<PAGE>
SCHEDULE 14A
(Rule 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ___________)
Filed by the Registrant: /X/
Filed by a party other than the Registrant: / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential for Use of the
/X/ Definitive Proxy Statement Commission Only (as permitted
/ / Definitive Additional Materials by Rule 14a-6(e)(2))
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Omtool, Ltd.
----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- -------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- -------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):
- -------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- -------------------------------------------------------------------------------
(5) Total fee paid:
- -------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
- -------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount Previously Paid:
- -------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- -------------------------------------------------------------------------------
(3) Filing Party:
- -------------------------------------------------------------------------------
(4) Date Filed:
- -------------------------------------------------------------------------------
<PAGE>
April 23, 1998
Dear Fellow Stockholder:
You are cordially invited to attend our Annual Meeting of
Stockholders, which will be held this year on Friday, May 22, 1998 at 10:00
A.M., at the offices of Testa, Hurwitz & Thibeault, LLP, 125 High Street,
High Street Tower, Boston, Massachusetts.
At this year's meeting, you are asked to elect two Class I directors
and to ratify the selection of the Company's auditors. The accompanying
Notice of Meeting and Proxy Statement describe these proposals. We urge you
to read this information carefully.
Your Board of Directors unanimously believes that the election of
its nominees as directors and the ratification of its appointment of auditors
are in the best interest of Omtool, Ltd. and its stockholders, and
accordingly recommends a vote FOR Items 1 and 2 on the enclosed proxy card.
Whether or not you plan to attend the meeting in person, it is
important that your shares be represented and voted. After reading the
enclosed Notice of Annual Meeting and Proxy Statement, may I urge you to
complete, sign, date and return your proxy ballot in the envelope provided.
If the address on the accompanying material is incorrect, please advise the
Company in writing at 8 Industrial Way, Salem, New Hampshire 03079,
Attention: Darioush Mardan.
For the Board of Directors
Robert L. Voelk
Chief Executive Officer and
Chairman of the Board
<PAGE>
OMTOOL, LTD.
8 INDUSTRIAL WAY
SALEM, NEW HAMPSHIRE 03079
-------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 22, 1998
-------------------
To The Stockholders:
The Annual Meeting of Stockholders of Omtool, Ltd., a Delaware
corporation, will be held on Friday, May 22, 1998 at 10:00 A.M. at the
offices of Testa, Hurwitz & Thibeault, LLP, 125 High Street, High Street
Tower, Boston, Massachusetts, for the following purposes:
1. To elect two Class I directors each to serve for a three-year
term.
2. To ratify the selection of the firm of Arthur Andersen LLP as
auditors for the fiscal year ending December 31, 1998.
3. To transact such other business as may properly come before
the meeting and any adjournments thereof.
Stockholders entitled to notice of and to vote at the meeting shall
be determined as of the close of business on Tuesday, April 14, 1998, the
record date fixed by the Board of Directors for such purpose.
By Order of the Board of Directors,
Darioush Mardan
Secretary
Salem, New Hampshire
April 23, 1998
- --------------------------------------------------------------------------------
Whether or not you expect to attend the meeting, please complete, date and
sign the enclosed proxy card and mail it promptly in the enclosed stamped
envelope in order to assure representation of your shares.
- --------------------------------------------------------------------------------
<PAGE>
OMTOOL, LTD.
8 INDUSTRIAL WAY
SALEM, NEW HAMPSHIRE 03079
-------------------
PROXY STATEMENT
-------------------
April 23, 1998
Proxies in the form enclosed with this proxy statement are solicited
by the Board of Directors of Omtool, Ltd. (the "Company") for use at the
Annual Meeting of Stockholders of the Company to be held on Friday, May 22,
1998 at 10:00 A.M. at the offices of Testa, Hurwitz & Thibeault, LLP, 125
High Street, High Street Tower, Boston, Massachusetts.
Only stockholders of record as of the close of business on April 14,
1998 (the "Record Date") will be entitled to vote at the meeting and any
adjournments thereof. As of that date, 12,738,801 shares of common stock, par
value $.01 per share (the "Common Stock"), of the Company were issued and
outstanding. Each share of Common Stock outstanding as of the Record Date will
be entitled to one vote and stockholders may vote in person or by proxy.
Execution of a proxy will not in any way affect a stockholder's right to attend
the meeting and vote in person. Any stockholder giving a proxy has the right to
revoke it by written notice to the Secretary of the Company at any time before
it is exercised. Each of the persons named as a proxy in the proxy is a director
and/or executive officer of the Company.
An Annual Report to Stockholders, containing audited financial
statements for the fiscal year ended December 31, 1997, is being mailed
together with this proxy statement to all stockholders entitled to vote. It
is anticipated that this proxy statement and the accompanying proxy will be
first mailed to stockholders on or about April 23, 1998.
