SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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 Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a-11(c) orss.240.14a-12
PROGINET CORPORATION
--------------------
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
4) Proposed maximum aggregate value of transaction:
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:
<PAGE>
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
PROGINET CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 14, 2000
To the Stockholders of Proginet Corporation:
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders of
Proginet Corporation, a Delaware corporation (the "Company"), will be held on
Tuesday, November 14, 1999 at 5:00 p.m.. local time, at the conference facility
of Parker Chapin LLP, The Chrysler Building, 405 Lexington Avenue, New York, NY
10174, 9th floor for the following purposes:
1. To elect five directors of the Company to serve until the next
Annual Meeting of Stockholders and until their respective
successors shall have been duly elected and qualified;
2. To approve an amendment to the Company's 1997 Stock Option
Plan, as amended, a copy of which is set forth on Exhibit A,
pursuant to which an additional 500,000 shares of the
Company's common stock are reserved for issuance under such
Plan.
3. To adopt the 2000 Stock Option Plan of the Company, a copy of
which is set forth on Exhibit B;
4. To ratify the appointment of Grant Thornton LLP to serve as
the Company's independent certified public accountants for the
fiscal year ending July 31, 2001; and
5. To transact such other business as may properly come before
the Annual Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on October 18,
2000 as the record date for determining those stockholders entitled to notice
of, and to vote at, the Annual Meeting and any adjournments or postponements
thereof. A complete list of the stockholders entitled to vote will be available
for inspection by any stockholder during the meeting; in addition, the list will
be open for examination by any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least 10 days prior
to the meeting, at the offices of CIBC Mellon Trust Company, the transfer agent
of the Company, located at Mall Level, 1177 West Hastings Street, Vancouver,
British Columbia V6E 2K3, or at the offices of Parker Chapin LLP, The Chrysler
Building, 405 Lexington Avenue, New York, New York 10174.
Whether or not you expect to be present at the meeting, please promptly
mark, sign and date the enclosed proxy and return it in the enclosed
pre-addressed envelope.
-3-
<PAGE>
BY ORDER OF THE BOARD OF DIRECTORS,
Kevin M. Kelly
President and Chief Executive
Officer
Garden City, New York
October 31, 2000
THIS IS AN IMPORTANT MEETING AND ALL STOCKHOLDERS ARE INVITED TO ATTEND THE
MEETING IN PERSON. THOSE STOCKHOLDERS WHO ARE UNABLE TO ATTEND ARE RESPECTFULLY
URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE.
STOCKHOLDERS WHO EXECUTE A PROXY CARD MAY NEVERTHELESS ATTEND THE MEETING,
REVOKE THEIR PROXY AND VOTE THEIR SHARES IN PERSON.
================================================================================
IMPORTANT
THE RETURN OF YOUR SIGNED PROXY AS PROMPTLY AS POSSIBLE WILL GREATLY FACILITATE
ARRANGEMENTS FOR THE MEETING. NO POSTAGE IS REQUIRED IF THE PROXY IS RETURNED IN
THE ENVELOPE ENCLOSED FOR YOUR CONVENIENCE AND MAILED IN THE UNITED STATES.
================================================================================
-4-
<PAGE>
2000 ANNUAL MEETING OF STOCKHOLDERS
OF
PROGINET CORPORATION
--------------------------
PROXY STATEMENT
--------------------------
The Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Proginet Corporation, a Delaware corporation (the
"Company"), of proxies from the holders of the Company's common stock, par value
$.001 per share (the "Common Stock"), for use at the Annual Meeting of
Stockholders of the Company to be held on November 14, 2000, or at any
adjournments or postponements thereof (the "Annual Meeting"), pursuant to the
enclosed Notice of Annual Meeting.
The approximate date that this Proxy Statement and the enclosed proxy
are first being sent to stockholders (the "Stockholders") of the Company is
October 31, 2000. Stockholders should review the information provided herein in
conjunction with the Company's Annual Report to Stockholders for the year ended
July 31, 2000 which accompanies this Proxy Statement. The Company's principal
executive offices are located at 200 Garden City Plaza, Garden City, New York
11530, and its telephone number is (516) 248-2000. The Company can also be
reached on the Internet at www.proginet.com.
INFORMATION CONCERNING PROXY
The enclosed proxy is solicited on behalf of the Company's Board of
Directors. The giving of a proxy does not preclude the right to vote in person
should you so desire. Stockholders have an unconditional right to revoke their
proxy at any time prior to the exercise thereof, either in person at the Annual
Meeting or by filing with the Company's Secretary at the Company's headquarters
a written revocation or duly executed proxy bearing a later date; however, no
such revocation will be effective until written notice of the revocation is
received by the Company at or prior to the Annual Meeting.
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of this Proxy Statement, the form of
proxy and any additional solicitation materials furnished to the Stockholders.
Copies of solicitation materials will be furnished to brokerage houses,
fiduciaries and custodians holding shares in their names that are beneficially
owned by others so that they may forward this solicitation material to such
beneficial owners. The Company may reimburse such persons for their costs in
forwarding the solicitation materials to such beneficial owners. In addition to
the solicitation of proxies by mail,
-5-
<PAGE>
proxies may be solicited without extra compensation paid by the Company by
directors, officers and employees of the Company by telephone, facsimile or
personal interview.
PURPOSES OF THE MEETING
At the Annual Meeting, the Stockholders will consider and vote upon the
following matters:
1. The election of five directors to the Company's Board of
Directors to serve until the Company's 2001 Annual Meeting of
Stockholders or until their successors are duly elected and
qualified;
2. The approval of an amendment to the Company's 1997 Stock
Option Plan, as amended, (the "1997 Plan"), pursuant to which
an additional 500,000 shares of the Company's common stock are
reserved for issuance;
3. The approval of the Company's 2000 Stock Option Plan (the
"2000 Plan"), pursuant to which up to 352,100 shares of the
Company's Common Stock are reserved for issuance;
4. The ratification of the appointment of Grant Thornton LLP as
the independent certified public accountants of the Company
for the fiscal year ending July 31, 2001; and
5. Such other business as may properly come before the Annual
Meeting, including any adjournments or postponements thereof.
Unless contrary instructions are indicated on the enclosed proxy, all
shares represented by valid proxies received pursuant to this solicitation (and
which have not been revoked in accordance with the procedures set forth above)
will be voted in favor of the election of the nominees for director named below,
in favor of approval of the amendment to the 1997 Plan, in favor of approval of
the 2000 Plan and in favor of ratification of the appointment of auditors. In
the event a stockholder specifies a different choice by means of the enclosed
proxy, such shares will be voted in accordance with the specification so made.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Board of Directors has set the close of business on October 18,
2000 as the record date (the "Record Date") for determining Stockholders
entitled to notice of and to vote at the Annual Meeting. As of the Record Date,
there were 13,478,054 shares of Common Stock, issued and outstanding. Each share
of Common Stock outstanding on the Record Date is entitled to one vote at the
Annual Meeting on each matter submitted to stockholders for approval at the
Annual Meeting.
-6-
<PAGE>
The directors will be elected by the affirmative vote of a plurality of
the shares of Common Stock present in person or represented by proxy at the
Meeting, provided a quorum exists. The approval of the amendments to the 1997
Plan, the approval of the 2000 Plan and the ratification of independent
certified public accountants require the affirmative vote of a majority of the
shares of Common Stock present in person or represented by proxy at the Meeting,
provided a quorum exists. A quorum is established if, as of the Record Date, at
least 34% of the outstanding shares of Common Stock are present in person or
represented by proxy at the Annual Meeting. Votes will be counted and certified
by one or more Inspectors of Election. In accordance with Delaware law,
abstentions and "broker non-votes" (i.e. proxies from brokers or nominees
indicating that such persons have not received instructions from the beneficial
owner or other persons entitled to vote shares as to a matter with respect to
which the brokers or nominees do not have discretionary power to vote) will be
treated as present for purposes of determining the presence of a quorum. For
purposes of determining approval of a matter presented at the meeting,
abstentions will be deemed present and entitled to vote and will, therefore,
have the same legal effect as a vote "against" a matter presented at the
meeting. Broker non-votes will be deemed not entitled to vote on the subject
matter as to which the non-vote is indicated and will, therefore, have no legal
effect on the vote on that particular matter.
The enclosed proxies will be voted in accordance with the instructions
thereon. Unless otherwise stated, all shares represented by such proxy will be
voted as instructed. Proxies may be revoked as noted above.
-7-
<PAGE>
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of October 18, 2000, information
with respect to the beneficial ownership of the Company's common stock by (i)
each stockholder known by the Company to own more than 5% of the outstanding
shares of common stock; (ii) each director of the Company; (iii) each executive
officer named in the Summary Compensation Table herein titled "Executive
Compensation"); and (iv) all current directors and officers of the Company as a
group.
<TABLE>
<CAPTION>
------------------------------------- ----------------------------------- -----------------------------------
Name and Address of Beneficial Amount and Nature of Beneficial Percent of Common Stock(2) %
Owner (1) Ownership (2)
------------------------------------- ----------------------------------- -----------------------------------
<S> <C> <C>
Microsoft Corporation 1,360,000 9.68
One Microsoft Way
9N-1264
Redmond, WA
------------------------------------- ----------------------------------- -----------------------------------
James F. Kelly 810,006 (3) 5.77
------------------------------------- ----------------------------------- -----------------------------------
Kevin M. Kelly 721,604 (3) 5.14
------------------------------------- ----------------------------------- -----------------------------------
Kevin Bohan 260,641 (3) 1.86
------------------------------------- ----------------------------------- -----------------------------------
Dr. E. Kelly Hyslop 258,994 (3) 1.84
Ard na Gaoithe
Knockeen, Goleen
W.Cork, Ireland
------------------------------------- ----------------------------------- -----------------------------------
John C. Daily 212,000 (3) 1.51
18 Holly Lane
Rye, NY 10580
------------------------------------- ----------------------------------- -----------------------------------
Stephen Sternbach 17,500 (3) .12
11 Phaeton Drive
Melville, NY 11747
------------------------------------- ----------------------------------- -----------------------------------
Arne H. Johnson 62,500 (3) .43
------------------------------------- ----------------------------------- -----------------------------------
All the Officers and Directors as a 2,363,245 16.83
Group (8 persons)
------------------------------------- ----------------------------------- -----------------------------------
</TABLE>
(1) Unless otherwise indicated, the address of each beneficial owner is the
care of Proginet Corporation, 200 Garden City Plaza, Garden City, New
York 11530
(2) A person is deemed to be the beneficial owner of securities which may
be acquired by such person within 60 days from the date of this proxy
statement upon the exercise of options, warrants or convertible
securities. Each beneficial owner's percentage of ownership is
determined by assuming all options, warrants or convertible securities
that are held by such person (but not held by any other person) and
which are exercisable or
-8-
<PAGE>
convertible within 60 days of this proxy statement have been exercised
or converted. The percentage of ownership of all officers and directors
as a group assumes a base of 14,044,672, including 13,438,054 shares of
common stock outstanding as of October 18, 2000 and 606,618 vested
options.
(3) The amount of beneficial ownership includes both common stock held and
vested options owned and exercisable within 60 days after October 18,
2000. The specific number of options for each individual is as follows:
Kevin M. Kelly - 193,765, James F. Kelly - 35,000; Kevin Bohan -
45,000, E.Kelly Hyslop - 70,294, John C. Daily - 165,059, Stephen
Sternbach - 15,000, Arne H. Johnson - 62,500, and all officers and
directors as a group 606,618.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than 10% of the Company's Common Stock, to file with the
Securities and Exchange Commission (the "SEC") initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Company. Officers, directors and greater than 10% shareholders are required
by SEC regulation to furnish the Company with copies of all Section 16(a)
reports they file. To the Company's knowledge, based solely on review of the
copies of such reports furnished to the Company during the one-year period ended
July 31, 2000, all Section 16(a) filing requirements applicable to its officers,
directors and greater than 10% beneficial owners were complied with, except as
follows:
Kevin M. Kelly, James F. Kelly, Arne Johnson, Jennifer Mundy, Kevin
Bohan, Stephen Sternbach, E. Kelly Hyslop and John C. Daily have not filed their
respective Forms 3 late; and, Kevin M. Kelly, Dr. E. Kelly Hyslop and John C.
Daily were each delinquent in filing a Form 5 reflecting the grant of a single
option to purchase 193,765, 35,294 and 37,059 shares, respectively, of the
Company's Common Stock at an exercise price of $0.85 per share.
PROPOSAL 1 - ELECTION OF DIRECTORS; NOMINEES
At the Meeting, stockholders will elect five (5) directors to serve
until the annual meeting of stockholders scheduled to be held in the year 2001
and until their respective successors are elected and qualified. Each of the
nominees has advised the Company of his willingness to serve as a director of
the Company. In case any nominee should become unavailable for election to the
Board of Directors for any reason, the persons named in the Proxies have
discretionary authority to vote the Proxies for one or more alternative nominees
who will be designated by the Board of Directors.
