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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ________)*
Storm Technology, Inc.
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock $0.001 par value
- --------------------------------------------------------------------------------
(Title of Class of Securities)
86-2219-10-2
----------------------------------------------
(CUSIP Number)
Rick M. McConnell, 1395 Charleston Road, Mountain View, CA 94043
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
12/18/97
- --------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the
following box.
NOTE: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom
copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of
that section of the Act but shall be subject to all other provisions of the
Act (however, see the Notes).
POTENTIAL 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.
1
<PAGE>
SCHEDULE 13D
- ----------------------- ---------------------
CUSIP NO. 86-2219-10-2 PAGE 2 OF 12 PAGES
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
1 L. WILLIAM KRAUSE
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [X]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4 PF
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6 UNITED STATES
- ------------------------------------------------------------------------------
7 SOLE VOTING POWER
133,741
NUMBER OF
SHARES -----------------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY 1,582,579
OWNED BY
-----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
133,741
REPORTING
PERSON -----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH 1,582,579
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11 1,716,320
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12 N/A
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13 13.4%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14 IN
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
- ----------------------- ---------------------
CUSIP NO. 86-2219-10-2 PAGE 3 OF 12 PAGES
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
1 L. GAY KRAUSE
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [X]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3 PF
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6 UNITED STATES
- ------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF
SHARES -----------------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY 1,582,579
OWNED BY
-----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON -----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH 1,582,579
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11 1,582,579
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12 N/A
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13 12.3%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14 IN
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
- ----------------------- ---------------------
CUSIP NO. 86-2219-10-2 PAGE 4 OF 12 PAGES
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
1 THE KRAUSE TRUST
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [X]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4 SEE ITEM 3 BELOW.
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5 N/A
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6 UNITED STATES
- ------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF
SHARES -----------------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY 1,563,349
OWNED BY
-----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
0
REPORTING
PERSON -----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH 1,563,349
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11 1,563,349
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12 N/A
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13 12.2%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14 OO (TRUST)
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
- ----------------------- ---------------------
CUSIP NO. 86-2219-10-2 PAGE 5 OF 12 PAGES
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
1 LWK VENTURES MONEY PURCHASE PENSION PLAN
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [X]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4 SEE ITEM 3 BELOW
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5 N/A
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6 UNITED STATES
- ------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF
SHARES -----------------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY 13,461
OWNED BY
-----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
0
REPORTING
PERSON -----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH 13,461
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11 13,461
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12 N/A
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13 LESS THAN 1%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14 EP
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
- ----------------------- ---------------------
CUSIP NO. 86-2219-10-2 PAGE 6 OF 12 PAGES
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
1 LWK VENTURES PROFIT SHARING PLAN
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [X]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4 SEE ITEM 3 BELOW.
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5 N/A
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6 UNITED STATES
- ------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF
SHARES -----------------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY 5,769
OWNED BY
-----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
0
REPORTING
PERSON -----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH 5,769
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11 5,769
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12 N/A
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13 LESS THAN 1%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14 EP
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
- -----------------------
CUSIP NO. 86-2219-10-2
- -----------------------
ITEM 1. SECURITY AND ISSUER
The class of equity securities to which this Statement on
Schedule 13D relates is the Common Stock, par value $0.001 per share (the
"Common Stock"), of Storm Technology, Inc. (the "Issuer" or "STI"), a
Delaware corporation, with its principal executive offices located at 1395
Charleston Road in Mountain View, California 94043.
ITEM 2. IDENTITY AND BACKGROUND
This Statement is being filed by L. William Krause based upon his
direct and indirect beneficial ownership of shares of Common Stock,
warrants and stock options to purchase Common Stock held by Mr. Krause and
his wife, L. Gay Krause, The Krause Trust, LWK Ventures Money Purchase
Pension Plan dated January 1, 1991 (the "Pension Plan") and LWK Ventures
Profit Sharing Plan dated January 1, 1991 (the "Profit Sharing Plan"), as
Trustee. Mr. Krause's business address is 1395 Charleston Road, Mountain
View, California 94043. Mr. Krause's principal occupation is serving as
Chief Executive Officer and President of STI which provides digital photo
solutions that enable consumers and small businesses to input, store,
organize, enhance and use photos easily on their personal computers.
The Pension Plan and the Profit Sharing Plan (collectively, the
"Plans") were formed by L. William Krause through LWK Ventures, his sole
proprietorship. The Plans' business address is 1395 Charleston Road,
Mountain View, California 94043. Mr. Krause is the trustee of the Plans.
During the last five years, Mr. Krause has not been (a) convicted
in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (b) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with respect to
such laws. Mr. Krause is a citizen of the United States.
During the last five years, Mrs. Krause has not been (a)
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (b) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with respect to
such laws. Mrs. Krause is a citizen of the United States.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Between November 1, 1991, and September 30, 1996, the effective
date of STI's initial public offering, (the "Effective Date"), Mr. Krause,
for himself and using his personal funds, acquired an aggregate of 346,683
shares of the Common Stock, Series A Preferred Stock and Series B Preferred
Stock of STI, all of which he transferred to The Krause Trust prior to the
Effective Date and all of which converted into Common Stock on the
Effective Date. The Pension Plan and the Profit Sharing Plan purchased
13,461 and 5,769 shares, respectively, of STI's Series D Preferred Stock on
July 27, 1995 both of which Series D Preferred Stock converted into Common
Stock on the Effective Date.
From the Effective Date to December 18, 1997 (the "Triggering
Date"), The Krause Trust periodically purchased a small number of shares of
STI Common Stock as listed below using personal funds of Mr. Krause:
<TABLE>
<CAPTION>
Date of Purchase Number of Shares Price Per Share
---------------- ---------------- ---------------
<S> <C> <C>
April 25, 1997 20,000 $1.375
May 20, 1997 10,000 $2.00
</TABLE>
7
<PAGE>
SCHEDULE 13D
- -----------------------
CUSIP NO. 86-2219-10-2
- -----------------------
which purchases did not materially increase the holdings of Mr. Krause or
the Krause Trust. Additionally, STI granted options to purchase shares of
its Common Stock to Mr. Krause as follows:
<TABLE>
<CAPTION>
Date of Option Grant Number of Shares
-------------------- ----------------
<S> <C>
July 9, 1997 80,000
January 15, 1998 50,000
</TABLE>
Pursuant to Rule 13d-3 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), Mr. Krause is deemed the beneficial owner of these
130,000 shares of Common Stock which he has the right to acquire upon
exercise of stock options which are presently exercisable within sixty days
of the date of the filing of this statement.
On the triggering date, Mr. and Mrs. Krause, in the name of The
Krause Trust, purchased: (i) 1,066,666 shares of STI Common Stock and (ii)
a warrant to purchase 100,000 shares of the STI Common Stock. The total
aggregate purchase price of $2,012,498.70 was provided from Mr. Krause's
personal funds. In no case were any funds borrowed.
Since the triggering date, Mr. Krause purchased 3,741 shares
under the STI 1996 Employee Stock Purchase Plan on February 2, 1998 at
$2.125 per share.
ITEM 4. PURPOSE OF TRANSACTION.
Mr. Krause directed the purchases of shares of Common Stock for
investment purposes only. At the time of the purchases of Common Stock
disclosed herein, Mr. Krause was serving as Chief Executive Officer of the
Issuer.
Consistent with his investment intent, and depending on market
conditions, Mr. Krause may acquire additional shares of Common Stock
through open market purchases, privately negotiated transactions, or
through the exercise of warrants and stock options; he may, however,
dispose all or a portion of shares of Common Stock through the open market
or in privately negotiated transactions to one or more purchasers which may
include the Issuer; and, Mr. Krause will consider other alternatives
available in connection with STI securities.
Other than as set forth above, Mr. Krause has no present plans or
proposals which may relate to or would result in:
(a) The acquisition or disposition of any additional securities
of the Issuer by any person;
(b) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Issuer or any of its
subsidiaries;
(c) A sale or transfer of a material amount of assets of the
Issuer or any of its subsidiaries;
(d) Any change in the present board of directors or management
of the Issuer, including any plans or proposals to change the number or
term of directors or to fill any existing vacancies or the board;
(e) Any material change in the present capitalization or
dividend policy of the Issuer;
(f) Any other material change in the Issuer's business or
corporate structure;
(g) Changes in the Issuer's charter, bylaws or instruments
corresponding thereto or other actions which may impede the acquisition of
control of the Issuer by any person;
8
<PAGE>
SCHEDULE 13D
- -----------------------
CUSIP NO. 86-2219-10-2
- -----------------------
(h) Causing a class of securities of the Issuer to be delisted
from a national securities exchange or to cease to be authorized to be
quoted in an inter-dealer quotation system of a registered national
securities association;
(i) A class of equity securities of the Issuer becoming eligible
for termination of registration pursuant to Section 12(g)(4) of the
Securities Exchange Act of 1934, as amended; or
(j) Any action similar to any of those enumerated above.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
Pursuant to Rule 13d-3, Mr. Krause may be deemed to beneficially
own a total of 1,716,320 shares of Common Stock as of the date of the
filing of this Schedule 13D (the "Filing Date"), representing 13.4% of the
outstanding Common Stock, based upon the number of shares of STI Common
Stock as of February 23, 1998, and computed in accordance with Rule 13d-
3(d)(1). Mr. Krause's beneficial ownership of STI is as follows:
L. William Krause
-----------------
3,741 shares of Common Stock (Direct)/1/
1,463,349 shares of Common Stock (Indirect)/2/
19,230 shares of Common Stock (Indirect)/3/
100,000 Warrants to purchase Common Stock (Indirect)
130,000 Options to purchase Common Stock (Direct)
L. Gay Krause
-------------
1,463,349 shares of Common Stock (Indirect)/2/
19,230 shares of Common Stock (Indirect)/3/
3,741 shares of Common Stock (Direct)/1/
100,000 Warrants to purchase Common Stock (Indirect)
The Krause Trust
----------------
3,741 shares of Common Stock (Indirect)/1/
1,463,349 shares of Common Stock (Indirect)/2/
19,230 shares of Common Stock (Indirect)/3/
100,000 Warrants to purchase Common Stock (Indirect)
LWK Ventures Money Purchase Pension Plan dated January 1, 1991
--------------------------------------------------------------
13,461 shares of Common Stock (Indirect)
LWK Ventures Profit Sharing Plan dated January 1, 1991
------------------------------------------------------
5,769 shares of Common Stock (Indirect)
As Mr. Krause's spouse, Mrs. Krause may also be deemed under the
applicable community property laws to hold up to 1,463,349 shares of STI's
Common Stock and Warrants to purchase 100,000 shares of STI's Common Stock.
______________________________
/1/ Shares held by Mr. Krause purchased under STI 1996 Employee Stock Purchase
Plan.
/2/ Includes holdings of the Krause Trust.
/3/ Includes holdings of 13,461 shares held by The Pension Plan and 5,769 shares
held by the Profit Sharing Plan.
9
<PAGE>
SCHEDULE 13D
- -----------------------
CUSIP NO. 86-2219-10-2
- -----------------------
Mr. Krause has (i) sole voting and dispositive powers for 3,741
shares of Common Stock, (ii) shared voting and dispositive powers for
1,463,349 shares of Common Stock and warrants to purchase 100,000 shares of
Common Stock as Trustee of the Trust and the (iii) sole voting and
dispositive power for stock options to purchase 130,000 shares of Common
Stock (the stock options are presently exercisable within sixty days of the
Filing Date), which represents 13.4% of the total shares of Common Stock
outstanding of 12,827,971 (based on the number of shares of Common Stock
outstanding on February 23, 1998).
Mrs. Krause has shared voting and dispositive powers for
1,463,349 shares of Common Stock and warrants to purchase 100,000 shares of
Common Stock as Trustee of The Trust which represents 12.2% of the total
shares of Common Stock outstanding of 12,827,971 (based on the number of
shares of Common Stock outstanding on February 23, 1998).
The Krause Trust has shared voting and dispositive powers for
1,463,349 shares of Common Stock and warrants to purchase 100,000 shares of
Common Stock as Trustee of The Trust which represents 12.2% of the total
shares of Common Stock outstanding of 12,827,971 (based on the number of
shares of Common Stock outstanding on February 23, 1998).
LWK Ventures Money Purchase Pension Plan has shared voting and
dispositive powers for 13,461 shares of Common Stock which represents less
than 1% of the total shares of Common outstanding of 12,827,971 (based on
the number of shares of Common Stock outstanding on February 23, 1998).
LWK Ventures Profit Sharing Plan has shared voting and
dispositive powers for 5,769 shares of Common Stock which represents less
than 1% of the total shares of Common outstanding of 12,827,971 (based on
the number of shares of Common Stock outstanding on February 23, 1998).
There were no transactions by Mr. Krause or related entities from
the date sixty days preceding the Triggering Date through the Filing Date
other than the purchase of 3,741 shares of Common Stock under the STI 1996
Employee Stock Purchase Plan on February 2, 1998.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
Mr. Krause was granted options to acquire shares of Common Stock
under the Issuer's Amended and Restated Stock Option Plan (the "Option
Plan").
Under the Option Plan, the exercise price must be at least 100%
of the fair market value of the Issuer's Common Stock on the date of grant,
except that for the grant of an option to a person holding 10% or more of
the total combined voting power of all classes of stock of the Issuer or
any parent or subsidiary of the Issuer the exercise price must be at least
110% of the fair market value of the Issuer's Common Stock on the date of
grant. Generally, options granted under the Option Plan are immediately
exercisable subject to a repurchase right in favor of the Issuer which
lapses over a four-year period. A copy of the Option Plan is attached
hereto as Exhibit A and incorporated herein by reference. Mr. Krause
---------
entered into option agreements with STI under the Option Plan on July 9,
1997 and January 15, 1998 (collectively the "Option Plan Agreements"), a
copy of each which is attached hereto as Exhibit B and Exhibit C,
--------- ---------
respectively, and incorporated herein by reference. The Option Plan
Agreement, dated July 9, 1997, provided a grant on July 9, 1997 of an
option to acquire 80,000 shares of Common Stock at an exercise price of
$1.938 per share. The Option Plan Agreement dated January 15, 1998,
provided a grant on January 15, 1998, of an option to purchase 50,000
shares of Common Stock at an exercise price of $2.688 per share. As of the
Filing Date, all of such shares were immediately exercisable.
On December 18, 1997, pursuant to a Common Stock and Warrant
Purchase Agreement (the "Warrant Agreement"), a copy of which is attached
hereto as Exhibit D, STI issued a warrant to purchase 100,000 shares of
---------
Common Stock to The Krause Trust, for $12,500, at $1.90 per share "). A
copy of the Warrant is attached hereto as Exhibit E and incorporated herein
---------
by reference.
10
<PAGE>
SCHEDULE 13D
- -----------------------
CUSIP NO. 86-2219-10-2
- -----------------------
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
A Storm Technology Inc. Amended and Restated Stock Option Plan is
incorporated by reference to Exhibit 10.2 to the Company's Form S-1 filed
on June 26, 1996 (File No. 333-06911).
B Immediately Exercisable Incentive Stock Option Agreement by and between
Storm Technology Inc. and L. William Krause dated July 9, 1997.
C Immediately Exercisable Incentive Stock Option Agreement by and between
Storm Technology, Inc. and L. William Krause dated January 15, 1998.
