive officers in
line with their responsibilities and with external market
practices. To provide the Compensation Committee with more
information for making compensation comparisons, we obtain and
consider, from time to time, third party, nationally recognized
surveys that include a broader group of companies than those
companies included in the peer groups shown on our Performance
Measurement Comparison Graph. Based on such surveys, the
Compensation Committee generally seeks to establish executive
officer salaries in the mid-range as compared to other surveyed
companies. When setting each officers compensation, the
Compensation Committee also considers the level of
responsibility, experience, individual contributions and
performance, and overall performance of Dot Hill. The 2005
compensation of our executive officers was set by the
Compensation Committee after consideration of the factors
discussed above.
23
Annual Bonuses. Annual bonuses are awarded to
our executives in accordance with the executive compensation
plan for the year as established by the Compensation Committee.
Under our 2005 Executive Compensation Plans, our Chief Executive
Officer, President and Chief Financial Officer were eligible to
receive bonuses in an amount to be calculated in accordance with
the terms of their respective plan and dependent on the
satisfaction of certain conditions relating to our revenues. The
target bonuses were 80% of our Chief Executive Officers
base salary, 70% of our Presidents base salary and 50% of
our Chief Financial Officers base salary. Pursuant to our
2006 Executive Compensation Plan, our President and Chief
Executive Officer, Chief Operating Officer, former Chief
Financial Officer, Senior Vice President of Sales and Marketing
and our Senior Vice President of Engineering are each eligible
to receive bonuses in an amount to be calculated in accordance
with the terms of our 2006 Executive Compensation Plan and
dependent 40% on certain quarterly management business
objectives, 50% on annual financial results relating to revenue
and operating income, and 10% on revenues associated with a
certain customer. The target 2006 bonuses for our President and
Chief Executive Officer, Chief Operating Officer, former Chief
Financial Officer, Senior Vice President of Sales and Marketing
and our Senior Vice President of Engineering are 80%, 70%, 60%,
50% and 40%, respectively, of their applicable base salaries.
Long-Term Incentives. Long-term incentives are
provided to executives through the 2000 Equity Incentive Plan.
Grants under the 2000 Equity Incentive Plan generally have a
term of 10 years and are tied to the market valuation of
our common stock, thereby providing an additional incentive for
executives to build stockholder value. In addition, grants are
generally subject to vesting over four years, with vesting tied
to continued employment. Executives receive value from this plan
only if our common stock appreciates accordingly. This component
is intended to retain and motivate executives to improve
long-term stock market performance. Additional long-term
incentives are provided through our 2000 Employee Stock Purchase
Plan in which all eligible employees may invest up to 15% of
their annual compensation. In January 2005, the Compensation
Committee granted options to purchase 245,000, 80,000 and
90,000 shares of common stock to Messrs. Lambert,
Kammersgard and Romm. In addition in March 2006, the
Compensation Committee granted options to purchase 150,000,
125,000 and 100,000 shares of common stock to
Messrs. Kammersgard, Romm and Davis.
The Compensation Committee subjectively determines option grant
levels to our executive officers after considering the practices
of other, similar companies based on information from the
surveys referred to above. The Compensation Committee generally
targets stock option awards that result in equity positions in
the mid-range relative to other surveyed companies. In making
stock option award determinations, the Compensation Committee
considers the amount and terms (such as vesting) of options and
restricted stock held by each executive officer, the overall
performance of Dot Hill, as well as the level of responsibility,
experience, individual contributions and performance of each
executive officer.
Chief
Executive Officer Compensation
The Compensation Committee uses the same procedures described
above for all executive officers in setting base salary, annual
bonus and long-term incentive awards for our Chief Executive
Officer. The base salary of James L. Lambert, our former Chief
Executive Officer, was $400,000 for the fiscal year ended
December 31, 2005, an increase of $15,000 from his base
salary for the prior year. Additionally, Mr. Lambert
received stock options to purchase 245,000 shares of our
common stock at an exercise price of $6.10 per share during
the fiscal year ended December 31, 2005. Mr. Lambert
was not granted an annual bonus for the fiscal year ended
December 31, 2005 and has did not receive any stock options
during 2006. Mr. Lambert retired as our Chief Executive
Officer and Vice Chairman in March 2006.
Section 162(m)
Compliance
Section 162(m) of the Internal Revenue Code generally
prohibits us from deducting any compensation over
$1 million per taxable year paid to any of our named
executive officers unless such compensation is treated as
performance-based compensation within the meaning of
the Internal Revenue Code. As the cash compensation paid by us
to our named executive officers is expected to be below
$1 million and the Compensation Committee believes that
stock options granted under the Incentive Plan to our named
executive officers meet the requirements for treatment as
performance-based compensation, the Compensation Committee
believes that Section 162(m) will not affect the tax
deductions available to Dot Hill with respect to the
compensation of its executives. In determining
24
the form and amount of compensation for our named executive
officers, the Compensation Committee will continue to consider
all elements of the cost of such compensation, including the
potential impact of Section 162(m).
Compensation Committee
Joseph Markee, Chairman
Charles Christ
25
Report
of the Audit Committee of the Board of Directors
The material in this report is not soliciting
material, is not deemed filed with the
Securities and Exchange Commission, and is not to be
incorporated by reference into any filing of Dot Hill under the
Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended.