The mailing address of the Company's principal executive offices is
8 Industrial Way, Salem, New Hampshire 03079.
All properly executed proxies returned in time to be counted at the
meeting and not revoked will be voted, and with respect to the election of
members of the Board of Directors, will be voted as stated under "Election of
Directors" below. In addition to the election of directors, the stockholders
will act on a proposal to ratify the selection of auditors, as further described
in this proxy statement. Where a choice has been specified on the proxy with
respect to the foregoing matters, the shares represented by the proxy will be
voted in accordance with the specification and will be voted FOR the matters if
no specification is indicated.
The representation in person or by proxy of at least a majority of all
shares of Common Stock issued, outstanding and entitled to vote at the meeting
is necessary to constitute a quorum for the transaction of business. Votes
withheld from the nominee for election as director, or which contain one or more
abstentions or broker "non-votes", are counted as present or represented for
purposes of determining the presence or absence of a quorum for the meeting. A
"non-vote" occurs when a broker or other nominee holding shares for a beneficial
owner votes on one proposal, but does not vote on another proposal because, in
respect of such other proposal, the nominee does not have discretionary voting
power and has not received instructions from the beneficial owner.
<PAGE>
The election of directors by the stockholders will require a
plurality of the votes cast by the stockholders entitled to vote at such
election. Thus, abstentions and broker non-votes will not be included in vote
totals and will have no effect on the outcome of the vote. On all other
matters being submitted to stockholders, the affirmative vote of the majority
of shares present or represented and voting on that matter is required for
approval. Thus, abstentions and broker non-voting will not be included in
vote totals and will have no effect on the outcome of the votes. An automated
system administered by the Company's transfer agent tabulates the votes. The
vote on each matter submitted to stockholders is tabulated separately.
The Board of Directors knows of no other matter to be presented at
the meeting. If any other matter should be presented at the meeting upon
which a vote may be properly taken, shares represented by all proxies
received by the Board of Directors will be voted with respect thereto in
accordance with the judgment of the persons named as proxies in the proxy.
2
<PAGE>
MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of the Record Date, except as set
forth below: (i) by each person who, to the knowledge of the Company, owned
beneficially more than 5% of the shares of Common Stock of the Company
outstanding at such date; (ii) by each director and nominee; (iii) by each
executive officer identified in the Summary Compensation Table set forth below
under "Compensation and Other Information Concerning Directors and Officers,"
and (iv) by the directors, nominees and executive officers of the Company as a
group.
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of of Beneficial
Beneficial Owner Ownership (1)(2)(3) Percent of Class
--------------------- ---------------------- -----------------
<S> <C> <C>
Martin A. Schultz................................. 2,170,654 17.0%
Omtool, Ltd.
8 Industrial Way
Salem, NH 03079
Robert L. Voelk (4)............................... 1,977,454 15.5%
Omtool, Ltd.
8 Industrial Way
Salem, NH 03079
Summit Partners (5)............................... 1,698,378 13.3%
600 Atlantic Avenue
Boston, MA 02110
Franklin Resources, Inc. (6)...................... 1,019,200 8.0 %
777 Mariners Island Blvd.
San Mateo, CA 94404
Essex Investment Management Company (7).. 673,070 5.3 %
125 High Street
Boston, MA 02110
Richard D. Cramer................................. 66,166 *
Bruce R. Evans (8)................................ 1,698,378 13.3%
Anthony J. Mark................................... 86,667 *
William C. Styslinger, III........................ -- --
Ellen Flaherty.................................... 134,833 1.1%
Craig A. Randall.................................. 91,513 *
Mark P. Overington................................ 33,100 *
All executive officers, nominees and directors as a
group (12 persons)................................ 6,628,789 50.5%
- -----------
</TABLE>
* Less than 1% of the outstanding Common Stock.
(1) The persons and entities named in the table have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them, except as noted in the footnotes below
and except to the extent authority is shared by spouses under
applicable law.
(2) The number of shares of Common Stock deemed outstanding includes (i)
12,738,801 shares of Common Stock outstanding as of the Record Date
and (ii) shares of Common Stock issuable pursuant to options held by
the respective person or group which may be exercised within 60 days
after the Record Date, as set forth below.
3
<PAGE>
(3) Includes options to purchase shares of Common Stock which may be
exercised within 60 days of the Record Date as follows: Mr. Cramer
19,667 options, Mr. Mark 17,667 options, Ms. Flaherty 134,833
options, and Mr. Overington 29,100 options. In addition, all current
directors, nominees and executive officers as a group hold options to
purchase 389,473 shares of Common Stock which may be exercised within
60 days of the Record Date.
(4) Includes 50,000 shares held in trust for the benefit of certain
family members; Mr. Voelk disclaims beneficial ownership of such
shares.
(5) Includes 1,609,966 shares held by Summit Ventures IV, L.P. and 88,412
shares held by Summit Investors III, L.P. The respective general
partners of these entities exercise sole voting and investment power
with respect to the shares owned by such entities.
