SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)and 0-11.
(1) Title of each class of securities to which transaction applies:
- -------------------------------------------------------------------------------
(2) Aggregate number of securities to which 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:
- -------------------------------------------------------------------------------
<PAGE>
SOFTNET SYSTEMS, INC.
717 Forest Avenue
Lake Forest, Illinois 60045
February 26, 1997
Dear Shareholder:
You are cordially invited to attend the 1997 Annual Meeting of
Shareholders. The meeting will be held at the Marriott Lincolnshire, 10 Marriott
Drive, Lincolnshire, Illinois, 60069 at 10:00 a.m. Chicago time on March 26,
1997. 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.
1996 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,
and Chief Executive Officer
<PAGE>
SOFTNET SYSTEMS, INC.
717 Forest Avenue
Lake Forest, Illinois 60045
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 26, 1997
The Annual Meeting of Shareholders of SoftNet Systems, Inc., a New York
corporation (the "Company"), will be held at the Marriott Lincolnshire, 10
Marriott Drive, Lincolnshire, Illinois, 60069 on March 26, 1997, at 10:00 a.m.
Chicago time, for the following purposes:
1. To elect five directors to hold office for the ensuing
year.
2. To consider and vote upon a proposal to authorize and
approve the SoftNet Systems, Inc. Amended 1995 Long Term
Incentive Plan.
3. 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 February 14,
1997 are entitled to notice of and to 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
Martin A. Koehler
Secretary
February 26, 1997
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.
<PAGE>
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
February 26, 1997, 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 Marriott Lincolnshire, at 10 Marriott Drive,
Lincolnshire, Illinois, on March 26, 1997, 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 a 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 February 14, 1997, the Company had outstanding 6,574,455 shares
of Common Stock and such shares are the only shares entitled to vote at the
Meeting.
A majority of the outstanding shares entitled to vote at the 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 to be voted upon at the
Meeting.
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 a plurality of the votes
cast according to cumulative voting rules and (ii) Proposal 2 (regarding the
authorization and approval of the SoftNet Systems, Inc. 1995 Amended Long Term
Incentive Plan) 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.
2
<PAGE>
PROPOSAL 1 - ELECTION OF DIRECTORS
At the Annual Meeting, five 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 five 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 (60) Director since 1995. Chairman of the Board of the
Company since July 1995. Chief Executive Officer of
the Company since September 1996. 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., Applied Power, Inc.,
Lunar Corporation, Plexus Corporation,
and Newell Co.
Ian B. Aaron (36) Director since 1994. President of MediaCity World
Inc., a subsidiary of the Company, since June 1996
and Chief Information Officer of the Company from
January 1996 to June 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.
John G. Hamm (58) 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.
A.J.R. Oosthuizen (61) Director since 1995. President and Chief Operating
Officer of the Company since September 1996.
President and Chief Executive Officer of
Micrographics Technology Corporation a subsidiary of
the Company, since March 1989.
Ronald I. Simon (58) Director since 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 (real estate investment company).
3
<PAGE>
Information Concerning the Board and its Committees
The Board of Directors currently consists of John J. McDonough, Ian B.
Aaron, John G. Hamm, A.J.R. Oosthuizen and Ronald I. Simon. John I. Jellinek,
James A. Gordon, Philip Kenny and C. William Vatz, who were elected to the Board
at the last Annual Meeting of shareholders, resigned from the Board on various
dates during 1996, as set forth elsewhere in this Proxy.
There were nine meetings of the Board of Directors in the fiscal year
ended September 30, 1996. Each director attended at least 75% of the meetings of
the Board of Directors and the Committees on which he served.
The Audit Committee had three meetings in fiscal 1996. The Audit
Committee originally consisted of Messrs. Hamm, Simon and Gordon. Following Mr.
Gordon's resignation from the Board of Directors in August, 1996, Messrs. Hamm
and Simon constitute all of the members of the Audit Committee. Messrs. Hamm and
Simon attended all of the meetings and Mr. Gordon attended two-thirds of the
meetings of the Audit Committee. The duties of the Audit Committee are to
recommend the appointment of auditors and oversee the accounting and audit
functions of the Company.
The Compensation/Stock Option Committee had four meetings in fiscal
1996, which were attended by all of the members of the Committee. The
Compensation/Stock Option Committee originally consisted of Messrs. Simon, Kenny
and Gordon. In connection with the resignations of Messrs. Kenny and Gordon from
the Company's Board of Directors, the Board of Directors assumed the
administrative responsibilities of the Compensation/Stock Option Committee in
November 1996.
The Executive Committee originally consisted of Messrs. McDonough,
Jellinek, Oosthuizen and Kenny. Following the resignation of Messrs. Jellinek
and Kenny from the Board of Directors in December 1996, the Executive Committee
has consisted of Messrs. McDonough and Oosthuizen. The Executive Committee did
not meet in fiscal 1996. The Executive Committee has all of the authority of the
Board, except with respect to items requiring shareholder approval or
submission, the filling of Board or Committee vacancies, fixing director
compensation, amending or adopting bylaws or amending or repealing Board
resolutions that are not amendable or repealable.
Director Compensation
Directors who were not officers of the Company or of a subsidiary,
namely, Mr. Hamm and Mr. Simon, each receive a fee of $1,000 per month for their
services as directors of the Company. Fees payable to the directors have been
deferred since July 1996. The Board currently anticipates that if the SoftNet
Systems, Inc. Amended 1995 Long Term Incentive Plan is approved by the
shareholders at the Meeting, then the Board will award stock options to Messrs.
Hamm and Simon in lieu of paying further director fees and in consideration of
Messrs. Hamm and Simon's waiver of the deferred fees.
Messrs. McDonough, Oosthuizen and Aaron each receive compensation for
their services as executive officers of the Company. A description of these
compensation arrangements is set forth under "Executive Compensation--Certain
Agreements."
A description of other transactions between directors and the Company
is set forth below in "Certain Relationships and Related Transactions."
The Board of Directors recommends a vote FOR the election of the named
nominees.