D Common Stock and Warrant Purchase Agreement issued to L. William and L.
Gay Krause Trust under Agreement dated June 21, 1994 by Storm Technology,
Inc. dated December 18, 1997.
E Stock Purchase Warrant to Purchase 100,000 shares of Common Stock of
Storm Technology, Inc. issued to L. William and L. Gay Krause Trust under
Agreement dated June 21, 1994 dated December 18, 1997.
F Joint Filing Agreement dated July 10, 1998.
</TABLE>
SIGNATURE
After reasonable inquiry and to the best of our knowledge and
belief, we certify that the information set forth in this statement is
true, complete and correct.
July 10, 1998
By:/s/ L. William Krause
-----------------------------------------
L. William Krause
By:/s/ L. Gay Krause
-----------------------------------------
L. Gay Krause
The original statement shall be signed by each person on whose behalf the
statement is filed or his authorized representative. If the statement is signed
on behalf of a person by his authorized representative (other than an executive
officer or general partner of this filing person), evidence of the
representative's authority to sign on behalf of such person shall be filed with
the statement, provided, however, that a power of attorney for this purpose
which is already on file with the Commission may be incorporated by reference.
The name and any title of each person who signs the statement shall be typed or
printed beneath his signature.
ATTENTION: INTENTIONAL MISSTATEMENTS OR OMISSIONS OF FACT CONSTITUTE FEDERAL
CRIMINAL VIOLATIONS (SEE 18 U.S.C. 1001)
11
<PAGE>
SCHEDULE 13D
- -----------------------
CUSIP NO. 86-2219-10-2
- -----------------------
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
A Storm Technology Inc. Amended and Restated Stock Option Plan is
incorporated by reference to Exhibit 10.2 to the Company's Form S-1 filed
on June 26, 1996 (File No. 333-06911).
B Immediately Exercisable Incentive Stock Option Agreement by and between
Storm Technology Inc. and L. William Krause dated July 9, 1997.
C Immediately Exercisable Incentive Stock Option Agreement by and between
Storm Technology, Inc. and L. William Krause dated January 15, 1998.
D Common Stock and Warrant Purchase Agreement issued to L. William and L.
Gay Krause Trust under Agreement dated June 21, 1994 by Storm Technology,
Inc. dated December 18, 1997.
E Stock Purchase Warrant to Purchase 100,000 shares of Common Stock of
Storm Technology, Inc. issued to L. William and L. Gay Krause Trust under
Agreement dated June 21, 1994 dated December 18, 1997.
F Joint Filing Agreement dated July 10, 1998.
</TABLE>
12
<PAGE>
EXHIBIT B
STORM TECHNOLOGY, INC.
IMMEDIATELY EXERCISABLE
INCENTIVE STOCK OPTION AGREEMENT
[Subsequent Grant]
THIS IMMEDIATELY EXERCISABLE INCENTIVE STOCK OPTION AGREEMENT (the "Option
Agreement") is made and entered into as of July 9, 1997, by and between Storm
Technology, Inc. and L. William Krause (the "Optionee").
The Company has granted to the Optionee an option to purchase certain
shares of Stock, upon the terms and conditions set forth in this Option
Agreement (the "Option").
1. Definitions and Construction.
----------------------------
1.1 Definitions. Whenever used herein, the following terms shall
-----------
have their respective meanings set forth below:
(a) "Date of Option Grant" means July 9, 1997.
--------------------
(b) "Number of Option Shares" means 80,000 shares of Stock, as
-----------------------
adjusted from time to time pursuant to Section 9.
(c) "Exercise Price" means $1.938 per share of Stock, as adjusted
-------------
from time-to time pursuant to Section 9.
(d) "Initial Exercise Date" means the Date of Option Grant.
---------------------
(e) "Initial Vesting Date" means the Date of Option Grant.
--------------------
(f) "Vested Ratio" means, on any relevant date, the ratio
------------
determined as follows:
<TABLE>
<CAPTION>
Vested Ratio
------------
<S> <C>
Prior to Initial Vesting Date 0
On Initial Vesting Date 1/48
Plus
----
For each full month of the Optionee's 1/48
continuous Service from the Initial Vesting
Date until the Vested Ratio equals 1/1,
an additional
</TABLE>
1
<PAGE>
(g) "Option Expiration Date" means the date ten (10) years after
----------------------
the Date of Option Grant.
(h) "Board" means the Board of Directors of the Company. If one
-----
or more Committees have been appointed by the Board to administer the Plan,
"Board" shall also mean such Committee(s).
(i) "Code" means the Internal Revenue Code of 1986, as amended,
----
and any applicable regulations promulgated thereunder.
(j) "Committee" means the Compensation Committee or other
---------
committee of the Board duly appointed to administer the Plan and having such
powers as shall be specified by the Board. Unless the powers of the Committee
have been specifically limited, the Committee shall have all of the powers of
the Board granted in the Plan, including, without limitation, the power to amend
or terminate the Plan at any time, subject to the terms of the Plan and any
applicable limitations imposed by law.
(k) "Company" means Storm Technology, Inc., a Delaware
-------
corporation, or any successor corporation thereto.
(l) "Consultant" means any person, including an advisor, engaged
----------
by a Participating Company to render services other than as an Employee or a
Director.
(m) "Director" means a member of the Board or of the board of
--------
directors of any other Participating Company.
(n) "Disability" means the permanent and total disability of the
----------
optionee within the meaning of Section 22(e)(3) of the Code.
(o) "Employee" means any person treated as an employee (including
--------
an officer or a Director who is also treated as an employee) in the records of a
Participating Company; provided, however, that neither service as a Director nor
payment of a director's fee shall be sufficient to constitute employment for
this purpose.
(p) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(q) "Fair Market Value" means, as of any date, the value of a
-----------------
share of stock or other property as determined by the Board, in its sole
discretion, or by the Company, in its sole discretion, if such determination is
expressly allocated to the Company herein.
(r) "Insider" means an officer or a Director of the Company or
-------
any other person whose transactions in Stock are subject to Section 16 of the
Exchange Act.
(s) "Parent Corporation" means any present or future "parent
------------------
corporation" of the Company, as defined in Section 424(e) of the Code.
2
<PAGE>
(t) "Participating Company" means the Company or any Parent
---------------------
Corporation or Subsidiary Corporation.
(u) "Participating Company Group" means, at any point in time,
---------------------------
all corporations collectively which are then Participating Companies.
(v) "Plan" means the Storm Technology, Inc. Amended and Restated
----
Stock Option Plan.
(w) "Rule 16b-3" means Rule 16b-3 under the Exchange Act, as
----------
amended from time to time, or any successor rule or regulation.
(x) "Securities Act" means the Securities Act of 1933, as
--------------
amended.
(y) "Service" means the Optionee's employment or service with the
-------
Participating Company Group, whether in the capacity of an Employee, a Director
or a Consultant. The Optionee's Service shall not be deemed to have terminated
merely because of a change in the capacity in which the Optionee renders Service
to the Participating Company Group or a change in the Participating Company for
which the Optionee renders such Service, provided that there is no interruption
or termination of the Optionee's Service. The Optionee's Service shall be
deemed to have terminated either upon an actual termination of Service or upon
the corporation for which the Optionee performs Service ceasing to be a
Participating Company. Subject to the foregoing, the Company, in its sole
discretion, shall determine whether the Optionee's Service has terminated and
the effective date of such termination. (NOTE: If the Option is exercised more
than three (3) months after the date on which the Optionee ceased to be an
Employee (other than by reason of death or a permanent and total disability as
defined in Section 22(e)(3) of the Code), the Option will be treated as a
nonstatutory stock option and not as an incentive stock option to the extent
required by Section 422 of the Code.)
(z) "Stock" means the common stock of the Company, as adjusted
-----
from time to time in accordance with Section 9.
(aa) "Subsidiary Corporation" means any present or future
----------------------
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.
1.2 Construction. Captions and titles contained herein are for
------------
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. Except when otherwise indicated by the
context, the singular shall include the plural, the plural shall include the
singular, and the term "or" shall include the conjunctive as well as the
disjunctive.
2. Tax Consequences.
----------------
2.1 Tax Status of Option. This Option is intended to be an incentive
--------------------
stock option within the meaning of Section 422(b) of the Code (an "Incentive
Stock Option"), but the Company does not represent or warrant that this Option
qualifies as such. The Optionee should consult with the Optionee's own tax
advisor regarding the tax effects of this Option and the requirements necessary
to obtain favorable income tax treatment under Section 422 of the Code,
3
<PAGE>
including, but not limited to, holding period requirements. (NOTE: If the
aggregate Exercise Price of the Option (that is, the Exercise Price multiplied
by the Number of Option Shares) plus the aggregate exercise price of any other
Incentive Stock Options held by the Optionee (whether granted pursuant to the
Plan or any other stock option plan of the Participating Company Group) is
greater than One Hundred Thousand Dollars ($100,000), the Optionee should
contact the Chief Financial Officer of the Company to ascertain whether the
entire Option qualifies as an Incentive Stock Option.)
2.2 Election Under Section 83(b) of the Code. If the Optionee
----------------------------------------
exercises this Option to purchase shares of Stock that are both nontransferable
and subject to a substantial risk of forfeiture, the Optionee understands that
the Optionee should consult with the Optionee's tax advisor regarding the
advisability of filing with the Internal Revenue Service an election under
Section 83(b) of the Code, which must be filed no later than thirty (30) days
after the date on which the Optionee exercises the Option. Shares acquired upon
exercise of the Option are nontransferable and subject to a substantial risk of
forfeiture if, for example, (a) they are unvested and are subject to a right of
the Company to repurchase such shares at the Optionee's original purchase price
if the Optionee's Service terminates, (b) the Optionee is an Insider and
exercises the Option within six (6) months of the Date of Option Grant (if a
class of equity security of the Company is registered under Section 12 of the
Exchange Act), or (c) the Optionee is subject to a restriction on transfer to
comply with "Pooling-of-Interests Accounting" rules. Failure to file an election
under Section 83(b), if appropriate, may result in adverse tax consequences to
the Optionee. The Optionee acknowledges that the Optionee has been advised to
consult with a tax advisor prior to the exercise of the Option regarding the tax
consequences to the Optionee of the exercise of the Option. AN ELECTION UNDER
SECTION 83(b) MUST BE FILED WITHIN 30 DAYS AFTER THE DATE ON WHICH THE OPTIONEE
PURCHASES SHARES. THIS TIME PERIOD CANNOT BE EXTENDED. THE OPTIONEE ACKNOWLEDGES
THAT TIMELY FILING OF A SECTION 83(b) ELECTION IS THE OPTIONEE'S SOLE
RESPONSIBILITY, EVEN IF THE OPTIONEE REQUESTS THE COMPANY OR ITS REPRESENTATIVE
TO FILE SUCH ELECTION ON HIS OR HER BEHALF.
3. Administration. All questions of interpretation concerning this Option
--------------
Agreement shall be determined by the Board, including any duly appointed
Committee of the Board. All determinations by the Board shall be final and
binding upon all persons having an interest in the Option. Any officer of a
Participating Company shall have the authority to act on behalf of the Company
with respect to any matter, right, obligation, or election which is the
responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right, obligation,
or election.
4. Exercise of the Option.
----------------------
4.1 Right to Exercise.
-----------------
(a) Except as otherwise provided herein, the Option shall be
exercisable on and after the Initial Exercise Date and prior to the termination
of the Option (as provided in Section 6) in an amount not to exceed the Number
of Option Shares less the number of shares previously acquired upon exercise of
the Option, subject to the Optionee's agreement
4
<PAGE>
that any shares purchased upon exercise are subject to the Company's repurchase
rights set forth in Section 11. Notwithstanding the foregoing, except as
provided in Section 4.1(b), the aggregate Fair Market Value of the shares of
Stock with respect to which the Optionee may exercise the Option for the first
time during any calendar year, when added to the aggregate Fair Market Value of
the shares subject to any other options designated as Incentive Stock Options
granted to the Optionee under all stock option plans of the Participating
Company Group prior to the Date of Option Grant with respect to which such
options are exercisable for the first time during the same calendar year, shall
not exceed One Hundred Thousand Dollars ($100,000). For purposes of the
preceding sentence, options designated as Incentive Stock Options shall be taken
into account in the order in which they were granted, and the Fair Market Value
of shares of stock shall be determined as of the time the option with respect to
such shares is granted. Such limitation on exercise shall be referred to in this
Option Agreement as the "ISO Exercise Limitation." If Section 422 of the Code is
amended to provide for a different limitation from that set forth in this
Section 4.1(a), the ISO Exercise Limitation shall be deemed amended effective as
of the date required or permitted by such amendment to the Code. The ISO
Exercise Limitation shall terminate upon the earlier of (i) the Optionee's
termination of Service, (ii) the day immediately prior to the effective date of
a Transfer of Control in which the Option is not assumed or substituted for by
the Acquiring Corporation as provided in Section 8, or (iii) the day ten (10)
days prior to the Option Expiration Date. Upon such termination of the ISO
Exercise Limitation, the Option shall be deemed a nonstatutory stock option to
the extent of the number of shares subject to the Option which would otherwise
exceed the ISO Exercise Limitation.
(b) Notwithstanding any other provision of this Option Agreement,
if compliance with the ISO Exercise Limitation as set forth in Section 4.1(a)
will result in the exercisability of any Vested Shares (as defined in Section
11.2) being delayed more than thirty (30) days beyond the date such shares
become Vested Shares (the "Vesting Date"), the Option shall be deemed to be two
(2) options. The first option shall be for the maximum portion of the Number of
Option Shares that can comply with the ISO Exercise Limitation without causing
the Option to be unexercisable in the aggregate as to Vested Shares on the
Vesting Date for such shares. The second option, which shall not be treated as
an Incentive Stock Option as described in section 422(b) of the Code, shall be
for the balance of the Number of Option Shares; that is, those such shares
which, on the respective Vesting Date for such shares, would be unexercisable if
included in the first option and thereby made subject to the ISO Exercise
Limitation. Shares treated as subject to the second option shall be exercisable
on the same terms and at the same time as set forth in this Option Agreement;
provided, however, that (i) the second sentence of Section 4.1(a) shall not
apply to the second option and (ii) each such share shall become a Vested Share
on the Vesting Date on which such share must first be allocated to the second
option pursuant to the preceding sentence. Unless the Optionee specifically
elects to the contrary in the Optionee's written notice of exercise, the first
option shall be deemed to be exercised first to the maximum possible extent and
then the second option shall be deemed to be exercised.
(c) In addition to the foregoing, in the event that the adoption
of the Plan or any amendment of the Plan is subject to the approval of the
Company's stockholders in order for the Plan or the grant of the Option to
comply with the requirements of Rule 16b-3, the Option shall not be exercisable
prior to such stockholder approval if the Optionee is an Insider,
5
<PAGE>
unless the Board, in its sole discretion, approves the exercise of the Option
prior to such stockholder approval.
4.2 Method of Exercise. Exercise of the Option shall be by written
------------------
notice to the Company which must state the election to exercise the Option, the
number of whole shares of Stock for which the Option is being exercised and such
other representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. The written notice must be signed by the Optionee and must be
delivered in person, by certified or registered mail, return receipt requested,
by confirmed facsimile transmission, or by such other means as the Company may
permit, to the Chief Financial Officer of the Company, or other authorized
representative of the Participating Company Group, prior to the termination of
the Option as set forth in Section 6, accompanied by (i) full payment of the
aggregate Exercise Price for the number of shares of Stock being purchased and
(ii) an executed copy, if required herein, of the then current forms of escrow
and security agreement referenced below. The Option shall be deemed to be
exercised upon receipt by the Company of such written notice, the aggregate
Exercise Price, and, if required by the Company, such executed agreements.