(6) Based on a Schedule 13G dated January 30, 1998 filed by Franklin
Resources, Inc. ("FRI"), Charles B. Johnson ("CBJ"), Rupert H.
Johnson, Jr. ("RHJ"), and Franklin Advisors, Inc. ("FAI") reflecting
beneficial ownership as of December 31, 1997. According to the
Schedule 13G, FRI, a parent holding company, CBJ and RHJ, its
principal shareholders, and its subsidiary FAI, an investment
advisor, have beneficial ownership of 1,019,200 shares of Common
Stock of the Company. FAI has sole dispositive and voting power with
respect to such shares.
(7) Based on a Schedule 13G dated January 21, 1998 filed by Essex
Investment Management Company ("EIMC") reflecting beneficial
ownership as of December 31, 1997. According to the Schedule 13G,
EIMC exercises sole voting power with respect to 494,870 shares and
sole dispositive power with respect to all of such shares.
(8) Includes 1,609,966 shares held by Summit Ventures IV, L.P. and 88,412
shares held by Summit Investors III, L.P. Mr. Evans is a general
partner of Summit Investors III, L.P. and is the general partner of
Stamps, Woodsum & Co. IV, which is the general partner of Summit
Partners IV, L.P., which is the general partner of Summit Ventures
IV, L.P. Mr. Evans may be deemed to share voting and investment power
with respect to all shares held by the partnerships. Mr. Evans
disclaims beneficial ownership of these shares, except to the extent
of his pecuniary interest therein.
PROPOSAL I
ELECTION OF DIRECTORS
No proxy may be voted for more people than the number of nominees set
forth below. Shares represented by all proxies received by the Board of
Directors and not so marked to withhold authority to vote for Richard D. Cramer
or Anthony J. Mark (by writing that individual director's name where indicated
on the proxy) will be voted FOR the election of Messrs. Cramer and Mark,
respectively. The Board of Directors knows of no reason why Messrs. Cramer or
Mark should be unable or unwilling to serve, but if such should be the case,
proxies may be voted for the election of some other person or persons or for
fixing the number of directors at a lesser number.
Information Pertaining to Directors and Nominees
In accordance with the Company's Amended and Restated By-laws (the
"By-laws"), the Company's Board of Directors is divided into three classes.
Each of the Company's two Class I Directors, Richard D. Cramer and Anthony J.
Mark, has served as a director since January 1996. The terms of Messrs.
Cramer and Mark expire as of the date of the Annual Meeting of Stockholders
to be held in 1998. Bruce R. Evans, one of the Company's two Class II
Directors, has served as a director since July 1996. William C. Styslinger,
III, the Company's other Class II Director, has served as a director since
June 1997. The terms of Messrs. Evans and Styslinger expire as of the date of
the Annual Meeting of Stockholders to be held in 1999. Martin A. Schultz, one
of the Company's two Class III Directors and Company founder, has served as a
director since the Company's inception in 1991. Robert L. Voelk, the
Company's other Class III Director, has served as a director since August
1993. The terms of Messrs. Schultz and Voelk expire as of the date of the
Annual Meeting of Stockholders to be held in 2000.
4
<PAGE>
The following table sets forth for each nominee to be elected at the
meeting and for each Director who will continue to serve as a director beyond
the meeting, the year such nominee or director was first elected as a director,
the positions currently held by such nominee or director with the Company, the
year such nominee's or director's term will expire and the class of director of
such nominee or director.
<TABLE>
<CAPTION>
Nominee's or Director's Name and Year
Nominee or Director Year Term Class of
First Became a Director Position(s) Held Will Expire Director
- --------------------------------------- ---------------- ----------- ---------
<S> <C> <C> <C>
Richard D. Cramer Director 1998 I
(1996)
Anthony J. Mark Director 1998 I
(1996)
Bruce R. Evans Director 1999 II
(1996)
William C. Styslinger, III Director 1999 II
(1997)
Robert L. Voelk Chief Executive Officer and 2000 III
(1993) Chairman of the Board
Martin A. Schultz President and Director 2000 III
(1991)
</TABLE>
Occupations of Directors and Executive Officers
The following table sets forth the Class I nominees to be elected at
the meeting, the current directors who will continue to serve as directors
beyond the meeting, and the current executive officers of the Company, their
ages and the positions currently held by each such person with the Company:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Robert L. Voelk............................. 42 Chief Executive Officer and Chairman of the Board
Martin A. Schultz........................... 42 President and Director
Glyn C. Davies.............................. 38 Managing Director, Omtool Europe, Ltd.
