SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Soliciting Material Pursuant to
sec.240.14a-11(c) or sec.240.14a-12
[ ] Definitive Proxy Statement [ ] Confidential, for Use of the
Commission Only
[ ] Definitive Additional Materials (as permitted by Rule 14a-6(e)(2))
Storm Technology, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[X] No fee required.
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(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):
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[ ] 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.
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STORM TECHNOLOGY, INC.
1395 Charleston Road
Mountain View, California 94043
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD May 7, 1998
Dear Stockholder:
You are invited to attend the Annual Meeting of Stockholders of
Storm Technology, Inc. (the "Company"), which will be held on May 7,
1998 at 10:00 a.m., local time, at the Company's principal executive
offices at 1395 Charleston Road, Mountain View, California, for the
following purposes:
1. To elect six (6) members of the Board of Directors to hold
office until the 1999 Annual Meeting of Stockholders or
until their respective successors are elected and qualified.
2. To ratify the sale and issuance of Series A 8.5% Convertible
Preferred Stock.
3. To ratify the acquisition of certain assets from Logitech,
Inc. and certain of its affiliated companies.
4. To ratify the appointment of Price Waterhouse LLP as the
independent accountants of the Company for the fiscal year
ending December 31, 1998.
5. To transact such other business as may properly come before
the meeting.
Stockholders of record at the close of business on March 27, 1998
are entitled to notice of, and to vote at, this meeting and any
adjournments or postponements thereof. For ten days prior to the
meeting, a complete list of the stockholders entitled to vote at the
meeting will be available for examination by any stockholder for any
purpose relating to the meeting during ordinary business hours at the
principal executives offices of the Company located at the above
address.
By Order of the Board of Directors,
L. WILLIAM KRAUSE
Chief Executive Officer and President
Mountain View, California
April 10, 1998
STOCKHOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY
AND RETURN IT IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE. PROXIES ARE
REVOCABLE, AND ANY STOCKHOLDER MAY WITHDRAW HIS PROXY AND VOTE IN PERSON
AT THE MEETING
STORM TECHNOLOGY, INC.
1395 Charleston Road
Mountain View, California 94043
Proxy Statement For Annual Meeting Of Stockholders
May 7, 1998
The accompanying proxy is solicited by the Board of Directors of
Storm Technology, Inc., a Delaware corporation (the "Company"), for use
at the Annual Meeting of Stockholders to be held May 7, 1998 at 10:00
a.m., local time, or any adjournment or postponement thereof (the
"Annual Meeting"), for the purposes set forth in the accompanying Notice
of Annual Meeting of Stockholders. The date of this Proxy Statement is
April 10, 1998, the approximate date on which this Proxy Statement and
the accompanying form of proxy were first sent or given to stockholders.
GENERAL INFORMATION
Annual Report. An annual report for the fiscal year ended
December 31, 1997, is enclosed with this Proxy Statement.
Voting Securities. Only holders of Common Stock of record as of
the close of business on March 27, 1998, will be entitled to vote at the
Annual Meeting. As of that date, there were 13,375,223 shares of Common
Stock of the Company, par value $0.001 per share, issued and
outstanding. Stockholders may vote in person or in proxy. Each holder
of shares of Common Stock is entitled to one vote for each share of
Common Stock held on the proposals presented in this Proxy Statement.
The Company's Bylaws provide that a majority of all of the shares of the
stock entitled to vote, whether present in person or represented by
proxy, shall constitute a quorum for the transaction of business at the
Annual Meeting.
Solicitation of Proxies. The cost of soliciting proxies will be
borne by the Company. The Company will solicit stockholders by mail
through its regular employees and will request banks and brokers, and
other custodians, nominees and fiduciaries, to solicit their customers
who have stock of the Company registered in the names of such persons
and will reimburse them for their reasonable, out-of-pocket costs. The
Company may use the services of its officers, directors, and others to
solicit proxies, personally or by telephone, without additional
compensation. In addition, the Company has retained Bank Boston, N.A.
to assist in the solicitation of proxies in connection with the Annual
Meeting.
Voting of Proxies. All valid proxies received prior to the Annual
Meeting will be voted. All shares represented by a proxy will be voted
and where a stockholder specifies by means of the proxy a choice with
respect to any matter to be acted upon, the shares will be voted in
accordance with the specification so made. If no choice is indicated on
the proxy, the shares will be voted in favor of the proposal. A
stockholder giving a proxy has the power to revoke his, her or its
proxy, at any time prior to the time it is voted, by delivery to the
Secretary of the Company of a written instrument revoking the proxy or a
duly executed proxy with a later date, or by attending the Annual
Meeting and voting in person.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Six (6) directors constituting the Company's full Board of
Directors (the "Board" or "Board of Directors") are to be elected at the
Annual Meeting to serve in such capacity until the next annual meeting
of stockholders or until their successors are elected and qualified.
Management's nominees for election to the Board of Directors, and
certain information with respect to their age and background, are set
forth below. Management knows of no reason why any nominee should be
unable or unwilling to serve. However, if any nominee(s) should for any
reason be unable or unwilling to serve, the proxies will be voted for
such substitute nominees as Management may designate.
If a quorum is present and voting, the nominees for directors
receiving the highest number of votes will be elected as directors.
Abstentions and shares held by brokers that are present, but not voted
because the brokers were prohibited from exercising discretionary
authority, i.e., "broker non-votes," will be counted as present for
purposes of determining if a quorum is present.
<TABLE>
<CAPTION>
Director
Name Position with the Company Age Since
- ---------------------- ------------------------------------ ---- -------
<S> <C> <C> <C>
Richard C. Alberding Director 67 1996
Louis J. Doctor Director nominee 39 n/a
James M. Koshland Director 46 1997
L. William Krause President, Chief Executive Officer 55 1991
and Director
William H. Lane III Director 59 1998
Adriaan Ligtenberg Director, Chairman of the Board 42 1990
</TABLE>
Richard C. Alberding has served as a director since March 1996.
From 1958 to 1991, he served in various management positions with
Hewlett-Packard, a manufacturer of computer hardware and software,
serving most recently as Executive Vice President of Worldwide
Marketing, Sales and Support and as a member of the Executive Committee.
Mr. Alberding is now retired and is also a director of Digital Link
Corporation, Digital Microwave Corp., Kennametal Inc., Paging Network Inc.,
Quickturn Design Systems Inc., Sybase, Inc., Walker Interactive Systems Inc.
and various private companies.
Louis J. Doctor will be elected a director of the Company on April 16,
1998, to replace Mary Jane Elmore, who resigned effective April 1998. Mr.
Doctor has been President and Chief Executive Officer of Truevision, Inc., a
manufacturer of videographic products, since joining in October 1994. Prior to
that and since May 1994 he was President of the Arbor Group. He also held
positions of Executive Vice President and Vice President of Business
Development at SuperMac Technology, Inc. from June 1991 to April 1994. Prior to
that, Mr. Doctor co-founded Raster Technologies, an industry pioneer in
high-end graphics and imaging systems, and served as its President until
January 1989. Mr. Doctor was an independent consultant from January 1989 to
June 1991.