4
<PAGE>
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 December 31, 1996, except as otherwise noted, of (i) each
person (including any "group" as defined 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 directors and executive officers 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 and voting power with respect to such shares,
subject to community property laws where applicable. In accordance with Rule
13d-3 under the Exchange Act, persons who have the 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 nature of
of beneficial owner beneficial ownership Percent of class
<S> <C> <C>
John J. McDonough.................................... 156,667(1) 2.4%
717 Forest Avenue
Lake Forest, IL 60045
Ian B. Aaron......................................... 155,762(2) 2.4%
c/o MediaCity World, Inc.
500 Logue Avenue
Mountain View, CA 94043
John G. Hamm......................................... 44,430(3) *
c/o ARTRA Group, Inc.
500 Central Avenue
Northfield, IL 60093
A.J.R. Oosthuizen.................................... 524,340(4) 7.8%
c/o Micrographics Technology Corporation
520 Logue Avenue
Mountain View, CA 94043
Ronald I. Simon...................................... - -
c/o Ronald Simon, Inc.
1020 Prospect Street, Suite 401C
P.O. Box 1986
LaJolla, CA 92038
Martin A. Koehler.................................... 8,333(5) *
717 Forest Avenue
Lake Forest, IL 60045
R.C.W. Mauran........................................ 676,040(6) 9.9%
47 Eaton Place, Flat A
London SWI, England
Joseph Rich.......................................... 408,587(7) 6.1%
1386 N. Green Bay Road
Lake Forest, IL 60045
John I. Jellinek..................................... 356,950(8) 5.2%
1425 Bush Parkway
Buffalo Grove, IL 60089
All directors and executive officers as a group
( 6 persons)......................................... 889,532 13.1%
</TABLE>
5
<PAGE>
* Less than 1%.
(1) Consists of 140,000 held by McDonough Partners II of which Mr. McDonough
is the general partner, and 16,667 shares issuable upon exercise of an
option which is exercisable within 60 days of December 31, 1996.
(2) Includes 10,333 shares issuable upon exercise of an option.
(3) Consists of 29,430 shares held jointly with his wife and 15,000 shares
issuable upon exercise of a warrant.
(4) Includes 179,615 shares issuable upon conversion of 9% convertible
Subordinated Debentures and 10,333 shares issuable upon exercise of an
option.
(5) Consists of 8,333 shares issuable upon the exercise of an option.
(6) Includes 185,553 shares issuable upon conversion of 9% convertible
Subordinated Debentures and 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.
(7) Includes 113,500 shares issuable upon exercise of warrants.
(8) Includes (i) 200,000 shares issuable upon exercise of an option held by
Jelco Ventures, Inc., (ii) 105,000 shares held by Jelken LLC, and (iii)
51,500 shares issuable upon exercise of warrants held by Jelken LLC. Mr.
Jellinek shares voting power with Philip Kenny, a former director of the
Company, for all shares held by Jelken LLC.
EXECUTIVE OFFICERS OF THE COMPANY
The following table lists the executive officers of the Company at
September 30, 1996:
Name Title
John J. McDonough........................ Chairman of the Board of Directors
and Chief Executive Officer
A.J.R. Oosthuizen........................ President and Chief Operating Officer
Martin A. Koehler (1).................... Vice President-Finance
and Chief Financial Officer
Ian B. Aaron............................. President of MediaCity World, Inc.
(1) 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 33.
6
<PAGE>
Executive Compensation
The following table presents information with respect to all
compensation awarded or paid to, or earned, during each of the last three fiscal
years for services rendered to the Company and its subsidiaries, by (i) Mr.
McDonough, the Company's Chief Executive Officer, (ii) Mr. Oosthuizen, Mr.
Koehler, and Mr. Aaron, the Company's only executive officers at September 30,
1996 earning in excess of $100,000 during fiscal 1996, (iii) Mr. Jellinek, the
Company's former President and Chief Executive Officer, and (iv) Dale H.
Sizemore, Jr., the former President of the Company's Telecommunications
Division, who would have been one of the four most highly compensated officers
at September 30, 1996 except for the fact that Mr. Sizemore resigned from his
position as an executive officer in June 1996 (collectively, the "Named
Executive Officers").
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Annual Compensation Compensation
------------------------------------------ Securities
Fiscal Underlying
Name and Principal Position Year Salary ($) Bonus ($) Options (#)
- --------------------------- ---- ---------- --------- -------------
<S> <C> <C> <C> <C>
John J. McDonough (1) 1996 $52,500 - 50,000
Chairman of the Board and 1995 - - -
Chief Executive Officer 1994 - - -
A.J.R. Oosthuizen (2) 1996 200,000 $80,000 31,000
President and Chief 1995 7,700 - -
Operating Officer 1994 - - -
Ian B. Aaron (2) 1996 189,000 - 31,000
President of MediaCity World, Inc. 1995 146,000 - -
1994 - - -
Martin A. Koehler (2) 1996 104,800 - -
Vice President - Finance and 1995 30,770 - 25,000
Chief Financial Officer 1994 - - -
John I. Jellinek (3) 1996 200,000 - 55,000(3)
Former President and Chief 1995 161,807 - -
Executive Officer 1994 145,835 - -
Dale H. Sizemore, Jr. (4) 1996 150,000 - 31,000(4)
Former President of the 1995 130,000 - -
Telecommunications Division 1994 55,000 8,000 -
<FN>
(1) Mr. McDonough was not employed by the Company in fiscal 1995 or 1994. Mr.
McDonough's annual compensation for fiscal 1996 was set at $60,000.
Effective July 1, 1996 Mr. McDonough voluntarily reduced his annual
compensation to $30,000. In addition, effective September 18, 1996, Mr.
McDonough has deferred the cash payment of his salary.
(2) Messrs. Oosthuizen, Aaron, and Koehler were not employed by the Company in
fiscal 1994. Mr. Oosthuizen has deferred his $80,000 bonus until cash flow
of the Company improves.
(3) On September 11, 1996, Mr. Jellinek resigned from all of his executive
positions with the Company and, as a result, his option expired. On
December 6, 1996, Mr. Jellinek resigned from the Company's Board of
Directors.