-9-
<PAGE>
INFORMATION ABOUT NOMINEES
The following table sets forth certain information with respect to the
directors of Proginet Corporation.
<TABLE>
<CAPTION>
------------------------------------- ----------------------------------- -----------------------------------
Name Age Position
------------------------------------- ----------------------------------- -----------------------------------
<S> <C> <C>
John C. Daily(1)(2) 55 Director, Chairman
------------------------------------- ----------------------------------- -----------------------------------
Kevin M. Kelly(3) 54 Director, President and Chief
Executive Officer
------------------------------------- ----------------------------------- -----------------------------------
James F. Kelly 34 Director, Senior Vice President
and Corporate Secretary
------------------------------------- ----------------------------------- -----------------------------------
Dr. E. Kelly Hyslop(1)(2)(3) Not Available Director
------------------------------------- ----------------------------------- -----------------------------------
Stephen Sternbach (1)(2)(3) 45 Director
------------------------------------- ----------------------------------- -----------------------------------
</TABLE>
(1) Member of the Audit Committee of the Board of Directors.
(2) Member of the Compensation Committee of the Board of Directors.
(3) Member of the Nominating Committee of the Board of Directors.
Kevin M. Kelly is the President and Chief Executive Officer of
Proginet. Mr. Kelly became president of Proginet in June 1994, and had
previously served as an outside director for 2 years. From 1992 to June 1994,
Mr. Kelly served as Chief Operating Officer of CDC Systems, where he managed an
armored car company of over 1500 employees. He was also Senior Vice President of
Nationar Bank in New York from 1984 to 1992, a correspondent commercial bank,
and previously he was Division Executive and Vice President of Chase Manhattan
Bank, a global banking organization. Mr. Kelly holds a Bachelor of Science
degree in Mathematics from Iona College.
James F. Kelly is a co-founder of the Company, and has been the Senior
Vice President of Proginet since May 1995. Mr. Kelly started with Proginet in
1985 where he served as head of Quality Assurance as well as lead developer on
several platforms for the XCOM project. From August 1988 to September 1999 Mr.
Kelly served as a communications analyst at Prudential-Bache Securities, a
financial services company. In September 1989, Mr. Kelly returned to Proginet as
Senior Vice President of Engineering with responsibility for the entire
development effort. In 1996, Mr. Kelly moved over to head the research efforts
for the Company, including the merger and acquisition strategy. Mr. Kelly has
been active in professional and engineering organizations on four continents and
has been the author of more than one dozen technical articles for McGraw-Hill
and Ziff Davis publications. Mr. Kelly holds a Bachelor of Science degree in
Computer Science from Manhattan College.
-10-
<PAGE>
John C. Daily has been Chairman of the Board since December 1998 and a
Director of the Company since 1993. He has been Senior Vice President and
Principal of Christian & Timbers, an executive search firm, since June 1996. Mr.
Daily has also served as Senior Vice President of Handy HRM, an executive search
firm, from 1994 to June 1996 and President and Chief Executive Officer of Image
Business Systems, a software development company, from June 1994 to December
1994.
Dr. E. Kelly Hyslop has been a Director of the Company since September
1996. Dr. Hyslop is retired from medical practice. He practiced as a medical
doctor from 1969 through 1995. He has been involved with many private investment
groups as a strategic and financial advisor, assisting in the raising of capital
for emerging growth companies. He is currently Chief Executive Officer of Red
Emerald Ltd. Gibraltar, and serves on the Board of Quaterra Resources Inc.
(QTA:CDNX) publicly traded on CDNX Exchange.
Stephen Sternbach has been a Director of the Company since November
1999. Mr. Sternbach has been the President, Chief Executive Officer and a
director of Star Multi Care Services, Inc., a health care provider based on Long
Island, since 1986. Star Multi Care is publicly traded on the NASDAQ Stock
Exchange under the symbol SMCS.
INFORMATION ABOUT NON-DIRECTOR OFFICERS
The following table sets forth certain information with respect to the
non-director executive officers of the Company (as of October 18, 2000):
<TABLE>
<CAPTION>
------------------------------------- ----------------------------------- -----------------------------------
<S> <C>
Arne H. Johnson 51 Vice President, Development
------------------------------------- ----------------------------------- -----------------------------------
Kevin Bohan 31 Vice President, Sales and
Customer Support
------------------------------------- ----------------------------------- -----------------------------------
</TABLE>
Arne H. Johnson has served as Proginet's Vice President of Development
since June 1997. Previously, he served as President of Huntington Consulting
Group, a software consulting company, from 1992 to June 1997, where his clients
included J.P. Morgan Investment Management. Mr. Johnson also served as Senior
Vice President and Vice President of Nationar Bank, a correspondent commercial
bank from 1985 to 1992, and as Vice President of Chase Manhattan Bank, a global
banking organization, from 1978 to 1985. Mr. Johnson holds a Bachelors Degree in
Systems Engineering from Polytechnic Institute of New York and a Masters of
Business Administration from Pace University.
Kevin Bohan has served as Vice President of Sales and Customer Support
for Proginet since 1998. He joined the Company in 1989 as a Network Engineer,
and became manager of Customer Support in 1994. Previously, Mr. Bohan served on
the Board of Directors of OSINET Corporation, a non-profit standards based
software association, and has served as Chairman of
-11-
<PAGE>
the North American Open System Implementers Workshop at the United States
National Institute of Standards and Technology. His standards work included work
on directory services. Mr. Bohan holds a Bachelor of Arts degree in Accounting
from Iona College.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended July 31, 2000, the Board of Directors held
eleven (11) meetings. During such year, no director attended fewer than 75
percent of the aggregate of (i) the total number of meetings of the Board of
Directors held during the period he served on the Board of Directors, and (ii)
the total number of meetings of committees of the Board of Directors held during
the period he served on such committees.
The Compensation Committee, which during fiscal year 2000 was comprised
of Mr. Sternbach, Mr. Daily and Dr. Hyslop, has authority over the salaries,
bonuses and other compensation arrangements of the executive officers of the
Company, and it also has the authority to examine, administer and make
recommendations to the Board of Directors with respect to benefit plans and
arrangements of the Company. The Compensation Committee met three (3) times
during fiscal 2000.
The Audit Committee was comprised of Mr. Daily, Dr. Hyslop and Mr.
Sternbach during fiscal year 2000. The Audit Committee's function is to nominate
independent certified public accountants, subject to approval by the Board of
Directors, and to examine and consider matters related to the audit of the
Company's accounts, the financial affairs and accounts of the Company, the scope
of the independent certified public accountants' engagement and their
compensation, the effect on the Company's financial statements of any proposed
changes in generally accepted accounting principles, disagreements, if any,
between the Company's independent certified public accountants and management,
and matters of concern to the independent certified public accountants resulting
from the audit, including the results of the independent certified public
accountants' review of internal accounting controls. The Audit Committee met
twice during fiscal 2000.
The Nominating Committee was composed of Dr. Hyslop, Mr. Kevin Kelly
and Mr. Sternbach during fiscal year 2000. The Nominating Committee's function
is to propose the slate of nominees of directors to be elected by the
stockholders (and any directors to be elected by the Board to fill vacancies),
and to recommend to the Board of Directors, the directors to be selected for
membership on the various board committees. The Nominating Committee met twice
during fiscal 2000.
-12-
<PAGE>
EXECUTIVE COMPENSATION
The following table sets out the compensation received by the Company's
Chief Executive Officer and each of the Company's other executive officers whose
total salary and bonus exceeded $100,000 during the year ended July 31, 2000
(the "Named Executive Officers").
<TABLE>
<CAPTION>
Annual Compensation Long -Term Compensation
-------------------------- ------- ------------ ------------- ------------------- ------------ ---------------------
$(US) Awards Payouts
-------------------------- ------- ------------ ------------- ------------------- ------------ ---------------------
<S> <C> <C> <C> <C> <C> <C>
Name and Principal Options All Other
Position FY Salary $ Bonus $ Other Comp $ Granted Compensation $
Kevin M. Kelly 00 200,000 0 0 293,765 0
Chief Executive 99 200,000 0 0 80,000 0
Officer and President 98 200,000 0 0 0 0
-------------------------- ------- ------------ ------------- ------------------- ------------ ---------------------
James F. Kelly 00 110,000 0 8,135 (1) 50,000 0
Senior Vice President 99 110,000 0 8,500 (1) 20,000 0
98 110,000 0 0 0 0
-------------------------- ------- ------------ ------------- ------------------- ------------ ---------------------
Arne Johnson 00 145,000 0 0 50,000 0
Vice President, 99 145,000 0 0 25,000 0
Development 98 145,000 0 0 0 0
-------------------------- ------- ------------ ------------- ------------------- ------------ ---------------------
Kevin Bohan 00 80,000 0 26,954(2) 50,000 0
Vice President, Sales 99 80,000 0 20,547(2) 40,000 0
and Customer Support 98 80,000 20,000 0 40,000 0
-------------------------- ------- ------------ ------------- ------------------- ------------ ---------------------
</TABLE>
(1) Commission earned on sales achieved for Indirect Channels license
revenue.
(2) Commission earned on sales achieved for Direct Sales license revenue.
STOCK OPTIONS
The following table provides information with respect to the stock
option grants made to the Named Executive Officers during fiscal year 2000. No
stock appreciation rights were granted during such fiscal year to the Named
Executive Officers.
-13-
<PAGE>
<TABLE>
<CAPTION>
--------------------------- --------------------- ----------------------- ------------------- ----------------------
% of total options
Securities under granted to
Options granted employee(s) in Exercise price
Name # fiscal year ($U.S.) Expiration Date
--------------------------- --------------------- ----------------------- ------------------- ----------------------
<S> <C> <C> <C> <C> <C>
Kevin M. Kelly 100,000 7.9 .62 11/16/09
--------------------------- --------------------- ----------------------- ------------------- ----------------------
Kevin M. Kelly 193,765 15.3 .85 7/1/10
--------------------------- --------------------- ----------------------- ------------------- ----------------------
Kevin Bohan 50,000 3.9 .62 11/16/09
--------------------------- --------------------- ----------------------- ------------------- ----------------------
Arne Johnson 50,000 3.9 .62 11/16/09
--------------------------- --------------------- ----------------------- ------------------- ----------------------
James F. Kelly 50,000 3.9 .62 11/16/09
--------------------------- --------------------- ----------------------- ------------------- ----------------------
OPTION GRANTS
--------------------------------------------------------------------------------------------------------------------
Number of Securities Underlying Value of Unexercised In the Money
Unexercised Options at Fiscal Year-End (1) Fiscal Year-End
--------------------------------------------------------------------------------------------------------------------
Name of Executive Officer Exercisable Unexercisable Exercisable Unexercisable
--------------------------------------------------------------------------------------------------------------------
Kevin M. Kelly 193,765 140,000 $0.00 $8,000
--------------------------------------------------------------------------------------------------------------------
James F. Kelly 35,000 25,000 $2,000 $2,000
--------------------------------------------------------------------------------------------------------------------
Arne Johnson 62,500 0 $4,000 $0.00
--------------------------------------------------------------------------------------------------------------------
Kevin Bohan 45,000 25,000 $2,000 $2,000
--------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Two Named Executive Officers exercised options during the Company's last
completed fiscal year ended July 31, 2000. Kevin M. Kelly exercised 219,600
options at an exercised price of $.75 per share which amounted to a realizable
value of $21,960.00 and Kevin Bohan exercised 40,000 options at an exercised
price of $.75 per share which amounted to a realizable value of $4,000.00. One
named executive officer, Arne Johnson surrendered 50,000 options for a payment
of $5,000 from the Company.
DIRECTOR COMPENSATION
Proginet compensates its non-employee directors by granting them each options
for 30,000 shares annually. The Chairman of the Board receives options for an
additional 15,000 shares. Proginet also compensates directors for reasonable
expenses incurred in attending meetings of the Board of Directors.
MANAGEMENT CONTRACTS AND CHANGE-IN-CONTROL AGREEMENTS
The Company has entered into "management agreements" with two key employees,
Kevin M. Kelly and James F. Kelly. When a change of control in the Company
occurs, these agreements provide for:
o A lump sum payment equal to the present value of the aggregate of the
executive's base compensation (equal to the highest rate of base
compensation in effect during the three-year
-14-
<PAGE>
period immediately preceding the termination) for the eighteen month period
following the termination and the aggregate amount of annual bonuses (equal
to the highest aggregate amount of such bonuses that the executive received
in any one of the three years preceding the termination) that the executive
would have received for the eighteen month period following the
termination.
o Continuation at the Company's expense of all benefits to which the
executive was entitled prior to termination for a period of eighteen
months.
o There are no other Management Contracts or Change in Control Agreements for
any of the executives or employees of the Company.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
ELECTION ON THE NOMINEES LISTED ABOVE.
