<PAGE>
Page 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only
(as permitted by Rule 14a- 6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11 (c) or Rule 14a-12
PAPERCLIP IMAGING SOFTWARE, INC.
.............................................................................
(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):
[ ] $125 per Exchange Act Rules 0-11 (c)(1)(ii), 14A-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
.....................................................................
2) Aggregate number of securities to which transaction applies:
.....................................................................
<PAGE>
Page 2
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:
.....................................................................
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
..............................................
2) Form, Schedule or Registration Statement No.:
..............................................
3) Filing Party:
..............................................
4) Date Filed:
..............................................
<PAGE>
Page 3
Preliminary Copies
PAPERCLIP IMAGING SOFTWARE, INC.
Three University Plaza
Hackensack, New Jersey 07601
----------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
October 29, 1996
----------
To Shareholders:
The Annual Meeting of Shareholders of PaperClip Imaging Software, Inc. (the
"Company") will be held at the Company's offices at Three University Plaza,
Hackensack, New Jersey 07601, 6th Floor, on Tuesday, October 29, 1996 at 10:00
a.m., for the following purposes:
1. To elect three directors to the Board of Directors;
2. To consider and authorize a proposal to amend Article FOURTH of the
Company's Certificate of Incorporation to increase the authorized shares of the
Company's common stock from 15,000,000 shares, par value $.01 per share, to
30,000,000 shares, par value $.01 per share;
3. To consider and authorize a proposal to amend Article FIRST of the
Company's Certificate of Incorporation to change the Company's name to
"PaperClip Software, Inc."
4. To approve and ratify the proposed amendments to the Company's 1995
Stock Option Plan; and
5. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on September 26,
1996 as the record date for the determination of the shareholders entitled to
notice of and to vote at the meeting and any adjournment thereof.
Your copy of the Annual Report of the Company for the year ended December
31, 1995 on Form 10-KSB and 10-KSB/A is enclosed. The 1995 Annual Report does
not form any part of the material for the solicitation of proxies.
<PAGE>
Page 4
Shareholders who do not expect to be present at the meeting are urged to
complete, date, sign and return the enclosed proxy. No postage is required if
the enclosed envelope is used and mailed in the United States.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Michael Suleski
-----------------------------------
Michael Suleski, Secretary
Hackensack, New Jersey
August 28, 1996
<PAGE>
Page 5
THIS IS AN IMPORTANT MEETING, AND ALL SHAREHOLDERS ARE INVITED TO ATTEND
THE MEETING IN PERSON. THOSE SHAREHOLDERS WHO ARE UNABLE TO ATTEND IN PERSON ARE
RESPECTFULLY URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY CARD AT THEIR
EARLIEST CONVENIENCE. PROMPTNESS IN RETURNING THE EXECUTED PROXY CARD WILL BE
APPRECIATED. SHAREHOLDERS WHO EXECUTE A PROXY CARD MAY NEVERTHELESS ATTEND THE
MEETING, REVOKE THEIR PROXY AND VOTE THEIR SHARES IN PERSON.
<PAGE>
Page 6
PAPERCLIP IMAGING SOFTWARE, INC.
Three University Plaza
Hackensack, New Jersey 07601
----------
Proxy Statement for Annual Meeting of Shareholders
October 29, 1996
----------
Solicitation and Revocation of Proxies
This Proxy Statement and the form of proxy accompanied by the Annual Report
of the Company on Forms 10-KSB and 10-KSB/A for the year ended December 31,
1995, anticipated to be mailed on or about September 30, 1996, is solicited by
and on behalf of the Board of Directors of PaperClip Imaging Software, Inc., a
Delaware corporation (the "Company") for the Annual Meeting of Shareholders, to
be held on Tuesday, October 29, 1996, at the offices of the Company, Three
University Plaza, Hackensack, New Jersey 07601, 6th Floor, at 10:00 a.m.,
including any adjournment thereof, for the purposes set forth in the Notice of
Annual Meeting and Proxy Statement.
If the enclosed form of proxy is executed and returned, it will be voted as
directed, but may be revoked at any time, either by a written notice of the
revocation received by the persons named therein, or by voting the shares
covered thereby in person or by another proxy dated subsequent to the date
thereof. In the absence of specific instructions by the shareholders, proxies
will be voted for (i) the election of directors, (ii) the authorization to amend
the Company's Certificate of Incorporation to increase the authorized common
stock, par value $.01 per share (the "Common Stock") from 15,000,000 shares to
30,000,000 shares, (iii) the authorization to amend the Company's Certificate of
Incorporation to change its name to PaperClip Software, Inc., and (iv) the
approval of the amendment of the 1995 Stock Option Plan (the "1995 Option
Plan"). Abstentions and broker non-votes will be counted for purposes of a
quorum, but are not votes cast and therefore will not be counted in determining
voting results. The form of proxy vests in the persons named therein as proxies,
discretionary authority to vote on any matter that may properly come before the
meeting not presently known to the Board of Directors.
A plurality of votes cast, in person and by proxy, is necessary to
effectuate the election of directors. For authorization to amend the Certificate
of Incorporation to increase the authorized Common Stock and to change the
Company's name, affirmative votes of a majority of the outstanding shares
entitled to vote thereon, by proxy or in person, are required. For the
<PAGE>
Page 7
approval of the amendment to the 1995 Option Plan, affirmative votes of a
majority of the shares present at the meeting entitled to vote thereon, by proxy
or in person, are required.
The cost of preparing and mailing the Notice of Annual Meeting and Proxy
material and soliciting proxies will be paid by the Company. In addition to the
use of the mails, officers, directors or employees of the Company, who will
receive no additional compensation therefor, may solicit proxies by telephone or
personal interview. The Company will request brokers, nominees, fiduciaries and
custodians to forward proxy materials to their beneficial owners, and will
reimburse such persons for reasonable expenses incurred by them in forwarding
the proxy materials.
Record Date
The Board of Directors has fixed the close of business on September 26,
1996, as the record date for the determination of shareholders entitled to
receive notice of and to vote at the Annual Meeting and any adjournment thereof.
Only shareholders of record on that date are entitled to vote at the meeting.
All share data reflected herein, including the exercise and conversion prices of
warrants and options, have been adjusted for (i) a two-for-one stock split of
the Common Stock effective as of May 31, 1996 and (ii) a two-for-one split of
the Company's Class A warrants, which were issued in connection with the
Company's initial public offering, effective as of June 11, 1996.
Voting Securities
As of August 27, 1996, 7,721,347 shares of Common Stock were outstanding
and entitled to be voted at the Annual Meeting.
Item 1
ELECTION OF DIRECTORS
At the Annual Meeting, the shareholders will elect three members to the
Board of Directors of the Company to serve for a one year term or until their
successors have been elected and qualified. The By-laws of the Company provide
that the Board of Directors shall not be less than three nor more than seven in
number. Since less than the maximum number of directors are to be elected, which
is permissible pursuant to the Company's By-laws, proxies cannot be voted for a
greater number of persons than the number of nominees named. The By-laws further
provide that the majority of directors, although less than a quorum, have the
right to appoint candidates to fill any vacancies on the Board, whether through
death, retirement or other termination of a director, or through an increase in
the Board. Upon such appointment such director shall serve until the next
election of directors.
<PAGE>
Page 8
The affirmative vote of a plurality of the shares of Common Stock
represented at the meeting is required to elect directors. Cumulative voting is
not permitted in the election of directors. Each shareholder is entitled to one
vote for each share of Common Stock held in his name. The persons named as
proxies in the form of proxy solicited hereby intend to vote all valid proxies
received in favor of the election of the three nominees as directors except
where authority to so vote is withheld by the shareholder. Each nominee has
consented to be named herein and to serve on the Board of Directors if elected.
If any nominee is unable to serve as a director (which presently is not
anticipated), the proxies will be voted for such substituted nominee who may be
designated by the present Board of Directors. Each nominee is now serving as a
director of the Company. Proxies will have full discretion to vote for another
person designated by the Board, or, if none is so designated, to vote for
persons of their own choice. Proxies may not be voted for the election of more
than three persons to the Board.
Nominees For Election
---------------------
Served as
Officer and/or
Name Age Position with the Company Director Since
---- --- ------------------------- --------------
William Weiss 53 Chief Executive Officer, Treasurer and
Director; 1991
Sol Rosenberg 51 President, Chief Technology Officer and
Director 1991
Michael Suleski 35 Vice President (Engineering), 1992
Secretary and Director 1995
WILLIAM WEISS, a founder of the Company, has been Chief Executive Officer,
Treasurer and a director of the Company since its formation in October 1991.
Since January 1980, Mr. Weiss has also been an executive officer (and President
since November 1988) and a director of Medical Registry Services, Inc., a
computer software company which sells and services a computerized system for
cancer record keeping in hospitals. Mr. Weiss devotes approximately 35-40 hours
per week to the Company and approximately 25-30 hours per week to Medical
Registry Services, Inc. Mr. Weiss received a B.S. from the Wharton School of the
University of Pennsylvania and a J.D. from New York Law School.