The purpose of the Audit Committee is to assist the Board in its
general oversight of our financial reporting, internal controls
and audit functions. The Audit Committee charter describes in
greater detail the full responsibilities of the Audit Committee.
During 2005, the members of the Audit Committee were Charles
Christ, Norman Farquhar and Joseph Markee. The Board has
determined that all members of the Audit Committee are
independent (as independence for audit committee members is
currently defined in Rule 4350(d)(2)(A)(i) and (ii) of
the Nasdaq listing standards).
Management is responsible for the financial statements and
reporting process, including the system of internal controls.
Our independent auditors are responsible for performing an audit
of our financial statements and expressing an opinion as to
their conformity with generally accepted accounting principles.
The Audit Committee oversees and reviews these processes and has
reviewed and discussed the financial statements with management
and our independent auditors. The Audit Committee is not,
however, employed by us, nor does it provide any expert
assurance or professional certification regarding our financial
statements. The Audit Committee relies, without independent
verification, on the accuracy and integrity of the information
provided, and representations made, by management and our
independent accountants.
In discharging its oversight responsibility as to the audit
process, the Audit Committee obtained from the independent
accountants a formal written statement describing all
relationships between the accountants and us that might bear on
the accountants independence consistent with Independence
Standards Board Standard No. 1, Independence
Discussions with Audit Committees. The Audit Committee
discussed with the independent accountants any relationships
that may impact their objectivity and independence, including
fees paid relating to the audit and any non-audit services
performed, and satisfied itself as to that firms
independence.
The Audit Committee discussed and reviewed with the independent
accountants all communications required by generally accepted
accounting standards, including those described in Statement on
Auditing Standards No. 61, as amended, Communication
with Audit Committees. In addition, the Audit Committee,
with and without management present, discussed and reviewed the
scope, plan and results of the independent accountants
examination of the financial statements. Based upon the Audit
Committees discussion with management and the independent
accountants and the Audit Committees review of the
representation of management and the report of the independent
accountants to the Audit Committee, subject to the limitations
on the role and responsibility of the Audit Committee referred
to in the written charter of the Audit Committee, the Audit
Committee recommended to the Board that the audited financial
statements be included in our Annual Report on
Form 10-K
for the year ended December 31, 2005 for filing with the
SEC. The Audit Committee also approved the selection, subject to
stockholder ratification, of the independent accountants and the
Board concurred in such authorization.
Audit Committee
Charles Christ
Joseph Markee
26
Compensation
Committee Interlocks and Insider Participation
As indicated above, during 2005 the Compensation Committee
consisted of Messrs. Christ, Farquhar and Markee. No member
of the Compensation Committee has ever been an officer or
employee of ours. None of our executive officers currently
serves, or has served during the last completed fiscal year, on
the Compensation Committee or board of directors of any other
entity that has one or more executive officers serving as a
member of our Board of Directors or Compensation Committee.
Performance
Measurement Comparison
The material in this section is not soliciting
material, is not deemed filed with the
Securities and Exchange Commission, and is not to be
incorporated by reference into any filing of Dot Hill under the
Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended.
The following graph shows the total stockholder return of an
investment of $100 in cash on December 31, 2000 for
(i) our common stock, (ii) the Standards &
Poors 500 Index (S&P 500), (iii) the common stock
of a new peer group of issuers and (iv) the common stock of
an old peer group of issuers. The new peer group of issuers
consists of the following 9 companies: Advanced Digital
Info Corp.; EMC Corp.; LSI Logic Corp.; Network Appliance, Inc.;
Overland Data, Inc.; Quantum Corp.; Qualstar Corp.; and Xyratex
Limited. The old peer group of issuers consists of the following
10 companies: Adaptec, Inc.; Advanced Digital Info Corp.;
EMC Corp.; Emulex Corp.; LSI Logic Corp.; MTI Technology Corp.;
Network Appliance, Inc.; Overland Data, Inc.; Procom Technology
Inc.; Qlogic Corp.; and Xyratex Limited. The graph assumes that
all dividends have been reinvested (to date, we have not
declared any dividends).
COMPARISON
OF 5 YEAR CUMULATIVE TOTAL RETURN AMONG
DOT HILL SYSTEMS CORP., THE S & P 500 INDEX, THE NASDAQ
STOCK MARKET (U.S.) INDEX,
A NEW PEER GROUP AND AN OLD PEER GROUP
27
Certain
Transactions
During the fiscal year ended December 31, 2005, we granted
options to purchase an aggregate of 545,000 shares of our
common stock to our directors and executive officers, with
exercise prices ranging from $5.20 to $6.92.
Our bylaws provide that we will indemnify our directors and
executive officers, and may indemnify other officers, employees
and other agents, to the fullest extent permitted by law. Our
bylaws also permit us to secure insurance on behalf of any
officer, director, employee or other agent for any liability
arising out of his or her actions in connection with their
services to us, regardless of whether our bylaws permit such
indemnification. We have obtained a policy of directors
and officers liability insurance.
