As filed with the Securities and Exchange Commission on July 30, 1998
Registration No. 333-57337
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------
SOFTNET SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 11-1817252
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
520 Logue Avenue
Mountain View, CA 94043
(650) 962-7470
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Dr. Lawrence B. Brilliant
Chief Executive Officer and President
SoftNet Systems, Inc.
520 Logue Avenue
Mountain View, CA 94043
(650) 962-7470
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
---------------------------
Copy to:
Thomas W. Kellerman, Esq.
Jason G. Wilson, Esq.
Two Embarcadero Place
2200 Geng Road
Palo Alto, CA 94303
(650) 424-0160
---------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
---------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. /__/
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering./__/
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering./__/
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box./__/
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>------------------------------------------------------------------------------------------------------------------------
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<S> <C> <C> <C> <C>
TITLE OF EACH CLASS OF AMOUNT TO PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED OFFERING PRICE PER AGGREGATE PRICE OFFERING REGISTRATION FEE
UNIT (1)
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Common Stock, $0.01 par value (2) . . . . 2,495,309(2) (3) $11.6875 $29,163,924 $8,604
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</TABLE>
(1) Estimated solely for purposes of calculating the amount of the registration
fee pursuant to Rule 457(c) of the Securities Act of 1933, based on the
average of the high and low sales price of a share of Common Stock of the
Registrant on the American Stock Exchange as reported in the consolidated
reporting system on June 15, 1998.
(2) Consists of Common Stock issuable upon exercise of certain stock purchase
warrants (the "Warrants"), conversion of 5% Convertible Subordinated
Debentures due 2002 (the "Debentures"), and conversion of Series B
Convertible Preferred Stock (the "Series B Preferred Stock").
(3) The shares of Common Stock set forth in the Calculation of Registration Fee
Table, and which may be offered pursuant to this Registration Statement,
includes the maximum number of shares of Common Stock underlying the
Debentures, the Series B Preferred Stock and the Warrants, and, pursuant to
Rule 416 of the Securities Act of 1933, as amended (the "Securities Act"),
such additional number of shares of the Registrant's Common Stock that may
become issuable as a result of any stock splits, stock dividends or
anti-dilution provisions (including by reason of the floating rate
conversion price mechanism and certain other adjustments, as set forth in
the Amended and Restated Certificate of Incorporation designating the terms
of the Series B Preferred Stock).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 30, 1998
PROSPECTUS
SOFTNET SYSTEMS, INC.
2,495,309 Shares of Common Stock
($0.01 par value)
This Prospectus covers the sale from time to time of up to 2,495,309 shares
(the "Shares") of Common Stock, par value $0.01 per share ("Common Stock"), of
SoftNet Systems, Inc., a New York corporation (the "Company"), by certain
shareholders of the Company (the "Selling Shareholders"). The Selling
Shareholders or their respective pledgees, donees, transferees or other
successors in interest may from time to time sell the Shares directly or through
one or more broker-dealers, in one or more transactions on the American Stock
Exchange, in privately negotiated transactions, through the writing of options
on the Shares, short sales or otherwise, at prices related to the prevailing
market prices or at negotiated prices. See "Plan of Distribution."
The Shares of Common Stock includes the maximum number of shares of Common
Stock underlying certain stock purchase warrants (the "Warrants"), the Company's
5% Convertible Subordinated Debentures due 2002 (the "Debenture") and the
Company's Series B Convertible Preferred Stock (the "Series B Preferred Stock"),
and, pursuant to Rule 416 of the Securities Act of 1933, as amended (the
"Securities Act"), such additional number of shares of the Registrant's Common
Stock that may become issuable as a result of any stock splits, stock dividends
or anti-dilution provisions (including by reason of the floating rate conversion
price mechanism and certain other adjustments, as set forth in the Amended and
Restated Certificate of Incorporation designating the terms of the Series B
Convertible Preferred Stock).
The Company will not receive any of the proceeds from the sale of the
Shares. The Company has agreed with the Selling Shareholders to register the
Shares offered hereby and to pay the expenses incident to the registration and
offering of the Shares, except that the Selling Shareholders will pay any
applicable underwriting commissions and expenses, brokerage fees and transfer
taxes, as well as the fees and disbursements of counsel to and experts for the
Selling Shareholders.
The Company's Common Stock is listed on the American Stock Exchange under
the symbol "SOF." On June 18, 1998, the last reported sales price of the Common
Stock on the American Stock Exchange was $12.125 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus is to be used solely in connection with sales of the Shares
from time to time by the Selling Shareholders.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES
OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER TO ANY
PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE UNLAWFUL. THE DELIVERY OF
THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO ITS DATE.
The date of this Prospectus is July __, 1998.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements, the registration statement related to this offering and other
information filed by the Company may be inspected and copied at the public
reference facilities of the Commission located at 450 Fifth Street N.W.,
Washington D.C. 20549 and at the Commission's regional offices located at Seven
World Trade Center, Suite 1300, New York, New York 10048 and at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can
also be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates or accessed
electronically on the Commission's home page on the World Wide Web at
http://www.sec.gov. In addition, reports, proxy statements and other information
filed by the Company may be inspected at the offices of the American Stock
Exchange, 86 Trinity Place, New York, New York 10006, upon which the Common
Stock of the Company is traded.
The Company has filed with the Commission, a Registration Statement on
Form S-3 (together with all amendments, schedules and exhibits thereto, the
"Registration Statement") under the Securities Act, covering the sale of the
Shares by the Selling Shareholders from time to time. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the Company and the Common Stock offered
hereby, reference is made to the Registration Statement. Statements made in the
Prospectus as to the contents of any contract, agreement or other document are
not necessarily complete and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement for a more
complete description. Each such statement is qualified in its entirety by such
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (File
No. 1-5270) pursuant to the Exchange Act are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1997.
2. The Company's Current Report on Form 8-K filed with the
Commission on January 12, 1998.
3. The Company's Proxy Statement on Schedule 14A filed with the
Commission on January 28, 1998.
4. The Company's Current Report on Form 8-K filed with the
Commission on February 12, 1998.
5. The Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1997.
6. The Company's Current Report on Form 8-K filed with the
Commission on April 24, 1998.
7. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998.
8. The Company's Current Report on Form 8-K filed with the
Commission on June 1, 1998.
9. The Company's Current Report on Form 8-K filed with the
Commission on July 28, 1998.
