SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sections 240.14a-11(c) or Section 240.14a-
12
SOFTNET SYSTEMS, INC.
(Name of Registrant as Specified In Its Charter)
Martin A. Koehler, 717 Forest Avenue, Lake Forest, Illinois 60045
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3)
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
[LOGO]
Dear Shareholder: January 31, 1996
You are cordially invited to attend the Annual Meeting of Shareholders. The
meeting will be held at the offices of the Company's subsidiary, Communicate
Direct, Inc., at 1425 Busch Parkway, Buffalo Grove, Illinois 60089, at 10:00
a.m. on February 28, 1996. After the business session, we will report on
current operations and other matters of importance.
The formal Notice and Proxy Statement appear on the following pages and
contain details of the business to be conducted at the meeting. Also enclosed
for your information is the SoftNet Systems, Inc. 1995 Annual Report to
Shareholders.
Your vote is very important regardless of the number of shares you own. We
hope you can attend the meeting. However, whether or not you plan to attend,
please sign, date and return the accompanying proxy card as soon as possible.
The enclosed envelope requires no postage if mailed in the United States. If
you attend the meeting, you may revoke your proxy if you wish and vote
personally.
Sincerely,
John J. McDonough
Chairman of the Board
SOFTNET SYSTEMS, INC.
717 FOREST AVENUE
LAKE FOREST, ILLINOIS 60045
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 28, 1996
The Annual Meeting of shareholders of SoftNet Systems, Inc., a New York
corporation (the "Company"), will be held at the offices of the Company's
subsidiary, Communicate Direct, Inc., at 1425 Busch Parkway, Buffalo Grove,
Illinois 60089, on February 28, 1996, at 10:00 a.m. Chicago time, for the
following purposes:
1. To elect nine directors to hold office for the ensuing year.
2. To consider and vote upon a proposed amendment to the Company's
Certificate of Incorporation, as amended, to increase the authorized common
stock from 10,000,000 to 25,000,000 shares of common stock, par value $.01
per share ("Common Stock").
3. To consider and vote upon a proposal to approve the SoftNet Systems,
Inc. 1995 Long Term Incentive Plan.
4. To consider and vote upon a proposal to approve the SoftNet Systems,
Inc. Employee Stock Option Plan for employees of Micrographics Technology
Corporation.
5. To ratify the grant of a stock option to purchase 150,000 shares of
Common Stock to John J. McDonough, the Chairman of the Board of Directors of
the Company.
6. To ratify the grant of a stock option to purchase 25,000 shares of
Common Stock to Martin A. Koehler, Vice President-Finance and Chief Financial
Officer of the Company.
7. To consider and transact such other business as may properly come
before the Annual Meeting or any adjournment thereof.
Only shareholders of record at the close of business on January 15, 1996 are
entitled to notice of and vote at the Annual Meeting. Whether or not you plan
to attend the meeting, please sign, date and mail the enclosed Proxy in the
envelope provided which requires no postage for mailing in the United States. A
prompt response is helpful, and your cooperation will be appreciated. If you
later find that you can be present and you desire to vote in person, or, for any
other reason, desire to revoke your proxy, you may do so at any time before the
voting by written notice to the Secretary of the Company.
By Order of the Board of Directors
Alfred J. Ziegler
Secretary
January 31, 1996
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN, DATE AND MAIL THE
ENCLOSED PROXY IN THE ENVELOPE PROVIDED WHICH REQUIRES NO POSTAGE FOR MAILING IN
THE UNITED STATES. A PROMPT RESPONSE IS HELPFUL, AND YOUR COOPERATION WILL BE
APPRECIATED.
SOFTNET SYSTEMS, INC.
717 FOREST AVENUE
LAKE FOREST, ILLINOIS 60045
PROXY STATEMENT
GENERAL
This Proxy Statement is being mailed to shareholders of SoftNet Systems,
Inc., a New York corporation ("SoftNet" or the "Company"), on or about January
31, 1996, and is furnished in connection with the solicitation by the Board of
Directors of the Company of proxies for the Annual Meeting of Shareholders to be
held at the offices of the Company's subsidiary, Communicate Direct, Inc., at
1425 Busch Parkway, Buffalo Grove, Illinois 60089, on February 28, 1996, at
10:00 a.m., Chicago time for the purpose of considering and acting upon the
matters specified in the Notice of Annual Meeting of Shareholders accompanying
this Proxy Statement.
REVOCABILITY OF PROXIES
If the form of Proxy which accompanies this Proxy Statement is executed and
returned, it will be voted. Proxies may be revoked by filing with the Secretary
of the Company written notice of revocation bearing a later date than the proxy,
by duly executing a subsequently dated proxy relating to the same shares of
stock and delivering it to the Secretary of the Company or by attending the
Meeting and voting in person. Attendance at the Meeting will not in and of
itself constitute revocation of a proxy. Any subsequently dated proxy or
written notice revoking a proxy should be sent to the Secretary of the Company
at SoftNet Systems, Inc., 717 Forest Avenue, Lake Forest, Illinois 60045.
SHARES OUTSTANDING AND VOTING RIGHTS
As of January 15, 1996, the Company had outstanding 5,547,033 shares of
Common Stock and such shares are the only shares entitled to vote at the
Meeting. The Company has no other class of voting securities outstanding.
A majority of the outstanding shares entitled to vote at this meeting and
represented in person or by proxy will constitute a quorum. Each shareholder
voting in the election of directors may cumulate such shareholder's votes and
give one candidate a number of votes equal to the number of directors to be
elected multiplied by the number of votes to which such shareholder's shares are
entitled, or may distribute such votes on the same principle among as many
candidates as the shareholder chooses, provided that votes cannot be cast for
more than the total number of directors to be elected at the meeting. There are
no conditions precedent to the exercise of cumulative voting rights. The Board
of Directors of the Company is soliciting discretionary authority to cumulate
votes. Each share has one vote on all other matters.
If choices are not specified on the proxy, the shares will be voted for the
proposals described herein. Under New York law, abstentions and broker "non-
votes" will be counted towards determining the presence of a quorum. With
respect to all proposals other than election of directors, abstentions and
broker "non-votes" will have the effect of a negative vote. A broker "non-vote"
occurs when a nominee holding shares for a beneficial owner does not vote for a
particular proposal because the nominee does not have discretionary voting power
with respect to that item and has not received instructions from the beneficial
owner. Unvoted shares are termed "non-votes" when a nominee holding shares for
beneficial owners may not have received instructions from the beneficial owner
and may not have exercised discretionary voting power on certain matters, but
with respect to other matters may have voted pursuant to discretionary authority
or instructions from the beneficial owners.
Assuming a quorum is present at the Meeting, approval of the proposed actions
shall require the following vote of shareholders: (i) Proposal 1 (regarding the
election of Directors) must be approved according to the cumulative voting rules
and (ii) Proposal 2 (regarding the amendment to the Certificate of
Incorporation), Proposal 3 (regarding the SoftNet Systems, Inc. 1995 Long Term
Incentive Plan), Proposal 4 (regarding the SoftNet Systems, Inc. Employee Stock
Option Plan), Proposal 5 (regarding option grant to John J. McDonough) and
Proposal 6 (regarding option grant to Martin A. Koehler) must be approved by a
majority of the outstanding shares entitled to vote thereon.
SOLICITATION
The Board of Directors has authorized the solicitation of proxies. Expenses
incurred in the solicitation of proxies will be borne by the Company. Directors
and officers of the Company may make additional solicitations in person or by
telephone without additional compensation.