-15-
<PAGE>
PROPOSAL 2
----------
RATIFICATION OF AN AMENDMENT TO
THE COMPANY'S 1997 STOCK OPTION PLAN
On June 22, 2000, the Board of Directors adopted, subject to stockholder
approval at the Annual Meeting, an amendment to the Company's 1997 Stock Option
Plan which increased the number of shares available for issuance under the 1997
Plan from a maximum of 1,910,000 to a maximum of 2,410,000 shares. The purpose
of the amendment is to provide for additional available shares for grants of
awards under the 1997 Plan so as to afford additional incentives for key
employees. As of October 30, 2000, 421,600 options had been exercised under the
1997 Plan. On June 22, 2000, the Board of Directors granted options to certain
employees described below which grants are conditioned upon obtaining
stockholder approval for the amendment increasing the number of shares available
under the 1997 Plan. As a result of increasing the maximum number of shares
available under the 1997 Plan to 2,410,000 and, after giving effect to the
options described below, the number of shares remaining available for grant
under the 1997 Plan will be 372,100. However, options for such number of shares
will not be granted under the 1997 Plan. Instead, the 372,100 shares will be
reserved for issuance under the Company's 2000 Stock Option Plan (see "Proposal
3--Approval of the Company's 2000 Stock Option Plan.
<TABLE>
<CAPTION>
OPTIONS GRANTED UNDER THE 1997 PLAN SUBJECT TO STOCKHOLDER APPROVAL
--------------------------------------------------------------------------------- ------------------------------------
Name Options Granted
--------------------------------------------------------------------------------- ------------------------------------
<S> <C>
Kevin M. Kelly 193,765
--------------------------------------------------------------------------------- ------------------------------------
All current directors who are not executive officers as a group 37,059
--------------------------------------------------------------------------------- ------------------------------------
All employees, including all current officers who are not executive officers, 105,882
as a group
--------------------------------------------------------------------------------- ------------------------------------
TOTAL 336,706
--------------------------------------------------------------------------------- ------------------------------------
</TABLE>
The following is a summary of the material features of the Plan and is qualified
in its entirety by reference to the 1997 Plan, a copy of which is attached to
this Proxy Statement as Exhibit A.
SHARES SUBJECT TO THE 1997 PLAN AND ELIGIBILITY
The 1997 Plan, as originally adopted, authorized the grant of options
to purchase a maximum of 1,970,000 shares of the Company's Common Stock (subject
to adjustment as described below) to key employees (including officers and
directors who are key employees) of the Company. Upon expiration, cancellation
or termination of unexercised options, the shares of the Company's Common Stock
subject to such options will again be available for the grant of options under
the 1997 Plan. In addition, shares of Common Stock subject to options pursuant
to the Company's Prior Plan which for any reason expire, are canceled or
terminate unexercised or which cease for any reason to be exercisable may become
available for the granting of options under the 1997 Plan, provided that, in no
event shall the aggregate number of shares of Common Stock available under the
1997 Plan (as originally adopted) and the Prior Plan exceed 2,000,000.
-16-
<PAGE>
The amendment to the 1997 Plan increases the aggregate number of shares from
2,000,000 to 2,500,000.
Set forth in the table below is information as to the number of shares
as to which options have been granted under the 1997 Plan (including options
subject to stockholder approval of the amendment) to the Named Executive
Officers, to all current executive officers as a group, to all current
directors, who are not executive officers, as a group and to all current
employees, including all current officers who are not executive officers, as a
group:
<TABLE>
<CAPTION>
Name (1) Number of Shares
-------- ----------------
----------------------------------------------------------------------------------------- ----------------------------------
<S> <C>
Kevin M. Kelly 373,765
----------------------------------------------------------------------------------------- ----------------------------------
James F. Kelly 70,000
----------------------------------------------------------------------------------------- ----------------------------------
Arne Johnson 75,000
----------------------------------------------------------------------------------------- ----------------------------------
Kevin Bohan 130,000
----------------------------------------------------------------------------------------- ----------------------------------
All current executive officers as a group (including the foregoing) 693,765
----------------------------------------------------------------------------------------- ----------------------------------
All current directors who are not executive officers as a group 262,353
----------------------------------------------------------------------------------------- ----------------------------------
All employees, including all current officers who are not executive officers, as a group 891,582
----------------------------------------------------------------------------------------- ----------------------------------
</TABLE>
TYPE OF OPTIONS
Options granted under the 1997 Plan may either be incentive stock
options ("ISOs"), within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), or nonqualified stock options which do not
qualify as ISOs ("NQSOs").
ADMINISTRATION
The 1997 Plan is administered by a committee of the Board of Directors
(the "Committee") consisting of at least two members of the Board, each of whom
is a "non-employee director" within the meaning of Rule 16b-3 promulgated under
the Securities Exchange Act of 1934. It is also intended that each member of the
Committee will be an "outside director" within the meaning of Section 162(m) of
the Code. The current members of the Committee are John C. Daily and Dr. Kelly
Hyslop.
Among other things, the Committee is empowered to determine, within the
express limits contained in the 1997 Plan: the key employees to be granted
options, the times when options shall be granted, whether an option is to be an
ISO or a NQSO, the number of shares of Common Stock to be subject to each
option, the exercise price of each option, the term of each option, the date
each option shall become exercisable as well as any terms, conditions or
installments relating to the exercisability of each option, whether and under
what conditions to accelerate the
--------
(1) See "Executive Compensation - Summary Compensation Table" for information
as to the positions held by the named persons.
-17-
<PAGE>
date of exercise of any option or installment, the form of payment of the
exercise price, the amount, if any, required to be withheld with respect to an
option and, with the consent of the optionee, to modify an option. The Committee
is also authorized to prescribe, amend and rescind rules and regulations
relating to the 1997 Plan and to make all other determinations necessary or
advisable for administering the 1997 Plan and to construe the 1997 Plan.
TERMS AND CONDITIONS OF OPTIONS
Options granted under the 1997 Plan will be subject to, among other
things, the following terms and conditions:
(a) The exercise price of each option will be determined by the
Committee; provided, however, that the exercise price of an ISO
may not be less than the fair market value of the Company's
Common Stock on the date of grant (110% of such fair market
value if the optionee owns (or is deemed to own) more than 10%
of the voting power of the Company).
(b) Options may be granted for terms determined by the Committee;
provided, however, that the term of an ISO may not exceed 10
years (5 years if the optionee owns (or is deemed to own) more
than 10% of the voting power of the Company).
(c) The maximum number of shares of the Company's Common Stock for
which options may be granted to an employee in any calendar year
is 250,000. In addition, the aggregate fair market value of
shares with respect to which ISOs may be granted to an employee
which are exercisable for the first time during any calendar
year may not exceed $100,000.
(d) The exercise price of each option is payable in full upon
exercise or, if the applicable stock option contract
("Contract") entered into by the Company with an optionee
permits, in installments. Payment of the exercise price of an
option may be made in cash, certified check or, if the
applicable Contract permits, in previously acquired shares of
the Company's Common Stock in an amount having an aggregate fair
market value, on the date of exercise, equal to the aggregate
exercise price of all options being exercised, or any
combination thereof.
(e) Options may not be transferred other than by will or by the laws
of descent and distribution, and may be exercised during the
optionee's lifetime only by the optionee or his or her legal
representatives.
(f) Except as may otherwise be provided in the applicable Contract,
if the optionee's relationship with the Company as an employee,
director or consultant is terminated for any reason (other than
the death or disability of the optionee), the option may be
exercised, to the extent exercisable at the time of termination
of such relationship, within three months thereafter, but in no
event after the expiration of the term of the
-18-
<PAGE>
option. However, if the relationship is terminated either for
cause or without the consent of the Company, the option will
terminate immediately. In the case of the death of an optionee
while an employee (or, generally, within three months after
termination of such relationship, or within one year after
termination of such relationship by reason of disability),
except as otherwise provided in the Contract, his or her legal
representative or beneficiary may exercise the option, to the
extent exercisable on the date of death, within one year after
such date, but in no event after the expiration of the term of
the option. Except as otherwise provided in the Contract, an
optionee whose relationship with the Company was terminated by
reason of his or her disability may exercise the option, to the
extent exercisable at the time of such termination, within one
year thereafter, but not after the expiration of the term of the
option.
(g) The Company may withhold cash and/or shares of the Company's
Common Stock having an aggregate value equal to the amount which
the Company determines is necessary to meet its obligations to
withhold any federal, state and/or local taxes or other amounts
incurred by reason of the grant or exercise of an option, its
disposition or the disposition of shares acquired upon the
exercise of the option. Alternatively, the Company may require
the optionee to pay the Company such amount, in cash, promptly
upon demand.
ADJUSTMENT IN EVENT OF CAPITAL CHANGES
Appropriate adjustments will be made by the Board of Directors in the
aggregate number and kind of shares available under the 1997 Plan, in the number
and kind of shares subject to each outstanding option, the exercise prices of
such options and the maximum number of options that may be granted to an
employee in any calendar year, in the event of any change in the Company's
Common Stock by reason of any stock dividend, recapitalization, merger or
consolidation in which the Company is the surviving corporation, split-up,
spin-off, combination or exchange of shares or the like.
In the event of (a) the liquidation or dissolution of the Company, (b) a
merger or consolidation in which the Company is not the surviving corporation,
or (c) any other capital reorganization (other than a recapitalization) in which
more than 50% of the shares of Common Stock of the Company entitled to vote are
exchanged, any outstanding options shall terminate unless other provision is
made therefor in the transaction.
DURATION AND AMENDMENT OF THE 1997 PLAN
No option may be granted under the 1997 Plan after September 11, 2007.
The Board of Directors may at any time terminate or amend the 1997 Plan;
provided, however, that, without the approval of the Company's stockholders, no
amendment may be made which would (a) except as a result of the adjustments in
the event of capital changes described above, increase
-19-
<PAGE>
the maximum number of shares available for the grant of options or increase the
maximum number of options that may be granted to an employee in any calendar
year, (b) change the eligibility requirements for persons who may receive
options or (c) materially increase the benefits to participants. No termination
or amendment may adversely affect the rights of an optionee with respect to an
outstanding option without the optionee's consent.
REQUIRED VOTE
Approval of the amendment requires the affirmative vote of the holders
of a majority of the shares of Common Stock present, in person or by proxy, at
the Annual Meeting of the Shareholders and entitled to vote on this proposal. If
the amendment to the 1997 Plan is not approved by the stockholders, the
amendment will not be made, and the options granted subject to shareholder
approval will be cancelled. The Board of Directors recommends a vote "FOR" the
amendment to the 1997 Plan.
-20-
<PAGE>
PROPOSAL 3
APPROVAL OF THE COMPANY'S 2000 STOCK OPTION PLAN
On October 10, 2000, the Board of Directors adopted, subject to
stockholder approval at the Annual Meeting, the Company's 2000 Stock Option
Plan. The 2000 Stock Option Plan is herein referred to as the "Plan". The Plan
is designed to provide an incentive to key employees and non-employee directors
of, and consultants to, the Company and to offer an additional inducement in
obtaining the services of such persons. The proceeds derived from the sale of
shares subject to options will be used for general corporate purposes of the
Company.
The following summary of certain material features of the Plan does not
purport to be complete and is qualified in its entirety by reference to the text
of the Plan, a copy of which is set forth as Exhibit B to this Proxy Statement.
SHARES SUBJECT TO THE OPTION PLAN AND ELIGIBILITY
The Plan authorizes the grant of options to purchase a maximum of
372,100 shares of the Company's Common Stock (subject to adjustment as described
below) to employees (including officers and directors who are employees) and
non-employee directors of, and consultants to, the Company. Upon expiration,
cancellation or termination of unexercised options, the shares of the Company's
Common Stock subject to such options will again be available for the grant of
options under the Plan. All of the employees of the Company are currently
eligible to receive grants of options under the Plan. In addition shares of
Common Stock subject to options pursuant to the Company's Prior Plan and the
1997 Plan (collectively, the "Pre-2000 Plans") which for any reason expire, are
canceled or terminate unexercised or which cease for any reason to be
exercisable may become available for the granting of options under the Plan,
provided that, in no event shall the aggregate number of shares of Common Stock
available under the Plan and the Pre-2000 Plans exceed 2,500,000.
Twenty-four thousand options have been granted under the Plan.
TYPE OF OPTIONS
Options granted under the Plan may either be ISOs or NQSOs.
ADMINISTRATION
The Plan will be administered by a committee of the Board of Directors
(the "Administrators") consisting of at least two members of the Board, each of
whom is a "non-employee director" within the meaning of Rule 16b-3 promulgated
under the Securities Exchange Act of 1934. It is also intended that each
Administrator will be an "outside director" within the meaning of Section 162(m)
of the Code.
Among other things, the Administrators are empowered to determine,
within the express
-21-
<PAGE>
limits contained in the Plan: the employees, directors and consultants to be
granted options, the times when options shall be granted, whether an option is
to be an ISO or a NQSO, the number of shares of Common Stock to be subject to
each option, the exercise price of each option, the term of each option, the
date each option shall become exercisable as well as any terms, conditions or
installments relating to the exercisability of each option, whether and under
what conditions to accelerate the date of exercise of any option or installment,
the form of payment of the exercise price, the amount, if any, required to be
withheld with respect to an option and, with the consent of the optionee, to
modify an option. The Administrators are also authorized to prescribe, amend and
rescind rules and regulations relating to the Plan and to make all other
determinations necessary or advisable for administering the Plan and to construe
the Plan.