We have entered, and intend to continue to enter, into
indemnification agreements with our directors and executive
officers, in addition to the indemnification provided for in our
bylaws. These agreements, among other things, require us to
indemnify our directors and executive officers for certain
expenses, including attorneys fees, judgments, fines and
settlement amounts incurred by a director or executive officer
in any action or proceeding arising out of their services as one
of our directors or executive officers, or any of our
subsidiaries or any other company or enterprise to which the
person provides services at our request.
Please see Employment, Severance and Change of Control
Agreements.
Householding
of Proxy Materials
The SEC has adopted rules that permit companies and
intermediaries (e.g., brokers, banks or other agents) to satisfy
the delivery requirements for proxy statements and annual
reports with respect to two or more stockholders sharing the
same address by delivering a single proxy statement addressed to
those stockholders. This process, which is commonly referred to
as householding, potentially means extra convenience
for stockholders and cost savings for companies.
This year, a number of broker, banks or other agents with
account holders who are stockholders of Dot Hill will be
householding our proxy materials. A single proxy
statement will be delivered to multiple stockholders sharing an
address unless contrary instructions have been received from the
affected stockholders. Once you have received notice from your
broker, bank or other agent that it will be
householding communications to your address,
householding will continue until you are notified
otherwise or until you revoke your consent. If, at any time, you
no longer wish to participate in householding and
would prefer to receive a separate proxy statement and annual
report, please notify your broker, bank or other agent, and
direct a written request for the separate proxy statement and
annual report to 2200 Faraday Avenue, Suite 100, Carlsbad,
California 92008, Attn: Kirsten Garvin, or contact
Ms. Garvin at
(760) 476-3811.
Stockholders whose shares are held by their broker, bank or
other agent as nominee and who currently receive multiple copies
of the proxy statement at their address that would like to
request householding of their communications should
contact their broker, bank or other agent.
Other
Matters
Our Board of Directors knows of no other matters that will be
presented for consideration at the annual meeting. If any other
matters are properly brought before the meeting, it is the
intention of the persons named in the accompanying proxy to vote
on such matters in accordance with their best judgment.
By Order of the Board of Directors
Dana W. Kammersgard
President and Chief Executive Officer
Carlsbad, California
April 11, 2006
A copy of our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2005 filed with the
SEC is available without charge upon written request to: 2200
Faraday Avenue, Suite 100, Carlsbad, California 92008,
Attn: Secretary.
28
APPENDIX A
DOT HILL SYSTEMS CORP.
2000 AMENDED AND RESTATED NON-EMPLOYEE DIRECTORS
STOCK OPTION PLAN
Adopted by the Board of Directors March 9, 2000
Approved By Stockholders May 8, 2000
Amendment and Restatement Adopted by the Board of Directors
July 25, 2005 and April 6, 2006
Amendment and Restatement Approved By Stockholders
May , 2006
Effective Date: April 6, 2006
Termination Date: April 5, 2016
1. Purposes.
(a) Eligible Option Recipients. The
persons eligible to receive Options are the Non-Employee
Directors of the Company.
(b) Available Options. The purpose of the
Plan is to provide a means by which Non-Employee Directors may
be given an opportunity to benefit from increases in value of
the Common Stock through the granting of Nonstatutory Stock
Options.
(c) General Purpose. The Company, by
means of the Plan, seeks to retain the services of its
Non-Employee Directors, to secure and retain the services of new
Non-Employee Directors and to provide incentives for such
persons to exert maximum efforts for the success of the Company
and its Affiliates.
2. Definitions.
(a) Affiliate means any
parent corporation or subsidiary corporation of the Company,
whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(b) Annual Grant means an Option
granted pursuant to subsection 6(b) of the Plan.
(c) Annual Meeting means the
annual meeting of the stockholders of the Company.
(d) Board means the Board
of Directors of the Company.
(e) Code means the
Internal Revenue Code of 1986, as amended.
(f) Common Stock means the
common stock of the Company.
(g) Company means Dot Hill
Systems Corp., a Delaware corporation.
(h) Consultant means any
person, including an advisor, engaged by the Company or an
Affiliate to render consulting or advisory services and who is
compensated for such services. A person shall not be deemed a
Consultant solely by reason of the performance of
services as a Director
and/or the
payment of compensation in relation thereto.
(i) Continuous Service
means that the Optionholders service with the Company as a
Non-Employee Director is not interrupted or terminated. The
Optionholders Continuous Service in any event shall not be
deemed to have been interrupted or terminated by reason of a
change in the capacity in which the Optionholder renders service
to the Company or an Affiliate of the Company. For example, a
change in status from a Non-Employee Director to an Employee or
Consultant will not constitute an interruption or termination of
Continuous Service. The Board, in its sole discretion, may
determine whether Continuous Service shall be considered
interrupted or terminated in the case of any leave of absence
approved by the Board, including sick leave, military leave or
any other personal leave.
(j) Director means a
member of the Board of Directors of the Company.
(k) Disability means the
permanent and total disability of a person within the meaning of
Section 22(e)(3) of the Code.
A-1
(l) Employee means any
person employed by the Company or an Affiliate. Service as a
Director
and/or
payment of compensation in relation thereto, in and of itself,
shall not be sufficient to constitute employment by
the Company or an Affiliate.
(m) Exchange Act means the
Securities Exchange Act of 1934, as amended.