Ellen Flaherty.............................. 32 Vice President, Sales
Darioush Mardan............................. 32 Vice President, Finance, Chief Financial Officer, Treasurer
and Secretary
Mark P. Overington.......................... 39 Vice President, Business Development
Craig A. Randall............................ 37 Vice President, Marketing
Paul E. St. Pierre.......................... 45 Vice President, Engineering
Richard D. Cramer (1)....................... 35 Director
Bruce R. Evans (2).......................... 39 Director
Anthony J. Mark (1)(2)...................... 51 Director
William C. Styslinger, III.................. 52 Director
</TABLE>
- ----------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
5
<PAGE>
Directors to be Elected at the Meeting
Richard D. Cramer has served as a Director of the Company since
January 1996. Mr. Cramer has served as Vice President, Sales and Marketing of
CENTRA Software, Inc., a developer and marketer of Web-Centric distance
learning software, since May 1996. Mr. Cramer served as Vice President of
North American Field Operations at Avid Technology from 1989 to 1995 and Vice
President and General Manager of the Desktop Division of Avid Technology
during 1996.
Anthony J. Mark has served as a Director of the Company since
January 1996. Mr. Mark joined CENTRA Software, Inc. in March 1997 and
currently serves as its Chief Operating Officer. Mr. Mark served as Vice
President and General Manager of Broadcast Products Group from 1993 to 1995
and Vice President of Engineering from 1990 to 1993 at Avid Technology. Prior
to his employment with Avid Technology, Mr. Mark held various technical and
managerial positions at companies such as Compass, Inc., Datamark, Ltd.,
Lexico Enterprises and GPP GmbH. Mr. Mark is a Director of PTS Learning
Systems.
Directors Whose Terms Extend Beyond the Meeting
Robert L. Voelk has served as Chief Executive Officer of the
Company since January 1996 and a Director of the Company since August 1993.
Mr. Voelk served as President of the Company from August 1993 to January
1996. Mr. Voelk was employed in various positions at ASA International, Ltd.,
a designer and developer of proprietary vertical market software, from 1981
to 1993, most recently serving as Executive Vice President and Director. Mr.
Voelk is a Director of ASA International, Ltd.
Martin A. Schultz, the founder of the Company, has served as
President of the Company since January 1996 and a Director of the Company
since its inception in March 1991. Mr. Schultz served as the Company's
President from its inception through August 1993 and served as Chief
Executive Officer of the Company from March 1991 to January 1996. Mr. Schultz
served as Vice President of ASA International, Ltd. from April 1989 to
January 1991.
Bruce R. Evans has served as a Director of the Company since July
1996. Since 1991, Mr. Evans has been a general partner of Summit Partners, a
venture capital firm, where he has been employed since 1986. Mr. Evans serves as
a Director of DSET Corporation and Pediatrix Medical Group.
William C. Styslinger, III has served as a Director of the Company
since June 1997. Mr. Styslinger has served as President, Chief Executive Officer
and Director of SeaChange International, Inc., a provider of software products
to manage, store and distribute digital video for cable television operators and
telecommunications companies, since 1993 and as Chairman of the Board of
SeaChange International, Inc. since January 1995. From March 1978 to July 1993,
Mr. Styslinger was employed at Digital Equipment Company, most recently as
manager of the Cable Television Business Unit.
Executive Officers
Glyn C. Davies joined the Company in December 1997 as Managing
Director, Omtool Europe Ltd., a wholly owned subsidiary of the Company. For the
last 12 years, Mr. Davies was the Chairman and Managing Director of CMA
Ettworth, Limited which was acquired by the Company in December of 1997.
Ellen Flaherty joined the Company in February 1994 as Vice President,
Sales. Ms. Flaherty served as Director of Sales at Laboratory Technologies
Company, a developer of engineering and scientific software, from
6
<PAGE>
May 1992 to November 1993. From 1987 to 1992, Ms. Flaherty worked for Analog
Devices, a manufacturer of linear digital and mixed-signal integrated circuits.
Darioush Mardan has served as Chief Financial Officer and Vice
President, Finance of the Company since October 1995. Mr. Mardan has also served
as Secretary and Treasurer of the Company since January 1996. Mr. Mardan was
employed in various positions by Arthur Andersen LLP, a national public
accounting firm, from August 1989 to October 1995, most recently serving as
audit manager in the firm's Boston office.
Mark P. Overington joined the Company in January 1997 as Vice
President, Operations and became Vice President, Business Development in March
1998. Mr. Overington was employed in various positions by Avid Technology, Inc.,
a developer of nonlinear film, video and audio solutions, from January 1989 to
December 1996, most recently serving as Vice President of Corporate Marketing.
From 1983 to 1989, Mr. Overington was employed in various positions by Lotus
Development Company, a software developer.
Craig A. Randall joined the Company in September 1995 as Vice
President, Marketing. Mr. Randall served as Vice President, Marketing for
Simplex Time Recorder Co., a seller of fire alarm, sound, security and other
monitor and control systems, from December 1994 to July 1995. Previously Mr.
Randall was employed by Racal-Datacom, Inc., a data communications company, from
November 1988 to December 1994, most recently as Division Vice President of
Product Marketing.
Paul E. St. Pierre joined the Company as Vice President,
Engineering in March 1996. Mr. St. Pierre was Director of Engineering at Avid
Technology from May 1992 to February 1996. Previously, Mr. St. Pierre was
Consulting Engineer for Digital Equipment Company, a computer systems,
peripheral equipment and software manufacturer, from January 1992 to May 1992.