PROPOSAL 1 - ELECTION OF DIRECTORS
At the Annual Meeting, nine directors are to be elected to hold office until
the next annual meeting of shareholders or until their successors are elected
and qualified. The Board of Directors of the Company currently consists of ten
members. One member of the Board, Mr. Ziegler, is not being nominated for re-
election. Commencing with the Annual Meeting, the Board will consist of nine
members.
It is intended that the proxies (except proxies marked to the contrary) will
be voted for the nominees listed below, all of whom are members of the present
Board of Directors. It is expected that the nominees will serve, but if any
nominee declines or is unable to serve for any unforeseen cause, the proxies
will be voted to fill any vacancy so arising in accordance with the
discretionary authority of the persons named in the proxies. Under the Bylaws
of the Company, persons must be nominated at least forty-five days prior to the
meeting; accordingly, no additional persons may be nominated at the meeting.
NOMINEES
The following table sets forth certain information concerning the nominees,
all of whom are members of the present Board of Directors:
NAME AND AGE PRINCIPAL OCCUPATION AND OTHER
INFORMATION
John J. McDonough (59) Chairman of the Board of Directors
since July 1995. Vice Chairman from
July 1993 to October 1995 and Chief
Executive Officer from July 1993 to
February 1995 of Dentsply
International Inc. (dental
products). Chairman and Chief
Executive Officer of GENDEX
Corporation (dental products) from
April 1983 to June 1993. Director
of AMRESCO, Inc., Bank One/Chicago,
CGW Southeast Fund, IMNET Systems,
Inc.(image processing) and Newell.
John I. Jellinek (50) Director since 1993. President and
Chief Executive Officer of the
Company since June 1993. President
of Jelco Ventures, Inc. (diversified
holding company) since 1971.
President of Fund Processing
Systems, Inc. since 1969. Director
of IMNET Systems, Inc. (image
processing) since October 1992.
Ian B. Aaron (35) Director since October 1994. Chief
Information Officer of the Company
since January 1996. Executive Vice
President of Systems Development of
Communicate Direct, Inc. from
October 1994 to January 1996 and
President of Communicate Direct,
Inc. from 1988 to October 1994.
James A. Gordon (46) Director since September 1995.
President of Gordon Management, Inc.
since 1992 From 1971 to 1992,
President of Gordon Wholesale, Inc.
Director of IMNET Systems, Inc.
(image processing) and Advanced
Photonix.
John G. Hamm (57) Director since 1985. Executive Vice
President of ARTRA Group
Incorporated (flexible packaging)
since 1988. Director from 1984 to
1994 and Vice President-Finance from
1990 to 1994 of Ozite Corporation
(textiles, hose and tubing).
Director of Plastic Specialties and
Technologies, Inc. (textiles, hose
and tubing) from 1993 to January
1996.
Philip Kenny (42) Director since June 1993. President
of Northgate Investments Corp. since
1991 and President of Seven K
Construction Co. (construction) from
1987 to 1991. Director of Kenny
Industries, Inc. since 1980 and
Summitt Golf Corporation of
Tallahassee, Florida since 1993.
Chairman of One on One Sports, Inc.
(national sports radio) since 1993.
A.J.R. Oosthuizen (60) Director since September 1995.
President and Chief Executive
Officer of Micrographics Technology
Corporation since March 1989.
Ronald I. Simon (57) Director since September 1995.
President of Ronald Simon, Inc.
(financial consulting) since 1974.
Chairman of Sonant Corporation
(interactive voice response
equipment) since April 1993.
Director of Citadel Corporation (a
real estate investment company).
C. William Vatz (79) Director since September 1995.
Private investor since March 1995.
From July 1993 to March 1995,
director of Dentsply International,
Inc. (dental products). From 1990
to July 1993, director of GENDEX
Corporation (dental products).
INFORMATION CONCERNING THE BOARD AND ITS COMMITTEES
There were sixteen meetings of the Board of Directors in the fiscal year
ended September 30, 1995. Each director attended at least 75% of the meetings.
The Audit Committee, currently consisting of Messrs. Gordon, Hamm, and Simon,
had one meeting in fiscal 1995. The Compensation Committee, currently
consisting of Messrs. Hamm, Kenny and McDonough, had one meeting in fiscal 1995.
The Executive Committee, currently consisting of Messrs. Jellinek, Kenny,
McDonough and Oosthuizen, had no meetings in fiscal 1995. The Stock Option
Committee, consisting of Messrs. Gordon, Simon and Vatz, was formed on September
29, 1995 and had no meetings in fiscal 1995. The purpose of the Stock Option
Committee is to administer the Company's 1995 Long Term Incentive Plan. The
Nominating Committee, consisting of Messrs. Gordon, McDonough and Simon, was
formed on December 12, 1995 and had no meetings in fiscal 1995. The purpose of
the Nominating Committee is to select the slate of Directors to be nominated by
the Board of Directors. The Nominating Committee will not consider nominees
recommended by shareholders.
The Directors who were not officers of the Company or of a subsidiary,
namely, Messrs. Gordon, Hamm, Kenny, Simon and Vatz, each receive a fee of
$1,000 per month for their services as Directors.
SECURITIES BENEFICIALLY OWNED BY
PRINCIPAL SHAREHOLDERS AND MANAGEMENT
Set forth in the following table are the beneficial holdings (and the
percentages of outstanding shares represented by such beneficial holdings) of
Common Stock as of January 15, 1996, except as otherwise noted, of (i) each
person (including any "group" as used in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), known by the Company to
own beneficially more than 5% of its outstanding Common Stock, (ii) each
director and executive officer and (iii) all executive officers and directors as
a group. Except as otherwise indicated, the Company believes that the
beneficial owners of the Common Stock listed below, based on information
provided by such owners, have sole investment voting power with respect to such
shares, subject to community property laws where applicable. Under Rule 13d-3
of the Exchange Act, persons who have power to vote or dispose of Common Stock
of the Company, either alone or jointly with others, are deemed to be beneficial
owners of such Common Stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND
OF BENEFICIAL OWNER NATURE OF PERCENT OF
BENEFICIAL CLASS
OWNERSHIP
<S> <C> <C>
140,000 (1) 2.5%
John J. McDonough . . . . . .
717 Forest Avenue
Lake Forest, IL 60045
John I. Jellinek . . . . . . 356,950 (2) 6.1%
717 Forest Avenue
Lake Forest, IL 60045
Ian B. Aaron . . . . . . . . 145,429 2.6%
c/o Micrographics Technology
Corporation
520 Logue Avenue
Mountain View, CA 94043
James A. Gordon . . . . . . . - -
666 Grand Avenue
Suite 200
Des Moines, IA 50309
John G. Hamm . . . . . . . . 47,330 (3) *
c/o ARTRA Group, Inc.
500 Central Avenue
Northfield, IL 60093
Philip Kenny . . . . . . . . 215,102 (4) 3.8%
c/o 7K Construction
144 Green Bay Road
Winnetka, IL 60493
A.J.R. Oosthuizen . . . . . . 334,392 6.0%
c/o Micrographics Technology
Corporation
520 Logue Avenue
Mountain View, CA 94043
Ronald I. Simon . . . . . . . - -
1020 Prospect Street, Suite
401C
P.O. Box 1986
LaJolla, CA 92038<PAGE>
C. William Vatz . . . . . . . - -
717 Forest Avenue
Lake Forest, IL 60045
Alfred Ziegler . . . . . . . 40,017 (5) *
74-19 Myrtle Avenue
Glendale, NY 11385
Dale H. Sizemore, Jr. . . . . 268,750 (6) 4.8%
c/o Kansas Communications
8206 Marshal Drive
Lenexa, Kansas 66214
Martin A. Koehler . . . . . . - -
717 Forest Avenue
Lake Forest, IL 60045
Peter R. Harvey . . . . . . . 503,928 9.1%
500 Central Avenue
Northfield, IL 60093
R.C.W. Mauran . . . . . . . . 490,487(7) 8.7%
47 Eaton Place, Flat A
London SWI, England
Joseph Rich . . . . . . . . . 408,587(8) 7.1%
1386 N. Green Bay Road
Lake Forest, IL 60045
Barry Rymer Life Insurance 323,435 5.8%
Trust . . . . . . . . . . . .
