<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
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Check the appropriate box:
[ ] Preliminary Proxy Statement
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[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
SOFTWORKS, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
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[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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
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previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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<PAGE> 2
SOFTWORKS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AUGUST 9, 1999
------------------------
To the Stockholders of
SOFTWORKS, Inc.
The Annual Meeting of Stockholders of SOFTWORKS, Inc. will be held on
Monday, August 9, 1999 at The Hampton Inn, Alexandria-Oldtown South, 5821
Richmond Highway, Alexandria, Virginia 22303 at 10:00 a.m. You will vote on:
1. The election of one director to Class II of the Board of Directors to
serve until the 2002 Annual Meeting of Stockholders or until his
successor has been duly elected and qualified and the election of one
director to Class III of the Board of Directors to serve until the 2001
Annual Meeting of Stockholders or until his successor has been duly
elected and qualified; and
2. A proposal to amend article FOURTH of the Certificate of Incorporation
to reduce the number of authorized shares of common stock from
152,000,000 to 52,000,000.
Stockholders will also vote on any other business as may properly come
before the meeting or any adjournments or postponements of the meeting.
Only stockholders of record on the books of SOFTWORKS at the close of
business on June 21, 1999 will be entitled to vote at the Annual Meeting or at
any adjournments or postponements of the meeting. Please sign, date and return
the enclosed proxy at your earliest convenience so that your shares are voted as
you specify.
By Order of the Board of Directors,
JUDY G. CARTER
President and Chief Executive Officer
Dated: June 25, 1999
Alexandria, Virginia
<PAGE> 3
SOFTWORKS, INC.
5845 RICHMOND HIGHWAY
ALEXANDRIA, VIRGINIA 22303
ANNUAL MEETING OF STOCKHOLDERS
MONDAY, AUGUST 9, 1999
PROXY STATEMENT
Our Annual Meeting of Stockholders will be on Monday, August 9, 1999 at The
Hampton Inn, Alexandria-Oldtown South, 5821 Richmond Highway, Alexandria,
Virginia 22303 at 10:00 a.m., for the purposes set forth in the accompanying
Notice of Annual Meeting of Stockholders. Our Board of Directors is soliciting
the enclosed proxy for use at the annual meeting. This proxy statement and the
enclosed proxy are being mailed to stockholders beginning about June 25, 1999.
If you sign and return a proxy in the accompanying form, the shares
represented by your proxy will be voted the way you specify. You may revoke your
proxy prior to its exercise either by sending a letter to SOFTWORKS, by
delivering a subsequent proxy or by voting in person at the annual meeting.
VOTING RIGHTS
Only stockholders of record on June 21, 1999 (the "Record Date"), will be
entitled to vote at the annual meeting or at any adjournment or postponement of
the annual meeting. On the Record Date, we had outstanding one class of voting
securities, namely 17,139,734 shares of common stock, $.001 par value, excluding
treasury shares. You are entitled to one vote for each share of common stock
registered in your name. In order to elect directors, the affirmative vote of a
majority of the votes cast at the meeting is required. In order to approve the
proposed amendment to our certificate of incorporation reducing the number of
authorized shares, the affirmative vote of a majority of the shares outstanding
is required. In order to determine whether proposals requiring a majority of the
votes cast at the meeting have received a majority vote, abstentions and broker
non-votes will not be included in the vote totals. Broker non-votes are those
instances where brokers are prohibited from exercising discretionary authority
for beneficial owners who have not returned a proxy. Consequently, abstentions
and broker non-votes will not effect the vote for directors, but will be counted
in the determination of a quorum. The effect of an abstention and a broker
non-vote is the same as a vote "against" the proposal to amend our certificate
of incorporation.
To the knowledge of the Board of Directors, who are soliciting your proxy,
the only person who owned of record or beneficially as of the Record Date more
than five (5%) percent of our outstanding common stock, was Computer Concepts
Corp., 80 Orville Drive, Bohemia, New York 11716, which beneficially owns
7,027,267 shares, representing 41% of our outstanding common stock.