(4) Mr. Sizemore became an executive officer of the Company on September 15,
1995 upon the Company's acquisition of Kansas Communications, Inc. The
acquisition of Kansas Communications, Inc. was accounted for as a pooling
of interests and the table reflects compensation received by Mr. Sizemore
from Kansas Communications, Inc. prior to September 15, 1995. In June
1996, Mr. Sizemore resigned from his positions with the Company.
Subsequent to September 30, 1996, Mr. Sizemore rejoined the Company as
President of Kansas Communications, Inc., a subsidiary of the Company. As
a result of his resignation from his positions with the Company in June
1996, Mr. Sizemore's option expired.
</FN>
</TABLE>
7
<PAGE>
The following tables present the number of stock options granted to the
Named Executive Officers during fiscal 1996, and information regarding stock
option exercises and exercisable and unexercisable options held by the Named
Executive Officers as of September 30, 1996.
<TABLE>
<CAPTION>
Option Grants in Fiscal 1996
Potential Realizable
Individual Grants
- ---------------------------------------------------------------------------------------------------- Value at Assumed
Number of Annual Rates of Stock
Securities Percent of Total Price Appreciation for
Underlying Options Granted Exercise or Option Term
Options to Employees in Base Price Expiration ---------------------------
Name Granted (#) Fiscal Year ($/Sh) (1) Date 5% ($) 10% ($)
- -------------------------- ---------------- ------------------- --------------- ------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
John J. McDonough 50,000 18% $ 4.94 2/28/06 $155,000 $394,000
A.J.R. Oosthuizen 31,000 10% 4.94 10/05/05 96,000 244,000
Martin A. Koehler - - - - - -
Ian B. Aaron 31,000 10% 4.94 10/05/05 96,000 244,000
John I. Jellinek 55,000 19% 8.25 - (2) - (2) - (2)
Dale H. Sizemore, Jr. 31,000 10% 8.25 - (3) - (3) - (3)
<FN>
(1) Stock options were granted on various dates during fiscal 1996 at exercise
prices ranging from $8.25 to $12.75 per share (the market price on the
date of grant). On February 28, 1996, the exercise price for all of the
options listed in the table was reduced to $8.25 per share (the market
price on such date). On November 15, 1996, the exercise price for all of
the options listed in the table (except options held by Messrs. Jellinek
and Sizemore which had previously expired) was further reduced to $4.94
per share (the market price on such date). The calculations of the
potential realizable value at assumed annual rates of stock price
appreciation for the option term is based upon the assumed market price of
$4.94 per share.
(2) As a result of his resignation as an employee, Mr. Jellinek's option
expired.
(3) As a result of his resignation as an employee, Mr. Sizemore's option
expired.
</FN>
</TABLE>
Aggregated Option Exercises in Fiscal Year 1996 and Year-end Option Values
Number of Securities
Underlying Unexercised Value of Unexercised
Options In-the-Money Options at
at Fiscal Year-End (#) Fiscal Year-End ($)
Name Exercisable Unexercisable Exercisable Unexercisable
John J. McDonough - 50,000 - -
A.J.R. Oosthuizen - 31,000 - -
Martin A. Koehler 8,333 16,667 - -
Ian B. Aaron - 31,000 - -
John I. Jellinek(1) - - - -
Dale H. Sizemore,Jr.(2) - - - -
(1) Mr. Jellinek was granted an option in fiscal 1996 to purchase 55,000
shares at $12.75 per share. On February 28, 1996, the exercise price per
share was reduced to $8.25 (the market price on such date). As a result of
his resignation as an employee, Mr. Jellinek's option expired.
(2) Mr. Sizemore was granted an option in fiscal 1996 to purchase 31,000
shares at $12.75 per share. On February 28, 1996, the exercise price per
share was reduced to $8.25 (the market price on such date). As a result of
his resignation as an employee, Mr. Sizemore's option expired.
8
<PAGE>
Ten Year Option Repricings
On February 28, 1996, the Stock Option Committee approved a stock
option repricing program to provide employee option holders additional
opportunity and incentive to achieve business plan goals. All options held by
employees on that date were repriced to $8.25 per share, which was the market
price on such date. All other terms of the options remained the same and,
accordingly, there was no change to the vesting or term of any option.
The table below presents the required disclosure with respect to any
repricing of options held by any executive officer during the last ten completed
fiscal years.
<TABLE>
<CAPTION>
Length of
Original Option
Number of Market Price Exercise Term Remaining
Securities of Stock at Price at at Date of
Underlying Time of Time of New Repricing or
Options Repriced Repricing or Repricing or Exercise Amendment
Name Date or Amended Amendment Amendment Price(1) (Years)
- ---- ---- ---------- -------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
A.J.R. Oosthuizen 2/28/96 31,000 $ 8.25 $ 12.75 $ 8.25 9.6
Martin A. Koehler 2/28/96 25,000 $ 8.25 $ 8.50 $ 8.25 9.4
Ian B. Aaron 2/28/96 31,000 $ 8.25 $ 12.75 $ 8.25 9.6
John I. Jellinek (2) 2/28/96 55,000 $ 8.25 $ 12.75 $ 8.25 9.6
Dale H. Sizemore (2) 2/28/96 31,000 $ 8.25 $ 12.75 $ 8.25 9.6
- ------------------------
<FN>
(1) On November 15, 1996, the exercise prices for all of the options listed in
the table (except options held by Messrs. Jellinek and Sizemore which had
previously expired) were further reduced to $4.94 per share (the market
price on such date).
(2) In connection with their resignations from their positions as employees,
options granted to Messrs. Jellinek and Sizemore expired.
</FN>
</TABLE>
SOFTNET SYSTEMS, INC. INCENTIVE COMPENSATION PLAN
In 1995, the Company adopted the SoftNet Systems, Inc. Incentive
Compensation Plan for the executive officers and certain other senior employees
of the Company and its subsidiaries (the "Bonus Plan"). Under the Bonus Plan, a
target bonus is established for each participant based upon a percentage ranging
from 0% to 90% of his or her base compensation. Payment of a bonus is dependent
upon the achievement of individual and Company performance goals. The Bonus Plan
is currently administered by the Board of Directors of the Company. Certain
employees of Micrographics Technology Corporation received $155,200 in bonuses
under the Bonus Plan with respect to fiscal 1996.