4.3 Payment of Exercise Price.
-------------------------
(a) Forms of Consideration Authorized. Except as otherwise
---------------------------------
provided below, payment of the aggregate Exercise Price for the number of shares
of Stock for which the Option is being exercised shall be made (i) in cash, by
check, or cash equivalent, (ii) by tender to the Company of whole shares of
Stock owned by the Optionee having a Fair Market Value (as determined by the
Company without regard to any restrictions on transferability applicable to such
stock by reason of federal or state securities laws or agreements with an
underwriter for the Company) not less than the aggregate Exercise Price, (iii)
by means of a Cashless Exercise, as defined in Section 4.3(c), or (iv) by any
combination of the foregoing.
(b) Tender of Stock. Notwithstanding the foregoing, the Option
---------------
may not be exercised by tender to the Company of shares of Stock to the extent
such tender of Stock would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Company's stock. The
Option may not be exercised by tender to the Company of shares of Stock unless
such shares either have been owned by the Optionee for more than six (6) months
or were not acquired, directly or indirectly, from the Company.
(c) Cashless Exercise. A "Cashless Exercise" means the assignment
-----------------
in a form acceptable to the Company of the proceeds of a sale or loan with
respect to some or all of the shares of Stock acquired upon the exercise of the
Option pursuant to a program or procedure approved by the Company (including,
without limitation, through an exercise complying with the provisions of
Regulation T as promulgated from time to time by the Board of Governors of the
Federal Reserve System). The Company reserves, at any and all times, the right,
in the Company's sole and absolute discretion, to decline to approve or
terminate any such program or procedure.
6
<PAGE>
4.4 Tax Withholding. At the time the Option is exercised, in whole or
---------------
in part, or at any time thereafter as requested by the Company, the Optionee
hereby authorizes withholding from payroll and any other amounts payable to the
Optionee, and otherwise agrees to make adequate provision for (including by
means of a Cashless Exercise to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding
obligations of the Participating Company Group, if any, which arise in
connection with the Option, including, without limitation, obligations arising
upon (i) the exercise, in whole or in part, of the Option, (ii) the transfer, in
whole or in part, of any shares acquired upon exercise of the Option, (iii) the
operation of any law or regulation providing for the imputation of interest, or
(iv) the lapsing of any restriction with respect to any shares acquired upon
exercise of the Option. The Optionee is cautioned that the Option is not
exercisable unless the tax withholding obligations of the Participating Company
Group are satisfied. Accordingly, the Optionee may not be able to exercise the
Option when desired even though the Option is vested, and the Company shall have
no obligation to issue a certificate for such shares or release such shares from
any escrow provided for herein.
4.5 Certificate Registration. Except in the event the Exercise Price
------------------------
is paid by means of a Cashless Exercise, the certificate for the shares as to
which the Option is exercised shall be registered in the name of the Optionee,
or, if applicable, in the names of the heirs of the Optionee.
4.6 Restrictions on Grant of the Option and Issuance of Shares. The
----------------------------------------------------------
grant of the Option and the issuance of shares of Stock upon exercise of the
Option shall be subject to compliance with all applicable requirements of
federal, state or foreign law with respect to such securities. The Option may
not be exercised if the issuance of shares of Stock upon exercise would
constitute a violation of any applicable federal, state or foreign securities
laws or other law or regulations or the requirements of any stock exchange or
market system upon which the Stock may then be listed. In addition, the Option
may not be exercised unless (i) a registration statement under the Securities
Act shall at the time of exercise of the Option be in effect with respect to the
shares issuable upon exercise of the Option or (ii) in the opinion of legal
counsel to the Company, the shares issuable upon exercise of the Option may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT
THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.
ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED
EVEN THOUGH THE OPTION IS VESTED. Questions concerning this restriction should
be directed to the Chief Financial Officer of the Company. The inability of the
Company to obtain from any regulatory body having jurisdiction the authority, if
any, deemed by the Company's legal counsel to be necessary to the lawful
issuance and sale of any shares subject to the Option shall relieve the Company
of any liability in respect of the failure to issue or sell such shares as to
which such requisite authority shall not have been obtained. As a condition to
the exercise of the Option, the Company may require the Optionee to satisfy any
qualifications that may be necessary or appropriate, to evidence compliance with
any applicable law or regulation and to make any representation or warranty with
respect thereto as may be requested by the Company.
7
<PAGE>
4.7 Fractional Shares. The Company shall not be required to issue
-----------------
fractional shares upon the exercise of the Option.
5. Nontransferability of the Option. The Option may be exercised during
--------------------------------
the lifetime of the Optionee only by the Optionee or the Optionee's guardian or
legal representative and may not be assigned or transferred in any manner except
by will or by the laws of descent and distribution. Following the death of the
Optionee, the Option, to the extent provided in Section 7, may be exercised by
the Optionee's legal representative or by any person empowered to do so under
the deceased Optionee's will or under the then applicable laws of descent and
distribution.
6. Termination of the Option. The Option shall terminate and may no
-------------------------
longer be exercised on the first to occur of (a) the Option Expiration Date, (b)
the last date for exercising the Option following termination of the Optionee's
Service as described in Section 7, or (c) a Transfer of Control to the extent
provided in Section 8.
7. Effect of Termination of Service.
--------------------------------
7.1 Option Exercisability.
---------------------
(a) Disability. If the Optionee's Service with the Participating
----------
Company Group is terminated because of the Disability of the Optionee, the
Option, to the extent unexercised and exercisable on the date on which the
Optionee's Service terminated, may be exercised by the Optionee (or the
Optionee's guardian or legal representative) at any time prior to the expiration
of twelve (12) months after the date on which the Optionee's Service terminated,
but in any event no later than the Option Expiration Date.
(b) Death. If the Optionee's Service with the Participating
-----
Company Group is terminated because of the death of the Optionee, the Option, to
the extent unexercised and exercisable on the date on which the Optionee's
Service terminated, may be exercised by the Optionee's legal representative or
other person who acquired the right to exercise the Option by reason of the
Optionee's death at any time prior to the expiration of twelve (12) months after
the date on which the Optionee's Service terminated, but in any event no later
than the Option Expiration Date. The Optionee's Service shall be deemed to have
terminated on account of death if the Optionee dies within thirty (30) days
after the Optionee's termination of Service other than upon "Termination For
Cause".
(c) Termination After Transfer of Control. If the Optionee's
-------------------------------------
Service with the Participating Company Group is terminated because of a
Termination After Transfer of Control (as defined below), (i) the Option, to the
extent unexercised and exercisable on the date on which the Optionee's Service
terminated, may be exercised by the Optionee (or the Optionee's guardian or
legal representative) at any time prior to the expiration of six (6) months
after the date on which the Optionee's Service terminated, but in any event no
later than the Option Expiration Date, and (ii) the Vested Ratio shall be deemed
to be 1/1 as of the date on which the Optionee's Service terminated.
Notwithstanding the foregoing, no acceleration of vesting pursuant to this
Section 7.1(c) shall occur if such acceleration of vesting would make "pooling
of interests" accounting treatment unavailable in connection with the Transfer
of Control (as defined below),
8
<PAGE>
as determined by the Board. The Company makes no representation as to the tax
consequences if the Option is exercised more than three (3) months after the
date on which the Optionee's Service as an Employee terminated. The Optionee
should consult with the Optionee's own tax advisor as to the tax consequences to
the Optionee of any such delayed exercise.
(d) Other Termination of Service. If the Optionee's Service with
----------------------------
the Participating Company Group terminates for any reason except Disability,
death or Termination After Transfer of Control, the Option, to the extent
unexercised and exercisable by the Optionee on the date on which the Optionee's
Service terminated, may be exercised by the Optionee within thirty (30) days (or
such other longer period of time as determined by the Board, in its sole
discretion) after the date on which the Optionee's Service terminated, but in
any event no later than the Option Expiration Date.
7.2 Certain Definitions.
-------------------
(a) "Termination After Transfer of Control" shall mean either of
-------------------------------------
the following events occurring within twelve (12) months after a Transfer of
Control (as defined in Section 8.1(b) below):
(i) termination by the Participating Company Group of the
Optionee's Service with the Participating Company Group for any reason other
than a Termination For Cause; or
(ii) the Optionee's resignation from Service with the
Participating Company Group within a reasonable period of time following any
Constructive Termination (as defined below).
Notwithstanding any provision herein to the contrary, Termination After Transfer
of Control shall not include any termination of the Optionee's Service with the
Participating Company Group which (1) is a Termination For Cause; (2) is a
result of the Optionee's death or Disability; (3) is a result of the Optionee's
voluntary termination of Service other than upon Constructive Termination (as
defined below); or (4) occurs prior to the effectiveness of a Transfer of
Control.
(b) "Termination For Cause" shall mean termination by the
---------------------
Participating Company Group of the Optionee's Service with the Participating
Company Group for any of the following reasons: (i) theft, dishonesty, or
falsification of any Participating Company records; (ii) improper use or
disclosure of a Participating Company's confidential or proprietary information;
(iii) any action by the Optionee which has a detrimental effect on a
Participating Company's reputation or business; (iv) the Optionee's failure or
inability to perform any reasonable assigned duties after written notice from
the Participating Company Group of, and a reasonable opportunity to cure, such
failure or inability; (v) any material breach by the Optionee of any employment
agreement between the Optionee and the Participating Company Group, which breach
is not cured pursuant to the terms of such agreement; or (vi) the Optionee's
conviction of any criminal act which impairs the Optionee's ability to perform
his or her duties with the Participating Company Group.
9
<PAGE>
(c) "Constructive Termination" shall mean any one or more of the
------------------------
following:
(i) without the Optionee's express written consent, the
assignment to the Optionee of any duties, or any limitation of the Optionee's
responsibilities, substantially inconsistent with the Optionee's positions,
duties, responsibilities and status with the Participating Company Group
immediately prior to the date of the Transfer of Control;
(ii) without the Optionee's express written consent, the
relocation of the principal place of the Optionee's employment to a location
that is more than fifty (50) miles from the Optionee's principal place of
employment immediately prior to the date of the Transfer of Control, or the
imposition of travel requirements substantially more demanding of the Optionee
than such travel requirements existing immediately prior to the date of the
Transfer of Control;
(iii) any failure by the Participating Company Group to pay,
or any material reduction by the Participating Company Group of, (1) the
Optionee's base salary in effect immediately prior to the date of the Transfer
of Control (unless reductions comparable in amount and duration are concurrently
made for all other employees of the Participating Company Group with
responsibilities, organizational level and title comparable to the Optionee's),
or (2) the Optionee's bonus compensation, if any, in effect immediately prior to
the date of the Transfer of Control (subject to applicable performance
requirements with respect to the actual amount of bonus compensation earned by
the Optionee); or
(iv) any failure by the Participating Company Group to (1)
continue to provide the Optionee with the opportunity to participate, on terms
no less favorable than those in effect for the benefit of any employee group
which customarily includes a person holding the employment position or a
comparable position with the Participating Company Group then held by the
Optionee, in any benefit or compensation plans and programs, including, but not
limited to, the Participating Company Group's life, disability, health, dental,
medical, savings, profit sharing, stock purchase and retirement plans, if any,
in which the Optionee was participating immediately prior to the date of the
Transfer of Control, or their equivalent, or (2) provide the Optionee with all
other fringe benefits (or their equivalent) from time to time in effect for the
benefit of any employee group which customarily includes a person holding the
employment position or a comparable position with the Participating Company
Group then held by the Optionee.
7.3 Additional Limitation on Option Exercise. Notwithstanding the
----------------------------------------
provisions of Section 7.1, the Option may not be exercised after the Optionee's
termination of Service to the extent that the shares to be acquired upon
exercise of the Option would be subject to the Unvested Share Repurchase Option
as provided in Section 11.
7.4 Extension if Exercise Prevented by Law. Notwithstanding the
--------------------------------------
foregoing, if the exercise of the Option within the applicable time periods set
forth in Section 7.1 is prevented by the provisions of Section 4.6, the Option
shall remain exercisable until three (3) months after the date the Optionee is
notified by the Company that the Option is exercisable, but in any event
10
<PAGE>
no later than the Option Expiration Date. The Company makes no representation as
to the tax consequences of any such delayed exercise. The Optionee should
consult with the Optionee's own tax advisor as to the tax consequences to the
Optionee of any such delayed exercise.
7.5 Extension if Optionee Subject to Section 16(b). Notwithstanding
----------------------------------------------
the foregoing, if a sale within the applicable time periods set forth in Section
7.1 of shares acquired upon the exercise of the Option would subject the
Optionee to suit under Section 16(b) of the Exchange Act, the Option shall
remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Optionee's termination of Service, or (iii) the Option Expiration
Date. The Company makes no representation as to the tax consequences of any such
delayed exercise. The Optionee should consult with the Optionee's own tax
advisors as to the tax consequences to the Optionee of any such delayed
exercise.
7.6 Leave of Absence. For purposes of Section 7.1, the Optionee's
----------------
Service with the Participating Company Group shall not be deemed to terminate if
the Optionee takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company of ninety (90) days or less. In the event of a
leave of absence in excess of ninety (90) days, the Optionee's Service shall be
deemed to terminate on the ninety-first (91st) day of such leave unless the
Optionee's right to return to Service with the Participating Company Group
remains guaranteed by statute or contract. Notwithstanding the foregoing, unless
otherwise designated by the Company (or required by law), a leave of absence
shall not be treated as Service for purposes of determining the Optionee's
Vested Ratio.
8. Transfer of Control.
-------------------
8.1 Definitions.
-----------
(a) An "Ownership Change Event" shall be deemed to have occurred
if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange in a single or
series of related transactions by the stockholders of the Company of more than
fifty percent (50%) of the voting stock of the Company;
(ii) a merger or consolidation in which the Company is a
party;
(iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the Company.
(b) A "Transfer of Control" shall mean an Ownership Change Event
or a series of related Ownership Change Events (collectively, the "Transaction")
wherein the stockholders of the Company immediately before the Transaction do
not retain immediately after the Transaction, in substantially the same
proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial
11
<PAGE>
ownership of more than fifty percent (50%) of the total combined voting power of
the outstanding voting stock of the Company or the corporation or corporations
to which the assets of the Company were transferred (the "Transferee
Corporation(s)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
8.2 Effect of Transfer of Control on Option. In the event of a
---------------------------------------
Transfer of Control, the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "Acquiring
Corporation"), may either assume the Company's rights and obligations under the
Option or substitute for the Option a substantially equivalent option for the
Acquiring Corporation's stock. The Option shall terminate and cease to be
outstanding effective as of the date of the Transfer of Control to the extent
that the Option is neither assumed or substituted for by the Acquiring
Corporation in connection with the Transfer of Control nor exercised as of the
date of the Transfer of Control. Notwithstanding the foregoing, shares acquired
upon exercise of the Option prior to the Transfer of Control and any
consideration received pursuant to the Transfer of Control with respect to such
shares shall continue to be subject to all applicable provisions of this Option
Agreement except as otherwise provided herein. Furthermore, notwithstanding the
foregoing, if the corporation the stock of which is subject to the Option
immediately prior to an Ownership Change Event described in Section 8.1(a)(i)
constituting a Transfer of Control is the surviving or continuing corporation
and immediately after such Ownership Change Event less than fifty percent (50%)
of the total combined voting power of its voting stock is held by another
corporation or by other corporations that are members of an affiliated group
within the meaning of Section 1504(a) of the Code without regard to the
provisions of Section 1504(b) of the Code, the Option shall not terminate unless
the Board otherwise provides in its sole discretion.