James M. Koshland has served as a director since December 1997.
Mr. Koshland is a lawyer and a partner in the law firm of Gray Cary Ware
& Freidenrich, LLP, the Company's outside general legal counsel.
L. William Krause has served as President and Chief Executive
Officer of the Company since joining the Company in October 1991. Prior
to joining the Company, Mr. Krause spent ten years at 3Com Corporation,
a manufacturer of global data networking systems, where he served as
President and Chief Executive Officer until he retired in September
1990. He continued as Chairman of the Board for 3Com Corporation until
1993. Previously, Mr. Krause served in various marketing and general
management executive positions at Hewlett-Packard. Mr. Krause currently
serves as a director of Aureal Semiconductor, Inc., Infoseek Corporation and
Sybase, Inc.
William H. Lane, III has been a director of the Company since
January 1998. Mr. Lane was the Vice President, Chief Financial Officer,
Secretary and Treasurer of Intuit, Inc. from January 1994 to April 1996.
Prior to that time, Mr. Lane served in a similar capacity at ChipSoft,
Inc., a tax preparation software company from July 1991 until its
acquisition by Intuit in December 1993. Mr. Lane is also a director of
Expert Software, Inc., Meta Creations Corporation, and Quarterdek
Corporation, as well as several private companies.
Adriaan Ligtenberg founded the Company and has served as a
director since its inception, as Chief Technical Officer and Vice
President, Engineering from October 1991 to February 1998, and was its
first Chief Executive Officer. Prior to the Company's inception, Mr.
Ligtenberg co-founded C-Cube Microsystems Inc., a manufacturer of video
compression hardware, and served as Vice President from May 1989 until
December 1989. Prior to May 1989, Mr. Ligtenberg was employed for five
years by AT&T Bell Laboratories Inc. where he served as Head of the
Image Systems Group. He has been a core member of the JPEG and MPEG
image compression standards committees of the ISO/CCITT and holds a
Ph.D. from the Swiss Federal Institute of Technology.
Board of Directors and Committee Meetings
During the fiscal year ended December 31, 1997 the Board held six
meetings. No director serving on the Board as of December 31, 1997
attended fewer than 75% of such meetings of the Board (and of the
Committees on which he or she serves) during the period he or she was a
director of the Company.
The Company has a Compensation Committee and an Audit Committee.
The Compensation Committee provides recommendations to the Board
concerning salaries and incentive compensation for officers and
employees of the Company, including stock options. The members of the
Compensation Committee during the fiscal year ended December 31, 1997
were Richard C. Alberding and Mary Jane Elmore. The Compensation
Committee held one meeting in fiscal 1997.
The Audit Committee recommends engagement of the Company's
independent accountants and reviews the results and scope of audit and
other accounting related services provided by such auditors. The
members of the Audit Committee for the fiscal year ended December 31,
1997 were Richard C. Alberding and Andrew S. Rappaport (the latter
resigning as a director of the Company effective December 1, 1997). The
Audit Committee held one meeting during fiscal 1997.
Compensation of Directors
Historically, members of the Board of Directors have not received
any cash compensation for their services as members of the Board,
although they are reimbursed for reasonable travel expenses while
attending Board and Committee meetings. Directors who are not employees
of the Company or Primax ("Outside Directors") are eligible to
participate in the automatic share grant program pursuant to the Storm
Technology, Inc. 1997 Outside Directors Stock Plan (the "Directors
Plan"). The Directors Plan, which was established effective as of June
30, 1997 (the "Effective Date"), provides for the automatic grant of
shares of Common Stock to Outside Directors in lieu of cash compensation
for their services as directors. The Directors Plan has a reserve of
25,000 shares of Common Stock and provides for grants of 500 shares of
Common Stock for each Board of Directors meeting an Outside Director
attends on or after the Effective Date. Shares issued pursuant to
grants under the Directors Plan are restricted securities.
<PAGE>
PROPOSAL NO. 2
RATIFICATION OF ISSUANCE OF SERIES A 8.5%
CONVERTIBLE PREFERRED STOCK
On December 18, 1997, the Company completed a private placement sale
of (i) 30,000 shares of its Series A 8.5% Convertible Preferred Stock (the
"Series A Shares") at a price of $100 per share; (ii) warrants to purchase
an aggregate of 150,000 shares of Common Stock at an exercise price of
$3.00 per share (the "Definitive Warrants"); and (iii) warrants to purchase
shares of Common Stock (the issuance of which would occur, if at all, upon
conversion of the Series A Shares and the occurrence of certain other
events) (the "Contingent Warrants") (the Definitive Warrants and Contingent
Warrants are collectively referred to as the "Warrants") as provided for in
the Certificate of Designation prescribing the rights, preferences,
privileges and limitations of the Series A Shares (the "Certificate of
Designation"). As of the date of this Proxy Statement, an aggregate of
9,997 Series A Shares have been converted into 540,180 shares of Common
Stock, no Definitive Warrants have been exercised and Contingent Warrants
to purchase an aggregate of 27,007 shares of Common Stock at an exercise
price of $1.47 per share expiring on March 18, 2005 have been issued.
Copies of the relevant documents for this private placement sale were filed
as exhibits to the Company's Report on Form 8-K filed on January 2, 1998
and are incorporated herein by reference.
The Board of Directors authorized the sale of the Series A Shares and
Warrants in order to raise proceeds which were applied principally towards
the cash portion of the purchase price for the acquisition of certain
assets of Logitech, Inc. (see Proposal No. 3 below).
Summary Terms of the Series A Shares
The Series A Shares and Definitive Warrants were issued in connection
with a private equity financing to institutional investors (the
"Investors") pursuant to a series of subscription agreements (the
"Financing Agreements"). The Series A Shares are convertible into shares
of the Company's Common Stock pursuant to a formula based on (i) the
average closing bid price of the Company's Common Stock on the three (3)
days preceding the date of the closing under the Financing Agreements (the
"Closing Date"); (ii) the average closing bid price of the Company's Common
Stock on the three (3) days preceding conversion (the "Conversion Date") of
the Series A Shares; and (iii) a mutually agreed upon rate of return to the
Investors, all as set forth in the Certificate of Designation. The
Certificate of Designation also gives the Company the right to redeem some
or all of the Series A Shares at a per share price equal to the greater of
(i) the number of shares of Common Stock calculated as though the Series A
Shares are converted on the date of notice of redemption (the "Redemption
Notice Date") multiplied by the greater of (x) the average closing bid
price of the Company's Common Stock on the three (3) days preceding the
Redemption Notice Date and (y) the closing bid price as of the Redemption
Notice Date, or (ii) one hundred fifteen percent (115%) of the purchase
price of the Series A Shares being called for redemption, plus any and all
accrued and unpaid dividends.
