U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB
(Mark One)
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required] for the fiscal year ended September
30, 1995.
[ ] Transition Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required] for the transition period from
_______________ to _______________.
Commission File No.: 1-5270
SOFTNET SYSTEMS, INC.
(Name of small business issuer in its charter)
New York 11-1817252
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
717 Forest Avenue, Lake Forest, Illinois 60045
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (708) 266-8150
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
Common Stock, par American Stock Exchange
value $.01 per share
Securities registered under Section 12(g) of the Exchange Act: None
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes [ X ] No [ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB. [ ]
SoftNet Systems, Inc. and subsidiaries's consolidated revenues for the
fiscal year ended September 30, 1995 were $21,252,290.
The registrant estimates that the aggregate market value of the
registrant's Common Stock held by non-affiliates on December 26, 1995 (based
upon an estimate that approximately 87% of the shares are so owned by non-
affiliates and upon the closing sales price for the Common Stock on the
American Stock Exchange on that date) was approximately $45,243,000.
Determination of stock ownership by non-affiliates was made solely for the
purpose of responding to this requirement and registrant is not bound by this
determination for any other purpose.
As of September 30, 1995, 5,547,033 shares of the registrant's Common
Stock were outstanding.
The following documents are incorporated into this Form 10-K by
reference:
Proxy Statement for Annual Meeting of Shareholders to be held
on February 28, 1996 (Part III).
PART I
ITEM 1. BUSINESS
OVERVIEW
SoftNet Systems, Inc. (the "Company") is engaged in the business of
developing, marketing, installing and servicing electronic information and
document management systems that allow customers to electronically request
and electronically receive information. The Company operates through two
divisions; telecommunications and document management.
The telecommunications division provides communication solutions through
the design, implementation, maintenance and integration of voice, data and
video communication equipment and service. The telecommunications division
is comprised of the Company's wholly-owned subsidiaries, Communicate Direct,
Inc. ("CDI") (which was acquired on October 31, 1994) and Kansas
Communications, Inc. ("KCI") (which was acquired on September 15, 1995). The
Company's telecommunications products include telephone systems and call
processing systems (including call centers, voice messaging, interactive
voice response ("IVR") and computer telephone integration ("CTI")). These
products are manufactured by third parties. Additionally, the Company
develops software for IVR and CTI applications, sells and installs local and
long distance network services, provides maintenance services for existing
customers and provides cabling and data communications. The
telecommunications division markets its products and services principally to
customers with 25 or more telephones located in the midwest.
The document management division designs, develops, manufactures and
integrates comprehensive, non-paper based systems and components that enable
the Company to deliver to its customers cost-effective solutions for storage,
indexing and/or distribution of high-volume computer generated or entered
information. The document management division is operated through the
Company's wholly owned subsidiary Micrographic Technology Corporation ("MTC")
(which was acquired on September 15, 1995) and the Company's integrated
solutions group. These systems, which include both hardware and software
products, are based on industry standard client-server architecture providing
flexibility to connect to a wide variety of information systems. The
hardware manufactured by the Company includes a family of computer output
microfilm ("COM") printers. The Company's software principally captures data
and information from a variety of sources, intelligently indexes the data and
outputs the information to a variety of storage media including optical disk,
magnetic disk and tape, CD-ROM, microfilm and microfiche. The image source
and storage media is transparent to the system user. In addition, the
Company is an authorized distributor of software and hardware products
developed and manufactured by IMNET Systems, Inc. ("IMNET"). IMNET's
proprietary software systems allow electronic management of information
including the electronic flow of information to achieve productivity
increases. IMNET manufacturers a storage and retrieval device that provides
electronic delivery of images stored on microfilm. Retrieval times for
images stored on microfilm rival those of images stored in single drive
optical disk jukeboxes. The Company's potential customer base includes paper
intensive industries such as insurance companies, banks and other financial
institutions, governmental agencies, educational institutions and service
providers.
The Company's strategy includes the selling of products and services
that, when taken together with a company's existing computer resources and
telecommunications systems, can consolidate all information within an
enterprise into a common, electronically accessible information warehouse,
regardless of geographic diversity.
The Company acquired Utilization Management Associates, Inc. ("UMA"), a
developer of hospital utilization systems, in November 1993 . Following the
acquisitions of CDI, KCI and MTC and the resulting change in the Company's
strategic focus, the Company elected to rescind its acquisition of UMA. On
November 20, 1995, all the issued and outstanding stock of UMA was
transferred to UMA's current management.
On November 30, 1995, the Company entered into a letter of intent to
acquire Hyland Software, Inc., a software development company which develops
electronic document management software applications. The terms of the
proposed transaction, including the purchase price and the form of
consideration, have not yet been determined. The acquisition is subject to
the completion of the Company's due diligence review and the negotiation and
execution of a definitive agreement.
SoftNet holds 377,770 shares of common stock in IMNET which represents
approximately 4.5% of the outstanding shares of IMNET. On November 29, 1995,
IMNET filed a registration statement for the offering of 2,250,000 shares of
IMNET's common stock. In connection with this offering, the Company has
included 100,000 of its IMNET shares to be offered for sale. Assuming a
successful completion of this offering, the Company's ownership interest in
IMNET will be reduced to 3.1%.
The Company was incorporated in New York in December 1956. Its
principal executive offices are located at 717 Forest Avenue, Lake Forest,
Illinois 60045 and its telephone number is (708) 266-8150. As used herein,
the defined term "Company" shall mean SoftNet Systems, Inc., together with
its three wholly-owned operating subsidiaries, KCI, MTC and CDI, unless the
context otherwise indicates.
MARKET OVERVIEW
Telecommunications Division
The Company believes that the telecommunications industry is becoming
increasingly complex and that, as a result, businesses are seeking to narrow
their vendor base to those suppliers who offer a broad range of products and
services and can manage the complexity of the new technology. Trends in the
industry include:
Growth of New Communication Products and Markets. A variety of new
communication technologies have emerged over the past several years which
enhance the capabilities of the traditional telephone system. A variety of
manufacturers have introduced new products including call centers, automated
attendants, interactive voice response ("IVR") units, video conferencing
systems and voice messaging products. The 1995 NATA Telecommunications
Market Review and Forecast estimates that the telecommunications equipment
industry grew 16% per annum during 1990-1994. The Company expects the number
of communication technologies to continue to grow.
Increased Use of "Unified Messaging" Systems. Over the past
several years, multiple forms of messaging, including voice mail, E-mail and
facsimile, have proliferated in the office environment. All of these forms
of messaging have emerged as independent technologies, generally requiring
their own dedicated hardware and their own communication protocols. As a
result, office workers generally are required to manually retrieve a
facsimile, pick up a telephone to listen to voice mail and log on to a
computer to retrieve E-mail. To improve the efficiency of managing
information, businesses are seeking ways to unify access to disparate forms
of messaging. This includes providing workers access to their messages
regardless of whether they are on-site or at a remote location. Computer
telephone integration ("CTI") is providing an interface for managing
different message types from either a desktop personal computer or a
telephone. While there are numerous manufacturers of CTI hardware and
software equipment, the manufactured systems need to be "customized" for an
individual business.
Increasing Role of Independent Vendors. Through new technologies,
the private branch exchange ("PBX") is being utilized as a multimedia
"backbone" for transporting voice and data over network services. As a
result, businesses are requiring increasingly complex telecommunications
systems. The Company believes that it will be more cost-effective for these
companies to contract the management of their communication systems to third
parities. The Company also believes that the role of independent vendors
such as itself will increase over time. As a result of its independence from
any manufacturer, the Company has the ability to select those products which
provide the best technological solution to its customers. This independence
also provides the Company with the flexibility to take advantage of new
technologies and products as they become available without large investments
in research and development and the risk of inventory obsolescence and
technological incompatibility.
Document Management Division
The volume of information being generated and processed by the private
and public sectors is growing rapidly. Currently, the Company estimates that
90% of information is generated and stored using paper, a format which (a)
causes delays, (b) requires significant space and personnel for document
storage, (c) results in lost, damaged and/or misfiled documents, (d) requires
support for dual document management systems, one for paper and one for
electronic documents, and (e) generally allows only one concurrent user of a
document. As a result, the focus in the imaging industry has been on
developing and expanding non-paper based storage and retrieval technologies.
Historically and currently, the impediments to a higher utilization rate
for non-paper based storage included:
- Lack of widespread personal computing technology and acceptance.
- Lack of network capabilities to connect employees within the office
and in remote locations with the storage and retrieval
technologies.
- Lack of "seamless" retrieval technology allowing the user to
retrieve a stored document from the desktop personal computer
rather than trying to determine on what storage media the document
was stored and then retrieving it through the specific retrieval
process associated with that media.
- High cost of electronic storage devices.
There is growing interest in non-paper based storage as a result of
increased computer competency created by the personal computer revolution,
proliferation of personal computers, growth of networks connecting those
computers to data repositories and declining cost of storage. Businesses
typically utilize several different non-paper based storage technologies
simultaneously. Demand for a particular technology is driven by cost, speed
of retrieval, ongoing feasibility of retrieval technology and longevity
requirements of the documents. The optimal mix of these attributes changes
according to the frequency of information usage and the urgency of its
retrieval. At the early stage of a document's life when the document is in
high usage, a high-cost, but fast-access technology is appropriate. In later
stages, it is more appropriate for the data to be transferred for archiving
to a low-cost technologically independent media such as COM.
COM converts digital information directly from a computer or magnetic
tape to an analog format which then can be stored on microfilm or microfiche.
COM was initially developed as an information management system that would
reduce the cost and increase the speed of computer output by "printing"
computer generated data on microfilm or microfiche instead of paper.
Compared to paper, COM has a number of benefits. COM recorders can print
reports substantially faster than high speed printers and multiple copies can
be made easily and economically on high-speed duplicators. The effective
speed of MTC's COM printer is up to 600 data pages of output per minute. By
contrast, today's high speed page printers average between 200 and 300 data
pages per minute. In addition, a COM recorder can print a 670 page report on
a single 4" X 6" microfiche. In addition, microfilm is accepted as evidence
in a court of law since the image cannot be altered and microfilm offers the
capability of storing a document for over 100 years as compared to the
electronic technology alternatives which become obsolete at 3-5 year
intervals. The fact that COM can be read by the human eye makes it the safer
choice for storage of documents which must outlive the 3-5 year technological
obsolescence cycle associated with electronic storage products.
INDUSTRY TRENDS
The Company believes that its two core businesses, telecommunications
and document management, are rapidly merging. To improve the efficiency of
managing information, businesses are seeking ways to unify access to
disparate forms of messaging. For example, unified messaging, call
processing and imaging message platforms from companies such as Octel/VMX,
Applied Voice Technologies and Wang have recently integrated with the E-mail
applications of Microsoft Windows 95, creating a single file management
system for voice, fax, E-mail and imaging messages. Similarly, imaging
vendors are utilizing telecommunications and Internet technology to
distribute large volumes of data from centralized data centers to remote
offices and customer sites. Technological developments such as higher speed
Integrated Services Digital Network (ISDN), Frame Relay, and Asyncronous
Transfer Modes (ATM) transmission lines have made the distribution of data
utilizing telecommunications and Internet technology cost effective.
Another trend is the blending of telecommunications and imaging
applications found in customer service call centers. Typically, these
applications are very transaction oriented. Customer Service agents must be
able to access various types of data instantly in order to service inquiries.
Data are usually found on written business forms for invoices and purchase
orders, optical server for publications and specifications, fax servers for
both inbound and outbound requests, E-mail, and soon the Internet.
Additionally, workflow applications, along with computer telephone
integration products, which provide the electronic routing mechanism to
manage all forms of data, must be integrated with the various types of
document retrieval and storage methods to allow the customer service call
center to efficiently access such data.
Currently, middle market customers' applications are addressed by
multiple vendors such as Novell resellers for local area network ("LAN")
implementation, telephone vendors for PBX and key systems, and consultants
for image enabling, Internet, or call center applications. The Company
believes that with its current resources and expertise in telecommunications
and document management, it is well positioned to address this new emerging
integration market as a single source provider.
PRODUCTS AND SERVICES
Telecommunications Division
The telecommunications division initially sold third party telephone
systems, along with maintenance contracts and service of these systems. From
this core business, the Company expanded into new communications products and
services to solve the communications needs of their customers. The array of
third party products is wide and allows the Company to provide a single
source of solutions for its customers.
Telephone Systems. The Company provides PBX and key/hybrid telephone
systems for its customers. A PBX, which is generally utilized for customers
with 100 phones or larger with growth up to thousands of phones, is handled
by the F9600 manufactured by Fujitsu Business Communications Systems, Inc.
("Fujitsu"). The smaller systems handle customers from 10 phones up to 200
phones. In this area, the Company markets the Integrated Digital System from
Executone, the Panasonic Digital Business System and Northern Telecom
Norstar. Prices for telephone systems range from $3,000 for a small key
system to over $1,000,000 for a large, complex PBX system.
Customer Service Revenue. The Company maintains a strong customer
service focus which helps generate recurring revenue from its existing
customer relationships. This revenue takes the form of maintenance
contracts, moves, adds and changes to existing systems, service calls,
upgrades to existing systems and new systems for new locations.
Call Processing. Call processing is a general term used for many new
applications to enhance the operation of existing telecommunication systems.
These areas are as follows:
- Call Centers. A call center enhances the telephone system's
ability to handle large volumes of inbound or outbound calls and is
used by businesses for customer service, reservations centers and
other large order entry type operations. The Company offers call
center products from Fujitsu and Executone.
- Voice Messaging. Voice mail is one of the more common products
encountered by the general public. This technology enables voice
communications to be sent, stored and retrieved from any touchtone
telephone. The Company offers voice mail systems from Octel, AVT
and Executone.
- Interactive Voice Response. This product was one of the first to
integrate the use of the telephone system with a computer system.
This technology allows a caller to access a computer database to
retrieve or input information via a touchtone telephone. IVR units
allow callers to access bank account information, obtain airline
reservation information and many other applications. The Company
markets IVR units from Syntellect and AVT.
Network Services. The Company provides both local and long distance
network services to their customers. The Company currently markets local
network services for SWB and Ameritech and long distance services for Sprint
and MCI.
Cabling. Cabling is the process of installing the physical connection
that connects telephones and computers. The Company provide cabling for a
variety of applications, including coax and fiber for voice, data and LAN
applications. The Company provides Building Industry Consulting Service
International ("BICSI") trained engineers to design cable networks for its
customers. The Company is an authorized distributor of AT&T's Systimax
Cabling System. In addition to providing the design and hardware for the
cabling system, the Company also provides installation labor for customers.
Data Communications. The Company is a Novell Gold and Microsoft Advance
Server certified reseller and the Company's primary focus on data network
integration has been to its existing customers. The Company has distribution
agreements with several strategic partners such as Compaq, Novell, Hewlett-
Packard and AST Research.
Computer Telephone Integration. The combination of the computer and
telephone has led to a new group of products entitled CTI. The Gartner Group
projects that the CTI market will grow from $2.5 billion in 1994 to $20
billion in 1999, an approximate 50% per annum increase. The Company
maintains a staff of programmers who have developed customized CTI
applications for their customers. In addition, the Company has entered into
an agreement with Answer Soft to market its line of CTI based products, and
is evaluating several other CTI products for distribution.
Document Management Division
COM Systems. The Company believes it is a leading manufacturer of COM
systems, offering a complete line of COM recorders, processors, duplicators
and related software. The Company manufactures three different sophisticated
COM printers under the System 6800 line of products, all of which have a
complete set of features, including wet or dry processing technology, cut
fiche capabilities, medium to high speed, stand-alone or integrated film
processors and duplicators, all under PC control utilizing electronic forms.
The System 6830 series provides an architectural platform designed to permit
easy integration of information and image management systems, including the
capability to add both magnetic and optical disk file storage subsystems for
use in future document and image processing applications. A key factor
differentiating the Company's product is its PC based client-serve
architecture which gives the System 6800 line of products the ability to
operate within the traditional direct connect environment or, alternatively,
become part of any client-server facility using LAN/WAN communications. This
last feature allows both central and remote users, of virtually any
application, to output information to microfiche regardless of their
location.
Information Distribution System. The Company's Information Distribution
System is a family of product options designed to automate the computer
output production process and expand the total product offering to include
electronic subsystems like optical disk and CD-ROM. This architecture
combines the client-server platform, Microsoft Windows operating environment
and Novell LAN to allow the user to transport any information to the print or
storage media of their choice, enhancing the productivity of their computer
output and storage operation. The following product options comprise the
Company's Information Distribution System:
Information Distribution System Executive. The Information
Distribution System Executive ("IDSEXEC") software product allows for
the collection of data streams generated from a variety of sources
including mainframes, LAN's and image processing platforms. The IDSEXEC
has the capability to intelligently search for incoming information from
these different sources, aggregate that information into a document and
then store that document on the most applicable media based on the
intended length of storage and the retrievability requirements. The
IDSEXEC also can intelligently index source information for convenient
and timely retrieval regardless of the storage media. Historically, if
a user wanted information contained on a computer tape stored on CD-ROM,
microfilm and paper, then the computer tape had to be duplicated two
times (a total of three copies available) and then three separate
application systems were utilized to store the information on the three
different media. With the Company's IDSEXEC, only one computer tape is
necessary, because the software allows the information to be output to
the three desired storage media simultaneously. With the IDSEXEC, it is
also possible to reorder images submitted in one sequence to any other
logical ordering sequence specified by the user. The Company believes
that it is the only company that possesses intelligent indexing
technology.
Page Handler. A software product which stores a "mirror image" of
the document on any of the supported IDSEXEC storage media. The
software is able to understand a wide variety of print languages.
Computer Output to Electronic Devices. A software/hardware product
which records any documents within the IDSEXEC production process on any
supported electronic storage device. The system provides software user
tools which facilitate the retrieval of stored documents for viewing,
printing, faxing or exporting.
Microfilm and Media Supplies. The Company offers a complete line of
original and duplicate microfilm and chemicals for use in its COM printer and
duplicator systems. The sale of microfilm and media supplies provides the
Company a continuing stream of cash flow and acts as a supplement to its
hardware sales, which provides a less consistent stream of cash flow due to
its high dollar value, long sales cycle and capital equipment nature. Media
sales also provide the opportunity to establish continuity of relationships
between the Company and its installed customer base. Maintaining these
relationships is important since numerous hardware sales of replacement
pieces or upgrades of technology are made to these customers. The Company
acquires a significant portion of its microfilm and media supplies from
Eastman Kodak and sells them on a drop-ship basis.
IMNET Products. Through its distribution agreement with IMNET, the
Company is able to offer its customers all of IMNET's products and services.
IMNET's products are components of an integrated electronic information and
document management system which includes patented hardware and proprietary
software. They allow a consistent method of storing, managing and retrieving
electronic information, regardless of information type (text, image or data)
or storage media (magnetic, optical disk, microfilm or paper). IMNET's open
client-server architecture encourages maximum use of its customer's and
partner's existing applications and information bases. IMNET's Electronic
Information Warehouse software facilitates cost containment within an
organization through streamlining of the existing manual or automated
business processes. The patented MegaSAR(R) Microfilm JukeboxTM hardware
allows immediate electronic access to on-line information stored in standard
microfilm formats.
The Company recently became an authorized distributor of InScript,
Symbus Technology, Inc.'s software for automated data entry. InScript
significantly reduces the need for data entry clerks to manually key entries
from paper forms. As a result, large forms processors have been able to
significantly reduce labor costs and increase the speed, accuracy and
efficiency of data entry. Original photocopied and faxed forms with hand
print, machine print, dot matrix print and check box entries can be read and
processed. The InScript software utilizes an open architecture platform and
therefore is compatible with almost any scanner, network, imaging system and
computing environment.
SALES AND MARKETING
Telecommunications Division
The Company sells its telecommunications products and services
throughout the midwest, with principal focus on the Chicago, Illinois
metropolitan area, Kansas, Missouri, and southeastern Wisconsin. The Company
employs a direct sales force to sell its telecommunications products and
services.
Document Management Division
The Company markets its document management products and services
worldwide. In the United States, the Company employs a direct sales force.
Outside of the United States, the Company uses a network of distributors.
CUSTOMERS
Telecommunications Division
The Company markets its products and services principally to customers
with 25 or more telephones and those customers with complex, expanding voice
and data management needs. The Company focuses on those customers who do not
have significant infrastructure to support their telecommunications needs,
but instead, seek to outsource this function. The Company strives to provide
outstanding customer service and support long after the initial sale, and
sees it as critical to being able to expand the product and service offerings
to its customers. The Company maintains a highly trained force of service
technicians, design engineers, communications consultants and project
coordinators who provide on-site and remote service and support.
Document Management Division
The Company markets its products and services to two distinct customer
groups: (a) those customers with high-volume document, storage and retrieval
needs and, (b) those customers who desire to image enable existing business
applications, to facilitate rapid and efficient data storage and retrieval
and provide a vehicle to electronically process data input (e.g. health
claims processing, lease administration, etc.).
For those customers who have high-volume data output, storage and
retrieval needs, the Company further defines its customers as service
bureaus, end users and authorized distributors. Service bureaus capitalize
on the recent trend toward outsourcing. Customers of service bureaus
generally do not have the data output volumes that would justify dedicated
COM and related systems. Conversely, certain financial institutions,
insurance companies and public utilities do have the output volumes that
would justify direct purchase of the Company's products. Current end user
customers include Fortune 500 companies and other service providers.
The Company currently markets its image enabling technologies to the
healthcare claims processing industry and governmental agencies. These
customers typically process high volumes of input data and have a variety of
storage and retrieval requirements. The Company's ability to blend current
technologies allows the customization of imaging applications that can meet a
customer's storage and retrieval needs.
No single customer accounted for more than 5% of the Company's revenue
in fiscal 1995 or 1994.
COMPETITION
Telecommunications Division
The telecommunications industry is intensely competitive and rapidly
changing. The Company competes on the basis of customer service, flexibility
and breadth of offering different technological products and solutions. The
Company competes with AT&T, Northern Telecom, Siemens, and Regional Bell
Operating Companies ("RBOCs") in the telecommunicating business. These
competitors have longer operating histories and significantly greater
financial, technical, marketing, and other resources, as well as greater name
recognition, than the Company. In addition, the Regional Bell Operating
Companies are currently subject to a variety of government regulations
limiting the manufacture, marketing and sale of certain products and services
in the telecommunications market which restrictions, if eliminated or
lessened, could adversely impact the Company's business.
Document Management Division
The document management industry is also highly competitive and rapidly
evolving. The Company competes on the basis of breadth of offering different
document management solutions, cost, flexibility and customer service. The
Company competes with Anacomp, Eastman Kodak, File-Net and View-Star, among
others. These competitors have longer operating histories and significantly
greater financial, technical, marketing, and other resources, as well as
greater name recognition, than the Company.
EMPLOYEES
As of September 30, 1995, the Company and its subsidiaries had 263 full-
time employees.
ITEM 2. PROPERTIES
The Company leases an aggregate of approximately 157,000 square feet of
office, warehouse and manufacturing space in Lake Forest, Illinois; Buffalo
Grove, Illinois; Chicago, Illinois; Glendale, New York; Wellesley
Massachusetts, Lenexa, Kansas; Mountain View, California and Milwaukee,
Wisconsin. Currently, approximately 43,000 square feet are being subleased
to third parties.
ITEM 3. LEGAL PROCEEDINGS
The Company has no material pending litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At a Special Meeting of Shareholders of the Company held on
September 15, 1995, the acquisitions of KCI and MTC were approved. The
number of votes cast for, against and abstentions, with respect to each
acquisition is set forth below:
<TABLE>
<CAPTION>
For Against Abstentions
<S> <C> <C> <C>
KCI Acquisition 2,424,238 1,400 1,220
MTC Acquisition 2,423,238 1,300 2,320
</TABLE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Common Stock of the Company is principally traded on the American
Stock Exchange ("AMEX"). The high and low sales prices for the stock
reported on AMEX for each quarterly period during the past two years were as
follows:
<TABLE>
<CAPTION>
Quarter High sale Low sale
ending price price
<S> <C> <C>
December 31, 1993 7-1/8 3-3/4
March 31, 1994 7-3/4 5-1/8
June 30, 1994 7-7/8 5-5/8
September 30, 1994 9 6-1/8
December 31, 1994 7-3/4 6-1/8
March 31, 1995 7-1/2 6-1/8
June 30, 1995 7-7/8 5-7/8
September 30, 1995 15-7/8 7-3/4
</TABLE>
There were approximately 467 record holders of the stock as of
September 30, 1995. The closing price for the stock on September 30, 1995
was $14.25. The Company paid no dividends during the period October 1, 1993
to September 30, 1995. The Company does not intend to pay dividends on its
Common Stock in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company, has acquired, and will continue to evaluate for
acquisition, businesses which it deems to be consistent with its financial
and strategic objectives.
Communicate Direct, Inc. ("CDI") and Micrographic Technology Corporation
("MTC") were acquired during the year ended September 30, 1995 and were
accounted for under the purchase method of accounting and are included in the
financial statements since the dates of their respective acquisitions. In
connection with these acquisitions, the Company paid an aggregate of
$1,250,000 in cash, $2,800,000 in convertible notes and 1,068,636 shares of
the Company's common stock (the "Common Stock"). The Company also acquired
Kansas Communications, Inc. ("KCI") during fiscal 1995, which was accounted
for as a pooling-of-interests. The Company's financial statements have been
restated to include the pooled businesses as if the companies had operated as
one entity since inception. The Company issued 1,300,000 shares of Common
Stock in connection with the acquisition accounted for as a pooling-of-
interest combination.
On November 30, 1995, the Company entered into a letter of intent to
acquire Hyland Software, Inc., a software development company which develops
electronic document management software applications. The terms of the
proposed transaction, including the purchase price and the form of
consideration, have not yet been determined. The acquisition is subject to
the completion of the Company's due diligence review and the negotiation and
execution of a definitive agreement.
In September 1995, the Company's Board of Directors made the strategic
decision to discontinue its operations of Utilization Management Associates,
Inc. ("UMA"), a medical cost containment business. Accordingly, the
Company's consolidated financial statements have been restated to reflect the
accounting treatment for discontinued operations. Management's discussion of
the results of operations covers continuing operations and discontinued
operations, separately.
RESULTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED
TO 1994
Net sales increased by $11,623,000 (or 121%) in fiscal 1995 to
$21,252,000 from $9,629,000 in fiscal 1994. The increase in sales was
principally a result of the acquisition of Communicate Direct, Inc. ("CDI")
on October 31, 1994 and the acquisition of Micrographic Technology Corp.
("MTC") on September 15, 1995. The Company's acquisition of CDI and MTC
added approximately $10,845,000 in net sales in 1995.
Gross profit increased $3,482,000 or 91% in fiscal 1995 to $7,282,000
from $3,800,000 in fiscal 1994, as a result of higher net sales. For the
year, gross profit as a percentage of sales decreased from 39.4% in 1994 to
34.3% in 1995. The percentage decrease relates primarily to inclusion of
CDI's results since November 1, 1994 (date since acquisition). Generally,
CDI's sales mix includes more initial sales to new customers, which are
usually at lower gross margins. Conversely, KCI's sales mix includes more
sales of higher margin products and services to existing customers.
Selling, general and administrative expenses increased $4,011,000 or
102% to $7,947,000 in fiscal 1995 from $3,936,000 in fiscal 1994, largely as
a result of the inclusion of CDI's results since November 1994 ($2,941,000),
the increase in sales and marketing activities in the SoftNet integrated
solutions group ($285,000) and the increase of the corporate staff to
accommodate the acquisitions of KCI and MTC ($248,000). Depreciation and
amortization increased primarily as a result of the inclusion of CDI's
results since November 1994 and the amortization of deferred acquisition
costs resulting from the acquisition of CDI. Also in the fourth quarter of
fiscal 1995, the Company incurred one-time charges for the write off of
unproven in-process technology acquired in connection with the acquisition of
MTC ($5,000,000), certain transaction costs related to the merger with KCI
($648,000) and other costs resulting from the write-off of certain leasehold
improvements and other restructuring activities.
Interest expense increased $35,000 or 5.6% to $650,000 in fiscal 1995
from $615,000 in fiscal 1994. Interest expense in 1994 included non-cash
amortization of senior note discounts of $514,000. Overall cash interest
expense increased as a result of increased borrowing during 1995 and the
inclusion of CDI's results since November 1994.
The Company's provision for income taxes relates exclusively to the
operation of KCI, for tax liabilities incurred prior to the merger with the
Company. The provision for income taxes decreased $253,000 or 67.0% to
$124,000 in fiscal 1995 from $377,000 in fiscal 1994 as a result of lower
taxable income for KCI during the twelve months ended September 30, 1995
compared to the same period in fiscal 1994. The Company has a tax net
operating loss carry forward of $10,990,000, which begins to expire in 1999.
Given the Company's history of operating losses, a valuation allowance of
$2,659,000 has been provided in the Company's consolidated financial
statements.
For fiscal 1995, the net loss from continuing operations increased
$7,279,000. If the unusual and non-recurring charges are excluded, the loss
from continuing operations increased $961,000. The loss per share of common
stock from continuing operations increased $1.62 from fiscal 1994. If the
unusual and non-recurring charges are excluded, the loss per share from
continuing operations increased $.17 per share, or 49%.
UMA was disposed in November 1995. The Company recorded an estimated
loss of $644,000 or $.15 per share for the disposal of UMA.
Net sales from the discontinued operations for fiscal 1995 were
$860,000, an increase of $165,000, or 23.7%, from net sales of $695,000 in
fiscal 1994. The loss from the operations of UMA was $419,000 for fiscal
1995, an increase of $304,000 from fiscal 1994. The increase was primarily a
result of higher operating costs in anticipation of higher sales growth. The
loss per share for the operations of UMA was $.10 for fiscal 1995 compared to
$.03 for fiscal 1994.
The net loss per share increased $1.84 from $.38 in fiscal 1994 to $2.22
in fiscal 1995 as a result of the items discussed previously. Weighted
average outstanding shares increased by 551,000 or 14.5% from 3,802,000 in
fiscal 1994 to 4,353,000 in fiscal 1995 mainly due to the issuance of shares
for acquisitions and the sale of shares of the Company's common stock in a
private placement transaction.
LIQUIDITY AND CAPITAL RESOURCES
In October and November, 1994, the Company issued its 10% Convertible
Subordinated Notes in the aggregate amount of $1,250,000, due in October
1999. Such notes (which bear interest, payable quarterly, at 10% per annum
for the first two years only and no interest thereafter) are subordinate to
all other liabilities of the Company and are convertible into the Company's
common shares at $4.10 per share. In connection with the issuance of the 10%
Convertible Subordinated Notes, the Company issued warrants to purchase
297,750 shares of its common stock exercisable for five years at an exercise
price of $6.875 per share.
During 1995, the Company issued its 9% Convertible Subordinated Notes
due December 31, 1998 in the aggregate amount of $2,189,499 which includes
the conversion of $295,000 of Senior Notes and accrued interest thereon of
$14,499. Interest is payable quarterly on the first of April, July, October,
and January. Such notes are subordinated to all other liabilities of the
Company and are convertible into the Company's common shares at $5 per share.
These notes may be prepaid by the Company in whole after April 1, 1996
provided the market price of the Company's common stock is at least 200% of
the conversion price over a defined period of time.
In connection with the acquisition of MTC, the Company issued $2,856,000
of 9% Convertible Subordinated Debentures due September 2000. Interest is
payable quarterly on the 15th of January, April, July and October. Such
debentures are subordinated to all other liabilities of the Company and are
convertible after September 15, 1996 into the Company's common shares at
$6.75 per share. These debentures may be prepaid by the Company in whole or
in part at 102% of face value through September 15, 1997, and at face value
thereafter.
Also in connection with the acquisition of MTC, the Company assumed
$1,800,000 of 6% Convertible Subordinated Secured Debentures due February
2002. Interest is payable semi-annually and is convertible into the
Company's common stock at $8.10 per share, subject to adjustment for anti-
dilution. The debentures are subject to redemption at the option of the
Company at par value, provided, however that the Company issues common share
purchase warrants to purchase the same number of shares as would have been
issuable if the debentures were converted.
In October, 1994 CDI obtained a bank line-of-credit facility whereby CDI
could borrow up to $2.5 million based upon eligible receivables and
inventories. The line-of-credit facility was collateralized by the assets of
CDI and bears interest at the bank's prime rate plus 1%. In connection with
the mergers with KCI and MTC, the Company has obtained a new line-of-credit
facility with its bank which allows the Company to borrow up to $6.5 million
based upon eligible receivables, inventories and long-term investments. The
new line-of-credit facility is collateralized by the assets of the Company
and bears interest at the bank's prime rate plus 1%. Proceeds from the new
line of credit were used to fund a portion of the purchase price for MTC,
retire the existing line-of-credit facilities at CDI and MTC, pay certain
transaction costs and provide working capital. Subsequent to year-end, the
Company restructured a portion of the revolving credit note into a term note
which matures on February 1, 1996. Accordingly, the term loan has been
classified as current on the accompanying consolidated financial statements.
Subsequent to year-end, the Company has agreed to include 100,000 shares
of common stock of IMNET Systems, Inc. in an underwritten offering that is
scheduled for completion in mid-January 1996. The Company anticipates using
the proceeds from the secondary offering to retire certain bank loans and to
provide additional working capital. Accordingly, the Company has classified
$2,575,000 as a current asset in the Company's consolidated financial
statements.
At September 30, 1995, the Company's current ratio was 1.30 to 1 with
working capital of $3.3 million. This compares with a current ratio of .97
to 1 and a working capital deficit of $78,000 at September 30, 1994.
The Company expects to be able to finance its working capital
requirements and capital expenditures from its operating income, existing
line-of-credit facilities and the sale of certain shares of IMNET Systems,
Inc. common stock.
For the fiscal year ended September 30, 1995, cash flows used by
operating activities were $4.7 million, compared to $572,000 for the fiscal
year ended September 30, 1994. The increase in cash used by operating
activities was mainly due to the inclusion of CDI's results of operations
from the date of acquisition (October 31, 1994).
EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 123 "Accounting
for Stock-Based Compensation" encourages, but does not require, companies to
recognize compensation expense for grants of stock, stock options and other
equity instruments to employees based on new fair value accounting rules.
Although expense recognition for employee stock based compensation is not
mandatory, SFAS No. 123 requires companies that choose not to adopt the new
fair value accounting to disclose pro-forma net income and earnings per share
under the new method. This new accounting principle is effective for the
Company's 1997 fiscal year. The Company believes that adoption will not have
a material impact on its financial condition or results of operations, as the
Company will not adopt the fair value accounting, but will instead comply
with the disclosure requirements.
ITEM 7. FINANCIAL STATEMENTS
SOFTNET SYSTEMS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED
FINANCIAL STATEMENTS
September 30, 1995
Page
Report of Independent Accountants
Consolidated Statements of Operations for the Years Ended
September 30, 1995 and 1994
Consolidated Balance Sheets as of September 30, 1995 and
1994
Consolidated Statements of Shareholders' Equity for the
Years ended September 30, 1995 and 1994
Consolidated Statement of Cash Flows for the Years Ended
September 30, 1995 and 1994
Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
SoftNet Systems, Inc.:
We have audited the consolidated financial statements of SoftNet Systems,
Inc. and Subsidiaries as listed in the preceding index to the consolidated
financial statements. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of SoftNet
Systems, Inc and Subsidiaries as of September 30, 1995 and 1994 and the
consolidated results of their operations and their cash flows for each of the
years then ended in conformity with generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, the Company
adopted Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" in 1995.
COOPERS & LYBRAND L.L.P.
/s/ Coopers & Lybrand L.L.P.
November 27, 1995
Chicago, Illinois
<TABLE>
SOFTNET SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 1995 AND 1994
<CAPTION>
1995 1994
<S> <C> <C>
Net sales $ 21,252,290 $ 9,629,383
Cost of sales 13,970,261 5,829,730
Gross profit 7,282,029 3,799,653
Operating expenses:
Selling 2,623,819 976,404
General and administrative 5,323,258 2,960,050
Depreciation and amortization 806,304 152,452
Write-off of acquired in-process
unproven technology 5,000,000 -
Acquisition costs and other 1,318,220 -
Total operating expenses 15,071,601 4,088,906
Loss from continuing operations (7,789,572) (289,253)
Interest expense 649,841 615,135
Other expense 28,239 31,332
Loss from continuing operations
before income taxes (8,467,652) (935,720)
Provision for income taxes 124,309 376,846
Net loss from continuing operations (8,591,961) (1,312,566)
Discontinued operations:
Loss from operations (419,366) (115,173)
Estimated loss on disposal (644,244) -
Net loss $ (9,655,571) $(1,427,739)
Earnings per share:
Continuing operations $ (1.97) $ (0.35)
Loss from discontinued operations (0.10) (0.03)
Estimated loss on disposal (0.15) -
Net loss $ (2.22) $ (0.38)
Weighted average shares outstanding 4,352,647 3,801,962
The accompanying notes to consolidated financial statements are an
integral part of these statements
</TABLE>
<TABLE>
SOFTNET SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1995 AND 1994
<CAPTION>
1995 1994
ASSETS
<S> <C> <C>
Current assets:
Cash $ 572,758 $ 487,597
Available-for-sale securities 2,575,000 -
Receivables, net 6,128,348 848,300
Inventories 4,785,326 1,141,371
Prepaid expenses 270,223 332,286
Total current assets 14,331,655 2,809,554
Property and equipment, net 2,619,474 478,361
Available-for-sale securities 7,156,638 1,989,379
Costs in excess of fair value of net 9,910,354 224,394
assets acquired, net
Other assets 1,378,180 144,884
$ 35,396,301 $ 5,646,572
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 7,572,087 $ 1,501,414
Current portion of long-term debt 1,788,012 884,488
Deferred revenue 1,031,672 501,477
Other liabilities 161,565 -
Net liabilities of business disposed 453,746 -
of in 1996
Total current liabilities 11,007,082 2,887,379
Long-term debt, net of current portion 12,704,117 122,969
Common stock subject to put option, - 200,000
29,630 shares
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.10 Par value, 4 - -
million shares authorized, none
outstanding
Common stock, $.01 Par value, 10 55,470 39,026
million shares authorized, 5,547,033
and 3,902,598 shares outstanding,
respectively
Capital in excess of par value 27,583,696 16,433,887
Accumulated deficit (23,692,263) (14,036,689)
Unrealized appreciation of -
available-for-sale securities 7,738,199
Total shareholders' equity 11,685,102 2,436,224
$ 35,396,301 $ 5,646,572
The accompanying notes to consolidated financial statements are an
integral part of these balance sheets
</TABLE>
<TABLE>
SOFTNET SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1995 AND 1994
<CAPTION>
UNREALIZED
APPRECIATION
CAPITAL IN OF AVAILABLE-
COMMON STOCK EXCESS OF FOR-SALE ACCUMULATED
SHARES AMOUNT PAR VALUE SECURITIES DEFICIT
<S> <C> <C> <C> <C> <C>
Balance, October 1, 1993 3,606,076 $ 36,061 $ 13,957,144 - $ (12,608,953)
Common stock issued for
investment in securities 196,022 1,960 733,123 - -
Common stock issued for
finder's fee relating to
UMA acquisition 2,500 25 16,850 - -
Settlement of related party
receivable - - 850,000 - -
Value assigned to warrants
issued with Senior Notes
payable - - 471,250 - -
Sale of common stock 88,000 880 388,120 - -
Exercise of warrants 10,000 100 17,400 - -
Net loss - - - - (1,427,739)
Balance, September 30, 1994 3,902,598 39,026 16,433,887 -- (14,036,692)
Sale of common stock,
net of issuance costs 200,000 2,000 707,828 - -
Value assigned to options
and warrants issued
with the extension of
of Senior Notes payable - - 66,458 - -
Exercise of warrants 100,255 1,003 187,012 - -
Common stock issued in
connection with acquisitions,
net of issuance costs 1,142,945 11,429 7,533,057 - -
Conversion of long-term
debt 201,235 2,012 1,627,988 - -
Settlement of related party
receivable - - 1,027,466 - -
Change in unrealized
appreciation of available-
for-sale securities - - - $ 7,738,199 -
Net loss - - - - (9,655,571)
Balance, September 30, 1995 5,547,033 $ 55,470 $ 27,583,696 $ 7,738,199 $ (23,692,263)
The accompanying notes to consolidated financial statements
are an integral part of these statements
</TABLE>
<TABLE>
SOFTNET SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1995 AND 1994
<CAPTION>
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (9,655,571) $ (1,427,739)
Adjustments to reconcile net loss to net cash used by
operating activities
Write-off of acquired in-process unproven technology 5,000,000 -
Depreciation and amortization 821,798 162,762
Acquisition costs 647,925 -
Net change of liabilities of discontinued operations 586,241 -
Loss on the disposal of property and equipment 392,572 -
Deferred income taxes (12,000) (7,898)
Debt discount and deferred financing amortization 86,660 514,164
Provision for bad debts 67,490 -
Changes in operating assets and liabilities, net of effect of
purchase transactions and disposal of discontinued operation-
Receivables (1,208,356) (232,113)
Inventories (1,706,741) (78,910)
Prepaid expenses 160,038 (319,315)
Accounts payable and accrued expenses (46,466) 860,347
Deferred revenue 196,420 (43,656)
Net cash used in operating activities (4,669,990) (572,358)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash paid in connection with acquisitions (2,562,428) (26,498)
Purchase of property and equipment (1,417,990) (172,884)
Proceeds from sale of investment securities 1,027,466 -
Purchase of investment securities - (462,924)
Increase in other assets (133,802) -
Proceeds from the sale of property and equipment 31,000 -
Net cash used in investing activities (3,055,754) (662,306)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt, net of deferred financing
costs 4,131,457 920,000
Repayment of long-term debt (978,844) (550,000)
Borrowings under revolving credit note 6,903,585 _
Payments under revolving credit note (1,684,000) _
Proceeds from settlement of related party receivable - 850,000
Repayment of prior revolving credit facility (1,208,252) _
Proceeds from the sale of common stock 720,341 389,000
Proceeds from the exercise of warrants 168,909 17,500
Capitalized lease obligations paid (202,003) (102,200)
Net cash provided by financing activities 7,851,193 1,524,300
NET INCREASE IN CASH 125,449 289,636
Cash, beginning of period, net of cash of discontinued operation 447,309 197,961
Cash, end of period $ 572,758 $ 487,597
The accompanying notes to consolidated financial statements are an integral part of these statements
</TABLE>
SOFTNET SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND BASIS FOR PRESENTATION
SoftNet Systems, Inc. and Subsidiaries (Company) is engaged in the
business of developing, marketing, installing and servicing electronic
information and document management systems that allow customers to
electronically request and electronically receive information. The
Company operates through two divisions, telecommunications and document
management. Through its wholly-owned subsidiaries Communicate Direct,
Inc. (CDI) and Kansas Communications, Inc. (KCI), the Company sells and
services telephone and computer hardware manufactured by others to
provide communications solutions through the design, implementation,
maintenance and integration of voice, data and video communications
equipment and services. Additionally, through these subsidiaries, the
Company sells and installs local and long distance network services.
Through its wholly-owned subsidiary, Micrographic Technology
Corporation, Inc. (MTC) and its integrated solutions group, the Company
designs, develops, manufactures and integrates comprehensive, non-paper
based systems and components that enable the Company to deliver to its
customers cost-effective solutions for the storage, indexing and/or
distribution of high-volume computer generated or entered information.
On September 15, 1995, a wholly-owned subsidiary of the Company merged
with Kansas Communications, Inc. (KCI), which was the surviving
corporation in the merger, pursuant to an Agreement and Plan of
Reorganization dated March 24, 1995, by and between the Company and KCI
(see Note 3). The transaction was accounted for as a pooling of
interests for financial reporting purposes and, accordingly, the
financial statements of the merged companies relating to all periods
presented have been restated and are presented on a combined basis.
Upon effectiveness of the merger, KCI changed its fiscal year end to
September 30 from March 31. KCI's financial statements have been
restated and are consolidated for the same periods as the Company's
fiscal year.
During 1995, the Company adopted a formal plan to dispose of Utilization
Management Association, Inc., a medical cost containment business.
Accordingly, the results of discontinued operations and the estimated
loss on disposal thereof have been reported separately from the
continuing operations of the Company (see Note 5).
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of SoftNet
Systems, Inc. (SoftNet) and its subsidiaries (Company). All significant
intercompany accounts and transactions have been eliminated in
preparation of the consolidated financial statements.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of trade receivables.
Credit risk is minimized as a result of the large number and diverse
nature of the Company's customers. As of September 30, 1995,
the Company had no significant concentrations of credit risk.
Inventories
Inventories are stated at the lower of cost or market and are comprised
of purchased component parts. Cost is determined using the first-in,
first-out method.
Receivables
The Company has recorded an allowance for uncollectible accounts of
$67,490 at September 30, 1995. No such allowance was recorded at
September 30, 1994.
Property and Equipment
Property and equipment are carried at cost less allowances for
accumulated depreciation. The cost of property and equipment held under
capital leases is equal to the lower of the net present value of the
minimum lease payments or the fair value of the leased property at the
inception of the lease. Repairs and maintenance are charged to expense
as incurred.
Depreciation is computed by the straight-line method over the useful
lives of the related assets. The estimated useful lives range from
three to five years for equipment to seven years for property,
principally office furniture. Amortization of capital leases is
included with depreciation expense.
Capitalized Software Costs
Certain costs of acquired software to be sold, leased, or otherwise
marketed are capitalized and amortized over the economic useful life of
the related software product, which is generally five years. Net
unamortized capitalized software costs, which resulted from the
acquisition of MTC, are included in other noncurrent assets and were
$991,000 at September 30, 1995.
Investments in Equity Securities
In 1995, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 115 "Accounting for Certain Investments in Debt and Equity
Securities." The adoption of SFAS No. 115 resulted in an increase to
shareholders' equity in the fourth quarter of 1995 of $7,738,000, upon
the completion by Imnet Systems, Inc. of its initial public offering of
common stock. Prior to this offering, there had been no public market
for this common stock. At September 30, 1995, the Company's investment
in marketable equity securities has been classified as available-for-
sale and as a result is stated at fair value. At September 30, 1994, no
readily determinable fair value existed with respect to the Company's
investment in equity securities, and, accordingly, such investment was
carried at cost.
Fair value of equity securities is determined by reference to various
market data and other valuation techniques as appropriate. As of
September 30, 1995, the Company had available-for-sale securities with a
current fair value of $9,732,000. Subsequent to year-end, the Company
has agreed to include 100,000 shares of its investment in equity
securities in an underwritten secondary offering. The offering is
scheduled for completion in 1996, and accordingly, $2,575,000 has been
classified with current assets as of September 30, 1995.
Costs in Excess of Fair Value of Net Assets Acquired
The excess of costs of acquired companies over the fair value of net
assets acquired (goodwill) are amortized on a straight-line basis over
10 years. Amortization expense for fiscal 1995 was $443,000.
Accumulated amortization at September 30, 1995 was $443,000.
The Company assesses the recoverability of unamortized goodwill by
reviewing the sufficiency of estimated future operating income and
undiscounted cash flows of the related entities to cover the
amortization during the remaining amortization period.
Revenue Recognition
Revenue from sales and installation of telephone systems, computer
hardware and peripheral telephone system products is recognized
principally on the completed contract method which does not differ
materially from the percentage completion method. Revenue from
maintenance contracts covering parts and labor on existing systems is
recognized on a monthly basis over the term of each contract.
Revenue from the imaging business is generated from four primary
sources, including product sales, installations, royalty and on-going
maintenance. Product sales revenue is recognized upon shipment,
installation, or final customer acceptance, depending on specific
contract terms. Installation revenue is recognized on a percentage-of-
completion basis. Royalty revenue is recognized monthly based upon
estimated maintenance fees and is subject to verification against actual
fees on a semi-annual basis. Revenue from on-going maintenance is
recognized as services are completed.
Income Taxes
Statement of Financial Accounting Standards No. 109 - Accounting for
Income Taxes which revised certain financial accounting and reporting
standards for income taxes was adopted by the Company effective
October 1, 1993. The adoption of Statement No. 109 did not have a
material effect on the Company's financial statements. In accordance
with this financial accounting standard, the Company recognizes the
amount of taxes payable or refundable for the current year and
recognizes deferred tax liabilities and assets for the expected future
tax consequences of events and transactions that have been recognized in
the Company's financial statements or tax returns. The Company
currently has substantial net operating loss carryforwards. The Company
has recorded a 100% valuation allowance against net deferred tax assets
due to uncertainty of their ultimate realization.
Loss Per Share
Loss per share is based on the weighted average number of common shares
outstanding during the periods. Common stock equivalents (outstanding
options warrants and convertible securities) are not included in the
computations of loss per share since their effect is anti-dilutive.
Reclassifications
Certain reclassifications have been made in the 1994 financial
statements to conform with the 1995 presentation.
3. MERGER
On September 15, 1995, a wholly-owned subsidiary of the Company merged
Kansas Communications, Inc. ("KCI") pursuant to an Agreement and Plan of
Reorganization dated March 24, 1995, by and between the Company and KCI.
The KCI shareholders received 1,300,000 shares of the Company's common
stock in exchange for all of the outstanding shares of KCI. The
business combination was accounted for as a pooling of interests and,
accordingly, the operations of KCI have been included with the results
of the Company for all periods presented.
KCI is a Kansas City-based company which sells and services telephone
systems, third-party computer hardware and application oriented
peripheral products such as voice mail, automated attendant systems,
interactive voice response (IVR) and video conferencing systems.
The following are the net revenues from continuing operations and net
income (loss) of the separate companies for the periods preceding the
acquisition:
<TABLE>
<CAPTION>
SOFTNET
SYSTEMS,
INC. KCI COMBINED
<S> <C> <C> <C>
Nine months ended
June 30, 1995: (Unaudited)
Net sales $ 8,285,000 $7,564,000 $ 15,849,000
Net (loss) income (1,777,000) 272,000 (1,505,000)
Fiscal year ended
September 30, 1994:
Net sales $ 188,000 $9,441,000 $ 9,629,000
Net income (loss) (1,763,000) 450,000 (1,313,000)
</TABLE>
In connection with the merger, the Company recorded transaction related
charges of $648,000. The merger costs relate to expenses incurred to
consummate the transaction, including investment banking, legal and
accounting fees.
4. ACQUISITIONS
Acquisition of CDI
On October 31, 1994, the Company acquired Communicate Direct, Inc.
("CDI") in a business combination accounted for as a purchase. CDI is a
Chicago-based company which sells and services telephone systems, third-
party computer hardware and application oriented peripheral products
such as voice mail, automated attendant systems, interactive voice
response ("IVR") and video conferencing systems. The operations of CDI
have been included with the results of the Company since November 1,
1994.
The Company acquired all of the outstanding stock of CDI for $1.9
million, such consideration consisting of 290,858 shares of the
Company's Series A Convertible Preferred Stock ("Preferred Shares")
valued at $6.00 per share and cash. In April 1995, the Preferred Shares
were converted into common shares on a one-to-one basis following the
approval of the Company's shareholders. The acquisition price has been
adjusted for settlement of an earnout agreement and resolution of
certain post-closing purchase adjustments. The cost in excess of fair
value of net assets acquired incurred in connection with the acquisition
of CDI of $4,182,000 is being amortized on a straight-line basis over
ten years.
Acquisition of MTC
On September 15, 1995, the Company acquired Micrographic Technology
Corporation ("MTC") pursuant to an Agreement and Plan of Reorganization
dated March 24, 1995 in a business combination accounted for as a
purchase transaction. MTC is a designer, developer, manufacturer and
integrator of comprehensive, non-paper based systems and components that
enable MTC to deliver to its customers cost-effective solutions for
storage, indexing and/or distribution of high-volume output data
streams. The MTC shareholders' received 777,778 shares valued at $6.95
per share of the Company's common stock, $1,050,000 in cash and
$2,800,000 principal amount of the Company's debentures. The operations
of MTC have been included with the results of the Company since
September 16, 1995.
The cost in excess of fair value of net assets acquired incurred in
connection with the acquisition of MTC of $6,130,000 is being amortized
on a straight-line basis over ten years. Additionally, in connection
with the acquisition of MTC, the Company incurred a one-time fourth
quarter charge of $5.0 million for the write-off of acquired in-process
unproven technology.
The following unaudited pro forma summary presents information as if the
acquisitions accounted for as purchases had occurred at the beginning of
each fiscal year. The pro forma information is provided for
informational purposes only. It is based on historical information and
does not necessarily reflect the actual results that would have occurred
nor is it necessarily indicative of future results of operations of the
combined enterprise:
<TABLE>
<CAPTION>
Years Ended
September 30
1995 1994
(amounts in thousands,
except per share data)
(unaudited)
<S> <C> <C>
Net sales from continuing operations $ 37,128 $ 36,280
Loss from continuing operations (6,583) (7,840)
Net loss (8,025) (10,572)
Net loss per share (1.45) (2.03)
</TABLE>
5. DISCONTINUED OPERATIONS
During September 1995, the Company's Board of Directors approved a plan
to rescind its November 1993 acquisition of Utilization Management
Associates, Inc. ("UMA"). The plan provided for the exchange of the
Company's interest in UMA for all common shares of the Company held by
the former shareholders of UMA, including related put options, and the
cancellation of SoftNet stock options held by the former shareholders of
UMA's.
Effective November 20, 1995, the plan was executed such that the Company
paid the former shareholders of UMA $200,000 in satisfaction of it's
common stock put obligation and received in exchange 29,630 shares of
SoftNet common stock In addition, the Company paid approximately
$300,000 in cash and notes for the termination of non-compete,
employment, and earn-out agreements and an irrevocable and unconditional
release of the Company from any outstanding obligations and liabilities
to UMA or the shareholders of UMA.
In connection with the disposition, the Company recorded an estimated
loss on disposal of discontinued operations of $644,000, along with a
loss from discontinued operations of $419,000 and $115,000 for the years
ended September 30, 1995 and 1994, respectively. Such amounts have not
been adjusted for any income tax effect given the Company's net
operating loss carryfoward. At September 30, 1995, UMA represented
approximately $116,000 and $53,000 of the Company's assets and
liabilities, respectively. For the years ended September 30, 1995 and
1994, UMA contributed revenue of approximately $860,000 and $695,000
respectively, to the consolidated revenues of the Company.
6. PROPERTY AND EQUIPMENT
Balances of major classes of assets and allowances for depreciation at
September 30, 1995 are as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Leasehold improvements $ 822,101 $ 58,819
Furniture and fixtures 864,832 263,557
Vehicles 31,517 48,694
Equipment 1,259,019 462,823
Total 2,977,469 833,893
Less allowance for depreciation (357,995) (355,532)
and amortization
Property and equipment, net $ 2,619,474 $478,361
</TABLE>
7. DEBT
Debt is summarized as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Revolving Credit Note with maximum borrowings of
$6,500,000, bearing interest, payable monthly, at
the bank's prime rate plus 1% (the bank's prime
rate being 9.75% at September 30, 1995). The note
matures on January 15, 1997 $3,889,585 -
9% Convertible Debentures due September 2000,
interest payable quarterly, convertible into the
Company's common shares at $6.75 per share 2,856,000 -
9% Convertible Subordinated Notes due December
1998, interest payable quarterly, subordinated to
all other liabilities of the Company, convertible
into the Company's common shares at $5.00 per
share 2,189,499 -
6% Convertible Subordinated Debentures, due
February 2002 with semi-annual interest payments,
convertible into the Company's common stock at
$8.10 per share (subject to adjustment for anti-
dilution) 1,800,000 -
Bank loan dated November 20, 1995, bearing interest
at prime plus 1%, payable monthly, principal due
February 1, 1996 1,330,000 -
10% Convertible Subordinated Notes due October
1999, bearing interest, payable quarterly, at 10%
for the first two years only and no interest
thereafter, subordinated to all other liabilities
of the Company, convertible into the Company's
common shares at $4.10 per share 1,250,000 -
Bank loans dated July 10, 1995, bearing interest at
prime plus 1%, principal and interest due in 60
monthly payments with final payment due July 2000 493,000 -
Bank loans dated April 13, 1995, bearing interest
at prime plus 1%, principal and interest due in 48
monthly installments with final payment due April
1999 113,239 -
Bank loan dated August 25, 1995, bearing interest
at prime plus 1%, principal and interest due in 36
monthly installments with final payment due August
1998 110,426 -
Senior Notes Payable, bearing interest at 10% with
principal and interest due October 1994 - $ 770,000
Capitalized lease obligations 460,380 237,457
14,492,129 1,007,457
Less current portion of debt (1,788,012) (884,488)
Total long-term debt $ 12,704,117 $ 122,969
</TABLE>
The availability under the revolving credit note is subject to revisions
on a monthly basis based upon available assets (as defined). Subsequent
to year-end, the Company restructured a portion of the revolving credit
note into a term note which matures on February 1, 1996. Accordingly,
the term loan has been classified as current on the accompanying
consolidated financial statements. The revolving credit note and the
bank term loans (issued from the same bank) are collateralized by
substantially all of the assets of the Company.