9. Adjustments for Changes in Capital Structure. In the event of any
--------------------------------------------
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification, or similar change in the capital structure of the Company,
appropriate adjustments shall be made in the number, Exercise Price and class of
shares of stock subject to the Option. If a majority of the shares which are of
the same class as the shares that are subject to the Option are exchanged for,
converted into, or otherwise become (whether or not pursuant to an Ownership
Change Event) shares of another corporation (the "New Shares"), the Board may
unilaterally amend the Option to provide that the Option is exercisable for New
Shares. In the event of any such amendment, the Number of Option Shares and the
Exercise Price shall be adjusted in a fair and equitable manner, as determined
by the Board, in its sole discretion. Notwithstanding the foregoing, any
fractional share resulting from an adjustment pursuant to this Section 9 shall
be rounded up or down to the nearest whole number, as determined by the Board,
and in no event may the Exercise Price be decreased to an amount less than the
par value, if any, of the stock subject to the Option. The adjustments
determined by the Board pursuant to this Section 9 shall be final, binding and
conclusive.
12
<PAGE>
10. Rights as a Stockholder, Employee or Consultant. The Optionee shall
-----------------------------------------------
have no rights as a stockholder with respect to any shares covered by the Option
until the date of the issuance of a certificate for the shares for which the
Option has been exercised (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company). No
adjustment shall be made for dividends, distributions or other rights for which
the record date is prior to the date such certificate is issued, except as
provided in Section 9. Nothing in this Option Agreement shall confer upon the
Optionee any right to continue in the Service of a Participating Company or
interfere in any way with any right of the Participating Company Group to
terminate the Optionee's Service as an Employee or Consultant, as the case may
be, at any time.
11. Unvested Share Repurchase Option.
--------------------------------
11.1 Grant of Unvested Share Repurchase Option. In the event the
-----------------------------------------
Optionee's Service with the Participating Company Group is terminated for any
reason or no reason, with or without cause, or if the Optionee, the Optionee's
legal representative, or other holder of shares acquired upon exercise of the
Option attempts to sell, exchange, transfer, pledge, or otherwise dispose of
(other than pursuant to an Ownership Change Event) any shares acquired upon
exercise of the Option which exceed the Vested Shares as defined in Section 11.2
below (the "Unvested Shares"), the Company shall have the right to repurchase
the Unvested Shares under the terms and subject to the conditions set forth in
this Section 11 (the "Unvested Share Repurchase Option").
11.2 Vested Shares and Unvested Shares Defined. The "Vested Shares"
-----------------------------------------
shall mean, on any given date, a number of shares of Stock equal to the Number
of Option Shares multiplied by the Vested Ratio determined as of such date and
rounded down to the nearest whole share. On such given date, the "Unvested
Shares" shall mean the number of shares of Stock acquired upon exercise of the
Option which exceed the Vested Shares determined as of such date.
11.3 Exercise of Unvested Share Repurchase Option. The Company may
--------------------------------------------
exercise the Unvested Share Repurchase Option by written notice delivered
personally or forwarded by first class mail to the Optionee within sixty (60)
days after (a) termination of the Optionee's Service (or exercise of the Option,
if later) or (b) the Company has received notice of the attempted disposition of
Unvested Shares. If the Company fails to give notice within such sixty (60) day
period, the Unvested Share Repurchase Option shall terminate unless the Company
and the Optionee have extended the time for the exercise of the Unvested Share
Repurchase Option. The Unvested Share Repurchase Option must be exercised, if at
all, for all of the Unvested Shares, except as the Company and the Optionee
otherwise agree.
11.4 Payment for Shares and Return of Shares to Company. The purchase
--------------------------------------------------
price per share being repurchased by the Company shall be an amount equal to the
Optionee's original cost per share, as adjusted pursuant to Section 9 (the
"Repurchase Price"). The Company shall pay the aggregate Repurchase Price to the
Optionee in cash within thirty (30) days after the date of personal delivery or
mailing of the written notice of the Company's exercise of the Unvested Share
Repurchase Option. For purposes of the foregoing, cancellation of any
indebtedness of the Optionee to any Participating Company shall be treated as
payment to the Optionee in cash to the
13
<PAGE>
extent of the unpaid principal and any accrued interest canceled. The shares
being repurchased shall be delivered to the Company by the Optionee at the same
time as the delivery of the Repurchase Price to the Optionee.
11.5 Assignment of Unvested Share Repurchase Option. The Company shall
----------------------------------------------
have the right to assign the Unvested Share Repurchase Option at any time,
whether or not such option is then exercisable, to one or more persons as may be
selected by the Company.
11.6 Ownership Change Event. Upon the occurrence of an Ownership
----------------------
Change Event, any and all new, substituted or additional securities or other
property to which the Optionee is entitled by reason of the Optionee's ownership
of Unvested Shares shall be immediately subject to the Unvested Share Repurchase
Option and included in the terms "Stock" and "Unvested Shares" for all purposes
of the Unvested Share Repurchase Option with the same force and effect as the
Unvested Shares immediately prior to the Ownership Change Event. While the
aggregate Repurchase Price shall remain the same after such Ownership Change
Event, the Repurchase Price per Unvested Share upon exercise of the Unvested
Share Repurchase Option following such Ownership Change Event shall be adjusted
as appropriate. For purposes of determining the Vested Ratio following an
Ownership Change Event, credited Service shall include all Service with any
corporation which is a Participating Company at the time the Service is
rendered, whether or not such corporation is a Participating Company both before
and after the Ownership Change Event.
12. Escrow.
------
12.1 Establishment of Escrow. To ensure that shares subject to the
-----------------------
Unvested Share Repurchase Option will be available for repurchase, the Company
may require the Optionee to deposit the certificate evidencing the shares which
the Optionee purchases upon exercise of the Option with an escrow agent
designated by the Company under the terms and conditions of an escrow agreement
approved by the Company. If the Company does not require such deposit as a
condition of exercise of the Option, the Company reserves the right at any time
to require the Optionee to so deposit the certificate in escrow. Upon the
occurrence of an Ownership Change Event or a change, as described in Section 9,
in the character or amount of any of the outstanding stock of the corporation
the stock of which is subject to the provisions of this Option Agreement, any
and all new, substituted or additional securities or other property to which the
Optionee is entitled by reason of the Optionee's ownership of shares of Stock
acquired upon exercise of the Option that remain, following such Ownership
Change Event or change described in Section 9, subject to the Unvested Share
Repurchase Option shall be immediately subject to the escrow to the same extent
as such shares of Stock immediately before such event. The Company shall bear
the expenses of the escrow.
12.2 Delivery of Shares to Optionee. As soon as practicable after the
------------------------------
expiration of the Unvested Share Repurchase Option, but not more frequently than
twice each calendar year, the escrow agent shall deliver to the Optionee the
shares and any other property no longer subject to such restrictions.
14
<PAGE>
12.3 Notices and Payments. In the event the shares and any other
--------------------
property held in escrow are subject to the Company's exercise of the Unvested
Share Repurchase Option, the notices required to be given to the Optionee shall
be given to the escrow agent, and any payment required to be given to the
Optionee shall be given to the escrow agent. Within thirty (30) days after
payment by the Company, the escrow agent shall deliver the shares and any other
property which the Company has purchased to the Company and shall deliver the
payment received from the Company to the Optionee.
13. Stock Distributions Subject to Option Agreement. If, from time to
-----------------------------------------------
time, there is any stock dividend, stock split or other change, as described in
Section 9, in the character or amount of any of the outstanding stock of the
corporation the stock of which is subject to the provisions of this Option
Agreement, then in such event any and all new, substituted or additional
securities to which the Optionee is entitled by reason of the Optionee's
ownership of the shares acquired upon exercise of the Option shall be
immediately subject to the Unvested Share Repurchase Option and with the same
force and effect as the shares subject to the Unvested Share Repurchase Option
immediately before such event.
14. Notice of Sales Upon Disqualifying Disposition. The Optionee shall
----------------------------------------------
dispose of the shares acquired pursuant to the Option only in accordance with
the provisions of this Option Agreement. In addition, the Optionee shall
promptly notify the Chief Financial Officer of the Company if the Optionee
disposes of any of the shares acquired pursuant to the Option within one (1)
year after the date the Optionee exercises all or part of the Option or within
two (2) years after the Date of Option Grant. Until such time as the Optionee
disposes of such shares in a manner consistent with the provisions of this
Option Agreement, unless otherwise expressly authorized by the Company, the
Optionee shall hold all shares acquired pursuant to the Option in the Optionee's
name (and not in the name. of any nominee) for the one-year period immediately
after the exercise of the Option and the two-year period immediately after Date
of Option Grant. At any time during the one-year or two-year periods set forth
above, the Company may place a legend on any certificate representing shares
acquired pursuant to the Option requesting the transfer agent for the Company's
stock to notify the Company of any such transfers. The obligation of the
Optionee to notify the Company of any such transfer shall continue
notwithstanding that a legend has been placed on the certificate pursuant to the
preceding sentence.
15. Legends. The Company may at any time place legends referencing the
-------
Unvested Share Repurchase Option and any applicable federal, state or foreign
securities law restrictions on all certificates representing shares of stock
subject to the provisions of this Option Agreement. The Optionee shall, at the
request of the Company, promptly present to the Company any and all certificates
representing shares acquired pursuant to the Option in the possession of the
Optionee in order to carry out the provisions of this Section.
16. Binding Effect. Subject to the restrictions on transfer set forth
--------------
herein, this Option Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
15
<PAGE>
17. Termination or Amendment. The Board may terminate or amend the Plan
------------------------
or the Option at any time; provided, however, that except as provided in Section
8.2 in connection with a Transfer of Control, no such termination or amendment
may adversely affect the Option or any unexercised portion hereof without the
consent of the Optionee unless such termination or amendment is necessary to
comply with any applicable law or government regulation or is required to enable
the Option to qualify as an Incentive Stock Option. No amendment or addition to
this Option Agreement shall be effective unless in writing.
18. Integrated Agreement. This Option Agreement constitutes the entire
--------------------
understanding and agreement of the Optionee and the Participating Company Group
with respect to the subject matter contained herein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Participating Company Group with respect to such subject
matter other than those as set forth or provided for herein. To the extent
contemplated herein, the provisions of this Option Agreement shall survive any
exercise of the Option and shall remain in full force and effect.
19. Applicable Law. This Option Agreement shall be governed by the laws
--------------
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
STORM TECHNOLOGY, INC.
By: /s/ Rick McConnell .
------------------------------------
Title: Chief Financial Officer
The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement, including the Unvested Share Repurchase
Option set forth in Section 11, and hereby accepts the Option subject to all of
the terms and provisions thereof. The Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board upon
any questions arising under this Option Agreement.
OPTIONEE
Date: July 24, 1997 . /s/ L. William Krause .
---------------------------- ---------------------------------------
16
<PAGE>
EXHIBIT C
STORM TECHNOLOGY, INC.
IMMEDIATELY EXERCISABLE
INCENTIVE STOCK OPTION AGREEMENT
[Subsequent Grant]
THIS IMMEDIATELY EXERCISABLE INCENTIVE STOCK OPTION AGREEMENT (the "Option
Agreement") is made and entered into as of January 15, 1998, by and between
Storm Technology, Inc. and L. William Krause (the "Optionee").
The Company has granted to the Optionee an option to purchase certain
shares of Stock, upon the terms and conditions set forth in this Option
Agreement (the "Option").
1. Definitions and Construction.
----------------------------
1.1 Definitions. Whenever used herein, the following terms shall
-----------
have their respective meanings set forth below:
(a) "Date of Option Grant" means January 15, 1998.
--------------------
(b) "Number of Option Shares" means 50,000 shares of Stock, as
-----------------------
adjusted from time to time pursuant to Section 9.
(c) "Exercise Price" means $2.688 per share of Stock, as
--------------
adjusted from time-to time pursuant to Section 9.
(d) "Initial Exercise Date" means the Date of Option Grant.
---------------------
(e) "Initial Vesting Date" means the Date of Option Grant.
--------------------
(f) "Vested Ratio" means, on any relevant date, the ratio
------------
determined as follows:
<TABLE>
<CAPTION>
Vested Ratio
--------------------
<S> <C>
Prior to Initial Vesting Date 0
On Initial Vesting Date 1/48
Plus
----
For each full month of the Optionee's continuous Service from the 1/48
Initial Vesting Date until the Vested Ratio equals 1/1, an additional
</TABLE>
1
<PAGE>
(g) "Option Expiration Date" means the date ten (10) years after
----------------------
the Date of Option Grant.
(h) "Board" means the Board of Directors of the Company. If one
-----
or more Committees have been appointed by the Board to administer the Plan,
"Board" shall also mean such Committee(s).
(i) "Code" means the Internal Revenue Code of 1986, as amended,
----
and any applicable regulations promulgated thereunder.
(j) "Committee" means the Compensation Committee or other
---------
committee of the Board duly appointed to administer the Plan and having such
powers as shall be specified by the Board. Unless the powers of the Committee
have been specifically limited, the Committee shall have all of the powers of
the Board granted in the Plan, including, without limitation, the power to amend
or terminate the Plan at any time, subject to the terms of the Plan and any
applicable limitations imposed by law.
(k) "Company" means Storm Technology, Inc., a Delaware
-------
corporation, or any successor corporation thereto.
(l) "Consultant" means any person, including an advisor, engaged
----------
by a Participating Company to render services other than as an Employee or a
Director.
(m) "Director" means a member of the Board or of the board of
--------
directors of any other Participating Company.
(n) "Disability" means the permanent and total disability of the
----------
optionee within the meaning of Section 22(e)(3) of the Code.
(o) "Employee" means any person treated as an employee
--------
(including an officer or a Director who is also treated as an employee) in the
records of a Participating Company; provided, however, that neither service as a
Director nor payment of a director's fee shall be sufficient to constitute
employment for this purpose.
(p) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(q) "Fair Market Value" means, as of any date, the value of a
-----------------
share of stock or other property as determined by the Board, in its sole
discretion, or by the Company, in its sole discretion, if such determination is
expressly allocated to the Company herein.
(r) "Insider" means an officer or a Director of the Company or
-------
any other person whose transactions in Stock are subject to Section 16 of the
Exchange Act.
(s) "Parent Corporation" means any present or future "parent
------------------
corporation" of the Company, as defined in Section 424(e) of the Code.
2
<PAGE>
(t) "Participating Company" means the Company or any Parent
--------------------
Corporation or Subsidiary Corporation.
(u) "Participating Company Group" means, at any point in time,
---------------------------
all corporations collectively which are then Participating Companies.
(v) "Plan" means the Storm Technology, Inc. Amended and Restated
----
Stock Option Plan.
(w) "Rule 16b-3" means Rule 16b-3 under the Exchange Act, as
----------
amended from time to time, or any successor rule or regulation.
(x) "Securities Act" means the Securities Act of 1933, as
--------------
amended.