Barry Rymer, Trustee
4600 So. Packers Ave.
Chicago, IL 60609
All directors and executive 1,391,470 23.0%
officers as a group
(12 persons) . . . . . . . .
* Less than 1%.
(1) Includes 140,000 shares issuable upon conversion of the Company's 9%
Convertible Subordinated Notes held by McDonough Partners II of which Mr.
McDonough is the general partner.
(2) Includes (i) an option held by Jelco Ventures, Inc. to purchase 200,000
shares, (ii) 80,000 shares held by Jelken LLC, (iii) 51,500 shares
issuable upon exercise of warrants held by Jelken LLC and (iv) 25,000
shares issuable upon conversion of 9% Convertible Subordinated Notes held
by Jelken LLC. Mr. Jellinek shares voting power with Mr. Kenny for all
shares held by Jelken LLC.
(3) Includes 32,330 shares that are held jointly with his wife and 15,000
shares issuable upon exercise of a warrant.
(4) Includes 58,602 shares held by Kenny family interests for which Mr. Kenny
has shared voting power. Also includes (i) 80,000 shares held by Jelken
LLC, (ii) 51,500 shares issuable upon exercise of warrants held by Jelken
LLC, and (iii) 25,000 shares issuable upon conversion of 9% Convertible
Subordinated Notes held by Jelken LLC. Mr. Kenny shares voting power with
Mr. Jellinek for all shares held by Jelken LLC.
(5) Includes 40,000 shares issuable upon exercise of a warrant.
(6) Includes a warrant to purchase 25,000 shares.
(7) Includes 81,481 shares issuable upon conversion of 6% Convertible
Subordinated Secured Debentures issued by Micrographics Technology
Corporation. Shares listed reflect shares held by Eurocredit Investments,
Ltd., a Maltese company that is wholly-owned by Mr. Mauran.
(8) Includes 69,900 shares issuable upon exercise of warrants relating to the
Company's Senior Notes, 76,900 shares issuable upon conversion of the
Company's 9% Convertible Subordinated Notes, 48,780 shares issuable upon
conversion of the Company's 10% Convertible Subordinated Notes and 43,600
shares issuable upon exercise of warrants relating to the Company's 10%
Convertible Subordinated Notes.
</TABLE>
EXECUTIVE OFFICERS OF THE COMPANY
EXECUTIVE OFFICERS
The following table lists the executive officers of the Company:
NAME TITLE
John J. McDonough . . . . Chairman of the Board of Directors
John I. Jellinek . . . . President and Chief Executive
Officer
A.J.R. Oosthuizen . . . . President of Micrographics
Technology Corporation
Dale H. Sizemore, Jr. (1) President of SoftNet's
Telecommunications Division
Martin A. Koehler (2) . . Vice President-Finance and Chief
Financial Officer
Alfred J. Ziegler (3) . . Vice President and Secretary
Ian B. Aaron . . . . . . Chief Information Officer
(1) President of the Telecommunications Division of the Company and Chairman
of Kansas Communications, Inc., a wholly-owned subsidiary of the Company,
since September 1995. From 1990 to September 1995, Chairman of Kansas
Communications, Inc. (distributor of voice and data telecommunications
services), which was merged into a subsidiary of the Company in September
1995. Director of Torotel, Inc. (electronic component manufacturer). Mr.
Sizemore is 44.
(2) Vice President-Finance and Chief Financial Officer of the Company since
June 1995. Manager from 1991 to June 1995 and Senior Auditor from 1990 to
1991 at Arthur Andersen LLP (public accounting firm). Mr. Koehler is 32.
(3) Vice President of the Company since 1978, Secretary of the Company since
1985 and Director of the Company since 1977. Chief Accounting Officer of
the Company from April 1988 to June 1995. Mr. Ziegler is 57.
EXECUTIVE COMPENSATION
The following table presents information with respect to all compensation
awarded or paid to, or earned, by Mr. Jellinek, the Company's Chief Executive
Officer, Mr. Sizemore and Mr. Aaron, the Company's only executive officers
earning in excess of $100,000 during fiscal 1995, during each of the last three
fiscal years for services rendered to the Company and its subsidiaries. Mr.
Sizemore became an executive officer on September 15, 1995 in connection with
the Company's acquisition of Kansas Communications, Inc. The acquisition of
Kansas Communications, Inc. was accounted for as a pooling and the following
table reflects Mr. Sizemore's compensation for fiscal 1993 and 1994 even though
Mr. Sizemore was not employed by the Company prior to September 15, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
SECURITIES
NAME AND BONUS UNDERLYING
PRINCIPAL POSITION YEAR SALARY($) ($) OPTIONS (#)
<S> <C> <C> <C> <C>
John I. Jellinek
President and 1995 $161,807 - -
Chief Executive 1994 145,835 - -
Officer 1993 - - -
Dale H. Sizemore, 1995 25,000
Jr. 1994 -
President of the 1993 130,000 $8,00
Telecommunications 55,000 0
Division 55,000 -
Ian B. Aaron 1995 146,000 - -
Chief Information 1994 - (1) - -
Officer 1993 - (1) - -
_________________
(1) Mr. Aaron was not employed by the Company in fiscal 1993 or 1994.
</TABLE>
The following tables present certain additional information concerning the
stock option granted to Mr. Sizemore during fiscal 1995 and the value of the
option held by him at September 30, 1995. No compensatory stock options were
granted to Messrs. Jellinek and Aaron during fiscal 1995 and they did not hold
any compensatory stock options at September 30, 1995.
OPTION GRANTS IN FISCAL 1995
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES EXERCISE OR
GRANTED IN FISCAL BASE PRICE EXPIRATION
NAME (#) YEAR ($/SH) DATE
<S> <C> <C> <C> <C>
John I. - - - -
Jellinek
Dale H. 25,000 100% $13.25 9/15/00
Sizemore
Ian B. Aaron - - - -
</TABLE>
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-
NAME OPTIONS AT FISCAL THE-MONEY OPTIONS AT
YEAR END FISCAL YEAR END ($)
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
<S> <C> <C>
John I. Jellinek - -
Dale H. Sizemore 25,000/- $25,000/-
Ian B. Aaron - -
</TABLE>
CERTAIN AGREEMENTS
On September 15, 1995, Micrographics Technology Corporation, a wholly-owned
subsidiary of the Company ("MTC"), entered into an employment agreement with
A.J.R. Oosthuizen, a Director of the Company, pursuant to which Mr. Oosthuizen
became President of MTC. This employment agreement has a three year term and
provides for a base salary of $200,000 plus bonuses to be made at the discretion
of the Board of Directors of the Company. Under this employment agreement, Mr.
Oosthuizen has agreed not to divulge confidential information relating to the
Company and not to compete with the Company in certain territories for a period
of one year after termination of his employment.
On September 15, 1995, the Company entered into an employment agreement with
Dale H. Sizemore, Jr. pursuant to which Mr. Sizemore became President of the
Telecommunications Division of the Company and Chairman of Kansas
Communications, Inc., a wholly-owned subsidiary of the Company. This employment
agreement has a three year term and provides for a base salary of $200,000 plus
bonuses to be made at the discretion of the Board of Directors of the Company.