TERMS AND CONDITIONS OF OPTIONS
Options granted under the Plan will be subject to, among other things,
the following terms and conditions:
(a) The exercise price of each option will be determined by the
Administrators; provided, however, that the exercise price of an
ISO may not be less than the fair market value of the Company's
Common Stock on the date of grant (110% of such fair market
value if the optionee owns (or is deemed to own) more than 10%
of the voting power of the Company).
(b) Options may be granted for terms determined by the
Administrators; provided, however, that the term of an ISO may
not exceed 10 years (5 years if the optionee owns (or is deemed
to own) more than 10% of the voting power of the Company).
(c) The maximum number of shares of the Company's Common Stock for
which options may be granted to an employee in any calendar year
is 250,000. In addition, the aggregate fair market value of
shares with respect to which ISOs may be granted to an employee
which are exercisable for the first time during any calendar
year may not exceed $100,000.
(d) The exercise price of each option is payable in full upon
exercise or, if the applicable stock option contract
("Contract") entered into by the Company with an optionee
permits, in installments. Payment of the exercise price of an
option may be made in cash, certified check or, if the
applicable Contract permits, in previously acquired shares of
the Company's Common Stock in an amount having an aggregate fair
market value, on the date of exercise, equal to the aggregate
exercise price of all options being exercised, or any
combination thereof.
(e) Options may not be transferred other than by will or by the laws
of descent and distribution, and may be exercised during the
optionee's lifetime only by the optionee or his or her legal
representatives.
-22-
<PAGE>
(f) Except as may otherwise be provided in the applicable Contract,
if the optionee's relationship with the Company as an employee,
director or consultant is terminated for any reason (other than
the death or disability of the optionee), the option may be
exercised, to the extent exercisable at the time of termination
of such relationship, within three months thereafter, but in no
event after the expiration of the term of the option. However,
if the relationship is terminated either for cause or without
the consent of the Company, the option will terminate
immediately. In the case of the death of an optionee while an
employee, director or consultant (or, generally, within three
months after termination of such relationship, or within one
year after termination of such relationship by reason of
disability), except as otherwise provided in the Contract, his
or her legal representative or beneficiary may exercise the
option, to the extent exercisable on the date of death, within
one year after such date, but in no event after the expiration
of the term of the option. Except as otherwise provided in the
Contract, an optionee whose relationship with the Company was
terminated by reason of his or her disability may exercise the
option, to the extent exercisable at the time of such
termination, within one year thereafter, but not after the
expiration of the term of the option. Options are not affected
by a change in the status of an optionee so long as he or she
continues to be an employee of, or a consultant to, the Company.
(g) The Company may withhold cash and/or shares of the Company's
Common Stock having an aggregate value equal to the amount which
the Company determines is necessary to meet its obligations to
withhold any federal, state and/or local taxes or other amounts
incurred by reason of the grant or exercise of an option, its
disposition or the disposition of shares acquired upon the
exercise of the option. Alternatively, the Company may require
the optionee to pay the Company such amount, in cash, promptly
upon demand.
ADJUSTMENT IN EVENT OF CAPITAL CHANGES
Appropriate adjustments will be made in the number and kind of shares
available under the Plan, in the number and kind of shares subject to each
outstanding option and the exercise prices of such options, as well as the
number of shares subject to future grants to non-employee directors and
limitation on the number of shares that may be granted to any employee in any
calendar year, in the event of any change in the Company's Common Stock by
reason of any stock dividend, split-up, spin off, combination, reclassification,
recapitalization, merger in which the Company is the surviving corporation,
exchange of shares or the like. In the event of (i) the liquidation or
dissolution of the Company; (ii) a proposed sale of all or substantially all of
the assets or outstanding equity of the Company; or (iii) the merger or
consolidation of the Company with or into another entity or any other corporate
reorganization if persons who were not shareholders of the Company immediately
prior to such merger, consolidation or other reorganization own immediately
after such merger, consolidation or other reorganization fifty percent (50%) or
more of the voting power of the outstanding securities of each of (A) the
continuing or surviving entity and (B) any direct or indirect parent corporation
of such surviving
-23-
<PAGE>
entity, the Board of Directors of the Company shall, as to outstanding options,
either (1) make appropriate provisions for the protection of any such
outstanding options by the substitution on an equitable basis of appropriate
stock of the Company or of the merged, consolidated or otherwise reorganized
corporation which will be issuable in respect to one share of Common Stock of
the Company; provided that the excess of the aggregate fair market value of the
shares subject to the options immediately after such substitution over the
purchase price thereof is not more than the excess of the aggregate fair market
value of the shares subject to such options immediately before such substitution
over the purchase price thereof, or (2) upon written notice to an optionee,
provide that all unexercised options must be exercised within a specified number
of days of the date of such notice or they will be terminated. In any such case,
the Board of Directors may, in its discretion, advance the lapse of any waiting
or installment periods and exercise dates.
DURATION AND AMENDMENT OF THE PLAN
No option may be granted under the Plan after October 10, 2010. The
Board of Directors may at any time terminate or amend the Plan; provided,
however, that, without the approval of the Company's stockholders, no amendment
may be made which would (a) except as a result of the anti-dilution adjustments
described above, increase the maximum number of shares available for the grant
of options or increase the maximum number of options that may be granted to an
employee in any calendar year, (b) change the eligibility requirements for
persons who may receive options or (c) make any changes for which applicable law
or regulatory authority requires stockholder approval. No termination or
amendment may adversely affect the rights of an optionee with respect to an
outstanding option without the optionee's consent.
REQUIRED VOTE
Approval of the Plan requires the affirmative vote of the holders of a
majority of the shares of Common Stock present, in person or by proxy, at the
Annual Meeting and entitled to vote on this proposal. If the Plan is not
approved by stockholders, the Plan will terminate and the options granted
thereunder will be cancelled. The Board of Directors receommends a vote "FOR"
approval of the Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of certain material federal income
tax consequences of the grant and exercise of the options under the 1997 Plan
and the Plan and the sale of any underlying security. This description is based
on current law which is subject to change, possibly with retroactive effect.
This discussion does not purport to address all tax considerations relating to
the grant and exercise of the options or resulting from the application of
special rules to a particular optionee (including an optionee subject to the
reporting and short-swing profit provisions under Section 16 of the Securities
Exchange Act of 1934, as amended), and state, local, foreign and other tax
consequences inherent in the ownership and exercise of stock options and the
ownership and disposition of the underlying securities. An optionee should
-24-
<PAGE>
consult with the optionee's own tax advisors with respect to the tax
consequences inherent in the ownership and exercise of stock options and the
ownership and disposition of any underlying security.
ISOS EXERCISED WITH CASH
No taxable income will be recognized by an optionee upon the grant or
exercise of an ISO. The optionee's tax basis in the shares acquired upon the
exercise of an ISO with cash will be equal to the exercise price paid by the
optionee for such shares.
If the shares received upon exercise of an ISO are disposed of more than
one year after the date of transfer of such shares to the optionee and more than
two years from the date of grant of the option, the optionee will recognize
long-term capital gain or loss on such disposition equal to the difference
between the selling price and the optionee's basis in the shares, and the
Company will not be entitled to a deduction. Long-term capital gain is generally
subject to more favorable tax treatment than short-term capital gain or ordinary
income.
If the shares received upon the exercise of an ISO are disposed of prior
to the end of the two-years-from-grant/one-year-after-transfer holding period (a
"disqualifying disposition"), the excess (if any) of the fair market value of
the shares on the date of transfer of such shares to the optionee over the
exercise price (but not in excess of the gain realized on the sale of the
shares) will be taxed as ordinary income in the year of such disposition, and
the Company generally will be entitled to a deduction in the year of disposition
equal to such amount. Any additional gain or any loss recognized by the optionee
on such disposition will be short-term or long-term capital gain or loss, as the
case may be, depending upon the period for which the shares were held.
NQSOS EXERCISED WITH CASH
No taxable income will be recognized by an optionee upon the grant of a
NQSO. Upon the exercise of a NQSO, the excess of the fair market value of the
shares received at the time of exercise over the exercise price therefor will be
taxed as ordinary income, and the Company will generally be entitled to a
corresponding deduction. The optionee's tax basis in the shares acquired upon
the exercise of such NQSO will be equal to the exercise price paid by the
optionee for such shares plus the amount of ordinary income so recognized.
Any gain or loss recognized by the optionee on a subsequent disposition
of shares purchased pursuant to a NQSO will be short-term or long-term capital
gain or loss, depending upon the period during which such shares were held, in
an amount equal to the difference between the selling price and the optionee's
tax basis in the shares.
EXERCISES OF OPTIONS USING PREVIOUSLY ACQUIRED SHARES
If previously acquired shares are surrendered in full or partial payment
of the exercise price of an option (whether an ISO or a NQSO), gain or loss
generally will not be recognized by the optionee upon the exercise of such
option to the extent the optionee receives shares which on the
-25-
<PAGE>
date of exercise have a fair market value equal to the fair market value of the
shares surrendered in exchange therefor ("Replacement Shares"). If the option
exercised is an ISO or if the shares used were acquired pursuant to the exercise
of an ISO, the Replacement Shares are treated as having been acquired pursuant
to the exercise of an ISO.
However, if an ISO is exercised with shares which were previously
acquired pursuant to the exercise of an ISO but which were not held for the
required two-years-from-grant/one-year-after-transfer holding period, there is a
disqualifying disposition of such previously acquired shares. In such case, the
optionee would recognize ordinary income on such disqualifying disposition equal
to the difference between the fair market value of such shares on the date of
exercise of the prior ISO and the amount paid for such shares (but not in excess
of the gain realized). Special rules apply in determining which shares are
considered to have been disposed of and in allocating the basis among the
shares. No capital gain is recognized.
The optionee will have an aggregate basis in the Replacement Shares
equal to the basis of the shares surrendered, increased by any ordinary income
required to be recognized on the disposition of the previously acquired shares.
The optionee's holding period for the Replacement Shares generally includes the
period during which the surrendered shares were held.
Any shares received by the optionee on such exercise in addition to the
Replacement Shares will be treated in the same manner as a cash exercise of an
option for no consideration.
ALTERNATIVE MINIMUM TAX
In addition to the federal income tax consequences described above, an
optionee who exercises an ISO may be subject to the alternative minimum tax,
which is payable only to the extent it exceeds the optionee's regular tax
liability. For this purpose, upon the exercise of an ISO, the excess of the fair
market value of the shares over the exercise price is an adjustment which
increases the optionee's alternative minimum taxable income. In addition, the
optionee's basis in such shares is increased by such amount for purposes of
computing the gain or loss on disposition of the shares for alternative minimum
tax purposes. If the optionee is required to pay an alternative minimum tax, the
amount of such tax which is attributable to deferral preferences (including the
ISO adjustment) is allowable as a tax credit against the optionee's regular tax
liability (net of other non-refundable credits) in subsequent years. To the
extent the credit is not used, it is carried forward. A holder of an ISO should
consult with the optionee's tax advisors concerning the applicability and effect
of the alternative minimum tax.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
-26-
<PAGE>
PROPOSAL 4
----------
RATIFICATION AND APPROVAL OF APPOINTMENT
OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors has appointed Grant Thornton LLP, as the
independent certified public accountants of the Company for the fiscal year
ending July 31, 2001, subject to ratification by the Stockholders. The firm of
Grant Thornton LLP, has audited the books of the Company since fiscal year 2000.
A representative of Grant Thornton LLP, is expected to be present at the Annual
Meeting to respond to questions from Stockholders and to make a statement if
such representative desires to do so.
VOTE REQUIRED
Ratification of the appointment of Grant Thornton LLP as the
independent certified public accountants of the Company requires the affirmative
vote of the holders of a majority of the shares of Common Stock present, in
person or by proxy, at the Annual Meeting and entitled to vote on this proposal.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
MISCELLANEOUS
OTHER MATTERS
The Board of Directors does not intend to bring before the Annual
Meeting any matters other than those specifically described above and knows of
no matters other than the foregoing to come before the Annual Meeting. If,
however, any other matters should properly come before the Annual Meeting, the
persons named in the accompanying proxy will vote proxies as in their discretion
they may deem appropriate, unless they are directed by a proxy to do otherwise.
INFORMATION CONCERNING STOCKHOLDER PROPOSALS
Any shareholder proposal intended to be presented at the 2001 Annual
Meeting of Shareholders must be received by the Company not later than August 7,
2001 for inclusion in the Company's proxy statement and form of proxy card for
that meeting. Notices of shareholder proposals relating to proposals to be
presented at the meeting but not included in the Company's proxy statement and
form of proxy, will be considered untimely, and thus the Company's proxy may
confer discretionary authority on the persons named in the proxy with regard to
such proposals, if received after October 21, 2001.