(n) Fair Market Value
means, as of any date, the value of the Common Stock determined
as follows:
(i) If the Common Stock is listed on any established
stock exchange, such as the New York Stock Exchange, or traded
on the Nasdaq National Market or the Nasdaq SmallCap Market, the
Fair Market Value of a share of Common Stock shall be the
closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such exchange or market (or
the exchange or market with the greatest volume of trading in
the Common Stock) on the last market trading day prior to the
day of determination, as reported in The Wall Street Journal or
such other source as the Board deems reliable.
(ii) In the absence of such markets for the Common
Stock, the Fair Market Value shall be determined in good faith
by the Board.
(o) Initial Grant means an
Option granted pursuant to section 6(a) of the Plan.
(p) Non-Employee Director
means a Director who is not an Employee.
(q) Nonstatutory Stock
Option means an Option not intended to qualify as
an incentive stock option within the meaning of
Section 422 of the Code and the regulations promulgated
thereunder.
(r) Option means a
Nonstatutory Stock Option granted pursuant to the Plan.
(s) Option Agreement means
a written agreement between the Company and an Optionholder
evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and
conditions of the Plan.
(t) Optionholder means a
person to whom an Option is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Option.
(u) Plan means this Dot
Hill Systems Corp. 2000 Non-Employee Directors Stock
Option Plan.
(v) Rule 16b-3
means
Rule 16b-3
promulgated under the Exchange Act or any successor to
Rule 16b-3,
as in effect from time to time.
(w) Securities Act means
the Securities Act of 1933, as amended.
3. Administration.
(a) Administration by Board. The Board
shall administer the Plan. The Board may not delegate
administration of the Plan to a committee.
(b) Powers of Board. The Board shall have
the power, subject to, and within the limitations of, the
express provisions of the Plan:
(i) To determine the provisions of each Option to
the extent not specified in the Plan.
(ii) To construe and interpret the Plan and Options
granted under it, and to establish, amend and revoke rules and
regulations for its administration. The Board, in the exercise
of this power, may correct any defect, omission or inconsistency
in the Plan or in any Option Agreement, in a manner and to the
extent it shall deem necessary or expedient to make the Plan
fully effective.
(iii) To amend the Plan or an Option as provided in
Section 12.
(iv) Generally, to exercise such powers and to
perform such acts as the Board deems necessary or expedient to
promote the best interests of the Company that are not in
conflict with the provisions of the Plan.
A-2
(c) Effect of Boards Decision. All
determinations, interpretations and constructions made by the
Board in good faith shall not be subject to review by any person
and shall be final, binding and conclusive on all persons.
4. Shares Subject
to the Plan.
(a) Share Reserve. Subject to the
provisions of Section 11 relating to adjustments upon
changes in the Common Stock, the Common Stock that may be issued
pursuant to Options shall not exceed in the aggregate one
million (1,00,000) shares of Common Stock.
(b) Reversion of Shares to the Share
Reserve. If any Option shall for any reason
expire or otherwise terminate, in whole or in part, without
having been exercised in full, the shares of Common Stock not
acquired under such Option shall revert to and again become
available for issuance under the Plan.
(c) Source of Shares. The shares of
Common Stock subject to the Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.
5. Eligibility.
Options shall automatically be granted under the Plan to
Non-Employee Directors in accordance with Section 6.
6. Non-Discretionary
Grants.
(a) Initial Grants. Without any further
action of the Board, each person who, at any time after the
Companys 2005 Annual Meeting, is duly elected or appointed
by the Board of Directors or stockholders of the Company to
serve as a Non-Employee Director and who, for at least one
(1) year preceding such election or appointment has at no
time served as a Non-Employee Director, shall, effective as of
the effective date of such election or appointment,
automatically be granted an option to purchase fifty thousand
(50,000) shares of Common Stock on the terms and conditions set
forth in this Plan. Termination of a Directors status as
an Employee shall not result in an Initial Grant to such
Director pursuant to this Subsection 6(a).
(b) Annual Grants. Without any further
action of the Board, each person who, immediately following each
Annual Meeting commencing with the 2006 Annual Meeting, is a
Non-Employee Director and who has been a Non-Employee Director
for at least four (4) months prior to such Annual Meeting
shall, effective as of the date of such Annual Meeting,
automatically be granted an option to purchase twenty thousand
(20,000) shares of Common Stock on the terms and conditions set
forth in this Plan.
7. Option
Provisions.
Each Option shall be in such form and shall contain such terms
and conditions as required by the Plan. Each Option shall
contain such additional terms and conditions, not inconsistent
with the Plan, as the Board shall deem appropriate. Each Option
shall include (through incorporation of provisions hereof by
reference in the Option or otherwise) the substance of each of
the following provisions:
(a) Term. No Option shall be exercisable
after the expiration of ten (10) years from the date it was
granted.
(b) Exercise Price. The exercise price of
each Option shall be one hundred percent (100%) of the Fair
Market Value of the stock subject to the Option on the date the
Option is granted. Notwithstanding the foregoing, an Option may
be granted with an exercise price lower than that set forth in
the preceding sentence if such Option is granted pursuant to an
assumption or substitution for another option in a manner
satisfying the provisions of Section 424(a) of the Code.