(y) "Service" means the Optionee's employment or service with
-------
the Participating Company Group, whether in the capacity of an Employee, a
Director or a Consultant. The Optionee's Service shall not be deemed to have
terminated merely because of a change in the capacity in which the Optionee
renders Service to the Participating Company Group or a change in the
Participating Company for which the Optionee renders such Service, provided that
there is no interruption or termination of the Optionee's Service. The
Optionee's Service shall be deemed to have terminated either upon an actual
termination of Service or upon the corporation for which the Optionee performs
Service ceasing to be a Participating Company. Subject to the foregoing, the
Company, in its sole discretion, shall determine whether the Optionee's Service
has terminated and the effective date of such termination. (NOTE: If the Option
is exercised more than three (3) months after the date on which the Optionee
ceased to be an Employee (other than by reason of death or a permanent and total
disability as defined in Section 22(e)(3) of the Code), the Option will be
treated as a nonstatutory stock option and not as an incentive stock option to
the extent required by Section 422 of the Code.)
(z) "Stock" means the common stock of the Company, as adjusted
-----
from time to time in accordance with Section 9.
(aa) "Subsidiary Corporation" means any present or future
----------------------
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.
1.2 Construction. Captions and titles contained herein are for
------------
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. Except when otherwise indicated by the
context, the singular shall include the plural, the plural shall include the
singular, and the term "or" shall include the conjunctive as well as the
disjunctive.
2. Tax Consequences.
----------------
2.1 Tax Status of Option. This Option is intended to be an incentive
--------------------
stock option within the meaning of Section 422(b) of the Code (an "Incentive
Stock Option"), but the Company does not represent or warrant that this Option
qualifies as such. The Optionee should consult with the Optionee's own tax
advisor regarding the tax effects of this Option and the requirements necessary
to obtain favorable income tax treatment under Section 422 of the Code,
3
<PAGE>
including, but not limited to, holding period requirements. (NOTE: If the
aggregate Exercise Price of the Option (that is, the Exercise Price multiplied
by the Number of Option Shares) plus the aggregate exercise price of any other
Incentive Stock Options held by the Optionee (whether granted pursuant to the
Plan or any other stock option plan of the Participating Company Group) is
greater than One Hundred Thousand Dollars ($100,000), the Optionee should
contact the Chief Financial Officer of the Company to ascertain whether the
entire Option qualifies as an Incentive Stock Option.)
2.2 Election Under Section 83(b) of the Code. If the Optionee
----------------------------------------
exercises this Option to purchase shares of Stock that are both nontransferable
and subject to a substantial risk of forfeiture, the Optionee understands that
the Optionee should consult with the Optionee's tax advisor regarding the
advisability of filing with the Internal Revenue Service an election under
Section 83(b) of the Code, which must be filed no later than thirty (30) days
after the date on which the Optionee exercises the Option. Shares acquired upon
exercise of the Option are nontransferable and subject to a substantial risk of
forfeiture if, for example, (a) they are unvested and are subject to a right of
the Company to repurchase such shares at the Optionee's original purchase price
if the Optionee's Service terminates, (b) the Optionee is an Insider and
exercises the Option within six (6) months of the Date of Option Grant (if a
class of equity security of the Company is registered under Section 12 of the
Exchange Act), or (c) the Optionee is subject to a restriction on transfer to
comply with "Pooling-of-Interests Accounting" rules. Failure to file an election
under Section 83(b), if appropriate, may result in adverse tax consequences to
the Optionee. The Optionee acknowledges that the Optionee has been advised to
consult with a tax advisor prior to the exercise of the Option regarding the tax
consequences to the Optionee of the exercise of the Option. AN ELECTION UNDER
SECTION 83(b) MUST BE FILED WITHIN 30 DAYS AFTER THE DATE ON WHICH THE OPTIONEE
PURCHASES SHARES. THIS TIME PERIOD CANNOT BE EXTENDED. THE OPTIONEE ACKNOWLEDGES
THAT TIMELY FILING OF A SECTION 83(b) ELECTION IS THE OPTIONEE'S SOLE
RESPONSIBILITY, EVEN IF THE OPTIONEE REQUESTS THE COMPANY OR ITS REPRESENTATIVE
TO FILE SUCH ELECTION ON HIS OR HER BEHALF.
3. Administration. All questions of interpretation concerning this Option
--------------
Agreement shall be determined by the Board, including any duly appointed
Committee of the Board. All determinations by the Board shall be final and
binding upon all persons having an interest in the Option. Any officer of a
Participating Company shall have the authority to act on behalf of the Company
with respect to any matter, right, obligation, or election which is the
responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right, obligation,
or election.
4. Exercise of the Option.
----------------------
4.1 Right to Exercise.
-----------------
(a) Except as otherwise provided herein, the Option shall be
exercisable on and after the Initial Exercise Date and prior to the termination
of the Option (as provided in Section 6) in an amount not to exceed the Number
of Option Shares less the number of shares previously acquired upon exercise of
the Option, subject to the Optionee's agreement
4
<PAGE>
that any shares purchased upon exercise are subject to the Company's repurchase
rights set forth in Section 11. Notwithstanding the foregoing, except as
provided in Section 4.1(b), the aggregate Fair Market Value of the shares of
Stock with respect to which the Optionee may exercise the Option for the first
time during any calendar year, when added to the aggregate Fair Market Value of
the shares subject to any other options designated as Incentive Stock Options
granted to the Optionee under all stock option plans of the Participating
Company Group prior to the Date of Option Grant with respect to which such
options are exercisable for the first time during the same calendar year, shall
not exceed One Hundred Thousand Dollars ($100,000). For purposes of the
preceding sentence, options designated as Incentive Stock Options shall be taken
into account in the order in which they were granted, and the Fair Market Value
of shares of stock shall be determined as of the time the option with respect to
such shares is granted. Such limitation on exercise shall be referred to in this
Option Agreement as the "ISO Exercise Limitation." If Section 422 of the Code is
amended to provide for a different limitation from that set forth in this
Section 4.1(a), the ISO Exercise Limitation shall be deemed amended effective as
of the date required or permitted by such amendment to the Code. The ISO
Exercise Limitation shall terminate upon the earlier of (i) the Optionee's
termination of Service, (ii) the day immediately prior to the effective date of
a Transfer of Control in which the Option is not assumed or substituted for by
the Acquiring Corporation as provided in Section 8, or (iii) the day ten (10)
days prior to the Option Expiration Date. Upon such termination of the ISO
Exercise Limitation, the Option shall be deemed a nonstatutory stock option to
the extent of the number of shares subject to the Option which would otherwise
exceed the ISO Exercise Limitation.
(b) Notwithstanding any other provision of this Option
Agreement, if compliance with the ISO Exercise Limitation as set forth in
Section 4.1(a) will result in the exercisability of any Vested Shares (as
defined in Section 11.2) being delayed more than thirty (30) days beyond the
date such shares become Vested Shares (the "Vesting Date"), the Option shall be
deemed to be two (2) options. The first option shall be for the maximum portion
of the Number of Option Shares that can comply with the ISO Exercise Limitation
without causing the Option to be unexercisable in the aggregate as to Vested
Shares on the Vesting Date for such shares. The second option, which shall not
be treated as an Incentive Stock Option as described in section 422(b) of the
Code, shall be for the balance of the Number of Option Shares; that is, those
such shares which, on the respective Vesting Date for such shares, would be
unexercisable if included in the first option and thereby made subject to the
ISO Exercise Limitation. Shares treated as subject to the second option shall be
exercisable on the same terms and at the same time as set forth in this Option
Agreement; provided, however, that (i) the second sentence of Section 4.1(a)
shall not apply to the second option and (ii) each such share shall become a
Vested Share on the Vesting Date on which such share must first be allocated to
the second option pursuant to the preceding sentence. Unless the Optionee
specifically elects to the contrary in the Optionee's written notice of
exercise, the first option shall be deemed to be exercised first to the maximum
possible extent and then the second option shall be deemed to be exercised.
(c) In addition to the foregoing, in the event that the adoption
of the Plan or any amendment of the Plan is subject to the approval of the
Company's stockholders in order for the Plan or the grant of the Option to
comply with the requirements of Rule 16b-3, the Option shall not be exercisable
prior to such stockholder approval if the Optionee is an Insider,
5
<PAGE>
unless the Board, in its sole discretion, approves the exercise of the Option
prior to such stockholder approval.
4.2 Method of Exercise. Exercise of the Option shall be by written
------------------
notice to the Company which must state the election to exercise the Option, the
number of whole shares of Stock for which the Option is being exercised and such
other representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. The written notice must be signed by the Optionee and must be
delivered in person, by certified or registered mail, return receipt requested,
by confirmed facsimile transmission, or by such other means as the Company may
permit, to the Chief Financial Officer of the Company, or other authorized
representative of the Participating Company Group, prior to the termination of
the Option as set forth in Section 6, accompanied by (i) full payment of the
aggregate Exercise Price for the number of shares of Stock being purchased and
(ii) an executed copy, if required herein, of the then current forms of escrow
and security agreement referenced below. The Option shall be deemed to be
exercised upon receipt by the Company of such written notice, the aggregate
Exercise Price, and, if required by the Company, such executed agreements.
4.3 Payment of Exercise Price.
-------------------------
(a) Forms of Consideration Authorized. Except as otherwise
---------------------------------
provided below, payment of the aggregate Exercise Price for the number of shares
of Stock for which the Option is being exercised shall be made (i) in cash, by
check, or cash equivalent, (ii) by tender to the Company of whole shares of
Stock owned by the Optionee having a Fair Market Value (as determined by the
Company without regard to any restrictions on transferability applicable to such
stock by reason of federal or state securities laws or agreements with an
underwriter for the Company) not less than the aggregate Exercise Price, (iii)
by means of a Cashless Exercise, as defined in Section 4.3(c), or (iv) by any
combination of the foregoing.
(b) Tender of Stock. Notwithstanding the foregoing, the Option
---------------
may not be exercised by tender to the Company of shares of Stock to the extent
such tender of Stock would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Company's stock. The
Option may not be exercised by tender to the Company of shares of Stock unless
such shares either have been owned by the Optionee for more than six (6) months
or were not acquired, directly or indirectly, from the Company.
(c) Cashless Exercise. A "Cashless Exercise" means the
-----------------
assignment in a form acceptable to the Company of the proceeds of a sale or loan
with respect to some or all of the shares of Stock acquired upon the exercise of
the Option pursuant to a program or procedure approved by the Company
(including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System). The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to decline to
approve or terminate any such program or procedure.
6
<PAGE>
4.4 Tax Withholding. At the time the Option is exercised, in whole or
---------------
in part, or at any time thereafter as requested by the Company, the Optionee
hereby authorizes withholding from payroll and any other amounts payable to the
Optionee, and otherwise agrees to make adequate provision for (including by
means of a Cashless Exercise to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding
obligations of the Participating Company Group, if any, which arise in
connection with the Option, including, without limitation, obligations arising
upon (i) the exercise, in whole or in part, of the Option, (ii) the transfer, in
whole or in part, of any shares acquired upon exercise of the Option, (iii) the
operation of any law or regulation providing for the imputation of interest, or
(iv) the lapsing of any restriction with respect to any shares acquired upon
exercise of the Option. The Optionee is cautioned that the Option is not
exercisable unless the tax withholding obligations of the Participating Company
Group are satisfied. Accordingly, the Optionee may not be able to exercise the
Option when desired even though the Option is vested, and the Company shall have
no obligation to issue a certificate for such shares or release such shares from
any escrow provided for herein.
4.5 Certificate Registration. Except in the event the Exercise Price
------------------------
is paid by means of a Cashless Exercise, the certificate for the shares as to
which the Option is exercised shall be registered in the name of the Optionee,
or, if applicable, in the names of the heirs of the Optionee.
4.6 Restrictions on Grant of the Option and Issuance of Shares. The
----------------------------------------------------------
grant of the Option and the issuance of shares of Stock upon exercise of the
Option shall be subject to compliance with all applicable requirements of
federal, state or foreign law with respect to such securities. The Option may
not be exercised if the issuance of shares of Stock upon exercise would
constitute a violation of any applicable federal, state or foreign securities
laws or other law or regulations or the requirements of any stock exchange or
market system upon which the Stock may then be listed. In addition, the Option
may not be exercised unless (i) a registration statement under the Securities
Act shall at the time of exercise of the Option be in effect with respect to the
shares issuable upon exercise of the Option or (ii) in the opinion of legal
counsel to the Company, the shares issuable upon exercise of the Option may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT
THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.
ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED
EVEN THOUGH THE OPTION IS VESTED. Questions concerning this restriction should
be directed to the Chief Financial Officer of the Company. The inability of the
Company to obtain from any regulatory body having jurisdiction the authority, if
any, deemed by the Company's legal counsel to be necessary to the lawful
issuance and sale of any shares subject to the Option shall relieve the Company
of any liability in respect of the failure to issue or sell such shares as to
which such requisite authority shall not have been obtained. As a condition to
the exercise of the Option, the Company may require the Optionee to satisfy any
qualifications that may be necessary or appropriate, to evidence compliance with
any applicable law or regulation and to make any representation or warranty with
respect thereto as may be requested by the Company.
7
<PAGE>
4.7 Fractional Shares. The Company shall not be required to issue
-----------------
fractional shares upon the exercise of the Option.
5. Nontransferability of the Option. The Option may be exercised during
--------------------------------
the lifetime of the Optionee only by the Optionee or the Optionee's guardian or
legal representative and may not be assigned or transferred in any manner except
by will or by the laws of descent and distribution. Following the death of the
Optionee, the Option, to the extent provided in Section 7, may be exercised by
the Optionee's legal representative or by any person empowered to do so under
the deceased Optionee's will or under the then applicable laws of descent and
distribution.
6. Termination of the Option. The Option shall terminate and may no
-------------------------
longer be exercised on the first to occur of (a) the Option Expiration Date, (b)
the last date for exercising the Option following termination of the Optionee's
Service as described in Section 7, or (c) a Transfer of Control to the extent
provided in Section 8.
7. Effect of Termination of Service.
--------------------------------
7.1 Option Exercisability.
---------------------
(a) Disability. If the Optionee's Service with the Participating
----------
Company Group is terminated because of the Disability of the Optionee, the
Option, to the extent unexercised and exercisable on the date on which the
Optionee's Service terminated, may be exercised by the Optionee (or the
Optionee's guardian or legal representative) at any time prior to the expiration
of twelve (12) months after the date on which the Optionee's Service terminated,
but in any event no later than the Option Expiration Date.
(b) Death. If the Optionee's Service with the Participating
-----
Company Group is terminated because of the death of the Optionee, the Option, to
the extent unexercised and exercisable on the date on which the Optionee's
Service terminated, may be exercised by the Optionee's legal representative or
other person who acquired the right to exercise the Option by reason of the
Optionee's death at any time prior to the expiration of twelve (12) months after
the date on which the Optionee's Service terminated, but in any event no later
than the Option Expiration Date. The Optionee's Service shall be deemed to have
terminated on account of death if the Optionee dies within thirty (30) days
after the Optionee's termination of Service other than upon "Termination For
Cause".