SOL ROSENBERG, a founder of the Company, has been President, Chief
Technology Officer and a director of the Company since its formation in October
1991. From July 1991 through October 1991, Mr. Rosenberg worked with Mr. Michael
Suleski to develop the DOS Network Edition. From February 1989 through July
1991, Mr. Rosenberg had been the
<PAGE>
Page 9
President of Synercon Corporation, a firm specializing in computer based
solutions for the medical profession. Mr. Rosenberg has many years of experience
in corporate technology, development of system designs and software systems. Mr.
Rosenberg received his B.S.E.E. from the City College of New York and his M.S.
and Ph.D. from Columbia University.
MICHAEL SULESKI, a founder of the Company, has been Vice President,
Engineering of the Company since August 1992 and its Director of Research and
Development from its inception in October 1991 to August 1992. Mr. Suleski has
been a director of the Company since May 1995 and Secretary of the Company since
July 1995. From July 1991 through October 1991, Mr. Suleski worked with Mr. Sol
Rosenberg to develop the DOS Network Edition. From April 1989 through July 1991,
he was a Senior Engineer with Synercon Corp., a firm specializing in computer
based solutions for the medical profession. Mr. Suleski's prior experience was
in software engineering with two other manufacturers of commercial industrial
control systems and military electronics. Mr. Suleski received a B.S. and an
M.S. degree from Fairleigh Dickenson University's College of Science and
Engineering.
There is no family relationship between any officer or director of the
Company.
This is the Company's first Annual Meeting of Shareholders since it became
a public company in September 1995. Since the Company became public there have
been nine meetings of the Board of Directors, including actions by unanimous
written consent. All directors participated at all the meetings. There are no
Committees of the Board of Directors.
The Company has not provided any cash compensation, per meeting fees or
options in lieu thereof to directors who were not executive officers of the
Company ("Non-Employee Directors") in connection with their services as such.
In lieu of any cash compensation or per meeting fees, the Company has provided
directors who were also executive officers of the Company ("Employee
Directors"), among others, with options to purchase Common Stock of the Company
at fair market value, and occasionally at a discount from fair market value, at
the date of grant. To date, Michael Suleski is the only Employee Director that
has been granted an option to purchase Common Stock at a discount from fair
market value. In January 1996, Mr. Suleski was granted an option to purchase
40,000 shares of Common Stock, of which 16,000 are exercisable at $.005 per
share and 24,000 are exercisable at $2.375. See "Executive Compensation -
Options, Warrants or Rights" and "Security Ownership of Certain Beneficial
Owners and Management."
Pursuant to the terms of the underwriting agreement between the Company and
A.R. Baron & Co., Inc. ("Baron"), the underwriter of the Company's initial
public offering, Baron has the right to nominate one person for election to the
Company's Board of Directors and the Company would be required to use its best
efforts to cause the election of such nominee. This would increase the Board to
four directors. To date, Baron has not designated a nominee
<PAGE>
Page 10
for election and has not indicated its intention to do so. On July 3, 1996,
Baron filed for protection under Chapter 11 of the Bankruptcy Code.
The Company's officers are chosen by the Board of Directors and serve at
the pleasure of the Board, subject to employment agreements. The loss of the
services of any one of the directors could have a material adverse effect on the
Company.
Compliance with Section 16
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires certain persons, including the Company's directors and
executive officers, to file reports with the Securities and Exchange Commission
regarding beneficial ownership of equity securities of the Company. Each of
William Weiss, Sol Rosenberg and Michael Suleski filed two late reports covering
(i) their respective beneficial ownership of securities of the Company at the
time of the Company's initial public offering and (ii) the acquisition of
options by each of them in January 1996. Helaine Fischer filed one late report
covering her beneficial ownership of securities of the Company at the time of
the Company's initial public offering.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE ELECTION
OF THE NOMINEES FOR DIRECTORS SET FORTH ABOVE.
EXECUTIVE COMPENSATION
The Summary Compensation Table below sets forth compensation paid by the
Company for the last three fiscal years ended December 31, 1995 for services in
all capacities for its Chief Executive Officer and each of its principal
executive officers whose total annual salary and bonus exceeded $100,000.
<PAGE>
Page 11
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Compensation Awards
Annual Compensation
(a) (b) (c) (g)
Name and Securities Underlying
Principal Position Year Salary($) Options/SARs(#)
------------------ ---- --------- ---------------
<S> <C> <C> <C>
William Weiss 1995 120,000(1) 0(2)
Chief Executive Officer 1994 120,000(1) 0
and Treasurer 1993 120,000 0
Sol Rosenberg 1995 120,000(3) 0(2)
President 1994 120,000(3) 0
1993 114,000 0
Helaine Fischer 1995 137,500 0
Vice President, 1994 150,000(4) 0
Sales & Marketing 1993 150,000 0
</TABLE>
- ----------
(1) $105,000 of Mr. Weiss's 1994 salary was accrued in 1994 and paid in 1995.
$60,000 of Mr. Weiss's 1995 salary was accrued in 1995, and paid in 1996.
(2) Does not include options to purchase 50,000 shares of Common Stock each
granted to Messrs. Weiss and Rosenberg in January 1996 under the 1995
Option Plan.
(3) $34,000 of Mr. Rosenberg's 1994 salary was accrued in 1994 and paid in
1995. $12,000 of Mr. Rosenberg's 1995 salary was accrued in 1995 and paid
in 1996.
(4) $46,000 of Ms. Fischer's 1994 salary was accrued in 1994 and paid in 1995.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements.
William Weiss, Chief Executive Officer of the Company, and Sol Rosenberg,
President of the Company, have each entered into employment agreements with the
Company
<PAGE>
Page 12
each for a term ending December 31, 1998. In accordance with their respective
contracts, each of Messrs. Weiss and Rosenberg is entitled to $120,000
compensation per annum. Messrs. Weiss and Rosenberg's annual compensation will
be increased to $150,000 per annum after the end of the first fiscal year in
which the Company is profitable. In addition, Mr. Rosenberg's contract requires
the Company to use reasonable efforts to purchase disability insurance for his
benefit in the maximum amount of $120,000 and provides for a severance payment
upon termination without cause of $120,000; provided, however, that no severance
pay shall be paid during the time, if any, that Mr. Rosenberg receives insurance
payments pursuant to such disability insurance.
Michael Suleski, Vice President, Engineering, has an employment agreement
with the Company which will expire on December 31, 1996. His compensation
pursuant to such agreement was $72,000 per annum, subject to increase by the
Board of Directors. As of January 1, 1996, Mr. Suleski's annual salary was
increased to $100,000.
Helaine Fischer, Vice President, Sales and Marketing, had an employment
agreement with the Company that expired on April 30, 1996. Under the terms of
that agreement, Ms. Fischer worked full time for the Company through July 31,
1995. From August 1, 1995 through December 31, 1995, she worked four days per
week. From January 1, 1996 through April 30, 1996, she worked three days per
week, after which Ms. Fischer's tenure as Vice President, Sales and Marketing,
and as an employee of the Company ended. Under Ms. Fischer's employment
agreement she received a salary of $150,000 per annum for full time work (i.e.,
five days per week with customary vacations), which amount was prorated for the
number of days worked beginning in August 1995. Ms. Fischer may, from time to
time in the future, render services to the Company on a consulting or part-time
basis.
The Company is the sole beneficiary of $1,000,000 term life insurance
policies covering each of Messrs. Weiss and Rosenberg.
Options, Warrants or Rights
1993 Option Plan
In March 1993, the Company adopted its 1993 Stock Option Plan (the "1993
Option Plan") covering 58,126 shares of Common Stock, pursuant to which key
employees, other than directors, of the Company were eligible to receive stock
options, either incentive or non-qualified stock options. The 1993 Option Plan
expires February 1, 2003 and is administered by the Board of Directors. The
selection of participants, allotment of shares, determination of price and other
conditions of the purchase of options are determined by the Board of Directors.
Stock options granted under the 1993 Option Plan are exercisable for a period of
up to ten years from the date of grant, unless the key employee is a substantial
shareholder, as defined in the next succeeding sentence, in which event such
options shall be exercisable for a period of up to five years. Incentive stock
options are granted at not less than 100% of fair market
<PAGE>
Page 13
value of the Common Stock on the date of grant, unless the key employee is a
substantial shareholder, defined in the 1993 Option Plan as owning more than 10%
of the total combined voting power of all classes of stock of the Company or a
subsidiary thereof, in which event the exercise price of an incentive stock
option is 110% of the fair market value of the Common Stock on the date of an
option grant. The option price of non-qualified stock options granted under the
1993 Option Plan is not less than 100% of the fair market value of the Common
Stock, unless the Board of Directors determines to grant options at a lower
percentage. Generally, options are non-transferable except by the laws of
descent and distribution. If an optionee ceases to be employed by the Company,
the option will terminate three months after he ceases to be so employed (unless
provided otherwise in the related option agreement in the case of a
non-qualified stock option), and if the option is an incentive stock option, the
option may be exercised one year from cessation of employment if caused by death
or disability. Options may be exercised with cash, or with the consent of the
Board of Directors, in whole or in part in shares of Common Stock having a fair
market value on the date the option is exercised equal to that portion of the
purchase price for which payment in cash is not made.