-27-
<PAGE>
FORM 10-KSB EXHIBITS
The Company will furnish, upon payment of a reasonable fee to cover
reproduction and mailing expenses, a copy of any exhibit to the Company's Annual
Report on Form 10-KSB requested by any person solicited hereunder.
By Order of the Board of Directors
/s/ John C. Daily
John C. Daily
Chairman
Garden City, New York
October 31, 2000
-28-
<PAGE>
EXHIBIT A
---------
1997 STOCK OPTION PLAN
OF
PROGINET CORPORATION
--------------------
1. PURPOSES OF THE PLAN. This stock option plan (the "Plan") is
designed to provide an incentive to key employees (including officers and
directors who are key employees), of Proginet Corporation, a Delaware
corporation (the "Company"), and its present and future subsidiary corporations,
as defined in Paragraph 19 ("Subsidiaries"), and to offer an additional
inducement in obtaining the services of such individuals. The Plan provides for
the grant of "incentive stock options" ("ISOs") within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
nonqualified stock options ("NQSOs"), but the Company makes no warranty as to
the qualification of any option as an "incentive stock option" under the Code.
2. (a) STOCK SUBJECT TO THE PLAN. Subject to the provisions of
Paragraph 2(b) and Paragraph 12, the aggregate number of shares of Common Stock,
$.0001 par value per share, of the Company ("Common Stock") for which options
may be granted under the Plan shall not exceed 1,970,000. Such shares of Common
Stock may, in the discretion of the Board of Directors of the Company (the
"Board of Directors"), consist either in whole or in part of authorized but
unissued shares of Common Stock or shares of Common Stock held in the treasury
of the Company. The Company shall at all times during the term of the Plan
reserve and keep available such number of shares of Common Stock as will be
sufficient to satisfy the requirements of the Plan. Subject to the provisions of
Paragraph 13, any shares of Common Stock subject to an option which for any
reason expires, is cancelled or is terminated unexercised or which ceases for
any reason to be exercisable shall again become available for the granting of
options under the Plan.
(b) In the event that options in respect of shares of Common Stock
previously granted pursuant to the Company's 1995 Equity Incentive Plan (the
"Equity Plan") become void, expire, are canceled, terminate unexercised, or
cease for any reason whatsoever to be exercisable (the "Voided Options"), the
aggregate number of shares of Common Stock for which options may be granted
under the Plan shall increase by an amount equal to the number of Voided Options
in any instance, provided that, in no event shall the aggregate number of shares
of Common Stock available under the Plan and the Equity Plan exceed 2,500,000.
A-1
<PAGE>
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Board of Directors which, to the extent it shall determine, may delegate its
powers with respect to the administration of the Plan to a committee of the
Board of Directors (the "Committee") consisting of not less than two directors
(or such greater number as required by law), each of whom shall be a
"non-employee director" (within the meaning of Rule 16b-3 (or any successor rule
or regulation) promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and an "outside director" (within the meaning of Section
162(m) of the Code), to the extent Rule 16b-3 and Section 162(m), respectively,
are applicable to the Company. References in the Plan to determinations or
actions by the Committee shall be deemed to include determinations and actions
by the Board of Directors. A majority of the members of the Committee shall
constitute a quorum, and the acts of a majority of the members present at any
meeting at which a quorum is present, and any acts approved in writing by all
members without a meeting, shall be the acts of the Committee.
Subject to the express provisions of the Plan, the Committee
shall have the authority, in its sole discretion, to determine: the key
employees who shall receive options; the times when they shall receive options;
whether an option shall be an ISO or a NQSO; the number of shares of Common
Stock to be subject to each option; the term of each option; the date each
option shall become exercisable; whether an option shall be exercisable in
whole, in part or in installments, and, if in installments, the number of shares
of Common Stock to be subject to each installment; whether the installments
shall be cumulative; the date each installment shall become exercisable and the
term of each installment; whether to accelerate the date of exercise of any
installment; whether shares of Common Stock may be issued on exercise of an
option as partly paid, and, if so, the dates when future installments of the
exercise price shall become due and the amounts of such installments; the
exercise price of each option; the form of payment of the exercise price;
whether to restrict the sale or other disposition of the shares of Common Stock
acquired upon the exercise of an option and to waive any such restriction;
whether to subject the exercise of all or any portion of an option to the
fulfillment of contingencies as specified in the Contract (as described in
Paragraph 11), including without limitation, contingencies relating to entering
into a covenant not to compete with the Company and its Parent and Subsidiaries,
to financial objectives for the Company, a Subsidiary, a division, a product
line or other category, and/or the period of continued employment of the
optionee with the Company or its Subsidiaries, to determine whether such
contingencies have been met; to construe the respective Contracts and the Plan;
to determine the amount, if any, necessary to satisfy the Company's obligation
to withhold taxes; with the consent of the optionee, to cancel or modify an
option, provided such option as modified would be permitted to be granted on
such date under the terms of the Plan; to prescribe, amend and rescind rules and
regulations relating to the Plan; and to make all other determinations necessary
or advisable for administering the Plan. The determinations of the Committee on
the matters referred to in this Paragraph 3 shall be conclusive. No member or
former member of the Committee shall be liable for any action or determination
made in good faith with respect to the Plan or any option granted hereunder.
A-2
<PAGE>
4. ELIGIBILITY; GRANTS. The Committee may, consistent with the
purposes of the Plan, grant options from time to time, to key employees
(including officers and directors who are key employees) of the Company or any
of its Subsidiaries. Options granted shall cover such number of shares of Common
Stock as the Committee may determine; provided, however, that the maximum number
of shares subject to options that may be granted to any employee in any fiscal
year of the Company under the Plan (the "162(m) Maximum") may not exceed
250,000; and further, provided, that the aggregate market value (determined at
the time the option is granted) of the shares of Common Stock for which any
eligible employee may be granted ISOs under the Plan or any other plan of the
Company, or of a Parent or a Subsidiary of the Company, which are exercisable
for the first time by such optionee during any calendar year shall not exceed
$100,000. The $100,000 ISO limitation shall be applied by taking ISOs into
account in the order in which they were granted. Any option (or the portion
thereof) granted in excess of such amount shall be treated as a NQSO.
5. EXERCISE PRICE. The exercise price of the shares of Common Stock
under each Option shall be determined by the Committee; provided, however, that
the exercise price shall not be less than 100% of the fair market value of the
Common Stock subject to such option on the date of grant; and, further provided,
that if, at the time an ISO is granted, the optionee owns (or is deemed to own
under Section 424(d) of the Code) stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company, of any of its
Subsidiaries or of a Parent, the exercise price of such ISO shall not be less
than 110% of the fair market value of the Common Stock subject to such ISO on
the date of grant.
The fair market value of a share of Common Stock on any day shall be
(a) if the principal market for the Common Stock is a national securities
exchange (including, the Vancouver Stock Exchange), the average between the high
and low sales prices per share of the Common Stock on such day as reported by
such exchange or on a consolidated tape reflecting transactions on such
exchange, (b) if the principal market for the Common Stock is not a national
securities exchange and the Common Stock is quoted on the National Association
of Securities Dealers Automated Quotations System ("NASDAQ"), and (i) if actual
sales price information is available with respect to the Common Stock, the
average between the high and low sales prices per share of the Common Stock on
such day on NASDAQ, or (ii) if such information is not available, the average
between the highest bid and the lowest asked prices for the Common Stock on such
day on NASDAQ, or (c) if the principal market for the Common Stock is not a
national securities exchange and the Common Stock is not quoted on NASDAQ, the
average between the highest bid and lowest asked prices per share for the Common
Stock on such day as reported on the NASDAQ OTC Bulletin Board Service, National
Quotation Bureau, Incorporated or a comparable service; provided that if clauses
(a), (b) and (c) of this Paragraph are all inapplicable, or if no trades have
been made or no quotes are available for such day, the fair market value of a
share of Common Stock shall be determined by the Committee by any method
consistent with applicable regulations adopted by the Treasury Department
relating to stock options. The determination of the Committee shall be
conclusive in determining the fair market value of the stock.
A-3
<PAGE>
6. TERM. The term of each option granted pursuant to the Plan shall
be such term as is established by the Committee, in its sole discretion, at or
before the time such option is granted; provided, however, that the term of each
ISO granted pursuant to the Plan shall be for a period not exceeding 10 years
from the date of grant thereof, and further, provided, that if, at the time an
ISO is granted, the optionee owns (or is deemed to own under Section 424(d) of
the Code) stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company, of any of its Subsidiaries or of a Parent,
the term of the ISO shall be for a period not exceeding five years from the date
of grant. Options shall be subject to earlier termination as hereinafter
provided.
7. EXERCISE. An option (or any part or installment thereof), to the
extent then exercisable, shall be exercised by giving written notice to the
Company at its principal office (at present 200 Garden City Plaza, Garden City,
New York 11530, Attn.: President), stating which ISO or NQSO is being exercised,
specifying the number of shares of Common Stock as to which such option is being
exercised and accompanied by payment in full of the aggregate exercise price
therefor (or the amount due on exercise if the Contract permits installment
payments) (a) in cash or by certified check or (b) if the applicable Contract at
the time of grant so permits, with the authorization of the Committee, with
previously acquired shares of Common Stock having an aggregate fair market
value, on the date of exercise, equal to the aggregate exercise price of all
options being exercised, or with any combination of cash, certified check or
shares of Common Stock.
The Committee may, in its discretion, permit payment of the exercise
price of an option by delivery by the optionee of a properly executed exercise
notice, together with a copy of his irrevocable instructions to a broker
acceptable to the Committee to deliver promptly to the Company the amount of
sale or loan proceeds sufficient to pay such exercise price. In connection
therewith, the Company may enter into agreements for coordinated procedures with
one or more brokerage firms.
A person entitled to receive Common Stock upon the exercise of an
option shall not have the rights of a shareholder with respect to such shares of
Common Stock until the date of issuance of a stock certificate to him for such
shares; provided, however, that until such stock certificate is issued, any
option holder using previously acquired shares of Common Stock in payment of an
option exercise price shall continue to have the rights of a shareholder with
respect to such previously acquired shares.
8. TERMINATION OF RELATIONSHIP. Any holder of an Employee Option
whose employment with the Company (and its Parent and Subsidiaries) has
terminated for any reason other than his death or Disability (as defined in
Paragraph 19) may exercise such option, to the extent exercisable on the date of
such termination, at any time within three months after the date of termination,
but not thereafter and in no event after the date the option would otherwise
have expired; provided, however, that if his employment shall be terminated
either (a) for cause, or (b) without the consent of the Company, said option
shall terminate immediately. Options granted under the Plan shall not be
affected by any change in the status of the holder so long as he continues to be
a full-time employee of the Company, its Parent or any of the
A-4
<PAGE>
Subsidiaries (regardless of having been transferred from one corporation to
another).
For purposes of the Plan, an employment relationship shall be deemed
to exist between an individual and a corporation if, at the time of the
determination, the individual was an employee of such corporation for purposes
of Section 422(a) of the Code. As a result, an individual on military, sick
leave or other bona fide leave of absence shall continue to be considered an
employee for purposes of the Plan during such leave if the period of the leave
does not exceed 90 days, or, if longer, so long as the individual's right to
reemployment with the Company (or a related corporation) is guaranteed either by
statute or by contract. If the period of leave exceeds 90 days and the
individual's right to reemployment is not guaranteed by statute or by contract,
the employment relationship shall be deemed to have terminated on the 91st day
of such leave. In addition, for purposes of the Plan, an optionee's employment
with a Subsidiary or Parent of the Company shall be deemed to have terminated on
the date such corporation ceases to be a Subsidiary or Parent of the Company.
Nothing in the Plan or in any option granted under the Plan
shall confer on any individual any right to continue in the employ of the
Company, its Parent or any of its Subsidiaries, or interfere in any way with the
right of the Company, its Parent or any of its Subsidiaries to terminate such
relationship at any time for any reason whatsoever without liability to the
Company, its Parent or any of its Subsidiaries.
9. DEATH OR DISABILITY OF AN OPTIONEE. If an optionee dies (a) while
he is employed by the Company, its Parent or any of its Subsidiaries, (b) within
three months after the termination of his employment (unless such termination
was for cause or without the consent of the Company) or (c) within one year
following the termination of his employment by reason of Disability, an option
may be exercised, to the extent exercisable on the date of his death, by his
executor, administrator or other person at the time entitled by law to his
rights under such option, at any time within one year after death, but not
thereafter and in no event after the date the option would otherwise have
expired.
Any optionee whose employment has terminated by reason of
Disability may exercise his option, to the extent exercisable upon the effective
date of such termination, at any time within one year after such date, but not
thereafter and in no event after the date the option would otherwise have
expired.
10. COMPLIANCE WITH SECURITIES LAW. It is a condition to the
exercise of any option that either (a) a Registration Statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
shares of Common Stock to be issued upon such exercise shall be effective and
current at the time of exercise, or (b) there is an exemption from registration
under the Securities Act for the issuance of shares of Common Stock upon such
exercise. Nothing herein shall be construed as requiring the Company to register
shares subject to any option under the Securities Act.