All documents filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering made hereby shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date such documents were filed. Any statement contained herein
or in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of such person, a copy of any and all of the documents
incorporated by reference herein (other than exhibits to such documents, unless
such exhibits are specifically incorporated by reference in such documents).
Requests for such copies should be directed to Mark A. Phillips, Treasurer,
SoftNet Systems, Inc., 520 Logue Avenue, Mountain View, California 94043.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares
by the Selling Shareholders.
THE SELLING SHAREHOLDERS
The following table sets forth certain information regarding the
Selling Shareholders, including (i) the name of each Selling Shareholder, (ii)
the number of Shares beneficially owned by each Selling Shareholder as of May
31, 1998, and (iii) the maximum number of Shares that may be offered hereby. The
information presented is based on data furnished to the Company by the Selling
Shareholders. Percentage ownership is based upon 7,607,462 shares of Common
Stock outstanding on May 31, 1998.
The number of shares that may be actually sold by each Selling
Shareholder will be determined by such Selling Shareholder. Because each Selling
Shareholder may sell all, some or none of the shares of Common Stock which each
holds, and because the offering contemplated by this Prospectus is not currently
being underwritten, no estimate can be given as to the number of shares of
Common Stock that will be held by the Selling Shareholders upon termination of
the offering.
Pursuant to Rule 416 of the Securities Act, Selling Shareholders may
also offer and sell additional shares of Common Stock issued with respect to the
Warrants, the Debentures or the Series B Preferred Stock as a result of stock
splits, stock dividends and anti-dilution provisions.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BEING
PRIOR TO OFFERING OFFERED
--------------------- ---------
NUMBER PERCENT
------ -------
<S> <C> <C> <C>
RGC International Investors, LDC (1) . . . . . . . . . 1,581,631(2) 17.6% 1,980,000(3)
R.C.W. Mauran. . . . . . . . . . . . . . . . . . . . . 553,526(4) 7.0% 175,000(5)
Dale H. Sizemore, Jr. . . . . . . . . . . . . . . . . 150,716(6) 2.0% 25,000(7)
Shoreline Associates I, LLC (1) . . . . . . . . . . . 95,758(8) 1.2% 220,000(9)
Harlan P. Kleiman. . . . . . . . . . . . . . . . . . . 52,800(7) * 40,000(7)
James L. Kropf . . . . . . . . . . . . . . . . . . . . 8,000(7) * 5,000(7)
Steve Lamar. . . . . . . . . . . . . . . . . . . . . . 7,400(7) * 5,000(7)
Lawrence Fleischman . . . . . . . . . . . . . . . . . 5,154(7) * 5,154(7)
Linda Cappello . . . . . . . . . . . . . . . . . . . 3,093(7) * 3,093(7)
Gerard Cappello . . . . . . . . . . . . . . . . . . . 2,062(7) * 2,062(7)
Bryan Dancer.. . . . . . . . . . . . . . . . . . . . . 25,000(7) * 25,000(7)
Rick Prosser.. . . . . . . . . . . . . . . . . . . . . 15,666(10) * 10,000(7)
</TABLE>
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* Less than 1%.
(1) The number of shares of Common Stock actually issued upon conversion of
the Series A and Series B Convertible Preferred Stock of the Company
(collectively referred to herein as the "Series A and Series B
Preferred Stock") is indeterminable as of the date of this Prospectus.
The number of shares of Common Stock set forth in the foregoing table
for these Selling Shareholders reflect the number of shares of Common
Stock issuable upon conversion of the Company's Series A Convertible
Preferred Stock (the "Series A Preferred Stock") at a conversion price
of $8.28 per share of Common Stock, and the number of shares of Common
Stock issuable upon conversion of the Series B Preferred Stock at a
conversion price of $13.20 per share of Common Stock, which are the
conversion prices in effect as of the date of this Prospectus.
(2) Consists of (i) 199,946 shares of Common Stock, (ii) 330,000 shares of
Common Stock issuable upon exercise of the Warrants, (iii) 369,867
shares of Common Stock issuable upon conversion of the Series A
Preferred Stock at the conversion price in effect as of the date of
this Prospectus, and (iv) 681,818 shares of Common Stock issuable upon
conversion of the Series B Preferred Stock at the conversion price in
effect as of the date of this Prospectus, held by such Selling
Shareholder. The actual number of shares of Common Stock issuable upon
conversion of the Series A and Series B Preferred Stock is
indeterminable and is subject to adjustment based on various factors,
including the floating rate conversion price mechanism contained in the
terms of the Series A and Series B Preferred Stock. The Company has
reserved up to 1,093,466 shares of Common Stock for issuance upon
conversion of the Series A Preferred Stock. The maximum number of
shares of Common Stock issuable upon conversion of the Series B
Preferred Stock held by this Selling Shareholder is 1,800,000. If this
Selling Shareholder obtained these share amounts upon conversion of the
Series A and Series B Preferred Stock that it owns, then its ownership
position, including shares of Common Stock owned and underlying its
Warrants, would total 3,223,466 shares of Common Stock, or 29.8% of the
outstanding shares of Common Stock of the Company. Pursuant to the
agreements under which both the Series A and Series B Preferred Stock
were issued, the shareholder is required to give notice of a conversion
that would bring such shareholder's total ownership of the Common Stock
to 4.99% or greater, as determined in accordance with Section 13(d) of
the Exchange Act.
(3) Consists of (i) 180,000 shares of Common Stock issuable upon exercise
of warrants, and (ii) 1,800,000 shares of Common Stock, which
represents the maximum number of shares potentially issuable upon
conversion of Series B Preferred Stock held by such Selling
Shareholder. The actual number of shares of Common Stock reserved for
issuance upon conversion of the Series B Preferred Stock is
indeterminable as of the date of this Prospectus, and is subject to
adjustment. The number of shares of Common Stock actually issued upon
conversion of the Selling Shareholder's Series B Preferred Stock could
be materially less than the 1,800,000 set forth above, depending on
various factors, including the floating rate conversion price mechanism
contained in the Series B Preferred Stock.
(4) Consists of (i) 292,407 shares of Common Stock, (ii) 81,481 shares of
Common Stock issuable upon the conversion of $660,000 of the Company's
6% Convertible Subordinated Debentures due February 28, 2002 and (ii)
179,638 shares of Common Stock issuable upon the conversion of
$1,212,556 of the Company's 9% Convertible Subordinated Debentures due
September 15, 2000.