(c) Termination After Transfer of Control. If the Optionee's
-------------------------------------
Service with the Participating Company Group is terminated because of a
Termination After Transfer of Control (as defined below), (i) the Option, to the
extent unexercised and exercisable on the date on which the Optionee's Service
terminated, may be exercised by the Optionee (or the Optionee's guardian or
legal representative) at any time prior to the expiration of six (6) months
after the date on which the Optionee's Service terminated, but in any event no
later than the Option Expiration Date, and (ii) the Vested Ratio shall be deemed
to be 1/1 as of the date on which the Optionee's Service terminated.
Notwithstanding the foregoing, no acceleration of vesting pursuant to this
Section 7.1(c) shall occur if such acceleration of vesting would make "pooling
of interests" accounting treatment unavailable in connection with the Transfer
of Control (as defined below),
8
<PAGE>
as determined by the Board. The Company makes no representation as to the tax
consequences if the Option is exercised more than three (3) months after the
date on which the Optionee's Service as an Employee terminated. The Optionee
should consult with the Optionee's own tax advisor as to the tax consequences to
the Optionee of any such delayed exercise.
(d) Other Termination of Service. If the Optionee's Service with
----------------------------
the Participating Company Group terminates for any reason except Disability,
death or Termination After Transfer of Control, the Option, to the extent
unexercised and exercisable by the Optionee on the date on which the Optionee's
Service terminated, may be exercised by the Optionee within thirty (30) days (or
such other longer period of time as determined by the Board, in its sole
discretion) after the date on which the Optionee's Service terminated, but in
any event no later than the Option Expiration Date.
7.2 Certain Definitions.
-------------------
(a) "Termination After Transfer of Control" shall mean either of
-------------------------------------
the following events occurring within twelve (12) months after a Transfer of
Control (as defined in Section 8.1(b) below):
(i) termination by the Participating Company Group of the
Optionee's Service with the Participating Company Group for any reason other
than a Termination For Cause; or
(ii) the Optionee's resignation from Service with the
Participating Company Group within a reasonable period of time following any
Constructive Termination (as defined below).
Notwithstanding any provision herein to the contrary, Termination After Transfer
of Control shall not include any termination of the Optionee's Service with the
Participating Company Group which (1) is a Termination For Cause; (2) is a
result of the Optionee's death or Disability; (3) is a result of the Optionee's
voluntary termination of Service other than upon Constructive Termination (as
defined below); or (4) occurs prior to the effectiveness of a Transfer of
Control.
(b) "Termination For Cause" shall mean termination by the
---------------------
Participating Company Group of the Optionee's Service with the Participating
Company Group for any of the following reasons: (i) theft, dishonesty, or
falsification of any Participating Company records; (ii) improper use or
disclosure of a Participating Company's confidential or proprietary information;
(iii) any action by the Optionee which has a detrimental effect on a
Participating Company's reputation or business; (iv) the Optionee's failure or
inability to perform any reasonable assigned duties after written notice from
the Participating Company Group of, and a reasonable opportunity to cure, such
failure or inability; (v) any material breach by the Optionee of any employment
agreement between the Optionee and the Participating Company Group, which breach
is not cured pursuant to the terms of such agreement; or (vi) the Optionee's
conviction of any criminal act which impairs the Optionee's ability to perform
his or her duties with the Participating Company Group.
9
<PAGE>
(c) "Constructive Termination" shall mean any one or more of the
------------------------
following:
(i) without the Optionee's express written consent, the
assignment to the Optionee of any duties, or any limitation of the Optionee's
responsibilities, substantially inconsistent with the Optionee's positions,
duties, responsibilities and status with the Participating Company Group
immediately prior to the date of the Transfer of Control;
(ii) without the Optionee's express written consent, the
relocation of the principal place of the Optionee's employment to a location
that is more than fifty (50) miles from the Optionee's principal place of
employment immediately prior to the date of the Transfer of Control, or the
imposition of travel requirements substantially more demanding of the Optionee
than such travel requirements existing immediately prior to the date of the
Transfer of Control;
(iii) any failure by the Participating Company Group to pay,
or any material reduction by the Participating Company Group of, (1) the
Optionee's base salary in effect immediately prior to the date of the Transfer
of Control (unless reductions comparable in amount and duration are concurrently
made for all other employees of the Participating Company Group with
responsibilities, organizational level and title comparable to the Optionee's),
or (2) the Optionee's bonus compensation, if any, in effect immediately prior to
the date of the Transfer of Control (subject to applicable performance
requirements with respect to the actual amount of bonus compensation earned by
the Optionee); or
(iv) any failure by the Participating Company Group to (1)
continue to provide the Optionee with the opportunity to participate, on terms
no less favorable than those in effect for the benefit of any employee group
which customarily includes a person holding the employment position or a
comparable position with the Participating Company Group then held by the
Optionee, in any benefit or compensation plans and programs, including, but not
limited to, the Participating Company Group's life, disability, health, dental,
medical, savings, profit sharing, stock purchase and retirement plans, if any,
in which the Optionee was participating immediately prior to the date of the
Transfer of Control, or their equivalent, or (2) provide the Optionee with all
other fringe benefits (or their equivalent) from time to time in effect for the
benefit of any employee group which customarily includes a person holding the
employment position or a comparable position with the Participating Company
Group then held by the Optionee.
7.3 Additional Limitation on Option Exercise. Notwithstanding the
----------------------------------------
provisions of Section 7.1, the Option may not be exercised after the Optionee's
termination of Service to the extent that the shares to be acquired upon
exercise of the Option would be subject to the Unvested Share Repurchase Option
as provided in Section 11.
7.4 Extension if Exercise Prevented by Law. Notwithstanding the
--------------------------------------
foregoing, if the exercise of the Option within the applicable time periods set
forth in Section 7.1 is prevented by the provisions of Section 4.6, the Option
shall remain exercisable until three (3) months after the date the Optionee is
notified by the Company that the Option is exercisable, but in any event
10
<PAGE>
no later than the Option Expiration Date. The Company makes no representation as
to the tax consequences of any such delayed exercise. The Optionee should
consult with the Optionee's own tax advisor as to the tax consequences to the
Optionee of any such delayed exercise.
7.5 Extension if Optionee Subject to Section 16(b). Notwithstanding
----------------------------------------------
the foregoing, if a sale within the applicable time periods set forth in Section
7.1 of shares acquired upon the exercise of the Option would subject the
Optionee to suit under Section 16(b) of the Exchange Act, the Option shall
remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Optionee's termination of Service, or (iii) the Option Expiration
Date. The Company makes no representation as to the tax consequences of any such
delayed exercise. The Optionee should consult with the Optionee's own tax
advisors as to the tax consequences to the Optionee of any such delayed
exercise.
7.6 Leave of Absence. For purposes of Section 7.1, the Optionee's
----------------
Service with the Participating Company Group shall not be deemed to terminate if
the Optionee takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company of ninety (90) days or less. In the event of a
leave of absence in excess of ninety (90) days, the Optionee's Service shall be
deemed to terminate on the ninety-first (91st) day of such leave unless the
Optionee's right to return to Service with the Participating Company Group
remains guaranteed by statute or contract. Notwithstanding the foregoing, unless
otherwise designated by the Company (or required by law), a leave of absence
shall not be treated as Service for purposes of determining the Optionee's
Vested Ratio.
8. Transfer of Control.
-------------------
8.1 Definitions.
-----------
(a) An "Ownership Change Event" shall be deemed to have occurred
if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange in a single
or series of related transactions by the stockholders of the Company of more
than fifty percent (50%) of the voting stock of the Company;
(ii) a merger or consolidation in which the Company is a
party;
(iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the Company.
(b) A "Transfer of Control" shall mean an Ownership Change Event
or a series of related Ownership Change Events (collectively, the "Transaction")
wherein the stockholders of the Company immediately before the Transaction do
not retain immediately after the Transaction, in substantially the same
proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial
11
<PAGE>
ownership of more than fifty percent (50%) of the total combined voting power of
the outstanding voting stock of the Company or the corporation or corporations
to which the assets of the Company were transferred (the "Transferee
Corporation(s)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
8.2 Effect of Transfer of Control on Option. In the event of a
---------------------------------------
Transfer of Control, the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "Acquiring
Corporation"), may either assume the Company's rights and obligations under the
Option or substitute for the Option a substantially equivalent option for the
Acquiring Corporation's stock. The Option shall terminate and cease to be
outstanding effective as of the date of the Transfer of Control to the extent
that the Option is neither assumed or substituted for by the Acquiring
Corporation in connection with the Transfer of Control nor exercised as of the
date of the Transfer of Control. Notwithstanding the foregoing, shares acquired
upon exercise of the Option prior to the Transfer of Control and any
consideration received pursuant to the Transfer of Control with respect to such
shares shall continue to be subject to all applicable provisions of this Option
Agreement except as otherwise provided herein. Furthermore, notwithstanding the
foregoing, if the corporation the stock of which is subject to the Option
immediately prior to an Ownership Change Event described in Section 8.1(a)(i)
constituting a Transfer of Control is the surviving or continuing corporation
and immediately after such Ownership Change Event less than fifty percent (50%)
of the total combined voting power of its voting stock is held by another
corporation or by other corporations that are members of an affiliated group
within the meaning of Section 1504(a) of the Code without regard to the
provisions of Section 1504(b) of the Code, the Option shall not terminate unless
the Board otherwise provides in its sole discretion.
9. Adjustments for Changes in Capital Structure. In the event of any
--------------------------------------------
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification, or similar change in the capital structure of the Company,
appropriate adjustments shall be made in the number, Exercise Price and class of
shares of stock subject to the Option. If a majority of the shares which are of
the same class as the shares that are subject to the Option are exchanged for,
converted into, or otherwise become (whether or not pursuant to an Ownership
Change Event) shares of another corporation (the "New Shares"), the Board may
unilaterally amend the Option to provide that the Option is exercisable for New
Shares. In the event of any such amendment, the Number of Option Shares and the
Exercise Price shall be adjusted in a fair and equitable manner, as determined
by the Board, in its sole discretion. Notwithstanding the foregoing, any
fractional share resulting from an adjustment pursuant to this Section 9 shall
be rounded up or down to the nearest whole number, as determined by the Board,
and in no event may the Exercise Price be decreased to an amount less than the
par value, if any, of the stock subject to the Option. The adjustments
determined by the Board pursuant to this Section 9 shall be final, binding and
conclusive.
12
<PAGE>
10. Rights as a Stockholder, Employee or Consultant. The Optionee shall
-----------------------------------------------
have no rights as a stockholder with respect to any shares covered by the Option
until the date of the issuance of a certificate for the shares for which the
Option has been exercised (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company). No
adjustment shall be made for dividends, distributions or other rights for which
the record date is prior to the date such certificate is issued, except as
provided in Section 9. Nothing in this Option Agreement shall confer upon the
Optionee any right to continue in the Service of a Participating Company or
interfere in any way with any right of the Participating Company Group to
terminate the Optionee's Service as an Employee or Consultant, as the case may
be, at any time.
11. Unvested Share Repurchase Option.
--------------------------------
11.1 Grant of Unvested Share Repurchase Option. In the event the
-----------------------------------------
Optionee's Service with the Participating Company Group is terminated for any
reason or no reason, with or without cause, or if the Optionee, the Optionee's
legal representative, or other holder of shares acquired upon exercise of the
Option attempts to sell, exchange, transfer, pledge, or otherwise dispose of
(other than pursuant to an Ownership Change Event) any shares acquired upon
exercise of the Option which exceed the Vested Shares as defined in Section 11.2
below (the "Unvested Shares"), the Company shall have the right to repurchase
the Unvested Shares under the terms and subject to the conditions set forth in
this Section 11 (the "Unvested Share Repurchase Option").
11.2 Vested Shares and Unvested Shares Defined. The "Vested Shares"
-----------------------------------------
shall mean, on any given date, a number of shares of Stock equal to the Number
of Option Shares multiplied by the Vested Ratio determined as of such date and
rounded down to the nearest whole share. On such given date, the "Unvested
Shares" shall mean the number of shares of Stock acquired upon exercise of the
Option which exceed the Vested Shares determined as of such date.
11.3 Exercise of Unvested Share Repurchase Option. The Company may
--------------------------------------------
exercise the Unvested Share Repurchase Option by written notice delivered
personally or forwarded by first class mail to the Optionee within sixty (60)
days after (a) termination of the Optionee's Service (or exercise of the Option,
if later) or (b) the Company has received notice of the attempted disposition of
Unvested Shares. If the Company fails to give notice within such sixty (60) day
period, the Unvested Share Repurchase Option shall terminate unless the Company
and the Optionee have extended the time for the exercise of the Unvested Share
Repurchase Option. The Unvested Share Repurchase Option must be exercised, if at
all, for all of the Unvested Shares, except as the Company and the Optionee
otherwise agree.
11.4 Payment for Shares and Return of Shares to Company. The purchase
--------------------------------------------------
price per share being repurchased by the Company shall be an amount equal to the
Optionee's original cost per share, as adjusted pursuant to Section 9 (the
"Repurchase Price"). The Company shall pay the aggregate Repurchase Price to the
Optionee in cash within thirty (30) days after the date of personal delivery or
mailing of the written notice of the Company's exercise of the Unvested Share
Repurchase Option. For purposes of the foregoing, cancellation of any
indebtedness of the Optionee to any Participating Company shall be treated as
payment to the Optionee in cash to the
13
<PAGE>
extent of the unpaid principal and any accrued interest canceled. The shares
being repurchased shall be delivered to the Company by the Optionee at the same
time as the delivery of the Repurchase Price to the Optionee.
11.5 Assignment of Unvested Share Repurchase Option. The Company
----------------------------------------------
shall have the right to assign the Unvested Share Repurchase Option at any time,
whether or not such option is then exercisable, to one or more persons as may be
selected by the Company.
11.6 Ownership Change Event. Upon the occurrence of an Ownership
----------------------
Change Event, any and all new, substituted or additional securities or other
property to which the Optionee is entitled by reason of the Optionee's ownership
of Unvested Shares shall be immediately subject to the Unvested Share Repurchase
Option and included in the terms "Stock" and "Unvested Shares" for all purposes
of the Unvested Share Repurchase Option with the same force and effect as the
Unvested Shares immediately prior to the Ownership Change Event. While the
aggregate Repurchase Price shall remain the same after such Ownership Change
Event, the Repurchase Price per Unvested Share upon exercise of the Unvested
Share Repurchase Option following such Ownership Change Event shall be adjusted
as appropriate. For purposes of determining the Vested Ratio following an
Ownership Change Event, credited Service shall include all Service with any
corporation which is a Participating Company at the time the Service is
rendered, whether or not such corporation is a Participating Company both before
and after the Ownership Change Event.
12. Escrow.
------
12.1 Establishment of Escrow. To ensure that shares subject to the
----------------------
Unvested Share Repurchase Option will be available for repurchase, the Company
may require the Optionee to deposit the certificate evidencing the shares which
the Optionee purchases upon exercise of the Option with an escrow agent
designated by the Company under the terms and conditions of an escrow agreement
approved by the Company. If the Company does not require such deposit as a
condition of exercise of the Option, the Company reserves the right at any time
to require the Optionee to so deposit the certificate in escrow. Upon the
occurrence of an Ownership Change Event or a change, as described in Section 9,
in the character or amount of any of the outstanding stock of the corporation
the stock of which is subject to the provisions of this Option Agreement, any
and all new, substituted or additional securities or other property to which the
Optionee is entitled by reason of the Optionee's ownership of shares of Stock
acquired upon exercise of the Option that remain, following such Ownership
Change Event or change described in Section 9, subject to the Unvested Share
Repurchase Option shall be immediately subject to the escrow to the same extent
as such shares of Stock immediately before such event. The Company shall bear
the expenses of the escrow.