A-5
<PAGE>
The Committee may require the optionee to execute and deliver to the
Company his representations and warranties, in form and substance satisfactory
to the Committee, that (i) the shares of Common Stock to be issued upon the
exercise of the option are being acquired by the optionee for his own account,
for investment only and not with a view to the resale or distribution thereof,
and (ii) any subsequent resale or distribution of shares of Common Stock by such
optionee will be made only pursuant to (a) a Registration Statement under the
Securities Act which is effective and current with respect to the shares of
Common Stock being sold, or (b) a specific exemption from the registration
requirements of the Securities Act, but in claiming such exemption, the optionee
shall prior to any offer of sale or sale of such shares of Common Stock provide
the Company with a favorable written opinion of counsel, in form and substance
satisfactory to the Company, as to the applicability of such exemption to the
proposed sale or distribution.
In addition, if at any time the Committee shall determine in its
discretion that the listing or qualification of the shares of Common Stock
subject to such option on any securities exchange or under any applicable law,
or the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the granting of an option,
or the issuance of shares of Common Stock thereunder, such option may not be
exercised in whole or in part unless such listing, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Committee.
11. STOCK OPTION CONTRACTS. Each option shall be evidenced by an
appropriate Contract which shall be duly executed by the Company and the
optionee, and shall contain such terms and conditions not inconsistent herewith
as may be determined by the Committee.
12. ADJUSTMENTS UPON CHANGES IN COMMON STOCK. Notwithstanding any
other provisions of the Plan, in the event of any change in the outstanding
Common Stock by reason of a stock dividend, recapitalization, merger or
consolidation in which the Company is the surviving corporation, split-up,
spin-off, combination or exchange of shares or the like, the aggregate number
and kind of shares subject to the Plan, the aggregate number and kind of shares
subject to each outstanding option and the exercise price thereof and the 162(m)
Maximum shall be appropriately adjusted by the Board of Directors, whose
determination shall be conclusive.
In the event of (a) the liquidation or dissolution of the Company,
(b) a merger or consolidation in which the Company is not the surviving
corporation, or (c) any other capital reorganization (other than a
recapitalization) in which more than 50% of the shares of Common Stock of the
Company entitled to vote are exchanged, any outstanding options shall terminate,
unless other provision is made therefor in the transaction.
13. AMENDMENTS AND TERMINATION OF THE PLAN. The Plan was adopted by
the Board of Directors on September 11, 1997. No option may be granted under the
Plan after September 11, 2007. The Board of Directors, without further approval
of the Company's shareholders, may at any time suspend or terminate the Plan, in
whole or in part, or
A-6
<PAGE>
amend it from time to time in such respects as it may deem advisable, including,
without limitation, in order that ISO granted hereunder meet the requirements
for "incentive stock options" under the Code, to comply with the provisions of
Rule 16b-3 promulgated under the Exchange Act, Section 162(m) of the Code and to
conform to any change in applicable law or to regulations or rulings of
administrative agencies; provided, however, that no amendment shall be effective
without the requisite prior or subsequent shareholder approval which would (a)
except as contemplated in Paragraph 12, increase the maximum number of shares of
Common Stock for which options may be granted under the Plan or the 162(m)
Maximum, (b) materially increase the benefits to participants under the Plan or
(c) change the eligibility requirements for individuals entitled to receive
options hereunder. No termination, suspension or amendment of the Plan or
amendment to the Contract shall, without the consent of the holder of an
existing option affected thereby, adversely affect his rights under such option.
The power of the Committee to construe and administer any options granted under
the Plan prior to the termination or suspension of the Plan nevertheless shall
continue after such termination or during such suspension.
14. NON-TRANSFERABILITY OF OPTIONS. No option granted under the Plan
shall be transferable otherwise than by will or the laws of descent and
distribution, and options may be exercised, during the lifetime of the holder
thereof, only by him or his legal representatives. Except to the extent provided
above, options may not be assigned, transferred, pledged, hypothecated or
disposed of in any way (whether by operation of law or otherwise) and shall not
be subject to execution, attachment or similar process.
15. WITHHOLDING TAXES. The Company may withhold cash and/or, with
the authorization of the Committee, shares of Common Stock to be issued with
respect thereto having an aggregate fair market value equal to the amount which
it determines is necessary to satisfy its obligation to withhold Federal, state
and local income taxes or other taxes incurred by reason of the grant or
exercise of an option, its disposition, or the disposition of the underlying
shares of Common Stock. Alternatively, the Company may require the holder to pay
to the Company such amount, in cash, promptly upon demand. The Company shall not
be required to issue any shares of Common Stock pursuant to any such option
until all required payments have been made. Fair market value of the shares of
Common Stock shall be determined in accordance with Paragraph 5.
16. LEGENDS; PAYMENT OF EXPENSES. The Company may endorse such
legend or legends upon the certificates for shares of Common Stock issued upon
exercise of an option under the Plan and may issue such "stop transfer"
instructions to its transfer agent in respect of such shares as it determines,
in its discretion, to be necessary or appropriate to (a) prevent a violation of,
or to perfect an exemption from, the registration requirements of the Securities
Act, (b) implement the provisions of the Plan or any agreement between the
Company and the optionee with respect to such shares of Common Stock, or (c)
permit the Company to determine the occurrence of a "disqualifying disposition,"
as described in Section 421(b) of the Code, of the shares of Common Stock
transferred upon the exercise of an ISO granted under the Plan.
A-7
<PAGE>
The Company shall pay all issuance taxes with respect to the
issuance of shares of Common Stock upon the exercise of an option granted under
the Plan, as well as all fees and expenses incurred by the Company in connection
with such issuance.
17. USE OF PROCEEDS. The cash proceeds from the sale of shares of
Common Stock pursuant to the exercise of options under the Plan shall be added
to the general funds of the Company and used for its general corporate purposes
as the Board of Directors may determine.
18. SUBSTITUTIONS AND ASSUMPTIONS OF OPTIONS OF CERTAIN CONSTITUENT
CORPORATIONS. Anything in this Plan to the contrary notwithstanding, the Board
of Directors may, without further approval by the shareholders, substitute new
options for prior options of a Constituent Corporation (as defined in Paragraph
19) or assume the prior options of such Constituent Corporation.
19. DEFINITIONS.
(a) Subsidiary. The term "Subsidiary" shall have the same
definition as "subsidiary corporation" in Section 424(f) of the Code.
(b) Parent. The term "Parent" shall have the same definition as
"parent corporation" in Section 424(e) of the Code.
(c) Constituent Corporation. The term "Constituent Corporation"
shall mean any corporation which engages with the Company, its Parent or any
Subsidiary in a transaction to which Section 424(a) of the Code applies (or
would apply if the option assumed or substituted were an ISO), or any Parent or
any Subsidiary of such corporation.
(d) Disability. The term "Disability" shall mean a permanent and
total disability within the meaning of Section 22(e)(3) of the Code.
20. GOVERNING LAW. The Plan, such options as may be granted
hereunder and all related matters shall be governed by, and construed in
accordance with, the laws of the State of [New York].
21. PARTIAL INVALIDITY. The invalidity or illegality of any
provision herein shall not affect the validity of any other provision.
22. SHAREHOLDER APPROVAL. The Plan shall be subject to approval by a
majority of the votes cast at the next duly held meeting of the Company's
shareholders at which a majority of the outstanding voting shares are present,
in person or by proxy, and voting on the Plan. No options granted pursuant to
the Plan may be exercised prior to such approval, provided that the date of
grant of any options granted thereunder shall be determined as if the amendment
to the Plan had not been subject to such approval. Notwithstanding the
foregoing, if the Plan is
A-8
<PAGE>
not approved by a vote of the shareholders of the Company on or before December
31, 1997, the Plan and any options granted thereunder shall terminate.
A-9
<PAGE>
EXHIBIT B
---------
2000 STOCK OPTION PLAN
OF
PROGINET CORPORATION
1. Purposes of the Plan. This stock option plan (the "Plan") is
intended to provide an incentive to employees (including directors and officers
who are employees), and to consultants and directors who are not employees, of
Proginet Corporation, a Delaware corporation (the "Company"), or any of its
Subsidiaries (as such term is defined in Paragraph 19), and to offer an
additional inducement in obtaining the services of such individuals. The Plan
provides for the grant of "incentive stock options" ("ISOs") within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
and nonqualified stock options which do not qualify as ISOs ("NQSOs"). The
Company makes no representation or warranty, express or implied, as to the
qualification of any option as an "incentive stock option" under the Code.
2. Stock Subject to the Plan. Subject to the provisions of Paragraph
2(b) and Paragraph 12, the aggregate number of shares of the Company's Common
Stock, par value $.001 per share ("Common Stock"), for which options may be
granted under the Plan shall not exceed 352,100. Such shares of Common Stock
may, in the discretion of the Board of Directors of the Company (the "Board of
Directors"), consist either in whole or in part of authorized but unissued
shares of Common Stock or shares of Common Stock held in the treasury of the
Company. Subject to the provisions of Paragraph 13, any shares of Common Stock
subject to an option which for any reason expires, is canceled or is terminated
unexercised or which ceases for any reason to be exercisable shall again become
available for the granting of options under the Plan. However, should the
exercise price of an option under the Plan be paid with shares of Common Stock
or should shares of Common Stock otherwise issuable under the Plan be withheld
by the Company in satisfaction of the withholding taxes incurred in connection
with the exercise of an option, then the number of shares of Common Stock
available for issuance under the Plan shall be reduced by the gross number of
shares for which the option is exercised, and not by the net number of shares of
Common Stock issued to the holder of such option. The Company shall at all times
during the term of the Plan reserve and keep available such number of shares of
Common Stock as will be sufficient to satisfy the requirements of the Plan.
(b) In the event that options in respect of shares of Common Stock
previously granted pursuant to the Company's Equity Incentive Plan (amended and
restated as of February 21, 1995) and the Company's 1997 Stock Option Plan
(collectively, the "Prior Plans") become void, expire, are cancelled, terminate
unexercised, or cease for any reason whatsoever to be exercisable (the "Voided
Options"), the aggregate number of shares of Common Stock for which options may
be granted under the Plan shall increase by an amount equal to the number of
Voided Options in any instance, provided, that in no event shall the aggregate
number of shares
B-1
<PAGE>
of Common Stock available under the Plan and the Prior Plans exceed 2,500,000.
3. Administration of the Plan. The Plan will be administered by the
Board of Directors, or by a committee (the "Committee") consisting of two or
more directors appointed by the Board of Directors. Those administering the Plan
shall be referred to herein as the "Administrators." Notwithstanding the
foregoing, if the Company is or becomes a corporation issuing any class of
common equity securities required to be registered under Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to the extent
necessary to preserve any deduction under Section 162(m) of the Code or to
comply with Rule 16b-3 promulgated under the Exchange Act, or any successor rule
("Rule 16b-3"), any Committee appointed by the Board of Directors to administer
the Plan shall be comprised of two or more directors each of whom shall be a
"non-employee director," within the meaning of Rule 16b-3, and an "outside
director," within the meaning of Treasury Regulation Section 1.162-27(e)(3), and
the delegation of powers to the Committee shall be consistent with applicable
laws and regulations (including, without limitation, applicable state law and
Rule 16b-3). Unless otherwise provided in the By-Laws of the Company, by
resolution of the Board of Directors or applicable law, a majority of the
members of the Board or the Committee shall constitute a quorum, and the acts of
a majority of the members present at any meeting at which a quorum is present,
and any acts approved in writing by all members without a meeting, shall be the
acts of the Board or the Committee.
Subject to the express provisions of the Plan, the Administrators
shall have the authority, in their sole discretion, to determine the persons who
shall be granted options; the times when they shall receive options; whether an
option granted to an employee shall be an ISO or a NQSO; the type (i.e., voting
or non-voting) and number of shares of Common Stock to be subject to each
option; the term of each option; the date each option shall become exercisable;
whether an option shall be exercisable in whole or in installments, and, if in
installments, the number of shares of Common Stock to be subject to each
installment; whether the installments shall be cumulative; the date each
installment shall become exercisable and the term of each installment; whether
to accelerate the date of exercise of any option or installment; whether shares
of Common Stock may be issued upon the exercise of an option as partly paid,
and, if so, the dates when future installments of the exercise price shall
become due and the amounts of such installments; the exercise price of each
option; the form of payment of the exercise price; the fair market value of a
share of Common Stock; whether and under what conditions to restrict the sale or
other disposition of the shares of Common Stock acquired upon the exercise of an
option and, if so, whether and under what conditions to waive any such
restriction; whether and under what conditions to subject the exercise of all or
any portion of an option to the fulfillment of certain restrictions or
contingencies as specified in the contract referred to in Paragraph 11 (the
"Contract"), including without limitation restrictions or contingencies relating
to (a) entering into a covenant not to compete with the Company, its Parent (if
any) (as such term is defined in Paragraph 19) and any Subsidiaries, (b)
financial objectives for the Company, any of its Subsidiaries, a division, a
product line or other category and/or (c) the period of continued employment of
the optionee with the Company or any of its Subsidiaries, and to determine
whether such restrictions or contingencies have been met; the amount, if any,
necessary to satisfy the obligation of the Company, any of its Subsidiaries or
any Parent to withhold taxes or other
B-2
<PAGE>
amounts; whether an optionee has a Disability (as such term is defined in
Paragraph 19); with the consent of the optionee, to cancel or modify an option,
provided, however, that the modified provision is permitted to be included in an
option granted under the Plan on the date of the modification; provided,
further, however, that in the case of a modification (within the meaning of
Section 424(h) of the Code) of an ISO, such option as modified would be
permitted to be granted on the date of such modification under the terms of the
Plan; to construe the respective Contracts and the Plan; to prescribe, amend and
rescind rules and regulations relating to the Plan; to approve any provision of
the Plan or any option granted under the Plan or any amendment to either which,
under Rule 16b-3 or Section 162(m) of the Code, requires the approval of the
Board of Directors, a committee of non-employee directors or the stockholders,
in order to be exempt under Section 16(b) of the Exchange Act (unless otherwise
specifically provided herein) or to preserve any deduction under Section 162(m)
of the Code; and to make all other determinations necessary or advisable for
administering the Plan. Any controversy or claim arising out of or relating to
the Plan, any option granted under the Plan or any Contract shall be determined
unilaterally by the Administrators in their sole discretion. The determinations
of the Administrators on matters referred to in this Paragraph 3 shall be
conclusive and binding on all parties. No Administrator or former Administrator
shall be liable for any action or determination made in good faith with respect
to the Plan or any option granted hereunder.