(5) Consists of 175,000 shares of Common Stock issuable upon the conversion
of $1,443,750 of the Company's 5% Convertible Subordinated Debenture
due September 30, 2002, which is not convertible until January 1, 1999.
(6) Consists of (i) 125,716 shares of Common Stock, and (ii) 25,000 shares
of Common Stock issuable upon the exercise of stock purchase warrants.
(7) Consists of shares of Common Stock issuable upon the exercise of stock
purchase warrants.
(8) Consists of (i) 20,000 shares of Common Stock issuable upon exercise of
Warrants, and (ii) 75,758 shares of Common Stock issuable upon
conversion of Series B Preferred Stock at the conversion price in
effect as of the date of this Prospectus, held by such Selling
Shareholder. The actual number of shares of Common Stock issuable upon
conversion of the Series B Preferred Stock is indeterminable and is
subject to adjustment based on various factors, including the floating
rate conversion price mechanism contained in the terms of the Series B
Preferred Stock. The maximum number of shares of Common Stock issuable
upon conversion of the Series B Preferred Stock held by this Selling
Shareholder is 200,000. If this Selling Shareholder obtained these
share amounts upon conversion of the Series B Preferred Stock that it
owns, then its ownership position, including shares of Common Stock
owned and underlying its Warrants, would total 220,000 shares of Common
Stock, or 2.8% of the outstanding shares of Common Stock of the
Company. In addition, two owners of the Selling Shareholder own
unvested stock purchase options in the aggregate of 100,000 shares,
issued pursuant to such consulting agreements with the Company.
(9) Consists of (i) 20,000 shares of Common Stock issuable upon exercise of
warrants, and (ii) 200,000 shares of Common Stock, which represents the
maximum number of shares potentially issuable upon conversion of Series
B Preferred Stock held by such Selling Shareholder. The actual number
of shares of Common Stock reserved for issuance upon conversion of the
Series B Preferred Stock is indeterminable as of the date of this
Prospectus, and is subject to adjustment. The number of shares of
Common Stock actually issued on conversion of the Selling Shareholder's
Series B Preferred Stock could be materially less than the 200,000 set
forth above, depending on various factors, including the floating rate
conversion price mechanism contained in the Series B Preferred Stock.
(10) Consists of (i) 5,666 shares of Common Stock issuable upon the exercise
of employee stock options and (ii) 10,000 shares of Common Stock
issuable upon the exercise of stock purchase warrants.
Relationships with the Company
On December 31, 1997, Registrant issued to RGC International Investors,
LDC ("RGC"), 5,000 shares of Series A Preferred Stock and warrants to purchase
150,000 shares of Common Stock ("RGC Series A Warrants") pursuant to a
Securities Purchase Agreement. The Series A Preferred Stock is convertible at a
price based upon the market price for the Common Stock during the trading period
preceding conversion but not more than $8.28 per share. The RGC Series A
Warrants are exercisable at $7.95 per share. Any Series A Preferred Stock
outstanding on December 31, 2000 will be automatically converted into Common
Stock and the RGC Series A Warrants expire on December 31, 2001. The RGC Series
A Warrants require adjustments of the exercise price and the number of shares of
Common Stock issuable if the Company issues additional shares of Common Stock
(other than pursuant to presently outstanding warrants and other convertible
securities, as well as under Board approved employee/director option plans) at
prices less than the then market price. The Series A Preferred Stock is subject
to redemption or automatic conversion, at the Company's option, at 118% of
stated value per share ($1,000), and the Company is subject to penalties, under
a variety of circumstances, including failure to list the underlying Common
Stock on the American Stock Exchange and failure to register the resale of the
underlying Common Stock under the Securities Act. At the Company's option, the
Series A Preferred Stock may be redeemed after December 31, 1998 at the greater
of Parity Value (as defined therein) or 130% of its stated value. The Series A
Preferred Stock is entitled to dividends, at the rate of 5% per annum, payable
in cash or, at the Company's election, in additional shares of Series A
Preferred Stock. The sale of the Preferred Stock and the RGC Series A Warrants
was arranged by Shoreline Pacific Institutional Finance, the Institutional
Division of Financial West Group ("SPIF"), which received a fee of $250,000 plus
warrants to purchase 20,000 shares of Common Stock, exercisable at $6.625 and
expiring on December 31, 2000. The warrants issued to SPIF were allocated among
Messrs. Kleiman, Kropf and Lamar, among others.
On May 29, 1998, Registrant issued to RGC and Shoreline Associates I,
LLC ("Shoreline"), an aggregate of 10,000 shares of Series B Preferred Stock and
warrants to purchase an aggregate 200,000 shares of Common Stock ("Series B
Warrants") pursuant to a Securities Purchase Agreement. The Series B Preferred
Stock is convertible at $13.20 per share until March 1, 1999, and thereafter at
a price potentially based upon the market price for the Common Stock during the
trading period preceding conversion, which may be higher or lower than $13.20
per share. The Series B Warrants are exercisable at $13.75 per share. Any Series
B Preferred Stock outstanding on May 28, 2001 will be automatically converted
into Common Stock and the Series B Warrants expire on May 28, 2002. The Series B
Warrants require adjustments of the exercise price and the number of shares of
Common Stock issuable if the Company issues additional shares of Common Stock
(other than pursuant to presently outstanding warrants and other convertible
securities, as well as under Board approved employee/director option plans) at
prices less than the then market price. In no event will the Series B Preferred
Stock be convertible into more than 2,000,000 shares of Common Stock. The Series
B Preferred Stock is subject to redemption or automatic conversion, at the
Company's option, at the greater of 120% of stated value per share ($1,000) or
the Parity Value (as defined), and the Company is subject to penalties, under a
variety of circumstances, including failure to list the underlying Common Stock
on the American Stock Exchange and failure to register the resale of the
underlying Common Stock under the Securities Act. At the Company's option, the
Series B Preferred Stock may be redeemed after November 29, 1999 at the greater
of Parity Value (as defined therein) or 120% of its stated value. The Series B
Preferred Stock is entitled to dividends, at the rate of 5% per annum, payable
in cash or, at the Company's election, in additional shares of Series B
Preferred Stock. The sale of the Preferred Stock and the Series B Warrants was
arranged by SPIF, which received a fee of $500,000 plus warrants to purchase
50,000 shares of Common Stock, exercisable at $11.00 and expiring on May 28,
2002. The warrants issued to SPIF were allocated among Messrs. Kleiman, Kropf
and Lamar.