The shares of Common Stock issuable upon conversion of the Series
A Shares or upon exercise of the Warrants may be deemed below market or
discounted securities because no additional consideration was paid by
the Investors for the right to receive the Warrants and thus the
issuance of Common Stock may be subject to the Marketplace Rules of the
Nasdaq National Market ("NASDAQ") regarding stockholder approval of
certain discounted securities. Section 4460(i)(1)(D)(ii) of such
Marketplace Rules requires stockholder approval of the sale or issuance
by a company of common stock (or securities convertible into or
exercisable for common stock) equal to 20% or more of the common stock
or 20% or more of the voting power outstanding before the issuance for
less than the greater of book or market value of the stock (the
"Discounted Securities Limit"). Accordingly, the Certificate of
Designation prohibits Investors from receiving shares of Common Stock
upon conversion of the Series A Shares or exercise of the Warrants in
the event that such conversion or exercise, when aggregated with all
prior or concurrent conversions or exercises would result in the
issuance to all Investors of shares of Common Stock in excess of 19.99%
of the shares of Common Stock outstanding on the Closing Date (the
"Outstanding Closing Date Stock"). As of the Closing Date, there were
11,598,637 shares of the Company's Common Stock outstanding and 19.99%
of such number of shares is 2,318,567. In seeking ratification of the
issuance of the Series A Shares and the Warrants, the Company is also
seeking approval from its stockholders to issue shares of Common Stock
upon conversion of the Series A Shares and exercise of the Warrants in
excess of the Discounted Securities Limit, if applicable.
In the event the Company is unable to obtain the stockholder
approval necessary to issue shares of Common Stock in excess of the
Discounted Securities Limit, and the Company issues shares of Common
Stock upon conversion of the Series A Shares or upon exercise of the
Warrants in excess of such limit, the Company may be delisted from the
National Market. While the quotation of the Company's Common Stock
could be included on the NASDAQ SmallCap Market (the "SmallCap Market")
if the requirements for inclusion on the SmallCap Market are met,
stockholders may find it more difficult to dispose of the Company's
stock. In order to preserve the market liquidity of stockholders'
investment and the ability of stockholders to sell shares of Common
Stock in the secondary market, the Company believes that it is in the
best interests of the Company and its stockholders to vote in favor of
this proposal.
Vote Required and Board of Directors' Recommendation
The affirmative vote of a majority of the votes cast at the Annual
Meeting, at which a quorum representing a majority of all outstanding
shares of Common Stock of the Company is present and voting, either in
person or by proxy, is required for approval of this proposal.
Abstentions and broker non-votes will each be counted as present for
purposes of determining the presence of a quorum, but will not be
counted as having been voted on the proposal.
The Board of Directors believes that ratification of the issuance
of the Series A Shares and the rights, preferences, privileges and
limitations related to such shares, including but not limited to the
right of holders of such shares to receive shares of Common Stock in
excess of the Discounted Securities Limit upon conversion of the Series
A Shares or exercise of Warrants, is in the best interests of the
stockholders and Storm Technology, Inc. for the reasons stated above.
THEREFORE, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
RATIFICATION OF THE ISSUANCE OF THE SERIES A SHARES.
PROPOSAL NO. 3
RATIFICATION OF LOGITECH ACQUISITION
On December 18, 1997, pursuant to an Agreement for Purchase and
Sale of Assets (the "Acquisition Agreement") by and among Storm and
Logitech, Inc. and certain Logitech affiliated companies (collectively,
"Logitech"), Storm acquired certain tangible and intangible assets (the
"Assets") related to the image scanning products of Logitech (the
"Products") (the "Logitech Acquisition"). Concurrent with the execution
of the Acquisition Agreement, Storm entered into (i) a Joint Sales and
Marketing Agreement (the "Joint Marketing Agreement") with a Logitech
affiliate, Logitech Trading S.A. ("Logitech Trading") for the marketing,
sale and distribution by Logitech Trading of the Products and Storm's
own proprietary products (the "Storm Products") and (ii) a Manufacturing
Services Agreement with another Logitech affiliate, Logitech Far East
Ltd., for the manufacture of certain products for Storm. Copies of the
relevant documents were filed as exhibits to the Company's Report on
Form 8-K filed on January 2, 1998 and are incorporated herein by
reference.
Summary Terms of Acquisition
Under the terms of the Acquisition Agreement, Storm (i) paid a
purchase price equal to $9,000,000, $5,000,000 payable in cash at the
closing under the Acquisition Agreement and the remaining $4,000,000
payable pursuant to a promissory note which, if not paid by March 27,
1998 (the "Original Maturity Date"), will be convertible under certain
circumstances by Logitech into Storm's Common Stock (the "Closing
Note"); (ii) issued to Logitech 1,159,413 shares of Storm's Common Stock
which represented 10% of the Company's outstanding Common Stock
immediately prior to the closing under the Acquisition Agreement (the
"Closing Stock"); (iii) will pay for certain inventory of the Products
pursuant to the Joint Marketing Agreement; and (iv) will pay for
distribution of the Products and Storm Products under the Joint
Marketing Agreement in the form of an "earn-out" based on the sales
revenue generated by such distribution (the "Earn-Out").
Storm did not pay the Closing Note on the Original Maturity Date
and therefore, the Closing Note is now due on March 26, 1999.
Furthermore, the Closing Note is convertible at Logitech's option into
shares of the Company's Common Stock equal to the outstanding and unpaid
principal and accrued interest under such note divided by the average of
the closing prices of one share of Common Stock on the five (5) trading
days (such average referred to as the "Storm Closing Price") ending on
the Original Maturity Date.
The Earn-Out is payable by Storm to Logitech in a cash component
and an equity component. With respect to the cash component, once
aggregate sales revenues attributable to sales made by Logitech outside
the United States and Canada pursuant to the Joint Marketing Agreement
("Sales Revenues") exceed US$10,000,000 (the "Trigger Amount"), Storm
pays (i) in the first month that Sales Revenues exceed the Trigger
Amount, an amount equal to 40% (the "Measurement Percentage") of the
difference of (a) the Sales Revenues made through such month less (b)
the Trigger Amount, and (ii) for each month thereafter, an amount equal
to the Measurement Percentage multiplied by the Sales Revenue in that
month. Once Sales Revenues reach US$20,000,000, the Measurement
Percentage used in calculating Storm's monthly payments to Logitech
increases to 45%.
At any time, Storm may elect to issue Logitech a note for the cash
component of the Earn-Out (a "Monthly Note") and the terms of any
Monthly Note would provide for a maturity date of September 30, 1999.
The Monthly Note would also be convertible at Logitech's option at any
time into shares of the Company's Common Stock equal to the outstanding
and unpaid principal and accrued interest under such note divided by the
Storm Closing Price on the last trading date of the month in which the
Sales Revenues giving rise to the issuance of a particular Monthly Note
were made.
With respect to the equity component of the Earn-Out, within 30
days after the end of each fiscal quarter in which Sales Revenues first
exceed the Trigger Amount, Storm is required to issue shares of Common
Stock equal to 0.5% of Storm's outstanding Common Stock (assuming full
conversion, exercise or exchange of all outstanding securities
convertible into or exchangeable or exercisable for shares of Common
Stock but excluding the grants and exercises of employee, director,
officer and consultant options) ("Storm Outstanding Common Stock") as of
February 15, 1998 for each Milestone Amount reached due to sales in such
fiscal quarter (such shares referred to as the "Quarterly Stock"). For
purposes of calculating the number of shares of Common Stock to be
issued to Logitech as Quarterly Stock, a "Milestone Amount" is an amount
of Sales Revenue evenly divisible by $1,000,000 and falling between
$10,000,000 and $30,000,000. That is, for each $1,000,000 in Sales
Revenue over $10,000,000 but up to $30,000,000, Logitech will be issued
0.5% of the Storm Outstanding Stock as of February 15, 1998.