As of May 31, 1996, options to acquire 58,126 shares of Common Stock had
been granted under the 1993 Option Plan. At such date, 12,328 options had
expired, 45,798 options remained outstanding and none had been exercised. All of
the 45,798 outstanding options are incentive stock options with an exercise
period of five years, expiring over periods from 1998 to 2000, exercisable at
$2.595. No options were granted at discounts from the fair market value of the
Common Stock on the date of grant.
None of the named executive officers in the Summary Compensation Table were
granted any options under the 1993 Option Plan in fiscal 1995.
1995 Option Plan
In May 1995, the Board of Directors adopted, and the Company's shareholders
approved, the 1995 Option Plan, which was amended by the Board of Directors on
August 23, 1996, to, among other things, provide for formula-based awards to
Employee Directors and Non-Employee Directors. The amendment is subject to
approval of shareholders. See Item 4, "Proposal to Amend the Company's 1995
Stock Option Plan."
The 1995 Option Plan is described herein under the caption "Proposal to
Amend the Company's 1995 Stock Option Plan."
As of August 27, 1996, of 1,000,000 shares of Common Stock issuable under
the 1995 Option Plan, 27,666 shares were issued and 972,334 shares were reserved
for issuance under such plan. The 1995 Option Plan terminates upon the earlier
of (i) the date on which all shares of Common Stock available for issuance
thereunder have been issued, (ii) the termination of such plan by the Board of
Directors, or (iii) March 1, 2005 and is administered by the
<PAGE>
Page 14
Committee (as defined herein). As of May 31, 1996, options to acquire 346,042
shares of Common Stock had been granted under the 1995 Option Plan. At such
date, 2,500 options had expired, 343,542 options remained outstanding and none
had been exercised. Of the 343,542 outstanding options, 206,700 are incentive
stock options with an exercise period of 10 years, at exercise prices ranging
from $1.125 per share to $2.375 per share. The remaining 136,842 options
outstanding are non-qualified and are exercisable for 10 years at exercise
prices ranging from $.005 per share to $2.50 per share. No named executive
officer in the Summary Compensation Table received any options under the 1995
Option Plan in fiscal 1995. In January 1996, William Weiss and Sol Rosenberg
each received options under the 1995 Option Plan for 50,000 shares of Common
Stock exercisable at $2.375 per share and Michael Suleski received options under
the 1995 Option Plan for 40,000 shares of Common Stock, 16,000 exercisable at
$.005 and 24,000 exercisable at $2.375 per share. See Item 4, "Proposal to Amend
the Company's 1995 Stock Option Plan."
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of August 27, 1996, the names and
beneficial ownership of the Company's Common Stock for directors, individually
itemized, and for directors and officers as a group, without naming them, and
for each of the named executive officers disclosed in the Summary Compensation
Table (see "Executive Compensation") and for shareholders known to the Company
to beneficially own more than 5% of its voting securities.
Name and Address of Amount and Nature of
Beneficial Owner* Beneficial Ownership(1) Percent of Class (2)
William Weiss 466,770(3) 6.0%
Sol Rosenberg 310,918(4) 4.0%
Michael Suleski 97,238(5) 1.3%
Helaine Fischer 151,978(6) 2.0%
All directors and executive
officers as a group (3 persons) 873,932 11.0%
- ----------
* Addresses are c/o PaperClip Imaging Software, Inc., Three University Plaza,
Hackensack, New Jersey 07601.
<PAGE>
Page 15
** Less than 1%.
(1) Based upon information furnished to the Company by either the directors and
officers or obtained from the stock transfer books of the Company. The
Company is informed that these persons hold sole voting and dispositive
power with respect to the shares of Common Stock except as noted herein.
(2) Based on 7,721,347 shares of Common Stock outstanding. Does not include (i)
58,126 shares of Common Stock reserved for issuance under the 1993 Option
Plan; (ii) 972,334 shares of Common Stock reserved for issuance under the
1995 Option Plan; (iii) 365,746 shares of Common Stock reserved for
issuance under bridge warrants exercisable at $1.125 per share through
April 2000; (iv) 45,608 shares of Common Stock reserved for issuance under
warrants issued in connection with 8% secured notes, exercisable at $1.625
per share through August 8, 2002; (v) 3,599,500 shares of Common Stock
reserved for issuance under Class A Warrants exercisable at $3.125 per
share through August 9, 2000; (vi) 359,950 shares of Common Stock reserved
for issuance under an option granted to Baron exercisable at $3.375 per
share through 2000; and (vii) 359,950 shares of Common Stock reserved for
issuance under Class A Warrants issuable under an option granted to Baron
exercisable at $4.219 per share through 2000. For purposes of computing the
percentage of outstanding shares held by each person or group of persons
named in this table, any securities which such person or group of persons
has the right to acquire within 60 days of August 27, 1996 is deemed to be
outstanding for purposes of computing the percentage ownership of such
person or persons, but is not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person.
(3) Includes (i) 50,000 shares of Common Stock underlying options granted to
Mr. Weiss under the 1995 Option Plan; (ii) 26,668 shares of Common Stock
held by the Sol Rosenberg Family 1994 Trust of which Mr. Weiss is one of
the trustees; (iii) 9,000 shares of Common Stock underlying Class A
Warrants owned by the Medical Registry, Inc. Profit Sharing Trust dated
January 1, 1991 of which Mr. Weiss is a trustee and beneficiary; and (iv)
1,848 shares of Common Stock underlying warrants obtained in a private
placement.
(4) Includes (i) 50,000 shares of Common Stock underlying options under the
1995 Option Plan and (ii) 26,668 shares of Common Stock held by the Sol
Rosenberg Family 1994 Trust of which William Weiss and Mr. Rosenberg's
spouse are the trustees and of which Mr. Rosenberg's spouse and children
are the beneficiaries. Mr. Rosenberg disclaims beneficial ownership of the
shares held by the Sol Rosenberg Family 1994 Trust.
<PAGE>
Page 16
(5) Includes (i) 15,408 shares of Common Stock underlying options granted to
Mr. Suleski under the 1993 Option Plan; and (ii) 40,000 shares of Common
Stock underlying options granted to Mr. Suleski under the 1995 Option Plan.
(6) Includes 4,236 shares of Common Stock underlying options granted to Ms.
Fischer's spouse under the 1993 Option Plan. Ms. Fischer disclaims
beneficial ownership of the shares underlying such options.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In August 1994, at the request of the Company, some members of Moroze
Sherman Gordon & Gordon, P.C., former counsel to the Company, accepted a note
(the "MSG&G Note") in the face amount of $150,000 to evidence $150,000 of fees
and disbursements due to such firm, and the holders thereof were issued warrants
to purchase 18,490 shares. They agreed to extend the maturity of the MSG&G Note
to the earlier of (i) September 30, 1995 or (ii) the consummation of the
Company's initial public offering, and the MSG&G Note was paid from the proceeds
of such public offering. In 1994 and 1995, the Company paid Moroze Sherman
Gordon & Gordon, P.C. approximately $815,000 in legal fees and related
disbursements (inclusive of the principal amount of the MSG&G Note), some of
which amount related to services rendered in 1993.
In July 1995, the Company issued (for benefits conferred upon the Company)
options to purchase 35,000 shares of Common Stock at $2.50 per share to David
Gordon, and options to purchase 35,000 shares of Common Stock at $2.50 per share
to Nahum Gordon, under the 1995 Option Plan. Such options became exercisable in
full on October 15, 1995 and expire ten years from the date of grant.
On February 27, 1995, Mr. Weiss loaned the Company $100,000 on a
non-interest bearing basis. Such loan was repaid in two equal installments of
$50,000 on March 13, 1995 and April 12, 1995, respectively, from revenues
generated by the Company.
Item 2
PROPOSAL TO AMEND THE COMPANY'S
CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED COMMON STOCK
The Company's Certificate of Incorporation presently authorizes the
issuance of 15,000,000 shares of Common Stock. As of August 27, 1996 there were
7,721,347 shares of Common Stock issued and outstanding and 5,761,214 reserved
for issuance under the Company's
<PAGE>
Page 17
1993 and 1995 Stock Option Plans, Class A Warrants, and other outstanding
warrants, options and convertible notes, leaving a balance of 1,517,439
authorized, unissued and unreserved shares of Common Stock.
Because of the limited number of shares of Common Stock available to be
issued, the Board of Directors has unanimously adopted resolutions approving an
amendment of the Certificate of Incorporation of the Company, subject to
approval of shareholders, to increase the authorized Common Stock from
15,000,000 shares to 30,000,000 shares. The Board recommends that shareholders
approve the amendment to Article FOURTH of the Certificate of Incorporation to
so increase the authorized Common Stock so that, as amended, Article FOURTH
shall read as follows:
"FOURTH: The total number of shares of stock which the corporation shall
have the authority to issue is 30,000,000 shares of Common Stock, par value
$.01 per share."
The additional shares of Common Stock would become part of the existing
class of Common Stock, and the additional shares, when issued, would have the
same rights and privileges as the shares of Common Stock now issued. There are
no pre-emptive rights relating to the Common Stock. If the proposed amendment is
approved by the shareholders, it will become effective upon filing and recording
a Certificate of Amendment as required by the General Corporation Law of the
State of Delaware.