Mr. Sizemore also was granted a warrant to purchase 25,000 shares of Common
Stock at $13.25 per share. This warrant expires on September 15, 2000. Under
this employment agreement, Mr. Sizemore has agreed to certain nonsolicitation
provisions and not to divulge confidential information relating to the Company.
On October 28, 1994, Communicate Direct, Inc., a wholly-owned subsidiary of
the Company, entered into an employment agreement with Ian Aaron, a Director and
the Chief Informative Officer of the Company. The employment agreement has a
three year term and provides for a base salary of $156,000 plus bonuses to be
made at the discretion of the Board of Directors of the Company. Mr. Aaron's
salary was subsequently increased to $200,000 per year. Under this employment
agreement, Mr. Aaron has agreed not to divulge confidential information of the
Company and not to compete with the Company in certain territories for a period
of one year after termination of his employment.
Mr. Ziegler, the Vice President and Secretary of the Company, has an
agreement with the Board of Directors pursuant to which Mr. Ziegler will receive
one year's salary as severance pay upon termination of his employment with the
Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On September 15, 1995 the Company acquired MTC (the "MTC Acquisition"). In
consideration for the sale of their shares of MTC stock, MTC stockholders
received from the Company an aggregate of 777,778 shares of Common Stock,
$1,050,000 in cash and $2.8 million principal amount of the Company's 9%
Convertible Subordinated Debentures due 2000 issued in connection with this
acquisition ("SoftNet Debentures"). In connection with the MTC Acquisition,
A.J.R. Oosthuizen, owning 43.3% of the outstanding common stock of MTC, became a
director of the Company and received 334,392 shares of Common Stock, $454,650 in
cash and $1,212,400 principal amount of SoftNet Debentures, which are
convertible into 179,615 shares of Common Stock on September 15, 1996. Mr.
Oosthuizen also entered into an employment agreement with MTC. As long as Mr.
Oosthuizen is employed by the Company, Mr. Oosthuizen shall be invited to attend
all of the meetings of the SoftNet Board but shall have no voting rights if not
elected a Director. In connection with the MTC Acquisition, R.C.W. Mauran,
owning 45.7% of the outstanding common stock of MTC, received 409,006 shares of
Common Stock, $759,000 in cash and $1,212,563 principal amount of SoftNet
Debentures, which are convertible into 179,638 shares of Common Stock on
September 15, 1996. Mr. Mauran also holds MTC Notes which are convertible into
81,481 shares of Common Stock at any time. Until these MTC Notes are redeemed
or converted into Common Stock, Mr. Mauran has the right to designate a Director
of the Company. In addition, the Company granted Messrs. Mauran and Oosthuizen
certain piggy-back and demand registration rights with respect to the shares of
Common Stock acquired by them pursuant to the MTC Acquisition. Messrs. Mauran
and Oosthuizen agreed to indemnify the Company for two years from and against
any and all losses arising from certain misrepresentations and breaches of
agreements by MTC in the related merger agreement, subject to certain dollar
limitations. As security for their indemnification obligations, SoftNet set
aside and held back 50% of the Common Stock issued to Messrs. Mauran and
Oosthuizen.
On September 15, 1995, the Company acquired Kansas Communications, Inc.
("KCI") whereby KCI stockholders received an aggregate of 1,300,000 shares of
Common Stock in exchange for all of the outstanding shares of KCI stock (the
"KCI Acquisition"). In connection with the KCI Acquisition, SoftNet entered
into an employment agreement with Dale H. Sizemore, Jr., the Chairman of the
Board of KCI, pursuant to which Mr. Sizemore became President of the Company's
Telecommunications Division and the Chairman of its new KCI subsidiary. As long
as the employment agreement is in effect, SoftNet has agreed to nominate Mr.
Sizemore as part of its annual slate for election to the Board of Directors and
to elect Mr. Sizemore as an Executive Vice President of the Company. At this
time, Mr. Sizemore has declined to serve as a member of the SoftNet Board or as
an Executive Vice President of the Company. In addition, pursuant to his
employment agreement, Mr. Sizemore received warrants to purchase 25,000 shares
of Common Stock at an exercise price of $13.25 per share. The warrants expire
on September 15, 2000. Mr. Sizemore received 243,750 shares of Common Stock in
consideration of the sale of his 19% ownership interest in KCI to the Company.
On each of August 12, 1993 and November 10, 1993, a predecessor of Jelken LLC
purchased $50,000 in principal amount of 10% Senior Notes of the Company and
warrants to purchase 5,000 shares of Common Stock at $1.75 per share. The
owners of Jelken LLC are affiliates of Messrs. Jellinek and Kenny. On October
13, 1994, Jelken LLC purchased $25,000 in principal amount of 10% Senior Notes
of the Company and warrants to purchase 2,500 shares of Common Stock at $6.375
per share. In consideration for agreeing to extend the maturity date of the
foregoing 10% Senior Notes, during fiscal 1994 and 1995, Jelken LLC received
warrants to purchase an aggregate of 39,000 shares of Common Stock at an average
exercise price of $5.08 per share.
In April 1995, in exchange for $125,000 principal amount of 10% Senior Notes
of the Company, the Company issued to Jelken LLC a $125,000 principal amount 9%
Convertible Subordinated Note due December 31, 1998 (the "9% Note"). The 9%
Note is convertible at any time until December 31, 1998 so that the holder will
receive one share of Common Stock for every $5.00 principal amount of the 9%
Note. Upon full conversion of this 9% Note, Jelken LLC will receive 25,000
shares of Common Stock. Under the terms of the 9% Note, Jelken LLC has piggy
back registration rights with respect to the shares issuable upon conversion of
the 9% Note.
In May 1995, the Company issued to McDonough Partners II, a partnership
controlled by John J. McDonough, the Chairman of the Board of the Company, a
$700,000 principal amount 9% Note in exchange for $700,000. Upon full
conversion of this 9% Note, McDonough Partners II will receive 140,000 shares of
Common Stock.
In January and March 1995, in exchange for $200,000, and in April 1995, in
exchange for $170,000 principal amount of 10% Senior Notes (plus $14,499 accrued
interest thereon), the Company issued to Joseph Rich three 9% Notes totalling
$384,499. Upon conversion of these Notes, Mr. Rich will receive 76,900 shares
of Common Stock. In November 1994, in exchange for $200,000, the Company issued
to Mr Rich a $200,000 principal amount 10% Convertible Subordinated Note (the
"10% Note") and a related warrant to purchase 43,600 shares of Common Stock at
an exercise price of $6.875 per share. The 10% Note and the warrant both expire
on October 31, 1999. The 10% Note is convertible at any time so that the holder
will receive one share of Common Stock for every $4.10 principal amount of the
10% Note. Upon full conversion of this 10% Note, Mr. Rich will receive 48,780
shares of Common Stock. Mr. Rich has both demand and piggy back registration
rights with respect to the shares issuable upon conversion of this 10% Note and
the exercise of the related warrant.
The Company pays Jelco Ventures, Inc. $4,000 per month ($40,000, $48,000 and
$48,000 in fiscal 1993, 1994 and 1995, respectively) for shared costs of a
computer information system and office equipment. Mr. Jellinek is the President
of and controls Jelco Ventures, Inc.