In connection with the issuance of the 10% Convertible Subordinated
Notes, the Company issued warrants to purchase 297,750 shares of the
Company's common stock exercisable for five years at an exercise price
of $6.875 per share. With respect to the 9% Convertible Subordinated
Notes, the Company may prepay the notes in whole after April 1, 1996
provided the market price of the Company's common stock is at least 200%
of the conversion price on any 20 trading days within a period of 30
consecutive trading days ending on the trading day prior to the date of
the notice of prepayment.
In October 1994, the Company issued an additional $25,000 Senior Note,
along with a warrant to purchase 2,500 shares of the Company's common
stock at the then current market price of $6.375 per share. Also, in
order to extend the maturity of $745,000 of Senior Subordinated notes,
the Company issued warrants to purchase 89,400 shares of the Company's
common stock at prices ranging from $6.125 to $7.875 (market price at
the end of each month during the period the notes were extended). As of
April 1, 1995, the $450,000 of notes were repaid and the remaining
principal of $295,000 together with accrued interest thereon, was
exchanged for the 9% Convertible Subordinated Notes described above.
In connection with the acquisition of MTC, the Company issued $2,856,000
of its 9% Convertible Subordinated Debentures (the "MTC 9% Debentures")
due September 2000. The MTC 9% Debentures are subordinated to all other
liabilities of the Company and are convertible after September 15, 1996,
into the Company's common shares at $6.75 per share. The MTC 9%
Debentures may be prepaid by the Company in whole or in part at 102% of
face value through September 15, 1997, and at face value thereafter.
Also in connection with the acquisition of MTC, the Company assumed
$1,800,000 of 6% Convertible Subordinated Secured Debentures (the
"Debentures") due February 2002. The Debentures are convertible into
the Company's common stock at $8.10 per share, subject to adjustment for
anti-dilution. The Debentures are subject to redemption at the option
of the Company at face value, provided, however, that the Company issues
common share purchase warrants to purchase the same number of shares as
would have been issuable if the Debentures were converted.
Aggregate maturities of long-term debt for each of the next five fiscal
years are as follows:
<TABLE>
<CAPTION>
<S> <C>
1996 $1,788,000
1997 4,192,000
1998 191,000
1999 2,316,000
2000 4,205,000
Thereafter 1,800,000
</TABLE>
8. SALE OF COMMON STOCK
On October 26, 1994, the Company sold 200,000 shares of its common stock
in a Regulation S offering at $4.00 per share. In connection with the
sale of common stock, the Company incurred fees of $90,000 and issued
warrants to purchase 249,750 shares of its common stock exercisable for
five years at an exercise price of $6.875 per share (fair market value
at the date of grant).
9. CAPITALIZED LEASE OBLIGATIONS AND OTHER LEASE COMMITMENTS
The Company leases computer equipment and certain other office equipment
under leases which are capital in nature. The Company has net assets of
$320,000 and $240,000 under these capital leases as of September 30,
1995 and 1994, respectively.
The Company has entered into operating leases for office space and
manufacturing facilities. These leases provide for minimum rents.
These leases generally include options to renew for additional periods.
The Company's rent expense for the years ended September 30, 1995 and
1994 was $282,000 and $100,000.
The aggregate amount of the lease payments under capital and operating
leases for each of the five fiscal years ending September 30 is as
follows:
<TABLE>
<CAPTION>
<S> <C>
1996 $ 1,234,000
1997 1,080,000
1998 849,000
1999 402,000
2000 616,000
</TABLE>
10. INCOME TAXES
The Company's provision for income taxes relates exclusively to the
operations of KCI, for tax liabilities incurred by KCI prior to the
merger with the Company.
The components of the provision for income taxes are as follows for the
fiscal years ending September 30:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Current
Federal $113,587 $320,620
State 22,722 64,124
Total current 136,309 384,744
Deferred
Federal (10,000) (6,582)
State (2,000) (1,316)
Total deferred (12,000) (7,898)
$124,309 $376,846
</TABLE>
The types of temporary differences between the tax basis of assets and
liabilities and their financial reporting amounts that give rise to deferred
taxes at September 30 and the approximate tax effects are as follows:
<TABLE>
<CAPTION>
1995 1994
TEMPORARY TAX TEMPORARY TAX
DIFFERENCE EFFECT DIFFERENCE EFFECT
<S> <C> <C> <C> <C>
Receivable from related party - - $ 4,150,000 $ 1,411,000
Securities received in settlement of
related party receivable $ 2,400,000 $ 816,000 - -
Capital loss carryforward 722,000 245,000
Value assigned to warrants issued
with senior notes - - 533,000 181,000
Reserve for the write-off of
discontinued operations 544,000 185,000 - -
Inventory and other operating reserves 568,000 193,000 - -
Reserve for lease termination 250,000 85,000 - -
Other 86,000 29,000 - -
Net operating loss carryforwards 10,990,000 3,737,000 6,500,000 2,210,000
Total deferred tax asset 5,290,000 3,802,000
Unrealized appreciation of available-
for-sale securities (7,738,000) (2,631,000) -
Total deferred tax liabilities (2,631,000) -
Valuation allowance (2,659,000) (3,802,000)
Net deferred tax asset $ - $ -
</TABLE>
A valuation allowance was recorded as a reduction to the deferred tax assets
due to the uncertainty of the ultimate realization of future benefits from
such deferred taxes.
Net operating loss carryforwards of approximately $10 million are available
as of September 30, 1995 to be applied against future taxable income. In
addition, net operating loss carryforwards of approximately $750,000
acquired in connection with the acquisition of MTC are available to reduce
recorded goodwill when utilized. The net operating loss carryforwards expire
between 1999 and 2009 and are subject to certain annual limitations as a
result of the changes in equity ownership.
11. STOCK OPTIONS AND WARRANTS
Outstanding options and warrants granted prior to 1993 were originally
granted at exercise prices equal to the then current market prices of
the Company's common stock. Outstanding options and warrants to
purchase shares of common stock at September 30, 1995 and 1994 were as
follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Outstanding at beginning of year 729,064 382,564
Granted (prices ranging from
$1.75 to $13.50) 884,400 356,500
Exercised or cancelled (prices ranging
from $1.75 to $4.00 per share) (100,255) (10,000)
Outstanding at end of year (prices ranging
from $1.75 to $13.50 per share) 1,513,209 729,064
Exercisable at end of year 1,334,650 729,064
Available for grant at end of year 600,000 -
</TABLE>
During fiscal 1995 the Company adopted, subject to shareholder approval,
the 1995 Long Term Incentive Plan (the "1995 LTIP") whereby the Company,
under the direction of the committee appointed by the Board of
Directors, can grant a variety of stock-based compensation awards. The
Company has reserved 600,000 shares for issuance under the plan.
Subsequent to year end, the Company granted 259,000 stock options to
certain key employees at a price equal to the then fair market value of
the Company's common stock. The options become exercisable, in one-
third increments, on the first three anniversaries of the option grant
and expire ten years from the date of grant.
In addition, during 1995 the Company granted 175,000 stock options to
two key employees prior to the adoption of the 1995 LTIP. The stock
options become exercisable, in one-third increments, on the first three
anniversary dates of the option grant and expire ten years from the date
of grant. The Company granted 25,000 of the stock options at a price
equal to the then fair market ($8.50) value and 150,000 of the stock
options at a price below the fair market value (exercise price of $6.50
and a market price of $13.50) of the Company's common stock.
Accordingly, the Company will incur stock option compensation expense
equal to the difference between the fair market value of the underlying
stock at the date of grant and the option's exercise price. The total
compensation expense of $1,050,000 will be amortized ratably over the
three-year vesting period. During fiscal 1995, the Company recorded
compensation expense related to these options of $14,000.
12. RELATED PARTY TRANSACTIONS
As of September 30, 1994, the Company was owed $4,150,000 plus accrued
interest by Ozite Corporation (Ozite). A Director of the Company and
the former Chairman of the Board held substantial interests in Ozite.
Due to uncertainties about collecting these funds, the receivable from
Ozite was written off and charged against earnings in 1991, and,
accordingly no amount related to this receivable is recorded on the
Company's consolidated financial statements.
On July 26, 1995, Ozite shareholders approved a merger of Ozite with
Pure Tech with Pure Tech being the surviving corporation. As a
condition of the merger, Ozite was required to secure a general release
from the Company and to surrender certain securities in satisfaction of
the amount owed to the Company. As a result, the Company received
311,025 shares of Pure Tech common stock (such shares are currently
listed on the NASDAQ), 267,203 shares of Artra Group Incorporated
(ARTRA) Common Stock (such shares are currently listed on the New York
Stock Exchange, however such shares received are not currently
registered) and 932.05 shares of Artra Preferred Stock (such shares are
not listed on any exchange and have no currently ready market).
Subsequently, the Company sold all 311,025 shares of Pure Tech for net
proceeds of $1,027,466, which was recorded as a capital contribution.
No amount has been recorded in the accompanying consolidated financial
statements for the remaining unsold securities due to uncertainty of
value.
The Company utilizes a jet aircraft which is owned by the Company's
Chairman. In 1995, the Company made payments of $58,000 to the Chairman
for use of this jet aircraft. The Company pays a management fee to a
company controlled by the Company's president and Chief Executive
Officer. The management fee is for the use of a computer information
system and other assets which are utilized in the Company's business.
The Company paid $48,000 in 1995 related to this management fee.
13. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Cash Paid During the Year For:
Interest $ 465,420 $ 68,564
Income taxes 194,000 161,000
Non Cash Investing & Financing Activities:
Common stock issued for acquisitions 7,931,153 -
Securities received in settlement of $4,150,000
related party receivable, at net realized value 1,027,466 -
Convertible subordinated debt issued for acquisitions 2,856,000 -
Common stock issued for the conversion of
subordinated notes 1,630,000 -
Conversion of Senior Notes and accrued interest to 9%
Convertible Notes 309,499 -
Equipment acquired by capital lease 331,924 49,601
</TABLE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF
1934
a. Directors of the Company.
The information required by this Item is set forth in registrant's Proxy
Statement for the Annual Meeting of Shareholders to be held on
February 28, 1996 under the caption "Election of Directors", which
information is hereby incorporated herein by reference.
b. Executive Officers of the Company.
The information required by this Item is set forth in registrant's Proxy
Statement for the Annual Meeting of Shareholders to be held on
February 28, 1996 under the caption "Election of Directors" and
"Executive Officers of the Company", which information is hereby
incorporated herein by reference.
c. Compliance with Section 16(a) of the Exchange Act
The information required by this Item is set forth in registrant's Proxy
Statement for the Annual Meeting of Shareholders to be held on
February 28, 1996 under the caption "Compliance with Section 16(a) of
the Exchange Act," which information is hereby incorporated herein by
reference.
ITEM 10. EXECUTIVE COMPENSATION
The information required by this Item is set forth in registrant's Proxy
Statement for the Annual Meeting of Shareholders to be held on February 28,
1996 under the caption "Executive Compensation" and under the caption "Board
of Directors", which information is hereby incorporated herein by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is set forth in registrant's Proxy
Statement for the Annual Meeting of Shareholders to be held on February 28,
1996 under the caption "Securities Beneficially Owned by Principal
Shareholders and Management", which information is hereby incorporated herein
by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is set forth in registrant's Proxy
Statement for the Annual Meeting of Shareholders to be held on February 28,
1996 under the caption "Certain Relationships and Related Transactions",
which information is hereby incorporated herein by reference.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(1) Exhibits.
Exhibit
Number Description
2.1 Agreement and Plan of Reorganization, dated October 28, 1994 by
and among SoftNet Systems, Inc., CDI Acquisition Corp.,
Communicate Direct, Inc., Marc Zionts and Ian Aaron.<F1>
2.2 Agreement and Plan of Reorganization dated March 24, 1995 among
SoftNet Systems, Inc., KCI Acquisition Corp., Kansas
Communications, Inc., Sizemore Enterprises and Gerald Tousey and
Cleo Tousey (attached as Appendix I to the Proxy
Statement/Prospectus included in the Registration Statement on
Form S-4, as amended, Registration Number 33-95542). The
registrant will furnish supplementally a copy of all omitted
Exhibits and Schedules to Exhibit 2.2 upon the request of the
Commission. Incorporated by reference to Appendix I to the
Company's Registration Statement on Form S-4, as amended,
Registration No. 33-95542.
2.3 Agreement and Plan of Reorganization dated March 24, 1995 among
SoftNet Systems, Inc., MTC Acquisition Corp., and Micrographic
Technology Corporation as amended by Amendment No. 1 dated as of
August 8, 1995 (attached as Appendix II to the Proxy
Statement/Prospectus included in the Registration Statement on
Form S-4, as amended, Registration Number 33-95542). The
registrant will furnish supplementally a copy of all omitted
Exhibits and Schedules to Exhibit 2.3 upon the request of the
Commission. Incorporated by reference to Appendix II to the
Company's Registration Statement on Form S-4, as amended,
Registration No. 33-95542.
3.1 Certificate of Incorporation of the Company, as amended.
3.2 By-Laws of the Company <F2>.
10.1 Loan and Security Agreement, dated September 15, 1995, by and
between West Suburban Bank and SoftNet Systems, Inc.
10.2 Revolving Credit Note, dated September 15, 1995, in the original
principal amount of $6,500,000 from SoftNet Systems, in favor of
West Suburban Bank
10.3 SoftNet Systems, Inc. 1995 Long Term Incentive Plan.
10.4 SoftNet Systems, Inc. Stock Option Agreement (Non-Plan) dated as
of September 15, 1995 by and between SoftNet Systems, Inc. and
John J. McDonough.
10.5 SoftNet Systems, Inc. Stock Option Agreement (Non-Plan) dated as
of June 12, 1995 by and between SoftNet Systems, Inc. and
Martin A. Koehler.
10.6 Registration Rights Agreement dated September 15, 1995 by and
among R.C.W. Mauran, A.J.R. Oosthuizen and SoftNet Systems, Inc.
10.7 Employment Agreement dated September 15, 1995 by and among A.J.R.
Oosthuizen, SoftNet Systems, Inc. and Micrographic Technology
Corporation.
10.8 SoftNet Systems, Inc. Employee Stock Option Plan for employees of
Micrographic Technology Corporation.
10.9 Form of SoftNet Systems, Inc. 9% Convertible Subordinated
Debentures due 2000.
10.10 $660,000 principal amount of Micrographic Technology Corporation
6% Convertible Subordinated Secured Debenture due 2002 issued to
R.C.W. Mauran.
10.11 Escrow Agreement dated September 15, 1995 by and among SoftNet
Systems, Inc., R.C.W. Mauran, A.J.R. Oosthuizen and Mellon Bank,
N.A.
10.12 Form of Stock Purchase Agreement executed by SoftNet Systems, Inc.
and U.S. 6-10 Small Company Series of the DFA Investment Trust
Company, U.S. 9-10 Small Company Portfolio of DFA Investment
Dimensions Group Inc., DFA Group Trust-The 6-10 Subtrust, DFA
Group Trust-Small Company Subtrust.
10.13 Employment Agreement, dated October 28, 1994, by and between
Communicate Direct, Inc. and Ian Aaron. <F1>
10.14 Registration Rights Agreement, dated as of October 28, 1994, by
and among SoftNet Systems, Inc., Marc Zionts and Ian Aaron. <F1>
10.15 Registration Rights Agreement, dated as of October 28, 1994, by
and among SoftNet Systems, Inc., Forsythe/McArthur Associates,
Inc., BWJ Partnership, Willard Aaron and D&K Stores, Inc. <F1>
10.16 Registration Rights Agreement, dated as of November 1, 1994, by
and among SoftNet Systems, Inc., Michael Cleary, Tim Reiland, Dave
Prokupek, Christopher Barnes and CGRM Limited Partnership I. <F1>
10.17 Note and Warrant Purchase Agreement, dated as of November 1, 1994,
by and among SoftNet Systems, Inc., Michael Cleary, Tim Reiland,
Dave Prokupek, Christopher Barnes and CGRM Limited Partnership I.
<F1>
10.18 SoftNet Systems, Inc. 10% Convertible Subordinated Note, dated
November 1, 1999, in the original principal amount of $150,000
from SoftNet Systems, Inc. in favor of Michael Cleary, Tim
Reiland, Dave Prokupek, Christopher Barnes and CGRM Limited
Partnership I. <F1>
10.19 SoftNet Systems, Inc. Common Stock Purchase Warrant expiring
October 31, 1999 held by Michael Cleary, Tim Reiland, Dave
Prokupek, Christopher Barnes and CGRM Limited Partnership I. <F1>
10.20 Note and Warrant Purchase Agreement, dated as of October 28, 1994,
by and between SoftNet Systems, Inc. and D&K Stores, Inc. <F1>
10.21 SoftNet Systems, Inc. 10% Convertible Subordinated Note, dated
October 26, 1994, in the original principal amount of $200,000
from SoftNet Systems, Inc. in favor of D&K Stores, Inc. <F1>
10.22 SoftNet Systems, Inc. Common Stock Purchase Warrant expiring
October 27, 1999 held by D&K Stores, Inc. <F1>
10.23 Note and Warrant Purchase Agreement, dated as of October 28, 1994,
by and between SoftNet Systems, Inc. and Willard Aaron. <F1>
10.24 SoftNet Systems, Inc. 10% Convertible Subordinated Note, dated
October 26, 1994, in the original principal amount of $100,000
from SoftNet Systems, Inc. in favor of Willard Aaron. <F1>
10.25 SoftNet Systems, Inc. Common Stock Purchase Warrant expiring
October 27, 1999 held by Willard Aaron. <F1>
10.26 Note and Warrant Purchase Agreement, dated as of October 28, 1994,
by and between SoftNet Systems, Inc. and BWJ Partnership. <F1>
10.27 SoftNet Systems, Inc. 10% Convertible Subordinated Note, dated
October 26, 1994, in the original principal amount of $100,000
from SoftNet Systems, Inc. in favor of BWJ Partnership. <F1>
10.28 SoftNet Systems, Inc. Common Stock Purchase Warrant expiring
October 27, 1994 held by BWJ Partnership. <F1>
10.29 Note and Warrant Purchase Agreement, dated as of October 28, 1994,
by and between SoftNet Systems, Inc. and Forsythe/McArthur
Associates, Inc. <F1>
10.30 SoftNet Systems, Inc. 10% Convertible Subordinated Note, dated
October 26, 1994, in the original principal amount of $500,000
from SoftNet Systems, Inc. in favor of Forsythe/McArthur
Associates, Inc. <F1>
10.31 SoftNet Systems, Inc. Common Stock Purchase Warrant expiring
October 27, 1999 held by Forsythe/McArthur Associates, Inc. <F1>
10.32 Note and Warrant Purchase Agreement, dated as of November 1, 1994,
by and between SoftNet Systems, Inc. and Joseph Rich. <F1>
10.33 SoftNet Systems, Inc. 10% Convertible Subordinated Note, dated
November 1, 1994, in the original principal amount of $200,000
from SoftNet Systems, Inc. in favor of Joseph Rich. <F1>
10.34 SoftNet Systems, Inc. Common Stock Purchase Warrant expiring
October 31, 1999 held by Joseph Rich. <F1>
10.35 SoftNet Systems, Inc. Subscription Agreement, dated October 27,
1994, by and between SoftNet Systems, Inc. and Compania Di
Investimento Antillianna. <F1>
10.36 Common Stock Purchase Warrant expiring October 27, 1999 held by
Compania Di Investimento Antillianna. <F1>
10.37 Off Shore Securities Subscription Agreement, dated October, 1994,
by and between SoftNet Systems, Inc. and Coutts & Co., A.G.,
acting in its capacity as agent for non-U.S. persons. <F1>
10.38 Employment Agreement dated September 15, 1995 between Dale H.
Sizemore, Jr. and SoftNet Systems, Inc.
10.39 Form of SoftNet Systems, Inc. Common Stock Purchase Warrant.
10.40 Form of SoftNet Systems, Inc. Promissory Note.
10.41 Form of SoftNet Systems, Inc. Note Extension Agreement.
10.42 Form of SoftNet Systems, Inc. Warrant to Purchase Common Stock
granted to holders of SoftNet Systems, Inc. Promissory Notes.
10.43 Form of 9% Convertible Subordinated Note. <F3>
10.44 Stockholders Agreement dated March 24, 1995 among SoftNet Systems,
Inc., A.J.R. Oosthuizen and R.C.W. Mauran. <F3>
10.45 First Amendment dated September 15, 1995 to Stockholders Agreement
dated March 24, 1995 among SoftNet Systems, Inc., A.J.R.
Oosthuizen and R.C.W. Mauran.
10.46 Stock Exchange Agreement dated December 17, 1992 between SoftNet
Systems, Inc. and Jelken Corp.
10.47 Option to Purchase Shares of SoftNet Systems, Inc. dated July 4,
1995, expiring July 31, 1977 granting John I. Jellinek the right
to acquire 200,000 shares of SoftNet Systems, Inc. common stock.
10.48 Form of Indenture between SoftNet Systems, Inc. and U.S. Trust
Company of California, as Trustee, including Form of Note,
relating to the 9% Debentures. Incorporated by reference to
Exhibit 4.2 to the Company's Registration Statement on Form S-4,
as amended, Registration No. 33-95542.
21.1 Subsidiaries.
27.1 Financial Data Schedule
___________________________
[FN]
<F1> Incorporated by reference to exhibits of equivalent number to the
Company's Current Report on Form 8-K dated October 31, 1994.
<F2> Incorporated by reference to Exhibit 3(b) to the Company's Annual
Report on Form 10-KSB for the fiscal year ended September 30, 1993.
<F3> Incorporated by reference to exhibits of equivalent number to the
Company's Registration Statement on Form S-4, as amended, Registration
No. 33-95542.
(2) The following reports on Form 8-K were filed during the last
quarter of the fiscal year ended September 30, 1995.
(a) Current Report on Form 8-K dated August 17, 1995.
The Company announced the following: (a) the Company's
financial results for the third quarter ended June 30, 1995,
(b) the registration statement on Form S-4 filed in connection
with the acquisitions of Micrographic Technology Corporation
("MTC") and Kansas Communications, Inc. ("KCI") had been
declared effective by the Securities and Exchange Commission
on August 10, 1995 and that a special meeting of shareholders
is to be held on September 15, 1995 to approve the
acquisitions, (c) the Company will incur a one-time charge of
$5.5 million for the write-off of certain intangible assets of
MTC and certain pooling-of-interests transaction costs in the
fourth quarter of fiscal 1995, (d) change in the amortization
period for the goodwill that arose in the Communicate Direct,
Inc. acquisition from forty years to ten years and the results
from the previously reported six months ended March 31, 1995
have been revised, (e) the Company expects a loss per share
for fiscal 1995 between $1.64 and $1.69, (f) IMNET Systems,
Inc. completed its public offering of common stock at $12 per
share. SoftNet owns 377,770 shares of IMNET's common stock.
The Company has no immediate plans to sell its IMNET common
stock. John J. McDonough, Chairman of the Board, and John I.
Jellinek, President, Chief Executive Officer and a Director
were elected to IMNET's board of directors, and (g) the
Company will receive shares of capital stock of Pure Tech
International, Inc. and Artra Group Incorporated in connection
with a settlement entered into between the parties.
(b) Current Report on Form 8-K dated September 15, 1995, as
amended by Form 8-K/A filed on November 29, 1995.
The Company announced that the acquisitions of Kansas
Communications, Inc. and Micrographic Technology Corporation
were approved by the shareholders of the Company at a special
meeting of shareholders held on September 15, 1995. The Form
8-K/A included the following financial information:
(a) Financial Statements of Micrographic
Technology Corporation (balance sheets as
of June 30, 1995 and June 26, 1994, and
the related statements of income,
shareholders' equity (net capital
deficiency) and cash flows for the years
then ended) with Report of Independent
Auditors.
(b) Unaudited Financial Statements of Kansas
Communications, Inc. for the three-month
period ended June 30, 1995.
(c) Unaudited Pro Forma Condensed Combined
Financial Statements of SoftNet Systems,
Inc. and the acquired businesses:
Micrographic Technology Corporation and
Kansas Communications, Inc.
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized on December 28, 1995.
SOFTNET SYSTEMS, INC.
By: /s/ John I. Jellinek
John I. Jellinek
President and Chief Executive Officer
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
Signature Title Date
/s/ John I. Jellinek President, Chief Executive December 28, 1995
John I. Jellinek Officer and Director
(Principal Executive Officer)
/s/ John J. McDonough Chairman of the Board of December 28, 1995
John J. McDonough Directors
/s/ Martin A. Koehler Vice President - Finance December 28, 1995
Martin A. Koehler (Principal Financial Officer and
Principal Accounting Officer)
/s/ Ian B. Aaron Director December 28, 1995
Ian B. Aaron
/s/ James A. Gordon Director December 28, 1995
James A. Gordon
/s/ John G. Hamm Director December 28, 1995
John G. Hamm
/s/ Philip Kenny Director December 28, 1995
Philip Kenny
/s/ Ronald I. Simon Director December 28, 1995
Ronald I. Simon
/s/ C. William Vatz Director December 28, 1995
C. William Vatz
/s/ Alfred J. Ziegler Vice President, Secretary December 28, 1995
Alfred J. Ziegler and Director
EXHIBIT INDEX
Exhibit Page
Number Description Number
2.1 Agreement and Plan of Reorganization, dated
October 28, 1994 by and among SoftNet Systems,
Inc., CDI Acquisition Corp., Communicate Direct,
Inc., Marc Zionts and Ian Aaron.<F1>
2.2 Agreement and Plan of Reorganization dated
March 24, 1995 among SoftNet Systems, Inc., KCI
Acquisition Corp., Kansas Communications, Inc.,
Sizemore Enterprises and Gerald Tousey and Cleo
Tousey (attached as Appendix I to the Proxy
Statement/Prospectus included in the
Registration Statement on Form S-4, as amended,
Registration Number 33-95542). The registrant
will furnish supplementally a copy of all
omitted Exhibits and Schedules to Exhibit 2.2
upon the request of the Commission.
Incorporated by reference to Appendix I to the
Company's Registration Statement on Form S-4, as
amended, Registration No. 33-95542.
2.3 Agreement and Plan of Reorganization dated
March 24, 1995 among SoftNet Systems, Inc., MTC
Acquisition Corp., and Micrographic Technology
Corporation as amended by Amendment No. 1 dated
as of August 8, 1995 (attached as Appendix II to
the Proxy Statement/Prospectus included in the
Registration Statement on Form S-4, as amended,
Registration Number 33-95542). The registrant
will furnish supplementally a copy of all
omitted Exhibits and Schedules to Exhibit 2.3
upon the request of the Commission.
Incorporated by reference to Appendix II to the
Company's Registration Statement on Form S-4, as
amended, Registration No. 33-95542.
3.1 Certificate of Incorporation of the Company, as
amended.
3.2 By-Laws of the Company <F2>.
10.1 Loan and Security Agreement, dated September 15,
1995, by and between West Suburban Bank and
SoftNet Systems, Inc.
10.2 Revolving Credit Note, dated September 15, 1995,
in the original principal amount of $6,500,000
from SoftNet Systems, in favor of West Suburban
Bank
10.3 SoftNet Systems, Inc. 1995 Long Term Incentive
Plan.
10.4 SoftNet Systems, Inc. Stock Option Agreement
(Non-Plan) dated as of September 15, 1995 by and
between SoftNet Systems, Inc. and John J.
McDonough.
10.5 SoftNet Systems, Inc. Stock Option Agreement
(Non-Plan) dated as of June 12, 1995 by and
between SoftNet Systems, Inc. and Martin A.
Koehler.
10.6 Registration Rights Agreement dated
September 15, 1995 by and among R.C.W. Mauran,
A.J.R. Oosthuizen and SoftNet Systems, Inc.
10.7 Employment Agreement dated September 15, 1995 by
and among A.J.R. Oosthuizen, SoftNet Systems,
Inc. and Micrographic Technology Corporation.
10.8 SoftNet Systems, Inc. Employee Stock Option Plan
for employees of Micrographic Technology
Corporation.
10.9 Form of SoftNet Systems, Inc. 9% Convertible
Subordinated Debentures due 2000.
10.10 $660,000 principal amount of Micrographic
Technology Corporation 6% Convertible
Subordinated Secured Debentures due 2002 issued
to R.C.W. Mauran.
10.11 Escrow Agreement dated September 15, 1995 by and
among SoftNet Systems, Inc., R.C.W. Mauran,
A.J.R. Oosthuizen and Mellon Bank, N.A.
10.12 Form of Stock Purchase Agreement executed by
SoftNet Systems, Inc. and U.S. 6-10 Small
Company Series of the DFA Investment Trust
Company, U.S. 9-10 Small Company Portfolio of
DFA Investment Dimensions Group Inc., DFA Group
Trust-The 6-10 Subtrust, DFA Group Trust-Small
Company Subtrust.
10.13 Employment Agreement, dated October 28, 1994, by
and between Communicate Direct, Inc. and Ian
Aaron. <F1>
10.14 Registration Rights Agreement, dated as of
October 28, 1994, by and among SoftNet Systems,
Inc., Marc Zionts and Ian Aaron. <F1>
10.15 Registration Rights Agreement, dated as of
October 28, 1994, by and among SoftNet Systems,
Inc., Forsythe/McArthur Associates, Inc., BWJ
Partnership, Willard Aaron and D&K Stores, Inc.
<F1>
10.16 Registration Rights Agreement, dated as of
November 1, 1994, by and among SoftNet Systems,
Inc., Michael Cleary, Tim Reiland, Dave
Prokupek, Christopher Barnes and CGRM Limited
Partnership I. <F1>
10.17 Note and Warrant Purchase Agreement, dated as of
November 1, 1994, by and among SoftNet Systems,
Inc., Michael Cleary, Tim Reiland, Dave
Prokupek, Christopher Barnes and CGRM Limited
Partnership I. <F1>
10.18 SoftNet Systems, Inc. 10% Convertible
Subordinated Note, dated November 1, 1999, in
the original principal amount of $150,000 from
SoftNet Systems, Inc. in favor of Michael
Cleary, Tim Reiland, Dave Prokupek, Christopher
Barnes and CGRM Limited Partnership I. <F1>
10.19 SoftNet Systems, Inc. Common Stock Purchase
Warrant expiring October 31, 1999 held by
Michael Cleary, Tim Reiland, Dave Prokupek,
Christopher Barnes and CGRM Limited Partnership
I. <F1>
10.20 Note and Warrant Purchase Agreement, dated as of
October 28, 1994, by and between SoftNet
Systems, Inc. and D&K Stores, Inc. <F1>
10.21 SoftNet Systems, Inc. 10% Convertible
Subordinated Note, dated October 26, 1994, in
the original principal amount of $200,000 from
SoftNet Systems, Inc. in favor of D&K Stores,
Inc. <F1>
10.22 SoftNet Systems, Inc. Common Stock Purchase
Warrant expiring October 27, 1999 held by D&K
Stores, Inc. <F1>
10.23 Note and Warrant Purchase Agreement, dated as of
October 28, 1994, by and between SoftNet
Systems, Inc. and Willard Aaron. <F1>
10.24 SoftNet Systems, Inc. 10% Convertible
Subordinated Note, dated October 26, 1994, in
the original principal amount of $100,000 from
SoftNet Systems, Inc. in favor of Willard Aaron.
<F1>
10.25 SoftNet Systems, Inc. Common Stock Purchase
Warrant expiring October 27, 1999 held by
Willard Aaron. <F1>
10.26 Note and Warrant Purchase Agreement, dated as of
October 28, 1994, by and between SoftNet
Systems, Inc. and BWJ Partnership. <F1>
10.27 SoftNet Systems, Inc. 10% Convertible
Subordinated Note, dated October 26, 1994, in
the original principal amount of $100,000 from
SoftNet Systems, Inc. in favor of BWJ
Partnership. <F1>
10.28 SoftNet Systems, Inc. Common Stock Purchase
Warrant expiring October 27, 1994 held by BWJ
Partnership. <F1>
10.29 Note and Warrant Purchase Agreement, dated as of
October 28, 1994, by and between SoftNet
Systems, Inc. and Forsythe/McArthur Associates,
Inc. <F1>
10.30 SoftNet Systems, Inc. 10% Convertible
Subordinated Note, dated October 26, 1994, in
the original principal amount of $500,000 from
SoftNet Systems, Inc. in favor of
Forsythe/McArthur Associates, Inc. <F1>
10.31 SoftNet Systems, Inc. Common Stock Purchase
Warrant expiring October 27, 1999 held by
Forsythe/McArthur Associates, Inc. <F1>
10.32 Note and Warrant Purchase Agreement, dated as of
November 1, 1994, by and between SoftNet
Systems, Inc. and Joseph Rich. <F1>
10.33 SoftNet Systems, Inc. 10% Convertible
Subordinated Note, dated November 1, 1994, in
the original principal amount of $200,000 from
SoftNet Systems, Inc. in favor of Joseph Rich.
<F1>
10.34 SoftNet Systems, Inc. Common Stock Purchase
Warrant expiring October 31, 1999 held by Joseph
Rich. <F1>
10.35 SoftNet Systems, Inc. Subscription Agreement,
dated October 27, 1994, by and between SoftNet
Systems, Inc. and Compania Di Investimento
Antillianna. <F1>
10.36 Common Stock Purchase Warrant expiring
October 27, 1999 held by Compania Di
Investimento Antillianna. <F1>
10.37 Off Shore Securities Subscription Agreement,
dated October, 1994, by and between SoftNet
Systems, Inc. and Coutts & Co., A.G., acting in
its capacity as agent for non-U.S. persons. <F1>
10.38 Employment Agreement dated September 15, 1995
between Dale H. Sizemore, Jr. and SoftNet
Systems, Inc.
10.39 Form of SoftNet Systems, Inc. Common Stock
Purchase Warrant.
10.40 Form of SoftNet Systems, Inc. Promissory Note.
10.41 Form of SoftNet Systems, Inc. Note Extension
Agreement.
10.42 Form of SoftNet Systems, Inc. Warrant to
Purchase Common Stock granted to holders of
SoftNet Systems, Inc. Promissory Notes.
10.43 Form of 9% Convertible Subordinated Note. <F3>
10.44 Stockholders Agreement dated March 24, 1995
among SoftNet Systems, Inc., A.J.R. Oosthuizen
and R.C.W. Mauran. <F3>
10.45 First Amendment dated September 15, 1995 to
Stockholders Agreement dated March 24, 1995
among SoftNet Systems, Inc., A.J.R. Oosthuizen
and R.C.W. Mauran.
10.46 Stock Exchange Agreement dated December 17, 1992
between SoftNet Systems, Inc. and Jelken Corp.
10.47 Option to Purchase Shares of SoftNet Systems,
Inc. dated July 4, 1995, expiring July 31, 1977
granting John I. Jellinek the right to acquire
200,000 shares of SoftNet Systems, Inc. common
stock.
10.48 Form of Indenture between SoftNet Systems, Inc.
and U.S. Trust Company of California, as
Trustee, including Form of Note, relating to the
9% Debentures. Incorporated by reference to
Exhibit 4.2 to the Company's Registration
Statement on Form S-4, as amended, Registration
No. 33-95542.
21.1 Subsidiaries.
27.1 Financial Data Schedule
___________________________
[FN]
<F1> Incorporated by reference to exhibits of equivalent
number to the Company's Current Report on Form 8-K dated
October 31, 1994.
<F2> Incorporated by reference to Exhibit 3(b) to the
Company's Annual Report on Form 10-KSB for the fiscal year ended
September 30, 1993.
<F3> Incorporated by reference to exhibits of equivalent
number to the Company's Registration Statement on Form S-4, as
amended, Registration No. 33-95542.
Exhibit 3.1
CERTIFICATE OF AMENDMENT
OF THE CERTIFICATE OF INCORPORATION
OF
SOFTNET SYSTEMS, INC.
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
* * * * *
WE, THE UNDERSIGNED, John I. Jellinek and Eleanor Ault, being respectively
the President and the Assistant Secretary of SoftNet Systems, Inc. hereby
certify:
Article 1. The name of the corporation is SoftNet Systems, Inc.,
originally known as Tensor Electric Development Co., Inc.
Article 2. The certificate of incorporation of said corporation was filed
by the Department of State on the 12th day of December, 1956.
Article 3.
(a) The certificate of incorporation is amended to designate the
preferred stock terms and preferences.
(b) To effect the foregoing, Article Third relating to the said
corporation's stock is amended to add the following:
The relative rights, preferences, powers, qualifications, limitations and
restrictions granted to or imposed upon the Series A Preferred Stock or the
holders thereof, are as follows:
1. DEFINITIONS: For purposes of this Designation, the following
definitions shall apply:
"Board: shall mean the Board of Directors of the Company.
"Closing Price" per share of Common Stock on any date shall mean
(i) the last sale price on such day on the principal stock exchange on
which the Common Stock is then listed or admitted to trading, (ii) if
no sale takes place on such day on any such exchange, the average of
the last reported closing bid and asked prices on such day as
officially quoted on any such exchange, (iii) if the Common Stock is
not then listed or admitted to trading on any stock exchange, the
average of the last reported closing bid and asked prices on such day
in the over-the-counter market, as furnished by the National
Association of Securities Dealers Automatic Quotation System or the
National Quotation Bureau, Inc., (iv) if neither such corporation at
the time is in the business of reporting such prices as furnished by
any similar firm then engaged in such business, or (v) if there is no
such firm, as furnished by any member of the NASD selected mutually by
the holders of Preferred Stock and the Company or, if they cannot
agree upon such selection, be selected by two such members of the
NASD, one of which shall be selected by such holders and one of which
shall be selected by the Company or, if two such members cannot agree
on the Closing Price, the average of the Closing Prices furnished by
two such members.
"Common Stock" shall mean the common stock, par value $.01 per share,
of the Company.
"Company" shall mean Softnet Systems, Inc.
"Original Issue Date" shall mean the date of the original issuance of
shares of Preferred Stock.
"Preferred Stock" shall refer to shares of Series A Preferred Stock,
par value $.10 per share of the Company.
"Redemption Date" shall mean the date on which any shares of Preferred
Stock are redeemed by the Company.
"Trading Day" shall mean a day on which the principal national
securities exchange on which the Common Stock is listed or admitted to
trading is open for the transaction of business or, if the Common
Stock is not listed or admitted to trading on any national securities
exchange, any day other than a Saturday, Sunday, or a day on which
banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
2. DESIGNATION; NUMBER OF SHARES. The designation of the Preferred
Stock authorized by this resolution shall be "Series A Preferred Stock" and
the number of shares of Preferred Stock authorized hereby shall be
1,500,000 shares.
3. DIVIDENDS. The holders of Preferred Stock shall be entitled to
receive dividends, when and as declared by the Board, at the same rate per
share as the holders of Common Stock.
4. LIQUIDATION RIGHTS OF PREFERRED STOCK.
(a) In the event of any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, each holder of Preferred Stock
then outstanding shall be entitled to be paid out of the assets of the
Company available for distribution to its stockholders, whether such assets
are represented by capital, surplus or earnings, before any payment or
declaration and setting apart for payment of any amount shall be made in
respect of any shares of Common Stock or any share of any other class or
series of the Company's Preferred Stock ranking junior to the Preferred
Stock with respect to the payment of dividends or distribution of assets on
liquidation, dissolution or winding up of the Company, an amount equal to
$8.00 per share.
(b) If, upon any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, the assets to be distributed
among the holders of Preferred Stock shall be insufficient to permit the
payment to such stockholders of the full preferential amounts aforesaid,
then the entire assets of the Company to be distributed shall be
distributed ratably among the holders of Preferred Stock, based on the full
preferential amounts for the number of shares of Preferred Stock held by
each holder.
(c) A consolidation or merger of the Company with or into any other
corporation or corporations in which the stockholders of the Company
receive solely capital stock of the acquiring corporation (or of the direct
or indirect parent corporation of the acquiring corporation), except for
cash in lieu of fractional shares, shall not be deemed to be a liquidation,
dissolution or winding up of the Company as those terms are used in this
paragraph 4.
5. REDEMPTION OF PREFERRED STOCK:
(a) The Company shall, at a redemption price equal to the greater of
(1) the number of shares of Preferred Stock outstanding multiplied by the
Closing Price per share of Common Stock on the Trading Day immediately
prior to the Redemption Date; and (2) $4,000,000 (the "Redemption Price"),
redeem from any source of funds legally available therefor, all shares of
Preferred Stock outstanding on the fifth anniversary of the Original Issue
Date.
(b) If, at the time of any redemption pursuant to (a) above, the
funds of the Company legally available for redemption of Preferred Stock
are insufficient to redeem the number of shares required to be redeemed,
those funds which are legally available shall be used to redeem the maximum
possible number of such shares, pro rata based upon the number of shares
requested to be redeemed by the holders thereof. At any time thereafter
when additional funds of the Company become legally available for the
redemption of Preferred Stock, such funds shall immediately be used to
redeem the Preferred Stock which the Company has become obligated to redeem
pursuant to this subparagraph, but which it has not redeemed, at the per
share value of the Redemption Price plus interest from the Redemption Date
at an annual rate equal to 6%.
6. VOTING RIGHTS:
(a) The holders of Preferred Stock, except as otherwise provided
hereunder or required under New York law, shall not be entitled to vote.
(b) So long as any shares of the Preferred Stock shall remain
outstanding, the Company will not, without the affirmative vote at a
meeting or the written consent with or without a meeting of the holders of
at least two-thirds of the outstanding shares of Preferred Stock, (1)
create any class or series of stock ranking prior to or on a parity with
the Preferred Stock either as to dividends or upon liquidation or (2)
amend, alter or repeal any of the provisions of the Company's Articles of
Incorporation or By-Laws so as to affect adversely the preferences, special
rights or powers of the Preferred Stock or (c) liquidate, wind up or
dissolve itself other than as a result of its insolvency or bankruptcy.
7. CONVERSION:
(a) From and after the date that the holders of the Common Stock of
the Company approve the conversion of Preferred Stock into Common Stock
("Shareholder Approval"), each share of Preferred Stock shall be
convertible into one fully paid and nonassessable share of Common Stock,
subject to adjustment as hereinafter set forth in subclause (d) below.
(b) Following the receipt of notice of Shareholder Approval, each
holder of shares of Preferred Stock shall surrender the certificate or
certificates representing the shares of preferred Stock to be converted,
duly endorsed for transfer to the Company, at the principal executive
office of the Company. Conversion shall be deemed to have been effected on
the date of Shareholder Approval (the "Conversion Date"). As promptly as
practicable thereafter, the Company shall issue to or upon the written
order of such holder, a certificate or certificates for the number of full
shares of Common Stock to which such holder is entitled. The conversion of
shares of Preferred Stock into shares of Common Stock shall be deemed to be
effective and such holder, or the person or persons designated by such
holder, shall be deemed to have become a holder of record of the shares of
Common Stock issuable upon conversion of such shares of Preferred Stock on
the applicable Conversion Date unless the transfer books of the company are
closed on such date, in which event such holder shall be deemed to have
become a holder of record of the shares of Common Stock issued upon
conversion of the shares of Preferred Stock on the next succeeding date on
which the transfer books of the Company are open.
(c) No fractional shares of Common Stock shall be issued upon
conversion of shares of Preferred Stock. In lieu of issuing fractional
shares of Common Stock upon conversion of shares of Preferred Stock, the
Company shall pay a cash adjustment in respect of such fractional shares of
Common Stock equal to the fair market value thereof as determined by the
Board of Directors of the Company.
(d) The number of shares of Common Stock into which a share of
Preferred Stock shall be convertible as set forth in subclause (a) above,
shall be subject to adjustment from time to time as follows:
(1) In case the Company shall at any time subdivide (e.g. split) its
outstanding shares of Common Stock or shall issue a dividend or other
distribution payable in shares of Common Stock, the number of shares
of Common Stock into which a share of Preferred Stock shall be
convertible shall be proportionately increased, effective immediately
after the effective date of such subdivision or at the close of
business on the record date fixed by the Board of Directors of the
Company for such dividend or other distribution, as the case may be;
(2) In case the Company shall at any time combine (e.g. reverse
split) its outstanding shares of Common Stock, the number of shares of
Common Stock into which a share of Preferred Stock shall be
convertible shall be proportionately decreased, effective immediately
after the effective date of such combination; and
(3) In case the Company shall at any time recapitalize or reclassify
its capital stock, or in case of any consolidation or merger of the
Company with or into any other person (other than a consolidation or
merger in which the Company is the continuing entity and which does
not result in any change in the capital stock of the Company) or in
case of the sale or other disposition of all or substantially all the
assets of the Company as an entirety to any other person, then in each
such case each outstanding share of Preferred Stock shall after such
recapitalization, reclassification, consolidation, merger, sale or
other disposition be convertible into the kind and number of shares of
capital stock or other securities or assets of the Company or of the
entity resulting from such consolidation or surviving such merger or
to which such assets shall have been sold or otherwise disposed of to
which the holder thereof would have been entitled if immediately prior
to such recapitalization, reclassification, consolidation, merger,
sale or other disposition such holder had converted its shares of
Preferred Stock. The provisions set forth above shall apply to
successive recapitalizations, reclassifications, consolidations,
mergers, sales or other dispositions.
(e) All shares of Common Stock issued upon conversion of shares of
Preferred Stock shall, upon issuance by the Company, be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issuance thereof.
8. NOTICES. All notices to the Company permitted hereunder shall be
personally delivered or sent by first class mail, postage prepaid,
addressed to its office located at One Overlook Point, Lincolnshire, IL
60069 or to such other address at which its principal office is located and
as to which notice thereof is similarly given to the holders of the
Preferred Stock at their addresses appearing on the books of the Company.
Article 4. The amendment was authorized by the Unanimous Written Consent
of the Board of Directors.
IN WITNESS WHEREOF, we have signed this certificate on the 28th day of
October, 1994 and we affirm the statements contained therein as true under
penalties of perjury.
/s/ John I. Jellinek
John I. Jellinek, President
/s/ Eleanor Ault
Eleanor Ault,
Assistant Secretary
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
THE VADER GROUP INC.
Under Section 805 of the Business Corporation Law
Pursuant to the provisions of Section 805 of the Business Corporation Law,
the undersigned Peter Harvey, President, and Alfred Ziegler, Secretary, hereby
certify:
FIRST: The name of the corporation is The Vader Group Inc., originally
known as Tensor Electric Development Co. Inc.
SECOND: The Certificate of Incorporation of the Corporation was filed by
the Department of State, Albany, New York on the 12th day of December, 1956.
THIRD: The amendments to the Certificate of Incorporation effected by this
Certificate are as follows:
Article FIRST of the Certificate of Incorporation is hereby amended to
change the name of the Corporation as follows:
"FIRST: The name of the Corporation is SoftNet Systems, Inc."
Article THIRD of the Certificate of Incorporation is hereby amended to
increase the number of authorized common shares and preferred shares and to
reduce the par value thereof by changing the first sentence of Article
THIRD to read as follows:
"THIRD: The aggregate number of shares which the Corporation
shall have authority to issue is 14,000,000 shares, of which
10,000,000 shares shall be common stock, par value $.01 per share
and 4,000,000 shares shall be Preferred Stock, par value $.10 par
share."
Article SEVENTH of the Certificate of Incorporation is hereby amended
to eliminate the nine-man classified Board of Directors by changing Article
SEVENTH (a) to read as follows and by deleting Article SEVENTH (b):
"SEVENTH: (a) The Board of Directors shall from to time determine
the number of directors constituting the entire Board of
Directors of the Corporation, provided, however, that in no event
shall the number of directors constituting the entire Board of
Directors be less than five directors."
FOURTH: That as a result of the amendment to Article THIRD, each of the
2,329,950 outstanding shares of Common Stock, par value $.10 per share, shall be
exchanged for an outstanding share of Common Stock, par value $.01 per share, on
a one-to-one ratio of exchange; each of the 3,670,050 unissued shares of Common
Stock, par value $.10 per share, shall be changed into unissued shares of Common
Stock, par value $.01 per share, on a 2.0899034 to one basis, the result being
7,670,050 unissued shares at par value .01 and each of the 2,000,000 unissued
shares of Preferred Stock, par value $1.00 per share, shall be changed into
unissued shares of Preferred Stock, par value $.10 per share on a two to one
basis; and $.09 per share of the stated capital per outstanding share of Common
Stock, or an aggregate of $209,695.50, shall be transferred from stated capital
to a capital surplus account.
FIFTH: That the foregoing amendments to the Certificate of Incorporation
were authorized by a vote of the Board of Directors followed by a vote of in
excess of two-thirds of all outstanding shares entitled to vote on amendments to
the Certificate of Incorporation at a meeting of shareholders.
IN WITNESS WHEREOF, we hereunto sign our names and affirm that the
statements made herein are true under penalties of perjury, this 29th day of
June 1993.
/s/ Peter Harvey
PETER HARVEY, President
/s/ Alfred Ziegler
ALFRED ZIEGLER, Secretary
CERTIFICATE OF CHANGE
THE VADER GROUP INC.
(Under Section 805-A of the Business Corporation Law)
FIRST: The name of the corporation (the "corporation") THE VADER GROUP
INC.
The name under which this corporation was formed is
TENSOR ELECTRIC DEVELOPMENT CO. INC.
SECOND: The certificate of incorporation of the corporation was filed by
the Department of state on 12-12-56.
THIRD: The certificate of incorporation of the corporation is hereby
changed, so as to change the post office address to which the Secretary of State
of the State of New York shall mail copy of process against the corpration
served upon him and to change the address of the registered agent; and to
accomplish said changes, the statements in the certificate of incorporation
relating to said post office address and the designation of registered agent are
hereby stricken and the following statements are subsitituted in lieu thereof:
"The post office address within the State of New York to which the
Secretary of State of New York shall mail a copy of any process against the
corporation served upon him is c/o United States Corporation Company, 15
Columbus Circle, New York, New York 10023-7773.
"The name and the address of the registered agent of the corporation are
United States Corporation Company, 15 Columbus Circle, New York, New York
10023-7773. Said registered agent is to be the agent upon which process
against the corporation may be served."
FOURTH: A notice of the proposed changes was mailed by the undersigned to
the corporation not less than 30 days prior to the date of the delivery of this
certificate to the Department of State and the corporation has not objected
thereto. The person signing this certificate is the agent of the corporation to
whose address the Secretary of the State of New York is required to mail copies
of process and the registered agent of the corporation.
IN WITNESS WHEREOF, we have subscribed this document on the date
hereinafter set forth and do hereby affirm, under the penalties of perjury, that
the statements contained therein have been examined by us and are true and
correct.
Dated: 11/13/1990
UNITED STATES CORPORATION COMPANY
/s/ Alan E. Spiewak
Alan E. Spiewak, Vice President
/s/ Richard L. Kushay
Richard L. Kushay, Asst. Secretary
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
MAGICSILK, INC.
_______________________________________
Under Section 805 of the Business Corporation Law
_______________________________________
Pursuant to the provisions of Section 805 of the Business Corporation Law,
the undersigned Hobart Overocker, President and Alfred Ziegler, Secretary,
hereby certify:
FIRST: The name of the corporation is Magicsilk, Inc., originally known as
TENSOR ELECTRIC DEVELOPMENT CO. INC.
SECOND: That the Certificate of Incorporation of the corporation was filed
with the Department of State, Albany, New York on the 12th day of December,
1956.
THIRD: The amendment to the Certificate of Incorporation effected by this
Certificate are as follows:
Paragraph First of the Certificate of Incorporation
is hereby amended to change the name of the Corporation as
follows:
First: That the name of the corporation is:
The Vader Group Inc.
FOURTH: That the amendment to the Certificate of Incorporation was
authorized by a vote of the Board of Directors followed by a vote of the
holders of a majority of all outstanding shares entitled to vote on
amendments to the Certificate of Incorporation at a meeting of
shareholders.
IN WITNESS WHEREOF, we hereunto sign our names and affirm that the
statements made herein are true under the penalties of perjury, this 11th day of
April, 1988.
By: /s/ H.L. Overocker
Hobart Overocker, President
By: /s/ Alfred Ziegler
Alfred Ziegler, Secretary
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
Hobart Overocker, being duly sworn, deposes and says that he is the
President of Magicsilk, Inc., the corporation mentioned and described in the
foregoing instrument; that he has read and signed the same and that the
statements contained therein are true.
/s/ H.L. Overocker
Hobart Overocker, President
Sworn to before me this
11th day of April, 1988:
/s/ Velma L. O'Loughlin
Notary Public
My commission expires:
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
TENSOR CORPORATION
_______________________________________
Under Section 805 of the Business Corporation Law
_______________________________________
Pursuant to the provisions of Section 805 of the Business Corporation Law,
the undersigned Hobart Overocker, President and Alfred Ziegler, Secretary,
hereby certify:
FIRST: The name of the corporation is TENSOR CORPORATION, formerly
known as TENSOR ELECTRIC DEVELOPMENT CO., INC.
SECOND: That the Certificate of Incorporation of the corporation was
filed with the Department of State, Albany, New York on the 12th day of
December, 1956.
THIRD: That the amendments to the Certificate of Incorporation
effected by this Certificate are as follows:
Paragraph First of the Restated Certificate of Incorporation is
hereby amended to change the name of the Corporation as follows:
First: That the name of the corporation is MAGICSILK, INC.
Paragraph Second of the Restated Certificate of Incorporation is
hereby amended to change the purpose for which the corporation was
formed as follows:
Second: The corporation is formed to engage in any lawful
act or activity for which Corporations may be organized under the
Business Corporation Law of the State of New York, provided that
it is not formed to engage in any act or activity requiring the
consent or approval of any state, official, department, board,
agency or other body.
Paragraph Third of the Restated Certificate of Incorporation is
hereby amended to increase the number of authorized common shares and
authorize a preferred stock as follows:
"Third: The aggregate number of shares which the
corporation shall have authority to issue is 8,000,000 shares, of
which 6,000,000 shares shall be common stock, par value $.10 per
share, and 2,000,000 shares of Preferred Stock, par value $1.00
per share. The Board of Directors shall have authority to
authorize the issuance, from time to time without any vote or
other action by the shareholders, of any or all shares of stock
of the corporation of any class at any time authorized. The
Preferred Stock may be issued from time to time in one or more
series. The number of shares included in any or all series of
any classes of preferred stock and the designations, relative
rights, preferences and limitations shall be determined by the
Board of Directors. The Board of Directors shall thereafter
implement the authority to issue shares of the Preferred Stock by
amendment to the Certificate of Incorporation pursuant to Section
502(d) of the Business Corporation Law of the State of New York.
Fourth: That the amendments to the Certificate of Incorporation were
authorized by a vote of the Board of Directors followed by a vote of the
holders of a majority of all outstanding shares entitled to vote on
amendments to the Certificate of Incorporation at a meeting of
shareholders.
IN WITNESS WHEREOF, we hereunto sign our names and affirm that the
statements made herein are true under the penalties of perjury, this 6th day of
May, 1986.
TENSOR CORPORATION
/s/ H.L. Overocker
Hobart Overocker, President
/s/ Alfred Ziegler
Alfred Ziegler, Secretary
STATE OF NEW JERSEY )
) ss:
COUNTY OF )
Hobart Overocker, being duly sworn, deposes and says that he is the
President of Tensor Corporation, the corporation mentioned and described in the
foregoing instruments; that he has read and signed the same and that the
statements contained therein are true.
By: /s/ H.L. Overocker
Hobart Overocker,
President
Sworn to before me this 6th day of May, 1986.
/s/ Michael E. Loeb
Notary Public
RESTATED
CERTIFICATE OF INCORPORATION
OF
TENSOR CORPORATION
Under Section 807 of the
Business Corporation Law
Pursuant to Section 807 of the Business Corporation Law, the undersigned
hereby certify:
FIRST: That the name of the corporation is TENSOR CORPORATION, formerly
known as TENSOR ELECTRIC DEVELOPMENT CO., INC.