4. Eligibility. The Administrators may from time to time, consistent
with the purposes of the Plan, grant options to such employees (including
officers and directors who are employees) of, or consultants to, the Company or
any of its Subsidiaries, and to such directors of the Company who, at the time
of grant, are not common law employees of the Company or of any of its
Subsidiaries, as the Administrators may determine in their sole discretion. Such
options granted shall cover such number of shares of Common Stock as the
Administrators may determine in their sole discretion; provided, however, that
if on the date of grant of an option, any class of common stock of the Company
(including without limitation the Common Stock) is required to be registered
under Section 12 of the Exchange Act, the maximum number of shares subject to
options that may be granted to any employee during any calendar year under the
Plan shall be 250,000 shares; provided, further, however, that the aggregate
market value (determined at the time the option is granted) of the shares of
Common Stock for which any eligible employee may be granted ISOs under the Plan
or any other plan of the Company, or of a Parent or a Subsidiary of the Company,
which are exercisable for the first time by such optionee during any calendar
year shall not exceed $100,000. The $100,000 ISO limitation amount shall be
applied by taking ISOs into account in the order in which they were granted. Any
option (or portion thereof) granted in excess of such ISO limitation amount
shall be treated as a NQSO to the extent of such excess.
5. Exercise Price. The exercise price of the shares of Common Stock
under each option shall be determined by the Administrators in their sole
discretion; provided, however, that the exercise price of an ISO shall not be
less than the fair market value of the Common Stock subject to such option on
the date of grant; and provided, further, however, that if, at the time an ISO
is granted, the optionee owns (or is deemed to own under Section 424(d) of the
Code) stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company, of any of its Subsidiaries or of a Parent, the
exercise price of such ISO
B-3
<PAGE>
shall not be less than 110% of the fair market value of the Common Stock subject
to such ISO on the date of grant.
The fair market value of a share of Common Stock on any day shall be
(a) if the principal market for the Common Stock is a national securities
exchange, the closing sales prices per share of the Common Stock on such day as
reported by such exchange or on a consolidated tape reflecting transactions on
such exchange, (b) if the principal market for the Common Stock is not a
national securities exchange and the Common Stock is quoted on the Nasdaq Stock
Market ("Nasdaq"), and (i) if actual sales price information is available with
respect to the Common Stock, the closing sales prices per share of the Common
Stock on such day on Nasdaq, or (ii) if such information is not available, the
closing bid and the asked prices per share for the Common Stock on such day on
Nasdaq, or (c) if the principal market for the Common Stock is not a national
securities exchange and the Common Stock is not quoted on Nasdaq, the closing
bid and asked prices per share for the Common Stock on such day as reported on
the OTC Bulletin Board Service or by National Quotation Bureau, Incorporated or
a comparable service as determined in the sole discretion of the Administrators;
provided, however, that if clauses (a), (b) and (c) of this Paragraph 5 are all
inapplicable because the Company's Common Stock is not publicly traded, or if no
trades have been made or no quotes are available for such day, the fair market
value of a share of Common Stock shall be determined by the Administrators by
any method consistent with any applicable regulations adopted by the Treasury
Department relating to stock options.
6. Term. Each option granted pursuant to the Plan shall be for such
term as is established by the Administrators, in their sole discretion, at or
before the time such option is granted; provided, however, that the term of each
option granted pursuant to the Plan shall be for a period not exceeding 10 years
from the date of grant thereof, and provided further, that if, at the time an
ISO is granted, the optionee owns (or is deemed to own under Section 424(d) of
the Code) stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company, of any of its Subsidiaries or of a Parent,
the term of the ISO shall be for a period not exceeding five years from the date
of grant. Options shall be subject to earlier termination as hereinafter
provided.
7. Exercise. An option (or any installment thereof), to the extent
then exercisable, shall be exercised by giving written notice to the Company at
its principal office stating which option is being exercised, specifying the
number of shares of Common Stock as to which such option is being exercised and
accompanied by payment in full of the aggregate exercise price therefor (or the
amount due on exercise if the applicable Contract permits installment payments)
(a) in cash and/or by certified check, (b) with the authorization of the
Adminstrators, with previously acquired shares of Common Stock having an
aggregate fair market value (determined in accordance with Paragraph 5), on the
date of exercise, equal to the aggregate exercise price of all options being
exercised, or (c) some combination thereof; provided, however, that in no case
may shares be tendered if such tender would require the Company to incur a
charge against its earnings for financial accounting purposes. The Company shall
not be required to issue any shares of Common Stock pursuant to the exercise of
any option until all required payments with respect thereto, including payments
for any required
B-4
<PAGE>
withholding amounts, have been made.
The Administrators may, in their sole discretion, permit payment of the
exercise price of an option by delivery by the optionee of a properly executed
notice, together with a copy of the optionee's irrevocable instructions to a
broker acceptable to the Administrators to deliver promptly to the Company the
amount of sale or loan proceeds sufficient to pay such exercise price. In
connection therewith, the Company may enter into agreements for coordinated
procedures with one or more brokerage firms.
An optionee shall not have the rights of a stockholder with respect to
such shares of Common Stock to be received upon the exercise of an option until
the date of issuance of a stock certificate to the optionee for such shares or,
in the case of uncertificated shares, until the date an entry is made on the
books of the Company's transfer agent representing such shares; provided,
however, that until such stock certificate is issued or until such book entry is
made, any optionee using previously acquired shares of Common Stock in payment
of an option exercise price shall continue to have the rights of a stockholder
with respect to such previously acquired shares.
In no case may a fraction of a share of Common Stock be purchased or
issued under the Plan.
8. Termination of Relationship. Except as may otherwise be expressly
provided in the applicable Contract, any optionee whose employment or consulting
relationship with the Company, its Parent and any of its Subsidiaries, has
terminated for any reason other than the death or Disability of the optionee may
exercise any option granted to the optionee as an employee or consultant, to the
extent exercisable on the date of such termination, at any time within three
months after the date of termination, but not thereafter and in no event after
the date the option would otherwise have expired; provided, however, that if
such relationship is terminated either (a) for Cause (as defined in Paragraph
19), or (b) without the consent of the Company, such option shall terminate
immediately.
For the purposes of the Plan, an employment relationship shall be
deemed to exist between an individual and a corporation if, at the time of the
determination, the individual was an employee of such corporation for purposes
of Section 422(a) of the Code. As a result, an individual on military leave,
sick leave or other bona fide leave of absence shall continue to be considered
an employee for purposes of the Plan during such leave if the period of the
leave does not exceed 90 days, or, if longer, so long as the individual's right
to re-employment with the Company, any of its Subsidiaries or a Parent is
guaranteed either by statute or by contract. If the period of leave exceeds 90
days and the individual's right to re-employment is not guaranteed by statute or
by contract, the employment relationship shall be deemed to have terminated on
the 91st day of such leave.
Except as may otherwise be expressly provided in the applicable
Contract, an optionee whose directorship with the Company has terminated for any
reason other than the optionee's death or Disability may exercise the options
granted to the optionee as a director who was not an
B-5
<PAGE>
employee of or consultant to the Company or any of its Subsidiaries, to the
extent exercisable on the date of such termination, at any time within three
months after the date of termination, but not thereafter and in no event after
the date the option would otherwise have expired; provided, however, that if the
optionee's directorship is terminated for Cause or without the consent of the
Company, such option shall terminate immediately.
Nothing in the Plan or in any option granted under the Plan shall
confer on any person any right to continue in the employ or as a consultant of
the Company, its Parent or any of its Subsidiaries, or as a director of the
Company, or interfere in any way with any right of the Company, its Parent or
any of its Subsidiaries to terminate such relationship at any time for any
reason whatsoever without liability to the Company, its Parent or any of its
Subsidiaries.
9. Death or Disability of an optionee. Except as may otherwise be
expressly provided in the applicable Contract, if an optionee dies (a) while he
is employed by, or a consultant to, the Company, its Parent or any of its
Subsidiaries, (b) within three months after the termination of the optionee's
employment or consulting relationship with the Company, its Parent and its
Subsidiaries (unless such termination was for Cause or without the consent of
the Company) or (c) within one year following the termination of such employment
or consulting relationship by reason of the optionee's Disability, the options
granted to the optionee as an employee of, or consultant to, the Company or any
of its Subsidiaries, may be exercised, to the extent exercisable on the date of
the optionee's death, by the optionee's Legal Representative (as such term is
defined in Paragraph 19), at any time within one year after death, but not
thereafter and in no event after the date the option would otherwise have
expired. Except as may otherwise be expressly provided in the applicable
Contract, any optionee whose employment or consulting relationship with the
Company, its Parent and its Subsidiaries has terminated by reason of the
optionee's Disability may exercise such options, to the extent exercisable upon
the effective date of such termination, at any time within one year after such
date, but not thereafter and in no event after the date the option would
otherwise have expired.
Except as may otherwise be expressly provided in the applicable
Contract, if an optionee dies (a) while the optionee is a director of the
Company, (b) within three months after the termination of the optionee's
directorship with the Company (unless such termination was for Cause) or (c)
within one year after the termination of the optionee's directorship by reason
of the optionee's Disability, the options granted to the optionee as a director
who was not an employee of or consultant to the Company or any of its
Subsidiaries, may be exercised, to the extent exercisable on the date of the
optionee's death, by the optionee's Legal Representative at any time within one
year after death, but not thereafter and in no event after the date the option
would otherwise have expired. Except as may otherwise be expressly provided in
the applicable Contract, an optionee whose directorship with the Company has
terminated by reason of Disability, may exercise such options, to the extent
exercisable on the effective date of such termination, at any time within one
year after such date, but not thereafter and in no event after the date the
option would otherwise have expired.
10. Compliance with Securities Laws. It is a condition to the
exercise of any option that either (a) a Registration Statement under the
Securities Act of 1933, as amended (the
B-6
<PAGE>
"Securities Act"), with respect to the shares of Common Stock to be issued upon
such exercise shall be effective and current at the time of exercise, or (b)
there is an exemption from registration under the Securities Act for the
issuance of the shares of Common Stock upon such exercise. Nothing herein shall
be construed as requiring the Company to register shares subject to any option
under the Securities Act or to keep any Registration Statement effective or
current.
The Administrators may require, in their sole discretion, as a
condition to the grant or exercise of an option, that the optionee execute and
deliver to the Company the optionee's representations and warranties, in form,
substance and scope satisfactory to the Administrators, which the Administrators
determine is necessary or convenient to facilitate the perfection of an
exemption from the registration requirements of the Securities Act, applicable
state securities laws or other legal requirements, including without limitation,
that (a) the shares of Common Stock to be issued upon exercise of the option are
being acquired by the optionee for the optionee's own account, for investment
only and not with a view to the resale or distribution thereof, and (b) any
subsequent resale or distribution of shares of Common Stock by such optionee
will be made only pursuant to (i) a Registration Statement under the Securities
Act which is effective and current with respect to the shares of Common Stock
being sold, or (ii) a specific exemption from the registration requirements of
the Securities Act, but in claiming such exemption, the optionee, prior to any
offer of sale or sale of such shares of Common Stock, shall provide the Company
with a favorable written opinion of counsel satisfactory to the Company, in
form, substance and scope satisfactory to the Company, as to the applicability
of such exemption to the proposed sale or distribution.
In addition, if at any time the Administrators shall determine that the
listing or qualification of the shares of Common Stock subject to such option on
any securities exchange, Nasdaq or under any applicable law, or that the consent
or approval of any governmental agency or regulatory body, is necessary or
desirable as a condition to, or in connection with, the granting of an option or
the issuance of shares of Common Stock thereunder, such option may not be
granted or exercised in whole or in part, as the case may be, unless such
listing, qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Administrators.