On October 31, 1994, the Company acquired Communicate Direct, Inc. ("CDI")
pursuant to a merger of CDI with and into its wholly-owned subsidiary (the "CDI
Acquisition"). In consideration of the sale of their CDI stock, CDI
stockholders received a total of $200,000 in cash and 290,858 shares of
Preferred Stock of the Company. The Company granted certain demand and piggy-
back registration rights with respect to the Common Stock and the securities
convertible into Common Stock that CDI stockholders received pursuant to the CDI
Acquisition. In connection with the CDI Acquisition, Mr. Ian Aaron, a 50%
stockholder of CDI, was appointed to the Board of Directors of the Company, and
received 145,429 shares of Preferred Stock plus $100,000 in cash. All of the
Preferred Stock of the Company was converted into Common Stock in April 1995 on
a share-for-share basis. In addition, Mr. Aaron entered into an employment
agreement with the Company.
As of September 30, 1994, the Company was owed approximately $4.1 million
plus accrued interest by Ozite Corporation ("Ozite"). John G. Hamm, a Director
of the Company, and Peter R. Harvey, the former Chairman of the Board of
Directors and a 9.1% shareholder of the Company, held substantial interests in
Ozite. Mr. Hamm was a Director of Ozite from 1984 to 1994, Vice President-
Finance of Ozite from 1990 to 1994 and a director of Plastic Specialties &
Technologies, Inc., a majority-owned subsidiary of Ozite ("PST"), from 1993 to
January 1996. Mr. Harvey has been a director of Ozite since 1984, a Vice
President of Ozite since 1987 and a director of PST since 1993. Due to
uncertainties about collecting these funds, the receivable from Ozite was
written off and charged against earnings in 1991. 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 International, Inc. ("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 National Market), 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
Company's consolidated financial statements for the remaining unsold securities
due to uncertainty of value.
In fiscal 1994, the Board voted to compensate Mr. Hamm, a Director of the
Company, $150,000 for uncompensated services as a consultant rendered to the
Company over the prior ten years. The Board authorized Mr. Hamm to receive (i)
$100,000 in cash, with $50,000 payable immediately and $50,000 payable at
$10,000 per month, and (ii) $50,000 in shares of Common Stock (10,000 shares) or
10 year warrants to purchase 16,667 shares of Common Stock at $5.00 per share,
as Mr. Hamm elects. In addition, Mr. Hamm will receive additional shares or
warrants at the rate of 20% of the outstanding shares or warrants theretofore
granted hereunder per annum until the shares to be received or the shares
received upon exercise of the warrants, as the case may be, are freely tradeable
or saleable under Rule 144 or 144k of the Securities Act of 1933, as amended.
Further, at specified dates, Mr. Hamm may elect to receive any unpaid cash
compensation in additional shares or warrants or receive interest on his unpaid
compensation at 10% per annum. At September 30, 1995, Mr. Hamm's additional
compensation relating to the unpaid compensation was $25,837.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Under the securities laws of the United States, the Company's directors, its
executive (and certain other) officers, and any person holding more than ten
percent of the Company's Common Stock are required to report their ownership of
Common Stock and any changes in that ownership to the Securities and Exchange
Commission (the "Commission") and any exchange or quotation system on which the
Common Stock is listed or quoted. Specific due dates for these reports have
been established and the Company is required to report in this proxy statement
any failure to file by these dates. All of these filing requirements were
satisfied by its directors and officers and ten percent holders, except (i) Mr.
Jellinek reported on a Form 5 five transactions that should have been reported
on Form 4s for the months of January, February and April, (ii) Mr. Oosthuizen
reported on a Form 5 two transactions that should have been reported on a Form 3
by September 25, 1995, (iii) Mr. Kenny reported on a Form 5 one transaction that
should have been reported on Form 3 by July 9, 1993 and twelve transactions that
should have been reported on Form 4s for the months of August 1993, November
1993, December 1993, October 1994, November 1994, December 1994, January 1995,
February 1995, March 1995 and April 1995, (iv) Mr. Koehler filed his Form 3 on
October 9, 1995 when it should have been filed by July 17, 1995 and (v) Mr.
McDonough filed his Form 3 on October 9, 1995 when it should have been filed by
April 19, 1995. In making these statements, the Company has relied on the
written representations of its directors and officers and its ten percent
holders and copies of the reports that they have filed with the Commission.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NAMED NOMINEES.
PROPOSAL 2- AMEND CERTIFICATE OF INCORPORATION TO
INCREASE THE AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has proposed an amendment to Article THIRD of the
Company's Certificate of Incorporation, as amended, (the "Certificate of
Incorporation"), increasing the number of authorized shares of Common Stock,
$.01 par value, from 10,000,000 to 25,000,000 shares. Under the present
Certificate of Incorporation, the Company has the authority to issue 10,000,000
shares of Common Stock, $.01 par value, and 4,000,000 shares of Preferred Stock,
$.10 par value ("Preferred Stock"). At January 15, 1996, 5,547,033 shares of
Common Stock were issued and outstanding and no shares of Preferred Stock were
outstanding. Accordingly, as of January 15, 1996, after taking into account the
shares reserved for issuance upon the conversion or exercise of certain notes,
debentures and warrants issued by the Company, there remained approximately
1,836,000 shares of Common Stock available for issuance (approximately 1,021,000
if the SoftNet Systems, Inc. 1995 Long Term Incentive Plan, the SoftNet Systems,
Inc. Employee Stock Option Plan and the grant of stock options to Messrs.
McDonough and Koehler are approved) and the proposed amendment would leave the
Company with approximately 16,836,000 shares of Common Stock available for
issuance (approximately 16,021,000 if the SoftNet Systems, Inc. 1995 Long Term
Incentive Plan, the SoftNet Systems, Inc. Employee Stock Option Plan and the
grant of stock options to Messrs. McDonough and Koehler are approved).
The Company has no present plans to issue any additional shares of authorized
but unissued Common Stock. However, management believes that it is advisable
for the Company to have an increased number of authorized shares of Common Stock
available for future issuance for various corporate purposes at the discretion
of the Board of Directors. Such corporate purposes may include future
financings, stock distributions, stock dividends, acquisitions, stock options
and various other corporate purposes as the Board of Directors may deem to be in
the best interests of the Company and its shareholders.
Shareholders have no preemptive rights with respect to capital stock of the
Company. Accordingly, the additional shares of Common Stock authorized by the
proposed amendment may be issued at such time or times to such persons and for
such consideration as the Board of Directors may determine, without further
shareholder approval, except as may be required by New York law, by the policy
of the American Stock Exchange or by other applicable laws and regulations in
effect from time to time. The Board of Directors believes that it is in the
best interests of the Company to have additional shares of Common Stock
authorized at this time in order to alleviate the expense and delay of holding a
special meeting of shareholders if and when there is a need to issue additional
shares of Common Stock. The issuance by the Company of shares of Common Stock,
including additional shares that would be authorized upon approval of the
proposed amendment, may dilute the present equity ownership position of the
current holders of Common Stock.
This proposed amendment is not intended to have any anti-takeover effect and
is not part of any series of anti-takeover measures contained in the Certificate
of Incorporation or the Bylaws of the Company as in effect on the date hereof,
except that the additional shares of Common Stock make more shares available for
corporate purposes. In addition, shareholders should note that the availability
of additional shares of Common Stock could make any attempt to gain control of
the Company or the Board of Directors more difficult or time-consuming.
Although the Board currently has no intention of doing so, shares of Common
Stock could be issued by the Board of Directors to dilute the percentage of
Common Stock owned by a significant shareholder and increase the number of
voting shares necessary to acquire control of the Board of Directors or to meet
the voting requirements imposed by New York law with respect to a merger or
other business combination involving the Company. The Company has no present
intention to use the increased authorized Common Stock for anti-takeover
purposes.
If this amendment is adopted, it is anticipated that it would be filed with
the Secretary of State of the State of New York on or about March 1, 1996.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS AMENDMENT TO THE
CERTIFICATE OF INCORPORATION INCREASING THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK.