SECOND: That the Certificate of Incorporation of the corporation was filed
by the Department of State, Albany, New York on the 12th day of December, 1956.
THIRD: That the changes in the Certificate of Incorporation effected by
this Certificate are as follows:
(a) To change the post office address to which the Secretary of State
shall mail a copy of any process against the corporation served upon
him, so that such address shall hereafter be United States Corporation
Company, 70 Pine Street, New York, New York 10270;
(b) To omit Articles Eighth and Ninth in accordance with Section 807(c).
Article Eighth states the names and post office addresses of the
directors until the first annual meeting of the stockholders and
Article Ninth states the names, shares and post office addresses of
each subscriber to the Certificate of Incorporation.
(c) To designate United States Corporation Company, 70 Pine Street, New
York, New York 10270 as the registered Agent of the Corporation upon
whom process against it may be served.
FOURTH: That the text of the Certificate of Incorporation of said TENSOR
CORPORATION, is hereby restated and changed to read in full as follows:
"FIRST: The name of the corporation is TENSOR CORPORATION.
SECOND: The purposes for which the proposed corporation is formed is
as follows:
(a) To do electronic and electrical work of every kind and
description, including the business of electricians, electrical
and electronic and mechanical manufacturers and dealers, either
as principals or agents. To manufacture, install, repair, buy,
sell, import, export, trade and deal in machinery and appliances
for the generation, transmission and utilization of electricity,
direct and alternating current machinery, gauges, motors,
generators, dynamos, transformers, storage and other batteries,
armatures, controllers, distributors, magnetos, switches and
switchboards, vibrators, elevators, engines, pumps, fans, lamps,
and flash lights, carbon brushes, fuses, insulators and
insulating materials, bells annunciators, burglar alarms,
electric cutting and welding machines and electrical tools,
machinery, devices, apparatus, appliances, equipment and
accessories of every description;
(b) To purchase, construct, own, maintain, improve, sell, lease,
mortgage, convey, and in all ways use and operate and make any
lawful contracts pertaining to factories, buildings, machinery,
equipment, works and facilities generally for the manufacturing,
selling, working, preparing, treating, handling and dealing in
electronic, electrical and mechanical products and in all kinds
of materials, goods, wares and merchandise;
(c) To acquire and take over as a going concern and to carry on the
business of any person, firm, association or corporation engaged
in any business which this corporation is authorized to carry on,
and in connection therewith to acquire the goodwill and all or
any part of the assets and to assume or otherwise provide for all
or any of the liabilities of the owner or owners of any such
business.
(d) To purchase or acquire real estate and leaseholds or any interest
therein in addition to such as may be necessary for the purposes
hereinbefore expressed and to own, hold, or improve, sell and
deal in the same;
(e) To purchase or otherwise acquire real and personal property of
any and all kinds that may be lawfully acquired, and held by a
business corporation, and in particular lands, leaseholds, shares
of stock, mortgages, bonds and other securities, merchandise,
book debts and claims, copyrights, trademarks, tradenames,
brands, labels, patents and patent rights, licenses and
concessions and any interest in real and personal property;
(f) To make, accept, endorse, execute and issue promissory notes,
bills of exchange, bonds and other obligations from time to time
for the purchase of property or for any purpose in or about the
business of the company, and to secure the payment of any such
obligations by mortgage, pledge, deed of trust or otherwise;
(g) The business or purpose of the company is from time to time to do
any one or more of the acts and things herein set forth and it
may conduct such business in all of its branches or any part
thereof outside of the State of New York and in any other states
and territories and the dependencies of the United States and in
foreign countries;
(h) To do all and everything necessary, suitable and proper for the
accomplishment of any of the purposes or the attainment of any of
the objects or the furtherance of any of the powers hereinbefore
set forth, either alone or associated with other corporations,
firms or individuals and to do any other act or acts, thing or
things, incidental or pertaining to, or growing out of, or
connected with the aforesaid business or powers, or any part or
parts thereof, provided the same be not inconsistent with the
laws under which this corporation is organized.
The foregoing clauses shall be construed both as objects and powers, and it
is hereby expressly provided that the foregoing enumeration of specific powers
shall not be held to limit or restrict in any manner the powers of this
corporation.
THIRD: The aggregate number of shares which the corporation shall
have authority to issue is 2,000,000 shares of the par value of $.10 each.
FOURTH: The capital of the corporation shall be at least equal to the
sum of the aggregate par value of all the issued shares having par value, plus
the aggregate amount of consideration received by the corporation for the
issuance of shares without par value, plus such amounts, as from time to time,
by resolution of the Board of Directors, may be transferred thereto.
FIFTH: The office of the corporation is to be located in County of
Kings, State of New York.
The Secretary of State is designated as the Agent of the
Corporation upon whom process against the Corporation may be served and the
address to which the Secretary of State shall mail a copy of any process against
the corporation which may be served upon it pursuant to law is c/o United States
Corporation Company, 70 Pine Street, New York, New York 10270.
SIXTH: The duration of the corporation shall be perpetual:
SEVENTH: (a) The number of directors of the
corporation shall be nine directors who shall be divided into
three classes of three directors each, designated as Class A,
Class B, and Class C.
(b) The term of office of the initial Class A directors
shall expire at the next annual meeting of shareholders. The
term of office of the initial Class B directors shall expire at
the second succeeding annual meeting and the term of office of
the initial Class C directors shall expire at the third
succeeding annual meeting. At each annual meeting after the
initial classification of directors, directors to replace those
whose terms expired at such annual meeting, shall be elected to
hold office until the third succeeding annual meeting.
(c) In all elections of directors, each shareholder shall
be entitled to as many votes as shall equal the number of shares
held by him, multiplied by the number of directors to be elected,
and he may cast all of such votes for a single director or may
distribute them among the number to be voted for, or any two or
more of them, as he may see fit, which right, when exercised,
shall be termed 'cumulative voting.'
(d) No director may be removed from office prior to the
expiration of this term except for cause by the vote of the
shareholders as required by Section 706 of the Business
Corporation Law.
EIGHTH: (omitted)
NINTH: (omitted)
TENTH: The United States Corporation Company, 70 Pine Street, New
York, New York 10270 is designated as the agent of the corporation upon whom
process in any action or proceeding against the corporation may be served.
ELEVENTH: No contract or other transaction between the corporation
and any other corporation shall be affected or invalidated by the fact that any
one or more of the directors of this corporation is or are interested in or is a
director or officer, or are directors or officers of such other corporation, and
any director or directors, individually or jointly, may be a party or parties to
or may be interested in any contractor transaction of this corporation, or in
which this corporation is interested, and no contract, act or transaction of
this corporation with any person or persons, firms or corporations shall be
affected or invalidated by the fact that any director or directors of this
corporation is a party or are parties to, or interested in, such contract, act
or transaction, or in any way connected with such person or persons, firms or
corporations, and each and every person who may become a director of this
corporation is hereby relieved from any liability that might otherwise exist
from contracting with the corporation for the benefit of himself or any firm or
corporation in which he may in anywise be interested.
TWELFTH: No stockholder of this Corporation shall, because of the
ownership of stock, have a pre-emptive or other right to purchase, subscribe
for, or take any part of any stock or any part of the notes, debentures, bonds,
or other securities convertible into or carrying options or warrants to purchase
stock of this Corporation issued, optioned, or sold by it. Any part of the
capital stock and any part of the notes, debentures, bonds, or other securities
convertible into or carrying options or warrants to purchase stock of this
Corporation, authorized by this amended certificate may at any time be issued,
optioned for sale, and sold or disposed of by this Corporation pursuant to
resolution of its board of directors to such persons and upon such terms as may
to such board seem proper without first offering such stock or securities or any
part thereof to existing stockholders.
The affirmative vote of holders of not less than two-thirds of the
outstanding shares of stock of the corporation shall be required in order to
amend, alter, change or repeal the provisions of Article SEVENTH hereof or this
Article TWELFTH."
FIFTH: That the changes in the Certificate of Incorporation and the
restatement were authorized by unanimous written consent of the Board of
Directors pursuant to Section 708 of the New York Business Corporation Law and
the By-laws of TENSOR CORPORATION.
IN WITNESS WHEREOF, we hereunto sign our names and affirm that the
statements made herein are true under penalties of perjury this 21st day of
January, 1986.
TENSOR CORPORATION
By: /s/ Peter R. Harvey
Peter R. Harvey,
Chairman of the Board
/s/ Philip E. Ruben
Philip E. Ruben,
Assistant Secretary
Exhibit 10.1
LOAN AND SECURITY AGREEMENT
THIS AGREEMENT is made as of this 15th day of September, 1995, by and
between WEST SUBURBAN BANK, an Illinois banking corporation ("BANK") and SOFTNET
SYSTEMS, INC., a New York Corporation ("PLEDGOR").
W I T N E S S E T H:
WHEREAS, Borrower (as such term is hereinafter defined) has requested a
revolving line of credit in the amount of SIX MILLION FIVE HUNDRED THOUSAND AND
NO/100 ($6,500,000.00) DOLLARS from Bank; and
WHEREAS, Bank has agreed to extend said revolving line of credit to
Borrower, subject to certain terms and conditions; and
WHEREAS, as one of the conditions of the extension of such credit to
Borrower, Bank requires that Pledgor execute and deliver this Agreement to Bank.
NOW THEREFORE, for and in consideration of any loan or advance (including
any loan or advance by renewal or extension) heretofore and hereafter made to
Borrower by Bank pursuant to this Agreement and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. DEFINED TERMS
Whenever used herein, the following terms, when capitalized shall have the
following respective meanings unless the context shall clearly indicate
otherwise:
a. "BORROWER" or "BORROWERS" shall mean, collectively or individually,
SOFTNET, CDI, MTC, and KCI.
b. "CDI" shall mean COMMUNICATE DIRECT, INC., an Illinois Corporation.
c. "COLLATERAL" shall mean all of the following, whether now existing or
hereafter acquired, and wherever now or hereafter located:
i. All accounts, contract rights, instruments, documents, chattel paper,
general intangibles (including, but not limited to choses in action,
tax refunds, and insurance proceeds); any other obligations or
indebtedness owed to Pledgor from whatever source arising; all rights
of Pledgor to receive any payments in money or kind; all guaranties of
the foregoing and security therefor; all of the right, title and
interest of Pledgor in and with respect to the goods, services, or
other property that gave rise to or that secure any of the foregoing
and insurance policies and proceeds relating thereto, and all rights
of Pledgor as an unpaid seller of goods and services, including, but
not limited to, the rights of stoppage in transit, replevin,
reclamation, and resale; and all of the foregoing, whether now owned
or existing or hereafter created or acquired (collectively referred to
as "RECEIVABLES");
ii. All goods, merchandise and other personal property now owned or
hereafter acquired by Pledgor that are held for sale or lease, or are
furnished or to be furnished under any contract of service or are raw
materials, work-in-process, supplies, or materials used or consumed in
Pledgor's business, and all products thereof, and all substitutions,
replacements, additions, or accessions therefor and thereto
(collectively referred to as "INVENTORY");
iii. All machinery and equipment and furniture and fixtures, now owned or
hereafter acquired by Pledgor, and used or acquired for use in the
business of Pledgor, together with all accessories, accessions and
attachments thereto and all substitutions and replacements thereof and
parts therefor (collectively referred to as "EQUIPMENT");
iv. All furniture and fixtures now owned or hereafter acquired by Pledgor
and used or acquired for use in the business of Pledgor, and all
substitutions and replacements thereof;
v. All instruments, documents, securities, cash, and other property owned
by Pledgor or in which Pledgor has an interest, which now or hereafter
are at any time in the possession or control of Bank or in transit by
mail or carrier to or in the possession of any third party acting on
behalf of Bank, without regard to whether Bank received the same in
pledge, for safekeeping, as agent for collection or transmission or
otherwise or whether Bank had conditionally released the same; any
deposit accounts of Pledgor with Bank against which Bank may exercise
its right of set-off;
vi. All good will, trademarks, tradenames, licenses, patents, copyrights,
inventions, franchises, things in action, and all other property
interests, rights, privileges and general intangibles in which Pledgor
has an interest (collectively referred to as "GENERAL INTANGIBLES");
vii. All chattel paper and instruments evidencing any obligations to
Pledgor for payment of goods, merchandise or other personal property
sold or services rendered, and all interest of Pledgor in any goods,
merchandise, or other personal property the sale or lease of which
shall have given or shall give rise to any account, chattel paper, or
instrument;
viii. All goods, merchandise, and other personal property returned to
or repossessed by Pledgor, and all interest of Pledgor as an
unpaid vendor or lienor, including stoppage in transit, replevin
and reclamation;
ix. All ledger sheets, files, records, documents, and instruments
(including, but not limited to, computer programs, tapes, and related
electronic data processing software) evidencing an interest in or
relating to the above;
x. All other property interests of whatever nature in which Pledgor has
an interest which would be considered accounts, equipment, inventory,
general intangibles, instruments, or documents, as such terms are
defined in Article 9 of the Illinois Uniform Commercial Code; and
xi. All cash or non-cash products and proceeds of any of the foregoing,
including insurance proceeds.
Notwithstanding the generality of the foregoing, the term "COLLATERAL"
shall not include Pledgor's ownership interest in and to the shares of
common stock of Communicate Direct, Inc., Micrographic Technology
Corporation, and Kansas Communications, Inc.
d. "DEFAULT RATE" shall mean the Prime Rate (hereinbelow defined) plus four
(4.0%) percent per annum and shall be charged on the Indebtedness upon the
occurrence of an Event of Default.
e. "EVENTS OF DEFAULT" shall mean the occurrence of any one or more of the
following events (subject to applicable cure periods, if any):
i. Borrower's failure to make prompt payment when due, of any
payment due on any of the Indebtedness;
ii. Any representation, warranty or other information made or
furnished to Bank by or on behalf of Pledgor or any Borrower
shall prove to have been false or incorrect in any material
respect;
iii. If Pledgor or any Borrower shall make a general assignment for
the benefit of creditors, or shall state in writing or by public
announcements its inability to pay its debts as they become due,
or shall file a petition in bankruptcy, or shall be adjudicated a
bankrupt, or insolvent, or shall file a petition seeking any
reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or
future statute, law or regulation, or shall file an answer
admitting or not contesting the material allegations of a
petition against it in any such proceeding, or shall seek or
consent to or acquiesce in the appointment of any trustee,
receiver or liquidator of Pledgor or any Borrower or any material
portion of its assets;
iv. If, within sixty (60) days after the commencement of any
proceeding against Pledgor or any Borrower seeking any
reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or
future statute, law or regulation, such proceeding shall not have
been dismissed, or if, within sixty (60) days after the
appointment, without the consent or acquiescence of Pledgor or
any Borrower, or any trustee, receiver or liquidator of Pledgor
or any Borrower or any material portion of its assets, such
appointment shall not have been vacated;
v. Entry against Pledgor or any Borrower of any judgment which in
the reasonable exercise of Bank's judgment may materially affect
its ability to repay the Indebtedness;
vi. Dissolution, merger or consolidation of Pledgor or any Borrower,
or sale, transfer, lease or other disposition of substantially
all of the assets of Pledgor or any Borrower other than in the
ordinary course of business;
vii. If, in the reasonable exercise of its judgment, Bank deems itself
insecure as insecurity is defined under Section 1-208 of the
Illinois Uniform Commercial Code;
viii. The making of any levy, seizure, or attachment upon any of
the Collateral;
ix. If, due to any act or omission by Pledgor or any Borrower, any
third party claim or action is brought against Bank arising out
of the Loan transaction or by reason of Bank's extension of
credit or security interests identified herein;
x. Failure of Pledgor or any Borrower to fully comply with the
requirements of any governmental agency or authority, if, in the
reasonable exercise of Bank's judgment such failure to comply
will materially affect the ability of Pledgor or any Borrower to
repay the Indebtedness;
xi. Any material adverse change in the financial condition of Pledgor
or any Borrower;
xii. Loss, theft, damage or destruction of any material portion of the
Collateral for which there is either no insurance coverage or for
which, in the reasonable opinion of Bank, there is insufficient
coverage; or
xiii. Failure to promptly perform any other covenant, promise or
agreement contained herein or in the other Loan Documents,
or in any other agreement, document or instrument
hereinafter delivered by Pledgor or any Borrower to Bank.
f. "FINANCIALS" shall mean those financial statements of Borrower heretofore,
concurrently herewith or hereafter delivered by or on behalf of Borrower to
Bank.
g. "INDEBTEDNESS" shall mean all obligations of Pledgor under this Agreement,
all obligations of the Borrowers under the Note and the other Loan
Documents, and all principal, interest, taxes, fees, charges, expenses, and
reasonable attorneys' fees chargeable under the Loan Documents.
h. "KCI" shall mean KANSAS COMMUNICATIONS, INC., a Kansas Corporation.
i. "LOAN" shall mean the obligations of Borrower to Bank as evidenced by the
Loan Documents, as defined herein.
j. "LOAN DOCUMENTS" shall mean all agreements, instruments and documents now
or from time to time executed by and/or on behalf of Borrower and Pledgor
and delivered to Bank, together with any amendments, modifications or
renewals and replacements and specifically including, but not limited to,
the following:
i. the Note;
ii. this Agreement;
iii. the Loan and Security Agreement of even date herewith executed and
delivered by CDI in favor of Bank;
iv. the Loan and Security Agreement of even date herewith executed and
delivered by MTC in favor of Bank;
v. the Loan and Security Agreement of even date herewith executed and
delivered by KCI in favor of Bank;
vi. the Stock Pledge Agreement executed and delivered by SoftNet in favor
of Bank pertaining to 377,770 shares of common stock of IMNET Systems,
Inc.; and
vii. all Uniform Commercial Code Financing Statements heretofore or
hereafter executed by Pledgor and each of the Borrowers pertaining to
the Loan granting a first security interest in the Collateral
described therein.
k. "MATURITY DATE" shall mean the maturity date under the Note or any
extensions, modifications, or replacements thereof, on which date all
principal, interest and other sums or Indebtedness thereunder or under the
other Loan Documents shall be due and payable in full.
l. "MTC" shall mean MICROGRAPHIC TECHNOLOGY CORPORATION, a Delaware
Corporation.
m. "NOTE" shall mean the Revolving Credit Note executed by Borrower in favor
of Bank in the amount of SIX MILLION FIVE HUNDRED THOUSAND AND NO/100
($6,500,000.00) DOLLARS evidencing the Loan, including all extensions,
modifications, and renewals thereof.
n. "PRIME RATE" shall mean at any time the rate of interest announced and
published from time to time by West Suburban Bank, Lombard, Illinois, as
its prime rate of interest and in effect daily. The Prime Rate is not
necessarily the lowest rate charged by the Bank to its most creditworthy
customers on commercial loans. In the event West Suburban Bank
discontinues the use of its Prime Rate, then in such event the term "Prime
Rate" shall mean that rate published from time to time in The Wall Street
Journal, Midwest Edition, as the prime rate of interest, and in the event
more than one such rate is so published in The Wall Street Journal, Midwest
Edition on any applicable date, the highest such rate shall be applicable.
o. "SOFTNET" shall mean SOFTNET SYSTEMS, INC., a New York Corporation.
2. BASIC TERMS OF THE LOAN
a. MAXIMUM AMOUNT/AVAILABILITY. The maximum aggregate principal balance of
the Loan shall not at any time exceed SIX MILLION FIVE HUNDRED THOUSAND AND
NO/100 ($6,500,000.00) DOLLARS (the "CREDIT LIMIT"). Principal which is
repaid may, subject to the terms and conditions hereof, be eligible for
disbursement again. Provided that no Event of Default has occurred,
Borrower may make any number of draws ("ADVANCES") per month subject to the
terms and limitations set forth herein and in the other Loan Documents.
Each Advance shall be in ann amount not less than Fifty Thousand and No/100
($50,000.00) Dollars. If a request for an Advance is received by Bank
after 2:00 p.m., Bank shall not be obligated to fund such Advance until the
following business day. Bank will render to Borrower each month a
statement of Borrower's account which shall constitute an account stated
and shall be deemed to be correct and accepted by and binding upon Borrower
unless Bank receives a written notification of Borrower's exceptions within
thirty (30) days after the date such statement was rendered to Borrower.
b. PURPOSE/USE OF PROCEEDS. Borrower may utilize and draw available funds
under the Loan for any proper business purpose.
c. BORROWING BASE LIMITATION. Notwithstanding the amount of the Credit Limit
set forth above, the amount of principal at any time outstanding under the
Loan shall not exceed the Borrowing Base. The "BORROWING BASE" shall mean
at any time an amount equivalent to Eighty (80%) Percent of Borrowers'
aggregate Eligible Receivables, Fifty (50%) Percent of the net value (after
deduction of reasonable reserves and allowances) of Borrowers' aggregate
Eligible Inventory, and Twenty-Five (25%) Percent of the fair market value
of the shares of stock of IMNET Systems, Inc. owned by SoftNet as
determined from time to time by Bank based upon published price quotations.
"ELIGIBLE RECEIVABLES" shall mean Borrowers' aggregate Receivables which
meet the following criteria:
(a) delivery of the products covered by the Receivable or the rendition of
services covered by the Receivable has been completed;
(b) no return, rejection or repossession has occurred;
(c) such products or services have been accepted by Borrower's customer
and no dispute, offset, defense or counterclaim has been asserted by
such customer;
(d) Borrower reasonably expects to collect the full amount of the
Receivable;
(e) no more than ninety (90) days have elapsed from the invoice date;
(f) the entity from which the Receivable is collectible is domiciled in
and maintains its principal place of business within the United States
of America; and
(g) the entity from which the Receivable is collectible is not one of the
Borrowers.
"ELIGIBLE INVENTORY" shall mean Borrowers' aggregate Inventory which meet
the following criteria:
(a) it is not stored with a bailee, warehouseman, or similar party without
Bank's approval;
(b) Bank has not determined in its sole discretion that it is unacceptable
due to age, type, category, quality, and/or quantity;
(c) it does not in any way fail to meet or it violates any warranty,
representation or covenant contained in this Agreement or any other
agreement to which Borrower is a party; and
(d) is held in the ordinary course of Borrower's business.
Notwithstanding the amount of Eligible Inventory, the amount of principal
advanced with respect to the Eligible Inventory portion of the Borrowing
Base shall not exceed the sum of Two Million and No/100 ($2,000,000.00)
Dollars. Receivables or Inventory which are at any time Eligible
Receivables or Eligible Inventory but which subsequently fail to meet any
of their respective foregoing requirements shall forthwith cease to be
Eligible Receivables or Eligible Inventory. All determinations as to
Eligible Receivables, Eligible Inventory, and valuation of IMNET Systems,
Inc. stock shall be made by Bank in its sole discretion. If at any time
the amount outstanding under the Loan exceeds the Borrowing Base, Borrower
shall promptly reduce the amount outstanding thereunder by the amount of
such excess.
d. BORROWING BASE CERTIFICATES AND RECEIVABLES DOCUMENTATION. On or before
the 20th day of each month, Pledgor shall provide Borrowing Base
certificates in form satisfactory to Bank, which certificates shall include
such information as is necessary in order to enable Bank to determine
whether outstanding Advances are within the Borrowing Base limitation. The
Borrowing Base certificates shall certify that no Events of Default exist
under the Loan Documents, that no events have occurred which with the
passage of time or the giving of notice would or could constitute an Event
of Default, and that the Borrowing Base information set forth therein is
true and correct. In addition, Pledgor shall furnish to the Bank such
detailed information regarding the Receivables and Inventory as may be
reasonably requested from time to time, including but not limited to:(i)
Receivables listings and agings; (ii) copies of sales invoices which
specify the location at which the products or services were furnished or
performed; (iii) evidence of shipment or delivery; (iv) purchaser orders,
vendors' invoices, or other documentary evidence of Pledgor's purchase of
Inventory; and/or (v) such further documents, schedules, or information as
Bank may reasonably request.
e. QUARTERLY FIELD AUDITS. At Pledgor's expense, Bank shall have the right
(but not the obligation) to retain independent certified public accountants
acceptable to Bank for the purpose of conducting physical inventory
inspections and performing audits of Pledgor's books, records, and accounts
on a quarterly basis in order to determine whether outstanding Advances are
within the Borrowing Base limitation and whether an Event of Default has
occurred. Pledgor shall make its books, records, and assets available to
such accountants for such purpose.
f. LOAN TERM. The Loan term shall expire on January 15, 1997, on which date
all amounts outstanding under the Loan shall be immediately due and payable
without notice or demand.
g. INTEREST RATE. The rate of interest charged on the outstanding principal
balance during the entire term of the Loan shall be the Prime Rate (as
defined herein) in effect from time to time plus one (1.0%) percent per
annum. During the term of the Loan, changes in the interest rate will take
effect contemporaneously with changes in the Prime Rate on a daily basis
without notice.
h. REPAYMENT TERMS. Monthly payments of interest only shall be made in
arrears and shall be due and payable on the 1st day of each month during
the term of the Loan. At the end of the term of the Loan, the entire
unpaid principal balance, accrued unpaid interest and other sums due and
owing Lender pertaining to the Loan shall be due and payable in full.
i. PREPAYMENT. All or part of the principal balance of the Loan may be
prepaid in whole or in part at any time without penalty. Partial
prepayments of principal shall be in amounts of not less than Fifty
Thousand ($50,000.00) Dollars.
j. AUTHORIZATION TO REQUEST ADVANCES. Advances may be requested only by any
one or more of the following individuals: JOHN I. JELLINEK, MARTIN A.
KOEHLER, and ELEANOR AULT.
3. LOAN FEES AND EXPENSES
In addition to all other amounts payable to Bank, Pledgor agrees to pay
Bank (i) a loan fee in the amount of Forty Thousand and No/100 ($40,000.00)
Dollars, and (ii) all closing costs, including, but not limited to, attorneys'
fees, appraisal, credit report, recording charges, and any other costs and fees
reasonably expended by Bank and incident to the closing of the Loan to be paid
promptly upon demand. In the event Pledgor fails to so pay Bank within five (5)
days after demand, the amount of such costs shall become additional indebtedness
under the Note and shall bear interest at the rate stated therein.
4. GRANT OF SECURITY INTEREST
To secure the payment of all of the Indebtedness and the performance of all
obligations under the Loan Documents, Pledgor hereby pledges, assigns and grants
to Bank a continuing first, blanket security interest in any and all of the
Collateral.
5. FILING AND RECORDING
Pledgor shall, at its cost and expense, cause all instruments and documents
given as security pursuant to this Agreement to be duly recorded and/or filed or
otherwise perfected in all places necessary, in the opinion of Bank, to perfect
and protect the lien or security interest of Bank in the property covered
thereby. Pledgor hereby authorizes Bank to file any UCC or similar financing
statement in respect of any security interest created pursuant to this Agreement
which may at any time be required or which, in the opinion of Bank, may at any
time be desirable although the same may have been executed only by Bank, or, at
the option of Bank, to sign such financing statement on behalf of Pledgor and
file the same, and Pledgor hereby irrevocably designates Bank, its agents,
representatives and designees as agents and attorneys-in-fact for Pledgor for
this purpose. In the event that any re-recording or refiling thereof (or the
filing of any statements of continuation or assignment of any financing
statement) is required to protect and preserve such lien or security interest,
Pledgor shall, at its cost and expense, cause the same to be recorded and/or
refiled at the time and in the manner requested by Bank.
6. REPRESENTATIONS AND WARRANTIES
Except as disclosed in writing to Bank, Pledgor warrants and represents to
and covenants with Bank that:
a. SoftNet is now and at all times hereafter shall be a corporation duly
organized and existing and in good standing under the laws of the State of
New York and qualified or licensed to do business in Illinois, New York,
and all other states in which the laws thereof require SoftNet to be so
qualified and/or licensed to do business;
b. CDI was formerly known as CDI Acquisition Corp. and is the surviving
corporation of a corporate merger by and between CDI and CDI Acquisition
Corp., which merger has been fully and legally consummated, and CDI is now
and at all times hereafter shall be a corporation duly organized and
existing and in good standing under the laws of the State of Illinois and
qualified or licensed to do business in Illinois, Wisconsin, and all other
states in which the laws thereof require CDI to be so qualified and/or
licensed to do business;
c. MTC was formerly known as MTC Acquisition Corp. and is the surviving
corporation of a corporate merger by and between MTC and Micrographic
Technology Corporation, a California corporation, which merger has been
fully and legally consummated, and MTC is now and at all times hereafter
shall be a corporation duly organized and existing and in good standing
under the laws of the State of Delaware and qualified or licensed to do
business in California, Indiana, and all other states in which the laws
thereof require MTC to be so qualified and/or licensed to do business;
d. KCI is the surviving corporation of a corporate merger by and between KCI
and KCI Acquisition Corp., which merger has been fully and legally
consummated, and KCI is now and at all times hereafter shall be a
corporation duly organized and existing and in good standing under the laws
of the State of Kansas and qualified or licensed to do business in Kansas,
Missouri, and all other
states in which the laws thereof require KCI to be so qualified and/or licensed
to do business;
e. SoftNet is now and at all times hereafter shall be the owner of 100% of the
issued and outstanding shares of stock of CDI, MTC, and KCI;
f. SoftNet's places of business are located at 717 Forest Avenue, Lake Forest,
Illinois, 60045, and 74-19 Myrtle Avenue, Glendale, New York, 11385;
g. CDI's places of business are located at 1425 E. Busch Parkway, Buffalo
Grove, Illinois, 60089, and 869 N. Mayfair Road, Milwaukee, Wisconsin,
53226;
h. MTC's places of business are located at 520 Logue Avenue, Mountainview,
California, 94043, and 3049 N. Post Road, Indianapolis, Indiana, 46226;
i. KCI's places of business are located at 8206 Marshall Drive, Lenexa,
Kansas, 66214, 8214 Marshall Drive, Lenexa, Kansas, 66214, 4959 Lulu Court,
Suite No. 5, Wichita, Kansas, 67276, and 3600 I-70 Drive, S.E., Unit No. A,
Columbia, Missouri, 65201.
j. Pledgor has the right, power and capacity and is duly authorized and
empowered to enter into, execute, deliver and perform this Agreement and
the other Loan Documents to which Pledgor is a party;
k. The execution, delivery and/or performance by Pledgor of this Agreement and
the other Loan Documents to which Pledgor is a party shall not, by the
lapse of time, the giving of notice or otherwise, constitute a violation of
any applicable law or a breach of any provision contained in Pledgor's
Articles of Incorporation, By-Laws, or similar document, or contained in
any agreement, instrument or document to which Pledgor is now or hereafter
becomes a party or by which it is or may become bound;
l. Pledgor has and at all times hereafter shall have good, indefeasible and
merchantable title to and ownership of the Collateral, free and clear of
all liens, claims, security interests and encumbrances except those of Bank
and those others, if any, as disclosed in writing to Bank;
m. Pledgor is now and at all times hereafter shall be solvent and generally
paying its debts as they mature and Pledgor now owns and shall at all times
hereafter own property which, at a fair valuation, is greater than the sum
of its debts;
n. Pledgor now has and shall have at all times hereafter capital sufficient to
carry on its business and transactions and all businesses and transactions
in which it is about to engage;
o. There are no actions or proceedings which are pending or threatened against
Pledgor which might result in any material and adverse change in its
financial condition or materially adversely affect its assets or the
Collateral;
p. Except for trade payables arising in the ordinary course of its business
since the dates reflected in the Financials and except as disclosed in the
Financials, Pledgor has no indebtedness;
q. Pledgor is not subject to the renegotiation of any government contracts;
r. Pledgor possesses adequate assets, licenses, patents, copyrights,
trademarks and tradenames to continue to conduct its business as previously
conducted by it;
s. Pledgor has and is in good standing with respect to all governmental
permits, certificates, consents and franchises necessary to continue to
conduct its business as previously conducted by it and to own or lease and
operate its properties as now owned or leased by it;
t. None of said permits, certificates, consents or franchises contain any
term, provision, condition or limitation more burdensome than such as are
generally applicable to persons engaged in the same or similar business as
Pledgor;
u. Pledgor is not a party to any contract or agreement or subject to any
change, restriction, judgment, decree or order materially and adversely
affecting its business, property, assets, operations or condition,
financial or otherwise;
v. Pledgor is not in violation of any applicable statute, regulation or
ordinance of the United States of America, of any state, city, town,
municipality, county or of any other jurisdiction, or of any agency
thereof, in any respect materially and adversely affecting its business,
property, assets, operations or condition, financial or otherwise;
w. None of the Borrowers is in default with respect to any indenture, loan
agreement, mortgage, deed or other similar agreement relating to the
borrowing of monies to which it is a party or by which it is bound;
x. The Financials fairly and accurately present the assets, liabilities and
financial conditions and results of operations of Pledgor and the
respective Borrowers and such other persons described therein as of and for
the periods ending on such dates and have been prepared in accordance with
generally accepted accounting principles and such principles have been
applied on a basis consistently followed in all material respects
throughout the periods involved;
y. There has been no material and adverse change in the assets, liabilities or
financial condition of Pledgor or the respective Borrowers since the date
of the Financials;
z. No financing statement covering the Collateral is on file in any public
office or is presently in the possession of any third party other than any
which have been disclosed to the Bank in writing;
aa. Pledgor is and will be the lawful owner of all Collateral, free of any and
all liens and claims whatsoever, other than the security interest
hereunder, with full power to subject the Collateral to the security
interest hereunder;
bb. All information furnished to Bank concerning the Collateral and financial
affairs of Pledgor, and all other written information heretofore or
hereafter furnished by Pledgor to Bank, is and will be true and correct in
all material respects; and
cc. Pledgor has filed all federal, state and local tax returns and other
reports it is required to file and has paid or made adequate provision for
payment of all such taxes, assessments and other governmental charges.
7. AGREEMENTS OF PLEDGOR
Pledgor hereby covenants, represents and warrants that:
a. Pledgor shall, upon request of Bank, execute such financing statements and
other documents (and pay the cost of filing or recording the same in all
public offices deemed necessary by Bank) and do such other acts and things,
all as Bank may from time to time request to establish and maintain a
perfected security interest in the Collateral (free of all liens, claims
and rights to third parties whatsoever) to secure the payment of the
Indebtedness and to consummate the transactions contemplated in or by this
Agreement or the Loan Documents;
b. Pledgor shall at all times maintain its accounts and depository
relationships at Bank, excepting solely accounts having inconsequential
balances maintained for convenience purposes at remote locations;
c. Pledgor shall keep at its principal place of business, its records
concerning the Collateral, which records will be of such character as will
enable Bank or its agents to determine at any time the status thereof;
d. Pledgor shall use the proceeds of all loans made by Bank to Pledgor
pursuant to this Agreement and the Loan Documents solely for the purposes
provided herein and consistently with all applicable laws and statutes.
Pledgor further warrants and represents to Bank and covenants with Bank
that Pledgor is not in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U
issued by the Board of Governors of the Federal Reserve System), and no
proceeds of any Loans and/or Advances made by Bank to or for the benefit of
Pledgor hereunder will be used to purchase or carry any margin stock or to
extend credit to others for the purpose of purchasing or carrying any
margin stock;
e. Each Advance made by Bank to Pledgor pursuant to this Agreement or the Loan
Documents shall constitute an automatic warranty and representation by
Pledgor to Bank that there does not then exist an "EVENT OF DEFAULT";
f. Pledgor hereby authorizes and directs Bank to disburse, for and on behalf
of Borrower and for Pledgor's account, the proceeds of loans made by Bank
to Pledgor pursuant to this Agreement to such person or persons as Pledgor
shall direct, whether in writing or orally;
g. Bank, in its sole and absolute discretion, without notice thereof to
Pledgor, may disburse any or all proceeds of loans made to Pledgor pursuant
to this Agreement and/or the Loan Documents to pay any costs, expenses or
other amounts required to be paid by Pledgor hereunder and not so paid,
and/or to pay any person as Bank deems necessary to insure that the
security interest granted to Bank in the Collateral shall at all times have
the priority represented and covenanted by this Agreement and the Loan
Documents. Pledgor agrees to reimburse Bank for such costs, expenses, and
other amounts within thirty (30) days of receipt of Bank's accounting of
and request of payment for same. In the event Pledgor fails to so
reimburse Bank within said thirty (30) days, then the monies so disbursed
by Bank shall become part of the Indebtedness, payable to Bank on demand;
h. Pledgor shall, upon request of Bank, allow the Bank physical access to the
Collateral and Pledgor's places of business for purposes of inspecting and
auditing same and shall deliver to Bank any and all evidence of ownership
of, certificates of title to, or other documents evidencing any interest in
any and all of the Collateral;
i. Pledgor shall furnish Bank such information concerning Pledgor, the
Collateral and the account debtors under the Receivables as Bank may from
time to time request;
j. Pledgor shall furnish to Bank:
i. as soon as practicable and in any event within 10 days after the close
of each month, an aging of Pledgor's accounts receivables and accounts
payables in such form and detail acceptable to Bank, and unaudited
financial statements (including balance sheet, income statement, and
statement of changes in financial position) of Pledgor, all in
reasonable detail, certified by the chief financial or accounting
officer of Pledgor to be true and correct, to the best of his
knowledge and belief, based upon a reasonable review of the affairs of
Pledgor conducted by him, subject to normal recurring year-end audit
adjustments, and to have been prepared in accordance with generally
accepted accounting principles consistently applied by Pledgor;
ii. as soon as practicable and in any event within 120 days after the
close of each fiscal year of Pledgor, financial statements (including
balance sheet, income statement, and statement of changes in financial
position) of Pledgor, as of the end of and for the fiscal year just
closed, setting forth the corresponding figures of the previous fiscal
year in comparative form, all in reasonable detail and certified
(without any qualification or exception deemed material by Bank) by
independent certified public accountants reasonably acceptable to
Bank; and
iii. as soon as practicable and in any event within 30 days after the due
date for filing (including any extensions), copies of federal and
state income tax returns filed annually by Pledgor.
k. Pledgor shall not assign, create, or permit to exist any lien or security
interest in any Collateral to or in favor of anyone other than Bank, and
Pledgor shall not sell, lease, or assign any of the Collateral other than
in the ordinary course of its business.
l. Pledgor shall, at its own cost and expense, maintain the following
insurance coverage with respect to its properties:
i. insurance against loss of or damage to Pledgor's properties by fire
and such other risks, including, but not limited to, risks insured
against under extended coverage policies with all risk, in each case
in amounts at all times sufficient to prevent the Pledgor from
becoming a co-insurer under the terms of applicable policies and, in
any event, in amounts not less than the greater of (a) the principal
balance remaining outstanding from time to time on the Note, and (b)
the full insurable value of Pledgor's properties, as determined from
time to time;
ii. comprehensive general liability insurance against any and all claims
(including all costs and expenses of defending the same) for bodily
injury or death and for property damage occurring upon, in or about
the Pledgor's properties and the adjoining streets or passageways in
amounts not less than ONE MILLION AND NO/100 ($1,000,000.00) DOLLARS,
or such other respective amounts which Bank shall from time to time
reasonably require, having regard to the circumstances and usual
practice at the time of prudent owners of comparable properties in the
area in which the Pledgor's business is located;
iii. explosion insurance in respect of boilers, heating apparatus or other
pressure vessels, if any, located on the Pledgor's properties in such
amounts as shall from time to time be reasonably satisfactory to Bank;
iv. such other insurance as is customarily purchased in the area for
similar types of business and property, in such amounts and against
such insurable risks as from time to time may reasonably be required
by Bank;
Pledgor shall deliver to Bank the originals of all insurance policies or
certificates of coverage under blanket policies, including renewal or
replacement policies, and in the case of insurance about to expire shall
deliver renewal or replacement policies as to the issuance thereof or
certificates in the case of blanket policies not less than thirty (30) days
prior to their respective dates of expiration.
Such policies of insurance shall contain an endorsement, in form and
substance acceptable to Bank, showing loss payable to Bank, and shall
provide that the insurance companies will give Bank at least thirty (30)
days written notice before any such policy or policies of insurance shall
be altered or canceled and that no act or default of any other person or
entity shall affect the right of Bank to recover under such policy or
policies of insurance in case of loss or damage. Pledgor hereby directs
all insurers under such policies of insurance to pay all proceeds payable
thereunder directly to Bank and hereby irrevocably appoints Bank as
Pledgor's agent and attorney-in-fact to make, settle and adjust claims
under such policies of insurance and endorse the name of Pledgor on any
check, draft, instrument or other item of payment for the proceeds of such
policies of insurance.
m. Pledgor shall pay promptly, on or before the due date or within any
applicable grace period, all taxes, levies, assessments, charges, liens,
claims or encumbrances of any federal, state or local agency, body or
department upon the Indebtedness, Pledgor's business, assets, income or
receipts and shall not permit the same to arise, or to remain, and will
promptly discharge the same;
n. Pledgor shall notify Bank in writing prior to any change in location of its
principal place of business or any change in location of the Collateral;
o. Pledgor shall maintain all Equipment in good operating condition and
repair, and make all necessary repairs thereto, and replacements of parts
thereof so that the value and operating efficiency thereof shall at all
times be maintained and preserved. Pledgor further shall keep complete and
accurate books and records with respect to the Equipment;
p. Pledgor shall notify Bank if any Receivables arise out of contracts with
the United States or any department, agency or instrumentality thereof and
take any steps requested by Bank to perfect the assignment of the rights of
Pledgor to Bank as required under the Federal Assignment of Claims Act or
any similar act or regulation;
q. Pledgor shall indemnify and hold Bank harmless from any and all claims,
demands, losses, liabilities, actions, lawsuits and other proceedings,
judgments, awards, decrees, costs and expenses (including reasonable
attorneys' fees), arising directly or indirectly, in whole or in part, out
of the acts and omissions whether negligent, willful or otherwise, of
Pledgor, or any of its officers, directors, agents, subagents, employees,
in connection with the Loan and the Loan Documents or as a result of (a)
ownership or the Collateral or any interest therein or receipt of any sum
therefrom, (b) any accident, injury to or death of persons or loss of or
damage to property occurring in, on or about the Collateral, (c) any use,
non-use or condition of the Collateral or any part thereof, (d) any failure
on the part of the Pledgor to perform or comply with any of the terms, of
the Loan Documents, or (e) the performance of any labor or services or the
furnishing of any materials or other property with respect to the
Collateral or any part thereof;
r. Regardless of the adequacy of any Collateral securing Pledgor's obligations
hereunder, any deposits or sums at any time credited by or payable or due
from Bank to Pledgor, or any monies, cash, cash equivalents, securities,
instruments, documents or other assets of Pledgor in the possession or
control of Bank or its bailee for any purpose may at any time be reduced to
cash and applied by Bank to or setoff by Bank against the Indebtedness
hereunder;
s. All of the representations and warranties contained herein, and all
representations and warranties contained in the other Loan Documents or any
other document or instrument delivered to Bank in connection herewith will
be and remain true and correct during the term of this Agreement;
t. Pledgor shall at all times comply with all laws, statutes, rules, and
regulations applicable to Pledgor, its business, and its assets, including
but not limited to the Occupational Safety and Health Act, the Fair Labor
Standards Act, and the Americans With Disabilities Act, and shall promptly
provide Bank with copies of all notices of violations or purported
violations thereof received by Pledgor; and
u. Pledgor shall promptly given written directions to each of Pledgor's
customers who are or may become indebted to Pledgor with respect to
Receivables to remit payments thereon to such post office address as Bank
may designate from time to time (which post office is initially designated
as Lombard, Illinois) (the "LOCK BOX"). Bank shall have access to such
post office box and shall have the right to take possession of, endorse,
and deposit to Pledgor's account at Bank any and all checks, drafts, and
other instruments for the payment of money relating to the Receivables
whether delivered to the Lock Box or otherwise, and Pledgor hereby waives
notice of presentment, protest, and non-payment of any instrument so
endorsed. Bank's administration, processing, crediting and reporting of
payments and other items received and other services described in the Lock
Box Agreement (referred to herein) shall be subject to reasonable and/or
customary "Lock Box" processing and handling fees. Relative to the
foregoing, Pledgor hereby covenants and agrees to execute and enter into a
Lock Box Agreement, in form and content satisfactory to Bank and to from
time to time perform such other actions and execute such other instruments
as may be requested by Bank which are reasonably necessary (in Bank's
reasonable judgment) to evidence or effectuate such Lock Box arrangements
and requirements.
8. REMEDIES
a. If any Event of Default shall occur, then or at any time thereafter at the
option of Bank, Bank may declare all Indebtedness to be due and payable
without notice, protest, presentment or demand, all of which are expressly
waived by Pledgor. Bank shall have in addition to any other rights and
remedies contained in this Agreement and the other Loan Documents, and any
other agreements, guarantees, notes, instruments, and documents heretofore,
now, or at any time hereafter executed by Pledgor and delivered to Bank,
all of the rights and remedies of a secured party under the Illinois
Commercial Code, all of which rights and remedies shall be cumulative, and
nonexclusive, to the extent permitted by law. Bank shall also have the
following rights and remedies:
i. to declare the Note in default and the Indebtedness shall thereupon
become immediately due and payable in full;
ii. to terminate Bank's obligations under this Agreement to extend credit
of any kind or to make any disbursement, whereupon the commitment and
obligations of Bank to extend credit or to make disbursements
hereunder shall be terminated;
iii. to notify or require Pledgor to notify any and all account debtors or
parties against which Pledgor has a claim that the Receivables have
been assigned to Bank and/or that Bank has a security interest
therein and that all payments should be delivered to a lock box or
post office box designed by Bank and solely within the control of
Bank;
iv. to endorse the name of Pledgor upon any instruments of payments
(including payments made under any policy of insurance) that may come
into the possession of Bank in full or part payment of any amount
owing to Bank;
v. to sell, assign, sue for, collect, or compromise payment of all or
any part of the Collateral in the name of Pledgor or in its own name,
or make any other disposition of the Collateral, or any part thereof,
which disposition may be cash, credit, or any combination thereof;
vi. to purchase all of any part of the Collateral at public, or private
sale, and in lieu of actual payment of such purchase price, may set
off the amount of such price against the Indebtedness;
vii. to require Pledgor to assemble the Collateral and make it available
to Bank at a place to be designated by Bank;
viii. to set off, without notice to Pledgor, any and all deposits or other
sums at any time credited by or due from Bank to Pledgor, whether in
a special account or other account or represented by a certificate of
deposit (whether or not matured); and
ix. to apply the net proceeds realized by Bank upon a sale or other
disposition of the Collateral, or any part thereof, after deduction
of the expenses of retaking, holding, preparing for sale, selling, or
the like, and reasonable attorneys' fees and other expenses incurred
by Bank, toward satisfaction of the Indebtedness hereunder. Bank
shall account to Pledgor for any surplus realized upon such sale or
other disposition and Pledgor shall remain liable for any deficiency.
The commencement of any action, legal or equitable, shall not affect
the security interest of Bank in the Collateral until the
Indebtedness hereunder or any judgment therefor are fully paid.
b. During the continuance of an Event of Default, Bank may at any time and
from time to time employ and maintain in any of Pledgor's premises a
custodian selected by Bank who shall have full authority to do all acts
necessary to protect Bank's interests and to report to the Bank thereon.
Pledgor hereby agrees to cooperate with any such custodian and to do
whatever Bank may reasonably request to preserve the Collateral. All
reasonable expenses incurred by Bank by reason of the employment of the
custodian shall be charged to Pledgor's account and added to the
Indebtedness to the Bank.
c. Any notice required to be given by Bank of a sale, lease, other disposition
of the Collateral which is given to Pledgor not less than five (5) days
prior to such proposed action shall constitute commercially reasonable and
fair notice to Pledgor thereof.
d. Upon the occurrence of an Event of Default, Pledgor agrees that Bank may,
if Bank deems it reasonable, postpone or adjourn any such sale of the
Collateral from time to time by an announcement at the time and place of
sale or by announcement at the time and place of such postponed or
adjourned sale, without being required to give a new notice of sale.
Pledgor agrees that Bank has no obligation to preserve rights against prior
parties to the Collateral. Further, to the extent permitted by law,
Pledgor waives and releases any cause of action and claim against Bank as a
result of Bank's possession, collection or sale of the Collateral, any
liability or penalty for failure of Bank to comply with any requirement
imposed by law on Bank relating to notice of sale, holding of sale or
reporting of sale of the Collateral, and any right of redemption from such
sale.
e. Upon the occurrence of any event which with the passage of time or the
giving of notice would or could constitute an Event of Default, Bank's
obligations under this Agreement to extend credit or to make disbursements
shall be terminated at Bank's option without advance notice to Pledgor.
9. EXPENSE OF ENFORCEMENT
Pledgor shall pay and reimburse Bank for all costs, expenses and reasonable
attorneys' fees incurred by Bank in seeking to protect or perfect a security
interest in the Collateral, in enforcing the terms of this Agreement or the
other Loan Documents upon Borrower's or Pledgor's failure to perform any
provision thereof (whether or not the effect of such failure is cured or
curable), in defending any action or proceeding relating hereto or to the
Collateral, or in connection with any probate or bankruptcy actions or
proceedings; preparations for the commencement of any action, proceeding or
suit; and preparations for the defense of any threatened action, proceeding or
suit which might affect the Collateral, whether or not actually filed,
including, without limitation, appraiser's fees, attorney's fees, accountant's
fees, storage costs, rental charges, transportation expenses, documentary and
expert evidence fees and costs, stenographers' charges, title and Torrens
charges. All such costs, expenses and fees shall become additional Indebtedness
secured by the Collateral and shall become immediately due and payable at the
Default Rate when paid or incurred by Bank.
If at any time, by assignment or otherwise, Bank transfers any Indebtedness
due hereunder or any Collateral, or other security therefor, such transfer shall
include all of Bank's rights and powers, under this Agreement with respect to
said Indebtedness, Collateral, or other security transferred and the transferee,
shall become vested with all the same rights and powers, whether or not they are
specifically referred to in the instrument of transfer. If and to the extent
that Bank retains any other Indebtedness and to the extent that Bank retains any
other Indebtedness or Collateral or other security, Bank will continue to have
the rights and powers herein set forth with respect thereto.
In the Event of Default, Bank shall have the exclusive right to determine
how, when and what application of payments and credits, if any, whether derived
from the Borrower, the Pledgor, the Collateral, or any other source, shall be
made on the Indebtedness, and such determination shall be conclusive upon the
Borrower and Pledgor.
10. REMEDIES ARE CUMULATIVE
Each right, power and remedy of Bank, now or hereafter existing at law or
in equity, shall be cumulative and concurrent and shall be in addition to every
right, power and remedy provided for in the Loan Documents, and the exercise of
any right, power or remedy shall not preclude the simultaneous or later exercise
of any other right, power or remedy.
11. WAIVER
No delay or failure by Bank to insist upon the strict performance of any
term hereof or of the other Loan Documents or to exercise any rights, power or
remedy provided for herein or therein as a consequence of an Event of Default
hereunder or thereunder, and no acceptance of any payment of the principal,
interest or premium, if any, on the Indebtedness during the continuance of any
such Event of Default, shall constitute a waiver of any such term, such Event of
Default or such right, power or remedy. The exercise by Bank of any right,
power or remedy conferred upon Bank by this or any other Loan Document or by law
or equity shall not preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. No waiver of any Event of Default
hereunder shall affect or alter this Agreement, which shall continue in full
force and effect with respect to any other then existing or subsequent Events of
Default.
12. AMENDMENT
This Agreement shall not be amended, modified or terminated orally but may
only be amended, modified or terminated pursuant to written agreement between
Pledgor and Bank.
13. NOTICES
Any notice or other communications required or permitted hereunder shall be
(a) in writing and shall be deemed to be given when either (i) delivered in
person; (ii) deposited in a regularly maintained receptacle of the United States
mail as registered or certified mail, postage prepaid; or (iii) when dispatched
if sent by private courier service; and (b) addressed as follows or to such
other address as the parties hereto may designate in writing from time to time:
Bank: West Suburban Bank
Attn: Michael P. Brosnahan, Senior Vice President
711 South Westmore-Meyers
Lombard, Illinois 60148
Pledgor: SoftNet Systems, Inc.
Attn: Martin Koehler, C.F.O.
717 Forest Avenue
Lake Forest, Illinois 60045
14. CROSS DEFAULT CLAUSE
The occurrence of any Event of Default hereunder shall be deemed an Event
of Default under each of the Loan Documents, entitling Bank to exercise all or
any remedies available to Bank under the terms of any or all Loan Documents, and
the occurrence of any Event of Default under any other Loan Document shall be
deemed an Event of Default hereunder, entitling Bank to exercise any or all
remedies provided for herein.
15. INCORPORATION BY REFERENCE
The terms of the Loan Documents are incorporated herein and made a part
hereof by reference.
16. COMPLIANCE WITH APPLICABLE LAW
Pledgor agrees that the obligations evidenced by this Agreement constitute
an excepted transaction under the Truth-In-Lending Act, 15 U.S.C., Section 1601
et seq. and said obligations constitute a business loan which comes within the
purview of Section 4(1)(c) of "An Act In Relation To The Rate Of Interest And
Lending Of Money" approved May 24, 1879, as amended, 815 ILCS 205/4(1)(c). The
Loan is further subject to all rules and regulations of the Federal Deposit
Insurance Corporation and the Illinois Commissioner of Banks and Trust
Companies, as well as the laws of the State of Illinois and of the United
States. In no event shall Bank be obligated to advance funds to the extent that
Bank will not result in being adequately secured, as determined by Bank in its
reasonable discretion.
17. HEADINGS
The various headings used in this Agreement as headings for paragraphs or
otherwise are for convenience only and shall not be used in interpreting the
text of the paragraphs in which they appear and shall not limit or otherwise
affect the meanings thereof.
18. SEVERABILITY
If any provision in this Agreement is held by a court of law to be in
violation of any applicable local, state or federal ordinance, statute, law,
administration or judicial decision, or public policy, and if such court should
declare such provision of this Agreement to be illegal, invalid, unlawful, void,
voidable, or unenforceable as written, then such provisions shall be given full
force and effect to the fullest possible extent that is legal, valid and
enforceable. The remainder of this Agreement shall be construed as if such
illegal, invalid, unlawful, void, voidable, or unenforceable provision was not
contained therein. The rights, obligations and interest of the Pledgor and the
holder hereof under the remainder of this Agreement shall continue in full force
and effect.
19. COPIES OF LEGAL PROCESS
If any action or proceeding shall be instituted relating to the Collateral
or Loan Documents or to accomplish any purpose which would materially affect
this Agreement, Pledgor shall immediately, upon service of notice thereof,
deliver to Bank a true copy of each petition, summons, complaint, citation,
garnishment, notice of motion, order to show cause, and all other process,
pleadings and papers, however designated, served in any such action or
proceeding.
20. NAMES
Regardless of their form, all words shall be deemed singular or plural and
to have such gender as required by the text.
21. GOVERNING LAW/VENUE
This Agreement and the Loan shall be governed by and construed in
accordance with the law of the State of Illinois. Pledgor irrevocably agrees
that, in Bank's sole and absolute discretion, all actions, suits and proceedings
in any manner or way arising out of or in respect to this Agreement, any
documents heretofore or hereafter executed or executed concurrently herewith, or
the Collateral, shall be litigated in courts within the County of Du Page, State
of Illinois, or having jurisdiction with respect to said county. Pledgor
expressly submits to the jurisdiction of any state or federal court located
within or having jurisdiction over said county. Pledgor waives any right it may
have to change the venue of any litigation brought in accordance herewith.
22. COMPLETION OF DOCUMENTS
If this Agreement contains any blanks when executed by Pledgor, Bank is
hereby authorized, without notice to Pledgor, to complete any such blanks
according to the terms upon which any Loan has been granted.
23. RECIPROCAL WAIVER OF JURY TRIAL
Pledgor and Bank each hereby irrevocably waive their respective right to a
trial by jury in the event that any action or proceeding shall be instituted to
enforce or defend any rights or remedies under this Agreement or any of the
other Loan Documents.
24. ASSIGNABILITY BY BANK
Bank may assign, negotiate, pledge or otherwise hypothecate all or any
portion of the Loan or grant participations therein, or in any of its rights and
security thereunder, and in case of such assignment, Pledgor will accord full
recognition thereto and agree that all rights and remedies of Bank in connection
with the interest so assigned shall be enforceable against Pledgor by such
assignee with the same force and effect and to the same extent as the same would
have been enforceable by Bank but for such assignment.