(c) Consideration. The purchase price of
stock acquired pursuant to an Option may be paid, to the extent
permitted by applicable statutes and regulations, in any
combination of the following methods:
(i) By cash or check.
A-3
(ii) Provided that at the time of exercise the
Common Stock is publicly traded and quoted regularly in The
Wall Street Journal, by delivery of already-owned shares of
Common Stock either that the Optionholder has held for the
period required to avoid a charge to the Companys reported
earnings (generally six months) or that the Optionholder did not
acquire, directly or indirectly from the Company, that are owned
free and clear of any liens, claims, encumbrances or security
interests, and that are valued at Fair Market Value on the date
of exercise. Delivery for these purposes shall
include delivery to the Company of the Optionholders
attestation of ownership of such shares of Common Stock in a
form approved by the Company. Notwithstanding the foregoing, the
Optionholder may not exercise the Option by tender to the
Company of Common Stock to the extent such tender would violate
the provisions of any law, regulation or agreement restricting
the redemption of the Companys stock.
(iii) Provided that at the time of exercise the
Common Stock is publicly traded and quoted regularly in The
Wall Street Journal, pursuant to a program developed under
Regulation T as promulgated by the Federal Reserve Board
that, prior to the issuance of Common Stock, results in either
the receipt of cash (or check) by the Company or the receipt of
irrevocable instructions to pay the aggregate exercise price to
the Company from the sales proceeds.
(iv) Pursuant to the following deferred payment
provisions:
(1) One hundred percent (100%) of the aggregate exercise
price, plus accrued interest, shall be due four (4) years
from date of exercise or upon termination of your Continuous
Service.
(2) Interest shall be compounded annually and shall be
charged at the minimum rate of interest necessary to avoid the
treatment as interest, under any applicable provisions of the
Code, of any portion of any amounts other than amounts stated to
be interest under the deferred payment arrangement.
(3) At any time that the Company is incorporated in
Delaware, payment of the Common Stocks par
value, as defined in the Delaware General Corporation Law,
shall be made in cash and not by deferred payment.
(4) The Optionholder must, as a part of his or her written
notice of exercise, give notice of the election of this payment
alternative and must tender to the Company a promissory note and
a security agreement covering the purchased shares of Common
Stock, both in form and substance satisfactory to the Company,
or such other or additional documentation as the Company may
request.
(d) Transferability. An Option is
transferable by will or by the laws of descent and distribution.
Subject to this Subsection 7(d), an Option also is
transferable (i) by instrument to an inter vivos or
testamentary trust, in a form accepted by the Company, in which
the Option is to be passed to beneficiaries upon the death of
the trustor (settlor), and (ii) by gift, in a form accepted
by the Company, to a member of the immediate family
of the Optionholder as that term is defined in 17 C.F.R.
240.16a-1(e).
An Option shall be exercisable during the lifetime of the
Optionholder only by the Optionholder and a permitted transferee
as provided herein. However, the Optionholder may, by delivering
written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death
of the Optionholder, shall thereafter be entitled to exercise
the Option. Any transfer by an Optionholder or permitted
transferee as provided under this Subsection 7(d), shall be
subject to (i) the Companys obligation, if any, to
execute and file with the Securities and Exchange Commission a
Registration Statement on
Form S-8
or such appendices or amendments to the Companys
Registration Statement on
Form S-8
currently on file as may be necessary or appropriate for the
Companys compliance thereof, and (ii) any rules and
regulations, restrictions or limitations on the rights of
transfer promulgated under the Exchange Act or Securities Act.
(e) Vesting Schedule. Options shall vest
as follows:
(i) Initial Grants shall vest (become exercisable)
over a period of four (4) years with twelve thousand five
hundred (12,500) of the shares of Common Stock subject to each
Initial Grant vesting as of twelve (12) months after the
date of the grant thereof, and an additional one thousand
forty-one (1,041) of the shares of Common Stock subject to such
Initial Grant vesting each month thereafter over the three
A-4
(3) year period following such initial twelve
(12) months (with one thousand sixty-five (1,065) shares
vesting as of the 36th such month).
(ii) Annual Grants shall be fully vested as of the
date of grant.
(f) Early Exercise. If applicable,
Options shall include a provision whereby the Optionholder may
elect at any time before the Optionholders Continuous
Service terminates to exercise the Option as to any part or all
of the shares of Common Stock subject to the Option prior to the
full vesting of the Option. Any unvested shares of Common Stock
so purchased shall be subject to a repurchase option in favor of
the Company to the extent such Option was unvested when
exercised and which corresponds with the vesting schedule
applicable to such unvested shares.
(g) Termination of Continuous Service. In
the event an Optionholders Continuous Service terminates
(other than upon the Optionholders death or Disability),
the Optionholder may exercise his or her Option (to the extent
that the Optionholder was entitled to exercise it as of the date
of termination) but only within such period of time ending on
the earlier of (i) the date three (3) months following
the termination of the Optionholders Continuous Service
(or such longer or shorter prior specified in the Option
Agreement), or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. If, after
termination, the Optionholder does not exercise his or her
Option within the time specified in the Option Agreement, the
Option shall terminate.