Although the Company has no present plans, agreements, or understandings
regarding the issuance of the proposed additional shares, the Board of Directors
believes that adoption of the amendment is advisable because it will provide the
Company with greater flexibility in connection with possible future financing
transactions, acquisitions of other companies or business properties, stock
dividends or splits, employee benefit plans, and other proper corporate
purposes, and other programs to facilitate expansion and growth. Moreover,
having such additional authorized shares available will give the Company the
ability to issue shares without the expense and delay of a special meeting of
shareholders. Such a delay might deprive the Company of the flexibility the
Board views as important in facilitating the effective use of the Company's
shares. Except as otherwise required by applicable law or the National
Association of Securities Dealers Automated Quotation National Market System or
the rules thereunder, authorized but unissued shares of Common Stock may be
issued at such time, for such purposes, and for such consideration as the Board
of Directors may determine to be appropriate, without further authorization by
shareholders.
Since the issuance of additional shares of Common Stock, other than on a
pro rata basis to all current shareholders, would dilute the ownership interest
of a person seeking to obtain control of the Company, such issuance could be
used to discourage a change in control of the
<PAGE>
Page 18
Company by making it more difficult or costly. The Company is not aware of
anyone seeking to accumulate Common Stock or obtain control of the Company, and
has no present intention to use the additional authorized shares to deter a
change in control.
The affirmative vote of a majority of the outstanding shares of Common
Stock entitled to vote thereon, by proxy or in person, is needed to approve the
proposed amendment to the Company's Certificate of Incorporation to increase the
authorized shares of Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND THE
COMPANY'S CERTIFICATE OF INCORPORATION, AS SET FORTH ABOVE, AND YOUR PROXY WILL
BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
Item 3
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION
TO CHANGE THE COMPANY'S NAME TO PAPERCLIP SOFTWARE, INC.
On June 10, 1996, the Board of Directors unanimously approved an amendment
to the Company's Certificate of Incorporation to change the Company's name to
PaperClip Software, Inc, subject to approval of shareholders. This change is
intended to make the Company's name more accurately reflect its business.
As amended, Article FIRST of the Company's Certificate of Incorporation to
reflect the Company's new name shall read as follows:
"FIRST: The name of the corporation is PaperClip Software, Inc."
The affirmative vote of a majority of the outstanding shares of Common
Stock entitled to vote thereon, by proxy or in person, is needed to approve the
proposed amendment to the Company's Certificate of Incorporation to change its
name to PaperClip Software, Inc.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND THE
COMPANY'S CERTIFICATE OF INCORPORATION TO CHANGE ITS NAME TO PAPERCLIP SOFTWARE,
INC., AND YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
<PAGE>
Page 19
Item 4
PROPOSAL TO AMEND THE COMPANY'S
1995 STOCK OPTION PLAN
The Company's 1995 Option Plan, approved by shareholders in May 1995,
provides for incentive and non-qualified stock options to purchase Common Stock
to be issued to key employees, directors, former directors, consultants and
other persons who have conferred substantial benefit upon the Company, in order
to attract and retain such key personnel and executives with the ability to
achieve the corporate objectives necessary to increase shareholder value. Such
incentives encourage the holder to manage the Company's business in the best
interests of shareholders by creating an identity of interest with the
shareholders.
On August 23, 1996, the Board of Directors unanimously approved certain
amendments (the "Amendments") to the 1995 Option Plan (as amended, the "Amended
and Restated 1995 Stock Option Plan"), subject to shareholder approval. The
summary of the Amendments and material terms of the Amended and Restated 1995
Stock Option Plan, which is set forth below, should be read in conjunction with,
and is qualified in its entirety by, reference to the complete text of the
Amended and Restated 1995 Stock Option Plan, which is attached as Appendix A
hereto.
Administration
The Amendments provide that the Amended and Restated 1995 Stock Option Plan
shall be administered by a committee (the "Committee") consisting of either the
full Board of Directors or at least two directors, each of whom is an "outside
director" as that term is defined for purposes of Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"). Until there are members of the
Board who qualify as "outside directors," the full Board will administer the
Amended and Restated 1995 Stock Option Plan.
The Committee has the full power and authority, subject to the provisions
of the Amended and Restated 1995 Stock Option Plan, to designate participants,
grant options and determine the terms of all options, other than options granted
to Employee Directors and Non-Employee Directors pursuant to the formula
described below. The Committee has the right to make adjustments with respect to
options granted under the Amended and Restated 1995 Stock Option Plan in order
to prevent unfair dilution or enlargement of the rights of any holder. The
Amendments provide that members of the Board of Directors are not eligible to
receive options under the Amended and Restated 1995 Stock Option Plan other than
pursuant to the formula based awards for Employee Directors and Non-Employee
Directors described below.
<PAGE>
Page 20
Stock Options
The terms of specific options granted under the Amended and Restated 1995
Stock Option Plan are determined by the Committee, other than in the case of
formula based awards to Employee Directors and Non-Employee Directors. The per
share exercise price of the Common Stock subject to an option shall not be less
than 100% of the fair market value of the Common Stock on the date of grant,
unless, with respect to an option which is not an incentive stock option, the
Board approves a lower percentage with respect to such option. However, in the
case of an incentive stock option granted to a holder of shares representing at
least 10% of the total combined voting power of all classes of stock of the
Company or the parent or a subsidiary thereof (a "Substantial Shareholder"), the
per share exercise price shall not be less than 110% of the fair market value of
the Common Stock on the date of grant. The term of each option shall be
determined by the Committee, but no option shall be exercisable after ten years
have elapsed from the date upon which the option is granted. However, if an
incentive stock option is granted to a Substantial Holder, the term of such
option shall not exceed five years.
Upon the exercise of an option (including option grants to Employee
Directors and Non-Employee Directors under the provision for automatic grants
described below), the option holder shall pay the Company the exercise price
plus the amount of the required federal and state withholding taxes, if any. The
Amendments would allow an optionee, subject to approval of the Committee, to pay
the exercise price in shares of Common Stock, only if such Common Stock has been
held by the optionee for the requisite period necessary to avoid a charge to the
Company's earnings for financial reporting purposes (and otherwise meeting any
other requirements to avoid such charge). The Amendments would also allow an
optionee, subject to approval of the Committee, to pay the exercise price
pursuant to a broker-assisted cashless-exercise program established by the
Committee; provided in each case that such methods avoid "short-swing" profits
to the optionee under Section 16(b) of the Exchange Act. Withholding taxes due
upon such exercise may also be satisfied pursuant to such broker-assisted
cashless-exercise program. The Amendments limit the availability of the
alternative to pay the exercise price pursuant to a broker-assisted
cashless-exercise program so that such alternative is not available with respect
to incentive stock options outstanding as of the date of shareholder approval of
the Amended and Restated 1995 Stock Option Plan.
The Amendments also include certain other technical amendments to the
Amended and Restated 1995 Stock Option Plan, including, but not limited to (i)
the ability of the Committee to employ and rely on the advice of attorneys,
consultants and accountants, (ii) the ability for an optionee to, in a manner
established by the Committee, designate a beneficiary to exercise his rights,
and to receive any property distributable, with respect to any option upon the
death of such optionee, and (iii) expanding the termination provision of the
Amended and Restated 1995 Stock Option Plan so that, instead of terminating on
March 1, 2005, such plan will
<PAGE>
Page 21
terminate upon the earlier of (x) the date on which all shares of Common Stock
available for issuance thereunder shall have been issued, (y) the termination of
such plan by the Board of Directors, or (z) March 1, 2005.
The market value of the Common Stock underlying options granted, or to be
granted, under the Amended and Restated 1995 Stock Option Plan as of August 27,
1996 was $1,944,668.00.
Option Grants to Employee Directors and Non-Employee Directors
The Amendments add to the Amended and Restated 1995 Stock Option Plan a
provision for automatic annual grants of stock options to Employee Directors and
Non-Employee Directors. As of the date on which the shareholders approve the
Amendments, each (i) Employee Director who is a member of the Board on December
31 of a year during the term of the Amended and Restated 1995 Stock Option Plan
shall be eligible to receive a non-qualified stock option to purchase one
percent (1%) of the outstanding Common Stock of the Company on the date of grant
on the first business day of the following year and (ii) Non-Employee Director
who is a member of the Board on December 31 of a year during the term of the
Amended and Restated 1995 Stock Option Plan shall be eligible to receive a
non-qualified stock option to purchase one-fourth of one percent (1/4%) of the
outstanding Common Stock of the Company on the date of grant on the first
business day of the following year. The exercise price of the shares of Common
Stock subject to options granted to each such director shall be 100% of the fair
market value of the shares of Common Stock on the date of grant. Options granted
to such directors may only be exercised within ten years of the date of grant.
Such options terminate (i) three months after termination of the director's
service as a director of the Company (or if the director is also an employee or
consultant of the Company, three months after termination of such director's
service in all such capacities) for any reason other than disability (as such
term is defined by Section 22(e)(3) of the Code) or death, (ii) three months
after the date the director ceases to serve as a director of the Company due to
disability or (iii) (A) twelve months after the date the director ceases to
serve as a director due to the death of the director or (B) three months after
the death of the director if such death shall occur during the three month
period following the date the director ceased to serve as a director of the
Company due to disability. Except as discussed therein, options granted to
Employee Directors and Non-Employee Directors are on the same terms and
conditions as all other options granted pursuant to the Amended and Restated
1995 Stock Option Plan. Notwithstanding the foregoing, the Company reserves the
right in the Amendments to grant options to Employee Directors and Non-Employee
Directors under the other provisions of the Amended and Restated 1995 Stock
Option Plan at such time as the Committee shall be composed of at least two
"outside directors" and to dispense, at that time, with the provision for
automatic annual grants of stock options to such directors.