25. BANK NEITHER A PARTNER NOR A JOINT VENTURER
Bank, by making the Loan, or taking any action hereto will not be deemed to
be a partner or joint venturer with Pledgor, and Pledgor will and does hereby
indemnify, hold harmless and shall forever defend Bank from any and all damages
arising out of any claims that the Loan constitutes a partnership or joint
venture between Bank and Pledgor.
26. ENTIRE AGREEMENT
This Agreement, together with the other Loan Documents, contains the sole
and entire agreement of the parties hereto with respect to the subject matter
hereof. Any and all prior discussions, negotiations, commitments, writings and
understandings relating to the loan transaction are merged into this Agreement.
This Agreement and the other Loan Documents cannot be changed or amended except
in writing signed by the parties hereto.
27. BENEFIT OF AGREEMENT
This Agreement shall be binding upon and inure to the benefit of Pledgor
and Bank and their respective successors and assigns, except that the
obligations of Bank to make Advances hereunder shall not inure to the benefit of
any successors and assigns of Pledgor.
28. COUNTERPARTS
This Agreement may be executed by the parties hereto individually or in any
combination, in one or more counterparts, each of which shall be an original and
all of which shall together constitute one and the same agreement.
29. NO PARTY DEEMED DRAFTER
Each party hereto acknowledges that this Agreement has been negotiated at
arms-length by the parties and their respective counsel and that neither party
shall be deemed the author or drafter of this Agreement or the other Loan
Documents for purposes of construction of the terms thereof or for any other
purpose.30. TIME OF ESSENCE
Time is of the essence of this Agreement.
IN WITNESS WHEREOF, this Agreement is executed and effective as of the date
first set forth above.
PLEDGOR: BANK:
SOFTNET SYSTEMS, INC. WEST SUBURBAN BANK
By: /s/ Martin A. Koehler By: /s/ Michael P. Brosnahan
Its:_______________________________ Its: Sr. V.P.
Attest: /s/ Eleanor Ault
Its: Asst. Sec.
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
I, the undersigned, a Notary Public in and for the County and State
aforesaid, DO HEREBY CERTIFY that Martin Koehler, V.P. of Finance of SOFTNET
SYSTEMS, INC., a New York Corporation, and Eleanor Ault, Asst. Sec. of said
Corporation, personally known to me to be the same persons whose names are
subscribed to the foregoing instrument as such V.P. of Finance and Asst. Sec.,
respectively, appeared before me this day in person and acknowledged that they
signed and delivered the said instrument as their own free and voluntary act and
as the free and voluntary act of said Corporation; and the said Asst. Sec. then
and there acknowledged that, as custodian of the Corporate Seal of said
Corporation, did affix the Corporate Seal of said Corporation to said
instrument, for the uses and purposes therein set forth. GIVEN under my hand
and official seal this 15th day of September, 1995.
/s/ Theresa A. Florek
Notary Public
Exhibit 10.2
REVOLVING CREDIT NOTE
$6,500,000.00 STATE OF ILLINOIS
SEPTEMBER 15, 1995
I.
DESCRIPTION
1.1 DESCRIPTION OF PARTIES. This Revolving Credit Note (hereinafter
referred to as "NOTE") is made by the following corporations:
a. SOFTNET SYSTEMS, INC., a corporation organized under the laws of the State
of New York ("SOFTNET"); and
b. COMMUNICATE DIRECT, INC., a corporation organized under the laws of the
State of Illinois ("CDI"), being formerly known as CDI Acquisition Corp.,
an Illinois corporation, and being the successor by merger to and the
surviving corporation of a corporate merger by and between CDI and CDI
Acquisition Corp.; and
c. MICROGRAPHIC TECHNOLOGY CORPORATION, a corporation organized under the laws
of the State of Delaware ("MTC"), being formerly known as MTC Acquisition
Corp., a Delaware corporation, and being the successor by merger to and the
surviving corporation of a corporate merger by and between MTC and
Micrographic Technology Corporation, a California corporation; and
d. KANSAS COMMUNICATIONS, INC., a corporation organized under the laws of the
State of Kansas ("KCI"), being the successor by merger to and the surviving
corporation of a corporate merger by and between KCI and KCI Acquisition
Corp., a Kansas corporation.
CDI, MTC, and KCI are each wholly-owned subsidiaries of SoftNet. Softnet, CDI,
MTC, and KCI are collectively and individually referred to herein as "MAKER."
This Note is payable to the order of WEST SUBURBAN BANK, an Illinois banking
corporation (hereinafter referred to as "PAYEE") and evidences a revolving
credit loan (hereinafter referred to as the "LOAN") made by Payee to Maker.
1.2 DESCRIPTION OF SECURITY. SoftNet, CDI, MTC, and KCI have each
executed and delivered to Payee a separate Loan and Security Agreement
(collectively the "LOAN AGREEMENTS") of even date herewith securing the
repayment of this Note. SoftNet has also executed and delivered to Payee a
Stock Pledge Agreement (the "PLEDGE AGREEMENT") of even date herewith pledging
377,770 shares of common stock of IMNET Systems, Inc., a Delaware corporation,
as further security for the repayment of this Note.
1.3 DESCRIPTION OF LOAN DOCUMENTS. This Note, the Loan Agreements, and
the Pledge Agreement, together with any amendments, modifications, renewals and
replacements thereof and any and all other instruments now or hereinafter given
to Payee, by or on behalf of the Maker or any guarantor of Maker's obligations
to Payee, or by their respective agents in connection with the Loan, are
collectively referred to herein as the "LOAN DOCUMENTS".
II.
PAYMENT
2.1 FOR VALUE RECEIVED, the Maker promises to pay to the order of the
Payee in legal tender of the United States of America, the principal sum of SIX
MILLION FIVE HUNDRED THOUSAND AND 00/100 ($6,500,000.00) DOLLARS (the "PRINCIPAL
SUM") or so much thereof as may have been advanced pursuant to the terms of the
Loan Agreements (the "PRINCIPAL BALANCE") together with interest on the
Principal Balance remaining from time to time unpaid as follows:
a. MONTHLY PAYMENTS. Commencing on the 1st day of the month following the
date of initial funding hereunder and on the same day of each successive
month thereafter until the Maturity Date (as hereinafter defined), Maker
agrees to make monthly installment payments consisting of interest on the
Principal Balance from time to time outstanding. Maker also promises to
make such repayments of the Principal Balance as may be necessary in order
to comply with the borrowing base limitations described in the Loan
Agreements.
b. INTEREST RATE. The unpaid Principal Balance shall bear interest at a daily
rate equivalent to the Prime Rate (as hereinafter defined) in effect from
time to time plus one (1%) percent per annum. The rate at which interest
accrues hereon shall change contemporaneously with changes in the Prime
Rate on a daily basis without notice.
c. MATURITY DATE. The entire outstanding Principal Balance, all interest
accrued thereon, and all other amounts due hereunder or under the Loan
Documents, unless sooner paid, shall be due and payable in full on JANUARY
15, 1997 (the "MATURITY DATE").
d. PRIME RATE. The "PRIME RATE" as used herein shall mean that rate so
announced and/or published by West Suburban Bank, Lombard, Illinois, as its
prime rate and in effect daily. Changes in the Prime Rate shall have the
effect of changing the interest charged hereunder in a manner corresponding
with such change in the Prime Rate. Such Prime Rate is not necessarily the
most favorable rate charged on loans by West Suburban Bank to its most
creditworthy customers. In the event West Suburban Bank discontinues the
use of its Prime Rate, then in such event the term "PRIME RATE" shall mean
that rate published from time to time in The Wall Street Journal, Midwest
Edition, as the prime rate of interest,and in the event more than one such
rate is so published in The Wall Street Journal, Midwest Edition, on any
applicable date, the highest such rate shall be applicable.
e. INTEREST RATE COMPUTATION. All interest calculated hereunder shall be
computed on the basis of a three hundred sixty (360) day year and not on
the basis of a calendar year and shall be calculated on the actual number
of days elapsed in each month. The outstanding balance hereunder shall be
evidenced by the Payee's books and records, which are incorporated herein
by reference, which shall be conclusive as to the principal amount
outstanding hereunder.
f. PREPAYMENT PRIVILEGE. Maker may prepay all or any part of the outstanding
Principal Balance of the Loan at any time without premium or penalty.
Partial prepayments of principal shall be in amounts of not less than Fifty
Thousand ($50,000.00) Dollars.
g. APPLICATION OF PAYMENTS. All payments made hereunder shall be applied
first to the payment of accrued interest and the remainder, if any, shall
be applied to the Principal Balance.
h. PLACE OF PAYMENT. The payments of all amounts due under the Loan Documents
shall be made at the principal office of the Payee at 711 South Westmore-
Meyers Road, Lombard, Illinois, 60148, or such other place as Payee may
from time to time designate in writing.
III
REVOLVING CREDIT
This Note evidences a revolving credit loan and, as such, the Principal Sum
or portions thereof may be borrowed, repaid,and reborrowed from time to time as
requested, subject to the terms of the Loan Agreements and the other Loan
Documents.
IV.
ADDITIONAL COVENANTS
4.1 LOAN FEES AND ATTORNEYS' FEES. In addition to the amounts due
pursuant to Section 2.1 herein Maker agrees to pay to Payee (i) a Loan Fee in
the amount of $40,000.00, to be paid promptly upon demand, and (ii) all
attorneys' fees and other costs and expenses incurred by Payee for legal
representation related to the preparation and negotiation of the Loan Documents,
to be paid promptly upon demand.
4.2 EVENTS OF DEFAULT. If any one or more of the following events
("EVENTS OF DEFAULT") shall occur, to wit:
a. failure to make prompt payment, when due, of any payment of principal or
interest herein on or before the due date thereof; or
b. the occurrence of any other Event of Default as such term is defined in any
of the Loan Agreements;
then, at any time thereafter, at the sole option of Payee, without notice to
Maker, the Principal Balance and accrued interest shall become immediately due
and payable without presentment, demand, notice or protest of any kind, all of
which are expressly waived by the Maker. All sums coming due and payable under
this paragraph 4.2 shall bear interest after acceleration at a daily rate
equivalent to the Prime Rate plus four (4.0%) percent per annum.
4.3 COLLECTION. Maker, in addition to payment of all sums due herein,
shall pay and/or reimburse Payee for all costs, expenses and reasonable
attorney's fees incurred in seeking to enforce the terms of this Note or the
other Loan Documents, or to defend any action or proceeding relating thereto,
including but not limited to those incurred in connection with any probate or
bankruptcy actions or proceedings; preparations for the commencement of any
action, proceeding or suit; and preparations for the defense of any threatened
action, proceeding or suit related to the Loan or Loan Documents whether or not
suit is actually filed. All such costs, expenses and fees shall become
additional indebtedness hereunder and shall become immediately due and payable
when paid or incurred by Payee.
4.4 EXTENSIONS. Except as herein provided, Maker agrees that the time of
payment of the Principal Balance or any part thereof may be extended from time
to time without modifying or releasing the Loan Documents or the liability of
Maker or any other such parties, the right of recourse against Maker and such
parties being hereby reserved by Payee.
4.5 GOVERNING LAW. This Note shall be governed by and construed in
accordance with the laws of the State of Illinois.
4.6 NAMES. As used herein, the term "Payee" shall also mean the
subsequent holder or holders of this Note from time to time. Regardless of
their form, all words shall be deemed singular or plural and shall have the
gender as required by the text.
4.7 BENEFIT OF PAYEE. This Note shall inure to the benefit of the Payee
and its successors and assigns and shall be binding upon the Maker and its
successors and assigns.
4.8 WAIVER OF SET-OFF/RECOUPMENT. Maker waives any right of set-off
and/or recoupment it may have against Payee in connection with claims against
Payee related to any other claim it now or forever may have against Payee and
agrees that it will not assert any claim including but not limited to a set-off
and/or recoupment, it may now or hereafter have against Payee as a defense
against payment under the Loan Documents.
4.9 TIME OF ESSENCE. Time is of the essence of this Note.
4.10 COMPLIANCE WITH APPLICABLE LAW. Maker agrees that the obligations
evidenced by this Note constitute an exempt transaction under the Truth-In-
Lending Act, 15 U.S.C. Section 1601, et seq., and said obligations constitute a
business loan which comes within the purview of Section 4(1)(c) of "An Act In
Relation To The Rate of Interest and Lending of Money," approved May 24, 1879,
as amended, 815.ILCS 205/4.
4.11 SEVERABILITY. If any provision in this Note is held by a court of
law to be in violation of any applicable local, state or federal ordinance,
statute, law, administrative or judicial decision, or public policy, and if such
court should declare such provision of this Note to be illegal, invalid,
unlawful, void, voidable, or unenforceable as written, then such provision shall
be given full force and effect to the fullest possible extent that it is legal,
valid and enforceable, that the remainder of this Note shall be construed as if
such illegal, invalid, unlawful, void, voidable or unenforceable provision was
not contained therein, and that the rights, obligations and interest of the
Maker and the holder hereof under the remainder of this Note shall continue in
full force and effect.
4.12 LAWFUL INTEREST. It being the intention of Payee and Maker to comply
with the applicable laws with regard to the interest charged hereunder, it is
agreed that, notwithstanding any provision to the contrary in this Note or the
other Loan Documents, no such provision, including without limitation any
provision of this Note providing for the payment of interest or other charges,
shall require the payment of permit the collection of any amount ("EXCESS
INTEREST") in excess of the maximum amount of interest permitted by law to be
charged for the use or detention, or the forbearance in the collection, of all
or any portion of the indebtedness evidenced by this Note. If any Excess
Interest is provided for, or is adjudicated to be provided for, in this Note or
the other Loan Documents, then in such event:
a. the provisions of this paragraph shall govern and control;
b. Maker shall not be obligated to pay any Excess Interest;
c. any Excess Interest that Payee may have received hereunder shall, at the
option of Payee, be (i) applied as a credit against the Principal Balance
due under this Note or accrued and unpaid interest thereon not to exceed
the maximum amount permitted by law, or both; (ii) refunded to the Maker;
or (iii) any combination of the foregoing;
d. the applicable interest rate or rates shall be automatically subject to
reduction to the maximum lawful rate allowed to be contracted for in
writing under the applicable governing usury laws, and this Note and the
Loan Documents shall be deemed to have been, and shall be, reformed and
modified to reflect such reduction in such interest rate or rates; and
e. Maker shall not have any action or remedy against Payee for any damages
whatsoever or any defense to enforcement of the Note or arising out of the
payment or collection of any Excess Interest.
4.13 NOTICES. Any notices or other communications required or permitted
hereunder shall be (a) in writing and shall be deemed to be given when either:
(i) delivered in person; (ii) received after deposit in a regularly maintained
receptacle of the United States mail as registered or certified mail, postage
prepaid; (iii) when received if sent by private courier services; or (iv) on the
day on which either party refuses delivery by mail or by private courier
service, and (b) addressed as follows or to such other address as the parites
hereto may designate in writing from time to time:
Maker: SoftNet Systems, Inc.
Attn: Martin Koehler, C.F.O.
717 Forest Avenue
Lake Forest, Illinois 60045
Payee: West Suburban Bank
Attn: Michael P. Brosnahan, Senior Vice President
711 South Westmore-Meyers Road
Lombard, Illinois 60148
4.14 LIABILITY OF MAKER. The liability of each of the Makers hereunder
shall be primary, direct, joint, and several, and none of the Makers shall be
deemed a surety, accommodation maker, or guarantor. The liability of each of
the Makers shall not be affected by (a) modification, extension, renewal,
substitution or replacement of any of the Loan Documents; (b) the extension of
additional credit separate from this transaction by Payee; (c) the surrender,
release, renewal, extension, sale, exchange, or other disposition of all or any
part of the collateral securing the Loan or the acceptance of any additional or
substituted collateral for the Loan; (d) Payee's failure to protect any such
collateral from waste, diminution in value, or otherwise; (e) Payee's purchase
of any such collateral at judicial or other sale, or any subsequent resale at
public or private sale; (f) any extension of time or any other indulgence
granted by Payee under any of the Loan Documents; (g) any failure or delay by
Payee in attempting to enforce any of its rights or remedies under any of the
Loan Documents; (h) Payee's proceeding against fewer than all parties liable
under this Note; (i) Payee's release, settlement, or compromise of its claim
against any other party liable on this Note; or (j) the occurrence of any other
event which might otherwise operate as a discharge under principles of
suretyship. Each Maker waives all rights to seek contribution, indemnification,
or other form of reimbursement from the other Makers or any other person liable
under this Note, including any rights of subrogation to the rights of Payee. In
the event any payment on this Note to Payee is held to constitute a preference
under the bankruptcy laws, the liability of each Maker shall automatically be
revived to the full extent of such payment.
4.15 HEADINGS. The various headings used in this Note as headings for
sections or otherwise are for convenience and reference only and shall not be
used in interpreting the text of the section in which they appear and shall not
limit or otherwise affect the meanings thereof.
V.
INCORPORATION BY REFERENCE
5.1 To the extent not inconsistent with the terms of this Note, the terms
of the Loan Documents are incorporated herein and made a part hereof by
reference.
IN WITNESS WHEREOF, each Maker has executed this Note by its duly
authorized representatives.
SOFTNET SYSTEMS, INC. COMMUNICATE DIRECT, INC.
By: ______________________________ By: __________________________
Its: ______________________________ Its: __________________________
Attest:_____________________________ Attest:__________________________
Its: ______________________________ Its: __________________________
MICROGRAPHIC TECHNOLOGY KANSAS COMMUNICATIONS, INC.
CORPORATION
By: ______________________________ By: __________________________________
Its: ______________________________ Its: __________________________________
Attest:______________________________ Attest:_________________________________
Its: ______________________________ Its: __________________________________
STATE OF ILLINOIS )
) SS.
COUNTY OF ______ )
I, the undersigned, a Notary Public in and for the County and State
aforesaid, DO HEREBY CERTIFY that ________________________________,
_____________________ of SOFTNET SYSTEMS, INC., a New York Corporation, and
______________________________________, ____________________ of said
Corporation, personally known to me to be the same persons whose names are
subscribed to the foregoing instrument as such ____________________ and
_____________________, respectively, appeared before me this day in person and
acknowledged that they signed and delivered the said instrument as their own
free and voluntary act and as the free and voluntary act of said Corporation;
and the said _______________________ then and there acknowledged that, as
custodian of the Corporate Seal of said Corporation, did affix the Corporate
Seal of said Corporation to said instrument, for the uses and purposes therein
set forth. GIVEN under my hand and official seal this ________ day of
______________, 1995.
____________________________________________
Notary Public
STATE OF ILLINOIS )
) SS.
COUNTY OF ______ )
I, the undersigned, a Notary Public in and for the County and State
aforesaid, DO HEREBY CERTIFY that ________________________________,
_____________________ of COMMUNICATE DIRECT, INC., an Illinois Corporation, and
______________________________________, ____________________ of said
Corporation, personally known to me to be the same persons whose names are
subscribed to the foregoing instrument as such ____________________ and
_____________________, respectively, appeared before me this day in person and
acknowledged that they signed and delivered the said instrument as their own
free and voluntary act and as the free and voluntary act of said Corporation;
and the said _______________________ then and there acknowledged that, as
custodian of the Corporate Seal of said Corporation, did affix the Corporate
Seal of said Corporation to said instrument, for the uses and purposes therein
set forth. GIVEN under my hand and official seal this ________ day of
______________, 1995.
____________________________________________
Notary Public
STATE OF ILLINOIS )
) SS.
COUNTY OF ______ )
I, the undersigned, a Notary Public in and for the County and State
aforesaid, DO HEREBY CERTIFY that ________________________________,
_____________________ of MICROGRAPHIC TECHNOLOGY CORPORATION, a Delaware
Corporation, and ______________________________________, ____________________ of
said Corporation, personally known to me to be the same persons whose names are
subscribed to the foregoing instrument as such ____________________ and
_____________________, respectively, appeared before me this day in person and
acknowledged that they signed and delivered the said instrument as their own
free and voluntary act and as the free and voluntary act of said Corporation;
and the said _______________________ then and there acknowledged that, as
custodian of the Corporate Seal of said Corporation, did affix the Corporate
Seal of said Corporation to said instrument, for the uses and purposes therein
set forth. GIVEN under my hand and official seal this ________ day of
______________, 1995.
____________________________________________
Notary Public
STATE OF ILLINOIS )
) SS.
COUNTY OF ______ )
I, the undersigned, a Notary Public in and for the County and State
aforesaid, DO HEREBY CERTIFY that ________________________________,
_____________________ of KANSAS COMMUNICATIONS, INC., a Kansas Corporation, and
______________________________________, ____________________ of said
Corporation, personally known to me to be the same persons whose names are
subscribed to the foregoing instrument as such ____________________ and
_____________________, respectively, appeared before me this day in person and
acknowledged that they signed and delivered the said instrument as their own
free and voluntary act and as the free and voluntary act of said Corporation;
and the said _______________________ then and there acknowledged that, as
custodian of the Corporate Seal of said Corporation, did affix the Corporate
Seal of said Corporation to said instrument, for the uses and purposes therein
set forth. GIVEN under my hand and official seal this ________ day of
______________, 1995.
____________________________________________
Notary Public
Exhibit 10.3
SOFTNET SYSTEMS, INC.
1995 LONG TERM INCENTIVE PLAN
SECTION 1. Purpose. The purposes of this SoftNet Systems, Inc. 1995 Long
Term Incentive Plan (the "Plan") are to encourage selected employees of SoftNet
Systems, Inc. (together with any successor thereto, the "Company") and its
Affiliates (as defined below) to acquire a proprietary interest in the growth
and performance of the Company, to generate an increased incentive to contribute
to the Company's future success and prosperity, thus enhancing the value of the
Company for the benefit of its shareholders, and to enhance the ability of the
Company and its Affiliates to attract and retain exceptionally qualified
individuals upon whom, in large measure, the sustained progress, growth, and
profitability of the Company depend.
SECTION 2. Definitions. As used in the Plan, the following terms shall
have the meanings set forth below:
"Affiliate" shall mean (i) any entity that, directly or through one or more
intermediaries, is controlled by the Company and (ii) any entity in which the
Company has a significant equity interest, as determined by the Committee.
"Award" shall mean any Option, Stock Appreciation Right, Restricted
Security, Performance Award, Dividend Equivalent, or Other Stock-Based Award
granted under the Plan.
"Award Agreement" shall mean any written agreement, contract, or other
instrument or document evidencing any Award granted under the Plan.
"Board" shall mean the Board of Directors of the Company.
"Cause", as used in connection with the termination of a Participant's
employment, shall mean (i) with respect to any Participant employed under a
written contract with the Company or an Affiliate of the Company which contract
includes a definition of "cause," "cause" as defined in such contract and (ii)
with respect to any other Participant, the failure to perform adequately in
carrying out such Participant's employment responsibilities, including any
directives from the Board, or engaging in such behavior in his personal or
business life, as to lead the Committee in its reasonable judgment to determine
that it is in the best interests of the Company to terminate his employment.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and the regulations promulgated thereunder.
"Committee" shall mean the Compensation Committee or any other committee of
the Board designated by the Board to administer the Plan and composed of not
less than two outside directors, as described in Section 162(m) of the Code,
each of whom, to the extent necessary to comply with Rule 16b-3 only, is a
"disinterested person" within the meaning of Rule 16b-3.
"Common Shares" shall mean any or all, as applicable, of the Company's
Common Stock, $.01 par value, and such other securities or property as may
become the subject of Awards, or become subject to Awards, pursuant to an
adjustment made under Section 4(b) of the Plan and any other securities of the
Company or any Affiliate or any successor that may be so designated by the
Committee.
"Dividend Equivalent" shall mean any right granted under Section 6(e) of
the Plan.
"Employee" shall mean any employee of the Company or of any Affiliate.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Fair Market Value" shall mean (A) with respect to any property other than
the Common Shares, the fair market value of such property determined by such
methods or procedures as shall be established from time to time by the
Committee; and (B) with respect to the Common Shares, as of any date, (i) the
last reported sales price on the American Stock Exchange, or, in case no such
reported sale takes place on such day, the average of the reported closing bid
and asked quotations on the American Stock Exchange; (ii) if the Common Shares
are not listed on the American Stock Exchange (or another national exchange) or
no such quotations are available, the closing price of the Common Shares as
reported by the National Market System, or similar organization, or, if no such
quotations are available, the average of the high bid and low asked quotations
as quoted in the National Association of Securities Dealers' Automated Quotation
System, or similar organization; or (iii) in the event that there shall be no
public market for the Common Shares, the fair market value of the Common Shares
as determined (which determination shall be conclusive) in good faith by the
Committee, based upon the value of the Company as a going concern, as if such
Common Shares were publicly owned stock, but without any discount with respect
to minority ownership.
"Good Reason", as used in connection with the termination of a
Participant's employment, shall mean (i) with respect to any Participant
employed under a written employment contract with the Company or an Affiliate of
the Company, "good reason" as defined in such written employment agreement or,
if such contract contains no such definition, a material breach by the Company
of such written employment agreement or (ii) with respect to any other
Participant, a failure by the Company to pay such Participant any amount
otherwise vested and due and a continuation of such failure for 30 business days
following notice to the Company thereof.
"Incentive Stock Option" shall mean an option granted under Section 6(a) of
the Plan that is intended to meet the requirements of Section 422 of the Code or
any successor provision thereto.
"Non-Qualified Stock Option" shall mean an option granted under Section
6(a) of the Plan that is not intended to be an Incentive Stock Option. Any
stock option granted by the Committee which is not designated an Incentive Stock
Option shall be deemed a Non-Qualified Stock Option.
"Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option.
"Other Stock-Based Award" shall mean any right granted under Section 6(f)
of the Plan.
"Participant" shall mean any Employee granted an Award under the Plan.
"Performance Award" shall mean any right granted under Section 6(d) of the
Plan.
"Person" shall mean any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, or government or
political subdivision thereof.
"Released Securities" shall mean securities that were Restricted Securities
but with respect to which all applicable restrictions have expired, lapsed or
been waived in accordance with the terms of the Plan or the applicable Award
Agreement.
"Restricted Securities" shall mean any Common Share granted under Section
6(c) of the Plan, any right granted under Section 6(c) of the Plan that is
denominated in Common Shares or any other Award under which issued and
outstanding Common Shares are held subject to certain restrictions.
"Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Exchange Act, or any successor rule or regulation
thereto as in effect from time to time.
"16b-3 Plan" shall mean the Plan in the event that any Employee becomes
subject to Section 16 of the Exchange Act with respect to Common Shares.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Stock Appreciation Right" shall mean any right granted under Section 6(b)
of the Plan.
SECTION 3. Administration. The Plan shall be administered by the
Committee. Subject to the terms of the Plan and applicable law, and in addition
to other express powers and authorizations conferred on the Committee by the
Plan, the Committee shall have full power and authority to: (i) designate
Participants; (ii) determine the type or types of Awards to be granted to an
eligible Employee under the Plan; (iii) determine the number and classification
of Common Shares to be covered by (or with respect to which payments, rights, or
other matters are to be calculated in connection with) Awards; (iv) determine
the terms and conditions of any Award; (v) determine whether, to what extent,
and under what circumstances Awards may be settled or exercised in cash, Common
Shares, other securities, other Awards, or other property, or canceled,
forfeited, or suspended, and the method or methods by which Awards may be
settled, exercised, canceled, forfeited, or suspended; (vi) determine
requirements for the vesting of Awards or performance criteria to be achieved in
order for Awards to vest; (vii) determine whether, to what extent, and under
what circumstances cash, Common Shares, other securities, other Awards, other
property, and other amounts payable with respect to an Award under the Plan
shall be deferred either automatically or at the election of the holder thereof
or of the Committee; (viii) interpret and administer the Plan and any instrument
or agreement relating to, or Award made under, the Plan; (ix) establish, amend,
suspend, or waive such rules and regulations and appoint such agents as it shall
deem appropriate for the proper administration of the Plan; and (x) make any
other determination and take any other action that the Committee deems necessary
or desirable for the administration of the Plan. Unless otherwise expressly
provided in the Plan, all designations, determinations, interpretations, and
other decisions under or with respect to the Plan or any Award shall be within
the sole discretion of the Committee, may be made at any time and shall be
final, conclusive, and binding upon all Persons, including the Company, any
Affiliate, any Participant, any holder or beneficiary of any Award, any
shareholder, and any Employee. Notwithstanding the foregoing the maximum number
of Awards which may be granted to any one participant under this Plan shall not
exceed 75,000 Common Shares, subject to the adjustments provided in Section 4(b)
hereof and (b) no Awards under this Plan shall be granted after ten years from
the date this Plan is adopted by the Board.
SECTION 4. Common Shares Available for Awards.
(a) Common Shares Available. Subject to adjustment as provided in Section
4(b):
(i) Calculation of Number of Common Shares Available. The number of
Common Shares available for granting Awards under the Plan shall be
600,000, any or all of which may be or may be based on Common Shares, any
other security which becomes the subject of Awards, or any combination
thereof. If, after the effective date of the Plan, any Common Shares
covered by an Award granted under the Plan, or to which such an Award
relates, are forfeited, or if an Award otherwise terminates or is canceled
without the delivery of Shares or of other consideration, then the Common
Shares covered by such Award, or to which such Award relates, or the number
of Common Shares otherwise counted against the aggregate number of Common
Shares available under the Plan with respect to such Award, to the extent
of any such forfeiture, termination or cancellation, shall again be, or
shall become, available for granting Awards under the Plan.
(ii) Accounting for Awards. For purposes of this Section 4,
(A) if an Award (other than a Dividend Equivalent) is
denominated in or based upon Common Shares, the number of Common
Shares covered by such Award, or to which such Award relates, shall be
counted on the date of grant of such Award against the aggregate
number of Common Shares available for granting Awards under the Plan
and against the maximum number of Awards available to any participant;
and
(B) Dividend Equivalents and Awards not denominated in Common
Shares may be counted against the aggregate number of Common Shares
available for granting Awards under the Plan and against the maximum
number of Awards available to any participant in such amount and at
such time as the Committee shall determine under procedures adopted by
the Committee consistent with the purposes of the Plan;
provided, however, that Awards that operate in tandem with (whether granted
simultaneously with or at a different time from), or that are substituted
for, other Awards may be counted or not counted under procedures adopted by
the Committee in order to avoid double counting. Any Common Shares that
are delivered by the Company, and any Awards that are granted by, or become
obligations of, the Company, through the assumption by the Company or an
Affiliate of, or in substitution for, outstanding awards previously granted
by an acquired company shall, in the case of Awards granted to Employees
who are officers or directors of the Company for purposes of Section 16 of
the Exchange Act, be counted against the Common Shares available for
granting Awards under the Plan.
(iii) Sources of Common Shares Deliverable Under Awards. Any
Common Shares delivered pursuant to an Award may consist, in whole or in
part, of authorized and unissued Common Shares or of treasury Common
Shares.
(b) Adjustments. In the event that the Committee shall determine that any
dividend or other distribution (whether in the form of cash, Common Shares,
other securities, or other property), recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of Common Shares or other securities of the
Company, issuance of warrants or other rights to purchase Common Shares or other
securities of the Company, or other similar corporate transaction or event
affects the Common Shares such that an adjustment is determined by the Committee
to be appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee shall, in its sole discretion and such manner as it may deem
equitable, adjust any or all of (i) the number and kind of Common Shares (or
other securities or property) which thereafter may be made the subject of
Awards, (ii) the number and kind of Common Shares (or other securities or
property) subject to outstanding Awards, and (iii) the grant or exercise price
with respect to any Award or, if deemed appropriate, make provision for a cash
payment to the holder of an outstanding Award; provided, however, that the
number of Common Shares subject to any Award denominated in Common Shares shall
always be a whole number.
If the Company is merged into or consolidated with another corporation
under circumstances where the Company is not the surviving corporation, or if
the Company sells or otherwise disposes of substantially all its assets to
another corporation and is liquidated while unexercised Options remain
outstanding under the Plan, (i) subject to the provisions of clause (iii) below,
after the effective date of such merger, consolidation or sale and liquidation,
as the case may be, each holder of an outstanding Award shall be entitled to
receive, in lieu of Common Shares, shares of such stock or other securities or
property as the holders of Common Shares received pursuant to the terms of the
merger, consolidation or sale; (ii) the Committee may waive any limitations
imposed pursuant to Subsection 6(a)(ii) hereof so that all Awards, from and
after a date prior to the effective date of such merger, consolidation, or sale
and liquidation, as the case may be, specified by the Committee, shall be
exercisable in full (except that no Option may be exercised within six (6)
months of the date of grant); and (iii) all outstanding Awards may be canceled
by the Committee as of the effective date of any such merger, consolidation or
sale and liquidation provided that (x) notice of such cancellation shall be
given to each holder of an Option and (y) each holder of an Award shall have the
right to exercise such Award in full (except Options which were granted within
six (6) months of the date of cancellation) during a 30-day period preceding the
effective date of such merger, consolidation or sale and liquidation.
SECTION 5. Eligibility. Any Employee, including any officer or employee-
director of the Company or of any Affiliate, who is not a member of the
Committee shall be eligible to be designated a Participant.
SECTION 6. Awards.
(a) Options. The Committee is hereby authorized to grant to eligible
Employees options to purchase Common Shares (each, an "Option") which shall
contain the following terms and conditions and with such additional terms and
conditions, in either case not inconsistent with the provisions of the Plan, as
the Committee shall determine:
(i) Exercise Price. The purchase price per Common Share purchasable
under an Option shall be determined by the Committee; provided, however,
that such purchase price with respect to an Incentive Stock Option shall
not be less than one hundred percent (100%) of the Fair Market Value of a
Common Share on the date of grant of such Option, or such other price as
required under Subsection 6(a)(iv) hereof.
(ii) Time and Method of Exercise. Subject to the terms of Section
6(a)(iii), the Committee shall determine the time or times at which an
Option may be exercised in whole or in part, and the method or methods by
which, and the form or forms (including, without limitation, cash, Common
Shares, outstanding Awards, or other property, or any combination thereof,
having a Fair Market Value on the exercise date equal to the relevant
exercise price) in which, payment of the exercise price with respect
thereto may be made or deemed to have been made; provided that, unless
otherwise specified in the applicable Award Agreement and subject to the
terms of Section 6(a)(iii), no Option may be exercised until the expiration
of one year of continued employment of the Participant by the Company or an
Affiliate or both immediately following the date the Option was granted.
(iii) Exercisability Upon Death, Retirement and Termination of
Employment. Subject to the condition that no Option may be exercised in
whole or in part after the expiration of the Option period specified in the
applicable Award Agreement:
(A) Subject to the terms of paragraph (D) below, upon the death
of a Participant while employed or within 3 months of retirement or
disability as defined in paragraph (B) below, the person or persons to
whom such Participant's rights with respect to any Option held by such
Participant are transferred by will or the laws of descent and
distribution may, prior to the expiration of the earlier of: (1) the
outside exercise date determined by the Committee at the time of
granting the Option, or (2) nine months after such Participant's
death, purchase any or all of the Common Shares with respect to which
such Participant was entitled to exercise such Option immediately
prior to such Participant's death, and any Options not so exercisable
will lapse on the date of such Participant's death;
(B) Subject to the terms of paragraph (D) below, upon
termination of a Participant's employment with the Company (x) as a
result of retirement pursuant to a retirement plan of the Company or
an Affiliate or disability (as determined by the Committee) of such
Participant, (y) by the Company other than for Cause, or (z) by the
Participant with Good Reason, such Participant may, prior to the
expiration of the earlier of: (1) the outside exercise date
determined by the Committee at the time of granting the Option, or (2)
three months after the date of such termination, purchase any or all
of the Common Shares with respect to which such Participant was
entitled to exercise any Options immediately prior to such
termination, and any Options not so exercisable will lapse on such
date of termination;
(C) Subject to the terms of paragraph (D) below, upon
termination of a Participant's employment with the Company under any
circumstances not described in paragraphs (A) or (B) above, such
Participant's Options shall be canceled to the extent not theretofore
exercised;
(D) Upon (i) the death of the Participant, or (ii) termination
of the Participant's employment with the Company (x) by the Company
other than for Cause (y) by the Participant with Good Reason or (z) as
a result of retirement or disability as defined in paragraph (B)
above, the Company shall have the right to cancel all of the Options
such Participant was entitled to exercise at the time of such death or
termination (subject to the terms of paragraphs (A) or (B) above) for
a payment in cash equal to the excess, if any, of the Fair Market
Value of one Common Share on the date of death or termination over the
exercise price of such Option for one Common Share times the number of
Common Shares subject to the Option and exercisable at the time of
such death or termination; and
(E) Upon expiration of the respective periods set forth in each
of paragraphs (A) through (C) above, the Options of a Participant who
has died or whose employment has been terminated shall be canceled to
the extent not theretofore canceled or exercised.
(iv) Incentive Stock Options. The following provisions shall apply
only to Incentive Stock Options granted under the Plan:
(A) No Incentive Stock Option shall be granted to any eligible
Employee who, at the time such Option is granted, owns, within the
meaning of Section 422 of the Code, stock possessing more than ten
percent (10%) of the total combined voting power of all classes of
Common Shares of the Company or any of its affiliates, except that
such an Option may be granted to such an employee if at the time the
Option is granted the option price is at least one hundred ten percent
(110%) of the fair market value of the Common Shares (determined in
accordance with Section 2) subject to the Option, and the Option by
its terms is not exercisable after the expiration of five (5) years
from the date the Option is granted;
(B) To the extent that the aggregate fair market value of stock
with respect to which Incentive Stock Options (without regard to this
subsection) are exercisable for the first time by any individual
during any calendar year (under all plans of the Company and its
affiliates) exceeds $100,000, such Options shall be treated as Options
which are not Incentive Stock Options. This subsection shall be
applied by taking Options into account in the order in which they were
granted. If some but not all Options granted on any one day are
subject to this subsection, then such Options shall be apportioned
between Incentive Stock Option and Non-Qualified Stock Option
treatment in such manner as the Committee shall determine. For
purposes of this subsection, the fair market value of any Common
Shares shall be determined, in accordance with Section 2, as of the
date the Option with respect to such Common Shares is granted.
(C) No Incentive Stock Option granted under the Plan shall be
exercisable any earlier than one (1) year from the date of grant.
(D) Only Employees of the Company or an Affiliate shall be
eligible to receive Incentive Stock Options.
(b) Stock Appreciation Rights. The Committee is hereby authorized to
grant to eligible Employees "Stock Appreciation Rights." Each Stock
Appreciation Right shall consist of a right to receive the excess of (i) the
Fair Market Value of one Common Share on the date of exercise or, if the
Committee shall so determine in the case of any such right other than one
related to any Incentive Stock Option, at any time during a specified period
before or after the date of exercise over (ii) the grant price of the right as
specified by the Committee, which shall not be less than one hundred percent
(100%) of the Fair Market Value of one Common Share on the date of grant of the
Stock Appreciation Right (or, if the Committee so determines, in the case of any
Stock Appreciation Right retroactively granted in tandem with or in substitution
for another Award, on the date of grant of such other Award). Subject to the
terms of the Plan and any applicable Award Agreement, the grant price, term,
methods of exercise, methods of settlement, and any other terms and conditions
of any Stock Appreciation Right granted under the Plan shall be as determined by
the Committee. The Committee may impose such conditions or restrictions on the
exercise of any Stock Appreciation Right as it may deem appropriate.
(c) Restricted Securities.
(i) Issuance. The Committee is hereby authorized to grant to
eligible Employees "Restricted Securities," which shall consist of the
right to receive, by purchase or otherwise, Common Shares which are subject
to such restrictions as the Committee may impose (including, without
limitation, any limitation on the right to vote such Common Shares or the
right to receive any dividend or other right or property), which
restrictions may lapse separately or in combination at such time or times,
in such installments or otherwise, as the Committee may deem appropriate.
(ii) Registration. Restricted Securities granted under the Plan may
be evidenced in such manner as the Committee may deem appropriate,
including, without limitation, book-entry registration or issuance of a
stock certificates or certificates. In the event any stock certificate is
issued in respect of Restricted Securities granted under the Plan, such
certificate shall be registered in the name of the Participant and shall
bear an appropriate legend referring to the terms, conditions, and
restrictions applicable to such Restricted Securities.
(iii) Forfeiture. Except as otherwise determined by the Committee,
upon termination of a Participant's employment for any reason during the
applicable restriction period, all of such Participant's Restricted
Securities which had not become Released Securities by the date of
termination of employment shall be forfeited and reacquired by the Company;
provided, however, that the Committee may, when it finds that a waiver
would be in the best interests of the Company, waive in whole or in part
any or all remaining restrictions with respect to such Participant's
Restricted Securities. Unrestricted Common Shares, evidenced in such
manner as the Committee shall deem appropriate, shall be issued to the
holder of Restricted Securities promptly after such Restricted Securities
become Released Securities.
(d) Performance Awards. The Committee is hereby authorized to grant
to eligible Employees "Performance Awards." Each Performance Award shall
consist of a right, (i) denominated or payable in cash, Common Shares,
other securities or other property (including, without limitation,
Restricted Securities), and (ii) which shall confer on the holder thereof
rights valued as determined by the Committee and payable to, or exercisable
by, the holder of the Performance Award, in whole or in part, upon the
achievement of such performance goals during such performance periods as
the Committee shall establish. Subject to the terms of the Plan and any
applicable Award Agreement, the performance goals to be achieved during any
performance period, the length of any performance period, the amount of any
Performance Award granted, the termination of a Participant's employment
and the amount of any payment or transfer to be made pursuant to any
Performance Award shall be determined by the Committee and by the other
terms and conditions of any Performance Award. The Committee shall issue
performance goals prior to the commencement of the performance period to
which such performance goals pertain.
(e) Dividend Equivalents. The Committee is hereby authorized to
grant to eligible Employees "Dividend Equivalents." Each Dividend
Equivalent shall consist of a right pursuant to which the holder thereof
shall be entitled to receive payments equivalent to dividends with respect
to a number of Common Shares determined by the Committee, and the Committee
may provide that such amounts (if any) shall be deemed to have been
reinvested in additional Shares or otherwise reinvested. Subject to the
terms of the Plan and any applicable Award Agreement, Dividend Equivalents
may have such terms and conditions as the Committee shall determine.
(f) Other Stock-Based Awards. The Committee is hereby authorized to
grant to eligible Employees "Other Stock-Based Awards." Each Other
Stock-Based Award shall consist of a right (i) which is other than an Award
or right described in Section 6(a), (b), (c), (d) or (e) above and (ii)
which is denominated or payable in, valued in whole or in part by reference
to, or otherwise based on or related to, Common Shares (including, without
limitation, securities convertible into Common Shares) as are deemed by the
Committee to be consistent with the purposes of the Plan, provided,
however, that such right shall comply, to the extent deemed desirable by
the Committee, with Rule 16b-3 and applicable law. Subject to the terms of
the Plan and any applicable Award Agreement, the Committee shall determine
the terms and conditions of Other Stock-Based Awards. Common Shares or
other securities delivered pursuant to a purchase right granted under this
Section 6(f) shall be purchased for such consideration, which may be paid
by such method or methods and in such form or forms, including, without
limitation, cash, Common Shares, other securities, other Awards, or other
property, or any combination thereof, as the Committee shall determine.
(g) General.
(i) No Cash Consideration for Awards. Awards may be granted for no
cash consideration or for such minimal cash consideration as may be
required by applicable law.
(ii) Awards May Be Granted Separately or Together. Awards may, in the
discretion of the Committee, be granted either alone or in addition to, in
tandem with, or in substitution for any other Award, except that in no
event shall an Incentive Stock Option be granted together with a Non-
Qualified Stock Option in such a manner that the exercise of one Option
affects the right to exercise the other. Awards granted in addition to or
in tandem with other Awards may be granted either at the same time as or at
a different time from the grant of such other awards.
(iii) Forms of Payment Under Awards. Subject to the terms of the
Plan and of any applicable Award Agreement, payments or transfers to be
made by the Company or an Affiliate upon the grant, exercise or payment of
an Award may be made in such form or forms as the Committee shall
determine, including, without limitation, cash, Common Shares, other
securities, other Awards, or other property, or any combination thereof,
and may be made in a single payment or transfer, in installments, or on a
deferred basis, in each case in accordance with rules and procedures
established by the Committee. Such rules and procedures may include
without limitation, provisions for the payment or crediting of reasonable
interest on installment or deferred payments or the grant or crediting of
Dividend Equivalents in respect of installment or deferred payments. In
accordance with the above, the Committee may elect (i) to pay a Participant
(or such Participant's permitted transferee) upon the exercise of an Option
in whole or in part, in lieu of the exercise thereof and the delivery of
Common Shares thereunder, an amount of cash equal to the excess, if any, of
the Fair Market Value of one Common Share on the date of such exercise over
the exercise price of such Option for one Common Share times the number of
Common Shares subject to the Option or portion thereof or (ii) to settle
other stock denominated Awards in cash.
(iv) Limits on Transfer of Awards.
(A) No award (other than Released Securities), and no right
under any such Award, may be assigned, alienated, pledged, attached,
sold or otherwise transferred or encumbered by a Participant otherwise
than by will or by the laws of descent and distribution (or, in the
case of Restricted Securities, to the Company) and any such purported
assignment, alienation, pledge, attachment, sale or other transfer or
encumbrance shall be void and unenforceable against the Company or any
Affiliate. Notwithstanding the foregoing, at the discretion of the
Committee an Award may permit the transfer of the Award by the
Participant solely to members of the Participant's immediate family or
trusts or family partnerships for the benefit of such persons, subject
to such terms and conditions as may be established by the Committee.
(B) Each award, and each right under any Award, shall be
exercisable during the Participant's lifetime only by the Participant
or if permissible under applicable law, by the Participant's guardian
or legal representative.
(v) Terms of Awards. The term of each Award shall be for such period
as may be determined by the Committee; provided, however, that in no event
shall the term of any Incentive Stock Option exceed a period of ten years
from the date of its grant.
(vi) Rule 16b-3 Six-Month Limitations. To the extent required in
order to maintain the exemption provided under Rule 16b-3 only, any equity
security offered pursuant to the Plan must be held for at least six months
after the date of grant, and with respect to any derivative security issued
pursuant to the Plan, at least six months must elapse from the date of
acquisition of such derivative security to the date of disposition of the
derivative security (other than upon exercise or conversion) or its
underlying equity security. Terms used in the preceding sentence shall,
for the purposes of such sentence only, have the meanings, if any, assigned
or attributed to them under Rule 16b-3.
(vii) Common Share Certificates. All certificates for Common Shares
delivered under the Plan pursuant to any Award or the exercise thereof
shall be subject to such stop transfer orders and other restrictions as the
Committee may deem advisable under the Plan or the rules, regulations, and
other requirements of the Securities and Exchange Commission, any stock
exchange upon which such Common Shares are then listed, and any applicable
Federal or state securities laws, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate reference to
such restrictions.
(viii) Delivery of Common Shares or Other Securities and Payment by
Participant of Consideration. No Common Shares or other securities shall
be delivered pursuant to any Award until payment in full of any amount
required to be paid pursuant to the Plan or the applicable Award Agreement
is received by the Company. Such payment may be made by such method or
methods and in such form or forms as the Committee shall determine,
including, without limitation, cash, Common Shares, other securities, other
Awards or other property, or any combination thereof; provided that the
combined value, as determined by the Committee, of all cash and cash
equivalents and the Fair Market Value of any such Common Shares or other
property so tendered to the Company, as of the date of such tender, is at
least equal to the full amount required to be paid pursuant to the Plan or
the applicable Award Agreement to the Company.
SECTION 7. Unfunded Plan. Insofar as the Plan provides for Awards of
cash or Common Shares, the Plan shall be unfunded unless and until the Committee
otherwise determines. Although bookkeeping accounts may be established with
respect to Participants who are entitled to cash, Common Shares or rights
thereof under the Plan, any such accounts shall be used merely as a bookkeeping
convenience. Unless the Committee otherwise determines, (a) the Company shall
not be required to segregate any assets that may at any time be represented by
cash, Common Shares or rights thereto, nor shall the Plan be construed as
providing for such segregation, nor shall the Company, the Board or the
Committee be deemed to be a trustee of any cash, Common Shares or rights thereto
to be granted under the Plan unless the Committee decides to establish trusts of
the type described in Section 9(i) hereof; (b) any liability of the Company to
any Participant with respect to a grant of cash, Common Shares or rights thereto
under the Plan shall be based solely upon any contractual obligations that may
be created by the Plan and an Award Agreement; (c) no such obligation of the
Company shall be deemed to be secured by any pledge or other encumbrance on any
property of the Company; and (d) neither the Company, the Board nor the
Committee shall be required to give any security or bond for the performance of
any obligation that may be created by or pursuant to the Plan.
SECTION 8. Amendments; Adjustments and Termination. Except to the extent
prohibited by applicable law and unless otherwise expressly provided in an Award
Agreement or in the Plan:
(a) Amendments to the Plan. The Board may amend, alter, suspend,
discontinue, or terminate the Plan without the consent of any shareholder,
Participant, other holder or beneficiary of an Award, or other Person; provided,
however, that, subject to the Company's rights to adjust Awards under Sections
8(c) and (d), any amendment, alteration, suspension, discontinuation, or
termination that would impair the rights of any Participant, or any other holder
or beneficiary of any Award theretofore granted, shall not to that extent be
effective without the consent of such Participant, other holder or beneficiary
of an Award, as the case may be; and provided further, however, that
notwithstanding any other provision of the Plan or any Award Agreement, without
the approval of the shareholders of the Company no such amendment, alteration,
suspension, discontinuation, or termination shall be made that would:
(i) increase the total number of Common Shares available for Awards
under the Plan, except as provided in Section 4 hereof; or
(ii) otherwise cause the Plan to cease to comply with any tax or
regulatory requirement, including for these purposes any approval or other
requirement which is or would be a prerequisite for exemptive relief from
Section 16(b) of the Exchange Act.
(b) Amendments to Awards. The Committee may waive any conditions or
rights under, amend any terms of, accelerate vesting of, or alter, suspend,
discontinue, cancel or terminate, any Award theretofore granted, prospectively
or retroactively; provided, however, that, subject to the Company's rights to
adjust Awards under Sections 8(c) and (d), any amendment, alteration,
suspension, discontinuation, cancellation or termination that would impair the
rights of any Participant or holder or beneficiary of any Award theretofore
granted, shall not to that extent be effective without the consent of such
Participant or holder or beneficiary of an Award, as the case may be.
(c) Adjustment of Awards Upon Certain Acquisitions. In the event the
Company or any Affiliate shall assume outstanding employee awards or the right
or obligation to make future awards in connection with the acquisition of
another business or another corporation or business entity, the Committee may
make such adjustments, not inconsistent with the terms of the Plan, in the terms
of Awards as it shall deem appropriate in order to achieve reasonable
comparability or other equitable relationship between the assumed awards and the
Awards granted under the Plan as so adjusted.
(d) Adjustments of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee is hereby authorized to make adjustments in
the terms and conditions of, and the criteria included in, Awards in recognition
of unusual or nonrecurring events (including, without limitation, the events
described in Section 4(b) hereof) affecting the Company, any Affiliate, or the
financial statements of the Company or any Affiliate, or of changes in
applicable laws, regulations, or accounting principles, whenever the Committee
determines that such adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan.
SECTION 9. General Provisions.
(a) No Rights to Awards. No Employee or other Person shall have any claim
to be granted any Award under the Plan, and there is no obligation for
uniformity of treatment of Employees, or holders or beneficiaries of Awards
under the Plan. The terms and conditions of Awards need not be the same with
respect to each recipient.
(b) Delegation. Subject to the terms of the Plan and applicable law, the
Committee may delegate to one or more officers or managers of the Company or any
Affiliate, or to a committee of such officers or managers, the authority,
subject to such terms and limitations as the Committee shall determine, to grant
Awards to, or to cancel, modify, waive rights with respect to, alter,
discontinue, suspend, or terminate Awards; provided that, no such delegation
shall be permitted with respect to Awards held by Employees who are officers or
directors of the Company for purposes of Section 16 of the Exchange Act, or any
successor section thereto, or who are otherwise subject to such Section.
(c) Correction of Defects, Omissions, and Inconsistencies. The Committee
may correct any defect, supply any omission, or reconcile any inconsistency in
the Plan or any Award in the manner and to the extent it shall deem desirable to
carry the Plan into effect.
(d) Withholding. The Company or any Affiliate shall be authorized to
withhold from any Award granted, from any payment due or transfer made under any
Award or under the Plan or from any compensation or other amount owing to a
Participant the amount (in cash, Common Shares, other securities, other Awards,
or other property) of withholding taxes due in respect of an Award, its
exercise, or any payment or transfer under such Award or under the Plan and to
take such other action as may be necessary in the opinion of the Company or
Affiliate to satisfy all obligations for the payment of such taxes.
(e) No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Company or any Affiliate 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.
(f) No Right to Employment. The grant of an Award shall not be construed
as giving a Participant the right to be retained in the employ of the Company or
any Affiliate. Further, the Company or an Affiliate may at any time dismiss a
Participant from employment, free from any liability, or any claim under the
Plan, unless otherwise expressly provided in the Plan or in any Award Agreement.
(g) Governing Law. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in accordance
with the laws of the State of New York and applicable Federal law.
(h) Severability. If any provision of the Plan or any Award is or becomes
or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as
to any Person or Award 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 or the Award, such
provision shall be stricken as to such jurisdiction, Person or Award and the
remainder of the Plan and any such Award shall remain in full force and effect.
(i) No Trust or Fund Created. Neither the Plan nor any Award shall create
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any Affiliate and a Participant or any other
Person. To the extent that any Person acquires a right to receive payments from
the Company or any Affiliate pursuant to an Award, such right shall be no
greater than the right of any unsecured general creditor of the Company or any
Affiliate. Notwithstanding the foregoing, the Committee may cause to be
established one or more trust agreements in the form of "Rabbi Trusts" or
similar trusts, the assets of which remain subject to the general creditors of
the Company until distributed.
(j) No Fractional Common Shares. No fractional Common Shares shall be
issued or delivered pursuant to the Plan or any Award, and the Committee shall
determine whether cash, other securities, or other property shall be paid or
transferred in lieu of any fractional Common Shares or whether such fractional
Common Shares or any rights thereto shall be canceled, terminated, or otherwise
eliminated.
(k) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not
be deemed in any way material or relevant to the construction or interpretation
of the Plan or any provision thereof.
SECTION 10. Adoption, Approval and Effective Date of the Plan. The Plan
shall be considered adopted and shall become effective on the date the Plan is
approved by the Board; provided, however, that the Plan and any Awards granted
under the Plan shall be void, if the stockholders of the Company shall not have
approved the adoption of the Plan within twelve (12) months after the effective
date.
Exhibit 10.4
SOFTNET SYSTEMS, INC.
STOCK OPTION AGREEMENT
(Non-Plan)
THIS STOCK OPTION AGREEMENT (the "Agreement"), dated as of this 15th day of
September, 1995, is made by and between SoftNet Systems, Inc., a New York
corporation (the "Company") and John J. McDonough (the "Option Holder").
1. Grant of Option. The Company hereby grants to the Option Holder as of
September 15, 1995 (the "Option Date") an option (the "Option") to purchase from
the Company a total of 150,000 shares (the "Shares") of the Common Stock, par
value $.01, of the Company at $6.50 per share, during the periods and upon the
terms and conditions set forth in this Agreement. This Option is a Non-
Qualified Stock Option and not an Incentive Stock Option.
2. Time of Exercise.
(a) Except as provided elsewhere in this Agreement, this Option is
exercisable, and shall vest, in the following cumulative installments:
(i) The Option shall be exercisable with respect to 33 1/3% of
the total option Shares after the first year anniversary of
the Option Date.
(ii) The Option shall be exercisable with respect to 66 2/3% of
the total option Shares after the second year anniversary
of the Option Date.
(iii) The Option shall be exercisable with respect to 100% of the
total option Shares at any time after the third year
anniversary of the Option Date, to and including the date
described in Section 4(a) hereof.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the Board may in its sole discretion, adjust or amend any outstanding
Option if the Board determines such adjustment is necessary in order to prevent
dilution or undue enlargement of the intended benefits under the Option:
(i) in the event of a stock dividend or other distribution of
stock, recapitalization, stock split, reverse stock split, reorganization,
repurchase or exchange; or
(ii) in recognition of unusual or nonrecurring events affecting
the Company or its affiliates, or the financial statement of the Company or
its affiliates or due to changes in accounting principles or laws or
regulations or the interpretation thereof.