11. Stock Option Contracts. Each option shall be evidenced by an
appropriate Contract which shall be duly executed by the Company and the
optionee. Such Contract shall contain such terms, provisions and conditions not
inconsistent herewith as may be determined by the Administrators in their sole
discretion. The terms of each option and Contract need not be identical.
12. Adjustments upon Changes in Common Stock. Notwithstanding any
other provision of the Plan, in the event of any change in the outstanding
Common Stock by reason of a stock dividend, recapitalization, spin-off,
split-up, combination or exchange of shares or the like which results in a
change in the number or kind of shares of Common Stock which are outstanding
immediately prior to such event, the aggregate number and kind of shares subject
to the Plan, the aggregate number and kind of shares subject to each outstanding
option and the exercise price thereof, and the maximum number of shares subject
to options that may be granted
B-7
<PAGE>
to any employee in any calendar year, shall be appropriately adjusted by the
Board of Directors, whose determination shall be conclusive and binding on all
parties. Such adjustment may provide for the elimination of fractional shares
that might otherwise be subject to options without payment therefor.
Notwithstanding the foregoing, no adjustment shall be made pursuant to this
Paragraph 12 if such adjustment (a) would cause the Plan to fail to comply with
Section 422 of the Code or with Rule 16b-3 of the Exchange Act (if applicable to
such option), or (b) would be considered as the adoption of a new plan requiring
stockholder approval.
Except as may otherwise be expressly provided in the applicable
Contract, in the event of (i) a proposed dissolution or liquidation of the
Company, or (ii) a proposed sale of all or substantially all of the assets or
outstanding equity of the Company, or (iii) the merger or consolidation of the
Company with or into another entity or any other corporate reorganization if
persons who were not shareholders of the Company immediately prior to such
merger, consolidation or other reorganization own immediately after such merger,
consolidation or other reorganization fifty percent (50%) or more of the voting
power of the outstanding securities of each of (A) the continuing or surviving
entity and (B) any direct or indirect parent corporation of such continuing or
surviving entity, the Board of Directors of the Company shall, as to outstanding
options, either (1) make appropriate provision for the protection of any such
outstanding options by the substitution on an equitable basis of appropriate
stock of the Company or of the merged, consolidated or otherwise reorganized
corporation which will be issuable in respect to one share of Common Stock of
the Company; provided that the excess of the aggregate fair market value of the
shares subject to the options immediately after such substitution over the
purchase price thereof is not more than the excess of the aggregate fair market
value of the shares subject to such options immediately before such substitution
over the purchase price thereof, or (2) upon written notice to an optionee,
provide that all unexercised options must be exercised within a specified number
of days of the date of such notice or they will be terminated. In any such case,
the Board of Directors may, in its discretion, advance the lapse of any waiting
or installment periods and exercise dates.
13. Amendments and Termination of the Plan. The Plan was adopted by
the Board of Directors on October 10, 2000. No option may be granted under the
Plan after October 10, 2010. The Board of Directors, without further approval of
the Company's stockholders, may at any time suspend or terminate the Plan, in
whole or in part, or amend it from time to time in such respects as it may deem
advisable, including without limitation, in order that ISOs granted hereunder
meet the requirements for "incentive stock options" under the Code, or to comply
with the provisions of Rule 16b-3 or Section 162(m) of the Code or any change in
applicable laws or regulations, ruling or interpretation of any governmental
agency or regulatory body; provided, however, that no amendment shall be
effective, without the requisite prior or subsequent stockholder approval, which
would (a) except as contemplated in Paragraph 12, increase the maximum number of
shares of Common Stock for which options may be granted under the Plan or change
the maximum number of shares for which options may be granted to employees in
any calendar year, (b) change the eligibility requirements for individuals
entitled to receive options hereunder, or (c) make any change for which
applicable law or any governmental agency or regulatory body requires
stockholder approval. No termination, suspension or amendment of the Plan shall
adversely affect the rights of an optionee under any option granted under the
Plan
B-8
<PAGE>
without such optionee's consent. The power of the Administrators to construe and
administer any option granted under the Plan prior to the termination or
suspension of the Plan shall continue after such termination or during such
suspension.
14. Non-Transferability. No option granted under the Plan shall be
transferable other than by will or the laws of descent and distribution, and
options may be exercised, during the lifetime of the optionee, only by the
optionee or the optionee's Legal Representatives. Except to the extent provided
above, options may not be assigned, transferred, pledged, hypothecated or
disposed of in any way (whether by operation of law or otherwise) and shall not
be subject to execution, attachment or similar process, and any such attempted
assignment, transfer, pledge, hypothecation or disposition shall be null and
void ab initio and of no force or effect. 15. Withholding Taxes. The Company, or
its Subsidiary or Parent, as applicable, may withhold (a) cash or (b) with the
consent of the Administrators (in the Contract or otherwise), shares of Common
Stock to be issued upon exercise of an option or a combination of cash and
shares, having an aggregate fair market value (determined in accordance with
Paragraph 5) equal to the amount which the Administrators determine is necessary
to satisfy the obligation of the Company, a Subsidiary or Parent to withhold
Federal, state and local income taxes or other amounts incurred by reason of the
grant, vesting, exercise or disposition of an option or the disposition of the
underlying shares of Common Stock. Alternatively, the Company may require the
optionee to pay to the Company such amount, in cash, promptly upon demand.
16. Legends; Payment of Expenses. The Company may endorse such
legend or legends upon the certificates for shares of Common Stock issued upon
exercise of an option under the Plan and may issue such "stop transfer"
instructions to its transfer agent in respect of such shares as it determines,
in its sole discretion, to be necessary or appropriate to (a) prevent a
violation of, or to perfect an exemption from, the registration requirements of
the Securities Act, applicable state securities laws or other legal
requirements, (b) implement the provisions of the Plan or any agreement between
the Company and the optionee with respect to such shares of Common Stock, or (c)
permit the Company to determine the occurrence of a "disqualifying disposition,"
as described in Section 421(b) of the Code, of the shares of Common Stock
transferred upon the exercise of an ISO granted under the Plan.
The Company shall pay all issuance taxes with respect to the
issuance of shares of Common Stock upon the exercise of an option granted under
the Plan, as well as all fees and expenses incurred by the Company in connection
with such issuance.
17. Use of Proceeds. The cash proceeds to be received upon the
exercise of an option under the Plan shall be added to the general funds of the
Company and used for such corporate purposes as the Board of Directors may
determine, in its sole discretion.
B-9
<PAGE>
18. Substitutions and Assumptions of Options of Certain Constituent
Corporations. Anything in this Plan to the contrary notwithstanding, the Board
of Directors may, without further approval by the stockholders, substitute new
options for prior options of a Constituent Corporation (as such term is defined
in Paragraph 19) or assume the prior options of such Constituent Corporation.
19. Definitions.
(a) "Cause", in connection with the termination of an optionee,
shall mean (i) "cause," as such term (or any similar term, such as "with cause")
is defined in any employment, consulting or other applicable agreement for
services between the Company and such optionee, or (ii) in the absence of such
an agreement, "cause" as such term is defined in the Contract executed by the
Company and such optionee pursuant to Paragraph 11, or (iii) in the absence of
both of the foregoing, (A) indictment of such optionee for any illegal conduct,
(B) failure of such optionee to adequately perform any of the optionee's duties
and responsibilities in any capacity held with the Company, any of its
Subsidiaries or any Parent (other than any such failure resulting solely from
such optionee's physical or mental incapacity), (C) the commission of any act or
failure to act by such optionee that involves moral turpitude, dishonesty,
theft, destruction of property, fraud, embezzlement or unethical business
conduct, or that is otherwise injurious to the Company, any of its Subsidiaries
or any Parent or any other affiliate of the Company (or its or their respective
employees), whether financially or otherwise, (D) any violation by such optionee
of any Company rule or policy, or (E) any violation by such optionee of the
requirements of such Contract, any other contract or agreement between the
Company and such optionee or this Plan (as in effect from time to time); in each
case, with respect to subsections (A) through (E), as determined by the Board of
Directors.
(b) "Constituent Corporation" shall mean any corporation which
engages with the Company, its Parent or any Subsidiary in a transaction to which
Section 424(a) of the Code applies (or would apply if the option assumed or
substituted were an ISO), or any Parent or any Subsidiary of such corporation.
(c) "Disability" shall mean a permanent and total disability
within the meaning of Section 22(e)(3) of the Code.
(d) "Legal Representative" shall mean the executor, administrator
or other person who at the time is entitled by law to exercise the rights of a
deceased or incapacitated optionee with respect to an option granted under the
Plan.
(e) "Parent" shall mean a "parent corporation" within the meaning
of Section 424(e) of the Code.
(f) "Subsidiary" shall mean a "subsidiary corporation" within the
meaning of Section 424(f) of the Code.
B-10
<PAGE>
20. Governing Law. The Plan, such options as may be granted
hereunder, the Contracts and all related matters shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without regard
to conflict or choice of law provisions.
Neither the Plan nor any Contract shall be construed or interpreted
with any presumption against the Company by reason of the Company causing the
Plan or Contract to be drafted. Whenever from the context it appears
appropriate, any term stated in either the singular or plural shall include the
singular and plural, and any term stated in the masculine, feminine or neuter
gender shall include the masculine, feminine and neuter.
21. Partial Invalidity. The invalidity, illegality or
unenforceability of any provision in the Plan, any option or Contract shall not
affect the validity, legality or enforceability of any other provision, all of
which shall be valid, legal and enforceable to the fullest extent permitted by
applicable law.
22. Stockholder Approval. The Plan shall be subject to approval by
(a) the holders of a majority of the votes present in person or by proxy
entitled to vote hereon at a duly held meeting of the Company's stockholders at
which a quorum is present or (b) the Company's stockholders acting in accordance
with the provisions of Section 228 of the Delaware General Corporation Law. No
options granted hereunder may be exercised prior to such approval, provided,
however, that the date of grant of any option shall be determined as if the Plan
had not been subject to such approval. Notwithstanding the foregoing, if the
Plan is not approved by a vote of the stockholders of the Company on or before
October 10, 2001, the Plan and any options granted hereunder shall terminate.
B-11
<PAGE>
PROXY PROXY
PROGINET CORPORATION
ANNUAL MEETING OF STOCKHOLDERS - NOVEMBER 14, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder of Common Stock of PROGINET CORPORATION, hereby revokes
all previous proxies, acknowledges receipt of the Notice of Stockholders'
Meeting , Proxy Statement and Annual Report relating thereto, to be held at the
offices of Parker Chapin LLP, The Chrysler Building, 405 Lexington Avenue, New
York, NY at 5:00 P.M. EST, on Tuesday, November 14, 2000, and at any adjournment
or postponement thereof and hereby appoints Kevin M. Kelly or instead of him
James F. Kelly, as Proxy(s), of the undersigned, each with the power to appoint
his substitute, to represent and vote, as designated below, all shares of the
undersigned at said meeting and at any adjournment or postponement thereof with
the same effect as if the undersigned were present and voting the shares.
Each properly executed Proxy will be voted in accordance with the specifications
made below and in the discretion of the Proxies on any other matter that may
come before the meeting. Where no choice is specified, this Proxy will be voted
FOR all listed nominees to serve as directors and FOR each of the proposals set
forth below.
<TABLE>
<CAPTION>
<S> <C>
1. Election of Directors:
|_| FOR all nominees listed below |_| WITHHOLD
(except as indicated to the contrary below) Authority to vote for all
nominees listed below
Nominees: Kevin M. Kelly, James F. Kelly, John C. Daily, Dr. E. Kelly Hyslop, and Stephen Sternbach.
(Instruction: To withhold authority to vote for any individual nominee, write that nominee's name in the space
provided below the WITHHOLD box)
2. Approval of the amendment to the 1997 Stock Option Plan of the Company
FOR |_| AGAINST |_| ABSTAIN |_|
3. Approval of the 2000 Stock Option Plan of the Company
FOR |_| AGAINST |_| ABSTAIN |_|
4. Ratification of the appointment of Grant Thornton LLP as independent certified public accountants for
the fiscal year ending July 31, 2001.
FOR |_| AGAINST |_| ABSTAIN |_|
</TABLE>
This Proxy is solicited on
behalf of the Board of Directors
and, unless contrary
instructions are indicated, will
be voted FOR the election of all
nominees for director, FOR the
approval of the amendment to the
1997 Stock Option Plan, FOR the
approval of the 2000 Stock
Option Plan and FOR the
ratification of Grant Thornton
as independent certified public
accountants.
In their discretion, the Proxies
are authorized to vote upon such
other matters as may properly
come before the meeting or any
adjournment or postponement
thereof.
Dated____________________,2000
______________________________
______________________________
_____________________________
Signature of Stockholder(s)
______________________________
(Title, if appropriate)
THIS PROXY SHOULD BE DATED, SIGNED AND RETURNED PROMPTLY IN THE ENCLOSED
ENVELOPE