ELECTION OF DIRECTORS
Our by-laws provide for a Board of Directors of not less than three nor
more than nine directors, classified into three classes as nearly equal in
number as possible, whose terms of office expire in successive years. Our Board
of Directors now consists of five directors, with directors in each class as set
forth below:
<TABLE>
<CAPTION>
CLASS I CLASS II CLASS III
(TO SERVE UNTIL THE (TO SERVE UNTIL THE (TO SERVE UNTIL THE
ANNUAL MEETING OF ANNUAL MEETING OF ANNUAL MEETING OF
STOCKHOLDERS IN 1999) STOCKHOLDERS IN 2000) STOCKHOLDERS IN 2001)
--------------------- --------------------- ---------------------
<S> <C> <C>
Robert Devine(1)(2) James A. Cannavino(1)(2) Charles Feld(1)(2)
Judy G. Carter
</TABLE>
- ---------------
(1) Member of Audit Committee.
(2) Member of the Compensation Committee.
<PAGE> 4
Robert Devine, who is now a director in Class I, is nominated for election
to hold office until our annual meeting of stockholders in 2002 or until his
successor is chosen and qualified. Charles Feld, who is now a director in Class
III, is nominated to hold office until our annual meeting of stockholders in
2001 or until his successor is chosen and qualified. Mr. Feld was initially
elected by our shareholders to serve as a director in Class I, but was appointed
to fill a vacancy in Class III by the remaining Board members. Shares which are
represented by executed proxies in the form enclosed will be voted, unless
otherwise indicated, for the election as a director of Messrs. Devine and Feld
unless either or both of them is unavailable, in which event the shares
represented by the proxy will be voted for a substitute nominee designated by
the Board of Directors. Our Board of Directors has no reason to believe that
either Mr. Devine or Mr. Feld will be unavailable or, if elected, will decline
to serve.
Directors who are not employed by us receive a fee of $2,000 for each Board
of Directors or Committee meeting which he or she attends. During our fiscal
year ended December 31, 1998, there were five meetings of the Board of
Directors, two meetings of the audit committee and one meeting of the
compensation committee. Each director attended or participated in all of the
Board of Directors meetings and applicable committee meetings during the term of
his or her directorship. Our audit committee is involved in discussions with our
independent certified accountants with respect to the year end audited financial
statements. We do not have a nominating committee.
The following information, including stock ownership, is submitted with
respect to our directors, each executive officer named in the "Summary
Compensation Table" and for all executive officers and directors as a group:
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED AS OF
6/21/99
-------------------------
DIRECTOR NUMBER
NAME AGE SINCE OF SHARES PERCENTAGE
- ---- --- ------------ ---------- -----------
<S> <C> <C> <C> <C>
James A. Cannavino.................. 54 April 1998 707,469 4.0%(1)
Judy G. Carter...................... 46 October 1993 208,334 1.2%(2)
C.R. Kinsey, III.................... 53 -- 281,666 1.6%(3)
Robert C. McLaughlin................ 53 -- 48,333 *(4)
Robert Devine....................... 59 May 1998 42,000 *(5)
Charles Feld........................ 56 July 1998 42,000 *(5)
All Directors and Officers
as a Group (6 persons)............ 1,329,802 7.3%(1)(2)(3)(4)
(5)(6)
</TABLE>
- ---------------
* No officer or director owns more than one percent of our issued and
outstanding common stock unless otherwise indicated.
(1) Includes options currently exercisable or exercisable within 60 days to
purchase 500,000 shares of common stock.
(2) Includes options currently exercisable or exercisable within 60 days to
purchase 208,334 shares of common stock.
(3) Includes options currently exercisable or exercisable within 60 days to
purchase 281,666 shares of common stock.
(4) Includes options currently exercisable or exercisable within 60 days to
purchase 48,333 shares of common stock.
(5) Includes options currently exercisable or exercisable within 60 days to
purchase 42,000 shares of common stock.
(6) The address of each officer and director listed above is c/o SOFTWORKS,
Inc., 5845 Richmond Highway, Suite 400, Alexandria, Virginia 22303.
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<PAGE> 5
PRINCIPAL OCCUPATIONS OF DIRECTORS
James A. Cannavino has been our Chairman of the Board since April 1998. Mr.
Cannavino is President and Chief Executive Officer of CyberSafe, Inc., a
corporation specializing in network security. He was the President and Chief
Executive Officer of Perot Systems Corporation through July 1997, and prior to
that was a Senior Vice President at IBM, responsible for strategy and
development. He also served on the IBM Corporate Executive Committee and
Worldwide Management Council, and on the board of IBM's integrated services and
solutions company. Mr. Cannavino currently is a consultant to Computer Concepts
Corp. and serves on the boards of National Center for Missing and Exploited
Children, 7th Level, Inc. and Marist College.