(c) In the event that the Company is merged in or consolidated with
another corporation such that the Company is not the surviving corporation, or
upon a sale of substantially all of the assets of the Company and subsequent
liquidation, the Board may determine in its discretion that the Option at the
time of such merger or consolidation shall be exchangeable into such other class
of securities received by other holders of shares at the time of the
transaction. The Board, however, (i) may waive any limitations imposed herein
so that this Option from and after the date prior to the effective date of such
merger, consolidation, or sale and liquidation, as the case may be, as specified
by the Board, shall be exercisable in full (except that this Option may not be
exercised within six months of the date of grant); and (ii) this Option may be
canceled by the Board as of the effective date of any such merger, consolidation
or sale and liquidation provided that (x) notice of such cancellation shall be
given to the Option Holder and (y) the Option Holder shall have the right to
exercise such Option in full (except if the Option which was granted within
sixmonths of the date of cancellation) during a 30-day period preceding the
effective date of such merger, consolidation or sale and liquidation.
(d) In the event the Company or any of its affiliates shall assume
this Option, or the right or obligation to make future such options in
connection with the acquisition of another business or another corporation or
business entity, the Board may make such adjustments, not inconsistent with the
terms hereof, in the terms of options as it shall deem appropriate in order to
achieve reasonable comparability or other equitable relationship between the
assumed options and this Option.
3. Subject to Rules and Regulations. This Option is subject to any rules
and regulations promulgated by the Board, now or hereafter in effect, not
inconsistent herewith.
4. Term.
(a) This Option will terminate at 5:00 p.m. Chicago time on the tenth
anniversary of the Option Date.
(b) Nothing in this Section shall be construed as enlarging or
amending the time of exercise as described in Section 2 hereof.
5. Who May Exercise. Except as provided below, this Option is
nontransferable. This Option may be exercised only by the Option Holder during
his or her lifetime, or, if permissible under applicable law, the Option
Holder's legally appointed guardian or legal representative, or the Option
Holder's estate upon the death of the Option Holder.
6. Restrictions on Exercise.
(a) This Option may be exercised only with respect to fully vested
Shares and no fractional Shares shall be issued;
(b) This Option may be exercised only after the expiration of one
year from the Option Date;
(c) This Option may not be exercised in whole or in part after the
expiration of the Option period specified in Section 4(a), subject to the right
of the Board to extend the term of this Option; and
(d) Upon the death of the Option Holder (i) while in the active
employ of the Company or (ii) within three months of the Option Holder's
retirement pursuant to a retirement plan of the Company or upon disability as
determined by the Board, the Option may be exercised by the person(s) to whom
such Option Holder's rights with respect to this Option are transferred by will
or the laws of descent and distribution prior to the expiration of the earlier
of: (1) the date specified in Section 4(a) hereof, or (2) nine months after the
Option Holder's death; such person(s) shall be entitled to purchase all of the
vested Shares with respect to which the Option Holder was entitled to exercise
pursuant to Section 2 hereof immediately prior to the Option Holder's death, and
any part of this Option not so exercisable will lapse on the Option Holder's
death;
(e) Upon (i) the retirement pursuant to a retirement plan of the
Company, (ii) disability (as determined by the Board) of the Option Holder,
(iii) termination of the Option Holder by the Company without "Cause" (as
defined in Exhibit A) or (iv) termination by the Option Holder for "Good
Reasons" (as defined in Exhibit A) this Option may be exercised by the Option
Holder prior to the expiration of the earlier of: (1) the date specified in
Section 4(a) hereof, or (2) three months after the date of such termination of
the Option Holder's employment with the Company. The Option Holder shall be
entitled to purchase those vested Shares he/she was entitled to purchase
pursuant to Section 2 hereof immediately prior to such termination, and any part
of this Option not so exercisable will thereupon lapse; and
(f) In the event the Option Holder's employment with the Company is
terminated for reasons other than death, retirement, disability, or termination
of employment without Cause or for Good Reason as described in Section 6(e)
above, the Option shall be cancelled on the date of termination of employment to
the extent not theretofore exercised.
7. Manner of Exercise. Subject to such rules and regulations as the
Board may from time to time adopt, the Option Holder shall, in order to exercise
this Option, give written notice to the Board which states the number of Shares
being purchased and the purchase price to be paid therefor, accompanied by the
following:
(a) Payment, in full, of the amount required to be paid pursuant to
this Agreement, which may be made by such method(s) as the Board shall
determine, including, without limitation, cash, Shares, other securities, other
property, or any combination thereof; provided that the combined value, as
determined by the Board, of all cash and cash equivalents and the Fair Market
Value of any such Shares or other property so tendered to the Company, as of the
date of such tender, is at least equal to the full amount required to be paid
pursuant to this Agreement; and
(b) Such documents as the Board in its discretion deems necessary
(i) to evidence the exercise, in whole or in part, of the Option evidenced by
this Agreement, (ii) to determine whether registration is then required under
the Securities Act of 1933, as amended (the "Act"), or by any other law, as then
in effect, and (iii) to comply with or satisfy the requirements of the Act or
any other law, as then in effect.
8. Compliance With Law and Regulations. This Option and the obligation
of the Company to sell and deliver Shares hereunder, shall be subject to all
applicable federal and state laws, rules and regulations and to such approvals
by any government or regulatory agency as may be required. The Company shall
not be required to issue or deliver any certificates for Shares prior to (i) the
listing of such Shares on any stock exchange on which the Shares may then be
listed and (ii) the completion of any registration or qualification of such
Shares under any federal or state law, or any rule or regulation of any
government body which the Company shall, in its sole discretion, determine to be
necessary or advisable. Moreover, this Option may not be exercised if its
exercise, or the receipt of Shares pursuant thereto, would be contrary to
applicable law.
9. Withholding. The Company or any of its affiliates shall be authorized
to withhold from any Option exercised, from any payment due or transfer made
under this Option, or from any compensation or other amount owing to an Option
Holder, the amount (in cash, Shares, other securities, or other property) of
withholding taxes due in respect of this Option, its exercise, or any payment or
transfer under this Option, and to take such action as may be necessary in the
opinion of the Company or its affiliates to satisfy all obligations for the
payment of such taxes.
10. No Right To Employment. The grant of this Option shall not be
construed as giving the Option Holder the right to be retained in the employ of
the Company or for any of its affiliates. Further, the Company, or any of its
affiliates, may at any time dismiss the Option Holder from employment, free from
any liability, or any claim under this Option, unless otherwise expressly
provided in this Option Agreement.
11. Non-Assignability. This Option is not assignable or transferable by
the Option Holder except by the Option Holder's guardian or legal
representation, or upon his death, by will or by the laws of descent and
distribution.
12. Rights as Shareholder. The Option Holder will have no rights as a
shareholder of the Company with respect to any Shares covered by this Option
until the issuance of a stock certificate or stock certificates to the Option
Holder for the Shares. No adjustment shall be made for distributions or other
rights for which the record date is prior to the issuance of such stock
certificate or stock certificates.
13. Legend on Common Shares. Each certificate representing a Share
received upon the exercise of an Option under this Agreement may bear the
following legend:
"The Shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"), and may not
be sold or transferred in the absence of an effective registration
statement under the Act or an exemption from registration thereunder."
and such additional legends as the Board may require.
14. Amendments. Any amendment, alteration, suspension, discontinuation,
cancellation or termination of the provisions of this Agreement that would
impair the rights of any Option Holder or the beneficiary of any such Option
Holder shall not, to that extent, be effective without the consent of the Option
Holder or the beneficiary of such Option Holder or an Option, as the case may
be.
15. Entire Agreement. This Agreement embodies the complete agreement and
understanding of the Option Holder and the Company and supersede and preempt any
prior understandings, agreements or representations by either of them, written
or oral, with respect to the subject matter hereof in any way.
16. Law Governing. This Agreement is intended to be performed in the
State of Illinois and shall be construed and enforced in accordance with and
governed by the laws of such state and the federal laws of the United States of
America.
17. Committee. If at any time the Board of Directors of the Company
appoints a committee to administer any stock option plan hereafter adopted by
the Company, such committee shall have and assume all authority and
responsibility of the Board of Directors under this Option.
IN WITNESS WHEREOF, the Company and the Option Holder have duly executed
this Agreement as of the date specified in Section 1 hereof.
SOFTNET SYSTEMS, INC.
By_______________________
Its____________________
_________________________
[OPTION HOLDER]
EXHIBIT A
TO
SOFTNET SYSTEMS, INC.
STOCK OPTION AGREEMENT
(Non-Plan)
"Cause", as used in connection with the termination of an Option Holder's
employment, shall mean (i) if the Option Holder is then employed under a written
contract with the Company or an affiliate of the Company which contract includes
a definition of "cause", "cause" as defined in such contract and (ii) if the
Option Holder is not then employed under such a contract, the failure to perform
adequately in carrying out the Option Holder's employment responsibilities,
including any directives from the Board, or engaging in such behavior in his
personal or business life, as to lead the Board in its reasonable judgment to
determine that it is in the best interests of the Company to terminate his
employment.
"Good Reason", as used in connection with the termination of the Option
Holder's employment, shall mean (i) if the Option Holder is then employed under
a written employment contract with the Company or an affiliate of the Company,
"good reason" as defined in such written employment contract or, if such
contract contains no such definition, a material breach by the Company of such
written employment agreement or (ii) if the Option Holder is not then employed
under such a contract, a failure by the Company to pay the Option Holder any
amount otherwise vested and due and a continuation of such failure for 30
business days following notice to the Company thereof.
Exhibit 10.5
SOFTNET SYSTEMS, INC.
STOCK OPTION AGREEMENT
(Non-Plan)
THIS STOCK OPTION AGREEMENT (the "Agreement"), dated as of this 12th day of
June, 1995, is made by and between SoftNet Systems, Inc., a New York corporation
(the "Company") and Martin A. Koehler (the "Option Holder").
1. Grant of Option. The Company hereby grants to the Option Holder as of
June 12, 1995 (the "Option Date") an option (the "Option") to purchase from the
Company a total of 25,000 shares (the "Shares") of the Common Stock, par value
$.01, of the Company at $8.50 per share, said purchase price being 100% of the
Fair Market Value of a share of Common Stock on the Option Date, during the
periods and upon the terms and conditions set forth in this Agreement. This
Option is a Non-Qualified Stock Option and not an Incentive Stock Option.
2. Time of Exercise.
(a) Except as provided elsewhere in this Agreement, this Option is
exercisable, and shall vest, in the following cumulative installments:
(i) The Option shall be exercisable with respect to 33 1/3% of
the total option Shares after the first year anniversary of
the Option Date.
(ii) The Option shall be exercisable with respect to 66 2/3% of
the total option Shares after the second year anniversary
of the Option Date.
(iii) The Option shall be exercisable with respect to 100% of the
total option Shares at any time after the third year
anniversary of the Option Date, to and including the date
described in Section 4(a) hereof.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the Board may in its sole discretion, adjust or amend any outstanding
Option if the Board determines such adjustment is necessary in order to prevent
dilution or undue enlargement of the intended benefits under the Option:
(i) in the event of a stock dividend or other distribution of
stock, recapitalization, stock split, reverse stock split, reorganization,
repurchase or exchange; or
(ii) in recognition of unusual or nonrecurring events affecting
the Company or its affiliates, or the financial statement of the Company or
its affiliates or due to changes in accounting principles or laws or
regulations or the interpretation thereof.
(c) In the event that the Company is merged in or consolidated with
another corporation such that the Company is not the surviving corporation, or
upon a sale of substantially all of the assets of the Company and subsequent
liquidation, the Board may determine in its discretion that the Option at the
time of such merger or consolidation shall be exchangeable into such other class
of securities received by other holders of shares at the time of the
transaction. The Board, however, (i) may waive any limitations imposed herein
so that this Option from and after the date prior to the effective date of such
merger, consolidation, or sale and liquidation, as the case may be, as specified
by the Board, shall be exercisable in full (except that this Option may not be
exercised within six months of the date of grant); and (ii) this Option may be
canceled by the Board as of the effective date of any such merger, consolidation
or sale and liquidation provided that (x) notice of such cancellation shall be
given to the Option Holder and (y) the Option Holder shall have the right to
exercise such Option in full (except if the Option which was granted within six
months of the date of cancellation) during a 30-day period preceding the
effective date of such merger, consolidation or sale and liquidation.
(d) In the event the Company or any of its affiliates shall assume
this Option, or the right or obligation to make future such options in
connection with the acquisition of another business or another corporation or
business entity, the Board may make such adjustments, not inconsistent with the
terms hereof, in the terms of options as it shall deem appropriate in order to
achieve reasonable comparability or other equitable relationship between the
assumed options and this Option.
3. Subject to Rules and Regulations. This Option is subject to any rules
and regulations promulgated by the Board, now or hereafter in effect, not
inconsistent herewith.
4. Term.
(a) This Option will terminate at 5:00 p.m. Chicago time on the tenth
anniversary of the Option Date.
(b) Nothing in this Section shall be construed as enlarging or
amending the time of exercise as described in Section 2 hereof.
5. Who May Exercise. Except as provided below, this Option is
nontransferable. This Option may be exercised only by the Option Holder during
his or her lifetime, or, if permissible under applicable law, the Option
Holder's legally appointed guardian or legal representative, or the Option
Holder's estate upon the death of the Option Holder.
6. Restrictions on Exercise.
(a) This Option may be exercised only with respect to fully vested
Shares and no fractional Shares shall be issued;
(b) This Option may be exercised only after the expiration of one
year from the Option Date;
(c) This Option may not be exercised in whole or in part after the
expiration of the Option period specified in Section 4(a), subject to the right
of the Board to extend the term of this Option; and
(d) Upon the death of the Option Holder (i) while in the active
employ of the Company or (ii) within three months of the Option Holder's
retirement pursuant to a retirement plan of the Company or upon disability as
determined by the Board, the Option may be exercised by the person(s) to whom
such Option Holder's rights with respect to this Option are transferred by will
or the laws of descent and distribution prior to the expiration of the earlier
of: (1) the date specified in Section 4(a) hereof, or (2) nine months after the
Option Holder's death; such person(s) shall be entitled to purchase all of the
vested Shares with respect to which the Option Holder was entitled to exercise
pursuant to Section 2 hereof immediately prior to the Option Holder's death, and
any part of this Option not so exercisable will lapse on the Option Holder's
death;
(e) Upon (i) the retirement pursuant to a retirement plan of the
Company, (ii) disability (as determined by the Board) of the Option Holder,
(iii) termination of the Option Holder by the Company without "Cause" (as
defined in Exhibit A) or (iv) termination by the Option Holder for "Good
Reasons" (as defined in Exhibit A) this Option may be exercised by the Option
Holder prior to the expiration of the earlier of: (1) the date specified in
Section 4(a) hereof, or (2) three months after the date of such termination of
the Option Holder's employment with the Company. The Option Holder shall be
entitled to purchase those vested Shares he/she was entitled to purchase
pursuant to Section 2 hereof immediately prior to such termination, and any part
of this Option not so exercisable will thereupon lapse; and
(f) In the event the Option Holder's employment with the Company is
terminated for reasons other than death, retirement, disability, or termination
of employment without Cause or for Good Reason as described in Section 6(e)
above, the Option shall be cancelled on the date of termination of employment to
the extent not theretofore exercised.
7. Manner of Exercise. Subject to such rules and regulations as the
Board may from time to time adopt, the Option Holder shall, in order to exercise
this Option, give written notice to the Board which states the number of Shares
being purchased and the purchase price to be paid therefor, accompanied by the
following:
(a) Payment, in full, of the amount required to be paid pursuant to
this Agreement, which may be made by such method(s) as the Board shall
determine, including, without limitation, cash, Shares, other securities, other
property, or any combination thereof; provided that the combined value, as
determined by the Board, of all cash and cash equivalents and the Fair Market
Value of any such Shares or other property so tendered to the Company, as of the
date of such tender, is at least equal to the full amount required to be paid
pursuant to this Agreement; and
(b) Such documents as the Board in its discretion deems necessary
(i) to evidence the exercise, in whole or in part, of the Option evidenced by
this Agreement, (ii) to determine whether registration is then required under
the Securities Act of 1933, as amended (the "Act"), or by any other law, as then
in effect, and (iii) to comply with or satisfy the requirements of the Act or
any other law, as then in effect.
8. Compliance With Law and Regulations. This Option and the obligation
of the Company to sell and deliver Shares hereunder, shall be subject to all
applicable federal and state laws, rules and regulations and to such approvals
by any government or regulatory agency as may be required. The Company shall
not be required to issue or deliver any certificates for Shares prior to (i) the
listing of such Shares on any stock exchange on which the Shares may then be
listed and (ii) the completion of any registration or qualification of such
Shares under any federal or state law, or any rule or regulation of any
government body which the Company shall, in its sole discretion, determine to be
necessary or advisable. Moreover, this Option may not be exercised if its
exercise, or the receipt of Shares pursuant thereto, would be contrary to
applicable law.
9. Withholding. The Company or any of its affiliates shall be authorized
to withhold from any Option exercised, from any payment due or transfer made
under this Option, or from any compensation or other amount owing to an Option
Holder, the amount (in cash, Shares, other securities, or other property) of
withholding taxes due in respect of this Option, its exercise, or any payment or
transfer under this Option, and to take such action as may be necessary in the
opinion of the Company or its affiliates to satisfy all obligations for the
payment of such taxes.
10. No Right To Employment. The grant of this Option shall not be
construed as giving the Option Holder the right to be retained in the employ of
the Company or for any of its affiliates. Further, the Company, or any of its
affiliates, may at any time dismiss the Option Holder from employment, free from
any liability, or any claim under this Option, unless otherwise expressly
provided in this Option Agreement.
11. Non-Assignability. This Option is not assignable or transferable by
the Option Holder except by the Option Holder's guardian or legal
representation, or upon his death, by will or by the laws of descent and
distribution.
12. Rights as Shareholder. The Option Holder will have no rights as a
shareholder of the Company with respect to any Shares covered by this Option
until the issuance of a stock certificate or stock certificates to the Option
Holder for the Shares. No adjustment shall be made for distributions or other
rights for which the record date is prior to the issuance of such stock
certificate or stock certificates.
13. Legend on Common Shares. Each certificate representing a Share
received upon the exercise of an Option under this Agreement may bear the
following legend:
"The Shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"), and may not
be sold or transferred in the absence of an effective registration
statement under the Act or an exemption from registration thereunder."
and such additional legends as the Board may require.
14. Amendments. Any amendment, alteration, suspension, discontinuation,
cancellation or termination of the provisions of this Agreement that would
impair the rights of any Option Holder or the beneficiary of any such Option
Holder shall not, to that extent, be effective without the consent of the Option
Holder or the beneficiary of such Option Holder or an Option, as the case may
be.
15. Entire Agreement. This Agreement embodies the complete agreement and
understanding of the Option Holder and the Company and supersede and preempt any
prior understandings, agreements or representations by either of them, written
or oral, with respect to the subject matter hereof in any way.
16. Law Governing. This Agreement is intended to be performed in the
State of Illinois and shall be construed and enforced in accordance with and
governed by the laws of such state and the federal laws of the United States of
America.
17. Committee. If at any time the Board of Directors of the Company
appoints a committee to administer any stock option plan hereafter adopted by
the Company, such committee shall have and assume all authority and
responsibility of the Board of Directors under this Option.
IN WITNESS WHEREOF, the Company and the Option Holder have duly executed
this Agreement as of the date specified in Section 1 hereof.
SOFTNET SYSTEMS, INC.
By_______________________
Its____________________
_________________________
[OPTION HOLDER]
EXHIBIT A
TO
SOFTNET SYSTEMS, INC.
STOCK OPTION AGREEMENT
(Non-Plan)
"Cause", as used in connection with the termination of an Option Holder's
employment, shall mean (i) if the Option Holder is then employed under a written
contract with the Company or an affiliate of the Company which contract includes
a definition of "cause", "cause" as defined in such contract and (ii) if the
Option Holder is not then employed under such a contract, the failure to perform
adequately in carrying out the Option Holder's employment responsibilities,
including any directives from the Board, or engaging in such behavior in his
personal or business life, as to lead the Board in its reasonable judgment to
determine that it is in the best interests of the Company to terminate his
employment.
"Good Reason", as used in connection with the termination of the Option
Holder's employment, shall mean (i) if the Option Holder is then employed under
a written employment contract with the Company or an affiliate of the Company,
"good reason" as defined in such written employment contract or, if such
contract contains no such definition, a material breach by the Company of such
written employment agreement or (ii) if the Option Holder is not then employed
under such a contract, a failure by the Company to pay the Option Holder any
amount otherwise vested and due and a continuation of such failure for 30
business days following notice to the Company thereof.
Exhibit 10.6
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of September 15, 1995, among
SoftNet Systems, Inc., a New York corporation (the "Company") and R.W.C. Mauran
and A.J.R. Oosthuizen (the "Investors").
The parties to this Agreement are parties to an Agreement dated as of
March 24, 1995, as amended (the "Stockholders Agreement") which sets forth
certain obligations of the Investors and the entering into of which was a
condition to the Company entering into an Agreement and Plan of Reorganization
dated as of March 24, 1995, as amended (the "Merger Agreement") with
Micrographic Technology Corporation, a California corporation, of which the
Investors collectively own 89.1% of the outstanding common stock.
In connection with the Stockholders Agreement and the Merger Agreement, the
Company has agreed to provide the registration rights set forth in this
Agreement.
The parties hereto agree as follows:
1. PIGGYBACK REGISTRATIONS.
(a) Right to Piggyback. At any time beginning ninety (90) days from
the date hereof, whenever the Company proposes to register any of its shares of
Common Stock ("Common Stock") or other securities convertible or exchangeable
into or exercisable for Common Stock under the Securities Act and the
registration form to be used may be used for the registration of Registrable
Securities (a "Piggyback Registration"), the Company will give prompt written
notice (which will include a list of the jurisdictions in which the Company
intends to attempt to qualify such securities under the applicable blue sky or
other state securities laws, the proposed offering price, and the plan of
distribution) to all holders of Registrable Securities of its intention to
effect such a registration and will include in such registration all Registrable
Securities with respect to which the Company has received written requests for
inclusion therein within fifteen (15) days after receipt of the Company's notice
by the Investors.
(b) Priority on Primary Registrations. If a Piggyback Registration
is an underwritten primary registration on behalf of the Company, and the
managing underwriters advise the Company in writing that in their opinion the
number of securities requested to be included in such registration exceeds the
number which can be sold in an orderly manner in such offering within a price
range acceptable to the Company, the Company will include in such registration
(i) first, the securities the Company proposes to sell and (ii) second, Common
Stock requested to be included in such registration by the holders of any
registration rights including holders of Registrable Securities, pro rata among
such holders.
(c) Priority on Secondary Registrations. If a Piggyback Registration
includes an underwritten secondary registration on behalf of holders of the
Company's securities, and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included
in such registration exceeds the number which can be sold in an orderly manner
in such offering within a price range acceptable to the Company, the Company
will include in such registration (i) first, the securities requested to be
included therein by the persons requesting such registration and (ii) second,
Common Stock requested to be included in such registration by the holders of any
registration rights including holders of Registrable Securities, pro rata among
such holders.
(d) Other Registrations. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to this
Agreement, and if the Company is using its best efforts to cause such
registration statement to become effective, the Company will not file or cause
to be effected any other registration of any of its equity securities or
securities convertible or exchangeable into or exercisable for its equity
securities under the Securities Act (except on Form S-1 in connection with a
transaction of the type referred to in Rule 145 of the Securities Act or on Form
S-4 or Form S-8 or any successor forms), whether on its own behalf or at the
request of any holder or holders of such securities, until a period of at least
90 days has elapsed from the effective date of such previous registration,
unless the underwriters managing the registered public offering otherwise agree.
2. DEMAND REGISTRATION.
(a) On or prior to the second anniversary of the consummation of the
merger (the "Merger") contemplated under the Merger Agreement, the Company shall
cause a registration statement to be filed and become effective under the
Securities Act, or an existing registration statement to be amended, for the
purpose of registering all of the Registrable Securities which the holders of
Registrable Securities request to be registered ("Demand Registration"). If any
of the holders of Registrable Securities to be included in the Demand
Registration intends to distribute such shares by means of an underwriting, the
Company agrees to cooperate with such holder and the underwriter selected by
such holder, and if requested, enter into an underwriting agreement in customary
form.
3. HOLDBACK AGREEMENTS.
(a) Each holder of Registrable Securities agrees not to effect any
public sale or distribution of equity securities of the Company, or any
securities convertible into or exchangeable or exercisable for such securities,
during the seven days prior to and the 90-day period beginning on the effective
date of any underwritten Piggyback Registration in which Registrable Securities
are included (except as part of such underwritten registration), unless the
underwriters managing the registered public offering otherwise agree.
(b) The Company agrees (i) not to effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and during the 90-day period beginning on the effective date of any underwritten
Piggyback Registration or Demand Registration (except as part of such
underwritten registration or pursuant to registrations on Form S-1 in connection
with a transaction of the type referred to in Rule 145 of the Securities Act or
on Form S-4 or Form S-8 or any successor form), unless (x) the underwriters
managing the registered public offering otherwise agree and (y) the holders of
Registrable Securities are released from the restrictions under Section C(1)
above, and (ii) to cause each of its Affiliates to agree not to effect any
public sale or distribution of any such securities during such period (except as
part of such underwritten registration, if otherwise permitted), unless (x) the
underwriters managing the registered public offering otherwise agree and (y) the
holders of Registrable Securities are released from the restrictions under
Section C(1) above.
4. REGISTRATION PROCEDURES. Whenever the holders of Registrable
Securities have properly requested that any Registrable Securities be registered
pursuant to the Piggyback Registration or Demand Registration rights granted by
this Agreement, the Company will use its reasonable best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof, and pursuant thereto the Company will as
expeditiously as possible:
(A) prepare and file with the Commission a registration statement
with respect to such Registrable Securities and use its reasonable best efforts
to cause such registration statement to become effective;
(B) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
a period of not less than (i) six months with respect to a Piggyback
Registration and (ii) three years from the effective date of the Merger with
respect to the Demand Registration, or until such time as all of the securities
covered by such registration statement have been sold and comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such registration statement;
(C) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(D) use its reasonable best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller (provided that the Company will not be required
to (i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (ii) subject itself
to taxation in any such jurisdiction, or (iii) consent to general service of
process in any such jurisdiction, unless the Company is already subject to
service in such jurisdiction);
(E) notify each seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company will prepare
a supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any fact necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading;
(F) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed or, if not so listed, on any automated quotation system in which similar
securities issued by the Company are then quoted;
(G) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(H) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant, or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents, and properties of the Company, and cause the Company's
officers, directors, employees, and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant, or agent in connection with such registration statement;
(I) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months beginning with the first day of
the Company's first full calendar quarter after the effective date of the
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder; and
(J) on the date the Registrable Securities are delivered to the
underwriters, if such securities are being sold through underwriters, or, if
such securities are not being sold through underwriters, on the date that the
registration statement becomes effective, furnish a cold comfort letter from the
Company's independent public accountants in customary form and covering such
matters of the type customarily covered by comfort letters as the holders of a
majority of the Registrable Securities being sold reasonably request (provided
that such Registrable Securities constitute at least 10% of the securities
covered by such registration statement).
(K) on the date the Registrable Securities are delivered to the
underwriters, if such securities are being sold through underwriters, or, if
such securities are not being sold through underwriters, on the date that the
registration statement becomes effective, furnish an opinion of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering addressed to the underwriters, if any, and to the sellers of
Registrable Securities; and
(L) in the event of any underwritten public offering, enter into and
perform its obligations under and underwriting agreement, in usual and customary
form, with the managing underwriter of such offering.
5. REGISTRATION EXPENSES.
(a) All Registration Expenses will be borne by the Company.
(b) In connection with each Piggyback Registration and the Demand
Registration, underwriting discounts and commissions shall be borne by such
holders.
(c) To the extent any expenses are not required to be paid by the
Company, each holder of securities included in any registration hereunder will
pay those expenses allocable to the registration of such holder's securities so
included, and any Registration Expenses not so allocable will be borne by all
sellers of securities included in such registration in proportion to the
aggregate selling price of the securities to be so registered.
6. INDEMNIFICATION.
(a) The Company agrees to indemnify, to the extent permitted by law,
each holder of Registrable Securities, its officers, directors and agents, and
each person who controls such holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities, and expenses caused by (i) any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus, or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading, except
insofar as the same are caused by or contained in any information furnished in
writing to the Company by such holder and stated to be specifically for use
therein or by such holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished such holder with the reasonably requested number of copies
of the same or (ii) any violation or alleged violation by the Company under the
Securities Act, the Securities Exchange Act of 1934, as amended, or any state
securities law; and the Company will pay as incurred to each holder of
Registrable Securities or controlling person, any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action. In connection with an
underwritten offering, the Company will indemnify such underwriters, their
officers and directors, and each person who controls such underwriters (within
the meaning of the Securities Act) to the same extent as provided above with
respect to the indemnification of the holders of Registrable Securities.
(b) In connection with any registration statement in which a holder
of Registrable Securities is participating, each such holder will promptly
furnish to the Company in writing such information and affidavits as the Company
reasonably requests for use in connection with any such registration statement
or prospectus and, to the extent permitted by law, will indemnify the Company,
its directors and officers, and each person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus, or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances in which they were
made, not misleading, but only to the extent that such untrue statement or
omission is contained in any information or affidavit furnished in writing by
such holder and stated to be specifically for use therein; provided that the
obligation to indemnify will be several, not joint and several, among such
holders of Registrable Securities and the liability of each such holder of
Registrable Securities will be in proportion to and limited to the net amount
received by such holder from the sale of Registrable Securities pursuant to such
registration statement.
(c) Any person entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of such counsel a conflict of interest may exist between such indemnified party
and any other of such indemnified parties with respect to such claim.
(d) The indemnification provided for under this Agreement will remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director, or controlling person of such
indemnified party and will survive the transfer of securities.
7. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No person may
participate in any registration hereunder which is underwritten unless such
person (a) agrees to sell such person's securities on the basis provided in any
underwriting arrangements approved by the person or persons entitled hereunder
to approve such arrangements and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements.
8. DEFINITIONS.
(a) "Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
(b) The terms "register" and "registration" refer to a registration
effected by preparing and filing with the Commission a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
(c) "Registrable Securities" shall mean the shares of Common Stock of
the Company held by the Investors as a result of the Merger (the "Merger")
contemplated under the Merger Agreement, other securities held by the Investors
as a result of the Merger which are convertible or exchangeable into Common
Stock (provided that such securities are converted or exchanged into Common
Stock prior to the exercise of such Investor's registration rights hereunder)
and any shares of Common Stock issuable as a dividend or other distribution with
respect to, in exchange for, or in replacement of the foregoing, provided that
any shares of Common Stock sold to the public pursuant to a registered public
offering under the Securities Act, or pursuant to Rule 144 (or a similar rule)
under the Securities Act shall cease to be Registrable Securities from and after
the time of such sale.
(d) "Registration Expenses" shall mean all expenses incident to the
registration of Registrable Securities pursuant to this Agreement including,
without limitation, all registration and filing fees, printers and accounting
fees and fees and disbursements of counsel for the Company, reasonable fees and
disbursements of counsel for the sellers of Registrable Securities, all fees and
expenses in connection with complying with securities or blue sky laws,
including the expenses required by or incident to such performance or
compliance, but excluding any underwriting discounts and commissions and
applicable transfer taxes on the Registrable Securities and the fees and
disbursements of counsel for the sellers of Registrable Securities in excess of
a reasonable amount, which shall be borne pro rata by the sellers of Registrable
Securities.
(e) "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission promulgated thereunder,
all as from time to time in effect.
9. MISCELLANEOUS
(a) Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
(b) Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together will constitute
one and the same Agreement.
(c) Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
(d) Governing Law. The corporate law of New York will govern all
issues concerning the relative rights of the Company and its stockholders. All
other questions concerning the construction, validity and interpretation of this
Agreement and the exhibits and schedules hereto will be governed by the internal
law, and not the law of conflicts, of Illinois.
(e) Notices. All notices, demands, or other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
to the recipient, sent to the recipient by reputable overnight express courier
service (charges prepaid) or mailed to the recipient by certified or registered
mail, return receipt requested and postage prepaid. Such notices, demands and
other communications will be sent to each Investor at the address indicated
below his respective signature and to the Company at the address indicated
below:
SoftNet Systems, Inc.
717 Forest Avenue
Lake Forest, Illinois 60045
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
(f) Assignment. The rights to cause the Company to register the
Registrable Securities may be assigned by the Investors to permitted transferees
or assignees of the Registrable Securities; provided, however, that such
transferee or assignee agrees in writing to be bound by and subject to the terms
and conditions of this Agreement.
(g) Subsequent Registration Rights. Without the prior written
consent of each of the Investors, the Company may not grant registration rights
with priority in any respects to the registration rights provided under this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
SoftNet Systems, Inc.
By /s/ John Jellinek
John I. Jellinek,
President
/s/ R.C.W. Mauran
R.C.W. Mauran
47 Eaton Place, Flat A
London, England
/s/ Adrian J.R. Oosthuizen
A.J.R. Oosthuizen
13800 Saratoga Avenue
Saratoga, California
Exhibit 10.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated this 15th day of
September, 1995, by and between MICROGRAPHIC TECHNOLOGY CORPORATION, a Delaware
corporation (the "Company"), SoftNet Systems, Inc., a New York corporation
("SoftNet"), and A.J.R. OOSTHUIZEN (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of providing Computer
Output Microfilm ("COM") products and services; and
WHEREAS, the Employee is familiar with the administration and management of
a COM business; and
WHEREAS, the parties acknowledge that the Employee's abilities and services
are unique and essential to the prospects of the Company; and
WHEREAS, the Employee, SoftNet, and the Company are desirous of entering
into an agreement providing for the employment by the Company of the Employee in
the positions and upon the terms provided herein.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Employment, Duties and Term. The Company hereby employs the Employee
and the Employee hereby accepts employment upon the terms and conditions
hereinafter set forth.
(a) The Company agrees to employ the Employee in the position of
President and Employee agrees to perform such duties and tasks as the board of
directors of the Company may from time to time reasonably request, during the
three year period from the date hereof through September 15, 1998 (the
"Employment Period").
(b) The Employee hereby accepts such employment and agrees to devote
his full time and attention to such duties, except during usual vacation periods
and for personal and sick leave in accordance with the Company's policies.
2. Compensation.
(a) During the Employment Period the Company shall pay to the
Employee compensation equal to an annual base salary (the "Base Salary") of
$200,000.00, payable in accordance with the Company's normal payroll practices.
The Company shall reimburse the Employee for all expenses necessarily and
reasonably incurred by the Employee in connection with the business of the
Company, against presentation of proper receipts or other proof of expenditure,
and subject to such reasonable guidelines or limitations provided to the
Employee, and which are to be applied prospectively only as the Board of
Directors of the Company may impose. The Employee may receive such greater
compensation, including incentive bonuses and stock bonuses, as may from time to
time be determined by the Board of Directors of the Company, consistent with
compensation arrangements for other executives with similar responsibilities.
(b) The Employee shall have the option to receive his bonus arising
out of the operating results of Micrographic Technology Corporation, a
California corporation, for its fiscal year ended June 30, 1995, if any such
bonus shall be payable, in the form of cash or SoftNet common stock (based on
the 30-day trailing average closing price of SoftNet's common stock traded on
the American Stock Exchange).
3. Benefits. During the Employment Period, the Employee shall be
entitled to participate in any profit sharing plan, stock option or other
benefit plan or program, retirement plan, group life insurance plan or other
insurance plan or medical expense plan maintained by the Company and SoftNet for
its senior executives generally. In the event the Company does not maintain a
disability insurance plan that provides coverage for Employee, the Company
agrees to provide such coverage to Employee upon Employee's request, the cost of
which shall be deducted from Employee's compensation hereunder.
4. Termination. The employee's employment hereunder shall terminate
upon the earlier of (a) the expiration of the Employment Period, (b) the death
of the Employee, (c) the expiration of a continuous period of 120 days during
which the Employee is unable to perform his assigned duties due to physical or
mental incapacity, (d) termination by the Company due to a material breach of
this Agreement by the Employee, or for Just Cause (as defined below), or (e)
termination by the Employee due to a material breach of this Agreement by the
Company. The exercise of the right of the Company or the Employee to terminate
this Agreement pursuant to clause (d) or (e) hereof, as the case may be, shall
not abrogate the rights and remedies of the terminating party in respect of the
breach giving rise to such termination. The Company shall only be deemed to
have materially breached this Agreement and the terms of the Employee's
employment if it fails to comply with Sections 1, 2, or 3 in all material
respects. The Employee shall only be deemed to have materially breached the
Agreement if he fails to comply with Sections 1, 5 or 6 in all material
respects. For purposes of this Agreement, "Just Cause" shall be limited to one
of the following grounds:
(i) The Employee's failure or refusal, after notice thereof, to
perform specific directives of the Board of Directors which are
consistent with the scope and nature of the Employee's duties and
responsibilities as set forth herein; or
(ii) Dishonesty of the Employee directly or indirectly and
materially affecting the Company; or
(iii) Drunkenness or use of drugs (unless medically prescribed)
which interferes with the performance of the Employee's obligations
under this Agreement; or
(iv) The Employee's conviction of a felony or of any crime
involving moral turpitude, fraud, or misrepresentation; or
(v) Any gross or willful misconduct of the Employee resulting in
loss to the Company, damage to the Company's reputation or theft or
defalcation from the Company; or
(vi) Any intentional act having the purpose and effect of
injuring the reputation, business or business relationships of the
Company; or
(vii) Gross incompetence on the part of the Employee in the
performance of the duties undertaken by the Employee under the terms
of this Agreement.
In the event of any dispute regarding the existence of the Employee's
incapacity hereunder, the matter will be resolved by the determination of a
majority of three physicians qualified to practice medicine in California, one
to be selected by each of the Employee and the Board of Directors and the third
to be selected by the two designated physicians. For this purpose, the Employee
will submit to appropriate medical examinations. In the event that the Company
determines to relieve the Employee of his employment duties for any reason other
than as stated above, then the Company shall continue to pay the Employee his
Base Salary for the remainder of the year in which he is terminated plus a
prorated portion of his bonus for such year and, thereafter, to continue to pay
the Employee his base salary which would otherwise be payable hereunder. The
Company shall also reimburse Employee for the costs of COBRA or conversion
premium expense for the remaining Employment Period.
In the event Employee is terminated for any reason hereunder, the Company
shall assign to Employee any life insurance policies maintained by the Company
upon Employee's life upon the written request of Employee and payment by
Employee to the Company of any unexpired premiums and the cash surrender value,
if any, of such policies.
5. Confidential Information; Non-solicitation; Covenant Not to Compete .
(a) The Employee shall at all times hold in strictest confidence any
and all confidential information that may have come and may come into the
Employee's possession or within the Employee's knowledge concerning the
products, services, processes, businesses, suppliers, customers and clients of
the Company. For purposes of this Section, confidential information shall not
include information generally available to the public other than as a result of
Employee's disclosure thereof. The Employee agrees that neither he nor any
person or enterprise controlled by the Employee will for any reason, directly or
indirectly, for himself or any other person or enterprise, use or disclose any
trade secrets, proprietary information, inventions, manufacturing and industrial
processes and procedures, confidential information, patents, trademarks, trade
names, customer lists, service marks, service names, copyrights, applications
therefor, and license or other rights in respect thereof ("Confidential
Materials"), owned or used by, or licensed to, the Company or any of its
affiliates or otherwise relating to the Company's businesses.
(b) The Employee agrees that from the date hereof and continuing for
a period of one (1) year after the Employee's employment with the Company has
terminated (the "Non-Compete Period"), neither the Employee nor any person or
enterprise controlled by the Employee will solicit for employment any person
employed by the Company at any time within one (1) year prior to the time of the
act of solicitation.
(c) The Employee agrees that during the Non-Compete Period, neither
the Employee nor any person or enterprise controlled by the Employee or any
enterprise of which Employee is a stockholder, director, officer, agent or
employee shall canvas, solicit, or accept any business in connection with the
business of the Company or Softnet from (a) any customer of the Company or
Softnet, or (b) any person or entity to whom the Company or Softnet has
delivered a quote or proposal during the one (1) year period immediately prior
to the commencement of the Non-Compete Period; provided, however, that the
foregoing shall not prohibit the ownership of less than two percent (2%) of the
outstanding shares of the stock of any corporation engaged in any business,
which shares are regularly traded on a national securities exchange or in any
over-the-counter market.
(d) The Employee agrees that the restrictive covenants in subsections
(a) through (c) above are reasonable in their scope and duration and may be
enforced by specific performance or otherwise. The Employee shall not raise any
issue of reasonableness as a defense in any proceeding to enforce any of such
covenants. Notwithstanding the foregoing, in the event that a covenant included
in this Agreement shall be deemed by any court to be unreasonably broad in any
respect, it shall be modified in order to make it reasonable and shall be
enforced accordingly; provided, however, that in the event that a court shall
refuse to enforce any of the covenants contained in subsections (a) through (c)
above, then the unenforceable covenant shall be deemed eliminated from the
provisions of this Agreement for the purpose of those proceedings to the extent
necessary to permit the remaining covenants to be enforced so that the validity,
legality or enforceability of the remaining provisions of this Agreement shall
not be affected thereby.
6. Inventions. The Employee hereby assigns to the Company his entire
right, title and interest in all discoveries and improvements, patentable or
otherwise, trade secrets and ideas, writings and copyrightable material, which
may be conceived by the Employee or developed or acquired by him during the term
of this Agreement, which may pertain directly or indirectly to the Company's
business. The Employee agrees to promptly and fully disclose in writing all
such developments. The Employee will, upon the Company's request, execute,
acknowledge and deliver to the Company all instruments and do all other acts
which are necessary or desirable to enable the Company to file and prosecute
applications for, and to acquire, maintain and enforce all letters, patents,
trademark registrations, or copyrights in all countries.
7. Remedies. The Employee acknowledges that any material breach of this
Agreement will cause irreparable harm to the Company, difficult if not
impossible to ascertain, and that the Company shall be entitled to equitable
relief, including injunction, against any actual or threatened breach hereof,
without bond and without liability should such relief be denied, modified or
vacated. Neither the right to obtain such relief nor the obtaining of such
relief shall be exclusive of or preclude the Company from any other remedy. In
addition, the parties agree that in the event either party is found by a court
of law or equity to have breached this Agreement and relief is granted, the
breaching party shall be liable to the prevailing party for all attorneys' fees
and costs incurred by such prevailing party in such proceeding.
8. Assignment. The rights and benefits of the Employee hereunder are not
assignable whether by voluntary or involuntary assignment or transfer. This
Agreement shall be binding upon and inure to the benefit of the successors of
the Company and shall be assignable by the Company to any entity acquiring
substantially all of the assets of the Company.
9. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and sent by registered mail, or
overnight courier service to the Employee at 13800 Saratoga Avenue, Saratoga,
California or to the Company c/o Softnet Systems, Inc., 717 Forest Avenue, Lake
Forest, Illinois 60045, Attention: President.
10. Waiver of Breach. A waiver by the Company or the Employee of a breach
of any provision of this Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach by the other party.
11. Entire Agreement. This instrument contains the entire agreement of
the parties. It may be changed only by an agreement in writing signed by a
party against whom enforcement of any waiver, change, modification, extension or
discharge is sought.
12. Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal substantive laws of the State of Illinois, and the
parties hereby irrevocably and unconditionally consent and submit to the in
personam jurisdiction of Illinois courts over all matters relating to this
Agreement. Each party agrees that service of process in any action or
proceeding hereunder may be made upon such party by certified mail, return
receipt requested to the address for notice set forth herein. Each party
irrevocably waives any objection it may have to the venue of any action, suit or
proceeding brought in such courts or to the convenience of the forum and each
party irrevocably waives the right to proceed in any other jurisdiction. Final
judgment in any such action, suit or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment, a certified or true
copy of which shall be conclusive evidence of the fact and the amount of any
indebtedness or liability of any party therein described.
13. Arbitration. Any dispute between the parties arising under this
Agreement which cannot be amicably resolved between the parties, shall be
resolved by arbitration in Chicago, Illinois in accordance with the following
terms and conditions. Either party may deliver a notice to all other parties
which shall set forth in detail all issues which it believes constitutes a
dispute or grievance. Within twenty (20) days of the delivery of such notice,
counsel for the parties shall mutually select as an arbitrator an attorney
practicing in Chicago, Illinois who is experienced in commercial arbitration.
If counsel for the parties are unable to agree upon the selection of this
arbitrator, the arbitrator shall be an attorney selected by the President of the
Chicago Bar Association. The Arbitrator so selected shall schedule a hearing on
the disputed issues within forty-five (45) days after his appointment, and the
arbitrator shall render his decision after the hearing, in writing as
expeditiously as is possible. Except as set forth herein, the arbitration shall
be conducted in accordance with the rules of the American Arbitration
Association, unless the parties hereto agree otherwise in writing. A default
judgment may be entered against any party who fails to appear at the arbitration
hearing. The decision of the arbitrator shall be final and unappealable and
shall be confirmed by a court in any jurisdiction designated by the prevailing
party. The arbitrator shall assess the costs of the arbitration to the parties
as he determines to be appropriate. The parties to this Agreement agree that
this paragraph has been included to resolve rapidly and inexpensively any
disputes which may arise, and that submission of a dispute to arbitration in
accordance with this Agreement paragraph shall constitute grounds for dismissal
of any action commenced by any party with respect to a dispute arising out of or
from any provisions of this Agreement, except for actions for equitable
remedies, which shall survive the submission of a dispute for arbitration.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the day and year first above written.
MICROGRAPHIC TECHNOLOGY CORPORATION
By /s/ M.P. Moyer
Its Secretary
SOFTNET SYSTEMS, INC.
By /s/ John Jellinek
Its___________________________
/s/ Adrian J.R. Oosthuizen
A.J.R. Oosthuizen
Exhibit 10.8
SOFTNET SYSTEMS, INC.
EMPLOYEE STOCK OPTION PLAN
1. STATEMENT OF PURPOSE. The purpose of this Softnet Systems, Inc.
Employee Stock Option Plan (the "Plan") is to benefit Softnet Systems, Inc. (the
"Company") and Micrographics Technology Corporation ("MTC"), a wholly-owned
subsidiary of the Company, by offering certain present employees of MTC a
favorable opportunity to become holders of Softnet common stock, with $0.01 par
value per share ("Common Stock"), thereby giving them a permanent stake in the
growth and prosperity of both the Company and MTC and encouraging the
continuance of their involvement with the Company.
2. ADMINISTRATION - COMMON STOCK AVAILABLE. The Plan shall be
administered by the Compensation Committee of the Company, or any other
committee of the Board of Directors of the Company (the "Board") designated by
the Board to administer the Plan and composed of not less than two outside
directors, as described in Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"), each of whom, to the extent necessary to comply with
Rule 16b-3 (as promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended ("Rule 16b-3")) only, is a
"disinterested person" within the meaning of Rule 16b-3. Notwithstanding the
foregoing, the maximum number of options which may be granted to any one
participant under this Plan shall not exceed 4000 shares of Common Stock,
subject to the adjustments provided in Section 10 hereof and no options under
this Plan shall be granted after 10 years from the date this Plan is adopted by
the Board. Subject to adjustment as provided in Section 10, the number of
shares of Common Stock available for granting options under the Plan shall be
40,000.
3. ELIGIBILITY. Those employees of the Company to whom options are
granted under the Plan are identified on Exhibit A attached hereto.
4. GRANTING OF OPTIONS. The Board of Directors of the Company has
approved the grant of options to the MTC employees and in the amounts as are set
forth in Exhibit A hereto. Options granted under the Plan are intended to be
treated as incentive stock options as defined in Section 422 of the Code.
Nothing contained in the Plan or in any option granted pursuant thereto
shall confer upon any optionee any right to be continued in the employment of
MTC, or interfere in any way with the right of MTC to terminate his or her
employment at any time.
5. OPTION PRICE. The options shall be granted at an exercise price,
subject to the provisions of Section 10 hereof, equal to the fair market value
at the time the option is granted, of the shares of Common Stock subject to the
option.
6. DURATION OF OPTIONS, INCREMENTS, AND EXTENSIONS. Subject to the
provisions of Section 8 hereof, each option shall be for a term of 10 years.
Each option shall become exercisable with respect to 1/3 of the total number of
shares subject to the option on September 15, 1995, an additional 1/3 on
September 15, 1996, and the balance on September 15, 1997 (the "Vesting
Schedule"). Subject to the foregoing and subject to the provisions of Section 8
hereof, all or any part of the shares to which the right to purchase has vested
may be purchased at the time of such vesting or at any time or times thereafter
during the option period.
7. EXERCISE OF OPTION. An option may be exercised by giving written
notice to the Company, attention of the Vice President - Finance, specifying the
number of shares to be purchased, accompanied by the full purchase price for the
shares to be purchased either in cash or by check, or, if so approved by the
Board of Directors, by shares of the Common Stock of the Company or by a
combination of these methods of payment. For this purpose, the per share value
of Common Stock of the Company shall be the fair market value on the date of
exercise.
At any time of any exercise of any option, the Company may, if it shall
determine it necessary or desirable for any reason, require the optionee (or his
heirs, legatees, or legal representative, as the case may be) as a condition
upon the exercise thereof, to deliver to the Company a written representation of
present intention to purchase the shares for investment and not for
distribution. In the event such representation is required to be delivered, an
appropriate legend may be placed upon each certificate delivered to the optionee
upon his exercise of part or all of the option and a stop transfer order may be
placed with the transfer agent. Each option shall also be subject to the
requirement that, if at any time the Company determines, in its discretion, that
the listing, registration, or qualification of the shares subject to the option
upon any securities exchange or under any state or federal law, or the consent,
or approval of any governmental regulatory body is necessary or desirable as a
condition of or in connection with, the issue or purchase of shares thereunder,
the option may not be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Company.
At the time of the exercise of any option, the Company may require, as a
condition of the exercise of such option, the optionee to pay the Company an
amount equal to the amount of tax the Company may be required to withhold to
obtain a deduction for federal income tax purposes as a result of the exercise
of such option by the optionee.
8. TERMINATION OF RELATIONSHIP-EXERCISE THEREAFTER. In the event the
relationship between MTC and an employee who is an optionee is terminated for
any reason other than death, permanent disability, termination by the Company
without cause, or retirement, such optionee's option shall expire and all rights
to purchase shares pursuant thereto shall terminate immediately. Temporary
absence from employment because of illness, vacation, and approved leaves of
absence shall not be considered to terminate employment or to interrupt
continuous employment.
In the event of termination of said relationship because of death or
permanent disability (as that term is defined in section 22(e)(3) of the Code,
as now in effect or as subsequently amended), the option may be exercised to the
extent that any portion thereof would be exercisable on the date of such death
or permanent disability pursuant to the Vesting Schedule described in Section 6
hereof, by the optionee or, if he or she is not living, by his or her heirs,
legatees, or legal representative, as the case may be, during its specified term
prior to one year after the date of death or permanent disability. In the event
of termination of employment by the Company without cause, or by the employee
because of retirement, the option may be exercised by the optionee (or, if he or
she dies after such termination, by his or her heirs, legatees, or legal
representative, as the case may be), at any time during its specified term prior
to 90 days after the date of such termination, but only to the extent the option
was exercisable at the date of such termination.
9. NON-TRANSFERABILITY OF OPTIONS. During the lifetime of the optionee,
options shall be exercisable only by the optionee, and options shall not be
assignable or transferable by the optionee otherwise than by will or by the laws
of descent and distribution, or pursuant to a qualified domestic relations order
as defined by (a) the Code or (b) Title I of the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder.
10. ADJUSTMENT. The number of shares subject to options granted under the
Plan shall be adjusted as follows: (a) in the event that the number of
outstanding shares of Common Stock of the Company is changed by any stock
dividend, stock split or combination of shares, the number of shares subject to
options granted hereunder shall be appropriately adjusted; (b) in the event of
any recapitalization or reclassification of the shares of the Company, or of any
merger, consolidation or reorganization of the Company with any other
corporation or corporations, there shall be substituted, on an equitable basis
as determined by the Board of Directors, for each share of Common Stock then
subject to an outstanding option to the number and kind of shares of stock or
other securities to which the holders of shares of Common Stock of the Company
will be entitled pursuant to the transaction; and (c) in the event of any other
relevant change in the capitalization of the Company, the Board of Directors of
the Company shall provide for an equitable adjustment in the number of shares of
Common Stock then subject to outstanding options. In the event of any such
adjustment the purchase price per share shall be appropriately adjusted.
11. RULE 16B-3 SIX-MONTH LIMITATIONS. Notwithstanding anything herein to
the contrary, to the extent required in order to maintain the exemption provided
under Rule 16b-3, at least six months must elapse from the date of acquisition
of an option to the date of disposition of the option (other than upon exercise
or conversion) or its underlying equity security.
12. AMENDMENT OF PLAN. The Board of Directors may amend or discontinue
the Plan at any time; provided, however, that no such amendment or
discontinuance shall materially adversely affect any options previously granted
without the consent of the optionee or violate any contractual limitation on the
Company.
13. EFFECTIVE DATE. The Plan was adopted and authorized by the Board of
Directors on September 15, 1995 for submission to the stockholders of the
Company. If the Plan is approved by the affirmative vote of the holders of a
majority of the outstanding shares of common stock of the Company voting in
person or by proxy at a duly held stockholders' meeting, or by the written
unanimous consent of all of the stockholders of the Company, the Plan shall be
deemed to have become effective on September 15, 1995. Options may be granted
under the Plan prior to approval by the stockholders of the Company and, in each
such case, the date of grant shall be deemed to be the date of approval of the
Plan by stockholders of the Company; provided, however, that if the Plan is not
approved by stockholders, all options granted hereunder shall be cancelled and
void.
14. GOVERNMENT REGULATIONS. This Plan and the granting and exercise of
any option hereunder and the obligation of the Company to sell and deliver
shares under any such option shall be subject to all applicable laws, rules and
regulations, and to such approvals by any governmental agencies as may be
required.
15. PROCEEDS FROM SALE OF SHARES. Proceeds of the purchase of option
shares by any option holder shall be for the general business purposes of the
Company.
16. GOVERNING LAW. This Plan shall be construed and enforced in
accordance with and governed by the laws of the State of Delaware and the
federal laws of the United States of America.
Dated: ______________, 1995
Exhibit 10.9
SOFTNET SYSTEMS, INC.
9% Convertible Subordinated Debentures due 2000
No. __________ $__________
Softnet Systems, Inc., a New York corporation (herein called the "Company",
which term includes any successor Person under the Indenture hereinafter
referred to), for value received, hereby promises to pay to
________________________________ or registered assigns, the principal sum of
______________________________ Dollars on ________________, 2000, at the office
or agency of the Company referred to below, and to pay interest thereon from
________________, 1995 or from the most recent Interest Payment Date to which
interest has been paid or duly provided for quarterly, on January 15, April 15,
July 15 and October 15 in each year, commencing _____________ 15, 1995, at the
rate of 9% per annum, until the principal hereof is paid or duly provided for.
The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in such Indenture, be paid to the Person
in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the January 1, April 1, July 1 or October 1 (whether or
not a Business Day), as the case may be, next preceding such Interest Payment
Date. Any such interest not so punctually paid or duly provided for shall
forthwith cease to be payable to the Holder on such Regular Record Date and may
either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities not less than 10
days prior to such Special Record Date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in said Indenture. Payment of the
principal of (and premium, if any, on) and interest on this Security will be
made at the office or agency of the Company maintained for that purpose in the
City of New York, or at such other office or agency of the Company as may be
maintained for such purpose, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that payment of interest may be made at the
option of the Company by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed by
the Trustee referred to on the reverse hereof by the manual signature of one of
its authorized officers, this Security shall not be entitled to any benefit
under the Indenture, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated: SOFTNET SYSTEMS, INC.
By
Attest:
Authorized Signature Section 203. Form of Reverse of Security.
This Security is one of a duly authorized issue of securities of the
Company designated as its 9% Convertible Subordinated Debentures due 2000
(herein called the "Securities"), limited in aggregate principal amount to
$__________, issued under an indenture (herein called the "Indenture") dated as
of _________________, 1995 between the Company and
_____________________________________, trustee (herein called the "Trustee",
which term includes any successor trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties, obligations
and immunities thereunder of the Company, the Trustee and the Holders of the
Securities, and of the terms upon which the Securities are, and are to be,
authenticated and delivered.