CERTAIN AGREEMENTS
Mr. McDonough, as Chairman of the Board and Chief Executive Officer,
receives an annual salary of $30,000 plus a bonus of up to 90% of his base
salary as determined by the Board of Directors in accordance with the Bonus
Plan. Mr. McDonough's annual base salary was originally set at $60,000, but
McDonough volunteered to reduce his annual base salary to $30,000. In addition,
Mr. McDonough has elected to defer his salary since September 18, 1996. No bonus
was paid to Mr. McDonough with respect to fiscal 1996. On February 28, 1996, Mr.
McDonough withdrew from consideration of shareholders the prior grant of an
option to purchase 150,000 shares at $6.50 per share. On February 28, 1996, Mr.
McDonough was granted an option to purchase 50,000 shares of Common Stock at
$8.25 per share pursuant to the SoftNet System Inc. 1995 Long-Term Incentive
Plan (the "LTIP"). On November 15, 1996, this option was repriced to $4.94 per
share.
9
<PAGE>
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. During fiscal 1996, Mr. Oosthuizen was
named President and Chief Operating Officer of the Company. Mr. Oosthuizen
receives an annual salary of $200,000 plus a bonus of up to 90% of his base
salary as determined by the Board of Directors in accordance with the Company's
Bonus Plan. Mr. Oosthuizen earned $80,000 as a bonus with respect to fiscal
1996, which has been deferred until cash flow improves. In October 1995, Mr.
Oosthuizen was granted an option to purchase 31,000 shares of Common Stock at
$12.75 per share pursuant to the LTIP. On February 28, 1996 and November 15,
1996, the option was repriced to $8.25 and $4.94 per share, respectively. The
employment agreement terminates on September 15, 1998 and also contains
confidentiality and noncompetition provisions.
On October 28, 1994, Communicate Direct, Inc., a wholly-owned
subsidiary of the Company, entered into an employment agreement with Ian B.
Aaron, a Director and President of MediaCity World, Inc., a wholly owned
subsidiary of the Company. Mr. Aaron, as President of MediaCity World, Inc.,
receives an annual salary of $156,000 plus a bonus of up to 60% of his base
salary as determined by the Board of Directors in accordance with the Company's
Bonus Plan. No bonus was paid to Mr. Aaron with respect to fiscal 1996. In
October 1995, Mr. Aaron was granted an option to purchase 31,000 shares of
Common Stock at $12.75 per share pursuant to the LTIP. On February 28, 1996 and
November 15, 1996, the option was repriced to $8.25 and $4.94, respectively. The
employment agreement terminates on September 30, 1997 and also contains
confidentiality and noncompetition provisions.
In connection with the Company's acquisition of Kansas Communications
Inc. on September 15, 1995, the Company entered into an employment contract with
Dale H. Sizemore, Jr. pursuant to which Mr. Sizemore became President of the
Telecommunications Division of the Company. This employment agreement had a
three-year term and provided for a base salary of $200,000 plus bonuses to be
paid at the discretion of the Board of Directors. In June 1996, Mr. Sizemore
resigned from his positions with the Company and the employment agreement
terminated, except for the confidentiality provision contained therein.
Subsequent to September 30, 1996, Mr. Sizemore rejoined the Company as President
of Kansas Communications, Inc., a subsidiary of the Company.
10
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Prior to November 1996, the Compensation Committee was responsible for
the Company's executive compensation policies, and annually determined the
compensation to be paid to the executive officers of the Company. In November
1996, in connection with the resignations of Messrs. Gordon and Kenny from the
Board of Directors, the Board of Directors assumed all of the responsibilities
of the Compensation Committee.
Overview and Philosophy
The executive compensation program of the Company is intended to
provide overall levels of compensation for the executive officers which are
competitive for the industries and the geographic areas within which they
operate, the individual's experience, and contribution to the long-term success
of the Company. The Board believes that its task of determining fair and
competitive compensation is ultimately judgmental.
The program is composed of base salary, annual incentive compensation,
equity based incentives, and other benefits generally available to all
employees. As of September 30, 1996, options on 351,000 shares of the Company's
stock were outstanding and 559,000 options were granted to employees during the
fiscal year ended September 30, 1996.
Base Salary
The base salary for each executive is intended primarily to be
competitive with companies in the industries and geographic areas in which the
Company competes. In making annual adjustments to base salary, the Board also
considers the individual's performance over a period of time as well as any
other information which may be available as to the value of the particular
individual's past and prospective future services to the Company. This
information includes comments and performance evaluations by the Company's Chief
Executive Officer and Chief Operating Officer. The Board considers all such
data; it does not prescribe the relative weight to be given to any particular
component.
Annual Incentive Compensation
Annual incentive compensation is ordinarily determined by a formula
which considers the overall operations and financial performance of the Company
and its subsidiaries.
Long-term Incentives
In general, the Board believes that equity based compensation should
form a part of an executive's total compensation package. Stock options are
granted to executives because they directly relate the executive's earnings to
the stock price appreciation realized by the Company's shareholders over the
option period. Stock options also provide executives the opportunity to acquire
an ownership interest in the Company. The number of shares covered by each
executive's option was determined by factors similar to those considered in
establishing base salary.
Stock Option Repricing Program
On February 28, 1996, the Board of Directors approved a stock option
repricing program to provide employee option holders additional opportunity and
incentive to achieve business plan goals. The exercise prices for all options
held by employees on that date were repriced to $8.25 per share, which was the
market price on such date. All other terms of the options remained the same and,
accordingly, there was no change to the vesting or term of any option. In
addition, on November 15, 1996, the Board of Directors approved an additional
stock option repricing program to further provide employee option holders with
additional opportunity and incentive to achieve business plan goals. The
exercise prices for all options
11
<PAGE>
held by employees on November 15, 1996 were repriced to $4.94 per share, which
was the market price on that date.
Other
Other benefits are generally those available to all other employees in
the Company, or a subsidiary, as appropriate. Together with perquisites, these
benefits did not exceed 10% of any executive's combined salary and bonus in
fiscal 1996.