Storm's issuance of Common Stock in connection with the Logitech
Acquisition is subject to the NASDAQ Marketplace Rules. Section
4460(i)(1)(C)(ii) of such Marketplace Rules requires stockholder
approval for any acquisition of assets of another company where, due to
the present or potential issuance of common stock, or securities
convertible into or exercisable for common stock, the number of shares
of common stock either (i) has or will have upon issuance voting power
equal to or in excess of 20% of the voting power outstanding before the
issuance of stock or securities convertible into or exercisable for
common stock or (ii) is or will be equal to or in excess of 20% of the
number of shares of common stock outstanding before the issuance of the
stock or securities ("Acquisition Issuance Limit"). Taking into account
the issuance of the Closing Stock, the possible issuance of the
Quarterly Stock and issuances upon conversion of the Closing Note and
Monthly Notes (assuming that Storm elects to issue Monthly Notes instead
of making cash payments and assuming that Logitech exercises its
conversion right under the Closing Note and any Monthly Note), Storm may
issue shares of Common Stock in excess of the Acquisition Issuance
Limit. Accordingly, without stockholder approval, the Acquisition
Agreement and forms of Closing Note and Monthly Note preclude the
issuance of Quarterly Stock and shares of Common Stock upon conversion
of the Closing Note and any Monthly Note in the event that any such
issuance, when aggregated with all prior or concurrent issuances would
result in the issuance to Logitech of shares of Common Stock in excess
of the Acquisition Issuance Limit. In seeking ratification of the
Logitech Acquisition, the Company is also seeking approval from its
stockholders to issue Quarterly Stock and shares of Common Stock upon
conversion of the Closing Note and any Monthly Note in excess of the
Acquisition Issuance Limit, if applicable.
In the event the Company is unable to obtain the stockholder
approval necessary to issue shares of Common Stock in excess of the
Acquisition Issuance Limit, and the Company issues shares of Common
Stock required by the terms of the Logitech Acquisition in excess of
such limit, the Company may be delisted from the National Market. While
the quotation of the Company's Common Stock could be included on the
NASDAQ SmallCap Market (the "SmallCap Market") if the requirements for
inclusion on the SmallCap Market are met, stockholders may find it more
difficult to dispose of the Company's stock. In order to preserve the
market liquidity of stockholders' investment and the ability of
stockholders to sell shares of Common Stock in the secondary market, the
Company believes that it is in the best interests of the Company and its
stockholders to vote in favor of this proposal.
Vote Required and Board of Directors' Recommendation
The affirmative vote of a majority of the votes cast at the Annual
Meeting, at which a quorum representing a majority of all outstanding
shares of Common Stock of the Company is present and voting, either in
person or by proxy, is required for approval of this proposal.
Abstentions and broker non-votes will each be counted as present for
purposes of determining the presence of a quorum, but will not be
counted as having been voted on the proposal.
The Board of Directors believes that ratification of the Logitech
Acquisition, including but not limited to the right of Logitech to
receive shares of Common Stock as Quarterly Stock or upon conversion of
the Closing Note or any Monthly Note in excess of the Acquisition
Issuance Limit, is in the best interests of the stockholders and Storm
Technology, Inc. for the reasons stated above. THEREFORE, THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
LOGITECH ACQUISITION.
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has selected Price
Waterhouse LLP as independent accountants to audit the financial
statements of the Company for the fiscal year ending December 31, 1998.
Price Waterhouse LLP has acted in such capacity since its appointment
during the fiscal year ended December 31, 1991. A representative of
Price Waterhouse LLP is expected to be present at the Annual Meeting
with the opportunity to make a statement if the representative desires
to do so, and is expected to be available to respond to appropriate
questions.
The affirmative vote of a majority of the votes cast at the Annual
Meeting of Stockholders, at which a quorum representing a majority of
all outstanding shares of Common Stock of the Company is present and
voting, either in person or by proxy, is required for approval of this
proposal. Abstentions and broker non-votes will each be counted as
present for purposes of determining the presence of a quorum. THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPOINTMENT OF
PRICE WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR THE
FISCAL YEAR ENDING DECEMBER 31, 1998.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Beneficial Owners and Management. The following table sets forth
certain information, as of February 28, 1998, with respect to the
beneficial ownership of the Company's Common Stock by (i) all persons
known by the Company to be the beneficial owners of more than 5% of the
outstanding Common Stock of the Company, (ii) each director and
director-nominee of the Company, (iii) each of the executive officers
named in the Summary Compensation Table, and (iv) all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
Shares Owned (1)
----------------------
Name and Address of Number Percentage
Beneficial Owners of Shares of Class
- ---------------------------------------- ----------- ---------
<S> <C> <C>
Primax Electronics, Ltd. 1,807,234 14.1%
6F, N. 159 Kang Ning St.
Shi Chi Town, Taipei Hsien
Taiwan R.O.C.
Seamax Engineering Pte., Ltd. (9) 1,100,000 8.6%
c/o Primax Electronics, Ltd.
6F, N. 159 Kang Ning St.
Shi Chi Town, Taipei Hsien
Taiwan R.O.C.
State of Wisconsin Investment Board 840,000 6.5%
P.O. Box 7842
Madison, WI 53707
Institutional Venture Partners V(2) 746,286 5.8%
Mary Jane Elmore
3000 Sand Hill Road
Menlo Park, CA 94025
Logitech, Inc. 1,159,413 9.0%
6505 Kaiser Drive
Fremont, CA 94555
Dr. Adriaan Ligtenberg (10) 452,663 3.5%
L. William Krause (3) 1,590,589 12.4%
Robert F. Preston (4) 90,337 *
Rick M. McConnell (5) 107,740 *
Joseph G. Finegold (6) 32,644 *
James M. Koshland (8) 3,265 *
Richard C. Alberding (7) 16,000 *
William H. Lane III (11) 2,316 *
All directors and executive officers 3,041,840 23.7%
as a group (9 persons) (8)
</TABLE>
- -----------------------
* Less than 1%
(1) Except pursuant to applicable community property laws or as
indicated in the footnotes to this table, to the Company's
knowledge, each stockholder identified in the table possesses sole
voting and investment power with respect to all shares of Common
Stock shown as beneficially owned by such stockholder.
(2) Includes 12,056 shares held by Institutional Venture Management V,
697,230 shares held by Institutional Venture Partners V, 16,000
shares held by Institutional Venture Management IV 401(k) and
7,000 shares held by Ms. Elmore, a director of the Company, under
two trusts of which she is the trustee. Ms. Elmore is a general
partner of Institutional Venture Management V which in turn is the
general partner of Institutional Venture Partners V which retains
certain voting power over such shares. Although Ms. Elmore may be
deemed to be the beneficial owner of shares owned by such
entities, she disclaims all such beneficial ownership except to
the extent of any pecuniary interest therein which she may have.