The indebtedness evidenced by the Securities is, to the extent and in the
manner provided in the Indenture, subordinate and subject in right of payment to
the prior payment in full of all Senior Indebtedness of the Company as defined
in the Indenture, and this Security is issued subject to such provisions. Each
Holder of this Security, by accepting the same, (a) agrees to and shall be bound
by such provisions, (b) authorizes and directs the Trustee on his behalf to take
such action as may be necessary or appropriate to effectuate the subordination
as provided in the Indenture and (c) appoints the Trustee his attorney-in-fact
for such purpose.
The Securities are subject to redemption upon not less than 30 days'
notice, at any time as a whole or in part, at the election of the Company, at a
Redemption Price initially equal to 102% of the principal amount and beginning
on the second anniversary of the Effective Time equal to 100% of the principal
amount together in the case of any such redemption with accrued interest, if
any, to the Redemption Date, all as provided in the Indenture.
In the case of any redemption of Securities, interest installments whose
Stated Maturity is on or prior to the Redemption Date will be payable to the
Holders of such Securities, or one or more Predecessor Securities, of record at
the close of business on the relevant Regular Record Date referred to on the
face hereof. Securities (or portions thereof) for whose redemption and payment
provision is made in accordance with the Indenture shall cease to bear interest
from and after the Redemption Date.
In the event of redemption of this Security in part only, a new Security or
Securities for the unredeemed portion hereof shall be issued in the name of the
Holder hereof upon the cancellation hereof.
Subject to and upon compliance with the provisions of the Indenture, the
Holder of this Security is entitled, at his option, at any time after the first
anniversary of the Effective Time, or in case this Security or a portion hereof
is called for redemption, then in respect of this Security or such portion
hereof then at any time until and including, but (unless the Company defaults in
making the payment due upon redemption) not after, the close of business on the
Business Day preceding the Redemption Date, to convert this Security (or any
portion of the principal amount hereof which is $1,000 or an integral multiple
thereof), at the principal amount hereof (or of such portion), into fully paid
and non-assessable shares (calculated as to each conversion to the nearest 1/100
of a share) of Common Stock of the Company at the rate of 148.15 shares of
Common Stock for each $1,000 principal amount of Securities (or at the current
adjusted conversion rate if an adjustment has been made as provided in the
Indenture) by surrender of this Security, duly endorsed or assigned to the
Company or in blank, to the Company at its office or agency in the City of
Chicago, accompanied by written notice to the Company that the Holder hereof
elects to convert this Security, or if less than the entire principal amount
hereof is to be converted, the portion hereof to be converted, and, in case such
surrender shall be made during the period from the close of business on any
Regular Record Date next preceding any Interest Payment Date to the opening of
business on such Interest Payment Date (unless this Security or the portion
thereof being converted has been called for redemption on a Redemption Date
within such period), also accompanied by payment in New York Clearing House or
other funds acceptable to the Company of an amount equal to the interest payable
on such Interest Payment Date on the principal amount of this Security then
being converted. If this Security is converted after having been called for
redemption, interest accrued and unpaid hereon to the date of conversion shall
be payable on such date. Subject to the aforesaid and, in the case of a
conversion after the Regular Record Date next preceding any Interest Payment
Date and on or before such Interest Payment Date, to the right of the Holder of
this Security (or any Predecessor Security) of record at such Regular Record
Date to receive an installment of interest (with certain exceptions provided in
the Indenture), no payment or adjustment is to be made on conversion for
interest accrued hereon or for dividends on the Common Stock issued on
conversion. No fractions of shares or scrip representing fractions of shares
will be issued on conversion, but instead of any fractional interest the Company
shall pay a cash adjustment as provided in the Indenture. In addition, the
Indenture provides that in case of certain consolidations or mergers to which
the Company is a party or the transfer of substantially all of the assets of the
Company, the Indenture shall be amended without the consent of any Holders of
Securities, so that this Security, if then outstanding, will be convertible
thereafter, during the period this Security shall be convertible as specified
above, only into the kind and amount of securities, cash and other property
receivable upon the consolidation, merger or transfer (assuming such holder of
Common Stock failed to exercise any rights of election and received per share
the kind and amount received per share by a plurality of non-electing shares).
If an Event of Default shall occur and be continuing, the principal of all
the Securities may be declared due and payable in the manner and with the effect
provided in the Indenture.
Except as otherwise provided herein, the Securities are not subject to any
sinking fund and are not subject to redemption at the option of the Company
prior to Maturity.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of 66-
2/3% in aggregate principal amount of the Securities at the time outstanding.
The Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Securities at the time
outstanding, on behalf of the Holders of all the Securities, to waive compliance
by the Company with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by or on behalf of the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof whether or not notation of such consent or waiver is made upon
this Security.
As set forth in, and subject to, the provisions of the Indenture, no Holder
of any Security will have any right to institute any proceeding with respect to
the Indenture or for any remedy thereunder, unless such Holder shall have
previously given to the Trustee written notice of a continuing Event of Default,
the Holders of not less than 66-2/3% in principal amount of the Outstanding
Securities shall have made a written request, and offered reasonable indemnity,
to the Trustee to institute such proceeding as trustee, the Trustee for 60 days
after its receipt of such notice, request and offer of indemnity has failed to
institute any such proceeding and the Trustee shall not have received from the
Holders of 66-2/3% in principal amount of the Outstanding Securities during such
60-day period a direction inconsistent with such request; provided, however,
that such limitations do not apply to a suit instituted by the Holder hereof for
the enforcement of payment of the principal of (and premium, if any) or interest
on this Security on or after the respective due dates expressed herein.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of (and premium, of any on) and
interest on this Security at the times, place, and rate, and in the coin or
currency, herein prescribed.
This security may not be transferred, sold, assigned, pledged, mortgaged or
hypothecated without the express written consent of the Board of Directors.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registerable on the Security Register of
the Company, upon surrender of this Security for registration of transfer at the
office or agency of the Company maintained for such purpose in New York, New
York or Chicago, Illinois, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar duly executed by, the Holder hereof or his attorney in duly authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.
The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, the Securities
are exchangeable for like aggregate principal amount of Securities of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to the time of due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any agent shall be affected by notice to the
contrary.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
EXHIBIT 10.10
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OF AMERICA. THEY MAY NOT
BE OFFERED, SOLD OR RESOLD UNLESS SUCH OFFER, SALE OR RESALE IS MADE IN
ACCORDANCE WITH REGULATION S UNDER THE ACT OR PURSUANT TO REGISTRATION UNDER THE
ACT OR AN APPLICABLE EXEMPTION FROM REGISTRATION THEREUNDER.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBORDINATED TO THE EXTENT
PROVIDED IN THE INDENTURE HEREINAFTER REFERRED TO, AS TO PRINCIPAL, PREMIUM, IF
ANY, AND INTEREST, TO CLAIMS OF HOLDERS OF SENIOR DEBT AS DEFINED IN SUCH
INDENTURE.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFORE, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES. ATTACHED TO THIS CERTIFICATE
IS A COPY OF SECTION 260.141.11 OF THE COMMISSIONER'S RULES WHICH SETS FORTH A
NUMBER OF PERMISSIBLE TRANSFERS OF THIS SECURITY.
No. $660,000.00
Holder R.C.W. Mauran
MICROGRAPHIC TECHNOLOGY CORPORATION
(incorporated under the laws of California)
6% Convertible Subordinated Secured Debenture due 2002
1. Micrographic Technology Corporation (the "Company") for value
received hereby acknowledges itself indebted and promises (i) to pay to the
registered holder hereof on ________, 2002 or on such earlier date as the
principal amount hereof may become due in accordance with the provisions of the
Indenture hereinafter mentioned the principal sum of Six Hundred Sixty Thousand
Dollars, in lawful money of the United States, on presentation and surrender of
this Debenture to Micrographic Technology Corporation, 520 Logue Avenue,
Mountain View, California 94043, U.S.A., or such other location as the Trustee
may select after giving notice to the registered Holders, (ii) to pay interest
on the outstanding principal amount hereof from January 29, 1992, or from the
last Interest Payment Date to which all accrued interest shall have been paid or
made available for payment on the outstanding Debentures, whichever is later,
until on the outstanding Debentures, whichever is later, until payment of the
principal hereof has been made or duly provided for at the rate of 6% per annum,
payable in arrears in U.S. Dollars at said place on June 30 and December 31
(each an "Interest Payment Date") in each year, and (iii) should the Company at
any time default in the payment of any principal or interest, to pay interest on
the amount in default, in like money, at the same rate and semi-annually on such
Interest Payment Dates. Except in case of payment at maturity or on redemption
at which time payment of interest may be made upon surrender of this Debenture,
to the registered Holder of this Debenture upon surrender of this Debenture,
interest hereon payable on an Interest Payment Date shall, as provided in the
Indenture, be paid to the Person in whose name this Debenture is registered as
of the close of business on the Regular Record Date for such interest, which
shall be June 15 and December 16 (as the case may be) whether or not a business
day immediately preceding such Interest Payment Date. Such interest shall be
payable by cheque mailed to such registered Holder and, subject to the
provisions of the Indenture, the mailing of such cheque by prepaid first class
mail shall satisfy and discharge all liability for interest on this Debenture to
the extent of the sum represented by such cheque (plus the amount of any tax
deducted or withheld) unless such cheque shall not be paid on presentation.,
2. This Debenture is one of the Debentures of the Company issued
under the provisions of an Indenture made as of the 28th day of February, 1992
between the Company and U.S. Trust Company of California, N.A., as Trustee. The
6% Convertible Subordinated Secured Debentures due 2002 (the "Debentures"), of
which this Debenture is one, are limited to an aggregate principal amount of
$1,800,000. Reference is hereby expressly made to the Indenture and all
instruments supplemental thereto and in implementation thereof for a description
of the terms and conditions upon which the Debentures are issued and held and
the rights, remedies, limitation of rights, duties and immunities of the Holders
of the Debentures and of the Company and of the Trustee, and all such terms and
conditions are incorporated by reference herein, and to all of which provisions
the Holder of this Debenture by acceptance hereof assents. Capitalized terms
not otherwise defined herein shall have the meaning set forth in the Indenture.
3. Subject to and upon compliance with the provisions of this
Paragraph 3, the Holder of this Debenture has the right, at such Holder's
option, upon proper completion and execution of the Conversion Form attached to
this Debenture (or any other written notice in form satisfactory to the Trustee)
to surrender this Debenture at the principal office of U.S. Trust Company of
California, N.A. or such other entity that may be appointed as Security
Registrar, at any time prior to the redemption or repayment of this Debenture,
to convert the whole or any part of this Debenture into fully paid and non-
assessable common shares (the "Shares") in the capital of the Company, as
presently constituted (without adjustment for interest accrued hereon or for
dividends on Shares issuable upon such conversion) in the manner set forth in
this Debenture. The Conversion Price is subject to adjustment in the case of
subdivision or consolidation of the Shares and in other cases in the manner
described below in this Debenture.
(a) In order to exercise its right of conversion, the registered
Holder of a Debenture shall give notice in writing addressed to the Security
Registrar (the date of receipt by the Security Registrar of such notice being
referred to herein as the "Conversion Date") and by surrender of the Debenture
concurrently with such notice, such Holder shall be entitled to require the
Company to allot and issue to him fully paid Shares of the Company on the basis
of one share for each $0.12 principal amount of the Debenture, subject to
adjustment as set forth in Paragraph 3(d) (as so adjusted, from time to time,
the "Conversion Price").
As promptly as practicable after the Conversion Date, the Company
shall deliver or cause to be delivered at the office of the Security Registrar
where the Debenture was issued to the Debenture Holder who surrendered the
Debenture or his nominee or nominees, a certificate or certificates representing
the number of fully paid and nonassessable Shares into which such Debenture was
converted and if less than the entire principal amount of the Debenture is so
converted, the Company shall deliver to the Debenture Holder a Debenture for the
principal amount of the Debenture remaining after conversion.
(b) To the extent that a Debenture Holder would be entitled on
conversion to a fractional Share, the Company shall pay to him by cheque the
dollar equivalent of such fractional share based on the Conversion Price.
(c) The conversion of a Debenture shall be deemed to have been
made at the close of business on the Conversion Date so that any further rights
of the Holder with respect to the Debentures shall terminate at such time and
the Person or Persons entitled to receive the Shares into which the Debenture is
converted shall be treated, as between the Company and such person or persons,
as having become the Holder or Holders of record of such Shares at that time.
(d) The price at which Debentures are convertible and the number
of Shares deliverable upon the conversion of the Debenture shall be subject to
adjustment in the events and in the manner following:
(1) If and whenever at any time prior to the Conversion
Date, the Company shall (i) subdivide or redivide the outstanding
Shares into a greater number of Shares, (ii) reduce, combine or
consolidate the outstanding Shares into a smaller number of shares, or
(iii) issue Shares or securities that are exchangeable for or
convertible into Shares to the Holders of all or substantially all of
the outstanding Shares by way of a stock dividend (other than the
issue of Shares to Holders of Shares pursuant to their exercise of
options to receive dividends in the form of Shares in lieu of
dividends paid in the ordinary course on the Shares) without payment
of any additional consideration (any of such events being called a
"Share Reorganization"), the Conversion Price in effect immediately
after the record or effective dates of such Share Reorganization shall
be adjusted by multiplying the Conversion Price in effect on the day
preceding such record or effective date by a fraction, the numerator
of which shall be the number of Shares outstanding on such date and
the denominator of which shall be the total number of Shares
outstanding immediately after such record or effective date, including
in the case where securities exchangeable for or convertible into
Shares are distributed, the number of Shares that would have been
outstanding had such securities been exchanged for or converted into
Shares on such record or effective date. Such adjustment shall be
made successively whenever any event referred to in this subparagraph
(1) shall occur. Any such issue of Shares by way of a stock dividend
shall be deemed to have been made on the record date for the stock
dividend for the purpose of calculating the number of outstanding
Shares under subparagraphs (2) and (3) of this Paragraph 3 (d).
(2) If and whenever at any time prior to the Conversion
Date the Company shall fix a record date for the issuance of rights,
options or warrants to all or substantially all the Holders of its
outstanding Shares entitling them, for a period expiring not more than
45 days after such record date, to subscribe for or purchase Shares
(or securities convertible into or exchangeable for Shares) at a price
per share (or having a conversion or exchange price per share) less
than the Current Market Price, as defined below, of a Share on such
record date, the Conversion Price shall be adjusted immediately after
such record date so that it shall equal the price determined by
multiplying the Conversion Price in effect on such record date by a
fraction, of which the numerator shall be the total number of Shares
outstanding on such record date plus the number of Shares equal to the
number arrived at by dividing the aggregate price of the total number
of additional Shares offered for subscription or purchase (or the
aggregate conversion or exchange price of the convertible securities
so offered) by such Current Market Price per Share, and of which the
denominator shall be the total number of Shares outstanding on such
record date plus the total number of additional Shares offered for
subscription or purchase (or into which the convertible securities so
offered are convertible). Any Shares owned by or held for the account
of the Company shall be deemed not to be outstanding for the purpose
of any such computation. Such adjustments shall be made successively
whenever such a record date is fixed. To the extent that any such
rights or warrants are not so issued or any such rights or warrants
are not exercised prior to the expiration thereof, the Conversion
Price shall be readjusted to the Conversion Price which would then be
in effect if such record date had not been fixed or to the Conversion
Price which would then be in effect based upon the number of Shares
(or securities convertible into Shares) actually issued upon the -
exercise of such rights or warrants, as the case may be.
(3) If and whenever at any time prior to the Conversion
Date the Company shall fix a record date for the making of a
distribution to all or substantially all of the Holders of its
outstanding Shares of:
(i) shares of any class other than Shares and other
than shares distributed to Holders of Shares pursuant to their
exercise of options to receive dividends in the form of such
shares in lieu of dividends paid in the ordinary course on the
Shares, or
(ii) rights, options or warrants (excluding those
referred to in subparagraph (2) of this Paragraph 3(d)), or
(iii) evidences of its indebtedness, or
(iv) assets (excluding dividends paid in the ordinary
course),
then, in each such case (unless the Company elects to reserve shares,
rights, options, warrants, evidences of indebtedness or assets so
distributed so that any Holder of Debentures will receive upon such
conversion, in addition to the Shares to which such Holder is entitled
the amount and kind of shares, rights, options, warrants, evidences of
indebtedness or assets to which such Holder would have received if
such Holder had, immediately prior to the record date for the
distribution, converted its Debentures into Shares), the Conversion
Price shall be adjusted immediately after such record date so that it
shall equal the price determined by multiplying the Conversion Price
in effect on such record date by a fraction, of which the numerator
shall be the total number of Shares outstanding on such record date
multiplied by the Current Market Price per Share on such record date,
less the fair market value on a per share basis (as determined by the
Directors of the Company, which determination shall be conclusive) of
such shares, rights, options, warrants, evidences of indebtedness or
assets so distributed, and of which the denominator shall be the total
number of Shares outstanding on such record date multiplied by such
Current Market Price per Share. Any Shares owned by or held for the
account of the Company shall be deemed not to be outstanding for the
purpose of any such computation. Such adjustment shall be made
successively whenever such a record date is fixed. To the extent that
such distribution is not so made, the Conversion Price shall be
readjusted to the Conversion Price which would then be in effect if
such record date had not been fixed or to the Conversion Price which
would then be in effect based upon such shares, rights, options,
warrants, evidences of indebtedness or assets actually distributed, as
the case may be. In clause (iv) of this subparagraph (3) the term
"dividends paid in the ordinary course" shall include the value of any
securities or other property or assets distributed in lieu of cash
dividends paid in the ordinary course at the option of shareholders.
(4) For the purpose of any computation under subparagraphs
(2) or (3) of this Paragraph 3(d), the "Current Market Price" per
Share at any date shall be the weighted average price per share for
the Shares for 10 consecutive trading days commencing not more than 20
trading days before such date on the principal stock exchange on which
the Shares are then listed, or if the Shares are not listed on any
stock exchange, then on the over-the-counter market. If there is no
market for the Shares for the period during which the Current Market
Price thereof would otherwise be determined, the Current Market Price
in respect of any Share shall be determined by the Directors acting in
good faith. The weighted average price shall be determined by
dividing the aggregate sale price of all Shares sold on the said
exchange or market, as the case may be, during the said 10 consecutive
trading days by the total number of Shares so sold.
(5) If and whenever at any time prior to the Conversion
Date the Company shall issue any Shares other than pursuant to the
exercise of an employee or director share purchase option, at a price
per share and other than an issuance of Shares addressed in another
subparagraph of this Paragraph 3 (such issuance price, hereinafter
called the "Lesser Price") less than the lower of (i) $.10 and (ii)
the Conversion Price then payable (the "Dilution Threshold"), then the
Conversion Price shall be adjusted immediately after such issuance so
that it shall equal the price determined by multiplying the Conversion
Price then in effect by a fraction, of which the numerator shall be
the number of Shares outstanding immediately prior to the issuance of
shares at the Lesser Price plus the number of Shares which the
aggregate consideration received for such issuance would purchase at
the greater of the Current Market Price and the Dilution Threshold,
and of which the denominator shall be the number of Shares outstanding
immediately after the issuance of Shares at the Lesser Price. The
provisions of this subparagraph (5) shall apply on the same basis in
the case of any subsequent issue of Shares at a price per share less
than the Dilution Threshold.
(6) In the case of any reclassification of, or other change
in, the outstanding Shares of the Company other than a subdivision,
redivision, reduction, combination or consolidation, the Conversion
Price shall be adjusted in such manner as the Directors determine to
be appropriate on a basis consistent with this Paragraph 3.
(7) In any case in which this paragraph 3 shall require
that an adjustment shall become effective immediately after a record
date for an event referred to herein, the Company may defer, until the
occurrence of such event, issuing to the Debenture Holders converting
after such record date and before the occurrence of such event the
additional Shares issuable upon such conversion by reason of the
adjustment required by such event before giving effect to such
adjustment; provided, however, that the Company shall deliver to such
Holder an appropriate instrument evidencing such Holder's right to
receive such additional Shares upon the occurrence of the event
requiring such adjustment and the right to receive any distributions
made on such additional Shares declared in favor of Holders of record
of Shares on and after the Date of Conversion by such later date as
such Holder would, but for the provisions of this subparagraph (7)
have become the Holder of record of such additional Shares pursuant to
subparagraph (2) of this Paragraph 3 (d).
(8) The adjustments provided for in this Paragraph 3 are
cumulative and shall apply to successive subdivisions, redivisions,
reductions, combinations, consolidations, distributions, issues or
other events resulting in any adjustment under the provisions of this
Paragraph 3, provided that, notwithstanding any other provision of
this Debenture, no adjustment of the Conversion Price shall be
required unless such adjustment would require an increase or decrease
of at least 1% in the Conversion Price then in effect; provided,
however, that any adjustments which by reason of this subparagraph (8)
are not required to be made shall be carried forward and taken into
account in any subsequent adjustment.
(9) In the event of any question arising with respect to
the adjustments provided in this Paragraph 3, such questions shall be
conclusively determined by the Board of Directors of the Company who
may rely upon a firm of independent public accountants acceptable to
the Trustee (who may be the Company's auditors). Such accountants
shall have access to all necessary records of the Company and such
determination shall be binding upon the Company and the Trustee.
(10) While any of the Holders of the Debentures have the
right to convert such Debentures, the Company shall give at least 15
days prior notice in writing to the Debenture Holders of any
subdivision, consolidation or stock dividend pursuant to subparagraph
(1), any issue of rights, options or warrants pursuant to subparagraph
(2) or any distribution pursuant to subparagraph (3) and shall not
during the period of such notice close the transfer books for its
Shares so as to prevent the Shares resulting from the conversion of
Debentures to be voted.
(11) If any of the events referred to in subparagraphs (1),
(2), (3) or (5) of this Paragraph 3(d) occur, the Company shall
promptly file with the Trustee a certificate of the Company, setting
forth a brief statement of the facts and the consequent adjustment
required to be made by the provisions of this Debenture with respect
to conversion of the Debentures. The Trustee shall promptly mail a
copy of such certificate to each of the Holders of the Debentures.
(e) The Company will reserve and there will remain unissued out
of its authorized capital a sufficient number of Shares to satisfy the rights of
conversion provided for herein should the Holders of all the Debentures from
time to time outstanding determine to exercise such rights in respect of all
Shares which they are or may be entitled to receive pursuant thereto.
4. Any redemption of the Debentures at the option of the Company
will be made in a minimum amount of 20% of the principal amount then outstanding
and shall be made pro rata to each holder thereof and the procedures contained
in the first two paragraphs of Section 1103 of the Indenture providing for
partial redemption other than on a pro rata basis shall not be applicable to any
partial redemption of the Debentures. Upon any such redemption, Debentures may
be issued in any denominations that may be required in order to accommodate the
terms of any partial redemption.
The Debentures will not be subject to redemption prior to September
10, 1993 unless the 200% Common Stock Price Condition shall have occurred in
which case the Debentures will be subject to redemption at any time thereafter
on at least 30 days notice, as a whole or in part (so long as at least 20% of
the outstanding principal amount is redeemed), at a price equal to the principal
amount thereof, together with accrued interest to the date fixed for redemption;
provided, that upon any redemption of less than 100% of the outstanding
principal amount, the Debentures will not be subject to further redemption under
this paragraph until 12 months have elapsed from the date of such partial
redemption.
The "200% Common Stock Price Condition" shall have occurred from and
after any time that the closing price for the Company's Common Stock shall have
equaled or exceeded 200% of the Conversion Price for at least 75 trading days in
any 90 consecutive trading day period. The closing price of the Common Stock
shall be determined by the Company's Board of Directors and shall be the last
reported sales price regular way or, in case no such reported sale takes place
on such day, the reported closing bid price regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on a securities exchange, or if
there is not such principal consolidated transaction reporting system then, as
reported by the National Association of Securities Dealers, Inc. Automatic
Quotation System ("NASDAQ"), or a comparable system in use for the Common Stock,
or if such last sales price is not so quoted, the last quoted bid price or, if
not quoted, the average of the high bid and the low asked prices in the over-
the-counter market as reported by NASDAQ or such other comparable system then in
use for the Common Stock.
From and after September 10, 1993, the Debentures will also be subject
to redemption at any time on at least 30 days notice, as a whole or in part (so
long as at least 20% of the outstanding principal amount is redeemed), at a
price equal to the principal amount thereof, together with accrued interest to
the date fixed for redemption. In connection with any redemption made pursuant
to the preceding sentence, the Company shall issue to the Holders of Debentures
so redeemed warrants to purchase the same number of shares of Common Stock of
the Company that would have been issuable upon conversion of the redeemed
Debentures with exercise prices equal to the then applicable Conversion Price
for the Debentures and containing other standard terms and conditions as
determined by the Company. The issuance of such warrants shall be subject to
the Company's compliance with all applicable securities and other laws. Such
warrants shall have a term equal to the remaining life of the redeemed
Debentures and shall be subject to early expiration at the option of the Company
upon 30 days' notice from and after any time that the 200% Common Stock Price
Condition shall occur.
In the event that the Common Stock of the Company has not become
publicly traded at any time prior to March 10, 2002, as determined by the Board
of Directors of the Company, then the Company shall issue to the Holders of
Debentures at maturity warrants to purchase the same number of shares of Common
Stock of the Company that would have been issuable upon conversion of the
Debentures with exercise prices equal to the then applicable Conversion Price
for the Debentures and containing other standard terms and conditions as
determined by the Company. The issuance of such warrants shall be subject to
the Company's compliance with all applicable securities and other laws. Such
warrants shall have a term equal to five years and shall be subject to early
expiration at the option of the Company upon 30 days' notice from and after any
time that the 200% Common Stock Price Condition shall occur.
Upon notice being given as aforesaid, and subject to any exercise by a
Debenture Holder of rights to convert under Paragraph 3 prior to the redemption
date specified in the notice, the principal amount of all Debentures so called
for redemption and that part of the principal amount of all Debentures so called
for redemption in part shall be and become due and payable at the redemption
price, on the redemption date specified in such notice (which date shall be not
less than 30 days from the date of notice) and with the same effect as if it
were the date of maturity specified in each such Debenture, anything therein or
herein to the contrary notwithstanding, and from and after such redemption date
interest upon the principal amount of each such Debenture so becoming due and
payable shall cease unless, prior to the setting aside of the Redemption Price
pursuant to Section 1105 of the Indenture, payment of the Redemption Price shall
not be made on presentation and surrender of such Debenture pertaining thereto
at any of the places specified in such notice on or after the redemption date
and any such notice shall so state.
Any redemption shall be provided for by the Company irrevocably
depositing with the Trustee or any paying agent to the order of the Trustee in
trust for the Holders of the Debentures called for redemption, on or before the
redemption date specified in such notice, such sums as may be sufficient to pay
the Redemption Price of such Debentures. The Company shall also deposit with
the Trustee or the Security Registrar if required by either of them a sum
sufficient to pay any charges or expenses which may be incurred by the Trustee
or Security Registrar in connection with such redemption. From the sums so
deposited the Trustee or Security Registrar shall pay or cause to be paid to the
Holders of such Debentures so called for redemption, upon surrender of such
Debentures, the redemption price to which they are respectively entitled on
redemption.
5. The Debentures are issuable only in registered form without
coupons. The Company, the Trustee and any agent of the Company may treat the
registered Holder of the Debentures as the registered owner thereof for all
purposes. No transfer of this Debenture shall be valid unless made on the
register to be kept by and at the office of the Security Registrar and at such
other place or places (if any) as may be designated by the Company with the
approval of the Trustee, by the registered Holder or his executors,
administrators, or other legal representatives or his or their attorney duly
appointed by instrument in writing in form and execution satisfactory to the
Trustee or other registrar upon compliance with such reasonable requirements as
the Trustee or other registrar may prescribe, nor unless such transfer shall
have been noted hereon by the Trustee or other registrar. The said registers
may be closed for a period not exceeding 15 days immediately preceding and
including the day of the mailing of a notice of redemption for a redemption of
Debentures.
6. To the extent that payments to a Holder of this Debenture are not
exempt from United States withholding tax or are subject to a reduction on such
withholding pursuant to a treaty, the Company will make such payments net of
applicable withholding on the basis of documentation provided by the registered
Holder of this Debenture, and the Holder hereby agrees to indemnify the Company
against all liability for additional withholding taxes and any penalties and
interest in connection therewith. If the Holder of this Debenture seeks a
reduction in withholding pursuant to a treaty; such Holder acknowledges and
agrees that it must furnish the Company with satisfactory documentation
establishing such Holder's right to the benefit of such treaty.
7. This Debenture shall not become obligatory for any purpose until
certified by the Trustee under the Indenture.
IN WITNESS WHEREOF Micrographic Technology Corporation has caused this
Debenture to be signed under its corporate seal by its duly authorized officers
in that behalf.
Dated: MICROGRAPHIC TECHNOLOGY
CORPORATION
By:
VP Finance, C.F.O. and Secretary
By:
President and C.E.O.
APPENDIX A - RESTRICTIONS APPLICABLE TO ALL INVESTORS
NEITHER THE SPECIAL WARRANTS NOR THE SECURITIES OF THE COMPANY ISSUABLE UPON
EXERCISE OF THE SPECIAL WARRANTS HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE INITIAL OFFER AND SALE OF THE
SPECIAL WARRANTS WAS MADE PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT CONTAINED IN REGULATION S, WHICH EXEMPTION IMPOSES CERTAIN
REQUIREMENTS IN CONNECTION WITH THE SUBSEQUENT SALE OF THE SECURITIES.
THE SECURITIES ARE SUBJECT TO TRANSFER AND OTHER RESTRICTIONS FOR A "RESTRICTED
PERIOD" WHICH SHALL BE APPLICABLE AT LEAST THROUGH MARCH 17, 1995, OR LONGER IF
EXTENDED BY THE COMPANY. DURING SUCH RESTRICTED PERIOD, AMONG OTHER THINGS, (A)
NONE OF SUCH SECURITIES MAY BE SOLD WITHIN THE UNITED STATES OR TO OR FOR THE
ACCOUNT OR BENEFIT OF ANY U.S. PERSON, AND (B) THE OFFER OR SALE MUST BE MADE IN
SUCH A MANNER THAT EACH PURCHASER OF THE SECURITIES SHALL (i) CERTIFY THAT SUCH
PURCHASER IS NOT A U.S. PERSON FOR PURPOSES OF REGULATION S AND IS NOT ACQUIRING
THE SECURITIES FOR THE ACCOUNT OF A U.S. PERSON OR THAT IF SUCH PURCHASER IS A
U.S. PERSON IT HAS ACQUIRED THE SECURITIES IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT, AND (ii) AGREE TO SELL THE SECURITIES
ONLY IN A REGISTERED TRANSACTION OR PURSUANT TO REGULATION S OR ANOTHER
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED. IN
ADDITION, THE SECURITIES ARE REQUIRED TO BE LEGENDED DURING THE RESTRICTED
PERIOD AND THE COMPANY HAS AGREED IT WILL NOT REGISTER ANY TRANSFER OF THE
SECURITIES IN VIOLATION OF REGULATION S.
IN ORDER TO COMPLY WITH THE REQUIREMENTS OF REGULATION S DURING THE RESTRICTED
PERIOD, EACH SELLER AND PURCHASER OF THE NOTES, DEBENTURES OR THE COMMON SHARES
IS REQUIRED TO PROVIDE A DECLARATION TO THE TRANSFER AGENT IN THE FORMS SET
FORTH AS SCHEDULE A AND SCHEDULE B TO THIS PROSPECTUS, RESPECTIVELY, WHICH
INCLUDE DECLARATIONS TO THE EFFECT THAT THE TRANSFER IS BEING MADE IN COMPLIANCE
WITH THE RESTRICTED PERIOD REQUIREMENTS OF REGULATION S.
APPENDIX B - RESALE RESTRICTIONS
APPLICABLE TO ALL INVESTORS
NEITHER THE SPECIAL WARRANTS NOR THE SECURITIES OF THE COMPANY ISSUABLE UPON
EXERCISE OF THE SPECIAL WARRANTS HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"). ACCORDINGLY, THE SPECIAL WARRANTS
AND THE SECURITIES OF THE COMPANY ISSUABLE UPON EXERCISE OF THE SPECIAL WARRANTS
MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE BENEFIT
OF, U.S. PERSONS, EXCEPT IN CERTAIN TRANSACTIONS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.
IN GENERAL, THE RESALE OF THE SECURITIES BEING QUALIFIED FOR DISTRIBUTION HEREBY
MUST BE MADE PURSUANT TO THE RESALE EXEMPTION CONTAINED IN REGULATION S (ABSENT
THE AVAILABILITY OF ANOTHER EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED) AND ACCORDINGLY, ABSENT ANOTHER EXEMPTION, THE OFFER AND
SALE OF SECURITIES COVERED BY THIS PROSPECTUS MUST BE MADE IN AN "OFFSHORE
TRANSACTION" FOR PURPOSES OF REGULATION S WHICH GENERALLY REQUIRES BOTH THAT
OFFERS NOT BE MADE TO PERSONS IN THE UNITED STATES AND THAT EITHER (i) AT THE
TIME THE BUY ORDER IS ORIGINATED, THE BUYER IS OUTSIDE THE UNITED STATES, OR THE
SELLER AND ANY PERSON ACTING ON ITS BEHALF REASONABLY BELIEVE THAT THE BUYER IS
OUTSIDE THE UNITED STATES, OR (ii) THE TRANSACTION IS EXECUTED IN CERTAIN
OFFSHORE SECURITIES MARKETS AND NEITHER THE SELLER NOR ANY PERSON ACTING ON ITS
BEHALF KNOWS THAT THE TRANSACTION HAS BEEN PRE-ARRANGED WITH A BUYER IN THE
UNITED STATES.
IN ADDITION TO THE FOREGOING RESTRICTIONS, ANY RESALE BY AN AFFILIATE OF THE
COMPANY (WHICH MAY INCLUDE MR. MAURAN AND BEDFORD) CAN BE MADE PURSUANT TO
REGULATION S THROUGH COMPLIANCE WITH VARIOUS RESTRICTIONS INCLUDING THE
ESTABLISHMENT OF A NEW ONE YEAR "RESTRICTED PERIOD" AS DESCRIBED IN APPENDIX A.
THE RESTRICTIONS IN APPENDIX A ARE APPLICABLE THROUGH MARCH 17, 1995 AND THE
COMPANY WILL DETERMINE, IN THE FUTURE, WHETHER OR NOT TO EXTEND SUCH
RESTRICTIONS BEYOND MARCH 17 1995.
THE COMPANY PRESENTLY INTENDS TO EXTEND SUCH "RESTRICTED PERIOD" FOR ALL
SECURITIES BEING QUALIFIED FOR DISTRIBUTION HEREBY FOR A PERIOD OF ONE YEAR FROM
THE DATE OF THE LAST SALE OF ANY SECURITY HEREUNDER BY MR. MAURAN OR BEDFORD.
THERE CAN BE NO ASSURANCE WHEN SUCH LAST SALE BY MR. MAURAN OR BEDFORD MAY
OCCUR. THE COMPANY FURTHER INTENDS TO ALLOW ANY HOLDER OF A SECURITY TO SEEK
AFTER MARCH 17, 1995 (UNLESS THE COMPANY EXTENDS SUCH DATE) A WAIVER OF SUCH
EXTENDED "RESTRICTED PERIOD" IF THE HOLDER CAN ESTABLISH TO THE COMPANY'S
SATISFACTION THAT ANY SECURITIES FOR WHICH A WAIVER IS SOUGHT HAVE NOT BEEN
ACQUIRED FROM AN AFFILIATE OF THE COMPANY.
APPENDIX C - CALIFORNIA TRANSFER
RESTRICTIONS APPLICABLE TO ALL INVESTOR
THE SECURITIES OF THE COMPANY ISSUABLE UPON EXERCISE OF THE SPECIAL WARRANTS ARE
SUBJECT TO CERTAIN TRANSFER RESTRICTIONS REQUIRED BY CALIFORNIA LAW. THE
DEBENTURES, THE NOTES AND THE COMMON SHARES ARE SUBJECT TO CERTAIN TRANSFER
RESTRICTIONS UNDER SECTION 260.141.11 OF THE RULES OF THE CALIFORNIA
CORPORATIONS COMMISSIONER, A COPY OF WHICH IS ATTACHED HERETO. A COPY OF SUCH
SECTION 206.141.11 IS REQUIRED TO BE ATTACHED TO THE DEBENTURES, THE NOTES AND
THE COMMON SHARES. THE TERMS OF SECTION 260.141.11 REQUIRE AMONG OTHER THINGS
THAT (i) A COPY OF SECTION 260.141.11 BE GIVEN TO EACH HOLDER OR TRANSFEREE OF A
SECURITY, AND (ii) TRANSFERS OF THE SECURITIES BE LIMITED TO THOSE PERMITTED
UNDER SECTION 260.141.11(b)(1) THROUGH (17) UNLESS THE CALIFORNIA CORPORATIONS
COMMISSIONER GRANTS ITS WRITTEN CONSENT TO A TRANSFER OR AGREES TO REMOVE THE
RESTRICTIONS OF SECTION 260.141.11. THE RESTRICTIONS CONTAINED IN SECTION
260.141.11 ARE PERPETUAL AND WILL ONLY BE REMOVED IF THE CALIFORNIA CORPORATIONS
COMMISSIONER AGREES TO SUCH REMOVAL.
ONE OF THE PERMITTED TRANSFERS UNDER SECTION 260.141.11 IS ANY TRANSFER BETWEEN
PARTIES THAT ARE RESIDENTS OF STATES, TERRITORIES OR COUNTRIES OTHER THAN
CALIFORNIA IF SUCH PARTIES ARE NEITHER DOMICILED NOR ACTUALLY PRESENT IN
CALIFORNIA. IN ORDER TO COMPLY WITH THE REQUIREMENTS OF SECTION 260.141.11 OF
THE CALIFORNIA CORPORATIONS COMMISSIONER, EACH SELLER AND PURCHASER OF THE
NOTES, THE DEBENTURES OR THE COMMON SHARES IS REQUIRED TO PROVIDE A RESIDENT OF
A FOREIGN STATE, TERRITORY OR COUNTRY WHO IS NEITHER DOMICILED IN THIS STATE TO
THE KNOWLEDGE OF THE BROKER-DEALER, NOR ACTUALLY PRESENT IN THIS STATE IF THE
SALE OF SUCH SECURITIES IS NOT IN VIOLATION OF ANY SECURITIES LAW OF THE FOREIGN
STATE, TERRITORY OR COUNTRY CONCERNED.
(8) TO A BROKER-DEALER LICENSED UNDER THE CODE IN A PRINCIPAL
TRANSACTION, OR AS AN UNDERWRITER OR A MEMBER OF AN UNDERWRITING SYNDICATE OR
SELLING GROUP;
(9) IF THE INTEREST SOLD OR TRANSFERRED IS A PLEDGE OR OTHER LIEN
GIVEN BY THE PURCHASER TO THE SELLER UPON A SALE OF THE SECURITY FOR WHICH THE
COMMISSIONER'S WRITTEN CONSENT IS OBTAINED OR UNDER THIS RULE NOT REQUIRED;
(10) BY WAY OF A SALE QUALIFIED UNDER SECTIONS 25111, 25112, 25113, OR
25121 OF THE CODE, OF THE SECURITIES TO BE TRANSFERRED, PROVIDED THAT NO ORDER
UNDER SECTION 25143 IS IN EFFECT WITH RESPECT TO SUCH QUALIFICATION;
(11) BY A CORPORATION TO A WHOLLY OWNED SUBSIDIARY OF SUCH
CORPORATION, OR BY A WHOLLY OWNED SUBSIDIARY OF A CORPORATION TO SUCH
CORPORATION;
(12) BY WAY OF AN EXCHANGE QUALIFIED UNDER SECTION 25111, 25112, OR
25113 OF THE CODE, PROVIDED THAT NO ORDER UNDER SECTION 25140 OR SUBDIVISION (a)
OF SECTION 25143 IS IN EFFECT WITH RESPECT TO SUCH QUALIFICATION;
(13) BETWEEN RESIDENTS OF FOREIGN STATES, TERRITORIES OR COUNTRIES WHO
ARE NEITHER DOMICILED NOR ACTUALLY PRESENT IN THIS STATE;
(14) TO THE STATE CONTROLLER PURSUANT TO THE UNCLAIMED PROPERTY LAW OR
TO THE ADMINISTRATOR OF THE UNCLAIMED PROPERTY LAW OF ANOTHER STATE; OR
(15) BY THE STATE CONTROLLER PURSUANT TO THE UNCLAIMED PROPERTY LAW OR
BY THE ADMINISTRATOR OF THE UNCLAIMED PROPERTY LAW OF ANOTHER STATE IF, IN
EITHER SUCH CASE, SUCH PERSON (i) DISCLOSES TO POTENTIAL PURCHASERS AT THE SALE
THAT TRANSFER OF THE SECURITIES IS RESTRICTED UNDER THIS RULE, (ii) DELIVERS TO
EACH PURCHASER A COPY OF THIS RULE, AND (iii) ADVISES THE COMMISSIONER OF THE
NAME OF EACH PURCHASER;
(16) BY A TRUSTEE TO A SUCCESSOR TRUSTEE WHEN SUCH TRANSFER DOES NOT
INVOLVE A CHANGE IN THE BENEFICIAL OWNERSHIP OF THE SECURITIES;
(17) BY WAY OF ANY OFFER AND SALE OF OUTSTANDING SECURITIES IN AN
ISSUER TRANSACTION THAT IS SUBJECT TO THE QUALIFICATION REQUIREMENT OF SECTION
25110 OF THE CODE BUT EXEMPT FROM THAT QUALIFICATION REQUIREMENT BY SUBDIVISION
(f) OF SECTION 25102; PROVIDED THAT ANY SUCH TRANSFER IS ON THE CONDITION THAT
ANY CERTIFICATE EVIDENCING THE SECURITY ISSUED TO SUCH TRANSFEREE SHALL CONTAIN
THE LEGEND REQUIRED BY THIS SECTION.
(c) THE CERTIFICATES REPRESENTING ALL SUCH SECURITIES SUBJECT TO SUCH
A RESTRICTION ON TRANSFER, WHETHER UPON INITIAL INSURANCE OR UPON ANY TRANSFER
THEREOF, SHALL BEAR ON THEIR FACE A LEGEND, PROMINENTLY STAMPED OR PRINTED
THEREON IN CAPITAL LETTERS OF NOT LESS THAN 10-POINT SIZE, READING AS FOLLOWS:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
CONVERSION FORM
To: MICROGRAPHIC TECHNOLOGY CORPORATION
And To: U.S. TRUST COMPANY OF CALIFORNIA, N.A.
The undersigned registered Holder of the within Debenture hereby
authorizes and instructs U.S. Trust Company of California, N.A. (the "Trustee")
as agent of and for the account of the undersigned to convert said Debenture (or
$_________ principal amount thereof<F1>) into Shares Micrographic Technology
Corporation in accordance with the terms of the Indenture referred to in said
[FN]
<F1> If less than the full principal amount of the within Debenture is to be
converted, indicate in the space provided the principal amount to be converted.
Debenture, as amended, and directs that the Shares issuable and deliverable upon
the conversion be issued and delivered to the person indicated below.<F2>
The undersigned hereby further authorizes and instructs the
Trustee, as agent of and for the account of the undersigned, to send to the
undersigned at the address of the undersigned appearing in the register of
Debenture Holders a cheque for the fractional interests in Shares (if any)
resulting from this conversion.
Dated:
Name of Person in name of
which Shares are to be
Registered (If different
from Debenture Holder) Signature of Debenture Holder<F3>
Address
Name of Debenture Holder
(In full - Please Print)
City and Province
Postal Code
TRUSTEE'S CERTIFICATE
This Debenture is one of the 6% Convertible Subordinated Secured
Debentures due 2002, referred to in the Indenture within mentioned.
U.S. TRUST COMPANY OF
CALIFORNIA, N.A.
By:_____________________________
[FN]
<F2> If Shares are to be issued in the name of a person other than the
registered Holder, the signature of such Holder must be guaranteed by a
Canadian chartered bank, by a trust company registered in Canada, or by a
member firm of The Toronto Stock Exchange. If Shares are to be issued in the
name of a person other than the Holder, all requisite transfer taxes must be
tendered by the undersigned. If Shares are to be issued in the name of a person
other than the registered Holder, and this conversion is to be effective at any
time during the twelve (12) month period following March 10, 1992, such person
must provide certification (satisfactory in form and substance to the Company
and the Trustee) that he or she is neither a U.S. Person nor an agent of a U.S.
Person as such term is defined in Regulation S promulgated under the U.S.
Securities Act of 1933.
<F3> Any signature may be by the legal representative or attorney of the
Debenture Holder if the authority of the representative or attorney to sign is
proven to the satisfaction of the Trustee.
Authorized Signatory
(No writing hereon except by the Trustee or other Registrar)
Date of Registration In Whose Name Registered Trustee or Registrar
TRANSFER FORM
[See Schedule to the Indenture]
Exhibit 10.11
ESCROW AGREEMENT
This Escrow Agreement (this "Agreement") is dated as of September 15, 1995
among SoftNet Systems, Inc. ("SoftNet"), R.C.W. Mauran ("Mauran"), A.J.R.
Oosthuizen ("Oosthuizen") and MELLON BANK, N.A., as escrow agent ("Mellon" or
the "Escrow Agent").
WHEREAS, a Micrographic Technology Corporation ("MTC"), SoftNet and MTC
Acquisition Corp., a wholly owned subsidiary of SoftNet ("MTC Acquisition"),
entered into an Agreement and Plan of Reorganization dated as of March 24, 1995,
pursuant to which MTC will be merged (the "Merger") with and into MTC
Acquisition.
WHEREAS, in connection with the Merger, SoftNet, Mauran and Oosthuizen
entered into an Agreement dated as of March 24, 1995, as amended September 15,
1995 (the "Shareholders Agreement"), pursuant to which Mauran and Oosthuizen
agreed that fifty percent (50%) of the shares of Common Stock of SoftNet (the
"Escrow Shares") will be held in escrow until the second anniversary of the
closing of the Merger as security for Mauran and Oosthuizen's indemnity
obligations under the Shareholders Agreement.
WHEREAS, in connection with the Escrow Shares, SoftNet, Mauran and
Oosthuizen desire to appoint Mellon as the escrow agent.
NOW, THEREFORE, the parties hereto agree as follows:
1. Appointment of Escrow Agent. SoftNet, Mauran and Oosthuizen hereby
appoint Mellon as the Escrow Agent hereunder, and Mellon hereby accepts such
appointment.
2. Creation of Escrow Fund; Escrow Deposit. The Escrow Agent hereby
agrees to hold in a separate account or fund which shall be designated the
"SoftNet Escrow Fund" (the "Escrow Fund") the property hereinafter described.
The Escrow Fund shall be held and disbursed by the Escrow Agent under and
subject to the provisions of this Agreement. The Escrow Agent hereby
acknowledges its receipt of stock certificates representing 173,956 shares and
168,266 shares (the "Escrow Shares") of Common Stock of SoftNet from Mauran and
Oosthuizen, respectively, which shares shall be deposited into the Escrow Fund.
3. Disbursement of Escrow Fund. The Escrow Fund shall be held by the
Escrow Agent and not disbursed until one of the following events has occurred,
in which event the Escrow Agent is authorized and directed to disburse the
Escrow Fund, or a portion thereof, in the manner indicated:
(a) In the event SoftNet believes that a set off against the Escrow
Shares for Indemnifiable Damages (as defined in the Shareholders Agreement) is
appropriate in accordance with the terms of the Shareholders Agreement and
neither Mauran or Oosthuizen have disputed the setoff claim within twenty (20)
business days from receipt of the Notice of Contest (as defined in the
Shareholders Agreement), upon receipt of a written statement from SoftNet
indicating that SoftNet is exercising its right of setoff, that neither Mauran
or Oosthuizen have disputed the setoff claim within the notice period specified
in the Shareholders Agreement and the number of Escrow Shares to be released,
the Escrow Agent is authorized and directed to disburse the Escrow Shares as
directed in the written statement from SoftNet.
(b) In the event either Mauran or Oosthuizen timely disputes a setoff
claim and the dispute is submitted to arbitration in accordance with Section
6(iii) of the Shareholders Agreement, upon receipt of the arbitrator's written
decision, the Escrow Agent is authorized and directed to disburse the Escrow
Shares as directed in the arbitrator's written decision.
(c) Upon receipt of a written direction signed by SoftNet, Mauran and
Oosthuizen, the Escrow Agent is authorized and directed to disburse the Escrow
Shares as directed in such joint direction.
(d) In the event there are Escrow Shares remaining in the Escrow Fund
on September 15, 1997 and the Escrow Agent has not been notified of any
outstanding setoff claims by SoftNet, the Escrow Agent is authorized and
directed to disburse the remaining Escrow Shares to Mauran and Oosthuizen in
proportion to the number of shares placed in the Escrow Fund by Mauran and
Oosthuizen, respectively, or as otherwise designated in writing by Mauran and
Oosthuizen.
(e) In the event there are Escrow Shares remaining in the Escrow Fund
on September 15, 1997 and the Escrow Agent has been notified of outstanding
setoff claims by SoftNet, the Escrow Agent will retain sufficient Escrow Shares
to cover the outstanding setoff claims, and is authorized and directed to
disburse the remaining Escrow Shares to Mauran and Oosthuizen in proportion to
the number of shares placed in the Escrow Fund by Mauran and Oosthuizen,
respectively, or as otherwise designated in writing by Mauran and Oosthuizen.
The Escrow Agent is authorized and directed to disburse the retained Escrow
Shares in accordance with (i) written directions signed by SoftNet, Mauran and
Oosthuizen or (ii) the arbitrator's written decision.
4. Termination. This Agreement shall terminate and be of no further force
and effect on the date when all Escrow Shares comprising the Escrow Fund have
been disbursed in accordance with the terms hereof. If this Agreement is still
in effect on June 30, 1998 and there are Escrow Shares remaining in the Escrow
Fund, regardless if there are any outstanding Indemnifiable Damages claims by
SoftNet, the Escrow Agent shall promptly disburse the remaining Escrow Shares to
Mauran and Oosthuizen in proportion to the number of shares placed in the Escrow
Fund by Mauran and Oosthuizen, respectively, or as otherwise designated in
writing by Mauran and Oosthuizen, but such disbursement shall have no effect on
SoftNet's outstanding Indemnifiable Damages of which written notice has been
received by Mauran and Oosthuizen on or before September 15, 1997.
5. Escrow Agent's Duties and Fees.
(a) Duties Limited. The Escrow Agent undertakes to perform only such
duties as are expressly set forth herein and shall not be subject to, nor have
any liability or responsibility under, nor be obligated to recognize the
Shareholders Agreement or any other agreement between, or directions or
instructions of, any of the parties hereto or any other person in carrying out
its duties hereunder, except for written directions or notices delivered to the
Escrow Agent in accordance with Section 3 of this Agreement.
(b) Reliance. SoftNet, Mauran and Oosthuizen shall furnish the
Escrow Agent with a list of persons authorized to act on behalf of SoftNet,
Mauran and Oosthuizen, as applicable, together with specimen signatures of such
persons. The Escrow Agent may rely upon, and shall be protected in acting or
refraining from acting upon, any written notice, instruction or request
furnished to it hereunder and reasonably believed by it to be genuine and to
have been signed or presented by the proper party or parties. The Escrow Agent
may act in reliance upon the reasonable advice of counsel satisfactory to it in
reference to any matter connected with its obligations hereunder and shall not
incur any liability for any action taken in accordance with such advice.
(c) Standard of Care: Indemnification. The Escrow Agent shall not
be responsible for any act or failure to act hereunder except in the case of its
willful misconduct or gross negligence. The parties hereto (other than the
Escrow Agent) shall jointly and severally indemnify the Escrow Agent and hold it
harmless against any claims, losses, liabilities, judgments, attorneys' fees and
other costs or expenses of any kind incurred by the Escrow Agent without willful
misconduct or gross negligence on its part, arising out of or in connection with
its entering into this Agreement and the performance of its duties hereunder,
including, without limitation, any litigation arising from this Agreement or
involving the subject matter hereof. Under no circumstances shall the Escrow
Agent be liable for any incidental, consequential or special damages.
(d) Disputes. In case of any dispute regarding this Escrow
Agreement, the Escrow Agent shall not be required to institute legal proceedings
of any kind and shall be entitled to deposit the Escrow Fund with any court of
competent jurisdiction and thenceforth be relieved of any further duty or
responsibility hereunder.
(e) Successor Escrow Agent. The Escrow Agent may resign and be
discharged from its duties or obligations hereunder by giving notice in writing
of such resignation to SoftNet, Mauran and Oosthuizen, specifying the date upon
which such resignation shall take effect. Upon any such resignation of the
Escrow Agent, SoftNet, Mauran and Oosthuizen shall mutually appoint a successor
Escrow Agent who shall have all rights of an Escrow Agent hereunder and be bound
by all of the provisions hereof
(f) Fees and Expenses. The Escrow Agent shall receive a fee for its
services hereunder as set forth on Schedule 1 hereto, and shall be reimbursed
for its reasonable out-of-pocket expenses incurred in performing its duties
hereunder. SoftNet shall pay the Escrow Agent's fees for its services hereunder
and any costs and expenses (including attorney's fees and expenses) incurred by
it hereunder.
(g) Compliance with Court Order. If all or part of the Escrow Fund
held by the Escrow Agent hereunder shall be attached, garnished or levied upon
under any order of court, or if the delivery thereof shall be stayed or enjoined
by any order of court, or if any other order, judgment or decree shall be made
or entered by any court affecting the Escrow Fund or any part thereof, the
Escrow Agent is expressly authorized in its sole reasonable discretion to obey
and comply with all writs, orders, judgments, or decrees so entered or issued,
whether with or without jurisdiction, and in case it obeys and complies with any
such writ, order, judgment, or decree, it shall not be liable to SoftNet, Mauran
or Oosthuizen, their successors or assigns, any of their clients or to any other
person or entity, by reason of such compliance, notwithstanding that such writ,
order, judgment or decree be subsequently reversed, modified, annulled, set
aside or vacated.
6. Notices. Unless otherwise specifically provided herein all notices and
other communications required or permitted hereunder:
(a) shall be in writing;
(b) shall be sent by messenger, certified or registered U.S. mail, a
reliable express delivery service or telecopier (with a copy sent by one of the
foregoing means), charges prepaid as applicable, to the appropriate address(es)
or number(s) set forth below; and
(c) shall be deemed to have been given on the date of receipt by the
addressee (or, if the date of receipt is not a business day on the first
business day after the date of receipt), as evidenced by (i) a receipt executed
by the addressee (or a responsible person in his or her office), the records of
the person delivering such communication or a notice to the effect that such
addressee refused to claim or accept such communication, if sent by messenger,
U.S. mail or express delivery service, or (ii) a receipt generated by the
sender's telecopier showing that such communication was sent to the appropriate
number on a specified date, if sent by telecopier, provided that hard copy is
mailed on the same day.
All such communications shall be sent to the following addresses or
numbers, or to such other addresses or telecopy numbers as any party may inform
the others by giving five business days' prior notice:
If to: SoftNet Systems, Inc.
Address: 717 Forest Avenue
Lake Forest, Illinois 60045
Attn: President
Telecopy No.: (708) 266-8250
Telephone No.: (708) 266-8150
with copy to: Pedersen & Houpt
161 North Clark, Suite 3100
Chicago, IL 60601
Attn: Gary Mostow
Telecopy No.: (312) 641-6895
Telephone No.: (312) 641-6888
If to: R.C.W. Mauran
Address: c/o Bedford Capital Corporation
Scotia Plaza
40 King Street West, Suite 5114
Toronto, Ontario
Canada M5H 3Y2
Telecopy No.: (416) 366-4447
Telephone No.: (416) 366-6130
If to: A.J.R. Oosthuizen
Address: 19244 Bountiful Acres
Saratoga, California 95070
Telecopy No.: (415) 962-7475
Telephone No.: (415) 962-7404
If to Escrow Agent:
Mellon Bank, N.A.
Two Mellon Bank Center
Attn: Corporate Trust Group,
Claire Seidner
Room 325
Pittsburgh, Pennsylvania 15259
Telecopy No.: (412) 234-9196
Telephone No.: (412) 234-5292
7. Miscellaneous.
(a) Benefit of Parties. This Agreement shall inure to the benefit of
and be binding upon each of the parties and their respective successors and
permitted assigns. Nothing herein, expressed or implied, is intended or shall
be construed to confer upon or give to any person other than the parties hereto,
any right, remedy or claim hereunder.