Sean Doherty and Atam Lalchandani are owners of Shoreline. Mr. Doherty
is currently a member of the Company's Board of Directors and Mr. Lalchandani is
currently a consultant to the Company. Shoreline is unrelated to SPIF.
Mr. Prosser is a general manager in the Company's Telecommunications
Division.
PLAN OF DISTRIBUTION
The Company will not receive any proceeds from the sale of the Shares
offered hereby. The Selling Shareholders have advised the Company that the
Shares may be sold or by the Selling Shareholders or their respective pledgees,
donees, transferees or successors in interest, in one or more transactions
(which may involve one or more block transactions) on the American Stock
Exchange, in sales occurring in the public market of such Exchange, in privately
negotiated transactions, through the writing of options on shares, short sales
or in a combination of such transactions; that each sale may be made either at
market prices prevailing at the time of such sale or at negotiated prices or
such other price as the Selling Shareholders determine from time to time; that
some or all of the Shares may be sold directly to market makers acting as
principals or through brokers acting on behalf of the Selling Shareholders or as
agents for themselves or their customers or to dealers for resale by such
dealers; and that in connection with such sales such brokers and dealers may
receive compensation in the form of discounts and commissions from the Selling
Shareholders and may receive commissions from the purchasers of Shares for whom
they act as broker or agent (which discounts and commissions are not anticipated
to exceed those customary in the types of transactions involved). The Selling
Shareholders shall have sole discretion not to accept any purchase offer or make
any sale of Shares if they deem the purchase price to be unsatisfactory at any
time. Any broker or dealer participating in any such sale may be deemed to be an
"underwriter" within the meaning of the Securities Act and will be required to
deliver a copy of this Prospectus to any person who purchases any of the Shares
from or through such broker or dealer. The Company has been advised that, as of
the date hereof, none of the Selling Shareholders have made any arrangements
with any broker for the sale of their Shares. There can be no assurance that all
or any of the Shares being offered hereby will be issued to, or sold by the
Selling Shareholders.
In offering the Shares covered hereby, the Selling Shareholders and any
broker-dealers and any other participating broker-dealers who execute sales for
the Selling Shareholders may be deemed to be "underwriters" within the meaning
of the Securities Act in connection with such sales, and any profits realized by
the Selling Shareholders and the compensation of such broker-dealer may be
deemed to be underwriting discounts and commissions. In addition, any Shares
covered by this Prospectus which qualify for sale pursuant to Rule 144 may be
sold under Rule 144 rather than pursuant to this Prospectus.
In order to comply with certain states' securities laws, if applicable,
the Shares will be sold in such jurisdictions only through registered or
licensed brokers or dealers. In certain states, the Shares may not be sold
unless the Shares have been registered or qualified for sale in such state or an
exemption from registration or qualification is available and is complied with.
Under applicable rules and regulations under Regulation M, any person engaged in
the distribution of the shares may not simultaneously engage in market making
activities, subject to certain exceptions, with respect to the Common Stock of
the Company for a period of five business days prior to the commencement of such
distribution and until its completion. In addition and without limiting the
foregoing, each Selling Shareholder will be subject to the applicable
provisions of the Securities Act and Exchange Act and the rules and regulations
thereunder, including, without limitation, Regulation M, which provisions may
limit the timing of purchases and sales of shares of the Company's Common Stock
by the Selling Shareholders.
The Company will bear all expenses of the offering of the Shares,
except that the Selling Shareholders will pay any applicable underwriting
commissions and expenses, brokerage fees and transfer taxes, as well as the fees
and disbursements of counsel to and experts for the Selling Shareholders.
Pursuant to the terms of registration rights agreements with certain of
the Selling Shareholders, the Company has agreed to indemnify and hold harmless
such Selling Shareholders from certain liabilities under the Securities Act.
EXPERT
The consolidated financial statements of the Company appearing in the
Company's Annual Report on Form 10-K for the year ended September 30, 1997 have
been audited by Coopers & Lybrand L.L.P., independent certified public
accountants, as set forth in their reports thereon included therein and
incorporated herein by reference. Such financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following are the expenses (estimated except for the SEC
registration fee) for the issuance and distribution of the securities being
registered, all of which will be paid by the Registrant.
SEC registration fee.................................................$ 8,604
Fees and expenses of counsel..........................................20,000
Fees and expenses of accountants . . .................................10,000
Listing fees..........................................................17,500
Transfer agent fees....................................................5,000
Miscellaneous.........................................................17,500
--------
Total...................................................$78,604
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The New York Business Corporation Law and the By-laws of the Registrant
provide for indemnification of directors and officers for expenses (including
reasonable amounts paid in settlement) incurred in defending actions brought
against them.
The Company's Certificate of Incorporation provides that no contract or
other transaction between the corporation and any other corporation shall be
affected or invalidated by the fact that any one or more of the directors of the
Company is or are interested in or is a director or officer, or are directors or
officers, of such other corporation, and any director or directors, individually
or jointly, may be a party or parties to or may be interested in any contractor
transaction of the Company, or in which the Company is interested, and no
contract, act or transaction of the Company with any person or persons, firms or
corporations shall be affected or invalidated by the fact that any director or
directors of the Company is a party or are parties to, or interested in, such
contract, act or transaction, or in any way connected with such person or
persons, firms or corporations, and each and every person who may become a
director of the Company is hereby relieved from any liability that might
otherwise exist from contracting with the Company for the benefit of himself or
any firm or corporation in which he may be in anyway interested.
The Company's Bylaws provide that the Company may indemnify any person
made, or threatened to be made, a party to a civil or criminal action or
proceeding (other than one by or in the right of the Company to procure a
judgment in its favor), by reason of the fact that he was a director or officer
of the Company, or serves another entity in any capacity at the request of the
Company, against judgments, fines, settlement amounts and reasonable expenses,
including actual and necessary attorneys' fees, if such director or officer
acted, in good faith, for a purpose which he reasonably believed to be in, or,
in the case of service for any other entity, not opposed to, the best interest
of the Company, and, in criminal actions or proceedings, had no reasonable cause
to believe that his conduct was unlawful ("Good Faith"). The termination of any
such action or proceeding by judgment, settlement, conviction or upon a plea of
nolo contendere, or its equivalent, shall not in itself create a presumption
that any such director or officer did not act in Good Faith.