Compensation For The Chief Executive Officer
The Board applies the same standard in establishing the compensation of
the Company's Chief Executive Officer as are used for other executives. However,
there are procedural differences. The Chief Executive Officer does not
participate in setting the amount and nature of his compensation. Mr. McDonough
did not receive a bonus for fiscal 1996 and since September 15, 1996 has elected
to defer his compensation.
The Board does not expect that Section 162(m) of the Internal Revenue
Code will limit the deductibility of compensation expected to be paid by the
Company in the foreseeable future.
This report is submitted by the Board of Directors of the Company.
John J. McDonough, Chairman
Ian B. Aaron
John G. Hamm
A.J.R. Oosthuizen
Ronald I. Simon
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Members of the Company's Compensation Committee during fiscal 1996 were
Ronald I. Simon, Philip Kenny, and James Gordon. Messrs. Kenny and Gordon
resigned from their positions as Directors on August 22, 1996 and December 6,
1996, respectively No member of the Compensation Committee was an executive
officer or employee of the Company during fiscal year 1996 or at any time prior
thereto. In November 1996, in connection with the resignations of Messrs. Kenny
and Gordon from the Board of Directors, the Board assumed all of the
responsibilities of the Compensation Committee.
The description of certain relationships and related transactions
between Directors and the Company set forth below in "Certain Relationships and
Related Transactions" is incorporated herein by reference.
12
<PAGE>
PERFORMANCE GRAPH
Set forth below is a comparison of the total shareholder return on the
Company's Common Stock for the period beginning September 30, 1991 and ending
September 30, 1996 with the total shareholder return for the same period for the
AMEX Stock Market Index (a broad equity market index which includes the stock of
companies traded on the AMEX) and the AMEX Computer Programming, Data
Processing, & Other Computer Related Services Industrial Index (an index
including companies with primary SIC 7370- 7379). The total shareholder return
reflects the annual change in share price, assuming an investment of $100.00 on
September 30, 1991 plus the reinvestment of dividends, if any. No dividends were
paid on the Company's Common Stock during the period shown. The return shown is
based on the annual percentage change during each fiscal year in the five year
period ended September 30, 1996. The stock price performance shown below is not
necessarily indicative of future stock price performance.
Value of $100.00 Invested on September 30, 1991:
<TABLE>
<CAPTION>
9/30/91 9/30/92 9/30/93 9/30/94 9/29/95 9/30/96
--------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
SoftNet Systems, Inc. $ 100.00 $ 161.11 $ 327.78 $ 577.78 $1,206.35 $ 518.52
AMEX Stock Market Index 100.00 103.82 134.24 131.64 162.10 165.43
AMEX Computer Industrial Index 100.00 90.50 145.87 120.49 174.72 191.77
</TABLE>
13
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Subsequent to year-end, Communicate Direct, Inc., a wholly-owned
subsidiary of the Company ("CDI"), sold its operations that support its Fujitsu
maintenance base in the Chicago metropolitan area to a new company formed by
John I. Jellinek, the Company's former president and chief executive officer and
a 5.2% shareholder of the Company, and Philip Kenny, a former director of the
Company. The buyer acquired certain assets in exchange for a $209,000 promissory
note and the assumption of trade payables of at least $624,000. In addition, at
the closing the buyer paid off $438,000 of existing Company bank debt and
entered into a sub-lease of CDI's facility in Buffalo Grove, Illinois. At the
closing, the buyer merged with Telecom Midwest, LLC. and Messrs. Jellinek and
Kenny and two other shareholders of the merged company personally guaranteed
obligations arising out of the promissory note, the sub-lease arrangement and
trade payables. The personal guarantees of the promissory note are several. The
personal guarantees of the sub-lease are limited to $400,000 and are on a joint
and several basis. The personal guarantees of trade payables are on a joint and
several basis but are limited to Messrs. Jellinek and Kenny. Concurrent with
this transaction, Messrs. Jellinek and Kenny resigned from the Company's board.
The transaction was approved by the disinterested members of the Company's
board.
In June 1996, the Company acquired the exclusive worldwide
manufacturing rights to IMNET Systems, Inc.'s, ("IMNET") MegaSAR Microfilm
Jukebox and completed and amended its obligations under a previous agreement. In
addition to becoming the exclusive manufacturer of the MegaSAR for IMNET, the
Company will further integrate the device into its current product offering. The
Company issued a $2.9 million note for prepaid license fees, software inventory,
the manufacturing rights, and certain other payables. Approximately $2.5 million
was paid on this note during the fourth quarter of fiscal 1996. The Company has
a receivable from IMNET of $176,000. The transaction was approved by the
disinterested members of the Company's board. Following the transaction, John J.
McDonough and John I. Jellinek resigned from IMNET's board and James Gordon, a
director of IMNET, resigned from the Company's board.
During the fourth quarter of fiscal 1996, the Company decided to
integrate the IMNET microfilm retrieval software with another software
developer's product, which the Company was already distributing. The integrated
product will require less IMNET software than previously assumed. As a result,
the Company recorded a one-time charge of $1.5 million to write-off software
inventory. Since the acquisition of the manufacturing rights from IMNET, the
transfer of all of the technical and manufacturing know-how has been delayed due
to technical difficulties. The Company is currently negotiating with IMNET to
either complete the transfer or seek an alternative solution.
During fiscal 1996, the Company sold its entire holdings in IMNET for
net proceeds of $7.7 million. Accordingly, the Company recorded a gain on sale
of the securities of $5.7 million.
At 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 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. ("PST"), a majority-owned subsidiary of Ozite, 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.
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, 267,203 shares of ARTRA Group
Incorporated ("ARTRA") Common Stock, and approximately 932 shares of ARTRA
Preferred Stock. Subsequently, the Company sold all 311,025 shares of Pure Tech
for net proceeds of $1,027,466. During fiscal 1996, the remaining securities
consisting of
14
<PAGE>
ARTRA Common Stock and ARTRA Preferred Stock were sold for net proceeds of
$815,000, which were recorded as a capital contribution.