(b) Assignment. Neither this Agreement nor any right, interest or
obligation hereunder may be assigned, pledged or otherwise transferred by any
party, whether by operation of law or otherwise, without the prior consent of
the other parties.
(c) Amendments. This Agreement may be amended, modified or
supplemented only by a writing signed by each of the parties, and any such
amendment shall be effective only to the extent specifically set forth in such
writing.
(d) Counterparts; Telefacsimile Execution. This Agreement may be
executed in any number of counterparts, and by each of the parties on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all of which shall constitute but one and the same instrument. Delivery of an
executed counterpart of this Agreement by telefacsimile shall be equally as
effective as delivery of a manually executed counterpart of this Agreement. Any
party delivering an executed counterpart of this Agreement by facsimile also
shall deliver a manually executed counterpart of this Agreement, but the failure
to deliver a manually executed counterpart shall not affect the validity,
enforceability or binding effect of this Agreement.
(e) Entire Agreement. This Agreement contains the entire agreement
of the parties with respect to the transactions contemplated hereby and
supersedes all prior written and oral agreements, and all contemporaneous oral
agreements, relating to such transactions.
(f) Governing Law. This Agreement shall be a contract under the laws
of the Commonwealth of Pennsylvania and for all purposes shall be governed by
and construed and enforced in accordance with the laws of said Commonwealth.
(g) Headings. All titles and headings in this Agreement are intended
solely for convenience of reference and shall in no way limit or otherwise
affect the interpretation of any of the provisions hereof.
(h) Severability. If any clause, provision or section of this
Agreement is held illegal or invalid by any court, the invalidity of such
clause, provision or section shall not affect any other clause, provision or
section hereof and this Agreement shall be construed as if such illegal or
invalid clause, provision or section had not been contained herein.
IN WITNESS WHEREOF, this Escrow Agreement has been executed by the
undersigned as of the date first written above,
By: /s/ R.C.W. Mauran
R.C.W. Mauran
By: /s/ A.J.R. Oosthuizen
A.J.R. Oosthuizen
SOFTNET SYSTEMS, INC.
By: /s/ John Jellinek
Title:
MELLON BANK, N.A., as Escrow Agent
By: /s/
Title: Vice President
SCHEDULE 1
ESCROW AGENT'S COMPENSATION SCHEDULE
Escrow Agent's initial fee $ 500.00
Escrow Agents annual fee $ 1,500.00
per year or any part thereof
Exhibit 10.12
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made as of July __,
1994, by and between Softnet Systems, Inc., a New York corporation (the
"Corporation"), and U.S. 6-10 Small Company Series (the "Purchaser").
The Corporation and the Purchase hereby agree as follows:
SECTION 1
Authorization, Purchase and Sale of the Stock
1.1 Authorization of the Stock. The Corporation has authorized the
issuance and sale of 2,400 shares of its common stock (the "Stock") to Purchaser
as herein provided. The issuance of the Stock is subject to approval of a
listing application by the American Stock Exchange.
1.2 Sale and Purchase of the Stock. At the Closing, subject to the
terms and conditions hereof and in reliance upon the representations, warranties
and agreements contained herein, the Purchaser will purchase the Stock from the
Corporation at a purchase price of $5.00 per share, $12,000 in total.
SECTION 2
Closing, Payment and Delivery
2.1 Closing Date and Place of Closing. The closing shall be held at
9:00 a.m. on July __, 1994 or such other date as the Corporation and the
Purchase may agree to (the "Closing Date") and shall be held at the offices of
Dimensional Fund Advisors Inc., 1299 Ocean Avenue, Santa Monica, CA 90491.
2.2 Payment and Delivery. At the Closing, the Purchaser will pay to
the Corporation by check or wire funds transfer the entire purchase price and
the Corporation will deliver to the Purchaser a certificate or certificates,
registered in such name or names as Purchaser may reasonably designate,
representing all of the Stock.
2.3 Covenant of Best Efforts and Good Faith. The Corporation and the
Purchaser agree to use their respective best efforts and to act in good faith to
cause to occur all conditions to Closing which are in their respective control.
SECTION 3
Representations and Warranties of the Corporation
The Corporation hereby represents and warrants to the Purchaser that:
3.1 Corporate Power, Qualification and Standing. The Corporation and
its subsidiaries are validly existing and in good standing under the laws of
their respective jurisdictions of incorporation and each of them is qualified to
transact business in each jurisdiction in which its ownership of property or
conduct of activities requires such qualification. The Corporation has all
requisite corporate power and authority to enter into this Agreement, to sell
the Stock and to carry out and perform its other obligations under this
Agreement.
3.2 S.E.C. Reports; Financial Statements. The common stock of the
Corporation is registered under Section 12(b) or (g) of the Securities Exchange
Act of 1934 and the Corporation is in full compliance with its reporting and
filing obligations under said Act. The Corporation has delivered to Purchaser
its Annual Reports to shareholders and its reports on Form 10K for its last
three fiscal years, and all its quarterly reports to shareholders, quarterly
reports on Form 10Q, and each other report, registration statement, definitive
proxy statement or other document filed with the S.E.C. since the beginning of
said three fiscal years (collectively, the "SEC Reports"). The SEC Reports do
not (as of their respective dates) contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading. The audited and unaudited financial statements
of the Corporation included in the SEC Reports (the "Financial Statements") have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis (except as stated in such Financial Statements or
the notes thereto) and fairly present the financial position of the Corporation
and its consolidated subsidiaries as of the date thereof and the results of
their operations and changes in financial position for the periods then ended.
Except as publicly disclosed by the Corporation in the SEC Reports or otherwise,
since the end of the most recent of said fiscal years there has been no material
adverse change in the business, financial condition, or results of operations of
the Corporation and its subsidiaries taken together, and there is no existing
condition, event or series of events which can reasonably be expected to
adversely affect the business, financial condition or results of operations of
the Corporation and its subsidiaries taken together, or its ability to perform
its obligations under this Agreement.
3.3 Authorization; No Conflict. Execution and delivery of this
Agreement and issuance and sale of the Stock have been duly authorized by all
necessary corporate action of the Corporation. Performance by the Corporation
of its obligations under this Agreement will not conflict with or violate (i)
the charter documents or bylaws of the Corporation, (ii) any indenture, loan
agreement, lease, mortgage or other agreement binding on the Corporation, (iii)
any order of a court or administrative agency binding on the Corporation, or
(iv) any applicable law or governmental regulation; and such performance does
not and will not require the permission or approval of any governmental agency,
and will not result in the imposition or creation of any lien or charge against
any assets of the Corporation. Except as disclosed in the Financial Statements,
(i) the Corporation has no obligation to redeem or repurchase any of its equity
securities, (ii) no shareholder or other person has pre-emptive or other rights
to acquire equity securities of the Corporation, and (iii) the Corporation has
no obligation to register any of its securities otherwise than pursuant to
Section 7 of this Agreement.
3.4 Material Agreements; No Defaults. All material indentures, loan
agreements, leases, mortgages and other agreements binding on the Corporation or
its subsidiaries are identified in the list of exhibits contained in the
Corporation's most recent 10K report ("Other Agreements"). No material default
on the part of the Corporation or any of its subsidiaries (including any event
which, with notice or the passage of time, would constitute a default) exists
under any of the Other Agreements.
3.5 Material Liabilities. Except for liabilities disclosed in the
Financial Statements or the SEC Reports, and obligations under the Other
Agreements, the Corporation and its subsidiaries have no material liabilities or
obligations, absolute or contingent, other than liabilities arising in the
ordinary course of business subsequent to the date of the most recent of the
Financial Statements.
3.6 Properties. The Corporation and its subsidiaries (i) have good
title to the properties and assets reflected in the Financial Statements as
owned by them, (ii) have valid leasehold interests in the properties leased by
them, and (iii) own or have the right to use under valid licenses agreements all
trademarks, trade names, copyrights, patents and other intellectual property
rights regularly utilized by them; subject in each case to no liens, security
interests or adverse claims except as disclosed in the Financial Statements.
3.7 Litigation. There are no material legal actions, arbitrations,
or administrative proceedings pending against the Corporation or its
subsidiaries, except for the matters disclosed in the SEC Reports.
3.8 Tax Matters. The Corporation and its subsidiaries have filed on
a timely basis all tax returns required to be filed by them and have paid their
taxes prior to delinquency, and have made adequate accruals for tax liabilities
on the Financial Statements in accordance with generally accepted accounting
principles.
3.9 ERISA Compliance. Neither the Corporation nor any of its
subsidiaries has incurred any material funding deficiency within the meaning of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA") or any
material liability to the Pension Benefit Guarantee Corporation or any successor
thereto in connection with any employee benefit plan established or maintained
by the Corporation or any of its subsidiaries. The Corporation and its
subsidiaries are in compliance in all material respects with all applicable
provisions of ERISA, and have no obligations with respect to any multi-employer
plan. No "reportable event" as such term is defined in ERISA, which may result
in any material liability, has occurred with respect to any employee benefit or
other plan maintained for employees of the Corporation or any subsidiary.
3.10 Environmental Matters. Except as disclosed in the SEC Reports,
neither the Corporation nor any of its subsidiaries (i) has been notified by any
governmental authority that it is, or may be, a Responsible Party with respect
to cleanup or remediation of any environmental condition or hazardous waste
site, (ii) has violated any law, regulation, order or requirement of
governmental authority with respect to Hazardous Substances, or (iii) the
incurred any material liability for violation or noncompliance with applicable
Environmental Regulations. The term "Environmental Regulations" means any law,
regulation, order or requirement relating to protection of the environment,
including without limitation, the Clean Air Act, the Clean Water Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the
Resource Conservation and Recovery Act, the Hazardous Materials Transportation
Act and the Toxic Substances Control Act. The term "Hazardous Substance" means
any substance defined or listed as such in any Environmental Regulation.
3.11 Other Matters. The Corporation is not now and will not be after
giving effect to the receipt of the proceeds from the sale of the Stock an
"Investment Company" within the meaning of the Investment Company Act of 1940,
nor will it be controlled by or acting on behalf of any person which is such an
investment company. The Corporation does not own any "margin stock" within the
meaning of Regulation G of the Board of Governors of the Federal Reserve System
and is not selling the Stock "for the purpose of purchasing or carrying any
margin stock" within the meaning of said Regulation G. The Corporation has not
offered the Stock to any person other than the Purchaser.
SECTION 4
Representations and Warranties of the Purchaser
The Purchaser represents and warrants to the Corporation that:
4.1 Corporate Power and Authority. It is validly existing and in
good standing with all requisite power and authority to enter into this
Agreement and carry out its obligations hereunder and has taken all actions
necessary to authorize it to enter into this Agreement and carry out such
obligations.
4.2 Investment. It is acquiring the Stock for investment and not
with the view to, or for resale in connection with, any distribution thereof.
It understands that the Stock has not been registered under the Securities Act
of 1933 nor qualified under any State blue sky law by reason of specified
exemptions therefrom which depend upon, among other things, the bona fide nature
of its investment intent as expressed herein.
4.3 Rule 144. It acknowledges that the Stock must be held
indefinitely unless it is subsequently registered under the Securities Act of
1933 or an exemption from such registration is available. It has been advised
or is aware of the provisions of Rule 144 promulgated under the Securities Act.
4.4 Accredited Investor. The Purchaser is an "accredited investor"
within the definition of Rule 215 of the regulations promulgated under the
Securities Act of 1933.
SECTION 5
Conditions to Obligations of the Purchaser
The obligations of the Purchaser to purchase the Stock is subject to
the fulfillment on or prior to the Closing Date of each of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of the Corporation shall be true and correct in all material respects
on the Closing Date.
(b) Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Corporation
on or prior to the Closing Date shall have been performed or complied with in
all material respects.
(c) Opinion of Corporation's Counsel. The Purchaser shall have
received from counsel to the Corporation an opinion confirming the
representations set forth in Section 3.3 hereof.
(d) Legal Issuance. At the time of the Closing, the issuance
and purchase of the Stock shall be legally permitted by all laws and regulations
to which the Purchaser and the Corporation are subject.
(e) Compliance Certificate. The Corporation shall have
delivered to the Purchaser a certificate of its President and chief financial
officer, dated the Closing Date, certifying to the fulfillment of the conditions
specified in subsections (a) and (b) above.
(f) Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated hereby and all
documents and instruments incident to such transactions shall be satisfactory in
form and substance to the Purchaser and its counsel.
(g) Satisfaction of Obligations to Broker. The Corporation
shall have furnished the Purchaser with assurances satisfactory to the Purchaser
that the Corporation has satisfied its obligations to any broker acting for it
in connection with the sale of the Stock.
SECTION 6
Conditions to Obligations of the Corporation
The Corporation's obligation to sell the Stock is subject to the
fulfillment on or prior to the Closing Date of each of the following conditions:
(a) Representations. The representations made by the Purchaser
shall be true and correct in all material respects on the Closing Date.
(b) Legal Issuance. At the time of the Closing, the issuance
and purchase of the Stock shall be legally permitted by all laws and regulations
to which the Purchaser and the Corporation are subject.
SECTION 7
Covenant to Register
(a) For purposes of this Section 7, the following definitions shall
apply:
(i) The term "register," "registered", and "registration" refer
to a registration under the Securities Act of 1933, as amended (the "Act")
effected by preparing and filing a registration statement or similar
document in compliance with the Act or an amendment thereto, and the
declaration or ordering of effectiveness of such registration statement,
document or amendment thereto.
(ii) The term "Registrable Securities" means any issued and
outstanding common stock of the Corporation and any common stock of the
Corporation issued as, or issuable upon the conversion or exercise of any
warrant, right or other security that is issued as, a dividend or other
distribution with respect to, or in exchange for or in replacement of,
common stock.
(b) (i) At any time after one hundred and twenty (120) days after
the date of this Purchase Agreement and from time to time thereafter,
Purchaser shall have the right to request in writing that the Corporation
register all or any part of the Registrable Securities held by Purchaser (a
"Demand Registration").
(ii) The Corporation shall not be obligated to effect Demand
Registration (i) if all of the Registrable Securities held by Purchaser
which are intended to be covered by the Demand Registration are, at the
time of the request of a Demand Registration, included in an effective
registration statement and the Corporation is in compliance with its
obligations under Subsection (d)(ii) through (v) hereof with respect to
such registration statement, or (ii) within 120 days after the effective
date of any other registration as to which Purchaser was given piggy-back-
rights pursuant to subsection (c) hereof and in which Purchaser was able to
register and sell at least eighty percent (80%) of the Registrable
Securities requested by Purchaser to be included in such registration.
(c) If the Corporation proposes to register (including for this
purpose a registration effected by the Corporation for shareholders other than
the Purchaser) any of its stock or other securities under the Act in connection
with a public offering of such securities (other than a registration on Form S-
4, Form S-8 or other limited purpose form) and the Registrable Securities have
not heretofore been included in a registration statement under Subsection (b),
which remains effective, the Corporation shall, at such time, promptly give the
Purchaser written notice of such registration. Upon the written request of the
Purchaser given within twenty (20) days after receipt of such notice by the
Purchaser, the Corporation shall cause to be registered under the 1933 Act all
of the Registrable Securities that the Purchaser has requested to be registered.
However, the Corporation shall have no obligation under this Subsection (c) to
the extent that, with respect to a public offering registration, any underwriter
of such public offering reasonably requests that the Registrable Securities or a
portion thereof be excluded therefrom.
(d) Whenever required under this Section 7 to effect the registration
of any Registrable Securities, the Corporation shall, as expeditiously as
reasonably possible:
(i) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause
such registration to become effective and, upon the request of the
Purchaser, keep such registration statement effective for so long as
Purchaser desires to dispose of the securities covered by such registration
statement.
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statements and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the 1933 Act with respect to the disposition of all
securities covered by such registration statement.
(iii) Furnish to the Purchaser such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as the Purchaser may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by Purchaser.
(iv) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue
Sky laws of such jurisdictions as shall be reasonably requested by
Purchaser, provided that the Corporation shall not be required in
connection therewith or as a condition thereto to qualify to do business or
to file a general consent to service and process in any such states or
jurisdictions.
(v) Notify Purchaser of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
affect, includes an untrue statement of material fact or admits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing.
(vi) Furnish, at the request of Purchaser, an opinion of counsel
of the Corporation, dated the effective date of the registration statement,
as to the due authorization and issuance of the securities and compliance
with securities laws by the Corporation.
(e) The Purchaser will furnish to the Corporation in connection with
any registration under this Section 4 such information regarding itself, the
Registrable Securities and other securities of the Corporation held by it, and
the intended method of disposition of such securities as shall be required to
effect the registration of the Registrable Securities held by Purchaser.
(f) (i) The Corporation shall indemnify, defend and hold harmless,
each holder of Registrable Securities which are included in a registration
statement pursuant to the provisions of Subsections (b) or (c), its
directors and officers, from and against, and shall reimburse such holder,
its directors and officers with respect to, any and all claims, suits,
demands, causes of action, losses, damages, liabilities, costs or expenses
("Liabilities") to which any of them, may become subject under the Act or
otherwise, arising from or relating to (A) any untrue statement or alleged
untrue statement of any material fact contained in such registration
statement, any prospectus contained therein of any amendment or supplement
thereto, or (B) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made,
not misleading; provided, however, that the Corporation shall not be liable
in any such case to the extent that any such Liability arises out of or is
based upon an untrue statement or alleged untrue statement of omission or
alleged omission so made in conformity with information furnished by such
holder, in writing specifically for use in the preparation thereof.
(ii) Each holder of Registrable Securities included in a
registration pursuant to the provisions of Subsection (b) or (c) shall
indemnify, defend, and hold harmless the Corporation, its directors and
officers, and shall reimburse the Corporation, its directors and officers
with respect to, any and all Liabilities to which any of them may become
subject under the Securities Act or otherwise, arising from or relating to
(A) any untrue statement or alleged untrue statement of any material fact
contained in such registration statement, any prospectus contained therein
or any amendment or supplement thereto, or (B) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was so made in reliance upon and in strict
conformity with written information furnished by or on behalf of such
holder specifically for use in the preparation thereof.
(iii) Promptly after receipt by an indemnified party pursuant to
the provisions of Subsection (f)(i) or (f)(ii) of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions, such indemnified party shall, if a claim thereof is
to be made against the indemnifying party pursuant to the provisions of
Subsection (f)(i) or (f)(ii), promptly notify the indemnifying party of the
commencement thereof; provided, however, that the failure to so notify the
indemnifying party shall not relieve it from its indemnification
obligations hereunder except to the extent that the indemnifying party is
materially prejudiced by such failure. If such action is brought against
any indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party shall have the right to
participate in, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party; provided, however, if the
defendants in any action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses different from or in addition to
those available to the indemnifying party, or if there is conflict of
interest which would prevent counsel for the indemnifying party from also
representing the indemnified party, the indemnified party shall have the
right to select separate counsel to participate in the defense of such
action on behalf of such indemnified party. After notice from the
indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party pursuant to Subsection (f)(i) or (f)(ii) for any expense
of counsel subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation,
unless (A) the indemnified party shall have employed counsel in accordance
with the provisions of the preceding sentence, or (B) the indemnifying
party shall not have employed counsel satisfactory to the indemnified party
to represent the indemnified party within a reasonable time after the
notice of the commencement of the action.
(g) (i) With respect to the inclusion of Registrable Securities in a
registration statement pursuant to subsections (b) or (c), all fees, costs
and expenses of and incidental to such registration, inclusion and public
offering shall be borne by the Corporation; provided, however, that any
securityholders participating in such registration shall bear their pro
rata share of the underwriting discounts and commissions, if any.
(ii) The fees, costs and expenses of registration to be borne by
the Corporation as provided in this Subsection (g) shall include, without
limitation, all registration, filing and NASD fees, printing expenses, fees
and disbursements of counsel and accountants for the Corporation, and all
legal fees and disbursements and other expenses of complying with state
securities or Blue Sky laws of any jurisdiction or jurisdictions in which
securities to be offered are to be registered and qualified. Fees and
disbursements of counsel and accountants for the selling securityholders
shall, however, be borne by the respective selling securityholder.
(h) The rights to cause the Corporation to register all or any
portion of Registrable Securities pursuant to this Section 7 may be assigned by
Purchaser to a transferee or assignee of 10% or more of the Stock. Within a
reasonable time after such transfer the Purchaser shall notify the Corporation
of the name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned. Such assignment
shall be effective only if immediately following such transfer the further
disposition of such securities by the transferee or assignee is restricted under
the Act.
(i) From and after the date of this Purchase Agreement, the
Corporation shall not allow the holders of any securities of the Corporation to
include any of their securities in any registration statement filed by the
Corporation pursuant to Subsection (b) unless the inclusion of such securities
will not reduce the amount of the Registrable Securities of the Purchased
included therein.
SECTION 8
Affirmative Covenants of the Corporation
The Corporation hereby covenants that, during such time as the
Purchaser (of one of its affiliates) owns any Stock:
8.1 Reports and Financial Statements.
(a) The Corporation will cause its common stock to continue to
be registered under Sections 12(b) or 12(g) or the Securities Exchange Act of
1934, will comply in all respects with its reporting and filing obligations
under said Act, and will not take any action or file any document (whether or
not permitted by said Act or the rules thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations
under said Act. The Corporation will take all action necessary to continue the
listing or trading of its common stock on any national securities exchange or
the Automated Quotation System of the National Association of Securities Dealers
on which such common stock is listed or traded, and will comply in all respects
with its reporting, filing and other obligations under the bylaws or rules of
said exchange or Association.
(b) The Corporation will furnish to the Purchaser, concurrently
with the distribution or filing thereof, each annual and quarterly report to its
shareholders, its reports on Form 10K and 10Q, and each other report,
registration statement, definitive proxy statement or other document filed with
the S.E.C., and any reports, listing applications or other documents filed with
any national securities exchange or the National Association of Securities
Dealers, and each press release or other public announcement issued by the
Corporation.
8.2 Rights of Inspection. The Corporation will permit
representatives of the Purchaser to visit and inspect any of the properties of
the Corporation, including its books of account, and to discuss its affairs,
finances and accounts with the Corporation's officers and its independent public
accountants, all at such reasonable times and as often as the Purchaser may
reasonably request; provided, however, that the Corporation shall not be
obligated to disclose any information to the Purchaser that it is not obligated
to disclose to its other shareholders.
8.3 Payment by Wire Transfer. Upon written request of the Purchaser,
all amounts payable to Purchaser or one of its affiliates in respect of the
Stock shall be paid by wire transfer in federal funds to such account at such
address as Purchaser may from time to time designate in writing, each such
payment to be accompanied by sufficient information to identify the source
thereof.
8.4 Maintenance of Office. The Corporation will maintain an office
or agency in the United States at such address as may be designated in writing
from time to time to the registered holders of the Stock, where notices,
presentations and demands to or upon the Corporation in respect of the Stock may
be given or made. Unless or until another office or agency is designated by the
Corporation, such office shall be at:
___________________________
___________________________
___________________________
8.5 Maintenance and Compliance. The Corporation will and will cause
its subsidiaries to (i) maintain its corporate existence, rights, powers and
privileges in good standing, (ii) pay promptly when due all taxes, assessments
and governmental charges properly imposed on it, except where the same are
contested in good faith, (iii) maintain its properties in workable condition and
repair, (iv) comply in all material respects with all laws and governmental
regulations and restrictions applicable to its business or properties, (v)
maintain with financially sound insurers such insurance coverage against
liability, fire and other risks as is reasonably prudent and customary for
companies similarly situated, (vi) keep records and books of account and
maintain a system of internal accounting controls in accordance with generally
accepted accounting principles and in compliance with Section 13(b)(2) of the
Securities Exchange Act of 1934, (vii) retain independent public accountants of
recognized national standing as auditors of the Corporation's annual financial
statements, (viii) comply in all material respects with ERISA, and (ix) comply
in all material respects with all applicable Environmental Regulations.
8.6 Assignment of Rights. The rights of the Purchaser hereunder may
be assigned by the Purchaser in connection with the transfer or assignment to a
single transferee who is an accredited investor of not less than 20% of the
Stock originally purchased by the Purchaser hereunder, and such rights may be
further reassigned by such transferee to another such single transferee who is
an accredited investor.
SECTION 9
Legend on Stock
Each certificate representing the Stock shall be stamped or otherwise
imprinted with a legend substantially in the following form (in addition to any
legend required under any applicable state securities laws):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED
FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO
THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW
OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED.
Upon request of a holder of Stock the Corporation shall remove the
foregoing legend or issue to such holder a new certificate therefor free of any
such legend, if the Corporation shall have received either an opinion of counsel
or a "no-action" letter of the S.E.C., in either case reasonably satisfactory in
substance to the Corporation and its counsel, to the effect that such legend is
no longer required.
SECTION 10
Miscellaneous
10.1 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, insofar as it
relates to the internal affairs of the Corporation, which is a New York
corporation. In other respects this Agreement shall be governed by and
construed in accordance with the laws of California. Any action or proceeding
relating to this Agreement may be brought only in the courts of California
sitting in Los Angeles County, or in the United States courts located in Los
Angeles County, California, and each of the parties irrevocably consents to the
jurisdiction of such courts in any such action or proceeding.
10.2 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of and be binding upon
the successors and assigns of the parties.
10.3 Entire Agreement; Amendment. This Agreement (including any
Exhibits hereto) and the other documents delivered pursuant hereto constitute
the full and entire understanding and agreement between the parties with regard
to the subjects hereof and thereof. Neither this Agreement nor any term hereof
may be amended, waived, discharged or terminated except by a written instrument
signed by the Corporation and the Purchaser.
10.4 Notices, etc. All notices and other communications required or
permitted hereunder shall be mailed by first-class mail, postage prepaid, or
delivered either by hand or by messenger, addressed (a) if to the Purchaser, as
indicated below the Purchaser's signature, or at such other address as the
Purchaser shall have furnished to the Corporation in writing, or (b) if to any
other holder of any Stock, at the address of such holder as shown on the records
of the Corporation, or (c) if to the Corporation, at its address set forth above
or at such other address as the Corporation shall have furnished to the
Purchaser and each such other holder in writing. All such notices or
communications shall be deemed given when actually delivered by hand, messenger,
facsimile or mailgram or, if mailed, three days after deposit in the U.S. mail.
10.5 Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to any party to this Agreement (including any
holder of Stock), upon any breach or default of another party under this
Agreement, shall impair any such right, power or remedy of such party nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach of default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. All remedies, either
under this Agreement or by law or otherwise afforded to any party, shall be
cumulative and not alternative.
10.6 Severability. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
10.7 Titles and Subtitles. The titles of the Sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
10.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the day and year
first written above.
Softnet Systems, Inc.
By:
U.S. 9-10 Small Company Portfolio
By:
Exhibit 10.38
EXHIBIT C
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated this 15th day of
September, 1995, by and between SOFTNET SYSTEMS, INC., a New York corporation
(the "Company"), whose principal place of business is 660 LaSalle Place,
Highland Park, IL 60035 and DALE H. SIZEMORE, JR., residing at 2705 W. 121st
Terrace, Leawood, KS 66209 (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of providing
telecommunications services; and
WHEREAS, the Employee is familiar with the administration and management of
a telecommunications business; and
WHEREAS, the parties acknowledge that the Employee's abilities and services
are unique and essential to the prospects of the Company; and
WHEREAS, the Employee and the Company are desirous of entering into an
agreement providing for the employment by the Company of the Employee in the
positions and upon the terms provided herein.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Employment, Duties and Term. The Company hereby employs the Employee
and the Employee hereby accepts employment upon the terms and conditions
hereinafter set forth.
(a) The Company agrees to employ the Employee in the position of
Executive Vice President of the Company, President of the Telecommunications
division of the Company, and Chairman of Kansas Communications, Inc. and
Employee agrees to perform such duties and tasks as the Company may from time to
time reasonably request, during the three year period from the date hereof
through September 15, 1998 (the "Employment Period"). The period from the first
day of September 15 to the last day of September 14 during each year of the
Employment Period is hereafter referred to as an "Employment Year." The Company
also agrees during the Employment Period to nominate Employee as part of the
Company's management slate for election to its Board of Directors.
(b) The Employee hereby accepts such employment and agrees to devote
his full time and attention to such duties, except during usual vacation periods
and for personal and sick leave in accordance with the Company's policies. The
Company agrees that Employee will perform his duties hereunder primarily in
Lenexa, Kansas, and that Employee will not be required to relocate his residence
during the term of the Employment Agreement. Employee, however, agrees to
periodically travel to the Company's headquarters in Lincolnshire, Illinois or
such other locations as reasonably required by the Company to perform his duties
hereunder. The Company acknowledges that Employee serves on the Board of
Directors of Torotel, Inc. and may devote a reasonable amount of time to such
activity as long as it does not materially affect Employee's services hereunder.
2. Compensation.
(a) Upon the execution of this Agreement, the Company shall deliver
to Employee the Common Stock Purchase Warrant in the form as attached hereto as
Exhibit A.
(b) During the Employment Period the Company shall pay to the
Employee compensation equal to an annual base salary (the "Base Salary") of
$200,000, payable in semi-monthly installments. The Company shall reimburse the
Employee for all expenses necessarily and reasonably incurred by the Employee in
connection with the business of the Company, against presentation of proper
receipts or other proof of expenditure, and subject to such reasonable
guidelines or limitations provided to the Employee, and which are to be applied
prospectively only as the Board of Directors of the Company may impose. The
Employee may receive such greater compensation, including incentive bonuses and
stock bonuses, as may from time to time be determined by the Board of Directors
of the Company.
3. Benefits. During the Employment Period, the Employee shall be
entitled to participate in any profit sharing plan, bonus plan, stock option or
other benefit plan, retirement plan, group life insurance plan or other
insurance plan or medical expense plan maintained by the Company for its senior
executives generally. In the event the Company does not maintain a disability
insurance plan that provides coverage for Employee, the Company agrees to
provide such coverage to Employee upon Employee's request, the cost of which
shall be deducted from Employee's compensation hereunder. The Company also
agrees to maintain Employee's split dollar life insurance policy presently
maintained by Kansas Communications, Inc.
4. Termination. The employee's employment hereunder shall terminate
upon the earlier of (a) the expiration of the Employment Period, (b) the death
of the Employee, (c) the expiration of a continuous period of 120 days during
which the Employee is unable to perform his assigned duties due to physical or
mental incapacity, (d) termination by the Company due to a material breach of
this Agreement by the Employee, or for Just Cause (as defined below), or (e)
termination by the Employee due to a material breach of this Agreement by the
Company. The exercise of the right of the Company or the Employee to terminate
this Agreement pursuant to clause (d) or (e) hereof, as the case may be, shall
not abrogate the rights and remedies of the terminating party in respect of the
breach giving rise to such termination. The Company shall only be deemed to
have materially breached this Agreement and the terms of the Employee's
employment if it fails to comply with Sections 1, 2, or 3 in all material
respects. The Employee shall only be deemed to have materially breached the
Agreement if he fails to comply with Sections 1, 5 or 6 in all material
respects. For purposes of this Agreement, "Just Cause" shall be limited to one
of the following grounds:
(i) The Employee's failure or refusal, after notice thereof and
a reasonable opportunity to cure, to perform specific directives of
the Board of Directors which are consistent with the scope and nature
of the Employee's duties and responsibilities as set forth herein; or
(ii) Dishonesty of the Employee directly or indirectly and
materially affecting the Company; or
(iii) Habitual drunkenness or use of drugs (unless medically
prescribed) which interferes with the performance of the Employee's
obligations under this Agreement; or
(iv) The Employee's conviction of a felony or of any crime
involving moral turpitude, fraud, or misrepresentation; or
(v) Any gross or willful misconduct of the Employee resulting in
loss to the Company, damage to the Company's reputation or theft or
defalcation from the Company; or
(vi) Any intentional act having the purpose and effect or
injuring the reputation, business or business relationships of the
Company; or
(vii) Gross incompetence on the part of the Employee in the
performance of the duties undertaken by the Employee under the terms
of this Agreement.
In the event of any dispute regarding the existence of the Employee's
incapacity hereunder, the matter will be resolved by the determination of a
majority of three physicians qualified to practice medicine in Kansas, one to be
selected by each of the Employee and the Board of Directors and the third to be
selected by the two designated physicians. For this purpose, the Employee will
submit to appropriate medical examinations. In the event that the Company
determines to relieve the Employee of his Employment duties for any reason other
than as stated above, then the Company shall continue to pay the Employee his
Base Salary which would otherwise be payable hereunder and shall reimburse
Employee for the costs of COBRA coverage, for the remaining Employment Period.
In the event Employee is terminated for any reason hereunder, the Company
shall assign to Employee any life insurance policies maintained by the Company
upon Employee's life, upon written request of Employee and payment by Employee
to the Company of any unexpired premiums and the cash surrender value, if any,
of such policies.
5. Covenant Not to Compete; Confidential Information.
(a) The Employee shall at all times hold in strictest confidence any
and all confidential information that may have come and may come into the
Employee's possession or within the Employee's knowledge concerning the
products, services, processes, businesses, suppliers, customers and clients of
the Company. For purposes of this Section, confidential information shall not
include information known to Employee from sources other than Softnet or
generally available to the public other than as a result of Employee's improper
disclosure thereof. The Employee agrees that neither he nor any person or
enterprise controlled by the Employee will for any reason, directly or
indirectly, for himself or any other person or enterprise, use or disclose any
trade secrets, proprietary information, inventions, manufacturing and industrial
processes and procedures, confidential information, patents, trademarks, trade
names, customer lists, service marks, service names, copyrights, applications
therefor, and license or other rights in respect thereof ("Confidential
Materials"), owned or used by, or licensed to, the Company or any of its
affiliates or otherwise relating to the Company's businesses.
(b) The Employee agrees that from the date hereof and continuing
until the Employee's employment with the Company has terminated (the "Non-
Compete Period"), neither the Employee nor any person or enterprise controlled
by the Employee will solicit for employment any person employed by the Company
at any time within one (1) year prior to the time of the act of solicitation.
(c) The Employee agrees that during the Non-Compete Period, neither
the Employee nor any person or enterprise controlled by the Employee will become
a stockholder, director, officer, agent or employee of a corporation or member
of a partnership, engage as a sole proprietor in any business, act as a
consultant to or have any financial stake of any nature in any of the foregoing
or otherwise engage directly or indirectly in any enterprise which competes with
the Company's business operations or in any other business in which the Company
is engaged on the date hereof or in which the Company is engaged as of the
termination of the Employment Period, in any area within 200 miles of any office
of the Company; provided, however, that the foregoing shall not prohibit the
ownership of capital stock of the Company or less than two percent (2%) of the
outstanding shares of the stock of any corporation engaged in any business,
which shares are regularly traded on a national securities exchange or in any
over-the-counter market.
(d) The Employee agrees that the restrictive covenants in subsections
(a) through (c) above are reasonable in their scope and duration and may be
enforced by specific performance or otherwise. The Employee shall not raise any
issue of reasonableness as a defense in any proceeding to enforce any of such
covenants. Notwithstanding the foregoing, in the event that a covenant included
in this Agreement shall be deemed by any court to be unreasonably broad in any
respect, it shall be modified in order to make it reasonable and shall be
enforced accordingly; provided, however, that in the event that a court shall
refuse to enforce any of the covenants contained in subsections (a) through (c)
above, then the unenforceable covenant shall be deemed eliminated from the
provisions of this Agreement for the purpose of those proceedings to the extent
necessary to permit the remaining covenants to be enforced so that the validity,
legality or enforceability of the remaining provisions of this Agreement shall
not be affected thereby.
6. Inventions. The Employee hereby assigns to the Company his entire
right, title and interest in all discoveries and improvements, patentable or
otherwise, trade secrets and ideas, writings and copyrightable material, which
may be conceived by the Employee or developed or acquired by him during the term
of this Agreement, which may pertain directly or indirectly to the Company's
business. The Employee agrees to promptly and fully disclose in writing all
such developments. The Employee will, upon the Company's request, execute,
acknowledge and deliver to the Company all instruments and do all other acts
which are necessary or desirable to enable the Company to file and prosecute
applications for, and to acquire, maintain and enforce all letters, patents,
trademark registrations, or copyrights in all countries.
7. Remedies. The Employee acknowledges that any material breach of this
Agreement will cause irreparable harm to the Company, difficult if not
impossible to ascertain, and that the Company shall be entitled to equitable
relief, including injunction, against any actual or threatened breach hereof,
without bond and without liability should such relief be denied, modified or
vacated. Neither the right to obtain such relief nor the obtaining of such
relief shall be exclusive of or preclude the Company from any other remedy. In
addition, the parties agree that in the event either party is found by a court
of law or equity to have breached this Agreement and relief is granted, the
breaching party shall be liable to the prevailing party for all attorneys' fees,
expert witness fees and other costs incurred by such prevailing party in such
proceeding.
8. Insurance. The Company may, at its election and for its benefit,
insure the Employee against disability, accidental loss or death (in an amount
not to exceed $1,000,000 without Employees written consent) and the Employee
shall submit to such physical examination and supply such information as may be
required in connection therewith.
9. Assignment. The rights and benefits of the Employee hereunder are not
assignable whether by voluntary or involuntary assignment or transfer. This
Agreement shall be binding upon and inure to the benefit of the successors of
the Company and shall be assignable by the Company to any entity acquiring
substantially all of the assets of the Company.
10. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and sent by registered mail, or
overnight courier service to the Employee at his residence set forth above, or
to the Company c/o Softnet Systems, Inc., One Overlook Point, Lincolnshire,
Illinois 60069, Attention: President.
11. Waiver of Breach. A waiver by the Company or the Employee of a breach
of any provision of this Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach by the other party.
12. Entire Agreement. This instrument contains the entire agreement of
the parties. It may be changed only by an agreement in writing signed by a
party against whom enforcement of any waiver, change, modification, extension or
discharge is sought.
13. Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal substantive laws of the State of Illinois, and the
parties hereby irrevocably and unconditionally consent and submit to the in
personam jurisdiction of Illinois courts over all matters relating to this
Agreement. Each party agrees that service of process in any action or
proceeding hereunder may be made upon such party by certified mail, return
receipt requested to the address for notice set forth herein. Each party
irrevocably waives any objection it may have to the venue of any action, suit or
proceeding brought in such courts or to the convenience of the forum and each
party irrevocably waives the right to proceed in any other jurisdiction. Final
judgment in any such action, suit or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment, a certified or true
copy of which shall be conclusive evidence of the fact and the amount of any
indebtedness or liability of any party therein described.
14. Arbitration. Any dispute between the parties arising under this
Agreement which cannot be amicably resolved between the parties, shall be
resolved by arbitration in Chicago, Illinois in accordance with the following
terms and conditions: either party may deliver a notice to all other parties
which shall set forth in detail all issues which it believes constitutes a
dispute or grievance. Within twenty (20) days of the delivery of such notice,
counsel for the parties shall mutually select as an arbitrator an attorney
practicing in Chicago, Illinois who is experienced in commercial arbitration.
If counsel for the parties are unable to agree upon the selection of this
arbitrator, the arbitrator shall be an attorney selected by the President of the
Chicago Bar Association. The Arbitrator so selected shall schedule a hearing on
the disputed issues within forty-five (45) days after his appointment, and the
arbitrator shall render his decision after the hearing, in writing as
expeditiously as is possible. Except as set forth herein, the arbitration shall
be conducted in accordance with the rules of the American Arbitration
Association, unless the parties hereto agree otherwise in writing. A default
judgment may be entered against any party who fails to appear at the arbitration
hearing. The decision of the arbitrator shall be final and unappealable and
shall be confirmed by a court in any jurisdiction designated by the prevailing
party. The arbitrator shall assess the costs of the arbitration to the parties
as he determines to be appropriate. The parties to this Agreement agree that
this paragraph has been included to resolve rapidly and inexpensively any
disputes which may arise, and that submission of a dispute to arbitration in
accordance with this Agreement paragraph shall constitute grounds for dismissal
of any action commenced by any party with respect to a dispute arising out of or
from any provisions of this Agreement, except for actions for equitable
remedies, which shall survive the submission of a dispute for arbitration.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the day and year first above written.
SOFTNET SYSTEMS, INC.
By /s/ John Jellinek
Its President
/s/ Dale H. Sizemore, Jr.
Dale H. Sizemore, Jr.
Exhibit 10.39
SOFTNET SYSTEMS, INC.
COMMON STOCK PURCHASE WARRANT
Expiring __________________
660 LaSalle Place
Highland Park, Illinois 60035
Dated ________________________
No. of Shares: ________ Warrantholder: ______________
This is to certify that for value received SoftNet Systems, Inc., a New
York corporation having an address at 660 LaSalle Place, Highland Park, Illinois
60035 (the "Company") hereby acknowledges that the above-named warrantholder
(the "Warrantholder"), or his permitted registered assigns, is entitled to
purchase from the Company, until the close of the period specified in this
Warrant, an aggregate of ________ shares (subject to adjustment as hereinafter
provided in Section 6) of Common Stock, par value $.01 per share, at an exercise
per share of $________, all subject to the terms and conditions set forth in
this Warrant.
SECTION 1. DEFINITIONS. For all purposes of this Warrant, the following terms
shall have the meanings indicated:
(a) "Initial Exercise Price" shall mean the initial exercise price of
$____ per share of Common Stock as to the exercise of this Warrant, as
hereinbefore set forth and prior to any adjustment pursuant to Section 6.
(b) "Commission" shall mean the Securities and Exchange Commission,
or any other Federal agency then administering the Securities Act.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY
ONLY BE SOLD OR TRANSFERRED PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT OR AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
SUCH ACT, PROVIDED THAT IN THE EVENT THAT ANY RESALE OF THIS SECURITY IS MADE
PURSUANT TO SUCH AN EXEMPTION AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY
AND ITS LEGAL COUNSEL, WILL BE PROVIDED TO THE EFFECT THAT SUCH TRANSFER IS MADE
PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OF 1933.
(c) "Common Stock" shall mean the shares of Common Stock of the
Company as hereafter defined in Section 7.
(d) "Company" shall mean SoftNet Systems, Inc., a corporation
organized and existing under the laws of the State of New York, and any
corporation which shall succeed to, or assume, the obligations of said
corporation hereunder.
(e) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
(f) "Exercise Price" shall mean the Initial Exercise Price or such
Initial Exercise Price as adjusted from time to time pursuant to the provisions
of Section 6 hereof.
(g) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
(h) "Transfer" as used in Section 5 shall include any disposition of
any Warrants of Warrant Shares, or of any interest in either thereof, which
would constitute a sale thereof within the meaning of the Securities Act.
(i) "Warrantholder" shall mean the registered holder of the Warrants
and any related Warrant Shares.
(j) "Warrants" shall mean this Warrant evidencing the rights to
purchase initially an aggregate of 20,000 shares of Common Stock as existing,
and all Warrants issued in exchange, transfer or replacement.
(k) "Warrant Shares" shall mean the shares of Common Stock
purchasable by the registered holder of Warrants upon the exercise hereof
pursuant to Section 3 hereof.
All terms used in this Warrant which are not defined in Section 1
shall have the meanings respectively set forth therefor elsewhere in this
Warrant.
SECTION 2. DETERMINATION OF EXERCISE PRICE.
The Initial Exercise Price at which a holder may exercise this Warrant
shall be at a price equal to $1.75 per share of Common Stock as to the exercise
of this Warrant and shall be subject to adjustment from time to time pursuant to
the provisions of Section 6 hereof.
Any adjustment made pursuant to such Section 6 shall be computed on
the basis of an Initial Exercise Price of $1.75 per share of Common Stock.
SECTION 3. PROVISIONS GOVERNING EXERCISE.
A. Exercise of Warrant. In order to exercise this Warrant in whole
or in part, the Warrantholder shall complete the Subscription Form attached
hereto, and shall deliver to the Company, at its principal office in Highland
Park, Illinois (or at such office or agency of the Company as the Company may
designate by notice in writing to the holder of this Warrant), this Warrant and
cash or a check in an amount equal to the then aggregate Exercise Price of the
shares of Common Stock being purchased. Upon receipt thereof, the Company
shall, as promptly as practicable, execute or cause to be executed and delivered
to such holder a certificate or certificates representing the aggregate number
of shares of Common Stock in said Subscription Form. Each stock certificate so
delivered shall be registered in the name of such holder. If this Warrant shall
have been exercised only in part, the Company shall, at the time of delivery, of
said stock certificate or certificates, deliver to such holder a new Warrant
evidencing the rights of such holder to purchase the remaining shares of Common
Stock covered by this Warrant. The Company shall pay all expenses, taxes and
other charges payable in connection with the preparation, execution and delivery
of stock certificates pursuant to this Section, except that, in case such stock
certificates shall be registered in a name or names other than the name of the
Warrantholder of this Warrant, funds sufficient to pay all stock transfer taxes
which shall be payable upon the execution and delivery of such stock certificate
or certificates shall be paid by the Warrantholder hereof to the Company at the
time of redelivering this Warrant to the Company as mentioned above.
B. Period for Exercise. The right to purchase shares of Common Stock
represented by this Warrant shall expire at 3:00 p.m., New York time, on
February 18, 1998.
C. Transfer Restriction Legend. Each certificate for Warrant Shares
initially issued upon exercise of this Warrant, unless at the time of exercise
such Warrant Shares are registered under the Securities Act, shall bear the
following legend (and any additional legend required by any national securities
exchange upon which such Warrant may, at the time of such exercise, be listed)
on the face thereof:
This security has not been registered under the Securities Act of 1933
and may only be sold or transferred pursuant to an effective
registration statement under such act or an applicable exemption from
the registration requirements of such act, provided that in the event
that any resale of this security is made pursuant to such an exemption
an opinion of counsel, satisfactory to the Company and its legal
counsel, will be provided to the effect that such transfer is made
pursuant to an exemption from the registration requirements of the
Securities Act of 1933.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution under a registration statement of the securities
represented thereby) shall also bear such legend unless, in the opinion of legal
counsel to the Company and of counsel to the holder, the securities represented
thereby may be transferred as contemplated by such holder without violation of
the registration requirements of the Securities Act.
D. Character of Warrant Shares. All shares of Common Stock issuable
upon the exercise of this Warrant shall be duly authorized, validly issued,
fully paid and non-assessable, and, without limiting the generality of the
foregoing, the Company covenants and agrees that it will from time to time take
all such action as may be required to assure that the par value, if any, per
share of Common Stock is at all times equal to or less than the then effective
Exercise Price.
SECTION 4. OWNERSHIP AND TRANSFER OF WARRANT.
A. Ownership of this Warrant. The Company may deem and treat the
person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for registration of transfer
as provided in this Section 4.
B. Exchange, Transfer and Replacement.
(1) This Warrant is exchangeable upon the surrender hereof by
the Warrantholder to the Company at its office or agency described in Section 3,
for new Warrants of like tenor and date representing in the aggregate the right
to purchase the number of shares purchasable hereunder, each of such new
warrants to represent the right to purchase such number of shares as shall be
designated by said Warrantholder at the time of such surrender. This Warrant
and all rights hereunder are transferrable in whole or in part upon the books of
the Company by the Warrantholder hereof in person or by duly authorized
attorney, and a new Warrant shall be made and delivered by the Company, of the
same tenor and date as this Warrant, but registered in the name of the
transferee, upon surrender of this Warrant duly endorsed, at said office or
agency of the Company and receipt of an investment representation from such
transferee as set forth in Section 5 hereof.
(2) Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft or destruction, or mutilation of this
Warrant, and, in the case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and upon surrender and cancellation of
this Warrant, if mutilated, the Company will make and deliver a new Warrant of
like tenor, in lieu of this Warrant. This Warrant shall be promptly cancelled
by the Company upon the surrender hereof in connection with any exchange,
transfer or replacement. The Company shall pay all expenses, taxes (other than
stock transfer taxes) and other charges payable in connection with the
preparation, execution and delivery of Warrants pursuant to this Section 4.
SECTION 5. RESTRICTIONS ON EXERCISE, TRANSFER AND EXCHANGE.
If at any time of any exercise, transfer or surrender for exchange of
any of the Warrant Shares issued on the exercise thereof, such Warrant or
Warrant Shares are not registered under the Securities Act, the Company may
require, as a condition to allowing the exercise, transfer or exchange, that the
holder or transferee of Warrants of Common Stock furnish to the Company such
information as, in the opinion of its counsel, is necessary to establish the
fact that the exercise, transfer or exchange may be made without registration
under the Securities Act. That information shall include a written statement
that the holder is purchasing the Warrant Shares or that the transferee is
acquiring the Warrant or Warrant Shares for such holder's or transferee's own
account, for investment and not with a view to the sale or distribution of the
Warrant or Warrant Shares nor with any then present intention of distributing or
selling the Warrant or Warrant Shares.
SECTION 6. ADJUSTMENTS.
In the event of a stock dividend, stock split, or combination or other
reduction in the number of issued shares of Common Stock, the Board shall make
such adjustments in the number of unpurchased shares of Common Stock subject to
this Warrant and in the purchase price per share as it may reasonably determine
to be appropriate and equitable. In the event of a merger, consolidation,
reorganization, or a sale or exchange of substantially all assets, or
dissolution of the Company, the rights under this Warrant shall terminate as to
shares of Common Stock not theretofore purchased except to the extent and
subject to such adjustments as may be provided by the Board or in the terms of
the merger, consolidation, reorganization, or plan for dissolution or sale of
the assets.
SECTION 7. DEFINITION OF COMMON STOCK.
As used herein, the term "Common Stock" shall mean and include the
Company's authorized Common Stock, par value $.01 per share, as constituted, and
shall also include any capital stock of any class of the Company heretofore or
hereafter authorized which shall not be limited to a fixed sum or percentage of
the par value or liquidation preference in respect of the rights of the holders
thereof to participate in dividends and in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the Company,
and shall include any Common Stock of any class or classes resulting from any
reclassification or reclassifications thereof.
SECTION 8. REGISTRATION RIGHTS.
A. Company Registration. Except for offerings solely for the purpose
of employee benefit plans such as employee stock purchase, employee stock
ownership plan or employee stock option plans, or with respect to the sale of
Common Stock acquired pursuant to such plans, whenever the Company proposes to
register any of its Common Stock or any other equity securities under the
Securities Act for a public offering for cash, whether as a primary or secondary
offering, or pursuant to registration rights granted to holders of other
securities of the Company, the Company shall, each such time, give to the
Warrantholder written notice of its intent to do so. Upon the written request
of the Warrantholder given within thirty (30) days after receipt of such notice
the Company shall use its best efforts to cause to be included in such
registration all of the shares of Common Stock which the Warrantholder has
acquired by exercise and requests be registered; provided (i) at least fifty
percent (50%) of the Warrantholder's shares of Common Stock of the Company
acquired by a Warrantholder on exercise of Warrants are included in each such
request, (ii) the Warrantholder agrees to sell shares in the same manner and on
the same terms and conditions as the other Common Stock which the Company
proposes to register are sold, (iii) if the registration is to include Common
Stock to be sold for the account of the Company, the proposed managing
underwriter does not advise the Company that in its opinion the inclusion of the
Warrantholder's shares is likely to affect adversely the success of the offering
by the Company or the price it would receive in which case the rights of the
Warrantholder shall be as provided in subparagraph E hereinafter. In the event
the Warrantholder holds shares exceeding the maximum permissible volume
limitation of Rule 144 promulgated under the Securities Act at the date of the
notice, such excess shares may be included in the Registration Statement under
the terms, conditions and limitations contained herein.
B. Obligations of the Company. Whenever required under paragraph A
to use its best efforts to effect the registration of any of the Warrantholder's
shares the Company shall, as expeditiously as possible:
(1) Prepare and file with the Commission a Registration
Statement with respect to such shares and use its best efforts to cause such
Registration Statement to become and remain effective; provided, however, that
in connection with any proposed registration intended to permit an offering of
any securities from time to time (i.e., a so-called "shelf registration"), the
Company shall in no event be obligated to cause any such registration to remain
effective for more than ninety (90) days.
(2) Prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary for the disposition of all securities covered by
such Registration Statement.
(3) Furnish to the Warrantholder such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as a Warrantholder
may reasonably request in order to facilitate the disposition of its shares.
(4) Use its best efforts to register and qualify the securities
covered by such Registration Statement under such other securities or Blue Sky
Laws of such jurisdictions (not exceeding three unless otherwise agreed upon by
the Company) as the Company shall determine is reasonably appropriate for the
distribution of the securities covered by the Registration Statement, provided
that (anything herein to the contrary notwithstanding with respect to the
bearing of expenses) if any jurisdiction in which the securities shall be
qualified shall require that expenses incurred in connection with the
qualifications therein of the securities be borne by selling shareholders, then
such expenses shall be payable by selling shareholders pro rata, to the extent
required by such jurisdiction.
C. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any such action pursuant hereto that the
Warrantholder shall furnish to the Company such information regarding itself,
the shares it holds and the intended method of disposition thereof as the
Company shall reasonably request and as shall be required in connection with the
action to be taken by the Company.
D. Company Registration Expenses, In the case of any registration
effected pursuant to paragraph A, the Company shall bear registration and
qualification fees and expenses which result from the inclusion of the
Warrantholder's shares and other selling shareholders in such registration;
provided that if any such expense is attributable solely to one selling
shareholder and does not constitute a normal cost or expense of such a
registration, such cost or expense shall be allocated to that selling
shareholder. In addition, each selling shareholder shall bear the fees and
costs of its own counsel.
E. Underwriting Requirements. In connection with any offering
involving an underwriting of shares being issued by the Company, the Company
shall not be required under paragraph A, to include any of the Warrantholder's
securities therein unless Warrantholder accepts and agrees to the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
it, and then only in such quantity that the inclusion of the Warrantholder's
shares in the opinion of the underwriters is not likely to affect adversely the
success of the offering by the Company or the price it would receive. If the
total number of shares of stock which all selling shareholders of the Company
request to be included in any offering exceeds the number of such shares which
the underwriters reasonably believe compatible with the success of the offering,
the Company shall only be required to include in the offering so many of the
shares of stock of the selling shareholders as the underwriters believe will not
jeopardize the success of the offering (the shares so included to be apportioned
pro-rata among the selling shareholders according to the total number of shares
of Common Stock requested to be included in such offering by such selling
shareholders, or in such other proportions as shall be mutually agreed to by
such selling shareholders), provided that no such reduction shall be made with
respect to any securities offered by the Company for its own account.
F. Indemnification. In the event any of the Warrantholder's shares
are included in a Registration Statement hereunder:
(1) To the extent permitted by law, the Company will indemnify
and hold harmless the Warrantholder, each of its officers, directors and
controlling persons, if any, within the meaning of the Securities Act, any
underwriter (as defined in the Securities Act) for the Warrantholder, and each
person, if any, who controls such underwriter within the Securities Act, against
any losses, claims, damages or liabilities, joint or several, to which they may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities, or actions in respect thereof (a) arise out of
or are based on any untrue or alleged untrue statement of any material fact
contained in such Registration Statement, including any preliminary prospectus
or final prospectus contained therein or any amendments or supplements thereto,
(b) arise out of or are based upon the omission or alleged omission of a
material fact required to be stated therein, or necessary to make the statements
therein not misleading; or (c) arise out of any violation by the Company of any
rule or regulation promulgated under the Securities Act and state law applicable
to the Company and relating to action or inaction required of the Company in
connection with any such registration; and will reimburse the Warrantholder,
such underwriter, or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claims, damage, liability or action; provided, however, the Company
shall not be liable, in any case, for any such loss, claim, damage, liability or
action to the extent that it arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in connection
with such Registration Statement, preliminary prospectus or final prospectus, or
amendments or supplements thereto, in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such Warrantholder, such underwriter or controlling person.
(2) To the extent permitted by law, the Warrantholder will
indemnify and hold harmless the Company, and each of its directors, and each of
its officers who have signed such Registration Statement, each person, if any,
who controls the Company within the meaning of the Securities Act, and any
underwriter for the Company (within the meaning of the Securities Act) and any
person who controls the underwriter against any losses, claims, damages or
liabilities to which the Company or any such director, officer, controlling
person or underwriter may become subject, under the Securities Act and state law
or otherwise, insofar as such losses, claims, damages or liabilities or actions
in respect thereto, arise out of or are based on any untrue or alleged untrue
statement or any material fact contained in such Registration Statement,
including any preliminary or final prospectus contained therein, or amendments
or supplements thereto, or arise out of or are based upon the omission or
alleged omission of a material fact required to be stated therein, or necessary
to make the statements therein not misleading, in each case to the extent, but
only to the extent, that such untrue statement or omission was made in such
Registration Statement, preliminary or final prospectus, or amendments or
supplements thereto, in reliance upon and in conformity with written information
furnished by the Warrantholder expressly for use in connection with such
registration.