Includes 14,000 shares subject to options held by Ms. Elmore
exercisable within 60 days after February 28, 1998. Ms. Elmore resigned as a
director effective in April 1998.
(3) Includes 1,450,527 shares held as Trustee of the L. William and L.
Gay Krause Trust dated June 21, 1994, as amended (the "Krause
Trust"), 13,461 shares held as Trustee for LWK Ventures Money
Purchase Pension Plan dated January 1, 1991, 5,769 shares held as
Trustee for LWK Ventures Profit Sharing Plan dated January 1,
1991, 100,000 shares under a Warrant issued to the Krause Trust
which is exercisable at any time up to December 18, 2002, and
20,832 shares subject to options which will vest and no longer be
subject to a repurchase option in favor of the Company within 60
days after February 28, 1998.
(4) Includes 49,087 shares subject to options which will vest and no
longer be subject to a repurchase option in favor of the Company
within 60 days after February 28, 1998 and does not include 300
shares held by Mr. Preston's children.
(5) Includes 53,403 shares subject to options which will vest and no
longer be subject to a repurchase option in favor of the Company
within 60 days after February 28, 1998.
(6) Includes 28,644 shares subject to options which will vest and no
longer be subject to a repurchase option in favor of the Company
within 60 days after February 28, 1998 and does not include 200
shares held by Mr. Finegold's children.
(7) Includes 14,000 shares subject to options exercisable within 60
days after February 28, 1998 and 2,000 shares held by the
Alberding Trust.
(8) Includes 2,265 shares subject to options exercisable within 60
days after February 28, 1998.
(9) Seamax holds shares as a result of a series of distributions from
Primax Electronics, Ltd., an affiliate of Seamax.
(10) Includes 1,500 shares under a warrant which is exercisable at any
time up to December 18, 2002 and 3,332 shares subject to options
which will vest and no longer be subject to a repurchase option in
favor of the Company within 60 days after February 28, 1998.
(11) Includes 1,816 shares subject to options exercisable within 60
days after February 28, 1998 and 500 shares held by the William H.
Lane III and Kathleen M. Lane Trust dated December 26, 1995.
EXECUTIVE COMPENSATION AND OTHER MATTERS
Executive Compensation. The following table sets forth
information concerning the compensation paid for services to the Company
in all capacities by the Chief Executive Officer of the Company and the
four other most highly compensated executive officers of the Company for
the fiscal years ended December 31, 1997 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
--------------------------- ---------------------
Securities
Underlying
Name and Current Position Year Salary Bonus Options
- ----------------------------- -------- --------- -------- ---------
<S> <C> <C> <C> <C>
L. William Krause 1997 $169,714 -- 80,000
Chief Executive Officer, 1996 $162,757 -- --
President
Dr. Adriaan Ligtenberg 1997 $151,262 -- 20,000
Chief Technical Officer, Vice 1996 $138,550 -- --
President, Engineering (1)
Rick M. McConnell 1997 $133,315 -- 69,750 (2)
Chief Financial Officer, Vice 1996 $115,482 -- 43,124
President, Finance and
Administration
Joseph G. Finegold 1997 $147,029 -- 40,000 (3)
Vice President, Operations (5) 1996 $81,462 -- 37,500
Robert F. Preston 1997 $161,296 -- 72,500 (4)
Vice President, Sales 1996 $141,580 -- 68,750
</TABLE>
- ----------------
(1) Dr. Ligtenberg resigned as Chief Technical Officer and Vice President,
Engineering effective February 2, 1998.
(2) Includes an option for 13,750 shares of Common Stock which was
repriced in January 1997, replacing options for an aggregate of 13,750 shares
granted in September 1996. See "REPORT OF THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS ON REPRICING OF OPTIONS."
(3) Includes an option for 10,000 shares of Common Stock which was
repriced in January 1997, replacing options for an aggregate of 10,000 shares
granted in September 1996. See "REPORT OF THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS ON REPRICING OF OPTIONS."
(4) Includes an option for 12,500 shares of Common Stock which was
repriced in January 1997, replacing options for an aggregate of 12,500 shares
granted in September 1996. See "REPORT OF THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS ON REPRICING OF OPTIONS."
(5) Mr. Finegold joined the Company in June 1996.
Stock Options Granted During Fiscal 1997. The following table
provides the specified information concerning grants of options to
purchase the Company's Common Stock made during the fiscal year ended
December 31, 1997 to the persons named in the Summary Compensation
Table.
STOCK OPTIONS GRANTED IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% of
Total Potential Realizable
Options Value at Assumed
Number of Granted Exercise Annual Rates of Stock
Securities to or Base Price Appreciation for
Underlying Employees Price Expir- Option Term(3)
Options in Fiscal Per ation -----------------------
Name Granted(1) Year(6) Share(2) Date 5% 10%
- --------------------- ---------- -------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
L. William Krause 80,000 7.7% $1.938 7/9/07 $97,600 $247,200
Dr. Adriaan Ligtenberg 20,000 1.9% $1.938 7/9/07 $24,400 $61,800
Rick M. McConnell 16,000 1.5% $4.75 1/28/07 $47,840 $121,120
13,750 (4)(5) 1.3% $4.75 1/28/07 $41,113 $104,088
10,000 1.0% $1.438 4/24/07 $9,000 $22,900
10,000 1.0% $1.938 7/9/07 $12,200 $30,900
20,000 1.9% $1.938 12/18/07 $24,400 $61,800
Joseph G. Finegold 15,000 1.4% $4.75 1/28/07 $44,850 $113,550
10,000 (4)(5) 1.0% $4.75 1/28/07 $29,900 $75,700
5,000 0.5% $1.938 7/9/07 $6,100 $15,450
10,000 1.0% $1.938 12/18/07 $12,200 $30,900
Robert F. Preston 20,000 1.9% $4.75 1/28/07 $59,800 $151,400
12,500 (4)(5) 1.2% $4.75 1/28/07 $37,375 $94,625
15,000 1.4% $1.438 4/24/07 $13,500 $34,350
10,000 1.0% $1.938 7/9/07 $12,200 $30,900
15,000 1.4% $1.938 12/18/07 $18,300 $46,350
</TABLE>
- ----------------
(1) All options granted in 1997 were granted under the Amended and
Restated Stock Option Plan (the "Option Plan"). Options granted
under the Option Plan are immediately exercisable and subject to a
repurchase option which generally vests monthly over a four year
period and must be exercised within 10 years. The Board of
Directors has discretion, subject to plan limits, to modify the
terms of outstanding options and to reprice the options.
(2) The exercise price per share of options granted represented the
fair market value of the underlying shares of Common Stock on the
dates the options were granted.