Under the Company's Bylaws, a person who has been successful, on the
merits or otherwise, in the defense of an action or proceeding described above
shall be entitled to indemnification. Except as provided in immediately
preceding sentence, any indemnification under the above paragraph or otherwise
permitted by Section 721 of the New York Business Corporation Law, unless
ordered by a court of competent jurisdiction, shall be made by the Company, only
if authorized in the specific case: (i) by the Board of Directors acting by a
quorum consisting of disinterested directors, or (ii) if a quorum is not
obtainable or a quorum of disinterested directors so directs, by the Board, upon
the opinion of independent legal counsel that indemnification is proper in the
circumstances, or by the shareholders.
Under the Company's Bylaws, the Company may indemnify any person made,
threatened or threatened to be made, a party to an action by or in the right of
the Company to procure a judgment in its favor by reason of this fact that he is
or was a director or officer of the Company, or is or was serving at the request
of the Company as a director or officer of any other entity against amounts paid
in settlement and reasonable expenses, including actual and necessary attorneys,
fees, if such director or officer acted, in good faith, for a purpose which he
reasonably believed to be in, or, in the case of service for any other entity,
not opposed to, the best interest of the Company, except, that no
indemnification under this paragraph shall be made in respect of (i) a
threatened action, or a pending action if settled or otherwise disposed of, or
(ii) any claim, issue or matter as to which such person shall have been adjudged
to be liable to the Company, unless the court in which the action was brought,
or, if no action was brought, any court of competent jurisdiction, determines
that the person is fairly and reasonably entitled to indemnity for such portion
of the settlement amount and expenses as the court deems proper.
Under the Company's Bylaws, the Company shall have the power to
purchase and maintain insurance to satisfy its indemnification obligations
hereunder, or to indemnify directors and officers in instances in which they may
not otherwise be indemnified by the Company under certain circumstances. No
insurance may provide for any payment, other than the cost of defense, to or on
behalf of any director or officer: (i) if it is established that his acts were
committed in bad faith or with deliberate dishonesty, were material to the cause
of the adjudicated action, or that he personally and illegally gained a
financial profit or other advantage, or (ii) in relation to any risk, the
insurance of which is prohibited under New York state insurance law.
Under the Company's Bylaws, the indemnification and advancement of
expenses shall not be deemed the exclusive right of any other rights to which a
director or officer may be entitled, provided that no indemnification may be
made to or on behalf of any director or officer if a judgment or other final
adjudication adverse to the director or officer establishes that his acts were
committed in bad faith or were the result of deliberate dishonesty and were
material to the cause of action so adjudicated, or that he personally and
illegally gained a financial profit or other advantage. No indemnification,
advancement or allowance shall be made in any circumstances if (i) the
indemnification would be inconsistent with a provision of the Company's
Certificate of Incorporation, By- laws, Board or shareholders resolutions, an
agreement or other proper corporate action, that is in effect at the time of the
accrual of the alleged cause of action, which prohibits or limits
indemnification, or (ii) the court states that indemnification would be
inconsistent with any condition with respect to indemnification expressly
imposed by the court in a court-approved settlement. If any amounts are paid by
indemnification, otherwise than by court order or action by the shareholders,
the Company shall mail to its voting shareholders, a statement describing the
terms of the indemnification and any corporate action taken with respect to the
indemnification.
The Registrant maintains directors and officers liability insurance
covering all directors and officers of the Registrant against claims arising out
of the performance of their duties.
ITEM 16. EXHIBITS.
Exhibit
Number Description of Exhibit
4.1+ Amended and Restated Certificate of Incorporation.
4.2 By-Laws, as amended (incorporated herein by reference to Exhibit 3.2
to the Company's Annual Report on Form 10-K for the year ended
September 30, 1993).
5.1+ Opinion of Brobeck, Phleger & Harrison L.L.P.
23.1+ Consent of Brobeck, Phleger & Harrison L.L.P. (included as part of
Exhibit 5).
23.2+ Consent of Coopers & Lybrand L.L.P.
24.1+ Powers of Attorney (included on signature page of the Registration
Statement).
99.1+ Form of Common Stock Purchase Warrant Certificate issued to
purchasers of the Series B Preferred Stock dated May 28, 1998.
99.2+ Form of Common Stock Purchase Warrant Certificate issued to Assignees
of Shoreline Pacific Institutional Finance dated May 28, 1998.
99.3+ Securities Purchase Agreement by and among the Company and the Buyers
(as defined therein), dated as of May 28, 1998.
99.4+ Registration Rights Agreement by and among the Company and the
Initial investors (as defined therein) dated as of May 28, 1998.
99.5* Escrow Agreement by and among the Company, the Buyers (as defined
therein), SPIF and the Escrow Holder (as defined therein), dated as
of May 28, 1998.
99.6+ Opinion of Brobeck, Phleger & Harrison L.L.P. regarding the sale of
the Series B Preferred Stock, dated May 28, 1998.
- ---------------
* Filed herewith
+ Filed previously
ITEM 17. UNDERTAKINGS.
1. (a) .....The undersigned Registrant hereby undertakes to file,
during any period in which offers or sales are being made, a post-effective
amendment to this Registration Statement:
(i) To include any prospectus required by Section 10
(a)(3) of the Securities Act of 1933 (the "Securities Act");
(ii) To reflect, in the prospectus any facts or
events arising after the date of the Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in any information in the Registration Statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the Registration Statement or any material change to such
information in the Registration Statement;
provided, however, that the undertakings set forth in paragraph (i) and (ii)
above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed by the Registrant pursuant to section 13 or section 15(d) of the Exchange
Act that are incorporated by reference in this Registration Statement.
(b)......The undersigned Registrant hereby undertakes that,
for determining any liability under the Securities Act, each post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c)......The undersigned Registrant hereby undertakes to file
a post-effective amendment to remove from registration any of the securities
that remain unsold at the termination of the offering.
(d)......The undersigned Registrant hereby undertakes that for
purposes of determining any liability under the Securities Act, each filing of
the Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act that- is incorporated by reference in this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
2. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the undersigned Registrant pursuant to the foregoing provisions, or
otherwise, the undersigned Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the undersigned Registrant of expenses incurred or paid by a
director, officer or controlling person of the undersigned Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the undersigned Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3, and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in Mountain View, California on July 30, 1998
SOFTNET SYSTEMS, INC.
/s/ Mark A. Phillips
--------------------------------
Mark A. Phillips
Secretary, Treasurer and Chief Accounting
Officer
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- --------- --------------------------
4.1+ Amended and Restated Certificate of Incorporation.