In fiscal 1994, the Board voted to compensate Mr. Hamm, a Director of
the Company, $150,000 for previously uncompensated services as a consultant
rendered to the Company over the prior ten years. During that period, Mr. Hamm
coordinated the preparation of public filings made by the Company, reviewed
acquisition proposals and was involved in investor relations. The Board
authorized Mr. Hamm to receive (i) $100,000 in cash, and (ii) either $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 May 1996, the
Company paid Mr. Hamm $77,000 and signed a promissory note for $88,000 payable
in equal monthly installments of $15,000 beginning June 1, 1996. The cash
payment and the promissory note fulfilled the Company's entire obligation to Mr.
Hamm. At the Company's request, payments to Mr. Hamm were suspended on September
1, 1996 due to cash flow constraints. Payments of the principal are scheduled to
resume on April 1, 1997. At September 30, 1996, the unpaid compensation was
$44,500. Mr. Hamm no longer serves as a consultant to the Company. The Company
began interest only payments to Mr. Hamm on January 1, 1997.
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. During the fiscal year ended
September 30, 1996, to the knowledge of the Company, all of these filing
requirements were satisfied by its directors and officers, except Mr. McDonough
failed to filed his Form 5 on a timely basis. In making these statements, the
Company has relied on the written representations of its directors and officers
and copies of the reports that they have filed with the Commission. The Company
does not have any ten percent shareholders.
15
<PAGE>
PROPOSAL 2 - AUTHORIZATION AND APPROVAL OF
THE SOFTNET SYSTEMS, INC.
AMENDED 1995 LONG TERM INCENTIVE PLAN
Background
The Company's 1995 Long Term Incentive Plan, authorizing stock options
and other stock-based incentives of up to 600,000 shares of Common Stock, was
approved by the shareholders of the Company on February 15, 1996. The Board of
Directors is proposing for shareholder authorization and approval the SoftNet
Systems, Inc. Amended 1995 Long Term Incentive Plan (the "Plan") under which
benefits may be awarded to directors as well as employees and under which the
amount of shares available for benefits will be increased to 1,500,000 shares.
The purposes of the Plan are to encourage selected employees and non-employee
directors 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 qualified individuals upon whom, in large measure, the
sustained progress, growth and profitability of 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 copy of the amended
Plan which is 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 and director compensation and make the Company
competitive with those companies that offer creative incentives to attract and
keep key management employees and directors. 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 originally reserved 600,000 shares of Common Stock for awards,
all of which are currently subject to options granted to employees under the
Plan. The Amended Plan increases the number of shares reserved to 1,500,000
shares. The maximum number of shares which may be awarded to any participant in
any year during the term of the Plan is 200,000 shares. If any shares covered by
an award under the Plan are forfeited or any option or right otherwise
terminates or is canceled prior to the issuance of shares or the payment of the
equivalent thereunder, then those shares may again be available for new awards
under the Plan.
Administration
The Plan is administered by the Board or by a committee (the
"Committee") to be comprised of either the Compensation Committee of the Board
of Directors or any other committee designated by the Board with at least two
outside directors. The Board or the Committee (in either case, the
"Administrator") 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 Administrator 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
Administrator with respect to the Plan will be final. The Board of Directors is
currently acting as the Administrator of the Plan.
16
<PAGE>
Subject to the terms of the Plan and applicable law, the Administrator
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
Administrator may not delegate such authority with respect to awards held by
officers and directors subject to Section 16 of the Exchange Act.
Eligibility
Any employee or director of the Company or an Affiliate of the Company
is eligible to participate in the Plan. The selection of participants from among
directors and eligible employees is within the discretion of the Administrator.
The estimated number of persons who are eligible to participate in the Plan is
209.
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.
To date, only non-qualified stock options have been awarded under the Plan.
Awards may be granted singly, in combination, in tandem or in substitution for
any other award, as determined by the Administrator, 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 Administrator may grant awards in the form of
options to purchase shares of Common Stock. The Administrator 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 or directorship of a
participant, no employee option may be exercised until the employee receiving
the option has been continuously employed by the Company for at least one year,
unless the option otherwise provides. Options will be exercisable within such
period after a participant's termination of employment as the option provides.
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, and incentive stock options may be
granted only to employees.
Stock Appreciation Rights
The Plan authorizes the Administrator 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.
17
<PAGE>
Restricted Securities
The Plan authorizes the Administrator 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 Administrator deems
appropriate, including, but not by way of limitation, restrictions on
transferability, continued employment or directorship and performance goals
established by the Administrator over a designated period of time.
Performance Awards
Awards may also be 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
Administrator. 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 Administrator.
Other Stock-Based Award
The Administrator 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 Administrator, be paid by a
participant in cash, shares of Common Stock owned by the participant or such
consideration as the Administrator 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, except under certain
circumstances. Subject to specific provisions in the Plan with respect to
options, the Administrator shall determine the treatment to be afforded to a
participant in the event of termination of employment or directorship for any
reason, including death, disability or retirement. Notwithstanding the
foregoing, the Administrator 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 Administrator 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 Administrator 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 Administrator
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.
18
<PAGE>
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 Issued Under the Plan
At February 10, 1997, non-qualified stock options covering 600,000
shares of Common Stock, at an average price of $4.95 per share, were outstanding
under the Plan. Other awards to be granted under the Plan during the remainder
of fiscal 1997 are not currently determinable.
At the same date, (i) options on 29,167 shares at $4.94 per share were
outstanding under the SoftNet Systems, Inc. Employee Stock Option Plan (the "MTC
Option Plan"), none of which were held by directors or executive officers of the
Company, and (ii) Martin A. Koehler held an additional option on 25,000 shares
at $4.94 per share which was granted prior to the adoption of the Plan. See
"--Other Plans" below.
19
<PAGE>
The following table presents, for the persons and groups indicated,
information concerning options to purchase Common Stock that have been granted
under the Plan through February 14, 1997.