(3) Promptly after receipt by an indemnified party under this
paragraph F, of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party
under this paragraph F, notify the indemnifying party in writing of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent of the indemnifying party similarly noticed,
to assume the defense thereof with counsel mutually satisfactory to the parties.
The failure to notify an indemnifying party promptly of the commencement of any
such action, if prejudicial to the ability to defend such action, shall relieve
such indemnifying party of any liability which such party may have to the
indemnified party otherwise than under this paragraph F.
G. Reports under Exchange Act. The Company is subject to the
reporting requirements of the Exchange Act and, in order to make available to
the Warrantholder the benefits of Rule 144 promulgated under the Securities Act,
the Company shall use its best efforts (1)to file with the Commission in a
timely manner all reports and other documents required to be filed by an issuer
of securities registered under the Securities Act or the Exchange Act, and (2)
so long as any Warrantholder owns any of the Company's shares, to furnish in
writing upon such Warrantholder's request the following information: (i) the
Company's name, address and telephone number (ii) the Company's Internal Revenue
Service identification number, (iii) the Company's Commission file number, (iv)
the number of shares of Common Stock outstanding as shown by the most recent
report or statement published by the Company, and (v) a statement as to whether
the Company has filed all reports required to be filed by Section 13 or 15(d) of
the Exchange Act during the preceding twelve months. With respect to a rule or
regulation of the Commission (other than Rule 144) which may at any time permit
the Warrantholder to sell Common Stock to the public without registration the
Company shall take such action as is reasonable to enable utilization of such
rule.
SECTION 9. SPECIAL ASSIGNMENTS OF THE COMPANY.
The Company covenants and agrees that:
A. Will Reserve Shares. The Company will reserve and set apart and
have at all times, free from pre-emptive rights, a number of shares of
authorized but unissued Common Stock deliverable upon the exercise of Warrants,
and it will have at all times any other rights or privileges provided for
therein sufficient to enable it at any time to fulfill all of its obligations
hereunder.
B. Listing on Securities Exchanges: Registration. If, and so long as
the Company's Common Stock shall be listed on any national securities exchange
(as defined in the Exchange Act), it will, at its expense, obtain and maintain
the approval for listing upon official notice of issuance of all shares of
Common Stock receivable upon the exercise of Warrants at the time outstanding
and maintain the listing of such shares after their issuance; and the Company
will so list on such national securities exchange, will register under the
Exchange Act (or any similar statute then in effect), and will maintain such
listing of, and other securities that at any time are issuable upon exercise of,
the Warrants if and at the time that any securities of the same class shall be
listed on such national securities exchange by the Company.
C. Will Bind Successors. This Warrant shall be binding upon any
corporation succeeding to the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets.
SECTION 10. NOTICES.
Any notice or other document required or permitted to be given or
delivered to Warrantholder shall be delivered at, or sent by certified or
registered mail to each Warrantholder at the address shown on such
Warrantholder's Warrant or to such other address as shall have been furnished to
the Company in writing by such Warrantholder. Any notice or other document
required or permitted to be given or delivered to the Company shall be delivered
at, or sent by certified or registered mail to the principal office of the
Company, at 660 LaSalle Place, Highland Park, Illinois 60035, Attention:
President, or such other address as shall have been furnished to the
Warrantholder by the Company.
SECTION 11. NO RIGHTS AS SHAREHOLDER; LIMITATION OF LIABILITY.
This Warrant shall not entitle any holder hereof to any of the rights
of a shareholder of the Company. No provision hereof, in the absence of
affirmative action by the holder hereof to purchase shares of Common Stock, and
no mere enumeration herein of the rights or privileges of the holder hereof,
shall give rise to any liability of such holder for the Purchase Price or as a
shareholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
SECTION 12. LAW GOVERNING.
This Warrant shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York.
SECTION 13. MISCELLANEOUS.
This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
(or any predecessor in interest thereof) against which enforcement of the same
is sought. The headings in this Warrant are for purposes of reference only and
shall not affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, SoftNet Systems, Inc. has caused this Warrant to
be signed by its duly authorized officer, attested by its duly authorized
officer, and to be dated as of _______________________.
SOFTNET SYSTEMS, INC.
By
John Jellinek
ATTEST:
By:
Name:
Title:
SOFTNET SYSTEMS, INC.
SUBSCRIPTION FORM
Dated _________________, 1994
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing _____________ shares of Common Stock and
hereby makes payment of $________ in payment of the exercise price thereof and
acknowledges that if this purchase constitutes a partial exercise a new Warrant
representing the remaining balance of the unexercised shares will be issued and
forwarded to the address listed below.
INSTRUCTIONS FOR ISSUANCE OF STOCK
Name
(please typewrite or print in block letters)
Address
Social Security or otherTaxpayer Identification Number
Signature
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY
ONLY BE SOLD OR TRANSFERRED PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT OR AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
SUCH ACT, PROVIDED THAT IN THE EVENT THAT ANY RESALE OF THIS SECURITY IS MADE
PURSUANT TO SUCH AN EXEMPTION AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY
AND ITS LEGAL COUNSEL, WILL BE PROVIDED TO THE EFFECT THAT SUCH TRANSFER IS MADE
PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OF 1933.
Exhibit 10.40
PROMISSORY NOTE Appendix D
$_______________ Due: __________________
Highland Park, Illinois, __________, 19__
On _______________, The SoftNet Systems, Inc. ("SSI") for value received,
promises to pay to the order of ________________ ("Lender"), the principal
amount of ____________________________ DOLLARS ($__________) with interest in
arrears thereon from the date hereof until paid at a rate per annum equal to
_____ percent (__%). All interest shall be computed for the actual number of
days elapsed on the basis of a year consisting of 360 days and shall be payable
at maturity. The undersigned shall have the right to repay this Note in full or
in part at any time.
Notwithstanding anything to the contrary herein contained, in the event
that, prior to the scheduled maturity of this Note, (i) SSI shall agree to be
recapitalized by reclassifying its common stock, or consolidate or merge with or
convey all or substantially all of its property and assets to any other
corporation or corporations in exchange for stock or securities of a successor
corporation, or (ii) SSI agrees to sell all or substantially all of its assets,
then, in the case of any transaction specified in clause (i) of this sentence,
all principal and interest hereunder shall become due and payable upon the
consummation of any such transaction and, in the case of a sale of all or
substantially all of its assets, all cash proceeds received by SSI (after
payment of closing costs, taxes, legal fees and like expenses and the
satisfaction of any indebtedness secured by the assets sold) shall be applied,
first, to pay accrued interest and, thereafter, to repay outstanding principal.
SSI shall give Lender not less than five (5) days prior notice of any proposed
transaction of a type described in the preceding sentence.
As additional consideration for the loan made hereunder, SSI agrees to
simultaneously execute and deliver a Warrant to Purchase its Common Stock, $.01
par value, to Lender for the right to purchase _______ common shares of SSI at
$1.75 per share until __________________ (the "Warrant").
If SSI shall fail to pay, when due, any amount payable with respect to any
of the liabilities or to perform any other obligation to Lender, including SSI's
failure to include Lender's Warrant Shares in any Registration Statement or
permit Lender to sell its Warrant Shares thereunder, except as otherwise
permitted by the terms of the Warrant, such event shall constitute a Default
hereunder. Upon Default, this Note and all other liabilities may
(notwithstanding any provisions thereof), at the option of Lender, and without
demand or notice of any kind, be declared, and thereupon immediately shall
become, due and payable. The undersigned agrees to pay all expenses, including
reasonable attorneys' fees and legal expenses, incurred by Lender in endeavoring
to collect any of the liabilities.
Additional consideration: If note is not repaid in full on
_____________________, stock holder is entitled to an additional ________
warrants at a price of $____. This note will be due and payable
_________________.
The undersigned hereby expressly waives presentment, demand, notice of
dishonor, protest and, to the fullest extent permitted by applicable law, any
and all other notices, advertisements, hearings or process of law in connection
with the exercise by Lender of any of its rights and remedies upon Default.
The undersigned hereby authorizes, irrevocably, any attorney of any court
of record to appear for the undersigned in such court, in term time or vacation,
at any time after Default hereunder, and confess judgment without process in
favor of Lender for such amount as may appear to be unpaid thereon, together
with reasonable costs of collection, including reasonable attorneys' fees and
legal expenses, and to waive and release all errors which may intervene in any
such proceedings, and consent to immediate execution upon such judgment, hereby
ratifying and confirming all that said attorney may do by virtue hereof.
The loan evidenced hereby has been made, and this Note has been delivered,
at Highland Park, Illinois, and shall be governed by and construed in accordance
with the laws of the State of Illinois, except that the Warrants and underlying
common shares shall be governed in accordance with the laws of the State of New
York. Wherever possible, each provision of the Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited by or invalid under such law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Note.
By:
John I. Jellinek
President and CEO
Exhibit 10.41
NOTE EXTENSION AGREEMENT
THIS AGREEMENT (this "Agreement") is made and entered into as of the ____
day of ________________, by and between SoftNet Systems, Inc. ("SoftNet") and
__________________ ("[LENDER]").
W I T N E S S E T H
WHEREAS, SoftNet has delivered to [LENDER] or its predecessor in interest
certain promissory note[s] dated _____________________, [_________________, and
________________] (the "Note[s]") in the aggregate principal amount of
$____________; and
WHEREAS, SoftNet and [LENDER] have previously agreed to extend the maturity
of the Note[s] to _________________; and
WHEREAS, Softnet and [LENDER] desire to extend the maturity of the Note[s]
upon the terms and conditions set forth herein.
NOW THEREFORE, for and in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. Maturity Date. The maturity date of [each of] the Note[s] is hereby
extended to _____________________.
2. Grant of Warrants. At the end of each calendar month between the date
hereof and _________________, [LENDER] shall be granted warrants to purchase
common stock as of the last day of each such month (as published in The Wall
Street Journal). The number of warrants which shall be granted each month shall
equal (a) the aggregate principal amount then outstanding under the Notes;
divided by (b) 50,000; multiplied by (c) 1000. The warrants shall expire five
(5) years after the date of grant.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
[LENDER]
By:
SOFTNET SYSTEMS, INC.
By:
Exhibit 10.42
Appendix E
The Warrant represented by this Certificate has been acquired for investment and
has not been registered under the Securities Act of 1933, as amended (the
"Act"), and may not be sold, offered for sale, pledged, hypothecated or
otherwise transferred except pursuant to a registration statement under the Act
or an exemption from registration under the Act or the rules and regulations
thereunder.
SOFTNET SYSTEMS, INC.
WARRANT TO PURCHASE COMMON STOCK
($.01 PAR VALUE)
This is to certify that SoftNet Systems, Inc. (the "Company") hereby agrees
that, for the value received ___________ or his/its registered assigns (the
"Holder") is entitled to purchase, subject to the provisions of this Warrant,
from the Company, at a price of ______ per share of common stock of the Company,
without par value ("Common Stock"), at any time from the date hereof to 5:00
p.m., Chicago, Illinois time, on ________, 19__, _____ shares of Common Stock,
and any such Holder shall be governed and bound by all of the covenants, terms
and conditions contained herein. The number of shares of Common Stock to be
received upon the exercise of this Warrant and the price to be paid for a share
of Common Stock may be adjusted from time to time as hereinafter set forth. The
shares of Common Stock deliverable upon such exercise and as adjusted from time
to time are hereinafter sometimes referred to as "Warrant Shares", and the
exercise price of a share of Common Stock in effect at any time and as adjusted
from time to time is hereinafter sometimes referred to as the "Exercise Price".
1. Exercise of Warrant. This Warrant may be exercised in whole or in
part at any time or from time to time on or before 5:00 p.m., Chicago, Illinois
time on ________, ____, or if such day is a day on which banking institutions
are authorized by law to close in Chicago, Illinois, then on the next succeeding
business day, by presentation and surrender hereof to the Company at its office
at 660 LaSalle Place, Highland Park, Illinois, with the purchase form annexed
hereto duly executed and accompanied by payment of the Exercise Price for the
number of shares of Common Stock specified in such form. If this Warrant should
be exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the rights of the
Holder to purchase the balance of the Warrant Shares purchasable hereunder.
Upon receipt by the Company of this Warrant at its office in proper form for
exercise, the Holder shall be deemed to be the holder of record of the shares of
Common Stock issuable upon such exercise, notwithstanding that certificates
representing such shares of Common Stock shall not then be actually delivered to
the Holder.
2. Reservation of Shares, Fractional Shares.
(a) The Company hereby agrees that at all times it shall reserve for
issue and delivery upon exercise of this Warrant such number of shares of its
Common Stock as shall be required for issue and delivery upon exercise of this
Warrant.
(b) No fractional shares or scrip representing fractional shares
shall be issued upon the exercise of this Warrant. With respect to any fraction
of a share called for upon exercise hereof, the Company shall pay the Holder any
amount in cash equal to such fraction multiplied by the then current market
value of a share of Common Stock, determined as follows:
(i) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such exchange the current
value shall be the last reported sale price of the Common Stock on such exchange
on the last business day prior to the date of exercise of this Warrant or if no
such sale is made on such day, the average closing bid and asked prices for such
day on such exchange; or
(ii) If the Common Stock is not so listed or admitted to
unlisted trading privileges the current value shall be the mean of the last
reported bid and ask prices reported by the National Quotation Bureau, Inc., on
the last business day prior to the date of exercise of this Warrant; or
(iii) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and ask prices are not so reported, the
current value shall be an amount, not less than book value, determined in such
reasonable manner as may be prescribed by the Board of Directors of the Company.
3. Exchange, Assignment, or Loss of Warrant. This Warrant is
exchangeable, without expense to the Holder, at the option of the Holder, upon
presentation and surrender hereof to the Company for other Warrants of different
denominations entitling the Holder hereof to purchase in the aggregate the same
number of shares of Common Stock purchasable hereunder. Any such exchange shall
be made by surrender of this Warrant to the Company or at the office of its
agent, if any, with the assignment form annexed duly executed. Subject to
compliance with the provisions of applicable law, the Company, without charge to
the Holder, shall execute and deliver a new Warrant in the name of any assignee
named in such instrument or assignment, and this Warrant shall promptly be
canceled. This Warrant may be divided or combined with other Warrants which
carry the same rights upon presentation hereof at the office of the Company or
at the office of its agent, if any, together with a written notice specifying
the names and denominations of which new Warrants are to be issued and signed by
the Holder hereof. The term "Warrant" as used herein includes any Warrants into
which this Warrant may be divided or exchanged. Upon receipt by the Company of
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor and date. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed or mutilated shall be at
any time enforceable by anyone.
4. Rights of the Holder. This Warrant shall not entitle the holder
hereof to any voting rights or other rights as a stockholder of the Company. No
provision of this Warrant, in the absence of affirmative action by the Holder to
purchase shares of Common Stock, and no mere enumeration herein of the rights or
privileges of the Holder, shall give rise to any liability of the Holder for the
Warrant purchase price or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company. The rights
of the Holder are limited to those expressed in this Warrant and are not
enforceable against the Company except to the extent set forth herein.
5. Stock Dividends; Reclassification, Reorganization, Anti-Dilution
Provisions, etc. This Warrant is subject to the following further provisions:
(a) In case, prior to the expiration of this Warrant by exercise or
by its terms, the Company shall issue any shares of Common Stock as a stock
dividend or subdivide the number of outstanding shares of Common Stock into a
greater number of shares, then in either of such cases, the Exercise Price per
share of the Warrant Shares purchasable pursuant to this Warrant in effect at
the time of such action shall be proportionately reduced, and the number of
Warrant Shares at that time purchasable pursuant to this Warrant shall be
proportionally decreased. Any dividend paid or distributed upon the Common
Stock in stock of any other class or securities convertible into shares of
Common Stock shall be treated as a dividend paid in Common Stock to the extent
that shares of Common Stock are issuable upon the conversion thereof.
(b) In case, prior to the expiration of this Warrant by exercise or
by its terms, the Company shall be recapitalized by reclassifying its Common
Stock into stock without par value, or the Company or a successor corporation
shall consolidate or merge with or convey all or substantially all of its or of
any successor corporation's property and assets to any other corporation or
corporations (any such corporation being included within the meaning of the term
"successor corporation" in the event of any consolidation or merger of such
corporation with, or the sale of all or substantially all of the property of any
such corporation to another corporation or corporations), in exchange for stock
or securities of a successor corporation, the Holder of this Warrant shall
thereafter have the right to purchase, upon the terms and conditions and during
the time specified in this Warrant, in lieu of the Warrant Shares theretofore
purchasable upon the exercise of this Warrant, the kind and number of shares of
stock and other securities receivable upon such capitalization or consolidation,
merger or conveyance by a holder of the number of shares of Common Stock which
the Holder of this Warrant might have purchased immediately prior to such
recapitalization or consolidation, merger or conveyance.
(c) Upon the occurrence of each event requiring an adjustment of the
Exercise Price and of the number of Warrant Shares purchasable pursuant to this
Warrant in accordance with and as required by, the terms of subdivision (a) of
this Section 5, the Company shall compute the adjusted Exercise Price and the
adjusted number of Warrant Shares purchasable at such adjusted Exercise Price by
reason of such event in accordance with the provisions of subdivision (a) and
shall prepare an officer's certificate setting forth such adjusted Exercise
Price and the adjusted number of Warrant Shares and showing in detail the facts
upon which such conclusions are based. The Company shall forthwith mail a copy
of such certificate to each Holder of this Warrant at the Holder's address shown
in the Company's Warrant Registry, and thereafter such certificate shall be
conclusive and binding upon such Holder unless contested by such Holder by
written notice to the Company ten (10) days after receipt of the certificate.
(d) In case:
(i) the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend or any other
distribution in respect of the Common Stock (including cash) pursuant to,
without limitation, any spin-off, split-off or distribution of the Company's
assets; or
(ii) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to subscribe for or purchase any
shares of stock of any class or to receive any other rights; or
(iii) of a classification, reclassification or other
reorganization of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation or conveyance of all or
substantially all of the assets of the Company; or
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company, then, and in any such case, the Company shall mail to
the Holder of this Warrant at the Holder's address shown in the Company's
Warrant Registry a notice stating the date or expected date (the "Record Date")
on which a record is to be taken for the purpose of such dividend, distribution
or rights, on which such classification, reclassification, reorganization,
consolidation, merger, conveyance, dissolution, liquidation or winding up is to
take place, as the case may be. Such notice shall then specify the date or
expected date, if any is to be fixed, as of which holders of Common Stock of
record shall be entitled to participate in said dividend, distribution or
rights, or shall be entitled to exchange shares of Common Stock for securities
or other property deliverable upon such liquidation or winding up, as the case
may be. Such notice shall be provided for at least fifteen (15) days prior to
the Record Date.
(e) In case the Company at any time while this Warrant shall remain
unexpired and unexercised shall dissolve, liquidate or wind up its affairs, the
Holder of this Warrant may receive, upon exercise hereof prior to the Record
Date, in lieu of each share of Common Stock of the Company which it would have
been entitled to receive, the same number of any securities or assets as may be
issuable, distributable or payable upon any such dissolution, liquidation or
winding up with respect to each share of Common Stock of the Company.
6. Restriction on Transferability. (a) This Warrant and the shares of
the Company issuable upon the exercise of this Warrant have not been registered
under the Securities Act of 1933, as amended (the "Act"). By acceptance hereof,
the Holder covenants, agrees and represents that:
(i) This Warrant has been acquired for, and such shares, if
acquired upon the exercise of this warrant, shall be acquired for, investment
and may not be sold, offered for sale, pledged, hypothecated or otherwise
transferred, in the absence of an effective registration statement for such
securities under the Act or an opinion of counsel reasonably satisfactory to the
Company to the effect that registration is not required under the Act, and the
Holder has the capacity to protect his interests in connection with the purchase
of this Warrant.
(ii) The Holder has had the opportunity to ask questions and
receive answers from the Company about the Company's business and the purchase
by him of these securities, and he has been given the opportunity to make any
inquiries that he may desire of any personnel of the Company concerning the
proposed operation of the Company and has been furnished with all of the
information he has requested. No advertisement has been used in connection with
the offer or sale of this Warrant to the Holder.
(iii) The Holder will not offer, sell, transfer, mortgage,
assign or otherwise dispose of this Warrant or the shares of Common Stock
issuable upon the exercise of this Warrant except pursuant to a registration
statement under the Act and qualification under applicable state securities laws
or pursuant to an opinion of counsel reasonably satisfactory to the Company that
such registration and qualification are not required, and that the transaction
(if it involves a sale in the over-the-counter market or on a securities
exchange) does not violate any provision of the Act. The Holder understands
that a stop-transfer order will be placed on the books of the Company respecting
this Warrant and any certificates representing the shares of Common Stock
issuable upon the exercise of this Warrant and that this Warrant and any such
certificates shall bear a restrictive legend and a stop transfer order shall be
placed with the transfer agent prohibiting any such transfer until such time as
the securities represented by such certificates shall have been registered under
the Act or shall have been transferred in accordance with an opinion of counsel
reasonably satisfactory to the Company that such registration is not required;
and
(iv) The Holder understands that he must hold the shares
issuable upon the exercise of this Warrant indefinitely unless they are
registered under the Act or an exemption from registration becomes available.
Although the Company files reports pursuant to the Securities Act of 1934 and
accordingly makes available to the public the information required by Rule 144,
nothing contained in this Warrant shall require the Company to continue to make
available to the public such information.
(b) Each certificate for the shares issued upon the exercise of the
Warrant shall bear a legend in substantially the following form:
"The Shares represented by this Certificate have been acquired for
investment and have not been registered under the Securities Act of
1933, as amended (the "Act") and may not be sold, offered for sale,
pledged, hypothecated or otherwise transferred except pursuant to a
registration statement under the Act or an exemption from registration
under the Act or the rules and regulations thereunder."
7. Registration of Warrant Shares for Distribution. The Company hereby
covenants and agrees with the Holder that if, at any time before the date this
Warrant expires, the Company proposes to file with the Securities and Exchange
Commission (the "SEC") on its own behalf and/or on behalf of any of the holders
of its Common Stock, a Registration Statement under the Act, on any form
permitting the resale of Warrant Shares under a "shelf registration" or on any
other form for the general registration of the Common Stock of the Company for
cash, then the Company shall give notice to the Holder, at least 20 days before
the filing, with the SEC, or such proposed Registration Statement. The notice
shall offer to include in such filing, to the extent then permissible under the
Act, all of the Warrant Shares on behalf of the Holders of such shares. The
Holder shall then have a period of up to 10 days after the date of the mailing
of such notice by the Company within which to advise the Company of his election
to include all or any part of his Warrant Shares in such Registration Statement,
setting forth the number of Warrant Shares for which registration is being
requested. The Company shall thereupon include in such filing, subject to the
limitation hereinafter referred to, such Warrant Shares proposed to be offered
for sale and shall use its best efforts to effect registration under the Act of
such Warrant Shares. The Holder may elect to include Warrant Shares in such
Registration Statement which have not yet been acquired by exercise of the
Warrants, provided, however, that in such event, the Holder shall exercise the
Warrants with respect to such shares, and shall pay the Exercise Price of such
Warrant Shares in the manner provided in Section 1 hereof, prior to any sale of
such shares.
The right of the Holder to include such Warrant Shares in a Registration
Statement provided for herein shall be subject to the following conditions:
(a) The Company, in its sole discretion, shall select the underwriter
or underwriters, if any, who are to undertake the sale and distribution of the
Warrant Shares to be included in a Registration Statement filed under the
provisions of this Section 7; and
(b) The Company shall have the right to require, in any offering to
be made solely, or in part, for its own account, that the Holder delay any
offering of Warrant Shares to be included on behalf of the Holder for a period
of ninety (90) days after the first effective date of such Registration
Statement, upon the Company first having delivered to the Holder the written
opinion of its underwriter to the effect that the inclusion of such securities
in the Registration Statement may have an adverse effect on the marketing of
such offering; provided, however, that in the event of such delay, the Company
shall maintain the effectiveness of the Registration Statement, for which
purpose the Company shall prepare and file such amendments and supplements to
the Registration Statement and Prospectus unused in connection therewith as may
be necessary to keep the Registration Statement effective for a period of ninety
(90) days after the effective date of the post-effective amendment pursuant to
which the Holder is entitled to sell the Warrant Shares.
The Holder agrees to cooperate with the Company in the preparation and
filing of any Registration Statement hereunder and shall promptly provide to the
Company such information as it may reasonably request to enable it to comply
with any applicable law or regulation to facilitate the preparation of the
Registration Statement. The Company shall bear the legal, accounting and
printing expenses in connection with the preparation and filing of any
Registration Statement provided herein, together with all other expenses
incidental thereto, except (i) the expense of the underwriter or underwriters
selected by the Holder (if other than the underwriters selected by the Company),
(ii) the legal fees and expenses of the Holder's counsel, (iii) brokerage
commissions and transfer taxes, if any, in connection with the sale or
distribution of the Shares by the Holder; and (iv) the expense of registering,
or obtaining (or determining the availability of) an exemption from the
registration of shares of the Company's Common Stock for sale in any state or
other jurisdiction other that New York, California, Illinois or such other
jurisdiction in which the Company registers Shares or obtains an exemption from
in such other jurisdiction, the expense thereof may be allocated on an equitable
basis between or among the Holder and such other holder or holders who make such
request. The Company shall furnish to the Holder, without charge, a copy of the
Registration Statement and of each amendment and supplement thereto, including
all financial statements and exhibits, and such number of conformed copies of
the Registration Statement and of each amendment thereto, including all
financial statements, but excluding exhibits, as the Holder may reasonably
request.
The Company shall furnish to the Holder, as soon as possible after the
effective date of such Registration Statement or post-effective Amendment
thereto and thereafter, from time to time, during the period of ninety (90)
days, as many copies of the prospectus (and of any amended or supplemented
prospectus) as the Holder may reasonably request. If, during such period, any
event occurs as a result of which the prospectus, as then amended or
supplemented, would include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made, in light
of the circumstances under which they were made, not misleading, or it shall be
necessary to amend or supplement the prospectus to comply with the law or with
the rules and regulations promulgated by the SEC, the Company, shall forthwith
notify the Holder thereof and at the request of Holder, prepare and furnish to
the Holder, in such quantity as the Holder may reasonably request, an amendment
or supplement which shall correct such statement or omission or cause the
prospectus to comply with the law and with said rules and regulations.
The Company shall use its best efforts to cause such Registration Statement
to become effective and shall promptly advise the Holder (i) when such
Registration Statement, or any post-effective amendment thereto, shall have
become effective, and when any amendment of, or supplement to, the prospectus is
filed with the SEC, (ii) when the SEC shall make a request or suggestion for any
amendment to such Registration Statement or the prospectus or for additional
information and by the natures and substance thereof, and (iii) of the issuance
by the SEC of a stop order suspending the effectiveness of Registration
Statement or the suspension of the order suspending the effectiveness of such
Registration Statement of the suspension of the qualification of the Company's
shares for sale in the jurisdiction, or of the initiation or threatening of any
proceedings for that purpose, and shall use its best efforts to prevent the
issuance of any such stop orders, or, if such order shall be issued, to obtain
the withdrawal thereof.
The Company, when and as requested by the Holder, shall take all action
necessary to permit the offering of the Warrant Shares as contemplated hereby
under the securities laws of such states as the Holder shall designate at the
sole expense of the Holder (except that the Company shall pay all costs for
Illinois, New York and California); provided, however that the Company shall not
be required to qualify as a foreign corporation or to file a consent to service
of process in any state in which it is not then so qualified or in which it has
not then filed such consent notwithstanding the Holder's agreement to pay the
costs thereof.
Except as set forth below, the Company, on the one hand, and the Holder, on
the other hand, shall each indemnify and hold harmless the other and any
officer, director, employee, agent or attorney thereof from and against any
losses, claims, actions, damages or liabilities to which the other may become
subject, under the Act or any State Act (as hereinafter defined) or otherwise,
insofar as such losses, claims, damages or liabilities arise out of, or are
based upon, any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, or any Prospectus, whether final
or preliminary, forming a part thereof, or any amendment or supplement thereto,
or any blue sky application or other document filed in any state or other
jurisdiction in order to qualify any shares for offer or sale under the laws of
any such state or other jurisdiction ("State Act") (all of the foregoing
referred to herein as "Registration Material"), or the omission or alleged
omission of any material fact required to be stated therein or necessary to make
the statements therein not misleading, or in breach, or non-compliance with, any
duty of disclosure imposed upon such party under the Act or any State Act in
connection with such Registration Material; provided, however, that the Holder's
obligation to indemnify the Company and any officer, director, employee, agent
of attorney thereof shall be limited to any losses, claims, actions, damages or
liabilities which are based on written information supplied to the Company by
the Holder (or the failure of the Holder to supply material information
requested by the Company) specifically for the inclusion in the Registration
Material, and the Company's obligation to indemnify the Holder shall be
discharged to the extent of the foregoing.
The Holder further agrees to indemnify and hold harmless the Company and
any officer, director, employee, agent or attorney thereof from and against any
losses, claims, damages, fines, penalties, costs, expenses or liabilities
arising out of or based on the offer or sale or alleged offer or sale by the
Holder of any shares in, or to any person residing in any state in which the
shares have not been qualified for offer or sale, or otherwise in violation of
the Act or any State Act or of the terms and conditions of this Warrant.
Promptly after receipt by an indemnified party of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof may be made against any indemnifying party pursuant to this Agreement,
notify each indemnifying party in writing of the commencement thereof, and the
omission so to notify each indemnifying party will relieve such party from any
liability pursuant to this Agreement as to the particular item for which
indemnification is then being sought. In case any such action is brought
against any indemnified party, and it notifies any indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel who shall be reasonably satisfactory to the indemnified party, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. An indemnifying party shall not be liable to
any indemnified party on account of any settlement of any claim or action
effected without the consent of an indemnifying party.
The Holder shall execute and deliver to the underwriter or underwriters an
indemnification agreement in such form as may reasonably be requested and
refusal of a Holder to comply with this obligation shall nullify the Company's
obligation to register the Warrant shares.
The inclusion of the Warrant Shares in any Registration Statement shall not
be required if counsel of the Company shall render an opinion, in writing, that
all of the Holder's Warrant Shares, proposed to be included in such Registration
Statement, may be publicly distributed by the Holder without registration under
the Act in which case the restrictive legend and stop transfer shall be removed.
8. Registration on the Books of the Company. The Company shall keep, or
cause to be kept, at its office at 660 LaSalle Place, Highland Park, Illinois, a
register in which the Company shall register this Warrant. No transfer of this
Warrant shall be valid unless made at such office and noted on the Warrant
register upon satisfaction of all conditions for transfer. When presented for
transfer or payment, this Warrant shall be accompanied by a written instrument
or instruments of transfer or surrender, in form satisfactory to the Company,
duly executed by the registered Holder or by his duly authorized attorney. The
Company may deem and treat the registered Holder hereof as the absolute owner of
this Warrant for all purposes, and the Company shall not be affected by any
notice to the contrary.
9. Governing Law. This Warrant has been executed and delivered in the
State of Illinois and shall be construed in accordance with the laws of the
State of New York.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer.
By:
John I. Jellinek, President
HOLDER:
Agreed to and Accepted:
By:
Name
Title
Exhibit 10.45
FIRST AMENDMENT TO AGREEMENT
THIS AMENDMENT (the "Amendment") is made and entered into as of the 15th
day of September, 1995, by and between R.C.W. Mauran ("Mr. Mauran"), A.J.R.
Oosthuizen ("Mr. Oosthuizen"), and SoftNet Systems, Inc., a New York corporation
("SoftNet").
RECITALS:
A. The parties hereto previously entered into that certain Agreement
dated March 24, 1995 (the "Agreement").
B. The parties hereto desire to amend the Agreement as provided herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. All capitalized terms not defined herein shall have the
meanings ascribed to such terms in the Agreement.
2. Escrow Agent for Held Back Shares. The parties agree that Mellon
Bank, N.A. (the "Escrow Agent") shall hold the "Held Back Shares"
described in Section 6 of the Agreement. The Escrow Agent shall hold
the Held Back Shares pursuant to the terms of Section 6 of the
Agreement and shall deliver (a) to SoftNet the appropriate number of
Held Back Shares at such time as a setoff is determined to be required
pursuant to the terms of such Section 6, and (b) to Mr. Oosthuizen and
Mr. Mauran the Held Back Shares at such time as is provided in the
Agreement. The parties agree to execute, at or prior to Closing, the
form of escrow agreement required by the Escrow Agent which shall
contain customary terms and conditions generally included in such
agreements.
3. Registration Rights. SoftNet agrees that, at Closing, SoftNet will
deliver to Mr. Oosthuizen and Mr. Mauran the Registration Rights
Agreement in the form attached hereto as Exhibit A.
4. Savings Clause. Except as expressly set forth herein, the Agreement
shall remain in full force and effect and is hereby ratified,
confirmed and approved.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first above written.
/s/ R.C.W. Mauran
R.C.W. Mauran
/s/ Adrian J.R. Oosthuizen
A.J.R. Oosthuizen
SOFTNET SYSTEMS, INC.
By /s/ John Jellinek
Its_______________________
Exhibit 10.46
STOCK EXCHANGE AGREEMENT
THIS STOCK EXCHANGE AGREEMENT ("Agreement") is made as of this 17th day of
December, 1992 by and between THE VADER GROUP, INC., a New York corporation
("Vader") and JELKEN CORP., an Illinois corporation ("Jelken").
R E C I T A L S:
A. Jelken is the holder of (i) 91,500 shares of common stock of IMNET
Acquisition Co., a Delaware corporation (the "Company"), (ii) 6,000 shares of
Series A preferred stock of the Company, and (iii) 3,000 shares of Series B
preferred shares of the Company.
B. Jelken desires to transfer to Vader the following shares of the stock
of the Company (such shares are collectively referred to as the "IMNET Shares"):
(i) 56,547 shares of common stock of the Company, (ii) 3,708 shares of Series A
preferred stock of the Company, and (iii) 1,854 shares of the Series B preferred
stock of the Company.
C. In exchange for the IMNET Shares, Vader has paid to Jelken $421,837
(the "Cash Payment"), the receipt of which is hereby acknowledged, and desires
to issue to Jelken 80,000 treasury shares of Vader common stock (the "Vader
Shares").
In consideration of the mutual premises, representations and warranties and
covenants hereinafter set forth, the parties hereto agree as follows:
ARTICLE 1
Section 1.1 Transfer of the IMNET Shares. Jelken agrees to transfer to
Vader the IMNET Shares in exchange for the Cash Payment and the Vader Shares
free and clear of all liens, claims, charges or encumbrances of any kind derived
from or through Jelken.
Section 1.2 Transfer of Vader Shares. Vader agrees to issue to Jelken the
Vader Shares in exchange for a portion of the IMNET Shares free and clear of all
liens, claims, charges or encumbrances of any kind derived from or through
Vader.
Section 1.3 Closing. The closing of the transfer of the IMNET Shares to
Vader and the issuance of the Vader Shares shall take place at the offices of
Pedersen & Houpt, P.C., Suite 3400., 180 North LaSalle Street, Chicago, Illinois
60601 at 10:00 a.m. on __________________, 1992 or such other place, time and
date determined by mutual agreement of Jelken and Vader (the "Closing"). At the
Closing, the following steps shall be taken, provided that upon their completion
all such steps shall be deemed to have occurred simultaneously:
(a) Jelken shall deliver to Vader certificates representing or
evidencing the IMNET Shares duly endorsed for transfer, accompanied by
duly executed stock powers with signatures guaranteed; and
(b) Vader shall deliver to Jelken the Vader Shares.
ARTICLE 2
Section 2.1 Authority of Jelken. Jelken represents and warrants to Vader
that it has the full corporate power and authority to execute and deliver this
Agreement, to perform hereunder, and to consummate the transactions contemplated
hereby without the consent or approval of any other person whomsoever, other
than those consents which have already been obtained. This Agreement
constitutes the valid and legally binding obligation of Jelken, except ase
nforcement may be limited by bankruptcy or similar laws and except as the
availability of equitable remedies is subject to judicial discretion.
Section 2.2 Certain Matters Regarding the IMNET Shares. Jelken represents
and warrants to Vader that Jelken owns all of the IMNET Shares free and clear of
all liens, claims or other encumbrances other than the rights of Vader thereto,
and there are no restrictions on the transfer of such IMNET Shares except as may
appear on the face thereof. Upon Closing, the IMNET Shares to be transferred to
Vader from Jelken will be owned by Vader free and clear of all liens, claims or
other encumbrances derived from or through or known to Jelken. Jelken further
represents that it is acquiring the Vader Shares for investment and not with a
view to the distribution thereof.
ARTICLE 3
Section 3.1 Authority of Vader. Vader represents and warrants to LOP that
it has the full corporate power and authority to execute and deliver this
Agreement, to perform hereunder, and to consummate the transactions contemplated
hereby without the consent or approval of any other person whomsoever, and that
this Agreement constitutes the valid and legally binding obligation of Vader,
except as enforcement may be limited by bankruptcy or similar laws and except as
the availability of equitable remedies is subject to judicial discretion.
Section 3.2 Certain Matters Regarding Vader Shares. Vader represents and
warrants that there are no restrictions on the transfer of the Vader Shares
except as may appear on the certificates thereof, which contain the usual legend
on shares of Vader acquired for investment. Upon Closing, the Vader Shares to
be transferred to Jelken will be owned by Jelken free and clear of all liens,
claims or other encumbrances derived from or through or known to Vader, other
than the restrictions on shares purchased for investment in a private
transaction. The Vader Shares have not been registered under the Securities Act
of 1933, as amended, and are subject to Rule 144.
ARTICLE 4
Section 4.1 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
Section 4.2 Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
Section 4.3 Governing Law. This Agreement and the rights and obligations
of the parties hereto shall be governed, construed and enforced in accordance
with the laws of the State of Illinois.
Section 4.4 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
JELKEN CORP.
By /s/ John Jellinek
Its President
THE VADER GROUP, INC.
By
Its
Exhibit 10.47
SOFTNET SYSTEMS, INC.
OPTION TO PURCHASE SHARES
Expiring July 31, 1997 ("Expiration Date")
No. of Shares Optionee: John I. Jellinek
Covered by Option: 200,000 1661 Wincanton
Highland Park, IL 60035
Optionee is entitled any time on and after August 1, 1995 and until the
close of business on the Expiration Date to acquire from the Company for
investment an aggregate of 200,000 shares (subject to adjustment as hereinafter
provided in Section 4) of Common Stock, par value $.10 per share, at an exercise
price per share of $1.75, all subject to the terms and conditions set forth
herein.
SECTION 1. Definitions.
For all purposes of this Option, the following terms shall have the
meanings indicated:
(a) "Initial Exercise Price" shall mean the initial exercise price of
$1.75 per share of common Stock, prior to any adjustment pursuant to Section 4.
(b) "Commission" shall mean the Securities and Exchange Commission, or any
other Federal agency then administering the Securities Act.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY
NOT BE SOLD OR TRANSFERRED. IF THE OPTION IS EXERCISED, THE SHARES RECEIVED MAY
ONLY BE SOLD OR TRANSFERRED PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT OR AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
SUCH ACT, PROVIDED THAT IN THE EVENT THAT ANY RESALE OF SUCH SHARES IS MADE
PURSUANT TO SUCH AN EXEMPTION, AN OPINION OF COUNSEL, SATISFACTION TO THE
COMPANY AND ITS LEGAL COUNSEL, WILL BE PROVIDED TO THE EFFECT THAT SUCH TRANSFER
IS MADE PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933.
(c) "Common Stock" shall mean the shares of common stock of the Company,
as hereafter defined in Section 5.
(d) "Company" shall mean SoftNet Systems, Inc., a New York corporation
(F/K/A the Vader Group), and any corporation which shall succeed to, or assume,
the obligations of said corporation hereunder.
(e) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
(f) "Purchase Price" shall mean the Initial Purchase Price or such Initial
Purchase Price as adjusted from time to time pursuant to the provisions of
Section 4 hereof.
(g) "Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
SECTION 2. Determination of Purchase Price.
The Initial Purchase Price shall be $1.75 per share of Common Stock as to
the exercise of this Option, and shall be subject to adjustment from time to
time pursuant to the provisions of Section 4 hereof.
SECTION 3. Provisions Governing Exercise.
A. Exercise of Option. In order to exercise this Option in whole or in
part, the Optionee shall complete the Subscription Form attached hereto, and
shall deliver to the Company this Option and cash or a check in an amount equal
to the then aggregate Purchase Price of the shares of Common Stock being
purchased. Upon receipt thereof, the Company shall, as promptly as practicable,
execute or cause to be executed and delivered to the Optionee, a certificate or
certificates representing the aggregate number of shares of Common Stock
subscribed for. If this Option shall have been exercised only in part, the
Company shall, at the time of delivery of said stock certificate or
certificates, deliver to Optionee a new Option evidencing the rights of Optionee
to purchase the remaining shares of Common Stock covered by this Option. The
Company shall pay all expenses, taxes and other charges payable in connection
with the preparation, execution and delivery of stock certificates pursuant to
this Section.
B. Period of Exercise. The right to purchase shares of Common Stock
represented by this Option shall accrue and shall expire at 3:00 p.m., New York
time, on July 31, 1997.
C. Transfer Restriction Legend. Each certificate for Shares initially
issued upon exercise of this Option shall bear the following legend on the face
thereof:
This security has not been registered under the Securities Act of
1933 and may only be sold or transferred pursuant to an effective
registration statement under such act or an applicable exemption from
the registration requirements of such act, provided that in the event
that any resale of this security is made pursuant to such an
exemption, an opinion of counsel, satisfactory to the Company and its
legal counsel, will be provided to the effect that such transfer is
made pursuant to an exemption from the registration requirements of
the Securities Act of 1933.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend shall also bear such legend unless, in the
opinion of legal counsel to the Company and of counsel to the Optionee, the
securities represented thereby may be transferred as contemplated by the
Optionee without violation of the registration requirements of the Securities
Act.
D. Character of Shares Issued Upon Exercise. All shares of Common Stock
issuable upon the exercise of this Option shall be duly authorized, validly
issued, fully paid and non-assessable, and, without limiting the generality of
the foregoing, the Company covenants and agrees that it will from time to time
take all such action as may be required to assure that the par value, if any,
per share of Common Stock is at all times equal to or less than the then
effective Purchase Price.
SECTION 4. Adjustments.
In the event of a stock dividend, stock split, or combination or other
reduction in the number of issued shares of Common Stock, the Board may make
such adjustments in the number of unpurchased shares of Common Stock subject to
this Option and in the Purchase Price per share as it may determine to be
appropriate and equitable. In the event of a merger, consolidation,
reorganization, or a sale or exchange of substantially all assets, or
dissolution of the Company, the rights under this Option shall terminate as to
shares of Common Stock not theretofore purchased except to the extent and
subject to such adjustments as may be provided by the Board or in the terms of
the merger, consolidation, reorganization, or plan for dissolution or sale of
the assets.
SECTION 5. Definition of Common Stock.
As used herein, the term "Common Stock" shall mean and include the
Company's authorized Common Stock, par value $.10 per share, as constituted, and
shall also include any capital stock of any class of the Company heretofore or
hereafter authorized which shall not be limited to a fixed sum or percentage of
the par value or liquidation preference in respect of the rights of the holders
thereof or preference in respect of the rights of the holders thereof to
participate in dividends and in the distribution of assets upon the voluntary or
involuntary liquidation, dissolution or winding up of the Company, and shall
include any Common Stock of any class or classes resulting from any
reclassification or reclassifications thereof.
SECTION 6. Registration Rights.
A. Company Registration. Except for offerings for the purpose of employee
benefit plans such as employee stock purchase, employee stock ownership plan or
employee stock option plans, or with respect to the sale of Common Stock
acquired pursuant to such plans, whenever the Company proposed to register any
of its Common Stock or any other equity securities under the Securities Act for
a public offering for cash, whether as a primary or secondary offering, or
pursuant to registration rights granted to holders of other securities of the
Company, the Company shall, each such time, give to the Optionee written notice
of its intent to do so. Upon the written request of the Optionee given within
thirty (30) days after receipt of such notice, the Company shall use its best
efforts to cause to be included in such registration all of the shares of Common
Stock which the Optionee has acquired by exercise and requests be registered;
provided (i) at least fifty percent (50%) of the Optionee's shares of Common
Stock of the Company acquired by an Optionee on exercise of this Option are
included in each such request, (ii) the Optionee agrees to sell its shares in
the same manner and on the same terms and conditions as the other Common Stock
which the Company proposes to register are sold, (iii) if the registration is to
include Common Stock to be sold for the account of the Company, the proposed
managing underwriter does not advise the Company that in its opinion the
inclusion of the Optionee's shares is likely to affect adversely the success of
the offering by the Company or the price it would receive in which case the
rights of the Optionee shall be as provided in subparagraph E hereinafter. In
the event the Optionee holds shares exceeding the maximum permissible volume
limitation of rule 144 promulgated under the Securities Act at the date of the
notice, such excess shares may be included in the Registration Statement under
the terms, conditions and limitations contained herein.
B. Obligations of the Company. Whenever required under paragraph A to use
its best efforts to effect the registration of any of the Optionee's shares the
Company shall, as expeditiously as possible:
(1) Prepare and file with the Commission a Registration Statement, with
respect to such shares and use its best efforts to cause such Registration
Statement to become and remain effective; provided, however, that in connection
with any proposed registration intended to permit an offering of any securities
from time to time (i.e., a so-called "shelf registration"), the Company shall in
no event be obligated to cause any such registration to remain effective for
more than ninety (90) days.
(2) Prepare and file with the Commission such amendments and supplements
to such Registration Statement and the prospectus used in connection therewith
as may be necessary for the disposition of all securities covered by such
Registration Statement.
(3) Furnish to the Optionee such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as an Optionee may reasonably request
in order to facilitate the disposition of its shares.
(4) Use its best efforts to register and qualify the securities covered by
such Registration Statement under such other securities or Blue Sky Laws of such
jurisdictions (not exceeding three unless otherwise agreed upon by the Company)
as the Company shall determine is reasonably appropriate for the distribution of
the securities covered by the Registration Statement, provided that (anything
herein to the contrary notwithstanding with respect to the bearing of expenses)
if any jurisdiction in which the securities shall be qualified shall require
that expense incurred in connection with the qualifications therein of the
securities be borne by selling shareholders, then such expenses shall be payable
by selling shareholders pro rata, to the extent required by such jurisdiction.
C. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any such action pursuant hereto that the
Optionee shall furnish to the Company such information regarding itself, the
shares it holds and the intended method of disposition thereof as the Company
shall reasonably request and as shall be required in connection with the action
to be taken by the Company.
D. Company Registration Expenses. In the case of any registration
effected pursuant to paragraph A, the Company shall bear registration and
qualification fees and expenses which result from the inclusion of the
Optionee's shares and other selling shareholders in such registration; provided
that if any such expense is attributable solely to one selling shareholder and
does not constitute a normal cost or expense of such a registration, such cost
or expense shall be allocated to that selling shareholder. In addition, each
selling shareholder shall bear the fees and costs of its own counsel.
E. Underwriting Requirements. In connection with any offering involving
an underwriting of shares being issued by the Company, the Company shall not be
required under paragraph A, to include any of the Optionee's securities therein
unless Optionee accepts and agrees to the terms of the underwriting as agreed
upon between the Company and the underwriters selected by it, and then only in
such quantity that the inclusion of the Optionee's shares in the opinion of the
underwriters is not likely to affect adversely the success of the offering by
the Company or the price it would receive. If the total number of shares of
stock which all selling shareholders of the Company request to be included in
any offering exceeds the number of such shares which the underwriters reasonably
believe compatible with the success of the offering, the Company shall only be
required to include in the offering so many of the shares of stock of the
selling shareholders as the underwriters believe will not jeopardize the success
of the offering (the shares so included to be apportioned pro-rata among the
selling shareholders according to the total number of shares of Common Stock
requested to be included in such offering by such selling shareholders, or in
such other proportions as shall be mutually agreed to by such selling
shareholders), provided that no such reduction shall be made with respect to any
securities offered by the Company for its own account.
F. Indemnification. In the event any of the Optionee's shares are
included in a Registration statement hereunder:
(1) To the extent permitted by law, the Company will indemnify and hold
harmless the Optionee, each of its officers, directors and controlling persons,
if any, within the meaning of the Securities Act, any underwriter (as defined in
the Securities Act) for the Optionee, and each person, if any, who controls such
underwriter within the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which they may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities, or actions in respect thereof (a) arise out of or are based on any
untrue or alleged untrue statement of any material fact contained in such
Registration Statement, including any preliminary prospectus or final prospectus
contained herein or any amendments or supplements thereto, (b) arise out of or
are based upon the omission or alleged omission of a material fact required to
be stated herein, or necessary to make the statements therein not misleading; or
(c) arise out of any violation by the company of any rule or regulation
promulgated under the Securities Act and state law applicable to the Company and
relating to action or inaction required of the Company in connection with any
such registration; and will reimburse the Optionee, such underwriter, or
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claims, damage,
liability or action; provided, however, the Company shall not be liable, in any
case, for any such loss, claim, damage, liability or action to the extent that
it arises out of or is based upon an untrue statement or omission or alleged
omission made in connection with such Registration Statement, preliminary
prospectus or final prospectus, or amendments or supplements thereto, in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by any such Optionee, such underwriter
or controlling person.
(2) To the extent permitted by law, the Optionee will indemnify and hold
harmless the Company, and each of its directors, and each of its officers who
have signed such Registration Statement, each person, if any, who controls the
Company within the meaning of the Securities Act, and any underwriter for the
Company (within the meaning of the Securities Act) and any person who controls
the underwriter against any losses, claims, damages or liabilities to which the
Company or any such director, officer, controlling person or underwriter may
become subject, under the Securities Act and state law or otherwise, insofar as
such losses, claims, damages or liabilities or actions in respect thereto, arise
out of or are based on any untrue or alleged untrue statement or any material
fact contained in such Registration Statement, including any preliminary or
final prospectus contained therein, or amendments or supplements thereto, or
arise out of or are based upon the omission or alleged omission of a material
fact required to be stated herein, or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or omission was made in such Registration Statement,
preliminary or final prospectus, or amendments or supplements thereto, in
reliance upon and in conformity with written information furnished by the
Optionee expressly for use in connection with such registration.
(3) Promptly after receipt by an indemnified party under this paragraph F,
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under this
paragraph F, notify the indemnifying party in writing of the commencement
thereof and the indemnifying party shall have the right to participate in, and,
to the extent of the indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties. The failure to
notify an indemnifying party promptly of the commencement of any such action, if
prejudicial to the ability to defend such action, shall relieve such
indemnifying party of any liability which such party may have to the indemnified
party otherwise than under this paragraph F.
G. Reports under Exchange Act. The Company is subject to the reporting
requirements of the Exchange Act and, in order to make available to the Optionee
the benefits of Rule 144 promulgated under the Securities Act, the Company shall
use its best efforts (1) to file with the Commission in a timely manner all
reports and other documents required to be filed by an issuer of securities
registered under the Securities Act or the Exchange Act, and (2) so long as any
Optionee owns any of the Company's shares, to furnish in writing upon such
Optionee's request the following information: (i) the Company's name, address
and telephone number, (ii) the Company's Internal Revenue Service Identification
number, (iii) the Company's Commission file number, (iv) the number of shares of
common stock outstanding as shown by the most recent report or statement
published by the Company, and (v) a statement as to whether the Company has
filed all reports required to be filed by Section 13 or 15(d) of the Exchange
Act during the preceding twelve months. With respect to a rule or regulation of
the Commission (other than Rule 144) which may at any time permit the Optionee
to sell Common Stock to the public without registration, the Company shall take
such action as is reasonable to enable utilization of such rule.
SECTION 7. Special Assignments of the Company.
The Company covenants and agrees that:
A. Will Reserve Shares. The Company will reserve and set apart and have
at all times, free from pre-emptive rights, a number of shares of authorized but
unissued Common Stock deliverable upon the exercise of the Option, and it will
have at all times any other rights or privileges provided for therein sufficient
to enable it at any time to fulfill all of its obligations hereunder.
B. Listing on Securities Exchanges; Registration. If, and so long as the
Company's Common Stock shall be listed on any national securities exchange (as
defined in the Exchange Act), it will, at its expense, obtain and maintain the
approval for listing upon official notice of issuance of all shares of Common
Stock receivable upon the exercise of this Option.
C. Will Bind Successors. This Option shall be binding upon any
corporation succeeding to the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets.
SECTION 8. No Rights As Shareholder; Limitation of Liability.
This option shall not entitle Optionee to any of the rights of a
shareholder of the Company. No provision hereof, in the absence of affirmative
action by the Optionee hereof to purchase shares of Common Stock, and no mere
enumeration herein of the rights or privileges of the holder hereof, shall give
rise to any liability of such holder for the Purchase Price or as a shareholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.
SECTION 9. Law Governing.
This Option shall be governed by, and construed and enforced in accordance
with, the laws of the State of New York.
SECTION 10. Amendment and Restatement.
This option shall constitute an amendment and restatement of that certain
Option to Purchase Shares dated August 1, 1992, delivered to the Option hereof.
Executed this 4th day of July 1995.
SOFTNET SYSTEMS, INC.
By: /s/ John I. Jellinek
John I. Jellinek
President and CEO
SOFTNET SYSTEMS, INC.
SUBSCRIPTION FORM
Dated _________________, 1995
The undersigned hereby irrevocably elects to exercise the within Option to
the extent of purchasing ___________ shares for investment and not with a view
to distribute or resale of Common Stock and hereby makes payment of $__________
in payment of the exercise price thereof and acknowledges that if this purchase
constitutes a partial exercise, a new Option representing the remaining balance
of the unexercised shares will be issued and forwarded to the address listed
below.
INSTRUCTIONS FOR ISSUANCE OF STOCK
Name
Address
Social Security or other Taxpayer
Identification Number
Signature
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY
NOT BE SOLD OR TRANSFERRED. IF THE OPTION IS EXERCISED, THE SHARES RECEIVED MAY
ONLY BE SOLD OR TRANSFERRED PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT OR AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
SUCH ACT, PROVIDED THAT IN THE EVENT THAT ANY RESALE OF SUCH SECURITY IS MADE
PURSUANT TO SUCH AN EXEMPTION, AN OPINION OF COUNSEL, SATISFACTION TO THE
COMPANY AND ITS LEGAL COUNSEL, WILL BE PROVIDED TO THE EFFECT THAT SUCH TRANSFER
IS MADE PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933.
Exhibit 21.1
SOFTNET SYSTEMS, INC.
LIST OF SUBSIDIARIES OF THE REGISTRANT
As of September 30, 1995
Communicate Direct, Inc. (Illinois)
Kansas Communications, Inc. (Kansas)
Micrographic Technology Corporation (Delaware)
Utilization Management Associates, Inc. (Massachusetts)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SoftNet
Systems, Inc.'s Form 10-KSB and is qualified in its entirety by reference to
such Form 10-KSB filing.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 572,758
<SECURITIES> 9,731,638
<RECEIVABLES> 6,128,348
<ALLOWANCES> 67,490
<INVENTORY> 4,785,326
<CURRENT-ASSETS> 14,331,655
<PP&E> 2,619,474
<DEPRECIATION> 357,995
<TOTAL-ASSETS> 35,396,301
<CURRENT-LIABILITIES> 11,007,082
<BONDS> 12,704,117
<COMMON> 27,639,166
0
0
<OTHER-SE> 7,738,199
<TOTAL-LIABILITY-AND-EQUITY> 35,396,301
<SALES> 21,252,290
<TOTAL-REVENUES> 21,252,290
<CGS> 13,970,261
<TOTAL-COSTS> 15,071,601
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 649,841
<INCOME-PRETAX> (8,467,652)
<INCOME-TAX> 124,309
<INCOME-CONTINUING> (8,591,961)
<DISCONTINUED> (1,063,610)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,655,571)
<EPS-PRIMARY> (2.22)
<EPS-DILUTED> (2.22)
</TABLE>