<PAGE>
Page 22
The following table sets forth the amount of options which would have been
granted to the three nominees in January 1996 under the Amended and Restated
1995 Stock Option Plan if the Amended and Restated 1995 Stock Option Plan had
been in effect in December 1995:
- --------------------------------------------------------------------------------
Name and Position Number of Options
- --------------------------------------------------------------------------------
William Weiss 71,995
Chief Executive Officer, Treasurer and Director
- --------------------------------------------------------------------------------
Sol Rosenberg 71,995
President, Chief Technology Officer and Director
- --------------------------------------------------------------------------------
Michael Suleski 71,995
Vice President (Engineering), Secretary and Director
- --------------------------------------------------------------------------------
Federal Income Tax Consequences
Set forth below is a description of the federal income tax consequences
under the Code, of the grant and exercise of the benefits awarded under the
Amended and Restated 1995 Stock Option Plan.
There will be no federal income tax consequences to employees, directors,
consultants or the Company on the grant of a non-qualified stock option. On the
exercise of a non-qualified stock option, the employee, consultant or director
generally will have taxable ordinary income equal to the excess of the fair
market value of the shares of Common Stock received on the exercise date over
the option price of such shares. The Company will be entitled to a tax deduction
in an amount equal to such excess, provided the Company complies with applicable
withholding and/or reporting requirements. Any ordinary income realized by an
employee, consultant or director upon exercise of a non-qualified stock option
will increase his tax basis in the Common Stock thereby acquired. Upon the sale
of Common Stock acquired by exercise of a non-qualified stock option, employees,
consultants and directors will realize long-term or short-term capital gain or
loss depending upon their holding period for such stock. An employee, consultant
or director who surrenders shares of Common Stock in payment of the exercise
price of a non-qualified stock option will not recognize gain or loss on his
surrender of such shares, but will recognize ordinary income on the exercise of
the non-qualified stock option as described above. Of the shares received in
such an exchange, that number of shares equal to the number of shares
surrendered will have the same tax basis and capital gains holding period as the
shares surrendered. The balance of the shares received will have a tax basis
equal to their fair market value on the date of exercise, and the capital gains
holding period will begin on the date of exercise.
<PAGE>
Page 23
With respect to incentive stock options, no compensation income is
recognized by a participant, and no deduction is available to the Company upon
either the grant or exercise of an incentive stock option. However, the
difference between the exercise price of an incentive stock option and the
market price of the Common Stock acquired on the exercise date will be included
in alternative minimum taxable income of a participant for the purposes of the
"alternative minimum tax." Generally, if an optionee holds the shares acquired
upon exercise of incentive stock options until the later of (i) two years from
the grant of the incentive stock options or (ii) one year from the date of
acquisition of the shares upon exercise of incentive stock options, any gain
recognized by the participant on a sale of such shares will be treated as
capital gain. The gain recognized upon the sale is the difference between the
option price and the sale price of the Common Stock. The net federal income tax
effect on the holder of incentive stock options is to defer, until the shares
are sold, taxation of any increase in the value of the Common Stock from the
time of grant to the time of exercise. If the optionee sells the shares prior to
the expiration of the holding period set forth above, the optionee will realize
ordinary compensation income generally in the amount equal to the difference
between the exercise price and the fair market value on the date of exercise.
The compensation income will be added to the optionee's basis for purposes of
determining the gain on the sale of the shares. Such gain will be capital gain
if the shares are held as capital assets. If the application of the
above-described rule would result in a loss to the optionee, the compensation
income required to be recognized thereby would be limited to the excess, if any,
of the amount realized on the sale over the basis of the shares sold. If an
optionee disposes of shares obtained upon exercise of an incentive stock option
prior to the expiration of the holding period described above, the Company will
be entitled to a deduction in the amount of the compensation income that the
optionee recognizes as a result of the disposition.
If the Company delivers cash, in lieu of fractional shares, the employee
will recognize ordinary income equal to the cash paid and the fair market value
of any shares issued as of the date of exercise. An amount equal to any such
ordinary income will be deductible by the Company, provided it complies with
applicable withholding requirements.
Section 162(m) of the Code generally limits the annual deduction available
to a publicly held corporation for applicable remuneration paid to the Chief
Executive Officer and certain other highly compensated individuals to $1,000,000
per year. Regulations promulgated under Section 162(m) of the Code provide that
compensation payable pursuant to a plan or arrangement (such as the Amended and
Restated 1995 Stock Option Plan), which was in existence during the period prior
to the time that the corporation became publicly-held, is not subject to, or
counted toward, the $1,000,000 limitation; provided that the corporation made
certain required disclosures at the time of its initial public offering.
Accordingly, the options granted under the Amended and Restated 1995 Stock
Option Plan will be exempt from the provisions of Code Section 162(m) so long as
they are not "materially modified."
<PAGE>
Page 24
The Amended and Restated 1995 Stock Option Plan is not subject to any
provisions of the Employee Retirement Income Security Act of 1974 and is not
required to be qualified under Section 401(a) of the Code.
The affirmative vote of a majority of the shares present at the meeting
entitled to vote thereon, by proxy or in person, is required to approve the
Amendments.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND AND
RATIFY THE COMPANY'S 1995 STOCK OPTION PLAN, AS SET FORTH ABOVE, AND YOUR PROXY
WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
AUDITORS
The Board of Directors has reappointed Arthur Andersen LLP as its
independent accountants to audit the financial statements of the Company for the
current fiscal year. That firm has acted as accountants for the Company since
1992.
A representative of Arthur Andersen LLP is expected to be present at the
Annual Meeting and will have the opportunity to make a statement if desired to
do so. The representative will also be available to respond to appropriate
questions from any shareholder present at the meeting.
SUBMISSION OF SHAREHOLDER PROPOSALS
Any shareholder proposal to be considered by the Company for inclusion in
the 1997 Proxy Statement must be received by the Company not later than June 2,
1997. Any such proposal should be sent to the Secretary of the Company, Three
University Plaza, Hackensack, New Jersey 07601. Any such proposal should provide
the reason for it, the complete text of any resolution and other specified
matters, and must comply with Rule 14a-8 of Regulation 14A of the proxy rules of
the Securities and Exchange Commission.
OTHER MATTERS
Management is not aware of any other matter to be presented for action at
the meeting other than the proposals to (i) elect directors, (ii) amend the
Certificate of Incorporation to increase the authorized shares of Common Stock
from 15,000,000 shares to 30,000,000 shares, (iii) amend the Certificate of
Incorporation to change the Company's name, and (iv) to approve the Amendments
to the Company's 1995 Option Plan as set forth in the accompanying Notice of
Annual Meeting and in this Proxy Statement, and management does not intend to
bring any other matter before the meeting. However, if any other matter should
be presented at the meeting, it is
<PAGE>
Page 25
the intention of the persons named in the accompanying proxy to vote said proxy
in accordance with their best judgment and in the best interests of the Company.
AVAILABILITY OF FORM 10-KSB ANNUAL REPORT
A copy of the Company's Annual report on Form 10-KSB and Form 10-KSB/A for
the year ended December 31, 1995, has been included in this Proxy Statement, but
exclusive of certain exhibits filed therewith. These exhibits are available
without charge to shareholders of record on September 26, 1996 upon request to
Michael Suleski, Secretary, Three University Plaza, Hackensack, New Jersey
07601.
BY ORDER OF THE BOARD OF DIRECTORS
Michael Suleski, Secretary
Hackensack, New Jersey
August 28, 1996
<PAGE>
Page 26
Appendix A
PAPERCLIP IMAGING SOFTWARE, INC.
AMENDED AND RESTATED 1995 STOCK OPTION PLAN
PAPERCLIP IMAGING SOFTWARE, INC. hereby adopts an amended and restated
stock option plan upon and subject to the terms and provisions set forth below
for the benefit of certain of its key employees, directors, former directors,
consultants, and other persons who have conferred substantial benefit upon the
Company.
1. Definitions. The following terms shall have the meanings set forth below
whenever used in this instrument:
a. The word "Board" shall mean the Board of Directors of the Company.
b. The word "Code" shall mean the United States Internal Revenue Code of
1986, as amended from time to time (Title 26 of the United States
Code).
c. The word "Committee" shall mean the Compensation Committee designated
by the Board to administer the Plan and consisting of either the full
Board or at least two directors, each of whom is an "outside director"
as that term is defined for purposes of Section 162(m) of the Code.
Until there are members of the Board who qualify as "outside
directors," the Committee shall consist of the full Board.
d. The words "Common Stock" shall mean the common shares, $.01 par value
per share, of the Company.
e. The word "Company" shall mean PaperClip Imaging Software, Inc., a
Delaware Corporation, and any successor thereto which shall maintain
this Plan.