Softnet Systems, Inc. 1995 Long Term Incentive Plan Benefits
<TABLE>
<CAPTION>
Number of Shares
Underlying Options Date of Exercise Price
Name and Position Granted Grant per Share(1) Expiration Date
<S> <C> <C> <C> <C>
John J. McDonough
Chairman of the Board and
Chief Executive Officer................. 50,000 02/28/96 $ 4.94 02/28/06
25,000 11/15/96 4.94 11/15/06
75,000 02/10/97 5.00 02/10/07
A.J.R. Oosthuizen
President and Chief Operating Officer .. 31,000 10/05/95 4.94 10/05/05
44,000 11/15/96 4.94 11/15/06
31,000 02/10/97 5.00 02/10/07
Ian B. Aaron
President of MediaCity World, Inc....... 31,000 10/05/95 4.94 10/05/05
16,000 11/15/96 4.94 11/15/06
Martin A. Koehler
Vice President - Finance and
Chief Financial Officer (2)............. 18,000 11/15/96 4.94 11/15/06
John G. Hamm............................. - - - -
Ronald I. Simon.......................... - - - -
Executive Group.......................... 321,000 various 4.94 various
Non-Executive Director Group............. - - - -
Non-Executive Officer Employee Group..... 104,706(3) 10/05/95 4.94 10/05/05
119,000(4) 02/06/96 4.94 02/06/06
8,294 02/28/96 4.94 02/28/06
129,000(5) 06/21/96 4.94 06/21/06
142,000(6) 11/15/96 4.94 11/15/06
John I. Jellinek
Former President and
Chief Executive Officer................. 55,000 10/05/95 8.25 - (7)
Dale H. Sizemore
Former President of the Company's
Telecommunication Division.............. 31,000 10/05/95 8.25 - (8)
35,000(9) 11/15/96 4.94 11/15/06
<FN>
- ------------------------
(1) Stock options were granted on various dates during fiscal 1996 at exercise
prices ranging from $8.25 to $12.75 per share (the market price on the
date of grant). On February 28, 1996, the exercise prices per share for
all of the outstanding options granted under the Plan as of that date were
repriced to $8.25 per share (the market price on that date). On November
15, 1996, the exercise prices per share for all outstanding options
granted under the Plan as of that date were further reduced to $4.94 per
share (the market price on that date).
(2) Mr. Koehler also received an option to purchase 25,000 shares that was
granted prior to the adoption of the Plan.
(3) As a result of the departure of employees from the Company, 67,000 of the
options listed have expired.
(4) As a result of the departure of employees from the Company, 111,000 of the
options listed have expired.
(5) As a result of the departure of employees from the Company, 21,000 of the
options listed have expired.
(6) As a result of the departure of employees from the Company, 18,000 of the
options listed have expired.
(7) As a result of his resignation as an employee, Mr. Jellinek's options
expired.
(8) As a result of his resignation as an employee, Mr. Sizemore's options
expired.
(9) The Option was granted in connection with Mr. Sizemore's re-employment by
the Company in October 1996.
</FN>
</TABLE>
20
<PAGE>
Other Plans
The Company also maintains the MTC Option Plan which originally
authorized stock options to employees of MTC for up to 40,000 shares of Common
Stock. Incentive stock options on 40,000 shares at $13.50 per share were granted
under the MTC Option Plan on September 15, 1995. Options on 11,000 shares
expired upon the termination of the employment of certain optionholders and
options on 29,000 shares remain outstanding. Shares subject to options which
expire unexercised are not available for reissuance under the MTC Option Plan or
any other plan of the Company. On February 28, 1996 and November 15, 1996, the
outstanding options under the MTC Option Plan were repriced to $8.25 and $4.94
per share, respectively. The MTC Option Plan is administered by the Board of
Directors of the Company.
Other Information
On February 14, 1997, the closing price of the Company's Common Stock
as listed on the American Stock Exchange was $4.63 per share.
The Board of Directors recommends a vote FOR authorization and approval
of the SoftNet Systems, Inc. Amended 1995 Long Term Incentive Plan.
SHAREHOLDERS' PROPOSALS
A shareholder proposal to be presented at the 1998 Annual Meeting must
be received at the Company's executive offices, 717 Forest Avenue, Lake Forest,
Illinois 60045, by no later than November 26, 1997 for evaluation as to
inclusion in the Proxy Statement in connection with such Meeting.
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 Statement and to make a
statement if he or she desires.
The Company has furnished its financial statements to shareholders in
its 1996 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 1996 Annual Report
on Form 10-K. Requests for copies of such report should be directed to Martin A.
Koehler, Vice President - Finance and Chief Financial Officer, 717 Forest
Avenue, Lake Forest, Illinois 60045; telephone number (847) 266-8150.
You are urged to sign and return your proxy promptly.
Martin A. Koehler
Secretary
February 26, 1997
21
<PAGE>
Exhibit A
SOFTNET SYSTEMS, INC. AMENDED
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 and
directors 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 or directorship, shall mean (i) with respect to any Participant
employed or acting as a director 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 or other responsibilities, including any directives
from the Board, or engaging in such behavior in his personal or business life,
as to lead the Administrator in its reasonable judgment to determine that it is
in the best interests of the Company to terminate his employment or other
relationship with the Company
"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 "non-employee director" 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
Administrator.
"Dividend Equivalent" shall mean any right granted under Section 6(e)
of the Plan.
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"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
Administrator; 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 Administrator, 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 or directorship, shall mean (i) with respect to any
Participant employed or acting as a director under a written contract with the
Company or an Affiliate of the Company, "good reason" as defined in such written
agreement or, if such contract contains no such definition, a material breach by
the Company of such written 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 Administrator 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 or director 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.
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"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 or
director 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 Board
of Directors unless the Board of Directors determine that it shall be
administered by a Committee. Subject to the terms of the Plan and applicable
law, and in addition to other express powers and authorizations conferred on the
Board or the Committee, as the case may be (in either case, the "Administrator")
by the Plan, the Administrator shall have full power and authority to: (i)
designate Participants; (ii) determine the type or types of Awards to be granted
to a Participant 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 Administrator; (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
Administrator 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 Administrator,
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 or director.