(3) Potential realizable values are net of exercise price, but before
taxes associated with exercise. The assumed 5% and 10% rates of
stock price appreciation are mandated by federal securities law
and do not represent the Company's estimate or projection of the
future Common Stock price. Actual gains, if any, on a stock
option exercise depend on the future performance of the Common
Stock, overall market conditions and the optionholder's continued
employment through the vesting period. The amounts reflected in
this table may not necessarily be achieved. One share of stock
purchased in 1997 at $1.438 would yield profits of $0.90 per share
at 5% appreciation over ten years or $2.29 per share at 10%
appreciation over the same period. One share of stock purchased
in 1997 at $1.938 would yield profits of $1.22 per share at 5%
appreciation over ten years or $3.09 per share at 10% appreciation
over the same period. One share of stock purchased in 1997 at
$4.75 per share would yield profits of $2.99 per share at 5%
appreciation over ten years or $7.57 per share at 10% appreciation
over the same period.
(4) In January 1997, as a result of the continued decline in the fair
market value of the Company's Common Stock, the Compensation
Committee determined it was in the best interests of the Company
to offer all current option holders the opportunity to exchange
outstanding options with an exercise price above the then current
trading price for options with an exercise price equal to the then
current fair market value. Under the Committee's action,
optionees who agreed to the cancellation of their outstanding
options received in exchange a new option exercisable for the same
number of shares with an exercise price of $4.75 per share, the
fair market value of the Company's Common Stock on January 28,
1997, the date of the exchange. Vesting began under the exchanged
options as of the date of the exchange. Messrs. McConnell,
Preston and Finegold participated in the exchange. For details
concerning the repricing of options, see "REPORT OF THE
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON REPRICING OF
OPTIONS."
(5) Reflects options which were repriced in January 1997, replacing
options granted in September 1996.
(6) Based on total of 1,041,286 shares subject to options granted in
the fiscal year ended December 31, 1997, which total includes
repriced options to purchase an aggregate of 221,974 shares.
Option Exercises and Fiscal 1997 Year-End Values. The following
table provides the specified information concerning exercises of options
to purchase the Company's Common Stock during the fiscal year ended
December 31, 1997, and unexercised options held as of December 31, 1997,
by the persons named in the Summary Compensation Table:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Shares Unexercised In-the-Money
Acquired Options at Options at
on Value 12/31/97 (2) 12/31/97 (2)
Name Exercise Realized (1) Vested Vested
- ----------------------- --------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
L. William Krause -- $0 9,999 $5,619.44
Dr. Adriaan Ligtenberg -- $0 2,499 $1,404.44
Rick M. McConnell -- $0 3,541 $2,927.54
Joseph G. Finegold -- $0 833 $468.15
Robert F. Preston -- $0 4,374 $3,864.18
</TABLE>
- ----------------
(1) Value realized based on the difference between the option exercise
price and the fair market value of the Company's Common Stock on the date of
option exercise.
(2) All options are immediately exercisable upon grant but are subject
to a repurchase option which vests monthly over four years.
(3) Valuation based on the difference between the option exercise
price and the fair market value of the Company's Common Stock on
December 31, 1997 (which was $2.50 per share, based on the closing trade
price of the stock on the Nasdaq National Market).
The following table provides the specified information concerning
all repricings of options to purchase the Company's Common Stock held by
any executive officer of the Company since October 1, 1996, the date of
the Company's initial public offering:
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
Length of
Original
Option
Number of Market Term
Securities Price of Exercise Remaining
Underlying Stock at Price at at Date of
Options Time of Time of New Repricing or
Repricing Repriced or Repricing or Repricing or Exercise Amendment
Name Date Amended(#) Amendments($) Amendments($) Price($) (months)
- ----------------- --------- ----------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Rick M. McConnell 1/28/97 13,750 4.75 8.00 4.75 43
Joseph G. Finegold 1/28/97 10,000 4.75 8.00 4.75 43
Robert F. Preston 1/28/97 12,500 4.75 8.00 4.75 43
</TABLE>
REPORT OF THE COMPENSATION COMMITTEE
The following is the Report of the Compensation Committee of the
Company, describing the compensation policies and rationale applicable
to the Company's executive officers with respect to the compensation
paid to such executive officers for the year ended December 31, 1997.
The information contained in this report shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission nor shall such information be incorporated by reference into
any future filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the extent that
the Company specifically incorporates it by reference into such filing.
Executive Compensation
The Compensation Committee of the Board of Directors has the
responsibility to review compensation programs and benefits for the
Company's employees generally, and specifically for the executive
officers of the Company. The Company applies a consistent philosophy to
compensation for all employees, including its executive officers, based
on the premise that the achievements of the Company result from the
coordinated efforts of all individuals working toward common objectives.
The goals of the Compensation Committee are to align executive
compensation with business objectives and performance, and to enable the
Company to attract, retain and reward executive officers who contribute
to the long-term success of the Company.
The Company's executive compensation program consists of a cash
and an equity based component. The cash component is comprised of base
pay and a variable factor based on the Company's financial performance.
The equity component consists of stock options granted under the
Company's Option Plan.
Cash Component. Base salary generally is set within the range of
salaries of executive officers with comparable qualifications,
experience and responsibilities at other companies of comparable size
and success in the same or similar business. The Compensation Committee
generally has set base salary in the low to mid-range levels of
competitive compensation. The variable component of cash compensation
is paid monthly based on the Company's actual financial performance
relative to planned operating results. Executive salaries, including
the variable target component, are generally reviewed annually.
Equity Component. Stock options are an important element of the
Company's executive compensation package. The Compensation Committee
believes that such equity-based compensation closely links the interests
of management and stockholders by focusing employees and management on
increasing stockholder value. The actual value of this equity-based
compensation depends entirely on the appreciation of the Company's
stock. Generally, all of the Company's employees participate in the
Company's Option Plan. Option grants are provided to employees when
first joining the Company and may also be provided in connection with
significant achievements or changes in responsibilities and annually in
conjunction with the yearly compensation review.
During fiscal 1997, the Compensation Committee made stock option
grants to certain executives as summarized in "Executive Compensation-
Stock Option Grants In Last Fiscal Year." The number of shares subject
to each option grant takes into account anticipated future contribution,
past performance and prior option grants to the executive. The purpose
of these options is to provide greater incentives to those officers to
continue their employment with the Company and to strive to increase the
value of the Company's Common Stock. Options are generally granted at
exercise prices equaling the fair market value of the underlying common
stock and vest over a period of four years.
1997 CEO Compensation
L. William Krause has been the Chief Executive Officer of the
Company since 1991. In determining Mr. Krause's compensation for 1997,
the Compensation Committee evaluated corporate performance, individual
performance, compensation paid to other executive officers of the
Company and compensation paid to chief executive officers of comparable
privately held companies.
During fiscal 1997, Mr. Krause received cash compensation of
$169,714, of which $10,714 was a variable component based on the
Company's actual financial performance relative to planned operating
results. Mr. Krause received a single option grant for 80,000 shares of
Common Stock.