<PAGE>
Page 27
f. The words "Fair Market Value" shall have the meaning set forth in
Section 7(a) hereof.
g. The words "Incentive Stock Option" shall mean any option which
qualifies as an incentive stock option under terms of Section 422 of
the Code or any successor provision thereto.
h. The words "Key Employee" shall mean any person whose performance as an
employee of the Company or a Subsidiary is, in the judgment of the
Committee, important to the successful operation of the Company or a
Subsidiary.
i. The words "Non-Qualified Stock Option" shall mean an option granted
under Section 7 of the Plan that is not an Incentive Stock Option,
including any option granted under Section 8 hereof.
j. The word "Optionee" shall mean any Key Employee, director, former
director, or consultant or other person (who has conferred substantial
benefit upon the Company), to whom a stock option has been granted
pursuant to this Plan.
k. The word "Parent" shall mean any corporation which owns, directly or
indirectly, stock of the Company possessing at least 50% of the total
combined voting power of all classes of stock of the Company.
l. The word "Plan" shall mean the PaperClip Imaging Software, Inc.
Amended and Restated 1995 Stock Option Plan, as set forth in this
document, and as it may be amended hereafter.
m. The word "Subsidiary" shall mean any corporation in which the Company
owns,
<PAGE>
Page 28
directly or indirectly, stock possessing at least 50% of the total combined
voting power of all classes of stock of such corporation.
n. The words "Substantial Shareholder" shall mean any Optionee who owns
more than 10% of the total combined voting power of all classes of
stock of either the Company or any Parent or Subsidiary. Ownership
shall be determined in accordance with Section 424(d) of the Code and
lawful applicable regulations thereof.
2. Purpose of the Plan. The purpose of the Plan is to provide Key
Employees, directors, former directors, consultants, and other persons who have
conferred substantial benefit upon the Company, with greater incentive to serve
and promote the interests of the Company and its shareholders and/or to reward
such persons for extraordinary services rendered to the Company or on its behalf
or substantial benefit conferred upon it. Accordingly, the Company will, from
time to time during the effective period of the Plan, grant to such Key
Employees, directors, former directors, consultants, and other persons who have
conferred substantial benefit upon the Company, as may be selected to
participate in the Plan, options to purchase Common Stock on the terms and
subject to the conditions set forth in the Plan.
3. Effective Date of the Plan. The Plan became effective as of May 1, 1995,
subject to approval by holders of a majority of the outstanding shares of voting
capital stock of the Company, which was obtained in May 1995.
4. Administration of the Plan. (a) The Plan shall be administered by the
Committee. A majority 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, or acts approved in writing by all of the
<PAGE>
Page 29
members, shall be acts of the Committee.
(b) Subject to the terms and conditions of the Plan and applicable law, and
except as provided in Section 8 hereof, and in addition to the other
authorizations granted to the Committee under the Plan, the Committee shall have
full and final authority in its absolute discretion:
i. to select the Key Employees, former directors, consultants, and other
persons who have conferred substantial benefit upon the Company, other
than any member of the Board, to whom options will be granted;
ii. to determine the number of shares of Common Stock subject to any
option;
iii. to determine the time when options will be granted;
iv. to determine the terms and conditions of any option;
v. to determine the time when each option may be exercised;
vi. to determine at the time of grant of an option whether and to what
extent such option is an Incentive Stock Option;
vii. to prescribe the form of the option agreements governing the options
which are granted under the Plan and to set the provisions of such
option agreements as the Committee may deem necessary or desirable,
provided such provisions are not contrary to the terms and conditions
of either the Plan or, where the option is an Incentive Stock Option,
Section 422 of the Code;
viii. to adopt, amend, and rescind such rules and regulations as, in the
Committee's opinion, may be advisable in the administration of the
Plan; and
ix. to construe, interpret and administer the Plan, the rules and
regulations and
<PAGE>
Page 30
the instruments evidencing options granted under the Plan and to make
all other determinations deemed necessary or advisable for the
administration of the Plan.
(c) Any decision made or action taken by the Committee in connection with
the administration, interpretation, and implementation of the Plan and of its
rules and regulations, shall, to the extent permitted by law, be conclusive and
binding upon all Optionees under the Plan and upon any person claiming under or
through such an Optionee. The Committee may employ attorneys, consultants,
accountants or other persons and the Committee, the Company and its officers and
the Board shall be entitled to rely upon the advice, opinions or valuations of
any such persons. Neither the Committee nor any of its members shall be liable
for any act taken in good faith by the Committee pursuant to the Plan. No member
of the Committee shall be liable for the act of any other member.
5. Persons Eligible for Options. Subject to the restrictions herein
contained, options may be granted from time to time in the discretion of the
Committee only to such Key Employees, former directors, consultants and other
persons who have conferred substantial benefit upon the Company, as designated
by the Committee, whose initiative and efforts, in the Committee's judgment,
have contributed or may be expected to contribute to the continued growth and
future success of the Company and/or its Subsidiaries. Except as provided in
Section 8 hereof, the Board shall not be eligible to receive an option under the
Plan. No option shall be granted to any Key Employee during any period of time
when he is on leave of absence. The Committee may grant more than one option to
the same Optionee.
<PAGE>
Page 31
6. Shares Subject to the Plan. a. Subject to the provisions of paragraph
(b) of this Section 6, the aggregate number of shares of Common Stock for which
options may be granted under the Plan shall be 1,000,000 shares of Common Stock
(as adjusted for a 2 for 1 stock split effective as of May 31, 1996), each of
which may be the subject of an Incentive Stock Option as the Committee may
determine in its sole discretion. Either treasury or authorized and unissued
shares of Common Stock, or both, in such amounts, within the maximum limit of
the Plan, as the Committee shall from time to time determine, may be so issued.
All shares of Common Stock which are the subject of any lapsed, expired or
terminated options may be made available for reoffering under the Plan to any
Optionee. If an option granted under this Plan is exercised, any Common Stock
which is the subject thereof shall not thereafter be available for reoffering
under the Plan.
b. In the event that subsequent to the date of adoption of the Plan by the
Board, the outstanding shares of Common Stock are, as a result of a stock split,
stock dividend, combination or exchange of shares, exchange for other
securities, reclassification, reorganization, redesignation, merger,
consolidation, recapitalization or other such change, including without
limitation any transaction described in Section 424(a) of the Code, increased or
decreased or changed into or exchanged for a different number or kind of shares
of stock or other securities of the Company, then (i) there shall automatically
be substituted for each share of Common Stock subject to an unexercised option
granted under the Plan and each share of Common Stock available for additional
grants of options under the Plan the number and kind of shares of stock or other
securities into which each outstanding share of Common Stock shall be exchanged,
(ii) the option price per share of Common Stock or unit of securities shall be
increased or decreased proportionately so that the aggregate
<PAGE>
Page 32
purchase price for the securities subject to the option shall remain the same as
immediately prior to such event, and (iii) the Committee shall make such other
adjustments to the securities subject to options, the provisions of the Plan,
and option agreement as may be appropriate, equitable and in compliance with the
provisions of Section 424(a) of the Code to the extent applicable and any such
adjustment shall be final, binding and conclusive as to each Optionee; provided,
however, in each case, that (y) with respect to Incentive Stock Options, no such
adjustment shall be authorized to the extent that such adjustment would cause
the Plan to violate Section 422 of the Code or any successor provision thereto;
and (z) any such adjustment shall provide for the elimination of fractional
shares.
7. Option Provisions. The Committee is hereby authorized to grant options
to Key Employees, former directors, consultants and other persons who have
conferred substantial benefit upon the Company, as designated by the Committee,
upon the following terms and conditions (except to the extent otherwise provided
in Section 8 hereof) and with such additional terms and conditions, in either
case not inconsistent with the provisions of the Plan, as the Committee shall
determine:
a. Option Price. The option price per share of Common Stock which is the
subject of an Incentive Stock Option shall be determined by the Committee at the
time of grant but shall not be less than one hundred percent (100%) of the Fair
Market Value of a share of Common Stock on the date the option is granted;
provided, however, that if a Key Employee to whom an Incentive Stock Option is
granted is, at the time of the grant, a Substantial Shareholder, the option
price per share of Common Stock shall be determined by the Committee but shall
not be less than one hundred ten percent (110%) of the Fair Market Value of a
share of Common Stock on the date the option is
<PAGE>
Page 33
granted. The option price per share of Common Stock under each option granted
pursuant to the Plan which is not an Incentive Stock Option shall be determined
by the Committee at the time of grant but shall not be less than one hundred
percent (100%) of the Fair Market Value of a share of Common Stock on the date
the option is granted, unless the Board shall have approved a lower percentage
with respect to such option. Such Fair Market Value shall be determined in
accordance with procedures to be established by the Committee (the "Fair Market
Value"). The day on which the Committee approves the granting of an option shall
be deemed for all purposes hereunder the date on which the option is granted.
b. Term of Option. The Committee shall determine when each option is to
expire, but no option shall be exercisable after ten (10) years have elapsed
from the date upon which the option is granted; provided, however, that no
Incentive Stock Option granted to a person who is a Substantial Shareholder at
the time of the grant of such option shall be exercisable after five (5) years
have elapsed from the date upon which the option is granted.