Notwithstanding the foregoing the maximum number of Awards which may be granted
to any one Participant under this Plan shall not exceed 200,000 Common Shares in
any one fiscal year of the Company, 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 1,500,000, 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
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<PAGE>
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 Administrator
shall determine under procedures adopted by the
Administrator 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
Administrator 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 Administrator 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 Administrator 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 Administrator 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 or unvested Awards
remain outstanding under the Plan, (i) subject to the provisions of clause (iii)
below, after the
A-4
<PAGE>
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 Administrator 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 Administrator, shall be
exercisable in full; and (iii) all outstanding Awards may be canceled by the
Administrator 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 Award and (y) each holder of an Award shall have the right to
exercise such Award in full 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, and any director of the
Company, shall be eligible to be designated a Participant.
SECTION 6. Awards.
(a) Options. The Administrator is hereby authorized to grant
to eligible Participants 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 Administrator
shall determine:
(i) Exercise Price. The purchase price per Common
Share purchasable under an Option shall be determined by the
Administrator; 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 Administrator 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 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 while a director or within such period after
retirement or disability (as defined in paragraph (B)
below), as is set forth in the Option, 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 Administrator at the time of granting the
Option, or (2) such period after such Participant's
death, as is set forth in the Option, purchase any or
all of the Common Shares with respect to which such
Participant was entitled to exercise such Option
immediately prior
A-5
<PAGE>
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
or directorship 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 Administrator) 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 Administrator
at the time of granting the Option, or (2) such
period after the date of such termination, as is set
forth in the Option, 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
or directorship 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
or directorship 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 or directorship 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
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<PAGE>
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 Administrator 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) Only Employees of the Company or an
Affiliate shall be eligible to receive Incentive
Stock Options.
(b) Stock Appreciation Rights. The Administrator is hereby
authorized to grant to eligible Participants "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 Administrator 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
Administrator, 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 Administrator 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
Administrator. The Administrator 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 Administrator is hereby authorized
to grant to eligible Participants "Restricted Securities,"
which shall consist of the right to receive, by purchase or
otherwise, Common Shares which are subject to such
restrictions as the Administrator 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 Administrator may deem appropriate.
(ii) Registration. Restricted Securities granted
under the Plan may be evidenced in such manner as the
Administrator may deem appropriate, including, without
limitation, book-entry registration or issuance of a stock
certificate 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 Administrator, upon termination of a Participant's
employment or directorship 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 or directorship shall
be forfeited and reacquired by the Company; provided, however,
that the Administrator 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
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<PAGE>
such Participant's Restricted Securities. Unrestricted Common
Shares, evidenced in such manner as the Administrator shall
deem appropriate, shall be issued to the holder of Restricted
Securities promptly after such Restricted Securities become
Released Securities.
(d) Performance Awards. The Administrator is hereby authorized
to grant to eligible Participants "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 Administrator
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 Administrator 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 or directorship
and the amount of any payment or transfer to be made pursuant to any
Performance Award shall be determined by the Administrator and by the
other terms and conditions of any Performance Award. The Administrator
shall issue performance goals prior to the commencement of the
performance period to which such performance goals pertain.
(e) Dividend Equivalents. The Administrator is hereby
authorized to grant to eligible Participants "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
Administrator, and the Administrator 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 Administrator shall determine.
(f) Other Stock-Based Awards. The Administrator is hereby
authorized to grant to eligible Participants "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 Administrator to
be consistent with the purposes of the Plan, provided, however, that
such right shall comply, to the extent deemed desirable by the
Administrator, with Rule 16b-3 and applicable law. Subject to the terms
of the Plan and any applicable Award Agreement, the Administrator 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 Administrator 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 Administrator, 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
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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 Administrator 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 Administrator. 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 Administrator 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 Administrator 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 Administrator.
(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 or by persons, trusts or
partnerships to whom or to which the Award has been
transferred under Section 6(g)(iv)(A) above.
(v) Terms of Awards. The term of each Award shall be
for such period as may be determined by the Administrator;
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) 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 Administrator 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
Administrator may cause a legend or legends to be put on any
such certificates to make appropriate reference to such
restrictions.
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(vii) 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
Administrator 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 Administrator, 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
Administrator 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 Administrator 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 (if one is designated) be deemed to be a trustee of any cash,
Common Shares or rights thereto to be granted under the Plan unless the
Administrator 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 (if one is designated)
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 Administrator 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
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<PAGE>
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 Administrator 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 Administrator 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 Administrator
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, director 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, directors 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 Administrator 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 Administrator 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
Administrator 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.
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<PAGE>
(f) No Right to Employment or Directorship. The grant of an
Award shall not be construed as giving a Participant the right to be
retained in the employ of or to remain a director 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 Administrator, 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
Administrator, 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 Administrator 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
Administrator 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.
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<PAGE>
PROXY CARD
SOFTNET SYSTEMS, INC.
FOR THE ANNUAL MEETING TO BE HELD ON MARCH 26, 1997
The undersigned appoints John J. McDonough, A.J.R. Oosthuizen and Martin A.
Koehler, and each 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 March 26, 1997 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:_______________________________________, 1997
___________________________________________________
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)
<PAGE>
FOLD AND DETACH HERE
1. To elect John J. McDonough, Instruction: Unless otherwise
Ian B. Aaron, John G. Hamm, specified in the space provided
A.J.R. Oosthuizen and below, this proxy shall authorize the
Ronald I. Simon as the five proxies named herein to cumulate all
directors of the Company votes which the undersigned is
to serve until the next entitled to cast at the annual
Annual Meeting and until their meeting for, and to allocate such
successors shall be elected and votes among, one or more of the
qualify: nominees listed to the left as such
proxies shall determine, in their
sole and absolute discretion, in
FOR WITHHELD 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 Shares and the name(s)
FOR, except vote withheld for the of the nominee(s) in the space
following nominees: provided below.
____________________________________ ____________________________________
2. To authorize and 3. To consider and
approve the amended transact such other
SoftNet Systems, Inc. business as may
1995 Long Term properly come before
Incentive Plan. the Annual Meeting or
any adjournment thereof.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
/ / / / / / / / / / / /
PLEASE MARK INSIDE BLUE BOXES SO THAT DATA
PROCESSING EQUIPMENT WILL RECORD YOUR VOTES
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