12.2 Delivery of Shares to Optionee. As soon as practicable after the
------------------------------
expiration of the Unvested Share Repurchase Option, but not more frequently than
twice each calendar year, the escrow agent shall deliver to the Optionee the
shares and any other property no longer subject to such restrictions.
14
<PAGE>
12.3 Notices and Payments. In the event the shares and any other
--------------------
property held in escrow are subject to the Company's exercise of the Unvested
Share Repurchase Option, the notices required to be given to the Optionee shall
be given to the escrow agent, and any payment required to be given to the
Optionee shall be given to the escrow agent. Within thirty (30) days after
payment by the Company, the escrow agent shall deliver the shares and any other
property which the Company has purchased to the Company and shall deliver the
payment received from the Company to the Optionee.
13. Stock Distributions Subject to Option Agreement. If, from time to
-----------------------------------------------
time, there is any stock dividend, stock split or other change, as described in
Section 9, in the character or amount of any of the outstanding stock of the
corporation the stock of which is subject to the provisions of this Option
Agreement, then in such event any and all new, substituted or additional
securities to which the Optionee is entitled by reason of the Optionee's
ownership of the shares acquired upon exercise of the Option shall be
immediately subject to the Unvested Share Repurchase Option and with the same
force and effect as the shares subject to the Unvested Share Repurchase Option
immediately before such event.
14. Notice of Sales Upon Disqualifying Disposition. The Optionee shall
----------------------------------------------
dispose of the shares acquired pursuant to the Option only in accordance with
the provisions of this Option Agreement. In addition, the Optionee shall
promptly notify the Chief Financial Officer of the Company if the Optionee
disposes of any of the shares acquired pursuant to the Option within one (1)
year after the date the Optionee exercises all or part of the Option or within
two (2) years after the Date of Option Grant. Until such time as the Optionee
disposes of such shares in a manner consistent with the provisions of this
Option Agreement, unless otherwise expressly authorized by the Company, the
Optionee shall hold all shares acquired pursuant to the Option in the Optionee's
name (and not in the name. of any nominee) for the one-year period immediately
after the exercise of the Option and the two-year period immediately after Date
of Option Grant. At any time during the one-year or two-year periods set forth
above, the Company may place a legend on any certificate representing shares
acquired pursuant to the Option requesting the transfer agent for the Company's
stock to notify the Company of any such transfers. The obligation of the
Optionee to notify the Company of any such transfer shall continue
notwithstanding that a legend has been placed on the certificate pursuant to the
preceding sentence.
15. Legends. The Company may at any time place legends referencing the
-------
Unvested Share Repurchase Option and any applicable federal, state or foreign
securities law restrictions on all certificates representing shares of stock
subject to the provisions of this Option Agreement. The Optionee shall, at the
request of the Company, promptly present to the Company any and all certificates
representing shares acquired pursuant to the Option in the possession of the
Optionee in order to carry out the provisions of this Section.
16. Binding Effect. Subject to the restrictions on transfer set forth
--------------
herein, this Option Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
15
<PAGE>
17. Termination or Amendment. The Board may terminate or amend the Plan
------------------------
or the Option at any time; provided, however, that except as provided in Section
8.2 in connection with a Transfer of Control, no such termination or amendment
may adversely affect the Option or any unexercised portion hereof without the
consent of the Optionee unless such termination or amendment is necessary to
comply with any applicable law or government regulation or is required to enable
the Option to qualify as an Incentive Stock Option. No amendment or addition to
this Option Agreement shall be effective unless in writing.
18. Integrated Agreement. This Option Agreement constitutes the entire
--------------------
understanding and agreement of the Optionee and the Participating Company Group
with respect to the subject matter contained herein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Participating Company Group with respect to such subject
matter other than those as set forth or provided for herein. To the extent
contemplated herein, the provisions of this Option Agreement shall survive any
exercise of the Option and shall remain in full force and effect.
19. Applicable Law. This Option Agreement shall be governed by the laws
--------------
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
STORM TECHNOLOGY, INC.
By: /s/ Rick McConnell
--------------------------
Title: Chief Financial Officer
The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement, including the Unvested Share Repurchase
Option set forth in Section 11, and hereby accepts the Option subject to all of
the terms and provisions thereof. The Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board upon
any questions arising under this Option Agreement.
OPTIONEE
Date: February 11, 1998 /s/ L. William Krause
----------------------------- ------------------------------
16
<PAGE>
EXHIBIT D
STORM TECHNOLOGY, INC.
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
THIS COMMON STOCK AND WARRANT PURCHASE AGREEMENT is entered into as of
December 18, 1997, by and between Storm Technology, Inc., a Delaware corporation
(the "Company"), and the L. William and L. Gay Krause Trust under Agreement
dated June 21, 1994 (the "Purchaser").
In consideration of the mutual promises, covenants and conditions
hereinafter set forth, the parties hereto agree as follows:
1. Sale of the Shares. Subject to the terms and conditions hereof, upon
------------------
execution of this Agreement, the Company will issue and sell to the Purchaser,
and the Purchaser will purchase from the Company, (i) 1,066,666 shares of Common
Stock (the "Shares") and (ii) a warrant to purchase 100,000 shares of Common
Stock (the "Warrant Shares") at an exercise price of $1.90 in the form attached
hereto as Exhibit A. The aggregate purchase price payable by the Purchaser
---------
shall be $2,012,478.95. The parties agree that $1.875 of the purchase price
will be allocated to the each Share being purchased, and $0.125 will be
allocated to the right to buy one Warrant Share.
2. Representations and Warranties of the Company. The Company hereby
---------------------------------------------
represents and warrants to the Purchaser that:
2.1 Organization and Standing; Articles and Bylaws. The Company is a
----------------------------------------------
corporation duly organized and validly existing under, and by virtue of, the
laws of the State of Delaware and is in good standing under such laws. The
Company has the requisite corporate power to own and operate its properties and
assets and to carry on its business as presently conducted and as proposed to be
conducted.
2.2 Corporate Power. The Company has all requisite corporate power to
---------------
enter into this Agreement, to sell the Shares and Warrants hereunder and to
carry out and perform its other obligations under the terms of this Agreement.
2.3 Capitalization. The authorized capital stock of the Company
--------------
consists of 30,000,000 shares of Common Stock, $0.001 par value (the "Common
Stock"), and 500,000 shares of Preferred Stock, $0.001 par value (the "Preferred
Stock"), of which 30,000 shares have been designated Series A 8.5% Convertible
Preferred Stock. As of September 30, 1997, (i) 10,493,972 shares of Common Stock
were issued and outstanding, all of which are validly issued, fully paid and
nonassessable; and (ii) 1,570,426 shares of Common Stock were reserved for
issuance pursuant to stock options under the Company's stock option plans (the
"The Company Option Plans") and rights under the Company's Employee Stock
Purchase Plan.
2.4 Authorization.
-------------
(a) All corporate action on the part of the Company, its
officers, directors and stockholders necessary for (i) the sale and issuance of
the Shares and Warrants pursuant hereto, (ii) the issuance of the Warrant Shares
upon exercise of the Warrants, and (iii) the execution,
1
<PAGE>
performance and delivery by the Company of this Agreement has been taken. This
Agreement is a valid and binding obligation of the Company, enforceable against
it in accordance with its respective terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application relating to or affecting enforcement of
creditors' rights and rules or laws concerning equitable remedies.
(b) The Shares, when issued in compliance with the provisions of
this Agreement, and the Warrant Shares, when issued in accordance with the
Warrants, will be validly issued, fully paid and nonassessable; provided,
however, that the Shares, and the Warrant Shares may be subject to restrictions
on transfer under state and/or federal securities laws as set forth herein or
otherwise required by such laws at the time a transfer is proposed.
(c) No stockholder of the Company has any right of first refusal
or any preemptive rights in connection with the issuance and sale of the Shares,
the Warrants or the Warrant Shares.
2.5 Compliance with Other Instruments; None Burdensome, etc. The
-------------------------------------------------------
Company is not in violation of any term of Certificate of Incorporation or its
Bylaws, as amended, or any mortgage, indenture, contract, agreement, instrument,
judgment, decree or order by which the Company is bound or to which its
properties are subject or, to its knowledge, any statute, rule, or regulation
applicable to the Company where such violation would materially and adversely
affect the business, assets, liabilities, financial condition, operations or
prospects of the Company. The execution, delivery and performance of and
compliance with this Agreement and the transactions contemplated hereby and
thereby will not result in any such violation and will not be in conflict with
or constitute a default under any of the foregoing and will not result in the
creation of any mortgage, pledge, lien, encumbrance or charge upon any of the
properties or assets of the Company pursuant to any of the foregoing.
3. Representations and Warranties of the Purchasers and Restrictions on
--------------------------------------------------------------------
Transfer Imposed by the Securities Act of 1933 and the California Corporate
- ---------------------------------------------------------------------------
Securities Law of 1968.
- ----------------------
3.1 Representations and Warranties of the Purchaser. The Purchaser
-----------------------------------------------
hereby represents and warrants to the Company as follows:
(a) The Shares, the Warrants, and the Warrant Shares (the
"Securities") are being acquired for the Purchaser's own account, for investment
and not with a view to, or for resale in connection with, any distribution or
public offering thereof within the meaning of the Securities Act or the
California Law.
(b) The Purchaser understands that the Securities have not been
registered under the Securities Act by reason of their issuance in a transaction
exempt from the registration requirements of the Securities Act pursuant to
Regulation D promulgated thereunder, that the Company has no present intention
of registering the Securities, that the Securities must be held by the Purchaser
indefinitely, and that the Purchaser must therefore bear the economic risk of
the investment indefinitely, unless a subsequent disposition thereof is
registered under the Securities Act or is exempt from such registration. The
Purchaser further understands that the Securities have not been qualified under
the California Law by reason of their issuance in a
2
<PAGE>
transaction exempt from the qualification requirements of the California Law
pursuant to Section 25102(f) thereof, which exemption depends upon, among other
things, the bona fide nature of the Purchaser's investment intent expressed
above.
(c) The Purchaser will not sell, negotiate, pledge or otherwise
dispose of any of the Securities (other than in conjunction with an effective
registration statement for the Securities under the Securities Act) in the
United States, its territories and possessions or any area subject to its
jurisdiction, or to any person who is a national or resident of the United
States (including any estate of such person or any corporation, partnership or
other entity created or organized therein) unless and until (i) the Purchaser
shall have notified the Company of the proposed disposition, and (ii) the
Purchaser shall have furnished the Company with an opinion of counsel
satisfactory in form and substance to the Company to the effect that such
disposition will not require registration under the Securities Act.
(d) During the negotiation of the transactions contemplated
herein, the Purchaser and its counsel have been afforded full access to the
corporate books, records, documents, and other information concerning the
Company and have been afforded an opportunity to ask such questions of the
Company's officers and representatives concerning the Company's business,
operations, financial condition, assets, liabilities and other relevant matters
as they have deemed necessary or desirable, and have been given all such
information as has been requested, in order to evaluate the merits and risks of
the prospective investment contemplated herein.
(e) The Purchaser has such knowledge and experience in financial
and business matters that the Purchaser is capable of evaluating the merits and
risks of the purchase of the Shares and the Warrants pursuant to the terms of
this Agreement.
(f) The Purchaser has the full right, power and authority to
enter into and perform the Purchaser's obligations under this Agreement. This
Agreement is q valid and binding obligation of the Purchaser enforceable in
accordance with its terms except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors' rights
and rules or laws concerning equitable remedies.
(g) No consent, approval or authorization of or designation,
declaration or filing with any governmental authority on the part of the
Purchaser is required in connection with the valid execution and delivery of
this Agreement.
3.2 Legends. Each certificate representing the Shares, the Warrant
-------
Shares or the Warrant Shares may be endorsed with legends in substantially the
following form:
(a) THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE TRANSFER IS MADE IN
COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT OR THE
3
<PAGE>
COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES
REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SUCH ACT.
(b) THE HOLDER WILL NOT SELL, HYPOTHECATE, PLEDGE, OR OTHERWISE
DISPOSE OF ANY INTEREST IN THE SHARES FOR A PERIOD OF TWELVE MONTHS FROM
DECEMBER 18, 1997.
4. Miscellaneous.
-------------
4.1 Governing Law. This Agreement shall be governed in all respects
-------------
by the laws of the State of California as such laws are applied to agreements
between California residents entered into and to be performed entirely within
California.
4.2 Entire Agreement. This Agreement constitutes the entire
----------------
understanding and agreement between the parties with regard to the subjects
hereof. This Agreement may only be amended by a written instrument signed by the
Company and the Purchaser.
4.3 Expenses. The Company and the Purchasers shall each bear their
--------
respective expenses and legal fees incurred with respect to this Agreement and
the transactions contemplated hereby.
4.4 Lockup. Purchaser agrees that for the first twelve (12) months
------
after the date of this Agreement, the Purchaser will not directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase, pledge or otherwise transfer or dispose of
any shares of the Shares or Warrant Shares.
4
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
STORM TECHNOLOGY, INC.
By:_________________________________
Its:________________________________
PURCHASER :
L. William and L. Gay Krause Trust under
Agreement dated June 21, 1994
By:_________________________________
Its:________________________________
5
<PAGE>
EXHIBIT E
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, TOGETHER WITH THE REGULATIONS PROMULGATED THEREUNDER (THE "SECURITIES
ACT"), AND MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED OR IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT
AND ANY APPLICABLE STATE SECURITIES LAWS, UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. THIS WARRANT MAY NOT BE EXERCISED BY OR ON BEHALF OF
ANY U.S. PERSON UNLESS REGISTERED UNDER THE SECURITIES ACT, OR AN EXEMPTION FROM
REGISTRATION IS AVAILABLE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
STOCK PURCHASE WARRANT
To Purchase 100,000 Shares of Common Stock of
STORM TECHNOLOGY, INC.
THIS CERTIFIES that, for value received, the L. William and L. Gay
Krause Trust under Agreement dated June 21, 1994 (the "Holder"), is entitled,
upon the terms and subject to the conditions hereinafter set forth, at any time
on or after one day after the date hereof and on or prior to December 18, 2002
(the "Termination Date") but not thereafter, to subscribe for and purchase from
STORM TECHNOLOGY, INC., a Delaware corporation (the "Company"), One Hundred
Thousand (100,000) shares of Common Stock (the "Warrant Shares"). The purchase
price of one share of Common Stock (the "Exercise Price") under this Warrant
shall be One Dollar and Ninety Cents (US $1.90). The Exercise Price and the
number of shares for which the Warrant is exercisable shall be subject to
adjustment as provided herein. This Warrant is being issued in connection with
the Common Stock and Warrant Purchase Agreement dated on or about December 18,
1997, between the Company and Holder and is subject to its terms. In the event
of any conflict between the terms of this Warrant and the Agreement, the
Agreement shall control. Unless otherwise defined herein, all capitalized terms
shall have meanings as provided for in the Agreement.
1. Title of Warrant. Prior to the expiration hereof and subject to
----------------
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, pursuant to paragraph 9 hereof.
2. Authorization of Shares. The Company covenants that all shares of
-----------------------
Common Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon exercise of the rights represented by this Warrant, be duly
authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).