c. Limitation on Exercise and Transfer of Option. Except as otherwise
provided in paragraph (e) of this Section 7, only the Optionee (personally) may
exercise an option; provided, however, that, under applicable law with respect
to any option that is not an Incentive Stock Option, a guardian or other legal
representative who has been duly appointed for such Optionee may exercise such
option on behalf of the Optionee. Subject to Section 422 of the Code, no option
granted hereunder, and no right under any such option, shall be assignable,
alienable, saleable or transferable otherwise than by will or by the laws of
descent and distribution; provided, however, that, if so determined by the
Committee, an Optionee may, in the manner established by the Committee,
<PAGE>
Page 34
designate a beneficiary or beneficiaries to exercise the rights of the Optionee,
and to receive any property distributable, with respect to any option upon the
death of the Optionee. No option granted hereunder, and no right under any such
option, may be pledged or hypothecated, nor shall any such option be subject to
execution, attachment or similar process and any purported pledge,
hypothecation, execution or attachment thereof shall be void and unenforceable
against the Company or any Parent or Subsidiary.
d. Conditions Governing Exercise of Option. The Committee may, in its
absolute discretion, either require that, prior to the exercise of any option
granted hereunder, the Optionee shall have been an employee for a specified
period of time after the date such option was granted, or make any option
granted hereunder immediately exercisable. Each option shall be subject to such
additional restrictions or conditions with respect to the time and method of
exercise as shall be prescribed by the Committee. Upon satisfaction of any such
conditions, the option (including an option granted under the provision for
automatic grants contained in Section 8 hereof) may be exercised in whole or in
part at any time during the option period. Options shall be exercised by the
Optionee giving written notice to the Company of the Optionee's exercise of the
option accompanied by full payment of the purchase price either in cash or, with
the consent of the Committee, in whole or in part (i) in shares of Common Stock
held by the Optionee for the requisite period necessary to avoid a charge to the
Company's earnings for financial reporting purposes (and otherwise meeting any
other requirements to avoid such charge) having a Fair Market Value on the date
the option is exercised equal to that portion of the purchase price for which
payment in cash is not made or (ii) pursuant to a broker-assisted
cashless-exercise program established by the Committee; provided in
<PAGE>
Page 35
each case that such methods avoid "short-swing" profits to the Optionee under
Section 16(b) of the Exchange Act. Notwithstanding any of the foregoing, the
alternative referenced in (ii) shall not be available with respect to Incentive
Stock Options outstanding as of the date of stockholder approval of the Plan. A
dissolution or liquidation of the Company or, unless the surviving corporation
assumes said options, a merger or consolidation in which the Company is not the
surviving corporation, shall cause each outstanding option to terminate,
provided that during the option term each Optionee shall have the right during
the period prescribed in the option agreement prior to such dissolution or
liquidation, or merger or consolidation in which the Company is not the
surviving corporation, to exercise his option in whole or in part.
e. Termination of Employment, Etc. If an Optionee who is a Key Employee
ceases to be an employee of the Company, and all Subsidiaries, his option shall,
unless otherwise provided in Section 8 hereof or in the option agreement between
the Optionee and the Company, terminate on the date which is three (3) months
after such date to exercise all or any part of the option. An Optionee's
employment shall not be deemed to have terminated while he is on a military,
sick or other bona fide approved leave of absence from the Company or a
Subsidiary as such a leave of absence is described in Section 1.421-7(h) of the
Federal Income Tax Regulations or any lawful successor regulations thereto. If
the stock option is an Incentive Stock Option, no option agreement shall:
i. permit any Optionee to exercise any Incentive Stock Option more than
three (3) months after the date the Optionee ceased to be employed by
the Company or any Subsidiary if the reason for the Optionee's
cessation of employment was other than
<PAGE>
Page 36
his death or his disability (as such term is defined by Section
22(e)(3) of the Code); or
ii. permit any Optionee to exercise any Incentive Stock Option more than
twelve (l2) months after the date the Optionee ceased to be employed
by the Company or any Subsidiary if the reason for the Optionee's
cessation of employment was the Optionee's disability (as such term is
defined by Section 22(e)(3) of the Code); or
iii. permit any person to exercise any Incentive Stock Option more than
twelve (l2) months after the date the optionee ceased to be employed
by the Company or any Subsidiary if either (A) the reason for the
Optionee's cessation of employment was his death or (B) the Optionee
died within three (3) months after ceasing to be employed by the
Company or any Subsidiary.
If any option is, by the terms of the option agreement related to such option,
exercisable following the Optionee's death, then such option shall be
exercisable by the Optionee's estate, or the person designated in the Optionee's
Last Will and Testament, or the person to whom the option was transferred by the
applicable laws of descent and distribution.
f. Limitations on Grant of Incentive Stock Options. During the calendar
year in which any Incentive Stock Option granted under this Plan, or any other
plan of the Company or a Parent or Subsidiary, first becomes exercisable, the
aggregate Fair Market Value of the shares of Common Stock which are subject to
such Incentive Stock Option (determined as of the date the Incentive Stock
Option was granted) shall not exceed the sum of One Hundred Thousand dollars
($100,000). Options which are not designated as Incentive Stock Options shall
not be subject to the limitations
<PAGE>
Page 37
described in the preceding sentence and shall not be counted when applying such
limitation.
g. Prohibition of Alternative Options. It is intended that Optionees who
are Key Employees may be granted, simultaneously or from time to time, Incentive
Stock Options or other stock options, but no Key Employees shall be granted
alternative rights in Incentive Stock Options and other stock options so as to
prevent options granted as Incentive Stock Options from qualifying as such
within the meaning of Section 422 of the Code.
8. Options Awarded to Directors. Each director who is a member of the Board
and an executive officer of the Company on December 31 of a year during the term
of the Plan shall automatically be granted a Non-Qualified Stock Option to
purchase one percent (1%) of the outstanding Common Stock of the Company on the
date of grant on the first business day of the following year. Each director who
is a member of the Board and is not an executive officer of the Company on
December 31 of a year during the term of the Plan shall automatically be granted
a Non-Qualified Stock Option to purchase one-fourth of one percent (1/4%) of the
outstanding Common Stock of the Company on the date of grant. All options
granted pursuant to this Section 8 shall (a) be at an exercise price per share
of Common Stock equal to 100% of the Fair Market Value of a share of Common
Stock on the date of the grant; (b) have a term of ten (10) years; (c) terminate
(i) three (3) months after termination of a director's service as a director of
the Company (or if the director is also an employee or consultant of the
Company, three (3) months after termination of such director's service in all
such capacities) for any reason other than disability (as such term is defined
by Section 22(e)(3) of the Code) or death, (ii) three (3) months after the
date the director ceases to serve as a director of the Company due to
disability (as such term is defined by Section
<PAGE>
Page 38
22(e)(3) of the Code), or (iii) (A) twelve (12) months after the date the
director ceases to serve as a director due to death or (B) three (3) months
after the death of the director if the director died during the three month
period following the date the director ceased to serve as a director of the
Company due to disability (as such term is defined by Section 22(e)(3) of the
Code); and (d) be otherwise on the same terms and conditions as all other
options granted pursuant to the Plan. Notwithstanding any of the foregoing, the
Company reserves the right to grant options to directors under the other
provisions of the Plan upon the Committee being composed of at least two
"outside directors" and to dispense, at that time, with the automatic option
grants to directors provided in this Section 8.
9. Amendments to the Plan. (a) Except to the extent prohibited by
applicable law and unless otherwise expressly provided in an option agreement or
in the Plan, the Committee is authorized to interpret the Plan and from time to
time adopt any rules and regulations for carrying out the Plan that it may deem
advisable. Subject to the approval of the Board, the Committee may at any time
amend, modify, suspend or terminate the Plan. In no event, however, without the
approval of the Company's shareholders, shall any action of the Committee or the
Board result in:
i. amending, modifying or altering the eligibility requirements provided
in Section 5 hereof; or
ii. increasing or decreasing, except as provided in Section 6 hereof, the
maximum number of shares of Common Stock for which options may be
granted; or
<PAGE>
Page 39
iii. decreasing the minimum option price per share of Common Stock at which
options may be granted under the Plan, as provided in Section 7(a)
hereof; or
iv. extending either the maximum term during which an option is
exercisable as provided in Section 7(b) hereof or the date on which
the Plan shall be terminated as provided in Section 14 hereof; or
v. changing the requirements relating to the Committee; or
vi. making any other change which would cause any option granted under the
Plan as an Incentive Stock Option not to qualify as an Incentive Stock
Option; or
vii. amending, modifying or altering the plan to the extent that such
action would require approval of the Company's shareholders under
Section 162 (m) of the Code;
except as necessary to conform the Plan and the option agreements to changes in
the Code or other governing law. However, no such amendment, modification or
alteration shall, without the consent of the option holders, adversely affect
their rights and obligations under their outstanding options.
(b) Correction of Defects, Omissions, and Inconsistencies. The Committee
may correct any defect, supply any omission or reconcile any inconsistency in
the Plan or any option granted under the Plan in the manner and to the extent it
shall deem desirable to carry the Plan into effect.