PROPOSAL 3 - APPROVAL OF THE SOFTNET SYSTEMS, INC.
1995 LONG TERM INCENTIVE PLAN
BACKGROUND
The Board of Directors is proposing for shareholder approval the SoftNet
Systems, Inc. 1995 Long Term Incentive Plan (the "Plan"). The purposes of the
Plan are to encourage selected employees of 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
the Company depends. The term "Affiliate" is defined under the Plan to 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. Reference should be made to Exhibit A
for a complete statement of the provisions of the Plan which are summarized
below.
In structuring the Plan, the Board of Directors sought to provide for a
variety of awards that could be flexibly administered to carry out the purposes
of the Plan. This authority will permit the Company to keep pace with changing
developments in management compensation and make the Company competitive with
those companies that offer creative incentives to attract and keep key
management employees. The flexibility of the Plan will allow the Company to
respond to changing circumstances such as changes in tax laws, accounting rules,
securities regulations and other rules regarding benefit plans. The Plan grants
the administrators discretion in establishing the terms and restrictions deemed
appropriate for particular awards as circumstances warrant.
SHARES AVAILABLE
The Plan makes available for awards up to 600,000 shares of Common Stock.
The maximum number of shares which may be awarded to any participant in any year
during the term of the Plan is 75,000 shares. If any shares covered by an award
under the Plan are forfeited or any option or right prior to the issuance of
shares or the payment of the equivalent thereunder otherwise terminates or is
canceled, then those shares may again be available for granting new awards under
the Plan.
ADMINISTRATION
The Plan provides for administration by a committee (the "Committee") to be
comprised of either the Compensation Committee of the Board of Directors of the
Company or any other committee designated by the Board of Directors with at
least two outside directors. The Committee has full power and authority to
designate the participants in the Plan, determine the form, amount and other
terms and conditions of awards, interpret and administer the Plan and establish
and amend rules and regulations relating to the Plan's proper administration.
The Committee also has the power to modify or waive restrictions on awards,
amend awards and grant extensions and accelerations of awards. The
interpretation and decisions of the Committee with respect to the Plan will be
final. The Board of Directors has designated its Stock Option Committee,
consisting of Messrs. Gordon, Simon and Vatz, as the Committee that will
administer the Plan.
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
a committee composed thereof, the authority to grant, cancel, modify, waive
rights with respect to, alter, suspend or terminate awards. The Committee may
not delegate such authority with respect to awards held by officers and
directors subject to Section 16 of the Exchange Act.
ELIGIBILITY OF PARTICIPATION
Any employee of the Company or an Affiliate of the Company is eligible to
participate in the Plan. No member of the Committee can participate in the
Plan. The selection of participants from eligible employees is within the
discretion of the Committee. The estimated number of persons who are eligible
to participate in the Plan is 263.
TYPES OF AWARDS
The Plan provides for the grant of any or all of the following types of
awards: (1) options, including incentive stock options and non-qualified stock
options; (2) stock appreciation rights; (3) restricted securities; (4)
performance awards; (5) dividend equivalents; and (6) other stock-based awards.
Awards may be granted singly, in combination, in tandem or in substitution for
any other award, as determined by the Committee, 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.
OPTIONS
Under the Plan, the Committee may grant awards in the form of options to
purchase shares of the Common Stock. The Committee will, with regard to each
option, determine the number of shares subject to the option, the manner and
time of the option's exercise and vesting, and the exercise price per share of
Common Stock subject to the option. Subject to certain exercise rights in the
event of the death, retirement or termination of employment of a participant, no
option may be exercised until the employee receiving the option has been
continuously employed by the Company for at least one year. Options will be
exercisable within nine months of a participant's termination of employment by
reason of death and within three months of any termination of employment by the
Company for Cause (as defined in the Plan), by a participant for Good Reason (as
defined in the Plan) or due to the retirement or disability of a participant
(but not later than the expiration date of the award). Except as provided in
the preceding sentence, all options of a participant shall terminate or be
cancelled in the event that such participant's employment with the Company is
terminated.
The exercise price of an incentive stock option must be at least 100 percent
of the fair market value of the Common Stock on the date the option is granted.
In addition, incentive stock options granted to any holder of ten percent or
more of the voting power of the Company must (i) have an option price equal to
110% or more of the fair market value of the Common Stock and (ii) not be
exercisable for at least five years from the date the option is granted. In
addition, no incentive stock option can be exercised within one year, or after
ten years, from the date of its grant.
STOCK APPRECIATION RIGHTS
The Plan authorizes the Committee to grant stock appreciation rights ("SARs")
either in tandem with a stock option or independent of a stock option. An SAR
is a right to receive a payment equal to the appreciation in value of a stated
number of shares of Common Stock from the fair market value of such shares on
the date of the SAR's grant to the fair market value on the date of its
exercise.
A tandem SAR may be granted either at the time of the grant of the related
stock option or at any time thereafter during the term of the stock option.
RESTRICTED SECURITIES
The Plan authorizes the Committee to grant awards in the form of restricted
shares of Common Stock. Such awards will be subject to such terms, conditions,
restrictions and/or limitations, if any, as the Committee deems appropriate,
including, but not by way of limitation, restrictions on transferability,
continued employment and performance goals established by the Committee over a
designated period of time.
PERFORMANCE AWARDS
Awards may also be granted in the form of performance awards which are rights
payable or exercisable for cash, securities or other property upon the
achievement of certain goals over performance periods established by the
Committee. The length of the performance period, the performance objectives to
be achieved and the measure of whether and to what degree such objectives have
been achieved will be determined by the Committee.
OTHER STOCK-BASED AWARDS
The Committee is authorized to grant to participants, either alone or in
addition to other awards granted under the Plan, awards of stock and other
awards that are valued in whole or in part by reference to, or are otherwise
based on, Common Stock.
OTHER TERMS OF AWARDS
Awards may, at the discretion of the Committee, be paid by a participant in
cash, shares of Common Stock owned by the participant or such consideration as
the Committee may deem appropriate. Awards may be granted for no cash
consideration or for such minimal cash consideration as may be required by
applicable law.
The Plan provides that awards shall not be transferable otherwise than by
will or the laws of descent and distribution. Subject to specific provisions in
the Plan with respect to options, the Committee shall determine the treatment to
be afforded to a participant in the event of termination of employment for any
reason, including death, disability or retirement. Notwithstanding the
foregoing, the Committee may permit the transferability of an award by a
participant to members of the participant's immediate family or trusts or family
partnerships for the benefit of such person.
Upon the grant of any award, the Committee may, by way of an award notice or
otherwise, establish such other terms, conditions, restrictions and/or
limitations covering the grant of the award as are not inconsistent with the
Plan. The Board of Directors reserves the right to amend, alter, suspend,
discontinue or terminate the Plan at any time, subject to the rights of
participants with respect to any outstanding awards. The Board of Directors may
not without shareholder approval adopt any amendment that would increase the
total number of shares of Common Stock available under the Plan or cause the
Plan to fail to be in compliance with any tax or regulatory requirements.
The Plan contains provisions that allow the Committee to make equitable
adjustments of awards, and the number and kind of shares that are the subject of
awards, in the event of a merger, consolidation, or reorganization, the issuance
of shares by the Company without new consideration or a change of control. If
the Company is merged into or consolidated with another corporation or the
Company sells or disposes of all of its assets, then the Committee may cancel
all outstanding awards, provided that each holder of an award shall have the
right to exercise such award in full during the 30-day period preceding the
effective date of such merger, consolidation, sale or liquidation.
FEDERAL TAX TREATMENT
Under current law, the following are U.S. federal income tax consequences
generally arising with respect to awards under the Plan.