Prior to that, Mr. St. Pierre was employed by Compass, Inc., a software
engineering firm, from November 1982 to November 1991, most recently as Director
of Engineering.
Each director serves for a three-year term, with one class of directors
being elected at each Annual Meeting Each director holds office until his
successor is duly elected and qualified, or until his earlier death, resignation
or removal.
Executive officers of the Company are elected by the Board of Directors
on an annual basis and serve until their successors have been duly elected and
qualified. There are no family relationships among any of the executive officers
or directors of the Company.
Board Meetings and Committees
The Board of Directors met seven times, and took action by unanimous
written consent eleven times, during the fiscal year ended December 31, 1997.
The standing committees of the Board of Directors are the Audit Committee and
the Compensation Committee. The Audit Committee met once and the Compensation
Committee met once during the fiscal year ended December 31, 1997. The Board of
Directors does not currently have a standing nominating committee. Each director
attended at least 75% of the aggregate of all the meetings of the Board of
Directors and of all the committees of the Board of Directors of which he is a
member during the fiscal year ending December 31, 1997, except for Martin A.
Schultz who attended five of the seven meetings of the Board of Directors.
In March 1996, the Board of Directors established a Compensation
Committee and an Audit Committee. The Compensation Committee makes
recommendations to the Board of Directors concerning the compensation of
executives and salaries of the employees and consultants to the Company. The
Compensation Committee also makes recommendations to the Board of Directors
concerning incentive compensation of employees and directors
7
<PAGE>
of and consultants to the Company. The current members of the Compensation
Committee are Messrs. Evans and Mark. The Audit Committee recommends the
engagement of auditors and is responsible for reviewing the results and scope of
audits and other services provided by the Company's independent auditors. The
current members of the Audit Committee are Messrs. Cramer and Mark.
Compensation of Directors
Outside directors have been granted stock options by the Company under
the 1996 Stock Plan. During 1997, independent directors received a participation
fee of $1,000 for each Board of Directors meeting and $500 for each Board
committee meeting that they attended in person. Outside directors have been and
will continue to be reimbursed for their reasonable out-of-pocket expenses
incurred in attending meetings. No director who is an employee of the Company
will receive separate compensation for services rendered as a director.
Compensation Committee Interlocks and Insider Participation
Prior to March 1996, the Company had no separate compensation committee
or other equivalent function, and this function was performed by the Company's
Board of Directors. From March 1996 until July 1996, the Company had a
Compensation Committee comprised of Messrs. Voelk (the Chief Executive Officer
of the Company), Schultz (the President of the Company) and Mark. From July 22,
1996 until April 15, 1997, the Compensation Committee was comprised of Messrs.
Voelk, Mark and Evans. Mr. Evans is a general partner of Summit Investors III,
L.P. a stockholder of the Company, and is also a general partner of Stamps,
Woodsum & Co. IV, which is the general partner of Summit Partners IV, L.P. which
is the general partner of Summit Ventures IV, L.P., another stockholder of the
Company. Since April 15, 1997, the Compensation Committee has been comprised of
Messrs. Mark and Evans.
8
<PAGE>
COMPENSATION AND OTHER INFORMATION
CONCERNING DIRECTORS AND OFFICERS
Executive Compensation
The following table sets forth information concerning the
compensation for services in all capacities paid or accrued by the Company
for the fiscal years ended December 31, 1997 and 1996, for (i) the individual
who served as the Chief Executive Officer for the fiscal year ended December
31, 1997 and (ii) each of the four other most highly compensated executive
officers whose aggregate salary and bonus exceeded $100,000 in the fiscal
year ended December 31, 1997 (with the Chief Executive Officer, collectively,
the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation (1)
----------------
Annual Compensation (2) Awards
-------------------------------------------
Securities
Underlying All Other
Name and Options/ Compensation
Principal Position Year Salary ($) Bonus ($)(3) SARs (#) ($)(4)
- ------------------ ---- ---------- ------------ ------------ --------------------
<S> <C> <C> <C> <C> <C>
Robert L. Voelk........................ 1997 175,000 50,000 -- 8,600 (5)
Chairman of the Board, Chief Executive 1996 176,923 50,000 -- 8,600 (5)
Officer and Director
Martin A. Schultz...................... 1997 175,000 50,000 -- 9,075 (6)
President and Director 1996 176,923 50,000 -- 6,225 (6)
Ellen Flaherty ........................ 1997 99,058 102,300 (7) -- 4,750
Vice President, Sales 1996 65,609 86,026 (7) 160,000 1,900
Craig Randall.......................... 1997 119,731 -- 3,592
Vice President, Marketing 1996 99,333 10,000 160,000 2,885
Mark P. Overington (8)................. 1997 131,365 -- 160,000 3,941
Vice President, Operations 1996 -- -- -- --
</TABLE>
- -----------
(1) The Company did not grant any restricted stock awards or stock
appreciation rights during fiscal 1997 and 1996. The Company does
not have any long term incentive plan.