REPORT OF THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS ON REPRICING OF OPTIONS
In January 1997, the Compensation Committee considered the options
held by the Company's executive officers and employees and the fact that
a broad decline in the price of the Common Stock of the Company had
resulted in a substantial number of stock options granted pursuant to
the Option Plan having exercise prices well above the recent historical
trading prices of the Common Stock. The Compensation Committee was
advised by management that management believed that employee turnover
was likely to increase in part because the Company's total compensation
package for long-term employees, which included substantial options with
exercise prices well above the then current trading price, was less
attractive than compensation offered by other companies in the same
geographic location, since options granted to new hires at other
companies would be granted at current trading prices.
The Compensation Committee believed that (i) the Company's success
in the future would depend in large part on its ability to retain a
number of its highly skilled technical and managerial personnel,
(ii) that competition for such personnel would be intense, (iii) that
the loss of key employees could have a significant adverse impact on the
Company's business, and (iv) that it would be important and cost-
effective to provide equity incentives to employees and executive
officers of the Company to improve the Company's performance and the
value of the Company for its stockholders. The Compensation Committee
considered granting new options to existing employees at fair market
value, but recognized that the size of the option grants required to
offset the decline in market price would result in significant
additional dilution to stockholders and that such grants would
potentially exceed the option reserve, resulting in a potential charge
to earnings if the price at the time of the stockholders meeting was
greater than the price at the time the grants were approved. The
Compensation Committee recognized that a repricing of existing options
with exercise prices higher than fair market value ("Underwater
Options") would provide additional incentives to employees because of
the increased potential for appreciation. The Compensation Committee
also recognized that it could require the repriced options to be subject
to new vesting restrictions so that optionees participating in the
repricing program would have incentives to remain with the Company.
Considering these factors, the Compensation Committee determined it to
be in the best interests of the Company and its stockholders to restore
the incentives for employees and executive officers to remain as
employees of the Company and to exert their maximum efforts on behalf of
the Company by amending Underwater Options previously granted under the
Option Plan at the optionee's election, to provide for exercise prices
equal to current market value, restarted vesting and a new ten-year
term.
Accordingly, in January 1997, the Compensation Committee approved
an offer to all employees of the Company, including executive officers,
to amend their Underwater Options to receive an exercise price equal to
the current trading price, with vesting commencing on the effective date
of the repricing program. The Compensation Committee approved a new
vesting schedule for the repriced options, with 1/48 of the shares
vested as of the date of the repricing and the remaining shares vesting
in equal monthly installments over the following 47 months. All
repriced options will terminate no later than ten (10) years from the
date of the repricing. Accordingly, optionees who participated in the
exchange received a lower exercise price in exchange for their
forfeiture of accrued vesting on their exchanged options. The offer to
reprice Underwater Options was completed in January 1997 and options for
221,974 shares with exercise prices ranging from $6.00 to $12.625 were
repriced at an exercise price of $4.75, the fair market value of the
Company's Common Stock on January 28, 1997, the effective date of the
repricing program. See EXECUTIVE COMPENSATION AND OTHER MATTERS - "Ten-
Year Option Repricings" table for further information concerning the
repricing.
Respectfully submitted by the
Compensation Committee:
Richard C. Alberding
Mary Jane Elmore
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended December 31, 1997, Mr. Alberding and
Ms. Elmore served on the Compensation Committee. No member of the
Compensation Committee was at any time during the past fiscal year or
any other time an officer or employee of the Company or any of its
subsidiaries.
No executive officer of the Company served as a member of the
Compensation Committee (or other Board committee performing equivalent
functions or, in the absence of any such committee, the entire Board of
Directors) of another entity, where an executive officer of such other
entity served as a director of the Company. In addition, no executive
officer of the Company served on the Board of Directors of another
entity, one of whose executive officers served as a member of the
Compensation Committee of the Company.
Change-in-Control Arrangements
The Option Plan provide that, in the event of a sale or exchange
by the stockholders of all or substantially all of the Company's voting
stock or certain mergers or consolidations to which the Company is a
party in which the stockholders of the Company do not retain beneficial
ownership of at least a majority of the voting stock of the Company or
its successor, the Board of Directors of the Company may provide for the
acquiring or successor corporation to assume or substitute new options
for the options outstanding under the Option Plan. In addition, the
Company's standard forms of stock option agreements provide that in the
event an optionee is terminated as a result of such a transaction, the
optionee's options generally will become fully vested and the optionee
will have a period of six months to exercise such options.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, directors and persons who beneficially own
more than 10% of the Company's Common Stock to file initial reports of
ownership and reports of changes in ownership with the Securities and
Exchange Commission ("SEC"). Such persons are required by SEC
regulations to furnish the Company with copies of all Section 16(a)
forms filed by such persons.
Based solely on the Company's review of such forms furnished to
the Company and written representations from certain reporting persons,
the Company believes that all filing requirements applicable to the
Company's executive officers, directors and persons who beneficially own
more than 10% of the Company's Common Stock were complied with for the
fiscal year ended December 31, 1997, except that the Form 3 for James
Koshland was not timely filed upon his election as a director of the
Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has entered into indemnification agreements with its
directors and officers. Such agreements require the Company to
indemnify such individuals to the fullest extent permitted by Delaware
law.
On December 18, 1997, Storm sold to outside investors (i) 30,000
shares of Series A 8.5% Convertible Preferred Stock at a price of $100
per share; (ii) warrants to purchase an aggregate of 150,000 shares of
Common Stock at an exercise price of $3.00 per share; and (iii) warrants
to purchase shares of Common Stock upon conversion of the Series A
Shares contingent on certain events as provided for in the Certificate
of Designation. The aggregate proceeds of $3,000,000 were applied
principally towards the cash portion of the purchase price for the
Logitech Acquisition (see the description of the Logitech transaction
below).
Storm also completed an offer and sale to members of Storm's
management, including its Chief Executive Officer, on December 18, 1997,
of (i) 1,094,665 shares of Common Stock at a price of $1.875 per share
and (ii) warrants to purchase an aggregate of 102,625 shares of Common
Stock of Storm with an exercise price of $1.90 per share, such warrant
rights granted at a price of $0.125 per warrant share. Of such
issuances, (i) 1,066,666 shares of Common Stock and a warrant to
purchase 100,000 shares of Common Stock were issued to L. William
Krause, Storm's President and Chief Executive Officer, through the L.
William and L. Gay Krause Trust under Agreement dated June 21, 1994 (the
"Krause Trust") for a total purchase price of $2,012,478.95, $2,000,000
for the purchase price of the Common Stock and $12,478.95 for the right
to receive the warrant and (ii) 16,000 shares of Common Stock and a
warrant to purchase 1,500 shares of Common Stock were issued to Adriaan
Ligtenberg, the Company's Chairman of the Board, for a total purchase
price of $30,187.50, $30,000 for the purchase price of the Common Stock
and $187.50 for the right to receive the warrant. The aggregate
proceeds from such sale to Storm's management of $2,065,325 were applied
principally towards the cash portion of the purchase price for the
Logitech Acquisition.