(h) Extension of Termination Date. If the
exercise of the Option following the termination of the
Optionholders Continuous Service (other than upon the
Optionholders death or Disability) would be prohibited at
any time solely because the issuance of shares would violate the
registration requirements under the Securities Act, then the
Option shall terminate on the earlier of (i) the expiration
of the term of the Option set forth in subsection 7(a) or
(ii) the expiration of a period of three (3) months
after the termination of the Optionholders Continuous
Service during which the exercise of the Option would not be in
violation of such registration requirements.
(i) Disability of Optionholder. In the
event an Optionholders Continuous Service terminates as a
result of the Optionholders Disability, the Optionholder
may exercise his or her Option (to the extent that the
Optionholder was entitled to exercise it as of the date of
termination), but only within such period of time ending on the
earlier of (i) the date twelve (12) months following
such termination (or such longer or shorter period specified in
the Option Agreement), or (ii) the expiration of the term
of the Option as set forth in the Option Agreement. If, after
termination, the Optionholder does not exercise his or her
Option within the time specified herein, the Option shall
terminate.
(j) Death of Optionholder. In the event
(i) an Optionholders Continuous Service terminates as
a result of the Optionholders death, or (ii) the
Optionholder dies within the three-month period after the
termination of the Optionholders Continuous Service for a
reason other than death, then the Option may be exercised (to
the extent the Optionholder was entitled to exercise the Option
as of the date of death) by the Optionholders estate, by a
person who acquired the right to exercise the Option by bequest
or inheritance or by a person designated to exercise the Option
upon the Optionholders death, but only within the period
ending on the earlier of (1) the date eighteen
(18) months following the date of death (or such longer or
shorter period specified in the Option Agreement), or
(2) the expiration of the term of such Option as set forth
in the Option Agreement. If, after death, the Option is not
exercised within the time specified herein, the Option shall
terminate.
8. Covenants
of the Company.
(a) Availability of Shares. During the
terms of the Options, the Company shall keep available at all
times the number of shares of Common Stock required to satisfy
such Options.
(b) Securities Law Compliance. The
Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may
be required to grant Options and to issue and sell shares of
Common Stock upon exercise of the Options; provided, however,
that this undertaking shall not require the Company to
register under the Securities Act the Plan, any Option or any
stock issued or issuable
A-5
pursuant to any such Option. If, after reasonable efforts, the
Company is unable to obtain from any such regulatory commission
or agency the authority which counsel for the Company deems
necessary for the lawful issuance and sale of stock under the
Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such Options
unless and until such authority is obtained.
9. Use
of Proceeds from Stock.
Proceeds from the sale of stock pursuant to Options shall
constitute general funds of the Company.
10. Miscellaneous.
(a) Stockholder Rights. No Optionholder
shall be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to such
Option unless and until such Optionholder has satisfied all
requirements for exercise of the Option pursuant to its terms.
(b) No Service Rights. Nothing in the
Plan or any instrument executed or Option granted pursuant
thereto shall confer upon any Optionholder any right to continue
to serve the Company as a Non-Employee Director or shall affect
the right of the Company or an Affiliate to terminate
(i) the employment of an Employee with or without notice
and with or without cause, (ii) the service of a Consultant
pursuant to the terms of such Consultants agreement with
the Company or an Affiliate, or (iii) the service of a
Director pursuant to the Bylaws of the Company or an Affiliate,
and any applicable provisions of the corporate law of the state
in which the Company or the Affiliate is incorporated, as the
case may be.
(c) Investment Assurances. The Company
may require an Optionholder, as a condition of exercising or
acquiring stock under any Option, (i) to give written
assurances satisfactory to the Company as to the
Optionholders knowledge and experience in financial and
business matters
and/or to
employ a purchaser representative reasonably satisfactory to the
Company who is knowledgeable and experienced in financial and
business matters and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits
and risks of exercising the Option; and (ii) to give
written assurances satisfactory to the Company stating that the
Optionholder is acquiring the stock subject to the Option for
the Optionholders own account and not with any present
intention of selling or otherwise distributing the stock. The
foregoing requirements, and any assurances given pursuant to
such requirements, shall be inoperative if (iii) the
issuance of the shares upon the exercise or acquisition of stock
under the Option has been registered under a then currently
effective registration statement under the Securities Act, or
(iv) as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities
laws. The Company may, upon advice of counsel to the Company,
place legends on stock certificates issued under the Plan as
such counsel deems necessary or appropriate in order to comply
with applicable securities laws, including, but not limited to,
legends restricting the transfer of the stock.
(d) Withholding Obligations. The
Optionholder may satisfy any federal, state or local tax
withholding obligation relating to the exercise or acquisition
of stock under an Option by any of the following means (in
addition to the Companys right to withhold from any
compensation paid to the Optionholder by the Company) or by a
combination of such means: (i) tendering a cash payment;
(ii) authorizing the Company to withhold shares from the
shares of the Common Stock otherwise issuable to the
Optionholder as a result of the exercise or acquisition of stock
under the Option, provided, however, that no shares of
Common Stock are withheld with a value exceeding the minimum
amount of tax required to be withheld by law; or
(iii) delivering to the Company owned and unencumbered
shares of the Common Stock.
11. Adjustments
upon Changes in Stock.