4.2 By-Laws, as amended (incorporated herein by reference to
Exhibit 3.2 to the Company's Annual Report on Form 10-K for
the year ended September 30, 1993).
5.1+ Opinion of Brobeck, Phleger & Harrison L.L.P.
23.1+ Consent of Brobeck, Phleger & Harrison L.L.P. (included as
part of Exhibit 5.1).
23.2+ Consent of Coopers & Lybrand L.L.P.
24.1+ Powers of Attorney (included on signature page of the
Registration Statement).
99.1+ Form of Common Stock Purchase Warrant Certificate issued to
purchasers of the Series B Preferred Stock dated May 28,
1998.
99.2+ Form of Common Stock Purchase Warrant Certificate issued to
Assignees of Shoreline Pacific Institutional Finance dated
May 28, 1998.
99.3+ Securities Purchase Agreement by and among the Company and
the Buyers (as defined therein), dated as of May 28, 1998.
99.4+ Registration Rights Agreement by and among the Company and
the Initial Investors (as defined therein), dated as of May
28, 1998.
99.5* Escrow Agreement by and among the Company, the Buyers (as
defined therein), SPIF and the Escrow Holder (as defined
therein), dated as of May 28, 1998.
99.6+ Opinion of Brobeck, Phleger & Harrison L.L.P. regarding the
sale of the Series B Preferred Stock, dated May 28, 1998.
- ------------
+ Filed previously
* Filed herewith
II-1
ESCROW AGREEMENT
The undersigned parties hereby establish Chase Manhattan Bank and Trust
Company, N.A. Escrow No. C27110A (the "Escrow") and agree to be bound by this
Escrow Agreement, dated as of May 28, 1998, as follows:
1. Parties and Transaction. The following entities are parties to this Escrow
Agreement:
(a) Seller: SoftNet Systems, Inc. IRS EIN# 11-1817252
520 Logue Avenue
Mountain View, CA 94043
Attn: Mark Philips, Treasurer
Telephone: (650) 962-7474
Fax: (650) 962-7488 ("Seller").
(b) Buyers:
(i) RGC International Investors, LDC
c/o Rose Glen Capital Management, L.P.
3 Bala Plaza East, Suite 200
251 St. Asaphs Road
Bala Cynwyd, PA 19004
Attn: Mr. Wayne Bloch
Telephone: (610) 617-5900
Fax: (610) 617-0570; and
(ii) Shoreline Associates I, LLC
101 University Avenue, Suite 220
Palo Alto, CA 94301
Attn: Mr. Sean P. Doherty
Telephone: (650) 463-4234
Fax: (650) 463-1511
(each a"Buyer", and collectively "Buyers").
(c) Shoreline: Shoreline Pacific Institutional Finance, the
Institutional Division of Financial West Group, Three Harbor
Drive, Suite 211, Sausalito, California, 94965, Attn: General
Counsel, telephone number (415) 332-7800, facsimile number
(415) 332-7808 ("Shoreline"). Shoreline is acting as agent for
Buyers and Seller in this transaction and will be paid a
commission of five percent 5% by Seller. No commission is
being charged to Buyers. Shoreline will not receive any
payment for order flow relating to any of the securities
offered by Seller in connection with this transaction,
including any shares of Seller's common stock.
(d) Escrow Holder: Chase Manhattan Bank and Trust Company, N.A., a
subsidiary of Chase Manhattan Corporation, 101 California
Street, Suite 2725, San Francisco, California, 94111,
telephone number: (415) 954-9518, facsimile number: (415)
693-8850 ("Escrow Holder").
This Escrow Agreement contains the closing information for the transaction
effected between and on behalf of Buyers and Seller involving the sale by Seller
and the purchase by Buyers of Ten Thousand (10,000) shares of Seller's Series B
Convertible Preferred Stock ("Preferred Shares"), at a purchase price of One
Thousand Dollars ($1,000) per share, for an aggregate purchase price of Ten
Million Dollars ($10,000,000) U.S., pursuant to the Securities Purchase
Agreement dated as of May 28, 1998 ("Purchase Agreement"), by and among Seller
and Buyers. Seller represents that said Preferred Shares are issued by Seller
pursuant to Section 4(2) of the Securities Act of 1933, as amended and/or
Regulation D thereunder. Upon request of any party hereto, Escrow Holder will
furnish the date and time this transaction took place.
In the event funds transfer instructions are given by any party to this
Agreement (other than in writing at the time of execution of the Agreement),
whether in writing, by telecopier or otherwise, the Escrow Agent is authorized
to seek confirmation of such instructions by telephone call-back to the person
or persons designated above, and the Escrow Agent may rely upon the
confirmations of anyone purporting to be the person or persons so designated.
The persons and telephone numbers for call-backs may be changed only in a
writing actually received and acknowledged by the Escrow Agent. The parties to
this Agreement acknowledge that such security procedure is commercially
reasonable.
2. Deliveries.
(a) Deliveries By Seller. Seller shall deliver the following documents
to Escrow Holder or to Shoreline, as provided herein, no later 12:00 P.M.
Pacific Standard Time on the "Closing Date," as such term is defined below:
(1) Seller shall deliver to Escrow Holder, with a copy to
Shoreline, a copy of this Escrow Agreement, duly executed by Seller (which
delivery may be made by facsimile so long as a manually executed original of the
Escrow Agreement is delivered to Escrow Holder by Seller by overnight courier
within one (1) business day following the Closing Date).
(2) Seller shall deliver to Escrow Holder Ten Thousand
(10,000) Preferred Shares in the name of each Buyer and in face amounts and
denominations more particularly set forth in the Closing Schedule annexed hereto
as Exhibit C (the "Preferred Share Certificates"). The Preferred Share
Certificates shall each bear substantially the following legend:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or the securities laws of
any state of the United States. The securities have been acquired for
investment and may not be sold, transferred or assigned in the absence
of an effective registration statement for the securities under
applicable securities laws, or unless offered, sold or transferred
pursuant to an available exemption from the registration requirements
of those laws.
A copy of the form of Seller's Preferred Share Certificate is attached hereto as
Exhibit A and is incorporated herein by this reference.
(b) Deliveries By Buyer. Each Buyer shall deliver the following to
Escrow Holder or to Shoreline, as provided herein, not later than 12:00 P.M.