(2) In accordance with the rules of the Securities and Exchange
Commission, other compensation in the form of perquisites and other
personal benefits have been omitted because such perquisites and
other personal benefits constituted less than the lesser of $50,000
or 10% of the total annual salary and bonus reported for the
executive officer during the year ended December 31, 1997.
(3) Bonuses are reported in the year earned, even if actually paid in a
subsequent year.
(4) Consists of the Company's matching contributions related to the
Company's 401(k) Plan and premiums for life insurance paid by the
Company on behalf of the Named Executive Officers noted in the
footnotes below.
(5) Includes life insurance premiums paid by the Company on behalf of
Mr. Voelk.
(6) Includes life insurance premiums paid by the Company on behalf of
Mr. Schultz.
(7) Represents amounts earned as sales commissions.
(8) Mr. Overington joined the Company in January 1997 as Vice
President, Operations and became Vice President, Business
Development in March 1998.
9
<PAGE>
Option Grants
The following table sets forth information concerning options
granted during the last fiscal year under the Company's 1997 Stock Plan and
1996 Stock Option Plan to the Named Executive Officers. The Company did not
grant any stock appreciation rights in 1997.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
---------------------------------------------------
Percent of
Total
Options/
Number of SARs Potential Realizable Value at
Securities Granted to Exercise Assumed Annual Rates of Stock
Underlying Employees or Base Price Appreciation for Option
Option/SARs in Fiscal Price Expiration Term (2)
Name Granted (#)(1) Year (1) ($/Sh) Date 5%($) 10%($)
---- -------------- -------- ------ ---- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Voelk................. -- -- -- -- -- --
Martin A. Schultz............... -- -- -- -- -- --
Ellen Flaherty.................. -- -- -- -- -- --
Craig A. Randall................ -- -- -- -- -- --
Mark P. Overington.............. 160,000 37% $1.85 1/2/2007 $186,153 $471,748
</TABLE>
- ----------------
(1) Exercisable for 40,000 shares upon the earlier of January 2, 1998 or the
Company's initial public offering. The remaining option shares are
exercisable in three annual installments commencing January 2, 1999. All
of the options were granted on January 2, 1997 and become exercisable in
full upon a change in control of the Company. All options were granted at
fair market value on the date of grant as determined by the Board of
Directors of the Company.
(2) Amounts represent hypothetical gains that could be achieved for the
option if exercised at the end of the option term. These gains are based
on the fair market value on the date of grant and assumed rates of stock
price appreciation of 5% and 10% compounded annually from the date the
respective options were granted to their expiration date. These
assumptions are mandated by the rules of the Securities and Exchange
Commission and are not intended to forecast future appreciation of the
Company's stock price. The potential realizable value computation is net
of the applicable exercise price, but does not take into account federal
or state income tax consequences and other expenses of option exercises
or sales of appreciated stock. Actual gains, if any, are dependent upon
the timing of such exercise and the future performance of the Company's
Common Stock. There can be no assurance that the rates of appreciation in
this table can be achieved. This table does not take into account any
appreciation in the price of the Common Stock to date.
10
<PAGE>
Option Exercises and Fiscal Year-End Values
Shown below is information with respect to options to purchase the
Company's Common Stock granted under the Company's 1996 Stock Option Plan
and 1997 Stock Plan, including (i) the number of shares of Common Stock
received upon exercise of options in the fiscal year ended December 31,
1997; (ii) the net value realized upon such exercise; (iii) the number of
unexercised options held at December 31, 1997; and (iv) the aggregate
dollar value of unexercised options held at December 31, 1997:
AGGREGATED OPTION/SAR EXERCISES IN THE LAST
FISCAL YEAR AND FY-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of
Shares Securities Underlying Value of Unexercised
Acquired Unexercised In-the-Money
on Value Options/SARs at Options/SARs at
Exercise Realized Fiscal Year-End (#) Fiscal Year-End ($)(2)
-------------------------------- -------------------------------
Name (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- -------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Voelk............... -- -- -- -- -- --
Martin A. Schultz............. -- -- -- -- -- --
Ellen Flaherty............... 10,667 93,336 95,999 53,334 959,990 533,340
Craig A. Randall.............. 5,333 46,664 48,000 106,667 480,000 1,066,670
Mark P. Overington............ 8,000 62,200 32,000 120,000 268,800 1,008,000
</TABLE>
- ---------------
(1) Amounts disclosed in this column do not reflect amounts actually
received by the Named Executive Officers, but are calculated based
on the difference between the fair market value of the Company's
Common Stock on the date of exercise and the exercise price of the
options. Named Executive Officers will receive cash only if and when
they sell the Common Stock issued upon exercise of the options and
the amount of cash received by such individuals is dependent on the
price of the Company's Common Stock at the time of such sale.