(a) Capitalization Adjustments. If any
change is made in the stock subject to the Plan, or subject to
any Option, without the receipt of consideration by the Company
(through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating dividend,
combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities
subject both to the Plan pursuant to subsection 4(a) and to
A-6
the nondiscretionary Options specified in Section 6, and
the outstanding Options will be appropriately adjusted in the
class(es) and number of securities and price per share of stock
subject to such outstanding Options. The Board shall make such
adjustments, and its determination shall be final, binding and
conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a transaction without
receipt of consideration by the Company.)
(b) Dissolution or Liquidation. In the
event of a dissolution or liquidation of the Company, then all
outstanding Options shall terminate immediately prior to such
event.
(c) Asset Sale, Merger, Consolidation or Reverse
Merger. In the event of (i) a sale, lease or
other disposition of all or substantially all of the assets of
the Company; (ii) a merger or consolidation in which the
Company is not the surviving entity and in which the holders of
the Companys outstanding voting stock immediately prior to
such transaction own, immediately after such transaction,
securities representing less than fifty percent (50%) of the
voting power of the entity surviving such transaction or, where
the surviving entity is a wholly-owned subsidiary of another
entity, the surviving entitys parent; or (iii) a
reverse merger in which the Company is the surviving entity but
the shares of Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other
property, whether in the form of securities of the surviving
entitys parent, cash or otherwise, and in which the
holders of the Companys outstanding voting stock
immediately prior to such transaction own, immediately after
such transaction, securities representing less than fifty
percent (50%) of the voting power of the Company or, where the
Company is a wholly-owned subsidiary of another entity, the
Companys parent (each, individually, a Change in
Control), then with respect to Options held by
Optionholders whose Continuous Service has not terminated, the
vesting of such Options (and, if applicable, the time during
which such Options may be exercised) shall be accelerated in
full, and the Options shall terminate if not exercised (if
applicable) at or prior to such event. With respect to any other
Options held by Optionholders whose Continuous Service has
terminated, such Options shall terminate immediately if not
exercised prior to such event.
(d) Parachute Payments. If any payment or
benefit the Optionholder would receive pursuant to this Stock
Option Agreement in connection with a Change in Control
(Payment) would (i) constitute a
parachute payment within the meaning of
Section 280G of the Code, and (ii) but for this
sentence, be subject to the excise tax imposed by
Section 4999 of the Code (the Excise Tax), then
such Payment shall be reduced to the Reduced Amount. The
Reduced Amount shall be either (x) the largest
portion of the Payment that would result in no portion of the
Payment being subject to the Excise Tax or (y) the largest
portion, up to and including the total, of the Payment,
whichever amount, after taking into account all applicable
federal, state and local employment taxes, income taxes, and the
Excise Tax (all computed at the highest applicable marginal
rate), results in the Optionholders receipt, on an
after-tax basis, of the greater amount of the Payment
notwithstanding that all or some portion of the Payment may be
subject to the Excise Tax. If a reduction in payments or
benefits constituting parachute payments is
necessary so that the Payment equals the Reduced Amount,
reduction shall occur in the following order unless the
Optionholder elects in writing a different order: reduction of
cash payments; cancellation of accelerated vesting of stock or
other equity based awards; reduction of employee benefits. In
the event that acceleration of vesting of stock or other
equity-based award compensation is to be reduced, such
acceleration of vesting shall be cancelled in the reverse order
of the date of grant of the Optionholders stock or other
equity-based awards unless the Optionholder elects in writing a
different order for cancellation.
The accounting firm engaged by the Company for general audit
purposes as of the day prior to the effective date of the Change
in Control shall perform the foregoing calculations. If the
accounting firm so engaged by the Company is serving as
accountant or auditor for the individual, entity or group
effecting the Change in Control, the Company shall appoint a
nationally recognized accounting firm to make the determinations
required hereunder. The Company shall bear all expenses with
respect to the determinations by such accounting firm required
to be made hereunder.
The accounting firm engaged to make the determinations hereunder
shall provide its calculations, together with detailed
supporting documentation, to the Optionholder and the Company
within fifteen (15) calendar days after the date on which
the Optionholders right to a Payment is triggered (if
requested
A-7
at that time by the Optionholder or the Company) or such other
time as requested by the Optionholder or the Company. If the
accounting firm determines that no Excise Tax is payable with
respect to a Payment, either before or after the application of
the Reduced Amount, it shall furnish the Company and the
Optionholder with an opinion reasonably acceptable to the
Optionholder that no Excise Tax will be imposed with respect to
such Payment. Any good faith determinations of the accounting
firm made hereunder shall be final, binding and conclusive upon
the Optionholder and the Company.
12. Amendment
of the Plan and Options.
(a) Amendment of Plan. The Board at any
time, and from time to time, may amend the Plan. However, except
as provided in Section 11 relating to adjustments upon
changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent
stockholder approval is necessary to satisfy the requirements of
Rule 16b-3
or any Nasdaq or securities exchange listing requirements.
(b) Stockholder Approval. The Board may,
in its sole discretion, submit any other amendment to the Plan
for stockholder approval.
(c) No Impairment of Rights. Rights under
any Option granted before amendment of the Plan shall not be
impaired by any amendment of the Plan unless (i) the
Company requests the consent of the Optionholder, and
(ii) the Optionholder consents in writing.