Pacific Standard Time on the Closing Date:
(1) Each Buyer shall deliver to Escrow Holder, with a copy to
Shoreline, a copy of this Escrow Agreement, duly executed by such Buyer (which
delivery may be made by facsimile so long as a manually executed original of the
Escrow Agreement is delivered to Escrow Holder by Buyer by overnight courier
within one (1) business day following the Closing Date).
(2) Each Buyer shall wire funds in the amount specified for
such Buyer on Exhibit C hereof to Escrow Holder at the account set forth below:
The Chase Manhattan Bank
New York, New York
ABA #021000021
Credit: CTCC Operating Account #507874439
Ref: Shoreline Pacific/SoftNet Systems, Inc./Escrow No. C27110A/[Investor Name]
(3) Each Buyer shall deliver to Escrow Holder, with copy to
Shoreline, a written confirmation in the form attached hereto as Exhibit B (the
"Closing Confirmation", delivery of which may be made by facsimile so long as a
manually executed original thereof is delivered to the Escrow Agent by Buyer by
overnight courier within one (1) business day of the Closing Date), stating
that, subject to Escrow Holder's receipt of the items to be delivered by Seller
specified in Section 2(a) hereof, all of the conditions to the Closing in
Section 7 of the Purchase Agreement have been satisfied in full or waived as of
the date of delivery of such confirmation with respect to Buyer.
3. Closing. The closing of the purchase by Buyers (the "Closing") is scheduled
to occur on May 28, 1998 or on such other date as Seller, Buyers, and Shoreline
shall agree (the "Closing Date"). At the Closing, Escrow Holder shall undertake
the following:
(a) Original Deliveries to Buyer. Escrow Holder shall deliver to each
Buyer at the addresses noted in Exhibit C hereto, by overnight courier, the
original Preferred Share Certificates.
(b) Deliveries to Shoreline. Escrow Holder shall deliver to Shoreline,
by wire transfer, its commission in the amount of Five Hundred Thousand Dollars
($500,000) U.S. The wiring instructions for Shoreline are as follows:
Bank of New York
ABA #021000018
BNF-Correspondent Services Corp.
AC #8900186968
Financial West Group/UA99100
(c) Deliveries to Seller. Escrow Holder shall deliver to Seller, by
wire transfer, the funds delivered to it by Buyer less (i) the commission
payable to Shoreline specified in Section 3(b), and (ii) Escrow Holder's fees
and charges as specified in Section 5. The wiring instructions for Seller are as
follow:
Union Bank of California
99 Alameda Blvd., Suite 200
San Jose, CA 95113
For the benefit of SoftNet Systems Account No. 6450150965
ABA# 122000496
Attn: Ms. Lisa Shew, (408) 279-7715
4. Authorization to Escrow Holder to Close. By their signatures appearing below,
and subject to the provisions of Section 6(k) hereof, each Buyer, Seller and
Shoreline each authorize Escrow Holder to close the Escrow upon occurrence of
the following:
(a) Escrow Holder's receipt from Seller of all documents as set forth
in Section 2(a) hereof;
(b) Escrow Holder's receipt from each Buyer of wire transfers in the
amounts set forth in the Closing Schedule annexed hereto as Exhibit C and all
documents as set forth in Section 2(b) hereof;
(c) Escrow Holder's receipt of a Closing Confirmation from each Buyer;
and
(d) Escrow Holder's notification from Shoreline that copies of the
documents required to be received from Seller and Buyers pursuant to the
Purchase Agreement have been received by Shoreline and receipt from Shoreline of
written notice to close the Escrow (the "Shoreline Closing Notice"), which
notice may be delivered by facsimile transmission, provided that a manually
executed original thereof shall be delivered to Escrow Holder within one (1)
business day following the Closing.
Each party understands and agrees that its signature appearing below confirms
its approval of the documents and instruments delivered to Escrow Holder and
that, except for delivery of the Closing Confirmation, no further approval of
any of the documents and instruments is required by any party. Each Buyer and
Seller each agree that Escrow Holder is authorized to close the Escrow upon
receipt of the items specified in this Section 4.
5. Costs and Charges Due to Escrow Holder. Seller, each Buyer and Shoreline each
hereby authorize Escrow Holder to make the following charges:
(a) Escrow Holder's charges shall be borne by and billed to Seller, and
Escrow Holder shall debit Seller and credit itself with its customary fees, not
to exceed in the aggregate $1,000. Neither Buyer nor Shoreline shall have any
liability to pay Escrow Holder's charges; provided however, that if the Closing
does not occur and fees are due to Escrow Holder as a result thereof, Shoreline
will bear all of Escrow Holder's reasonable charges incurred in connection
herewith, up to a maximum of $500.00, plus any reasonable out of pocket
expenses.
6. Additional Provisions.
(a) Indemnification. Seller, each Buyer and Shoreline acknowledge and
agree that Escrow Holder is acting as an escrow agent in this transaction and in
no other capacity. Except for the negligence or willful misconduct of Escrow
Holder, Seller, each Buyer and Shoreline each hereby agree to indemnify and to
hold Escrow Holder harmless from any claim, liability, cost, expense or damage,
including reasonable attorneys' fees and costs, incurred by Escrow Holder in
connection with any action taken or not taken by Escrow Holder pursuant to this
Escrow Agreement. Seller, each Buyer and Shoreline, jointly and severally, shall
reimburse Escrow Holder for all of its reasonable expenses covered by the
foregoing indemnification as and when such expenses are incurred.
(b) Facsimile Signatures. Facsimile signatures on this Escrow Agreement
and the documents referred to herein are binding upon any party submitting same.
(c) Notices. Any notice, request, demand, instruction or other
communication given hereunder by any party must be in writing and will be
validly and timely given or made to another party if (i) delivered personally,
(ii) deposited in the United States mail, certified or registered, with postage
prepaid and return receipt requested, (iii) delivered by overnight courier, or
(iv) sent by telecopier, to each of the parties at the addresses and facsimile
numbers contained in Section 1 hereof. If such notice is served personally, such
notice will be deemed to be given at the time of such personal delivery. If
notice is served by mail, such notice will be deemed to be given two days after
the deposit of same in any United States mail post office box. If such notice is
served by overnight courier, such notice will be deemed to be given on the next
business day following the acceptance of such notice for delivery by such
overnight courier. If such notice is served by telecopier, such notice will be
deemed to be given upon confirmation of transmission. Any person entitled to
receive notice under this agreement may change the address or telecopier number
to which such notice may be sent, by giving notice thereof pursuant to this
Section 6(c).