<PAGE>
3. Exercise of Warrant.
-------------------
(a) Procedure for Exercise. Exercise of the purchase rights
----------------------
represented by this Warrant may be made at any time or times after the date
hereof, in whole or in part, before the close of business on the Termination
Date, or such earlier date on which this Warrant may terminate as provided in
paragraph 12 below, by the surrender of this Warrant and the Notice of Exercise
annexed hereto duly executed, at the office of the Company (or such other office
or agency of the Company as it may designate by notice in writing to the
registered Holder hereof at the address of such Holder appearing on the books of
the Company) and upon payment of the Exercise Price of the shares thereby
purchased; whereupon the Holder of this Warrant shall be entitled to receive a
certificate for the number of shares of Common Stock so purchased. Certificates
for shares of Common Stock purchased hereunder shall be delivered to the holder
hereof within five (5) NASDAQ trading days after the date on which this Warrant
shall have been exercised as aforesaid. Payment of the Exercise Price of the
shares may be by certified check or cashier's check or by wire transfer to an
account designated by the Company in an amount equal to the Exercise Price
multiplied by the number of shares of Common Stock being purchased.
(b) Net Exercise Rights. Notwithstanding the payment provisions set
-------------------
forth in this Section 3, the holder may elect to receive the amount of Warrant
Shares equal to the value (as determined below) of this Warrant by surrender of
this Warrant at the principal office of the Company together with notice of such
election, in which event the Company shall issue to the holder the number of
shares of Common Stock determined by use of the following formula:
X = Y(A-B)
------
A
Where: X = the number of shares of Common Stock to be issued to the
holder.
Y = the number of Warrant Shares subject to this Warrant.
A = the Fair Market Value (as defined below) of one (1) Warrant
Share.
B = the Exercise Price per share of the Warrant Shares.
For purposes of this Section 3, fair market value of a share as of a
particular date shall mean:
(i) If the Company's registration statement under the Act,
covering its initial underwritten public offering of stock has been declared
effective by the Securities and Exchange Commission, then the fair market value
of a share shall be the closing price (the last reported sales price, of not so
reported, the average of the last reported bid and asked prices) of the
Company's stock as of the last business day immediately prior to the exercise of
this Warrant.
(ii) If such a registration statement has not been declared
effective, or if it has been declared effective but the offering is not
consummated in accordance with the terms of
-2-
<PAGE>
the underwriting agreement between the Company and its underwriters relating to
such registration statement, then as determined in good faith by the Company's
Board of Directors upon a review of relevant factors.
4. No Fractional Shares or Scrip. No fractional shares or scrip
-----------------------------
representing fractional shares shall be issued upon the exercise of this
Warrant.
5. Charges, Taxes and Expenses. Issuance of certificates for shares
---------------------------
of Common Stock upon the exercise of this Warrant shall be made without charge
to the Holder hereof for any issue or transfer tax or other incidental expense
in respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the Holder of this Warrant or in such name or names as may be directed by the
Holder of this Warrant; provided, however, that in the event certificates for
-------- -------
shares of Common Stock are to be issued in a name other than the name of the
Holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the Holder
hereof; and provided further, that upon any transfer involved in the issuance or
-------- -------
delivery of any certificates for shares of Common Stock, the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
6. Holder Representations. The Holder of the Warrant agrees and
----------------------
acknowledges that the Warrant is being purchased for the Holder's own account,
for investment purposes only, and not for the account of any other person, and
not with a view to distribution, assignment, pledge or resale to others or to
fractionalization in whole or in part. The Holder further represents, warrants
and agrees as follows: no other person has or will have a direct or indirect
beneficial interest in this Warrant and the Holder will not sell, hypothecate or
otherwise transfer the Warrant except in accordance with the Securities Act and
Regulation D thereunder and applicable state securities laws or unless, in the
opinion of counsel for the Holder acceptable to the Company, an exemption from
the registration requirements of the Securities Act and such laws is available.
7. Closing of Books. The Company will at no time close its
----------------
shareholder books or records in any manner which interferes with the timely
exercise of this Warrant.
8. No Rights as Stockholder until Exercise. This Warrant does not
---------------------------------------
entitle the Holder hereof to any voting rights or other rights as a stockholder
of the Company prior to the exercise thereof. If, however, at the time of the
surrender of this Warrant and purchase the Holder hereof shall be entitled to
exercise this Warrant, the shares so purchased shall be and be deemed to be
issued to such holder as the record owner of such shares as of the close of
business on the date on which this Warrant shall have been exercised.
9. Assignment and Transfer of Warrant. This Warrant may be assigned
----------------------------------
by the surrender of this Warrant and the Assignment Form annexed hereto duly
executed at the office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the registered holder hereof
at the address of such holder appearing on the books of the
-3-
<PAGE>
Company); provided, however, that this Warrant may not be resold or otherwise
transferred except with the prior consent of the Company and (i) in a
transaction registered under the Securities Act, or (ii) in a transaction
pursuant to an exemption, if available, from such registration and whereby, if
requested by the Company, an opinion of counsel reasonably satisfactory to the
Company is obtained by the holder of this Warrant to the effect that the
transaction is so exempt.
10. Loss, Theft, Destruction or Mutilation of Warrant. The Company
-------------------------------------------------
represents and warrants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Warrant
or stock certificate, and in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and upon reimbursement to the Company of
all reasonable expenses incidental thereto, and upon surrender and cancellation
of such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of this Warrant or stock certificate.
11. Saturdays, Sundays, Holidays, etc. If the last or appointed day
---------------------------------
for the taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action may be
taken or such right may be exercised on the next succeeding day not a legal
holiday.
12. Effect of Certain Events.
------------------------
(a) If at any time the Company proposes (i) to sell or otherwise
convey all or substantially all of its assets, or (ii) to effect a transaction
(by merger or otherwise) in which more than 50% of the voting power of the
Company is disposed of (collectively, a "Sale or Merger Transaction") in which
the consideration to be received by the Company or its stockholders consists
solely of cash, the Company shall give the Holder of this Warrant thirty (30)
days' notice of the proposed effective date of the transaction specifying that
the Warrant shall terminate if the Warrant has not been exercised by the
effective date of the transaction.
(b) In case the Company shall at any time effect a Sale or Merger
Transaction in which the consideration to be received by the Company or its
stockholders consists in part of consideration other than cash, the Holder of
this Warrant shall have the right thereafter to purchase, by exercise of this
Warrant and payment of the aggregate Exercise Price in effect immediately prior
to such action, the kind and amount of shares and other securities and property
which it would have owned or have been entitled to receive after the happening
of such transaction had this Warrant been exercised immediately prior thereto.
(c) "Piggy-Back" Registration. The Holder of this Warrant shall have
-------------------------
the right to include all of the shares of Common Stock underlying this Warrant
(the "Registrable Securities") as part of any registration of securities filed
by the Company (other than in connection with a transaction contemplated by Rule
145(a) promulgated under the Securities Act or pursuant to Form S-8) and must be
notified in writing of such filing; provided, however, that the holder of this
Warrant agrees it shall not have any piggy-back registration rights pursuant to
-4-
<PAGE>
this Section 12(c) if the shares of Common Stock underlying this Warrant are
freely tradable in the United States pursuant to the provisions of Regulation D.
Holder shall have five (5) business days to notify the Company in writing as to
whether the Company is to include Holder or not include Holder as part of the
registration; provided, however, that if any registration pursuant to this
Section shall be underwritten, in whole or in part, the Company may require that
the Registrable Securities requested for inclusion pursuant to this Section be
included in the underwriting on the same terms and conditions as the securities
otherwise being sold through the underwriters. If in the good faith judgment of
the underwriter evidenced in writing of such offering only a limited number of
Registrable Securities should be included in such offering, or no such shares
should be included, the Holder, and all other selling stockholders, shall be
limited to registering such proportion of their respective shares as shall equal
the proportion that the number of shares of selling stockholders permitted to be
registered by the underwriter in such offering bears to the total number of all
shares then held by all selling stockholders desiring to participate in such
offering. Those Registrable Securities which are excluded from an underwritten
offering pursuant to the foregoing provisions of this Section (and all other
Registrable Securities held by he selling stockholders) shall be withheld from
the market by the Holders thereof for a period, not to exceed one hundred eighty
(180) days, which the underwriter may reasonably determine is necessary in order
to effect such underwritten offering. The Company shall have the right to
terminate or withdraw any registration initiated by it under this Section 12(c)
prior to the effectiveness of such registration whether or not any Warrant
holder elected to include securities in such registration. All registration
expenses incurred by the Company in complying with this Section 12(c) shall be
paid by the Company, exclusive of underwriting discounts, commissions and legal
fees and expenses for counsel to the holders of the Warrants.
13. Adjustments of Exercise Price and Number of Warrant Shares. The
----------------------------------------------------------
number and kind of securities purchasable upon the exercise of this Warrant and
the Exercise Price shall be subject to adjustment from time to time upon the
happening of any of the following.
In case the Company shall (i) declare or pay a dividend in shares of
Common Stock or make a distribution in shares of Common Stock to holders of its
outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock,
(iii) combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock, or (iv) issue any shares of its capital stock in a
reclassification of the Common Stock, the number of Warrant Shares purchasable
upon exercise of this Warrant immediately prior thereto shall be adjusted so
that the holder of this Warrant shall be entitled to receive the kind and number
of Warrant Shares or other securities of the Company which he would have owned
or have been entitled to receive had such Warrant been exercised in advance
thereof. An adjustment made pursuant to this paragraph shall become effective
immediately after the effective date of such event retroactive to the record
date, if any, for such event.
14. Voluntary Adjustment by the Company. The Company may at its
-----------------------------------
discretion, at any time during the term of this Warrant, reduce the then current
Exercise Price to any amount and for any period of time deemed appropriate by
the Board of Directors of the Company.
-5-
<PAGE>
15. Notice of Adjustment. Whenever the number of Warrant Shares or
--------------------
number or kind of securities or other property purchasable upon the exercise of
this Warrant or the Exercise Price is adjusted, as herein provided, the Company
shall promptly mail by registered or certified mail, return receipt requested,
to the Holder of this Warrant notice of such adjustment or adjustments setting
forth the number of Warrant Shares (and other securities or property)
purchasable upon the exercise of this Warrant and the Exercise Price of such
Warrant Shares after such adjustment, setting forth a brief statement of the
facts requiring such adjustment and setting forth computation by which such
adjustment was made. Such notice, in absence of manifest error, shall be
conclusive evidence of the correctness of such adjustment.
16. Authorized Shares. The Company covenants that during the period
-----------------
the Warrant is outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of Common
Stock upon the exercise of any purchase rights under this Warrant. The Company
further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of the
Company's Common Stock upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as may be necessary
to assure that such shares of Common Stock may be issued as provided herein
without violation of any applicable law or regulation, or of any requirements of
the NASDAQ (or on the principal national securities exchange on which the Common
Stock is admitted to trading or listed or, if not listed or admitted to trading
on NASDAQ or a national securities exchange, as reported by the National
Quotation Bureau, Inc. or other similar organization ("Other Exchanges")) for
the three (3) trading days immediately prior to the date such dividend is
payable.
17. Miscellaneous.
-------------
(a) Issue Date; Jurisdiction. The provisions of this Warrant shall
------------------------
be construed and shall be given effect in all respects as if it had been issued
and delivered by the Company on the date hereof. This Warrant shall be binding
upon any successors or assigns of the Company. This Warrant shall constitute a
contract under the laws and jurisdictions of Delaware and for all purposes shall
be construed in accordance with and governed by the laws of said state without
regard to its conflict of law, principles or rules.
(b) Restrictions. The holder hereof acknowledges that the Common
------------
Stock acquired upon the exercise of this Warrant, if not registered, may have
restrictions upon its resale imposed by state and federal securities laws.
(c) Modification and Waiver. This Warrant and any provisions hereof
-----------------------
may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
-6-
<PAGE>
(d) Notices. Any notice, request or other document required or
-------
permitted to be given or delivered to the holders hereof of the Company shall be
delivered or shall be sent by certified or registered mail, postage prepaid, to
each such holder at its address as shown on the books of the Company or to the
Company at the address set forth in the Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officers thereunto duly authorized.
Dated: December 18, 1997
STORM TECHNOLOGY, INC.
By: /s/ Rick McConnell
-------------------------------
Title: Chief Financial Officer
---------------------------
-7-
<PAGE>
NOTICE OF EXERCISE
------------------
To: STORM TECHNOLOGY, INC.
(1) The undersigned hereby elects to purchase ________ shares of
Common Stock of STORM TECHNOLOGY, INC. pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price in full, together
with all applicable transfer taxes, if any.
(2) By signing below, the undersigned hereby certifies that the shares
of Common Stock to be issued upon exercise of this Warrant have been registered
under the Securities Act of 1933 (the "Act"), or that an exemption from
registration under the Securities Act is available for such shares of Common
Stock.
(3) Please issue a certificate or certificates representing said
shares of Common Stock in the name of the undersigned or in such other name as
is specified below:
_______________________________
(Name)
_______________________________
(Address)
_______________________________
Dated:
______________________________
Signature
NOTE: Signature must conform in all respects to holder's name as specified on
the face of the attached warrant.
-8-
<PAGE>
ASSIGNMENT FORM
---------------
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
_______________________________________________ whose address is
_______________________________________________________________.
________________________________________________________________
Dated: ______________, 199_
Holder's Signature: _____________________________
Holder's Address: _____________________________
_____________________________
Signature Guaranteed: _________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant.
-9-
<PAGE>
EXHIBIT F
JOINT FILING AGREEMENT
WHEREAS, the statement on Schedule 13D to which this agreement is an
exhibit (the "Joint Statement") is being filed on behalf of two or more persons
(collectively, the "Reporting Persons"); and
WHEREAS, the Reporting Persons prefer to file the Joint Statement on behalf
of both Reporting Persons rather than individual statements on Schedule 13D on
behalf of each of the Reporting Persons;
NOW, THEREFORE, the undersigned hereby agree as follows with each of the
other Reporting Persons:
1. Each of the Reporting Persons is individually eligible to use the Joint
Statement.
2. Each of the Reporting Persons is responsible for the timely filing of
the Joint Statement and any amendments thereto.
3. Each of the Reporting Persons is responsible for the completeness and
accuracy of the information concerning such person contained in the Joint
Statement.
4. None of the Reporting Persons is responsible for the completeness or
accuracy of the information concerning the other Reporting Persons contained in
the Joint Statement, unless such person knows or has reason to believe that such
information is inaccurate.
5. The undersigned agree that the Joint Statement is, and any amendment
thereto will be, filed on behalf of each of the Reporting Persons.
Dated: July 10, 1998
/s/ L. William Krause /s/ L. Gay Krause
- ------------------------------------- ------------------------------------
L. William Krause L. Gay Krause
THE KRAUSE TRUST LWK VENTURES MONEY PURCHASE
PENSION PLAN dated January 1, 1991
By: /s/ L. William Krause By: /s/ L. William Krause
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Its: Trustee Its: Trustee
-------------------------------- --------------------------------
LWK VENTURES PROFIT SHARING PLAN
dated January 1, 1991
By: /s/ L. William Krause By: /s/ L. William Krause
---------------------------------- ----------------------------------
Its: Trustee Its: Trustee
-------------------------------- --------------------------------