A participant who is granted an incentive stock option does not recognize any
taxable income at the time of the grant or at the time of exercise. Similarly,
the Company is not entitled to any deduction at the time of grant or at the time
of exercise. If the participant makes no disposition of the shares acquired
pursuant to an incentive stock option before the later of two years from the
date of grant and one year from the date of exercise, any gain or loss realized
on a subsequent disposition of the shares will be treated as a long-term capital
gain or loss. Under such circumstances, the Company will not be entitled to any
deduction for federal income tax purposes.
A participant who is granted a non-qualified stock option will not have
taxable income at the time of grant, but will have taxable income at the time of
exercise equal to the difference between the exercise price of the shares and
the market value of the shares on the date of exercise. The Company is entitled
to a tax deduction for the same amount.
The grant of an SAR will produce no U.S. federal tax consequences for the
participant of the Company. The exercise of an SAR results in taxable income to
the participant, equal to the difference between the exercise price of the
shares and the market price of the shares on the date of exercise, and a
corresponding tax deduction to the Company.
A participant who has been granted an award of restricted shares of Common
Stock will not realize taxable income at the time of the grant, and the Company
will not be entitled to a tax deduction at the time of the grant, unless the
participant makes an election to be taxed at the time of the award. When the
restrictions lapse, the participant will recognize taxable income in an amount
equal to the excess of the fair market value of the shares at such time over the
amount, if any, paid for such shares. The Company will be entitled to a
corresponding tax deduction.
The grant of an unrestricted stock award will produce immediate tax
consequences for both the participant and the Company. The participant will be
treated as having received taxable compensation in an amount equal to the then
fair market value of the Common Stock awarded. The Company will receive a
corresponding tax deduction.
AWARDS TO BE ISSUED IN 1995 UNDER PRIOR PLAN
No awards were granted pursuant to the Plan in fiscal 1995. In October 1995,
the Company granted options to purchase 247,321 shares of Common Stock pursuant
to the Plan at an exercise price equal to the fair market value of the Common
Stock on the date of grant ($12.75 per share). Other awards to be granted under
the Plan during the remainder of fiscal 1996 are not determinable.
The following table presents, for the persons and groups indicated,
information concerning options to purchase Common Stock that have been granted
under the Plan.
1995 LONG TERM INCENTIVE PLAN BENEFITS
<TABLE>
<CAPTION>
NUMBER OF
SHARES EXERCISE
UNDERLYING PRICE
OPTIONS PER EXPIRATION
NAME AND POSITION GRANTED SHARE DATE
<S> <C> <C> <C>
John I. Jellinek
President and Chief
Executive Officer . . . . . 55,000 $12.75 10/05/05
Dale H. Sizemore
President of
Telecommunications
Division . . . . . . . . 31,000 $12.75 10/05/05
Ian B. Aaron
Chief Information Officer 31,000 $12.75 10/05/05
A.J.R. Oosthuizen
President of Micrographics
Technology Corporation . 31,000 $12.75 10/05/05
Executive Group . . . . . . 148,000 $12.75 10/05/05
Non-Executive Director
Group . . . . . . . . . . . - - -
Non-Executive Officer
Employer Group . . . . . . 99,321 $12.75 10/05/05
</TABLE>
OTHER INFORMATION
On January 15, 1996, the closing price of the Company's Common Stock was $9
5/8.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE SOFTNET SYSTEMS,
INC. 1995 LONG TERM INCENTIVE PLAN.
PROPOSAL 4 - APPROVAL OF SOFTNET SYSTEMS, INC.
EMPLOYEE STOCK OPTION PLAN RELATING TO ACQUISITION OF
MICROGRAPHICS TECHNOLOGY CORPORATION
BACKGROUND
The Board of Directors is proposing for shareholder approval the SoftNet
Systems, Inc. Employee Stock Option Plan (the "Option Plan"). The Option Plan
was approved by the Board of Directors in connection with the acquisition of
Micrographics Technology Corporation. Pursuant to the Option Plan and in
connection with the MTC Acquisition, options have been granted to certain MTC
employees, subject to shareholder approval, to provide these employees with a
permanent stake in the growth and prosperity of both the Company and MTC and
encourage their involvement with the Company. No other options will be granted
under the Option Plan. Reference should be made to Exhibit B for a complete
statement of the provisions of the Option Plan which are summarized below.
ADMINISTRATION
The Option Plan provides for administration by a committee (the "Committee")
to be comprised of either the Compensation Committee of the Board or another
committee designated by the Board with at least two outside directors.
OPTION GRANTS
The Board of Directors of the Company has granted options to purchase an
aggregate of 40,000 shares of Common Stock to 44 employees of MTC none of whom
are directors or executive officers of the Company. The exercise price of these
stock options will equal the fair market value of the Common Stock on the date
the Option Plan is approved. These options will be deemed to be granted on the
date that the shareholders of the Company approve the Option Plan. These
options shall become exercisable in three equal installments on September 15,
1995, September 15, 1996, and September 15, 1997. The options will expire on
September 15, 2005.
OTHER TERMS
The Option Plan provides that awards shall not be transferable otherwise than
by will, the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined by the Internal Revenue Code or Title I of
the Employee Retirement Income Security Act of 1974, as amended.
In the event that a participant's employment at MTC is terminated for reasons
other than death, permanent disability, termination by the Company without cause
or retirement, then such participant's options shall expire and all rights to
purchase Common Stock thereunder shall expire. In the event that a
participant's employment is terminated due to death or disability, then the
vested portion of the option will be exercisable for one year after the date of
such event. In the event that a participant's employment is terminated by the
Company without cause or due to retirement, then the vested portion of the
option shall be exercisable for ninety days after the date of such event.
The Plan contains provisions for equitable adjustment of outstanding options
due to certain changes in the capitalization of the Company.
FEDERAL TAX TREATMENT
Under current law, a participant who is granted a stock option will not have
taxable income at the time of grant, but will have taxable income at the time of
exercise equal to the difference between the exercise price of the shares and
the market value of the shares on the date of exercise. The Company is entitled
to a tax deduction for the same amount.<PAGE>
OTHER INFORMATION
On January 15, 1996, the closing price of the Company's Common Stock was $9
5/8 per share.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF SOFTNET SYSTEMS,
INC. EMPLOYEE STOCK OPTION PLAN AND THE OPTION GRANTS RELATED THERETO.
PROPOSAL 5 - RATIFICATION OF STOCK OPTION GRANT
TO JOHN J. MCDONOUGH
On September 15, 1995, the Company granted to John J. McDonough, the Chairman
of the Board of the Company, an option to purchase a total of 150,000 shares of
Common Stock at an exercise price equal to $6.50 per share. This option
exercise price was below the fair market value of the Common Stock on the date
of the option grant ($13.50 per share). This option becomes exercisable, in
one-third increments, on the first three anniversaries of the option grant and
expires on September 15, 2005. As a result of this option grant, the Company
will incur a compensation expense equal to $1,050,000, which is the difference
between the fair market value of the underlying stock on the date of grant and
the option's exercise price. This compensation expense will be amortized
ratably over the three-year vesting period.
This option was granted prior to the adoption of the SoftNet Systems, Inc.
1995 Long Term Incentive Plan. The Company granted this option to induce Mr.
McDonough to accept his position with the Company.
In the event Mr. McDonough's employment with the Company is terminated
without cause or for good reason by McDonough, then the unexercised portion of
the option shall be cancelled on such termination date. In any event, the
vested portion of the option shall be exercisable for nine months after Mr.