On December 18, 1997, pursuant to an Acquisition Agreement, Storm
acquired certain tangible and intangible assets related to the image
scanning products of Logitech (the "Products"). Concurrent with the
execution of the Acquisition Agreement, Storm entered into (i) a Joint
Sales and Marketing Agreement (the "Joint Marketing Agreement") with a
Logitech affiliate, Logitech Trading S.A. ("Logitech Trading") for the
marketing, sales and distribution by Logitech Trading of the Products
and Storm's own proprietary products (the "Storm Products") and (ii) a
Manufacturing Services Agreement with another Logitech affiliate,
Logitech Far East Ltd., for the manufacture of certain products for
Storm.
In accordance with the Acquisition Agreement, Storm (i) paid a
purchase price equal to $9,000,000, $5,000,000 payable in cash at the
closing under the Acquisition Agreement and the remaining $4,000,000
payable pursuant to a promissory note which, if not paid by March 27,
1998, will be convertible under certain circumstances by Logitech into
Storm's Common Stock; (ii) issued to Logitech 1,159,413 shares of
Storm's Common Stock; (iii) will pay for certain inventory of the
Products pursuant to the Joint Marketing Agreement; and (iv) will pay
for distribution of the Products and Storm Products under the Joint
Marketing Agreement in the form of an "earn-out" based on the sales
revenue generated by such distribution. Storm also assumed certain
contractual obligations of Logitech related to the Assets. The purchase
price was paid using funds from Storm's working capital obtained through
the sale of Storm's equity securities (see description of private
placements above).
James M. Koshland, a current director of the Company and a nominee
for election to director at the Annual Meeting, is a partner in the law
firm of Gray Cary Ware & Freidenrich, LLP, Storm's general outside
counsel.
COMPARISON OF STOCKHOLDER RETURN
Set forth below is a line graph comparing the percentage change in
the cumulative total return on the Company's Common Stock with the
cumulative total return of the Nasdaq Stock Market (U.S. companies only)
Index ("Nasdaq US") and the Hambrecht & Quist Growth Index ("H & Q
Index") for the period commencing on September 30, 1996 and ending on
December 31, 1997. The graph assumes that $100 was invested on
September 30, 1996(1) in the Company's Common Stock at the initial public
offering price of $10.50 and in each index, and that all dividends, if
applicable, were reinvested.
Comparison of Cumulative Total Return From September 30, 1996 through
December 31, 1997(2)
Storm Technology, Inc., Nasdaq US and H&Q Index
PERFORMANCE GRAPH
Sept 30, Dec. 31, June 30, Dec. 31,
1996 1996 1997 1997
- ----------------------------------- --------- ---------
[S] [C] [C]
Storm $100.00 $45.22 $19.04 $23.80
Nasdaq US $100.00 $105.86 $118.25 $128.77
H&Q Index $100.00 $93.76 $89.15 $96.86
(1) The Company's initial public offering commenced on October 1,
1996. For purposes of this presentation, the Company has assumed
that its initial offering price of $10.50 would have been the
closing sales price on September 30, 1996, the day prior to
commencement of trading.
(2) Assumes that $100.00 was invested on September 30, 1996 in the
Company's Common Stock at the Company's initial offering price of
$10.50 and at the closing sales price for each index on that date
and that all dividends were reinvested. No dividends have been
declared on the Company's Common Stock. Stockholder returns over
the indicated period should not be considered indicative of future
stockholder returns.
INCORPORATION BY REFERENCE
The following documents are hereby incorporated by reference
herein: (i) the Company's annual report on Form 10-K for the fiscal year
ended December 31, 1997 and (ii) the Company's Report on Form 8-K filed
on January 2, 1998.
STOCKHOLDER PROPOSALS TO BE PRESENTED
AT NEXT ANNUAL MEETING
Proposals of stockholders intended to be presented at the next
Annual Meeting of the Stockholders of the Company must be received by
the Company at its offices at 1395 Charleston Road, Mountain View,
California 94043, not later than October 31, 1998, and satisfy the
conditions established by the Securities and Exchange Commission for
stockholder proposals to be included in the Company's proxy statement
for that meeting.
TRANSACTION OF OTHER BUSINESS
At the date of this Proxy Statement, the only business which the
Board of Directors intends to present or knows that others will present
at the meeting is as set forth above. If any other matter or matters
are properly brought before the meeting, or any adjournment thereof, it
is the intention of the persons named in the accompanying form of proxy
to vote the proxy on such matters in accordance with their best
judgment.
By Order of the Board of
Directors,
L. WILLIAM KRAUSE
Chief Executive Officer and
President
April 10, 1998
<PAGE>
STORM TECHNOLOGY, INC.
Proxy for Annual Meeting of Stockholders
Solicited by the Board of Directors
The undersigned hereby appoints L. William Krause and Rick M.
McConnell, and each of them, with full power of substitution to
represent the undersigned and to vote all the shares of the stock of
Storm Technology, Inc. which the undersigned is entitled to vote at the
Annual Meeting of Stockholders of the Company to be held at 1395
Charleston Road, Mountain View, California 94043 on May 7, 1998, at
10:00 a.m. local time, and at any adjournment thereof (1) as hereinafter
specified upon the proposals listed below and as more particularly
described in the Company's Proxy Statement and (2) in their discretion
upon such other matters as may properly come before the meeting.
The undersigned hereby acknowledges receipt of: (1) Notice of
Annual Meeting of Stockholders of the Company, (2) accompanying Proxy
Statement, and (3) Annual Report of the Company for the fiscal year
ended December 31, 1997.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
COMPANY.
1. Election of the following directors:
[ ] FOR the nominees [ ] WITHHOLD AUTHORITY
listed below (except to vote for the
as marked to the nominees listed
contrary below.) below.
(INSTRUCTION: To withhold authority to vote for a nominee, strike
a line through the nominee's name.)
Richard C. Alberding
Louis J. Doctor
James M. Koshland
L. William Krause
William Lane III
Adriaan Ligtenberg
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
THIS PROPOSAL
2. To ratify the sale and issuance of Series A 8.5% Convertible
Preferred Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
THIS PROPOSAL
3. To ratify the acquisition of certain assets from Logitech,
Inc. and certain of its affiliated companies.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
THIS PROPOSAL
4. To ratify the appointment of Price Waterhouse LLP as
independent accountants of the Company for the fiscal year
ending December 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
THIS PROPOSAL
Whether or not you plan to attend the meeting in person, you are urged
to sign and promptly mail this proxy in the return envelope so that your
stock may be represented at the meeting.
The shares represented hereby shall be voted as specified. If no
specification is made, such shares shall be voted FOR proposals 1 and 2.
[ ] CHECK HERE FOR ADDRESS CHANGE AND NOTE BELOW.
[ ] CHECK HERE IF YOU PLAN TO ATTEND THE ANNUAL MEETING.
Sign exactly as your name(s) appears on your stock certificate. If
shares of stock stand of record in the names of two or more persons or
in the name of husband and wife, whether as joint tenants or otherwise,
both or all of such persons should sign the above Proxy. If shares of
stock are held of record by a corporation, the Proxy should be executed
by the President or Vice President and the Secretary or Assistant
Secretary, and the corporate seal should be affixed thereto. Executors
or administrators or other fiduciaries who execute the above Proxy for a
deceased stockholder should give their full title. Please date the
Proxy.
Dated: , 1998
Signature(s):