10. Election to Have Shares Withheld. Except with respect to an option
which at the time of grant was intended to be an Incentive Stock Option, in
combination with or in substitution for cash withholding or any other legal
method of satisfying federal and state withholding tax
<PAGE>
Page 40
liability, an Optionee may elect to participate in a broker-assisted
cashless-exercise program and have the proceeds of the shares of Common Stock
held by the Optionee sold pursuant to such broker-assisted cashless-exercise
program withheld by the Company in order to satisfy federal and state
withholding tax liability (a "share withholding election"); provided, (i) the
Committee shall not have revoked its advance approval of the option holder's
share withholding election; and (ii) the election to satisfy such tax liability
through such broker-assisted cashless-exercise program is made on or prior to
the date on which the amount of withholding tax liability is determined.
11. Investment Representation, Approvals and Listing. The Committee may
condition its grant of any option hereunder upon receipt of an investment
representation from the Optionee which shall be substantially similar to the
following:
"Optionee agrees that any shares of Common Stock of
PaperClip Imaging Software, Inc. (the "Company") which he may
acquire by virtue of the exercise of this option shall be
acquired for investment purposes only and not with a view to
distribution or resale; provided, however, that this restriction
shall become inoperative in the event the underlying shares of
Common Stock of the Company which are subject to this option
shall be registered under the Securities Act of 1933, as amended,
or in the event there is presented to the Company an opinion of
counsel satisfactory to counsel for the Company to the effect
that the offer or sale of the shares of Common Stock of the
Company which are subject to this option may lawfully be made
without registration under the Securities Act of 1933, as
amended."
The Company shall not be required to issue any certificates for shares of Common
Stock upon the exercise of an option granted under the Plan prior to
(i) obtaining any approval from any
<PAGE>
Page 41
governmental agency which the Committee shall, in its sole discretion, determine
to be necessary or advisable, (ii) the admission of such shares to listing on
any national securities exchange on which the shares of Common Stock may be
listed, (iii) completion of any registration or other qualification of the
shares of Common Stock under any state or federal law or ruling or regulations
of any governmental body which the Committee shall, in its sole discretion,
determine to be necessary or advisable, or the determination by the Committee,
in its sole discretion, that any registration or other qualification of the
shares of Common Stock is not necessary or advisable, and (iv) obtaining an
investment representation from the Optionee in the form set forth above or in
such other form as the Committee, in its sole discretion, shall determine to be
adequate.
12. General Purposes.
a. No Right to Awards or Equal Terms. No Key Employee, consultant, former
director or other person who has conferred substantial benefit upon the Company
shall have any claim to be granted an option under the Plan. The form and
substance of option agreements, whether granted at the same or different times,
need not be identical.
b. No Limit on Other Plans. Nothing contained in the Plan shall prevent the
Company or any Parent or Subsidiary from adopting or continuing in effect other
or additional compensation arrangements and such arrangements may be either
generally applicable or applicable only in specific cases.
c. No Right to be Employed, Etc. Nothing in the Plan or in any option
agreement shall confer upon any Optionee any right to continue in the employ of
the Company or any Subsidiary, or to serve as a member of the Board, or to be
entitled to receive any remuneration or benefits not
<PAGE>
Page 42
set forth in the Plan or such option agreement, or to interfere with or limit
either the right of the Company or any Subsidiary to terminate the employment of
such Optionee at any time or the right of the shareholders of the Company to
remove him as a member of the Board with or without cause.
d. Optionee Does Not Have Rights of Shareholder. Nothing contained in the
Plan or in any option agreement shall be construed as entitling any Optionee to
any rights of a shareholder as a result of the grant of an option until such
time as shares of Common Stock are actually issued to such Optionee pursuant to
the exercise of an option.
e. Successors in Interest. The Plan shall be binding upon the successors
and assigns of the Company.
f. No Liability Upon Distribution of Shares. The liability of the Company
under the Plan and any distribution of shares or Common Stock made hereunder is
limited to the obligations set forth herein with respect to such distribution
and no term or provision of the Plan shall be construed to impose any liability
on the Company or the Committee in favor of any person with respect to any loss,
cost or expense which the person may incur in connection with or arising out of
any transaction in connection with the Plan.
g. Use of Proceeds. The cash proceeds received by the Company from the
issuance of shares of Common Stock pursuant to the Plan will be used for general
corporate purposes.
h. Expenses. The expenses of administering the Plan shall be borne by the
Company.
i. Captions. The captions and section numbers appearing in the Plan are
inserted only as a matter of convenience. They do not define, limit, construe or
describe the scope or intent of the provisions of the Plan.
<PAGE>
Page 43
j. Number. The use of the singular or plural herein shall not be
restrictive as to number and shall be interpreted in all cases as the context
may require.
k. Gender. The use of the feminine, masculine or neuter pronoun shall not
be restrictive as to gender and shall be interpreted in all cases as the context
may require.
l. No Fractional Shares. No fractional shares of Common Stock shall be
issued or delivered pursuant to the Plan or any option granted under the Plan,
and the Committee shall determine whether cash, other securities, or other
property shall be paid or transferred in lieu of any fractional shares of Common
Stock or whether such fractional shares of Common Stock or any rights thereto
shall be canceled, terminated, or otherwise eliminated.
m. Severability. If any provision of the Plan or any option granted under
the Plan is or becomes or is deemed to be invalid, illegal, or unenforceable in
any jurisdiction, or would disqualify the Plan or any option granted under the
Plan under any law deemed applicable by the Committee, such provision shall be
construed or deemed amended to conform to applicable laws, or if it cannot be
construed or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan, such provision shall be deemed void
and stricken and the remainder of the Plan and any such option shall remain in
full force and effect.
13. Deductibility of Compensation under the Plan. Prior to the termination
of the "reliance period" set forth in Treasury Regulation Section
1.162-27(f)(2), the Committee shall determine whether and what actions to take
to ensure that options granted under the Plan after the expiration of the
"reliance period" constitute "performance-based compensation" within the meaning
of Section 162(m) of the Code. After the expiration of the "reliance period,"
provided that the
<PAGE>
Page 44
Committee consists solely of "outside directors," the Company believes that
options under the Plan will be exempt from the limitations of Section 162(m) of
the Code as "performance-based" compensation.
14. Termination of the Plan. The Plan shall terminate upon the earlier of
(i) the date on which all shares of Common Stock available for issuance under
the Plan shall have been issued, (ii) the termination of the Plan by the Board,
or (iii) on March 1, 2005, and thereafter no options shall be granted under the
Plan. All options outstanding at the time of termination of the Plan shall
continue in full force and effect according to the terms of the option
agreements governing such options and the terms and conditions of the Plan, and
unless otherwise provided in the Plan or in the applicable option agreement, the
authority of the Committee to amend, alter, adjust, suspend, discontinue, or
terminate any such option or to waive any conditions or rights under any such
option, and the authority of the Board to amend the Plan, shall extend beyond
such date.
<PAGE>
Page 45
Appendix B
PROXY
PAPERCLIP IMAGING SOFTWARE, INC.
Proxy solicited on behalf of the Board of Directors
of PaperClip Imaging Software, Inc. for the Annual Meeting of Shareholders
October 29, 1996
The undersigned, whose signature appears on the reverse side, hereby appoints
William Weiss and Wayne Hendon, jointly and severally, proxies with full power
of substitution to vote all shares of Common Stock the undersigned is entitled
to vote at the Annual Meeting of Shareholders of PAPERCLIP IMAGING SOFTWARE,
INC. on Tuesday, October 29, 1996, or adjournments thereof, on Items 1 through 4
as specified on the reverse side hereof (with discretionary authority under Item
1 to vote for a new nominee if any nominee has become unavailable) and on such
other matters as may properly come before the meeting.
Nominees for Director:
William Weiss, Sol Rosenberg and Michael Suleski
You are encouraged to specify your choices by marking the appropriate boxes,
[SEE REVERSE SIDE], but you need not mark any boxes if you wish to vote in
accordance with the Board of Director's recommendations.
<PAGE>
Page 46
|X| Please mark your votes as in this example.
This proxy when properly executed will be voted as you specify below. If
you do not specify otherwise, the proxy will be voted FOR election of directors
and FOR Items 2, 3 and 4.
The Board of Directors recommends a vote FOR Items 1-4.
The undersigned acknowledges receipt of the accompanying Proxy Statement
dated August 28, 1996.
1. Election of Directors (See Reverse) FOR [ ] WITHHELD [ ]
For, except vote withheld from the following nominee(s):
- --------------------------------------------------------
2. Proposal to approve the amendment to Article FOURTH of the Company's
Certificate of Incorporation to increase the authorized Common Stock from
15,000,000 shares to 30,000,000 shares.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Proposal to approve the amendment to Article FIRST of the Company's
Certificate of Incorporation to change its name to PaperClip Software, Inc.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Proposal to approve and ratify the amendments to the Company's 1995 Stock
Option Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. In their discretion, such other business as may properly come before the
meeting.
Signature DATE , 1996
------------------------------------------ ---------------
Signature DATE , 1996
------------------------------------------ ---------------
(Please sign exactly as name appears on this Proxy. When signing as executor,
administrator, trustee or the like please give full title. If more than one
trustee, all should sign. Joint owners must sign.)
I will attend the meeting [ ]