(2) Value is based on the difference between the option exercise price
and the fair market value at December 31, 1997 ($10.25 per share)
multiplied by the number of shares of Common Stock underlying the
option.
Compensation Committee Report on Executive Compensation
The Company's executive compensation program is administered by the two
member Compensation Committee of the Board of Directors (the "Compensation
Committee"). The two members of the Compensation Committee are non-employee
Directors. The Compensation Committee makes recommendations to the Board of
Directors concerning the compensation of executive officers and the salaries
of the employees of and consultants to the Company. The Compensation
Committee also makes recommendations to the Board of Directors concerning
incentive compensation of employees and directors of and consultants to the
Company.
The Company's executive compensation program is designed to provide
levels of compensation that assist the Company in attracting, motivating and
retaining qualified executive officers and aligning the financial interests
of the Company's executive officers and other employees with those of its
stockholders by providing a competitive compensation package based on
corporate and individual performance. In addition to cash compensation in the
form of base salary, compensation under the executive compensation program
can be
11
<PAGE>
comprised of annual cash incentive bonuses and long-term incentive awards in
the form of stock option grants. The compensation program is also comprised
of various benefits, including medical and insurance plans, as well as the
Company's 1997 Employee Stock Purchase Plan and 401(k) Plan, which plans are
generally available to all employees of the Company.
Base Salary
Base salary compensation levels for each of the Company's executive
officers, including the Chief Executive Officer, are generally set within the
range of base salaries that the Compensation Committee believes are paid to
executive officers with comparable qualifications, experience and
responsibilities at other companies located in the northeastern United States
of similar size and engaged in similar business to that of the Company. In
setting compensation levels, the Compensation Committee generally takes into
account such factors as (i) the Company's past operating and financial
performance and future expectations, (ii) individual performance and
experience and (iii) past salary levels. The Compensation Committee does not
assign relative weights or rankings to these factors, but instead makes
determinations based upon the consideration of all of these factors as well
as the progress made with respect to the Company's long-term goals and
strategies.
Incentive Compensation
Incentive Compensation in the form of performance-based bonuses for the
Chief Executive Officer and the Company's other executive officers is based
upon management's success in meeting the Company's financial and strategic
goals as well as meeting individual performance goals.
Stock Options
Stock Options are the principal vehicle used by the Company to provide
long-term incentive-based compensation to improve the Company's operating and
financial performance and to support the recruitment, motivation and
retention of key professional and managerial personnel. The Company's stock
option plans are administered by the Board of Directors. To date, the Board
of Directors has not granted stock options at less than fair market value.
Stock options are granted from time to time to eligible employees and
based upon the Company's overall financial performance and their
contributions thereto. Stock options are designed to align the interest of
the Company's executive officers and other employees with those of its
stockholders by encouraging them to enhance the value of the Company, the
price of the Common Stock and, hence, the stockholders' return. In addition,
the vesting of stock options over a period of time is designed to defer the
receipt of compensation by the option holder, thus creating an incentive for
the individual to remain with the Company. The Company periodically grants
new options to provide continuing incentives for future performance.
During the fiscal year ended December 31, 1997, options to purchase
160,000 shares of Common Stock were awarded to Mark Overington, Vice
President of Business Development in connection with his joining the Company.
No other stock options were granted to any of the Company's executive
officers, including the Chief Executive Officer, during fiscal 1997. In
January 1998, options to purchase an aggregate of 175,000 shares of Common
Stock were granted to certain officers of the Company. Such grants were made
in recognition of such officers' contributions to the Company's performance
in fiscal 1997.
12
<PAGE>
Other Benefits
The Company also has various broad-based employee benefit plans.
Executive officers participate in these plans on the same terms as eligible,
non-executive employees, subject to any legal limits on the amounts that may
be contributed or paid to executive officers under these plans. The Company
offers a stock purchase plan, pursuant to which employees may purchase Common
Stock at a discount and a 401(k) Plan. The Company matches each employee's
contributions to the 401(k) Plan up to 3% of such employee's salary. The
Company also maintains medical, disability and life insurance plans and other
benefit plans for its employees.
Compensation of the Chief Executive Officer
Compensation for the Company's Chief Executive Officer, Robert L.
Voelk, is determined in accordance with the policies applicable to the other
executive officers of the Company described above. The 1997 base salary
compensation for Mr. Voelk was $175,000 and his 1997 incentive compensation
was $50,000. In addition to achievement of performance targets in accordance
with the Company's executive compensation policies, the Compensation
Committee determines the Chief Executive Officer's cash compensation based
upon the Company's overall performance, the performance of his management
team, the compensation paid at competing companies and the Company's
prospects, among other objective and subjective factors. The Compensation
Committee does not find it practicable to quantify or assign relative weight
to the factors on which the Chief Executive Officer's compensation is based.
Tax Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended,
limits the tax deduction to $1 million for compensation paid to any of the
executive officers unless certain requirements are met. The Compensation
Committee has considered these requirements and it is the Compensation
Committee's present intention that, so long as it is consistent with its
overall compensation objectives, not to exceed the deduction limitations of
Section 162(m).