(d) Amendment of Options. The Board at
any time, and from time to time, may amend the terms of any one
or more Options; provided, however, that the rights under
any Option shall not be impaired by any such amendment unless
(i) the Company requests the consent of the Optionholder,
and (ii) the Optionholder consents in writing.
13. Termination
or Suspension of the Plan.
(a) Plan Term. The Board may suspend or
terminate the Plan at any time. Unless sooner terminated, the
Plan shall terminate on the day before the tenth Anniversary of
the date the Plan is adopted by the Board or approved by the
stockholders of the Company, whichever is earlier. No Options
may be granted under the Plan while the Plan is suspended or
after it is terminated.
(b) No Impairment of Rights. Suspension
or termination of the Plan shall not impair rights and
obligations under any Option granted while the Plan is in effect
except with the written consent of the Optionholder.
14. Effective
Date of Plan.
The Plan shall become effective on the date that the Plan is
adopted by the Board, but no Option shall be exercised unless
and until the Plan has been approved by the stockholders of the
Company, which approval shall be within twelve (12) months
before or after the date the Plan is adopted by the Board.
15. Choice
of Law.
All questions concerning the construction, validity and
interpretation of this Plan shall be governed by the law of the
State of California, without regard to such states
conflict of laws rules.
A-8
DOT HILL SYSTEMS CORP.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 8, 2006
The undersigned hereby appoints Dana W. Kammersgard and Shad L. Burke, and each of them, as
attorneys and proxies of the undersigned, with full power of substitution, to vote all of the
shares of stock of Dot Hill Systems Corp. which the undersigned may be entitled to vote at the
Annual Meeting of Stockholders of Dot Hill Systems Corp. to be held at 2200 Faraday Avenue, Suite
100, Carlsbad, California on Monday, May 8, 2006, at 8:30 a.m. (Pacific time), and at any and all
postponements, continuations and adjournments thereof, with all powers that the undersigned would
possess if personally present, upon and in respect of the following matters and in accordance with
the following instructions, and with discretionary authority as to any and all other matters that
may properly come before the meeting.
Unless a contrary direction is indicated, this Proxy will be voted for the nominee listed in
Proposal 1 and for Proposals 2 and 3, as more specifically described in the Proxy Statement. If
specific instructions are indicated, this Proxy will be voted in accordance therewith.
(continued and to be signed on other side)
|
|
|
|
DOT HILL SYSTEMS CORP.
2200 FARADAY AVENUE, SUITE 100
CARLSBAD, CA 92008
|
|
VOTE BY INTERNET www.proxyvote.com
Use the Internet to transmit your voting
instruction and for electronic delivery of
information up until 11:59 P.M. Eastern
Time on May 7, 2006. Have your proxy card
in hand when you access the web site. You
will be prompted to enter your 12-digit
Control Number, which is located below, to
obtain your records and to create an
electronic voting instruction form. |
|
|
VOTE BY PHONE 1-800-690-6903
Use any touch-tone telephone to transmit
your voting instructions up until 11:59
P.M. Eastern Time on May 7, 2006. Have
your proxy card in hand when you call. You
will be prompted to enter your 12-digit
Control Number, which is located below and
then follow the simple instructions the
Vote Voice provides you. |
|
|
VOTE BY MAIL.
Mark, sign, and date your proxy card and
return it in the postage-paid envelope we
have provided or return it to Dot Hill
Systems Corp., c/o ADP, 51 Mercedes Way,
Edgewood, NY 11717. |
|
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY
DOT HILL SYSTEMS CORP.
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominee |
|
For |
|
Withhold |
Proposal 1:
|
|
To elect one director,
Charles Christ, to hold
office until the 2009
Annual Meeting.
|
|
Charles Christ
|
|
o
|
|
o |
The Board of Directors recommends a vote for the election of the nominee for director.
|
|
|
|
|
|
|
|
|
|
|
|
|
For |
|
Against |
|
Abstain |
Proposal 2:
|
|
To approve an amendment to
the Dot Hill Systems Corp.
2000 Non-Employee
Directors Stock Option
Plan.
|
|
o
|
|
o
|
|
o |
The Board of Directors recommends a vote for Proposal 2.
|
|
|
|
|
|
|
|
|
|
|
|
|
For |
|
Against |
|
Abstain |
Proposal 3:
|
|
To ratify the selection of
Deloitte & Touche LLP as
independent auditors of Dot
Hill for its fiscal year
ending December 31, 2006.
|
|
o
|
|
o
|
|
o |
The Board of Directors recommends a vote for Proposal 3.
Please sign exactly as your name appears hereon. If the stock is registered in the names of
two or more persons, each should sign. Executors, administrators, trustees, guardians and
attorneys-in-fact should add their titles. If signer is a corporation, please give full corporate
name and have a duly authorized officer sign, stating title. If signer is a partnership, please
sign in partnership name by authorized person.
Please vote, date and promptly return this proxy in the enclosed return envelope which is postage
prepaid if mailed in the United States.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature (PLEASE SIGN WITHIN BOX)
|
|
|
Date
|
|
|
Signature (Joint Owners)
|
|
|
Date |
|
|