(d) Attorneys' Fees. Should any legal action be brought for the
enforcement of this Escrow Agreement or any term hereof, or due to any alleged
dispute, breach, default or misrepresentation in connection with any provisions
herein contained, the prevailing party shall be entitled to its reasonable
attorneys' fees and costs and other costs incurred in any such action or
proceeding and including any such action which results in an arbitration of the
matters herein, in addition to such other relief as may be granted by the courts
or arbitration proceedings.
(e) Applicable Law. The existence, validity, and construction of this
Escrow Agreement and all matters pertaining hereto shall be determined in
accordance with the laws of the State of New York.
(f) Further Assurances. Each of the parties agrees that it will,
without further consideration, execute, acknowledge and deliver such other
documents and take such other actions as may be reasonably requested by the
other party in order to consummate the purposes and subject matter hereof.
(g) Assignment. No party hereto shall have any right whatsoever to
voluntarily assign its rights or delegate its duties hereunder to any third
party, without the prior written consent of the other parties.
(h) Validity. If any provision of this Escrow Agreement may be
prohibited by law or otherwise held invalid, such prohibition or invalidity
shall be effective only to the extent of such prohibition or invalidity and
shall not invalidate or otherwise render ineffective the remaining provisions of
this Escrow Agreement.
(i) Counterparts. This Escrow Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
(j) Survival. The representations, warranties and covenants contained
in this Escrow Agreement shall survive the Closing, if any.
(k) Timing. If at any time any party hereto has made written demand
upon Escrow Holder for the return of documents and/or funds deposited by such
party, Escrow Holder may withhold and stop all further proceedings in this
Escrow upon notice to the parties, and may then return all documents and/or
funds to the party from which received within two business days of receipt of
said notice, without liability for interest on funds held or for damages.
Additionally, should the Closing not occur by 5 PM Central Time on June 4, 1998,
then Escrow Holder shall, on the next business day, return to each Buyer by wire
transfer any and all funds received by Escrow Holder from such Buyer(s) and
return to Seller by overnight mail service all Preferred Share Certificates
received from Seller.
(l) Reliance Upon Provided Information. It is understood that the
Escrow Agent and the beneficiary's banks in any funds transfer may rely solely
upon any account numbers or similar identifying number provided by any of the
parties hereto to identify (i) the beneficiary, (ii) the beneficiary's bank, or
(iii) an order it executes using any such identifying number, even where its use
may result in a person other than the beneficiary being paid, or the transfer of
funds to a bank other than the beneficiary's bank, or an intermediary bank
designated.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
<PAGE>
Escrow Agreement
SoftNet Systems, Inc.
(m) Representation or Warranties of Escrow Holder. Escrow Holder shall
make no representation or warranty with respect to the genuineness or any other
matter concerning any document or instrument deposited herein and shall have no
liability to any other party hereto with respect to such items; provided,
however, that Escrow Holder shall inspect the Preferred Share Certificates to
(i) confirm that required number of Preferred Share Certificates have been
delivered by Seller, in the denominations and face amounts set forth on the
Closing Schedule annexed hereto as Exhibit C, and (ii) that the legend appearing
on the Preferred Share Certificates conforms to the legend language set forth in
Section 2(a)(2) above.
THE COMPANY:
SOFTNET SYSTEMS, INC.
By: -------------------------------
Name:
Title:
DATE:--------------------------
[SIGNATURES CONTINUED ONTO NEXT PAGE]
<PAGE>
BUYERS:
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P.
Investment Manager
By: RGC General Partner Corp.
By: -------------------------------
Name:
Title:
DATE:--------------------------
SHORELINE ASSOCIATES I, LLC
By: -------------------------------
Name:
Title:
DATE:--------------------------
[SIGNATURES CONTINUED ONTO NEXT PAGE]
<PAGE>
SHORELINE:
SHORELINE PACIFIC INSTITUTIONAL FINANCE,
THE INSTITUTIONAL DIVISION
OF FINANCIAL WEST GROUP
By: -------------------------------
Name:
Title:
DATE:--------------------------
ESCROW HOLDER:
CHASE MANHATTAN BANK AND TRUST COMPANY,N.A.,
a subsidiary of Chase Manhattan Corporation
By: ------------------------------
Chii Ling Lei
Assistant Vice President
DATE:-----------------------
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EXHIBIT A
Form of Preferred Share Certificate
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EXHIBIT B
[INVESTOR'S LETTERHEAD]
[DATE]
Facsimile No. (415) 693-8850
Ms. Chii Ling Lei
Assistant Vice President
Chase Manhattan Bank and Trust Company, N.A.
101 California Street, Suite 2725
San Francisco, California 94111
Re: SoftNet Systems, Inc. Financing; Closing Confirmation
Dear Ms. Lei:
Please accept this letter as confirmation from [INVESTOR] that, subject to your
receipt of the items specified in Section 2(a) of the Escrow Agreement dated
[DATE], the conditions to the Closing in [Articles VI and VII] of the Securities
Purchase Agreement have been satisfied in full or waived as of the date hereof.
Accordingly, this shall serve as our Closing Confirmation as required pursuant
to Section 4(c) of said Escrow Agreement.
Please call me if you have any questions or require further information.
Sincerely,
Name:
Title:
cc: Shoreline Pacific
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CLOSING SCHEDULE - EXHIBIT C
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INVESTOR/CERTIFICATE DELIVERY ADDRESS: AGGREGATE NO. OF PREFERRED SHARES PREFERRED SHARE CERTIFICATE DENOMINATIONS:
PURCHASED/AGGREGATE PURCHASE PRICE:
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<S> <C> <C>
RGC International Investors, LDC
c/o Rose Glen Capital Management, L.P. 9,000 Preferred Shares 9 Preferred Share certificates each representing
Attn: Gary S. Kaminsky ----- --
3 Bala Plaza East, Suite 200 1,000 Preferred Shares/$1,000,000
251 St. Asaphs Road -----
Bala Cynwyd, PA 19004 $9,000,000
Telephone: (610) 617-5900 ----------
Fax: (610) 617-0570
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Shoreline Associates I, LLC
101 University Avenue, Suite 220 1,000 Preferred Shares 1 Preferred Share certificate representing
Palo Alto, CA 94301 ----- --
Attn: Mr. Sean P. Doherty 1,000 Preferred Shares
Telephone: (650) 463-4234 -----
Fax: (650) 463-1511 $1,000,000
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