The Compensation Committee is satisfied that the executive officers of
the Company are dedicated to achieving significant improvements in the
long-term financial performance of the Company and that the compensation
policies and programs implemented and administered have contributed and will
continue to contribute towards achieving this goal.
This report has been respectfully submitted by the members of the
Compensation Committee*:
Bruce R. Evans
Anthony J. Mark
Robert L. Voelk
- --------------
* From January 1, 1997 until April 15, 1997, the Compensation Committee was
comprised of Messrs. Voelk, Mark and Evans. Since April 15, 1997, the
Compensation Committee has been comprised of Messrs. Mark and Evans. The
Compensation Committee Report is not deemed filed with the Securities and
Exchange Commission and is not to be incorporated by reference in any filing
of the Company under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, whether made before or after the
date hereof and irrespective of any general incorporation language in any
such filing.
13
<PAGE>
Stock Performance Graph
The following graph compares the percentage change in the cumulative
total stockholder return on the Company's Common Stock during the period from
the Company's initial public offering through December 31, 1997 with the
cumulative total return on (i) the Nasdaq Market Index, and (ii) a broad peer
group index prepared by Media General Financial Services consisting of Nasdaq
listed companies grouped under SIC Code 7372.
COMPARISON OF FIVE YEAR* CUMULATIVE TOTAL RETURN** AMONG
OMTOOL, LTD., NASDAQ MARKET INDEX
AND PEER GROUP INDEX
<TABLE>
<CAPTION>
8/8/97 8/31/97 9/30/97 10/31/97 11/30/97 12/31/97
------------- ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Omtool, Ltd. 100.00 98.75 133.75 126.25 105.00 102.50
Nasdaq Market Index 100.00 97.34 99.41 97.53 100.91 92.77
Peer Group Index 100.00 99.63 105.60 100.30 100.73 99.06
------------- ------------ ------------ ------------ ------------ -------------
</TABLE>
* Prior to August 8, 1997 the Company's Common Stock was not publicly
traded. Comparative data is provided only for the period since that
date. This graph is not "soliciting material," is not deemed filed
with the Securities and Exchange Commission and is not to be
incorporated by reference in any filing of the Company under the
Securities Act of 1933, as amended, or the Securities Exchange Act
of 1934, as amended, whether made before or after the date hereof
and irrespective of any general incorporation language in any such
filing.
** Cumulative Total Return assumes reinvestment of dividends.
The stock price performance shown on the graph above is not necessarily
indicative of future price performance. Information used in the graph was
obtained from Media General Financial Services, a source believed to be
reliable, however, the Company is not responsible for any errors or omissions
in such information.
14
<PAGE>
PROPOSAL II
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected the firm of Arthur Andersen LLP,
independent auditors, to serve as auditors for the fiscal year ending
December 31, 1998. Arthur Andersen LLP has served as the Company's auditors
and outside accountants since 1996. It is expected that a member of the firm
will be present at the Annual Meeting of Stockholders with the opportunity to
make a statement if so desired and will be available to respond to
appropriate questions. The Board of Directors recommend a vote FOR
ratification of this selection. The ratification of this selection is not
required under the laws of the State of Delaware, where the Company is
incorporated, but the results of this vote will be considered by the Board of
Directors in selecting auditors for future fiscal years.
SECTION 16 (a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934, as
amended, requires the Company's directors, executive officers and holders of
more than 10% of the Company's Common Stock (collectively, "Reporting
Persons") to file with the Securities and Exchange Commission initial reports
of ownership and reports of changes in ownership of Common Stock of the
Company. Such persons are required by regulations of the Commission to
furnish the Company with copies of all such filings. Based on its review of
the copies of such filings received by it with respect to the fiscal year
ended December 31, 1997 and written representations from certain Reporting
Persons, the Company believes that all Reporting Persons complied with all
Section 16(a) filing requirements in the fiscal year ended December 31, 1997.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended for inclusion in the proxy
statement to be furnished to all stockholders entitled to vote at the next
Annual Meeting of the Company must be received at the Company's principal
executive offices no later than December 24, 1998. In order to curtail
controversy as to the date on which a proposal was received by the Company,
it is suggested that proponents submit their proposals by Certified Mail --
Return Receipt Requested to Omtool, Ltd., 8 Industrial Way, Salem, New
Hampshire 03079, attention: Darioush Mardan, Secretary.
EXPENSES AND SOLICITATION
Proxies may be solicited by the Company, by personal interview, mail
and telephone. The Company may request banks, brokers and other custodians,
nominees and fiduciaries to solicit their customers who have stock of the
Company registered in the names of a nominee and, if so, will reimburse such
banks, brokers and other custodians, nominees and fiduciaries for their
reasonable out-of-pocket costs. The cost of solicitation of proxies will be
borne by the Company.
15