McDonough's termination due to death and for three months upon Mr. McDonough's
disability, retirement, termination for good reason by Mr. McDonough or
termination by the Company without cause. If the Company is merged into or
consolidated with another corporation or upon a sale or liquidation of the
Company, then the Committee may cancel this option, provided that Mr. McDonough
shall have the right to exercise such option in full during the 30-day period
preceding the effective date of such merger, consolidation, sale or liquidation.
The affirmative vote of the holders of at least a majority of the voting
power of the shares entitled to vote at the Meeting is required for ratification
of this stock option grant. New York law requires that shareholders authorize
and approve the grant of options to directors, officers or employees of a
corporation that are issued as incentives to service or continued employment.
Shareholder approval is not required when options are granted pursuant to a plan
that has been previously adopted by a vote of such shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR RATIFICATION
OF THE STOCK OPTION GRANT TO JOHN J. MCDONOUGH.
PROPOSAL 6 - RATIFICATION OF STOCK OPTION GRANT
TO MARTIN A. KOEHLER
On June 12, 1995, the Company granted a stock option to Martin A. Koehler,
the Vice President-Finance and Chief Financial Officer of the Company, to
purchase a total of 25,000 shares of Common Stock for a purchase price of $8.50
per share, which was the fair market value of the Common Stock on the date of
grant. This option is exercisable in one-third installments on the first three
anniversaries of the option grant and expires on June 12, 2005. This option was
granted prior to the adoption of the SoftNet Systems, Inc. 1995 Long Term
Incentive Plan. The Company granted this option to induce Mr. Koehler to accept
his position with the Company.
In the event Mr. Koehler's employment with the Company is terminated without
cause or for good reason by Mr. Koehler, then the unexercised portion of the
option shall be cancelled on the employment termination date. In any event, the
vested portion of the option shall be exercisable for nine months after Mr.
Koehler's termination due to death and for three months upon Mr. Koehler's
disability, retirement, termination for good reason by Mr. Koehler or
termination by the Company without cause. If the Company is merged into or
consolidated with another corporation or upon a sale or liquidation of the
Company, then the Committee may cancel this option, provided that Mr. Koehler
shall have the right to exercise such option in full during the 30-day period
preceding the effective date of such merger, consolidation, sale or liquidation.
The affirmative vote of the holders of at least a majority of the voting
power of the shares entitled to vote at the Meeting is required for ratification
of this stock option grant. New York law requires that shareholders authorize
and approve the grant of options to directors, officers or employees of a
corporation that are issued as incentives to service or continued employment.
Shareholder approval is not required when options are granted pursuant to a plan
that has been previously adopted by a vote of such shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR RATIFICATION
OF THE STOCK OPTION GRANT TO MARTIN A. KOEHLER.
SHAREHOLDERS' PROPOSALS
Any shareholder may notify management of his intention to present a proposal
for action at the next annual meeting by delivery of a notice to be reviewed by
management not less than 120 calendar days in advance of the solicitation date
of the Company's next annual meeting or for action at any other meeting at a
reasonable time before solicitation is made, and any proposal received by
December 1, 1996 will be considered for action at the next Annual Meeting
notwithstanding that it is received less than 120 days prior to the next
solicitation date.
OTHER MATTERS
Management knows of no matters, other than those referred to in this proxy
statement, which will be presented to the meeting. However, if any other
matters properly come before the meeting or any adjournment, the persons named
in the accompanying proxy will vote it in accordance with their best judgment on
such matters.
It is expected that a representative of Coopers & Lybrand L.L.P., will be
present at the Annual Meeting and will have the opportunity to answer any
questions related to the financial statements in the 1996 annual report
distributed to the shareholders with this proxy and to make a statement if he or
she desires.
The Company has furnished its financial statements to shareholders in its
1995 Annual Report on Form 10-K which accompanies this Proxy Statement. In
addition, the Company will promptly provide, without charge to any shareholder,
on the request of such shareholder, an additional copy of the 1995 Annual Report
on Form 10-K. Requests for copies of such report should be directed to Alfred
J. Ziegler, Attention: Secretary, 717 Forest Avenue, Lake Forest, Illinois
60045; telephone number (847) 266-8150.
You are urged to sign and return your proxy promptly.
Alfred J. Ziegler
Secretary
January 31, 1996
EXHIBIT A
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 B
SOFTNET SYSTEMS, INC.
EMPLOYEE STOCK OPTION PLAN
(a) 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.
(b) 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.
(c) Eligibility. Those employees of the Company to whom options are
granted under the Plan are identified on Exhibit A attached hereto.
(d) 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.
(e) 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.
(f) 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.
(g) 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.
(h) 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.
(i) 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.
(j) 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.
(k) 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.
(l) 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.
(m) 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.
(n) 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.
(o) 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.
(p) 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.
EXHIBIT A TO MICROGRAPHICS TECHNOLOGY CORPORATION
EMPLOYEE STOCK OPTION PLAN NOT INCLUDED
SOFTNET SYSTEMS, INC.
FOR THE ANNUAL MEETING TO BE HELD ON FEBRUARY 28, 1996
The undersigned appoints and , and
either of them, attorneys and proxies of the undersigned, with power of
substitution, to represent the undersigned at the Annual Meeting of Shareholders
of SoftNet Systems, Inc. to be held on February 28, 1996 and at any adjournments
thereof, and to vote all shares of Common Stock of SoftNet Systems, Inc. which
the undersigned is entitled to vote on all matters coming before said meeting.
Dated:_______________________________________, 1996
___________________________________________________
Signature of Shareholder
___________________________________________________
Signature if held jointly
THIS PROXY MUST BE SIGNED EXACTLY AS NAME APPEARS HEREON. EXECUTORS,
ADMINISTRATORS, TRUSTEES, ETC., SHOULD GIVE FULL TITLE AS SUCH. IF THE SIGNER
IS A CORPORATION, PLEASE SIGN FULL CORPORATE NAME BY DULY AUTHORIZED OFFICER.
(CONTINUED ON REVERSE SIDE)
FOLD AND DETACH HERE
1. To elect John J. McDonough, Instruction: Unless otherwise
John I. Jellinek, James A. Gordon, specified in the space provided
John G. Hamm, Philip Kenny, A.J.R. below, this proxy shall authorize the
Oosthuizen, Ronald I. Simon and proxies named herein to cumulate all
C. William Vatz as the eight votes which the undersigned is
directors of the Company to serve entitled to cast at the annual
until the next Annual Meeting and meeting for, and to allocate such
until their successors shall be votes among, one or more of the
elected and qualify: nominees listed above as such proxies
shall determine, in their sole and
FOR WITHHELD absolute discretion, in order to
maximize the number of such nominees
/ / / / elected to the Company's Board of
Directors. To specify a different
method of cumulative voting, write
"Cumulative For" and the number of
FOR, except vote withheld for the Shares and the name(s) of the
following nominees: nominee(s) in the space provided
below.
____________________________________ ____________________________________
2. To approve the 3. To approve SoftNet 4. To approve SoftNet
amendment to the Systems, Inc. 1995 Systems, Inc.
Company's Certificate Long Term Incentive Employee Stock Option
of Incorporation Plan Plan.
increasing the
authorized common
stock from 10,000,000
to 25,000,000.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
/ / / / / / / / / / / / / / / / / /
5. To ratify the grant 6. To ratify the grant
of a stock option to of a stock option to
purchase 150,000 purchase 25,000
shares of Common shares of Common
Stock to John J. Stock to Martin A.
McDonough. Koehler.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
/ / / / / / / / / / / /
PLEASE MARK INSIDE BLUE BOXES SO THAT DATA
PROCESSING EQUIPMENT WILL RECORD YOUR VOTES
- -----------------------------------------------------------------------------
FOLD AND DETACH HERE