Judy G. Carter has been our President and Chief Executive Officer and a
director since October 1993. Prior thereto, Ms. Carter was our Chief Operating
Officer from 1991. Ms. Carter started with us as a system software developer and
progressed into a number of supervisory and managerial roles, culminating in her
appointment as Vice President of technical services in 1990. Ms. Carter is a
director of Fairfax Opportunities Unlimited, a non-profit organization.
Robert Devine has been a director since May 1998. Mr. Devine has been a
director and the Chief Executive Officer of Chemtainer Industries, Inc. for more
than twenty years. Chemtainer Industries manufactures and distributes a diverse
array of commercial and consumer products nationally and internationally with
eleven plants located in nine states throughout the United States. Mr. Devine is
also a director of Rototron Corp. and Tracey International, and has been a
director and vice-president of the non-profit New York City Mental Health
Association for more than ten years.
Charles Feld has been a director since July 1998. Mr. Feld has been
President of the Feld Group, Inc., a provider of temporary chief information
officer consulting services, for more than the past five years. Since December
1997, Mr. Feld has also served as operating Chief Information Officer of Delta
Air Lines. Prior thereto, from June 1992 until August 1997, Mr. Feld served as
operating Chief Information Officer for Burlington Northern Santa Fe. Corp.
MANAGEMENT
OFFICERS OF SOFTWORKS
Our officers are:
<TABLE>
<CAPTION>
NAME POSITION HELD
- ---- -------------
<S> <C>
James A. Cannavino....................... Chairman of the Board
Judy G. Carter........................... President and Chief Executive Officer
C.R. Kinsey, III......................... Vice President, Secretary and
Chief Technology Officer
Robert C. McLaughlin..................... Treasurer (Chief Financial Officer)
</TABLE>
C.R. Kinsey, III, one of our co-founders, has been Vice President since May
1998 and has been Secretary and Chief Technology Officer since 1977. From 1977
until May 1998, Mr. Kinsey was also our Treasurer. In addition, Mr. Kinsey is a
primary technical advisor to our technology division for new product research
and development, product enhancements and services and support.
Robert C. McLaughlin has been our Treasurer and Chief Financial Officer
since March 1998. Prior thereto, Mr. McLaughlin was a Department Director with
global responsibilities at Perot Systems Corporation in Dallas, Texas from
November 1996 through December 1997. Mr. McLaughlin also served as Senior Vice
President for a real estate investment venture in West Palm Beach, Florida from
1993 to 1996, as Vice President of First Union National Bank of Florida, N.A. in
Fort Lauderdale from 1991 to 1993 and a Vice President of Southeast Bank, N.A.
in Miami from 1987 to 1991.
3
<PAGE> 6
For a description of the business experience of Mr. Cannavino and Ms.
Carter, see "Principal Occupations of Directors" on page 3.
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation with
respect to our Chief Executive Officer and our other most highly compensated
executive officer other than the Chief Executive Officer ("named executive
officers") whose total annual salary and bonus equaled or exceeded $100,000 for
services rendered for the fiscal year ended December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------
OTHER ANNUAL ALL OTHER
COMPENSATION COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) ($)(2)
- --------------------------- ---- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Judy G. Carter..................... 1997 $155,000(3) $165,000(4) -- $ 1,000
President and Chief 1998 $170,833
Executive Officer
C.R. Kinsey, III................... 1997 $155,000(3) $165,000(4) -- $189,000
Vice-President, Secretary 1998 $170,833 $114,611
and Chief Technology Officer
</TABLE>
- ---------------
(1) No Other Annual Compensation is shown because the amounts of perquisites and
other non-cash benefits provided by us do not exceed the lesser of $50,000
or 10% of the total annual base salary and bonus disclosed in this table for
the respective officer.
(2) All Other Compensation includes royalties paid in respect of software
products developed by such officers.
(3) Includes $5,000 deferred from 1996.
(4) Includes $77,500 deferred from 1996.
EMPLOYMENT AGREEMENTS
We have entered into an agreement with Mr. James A. Cannavino pursuant to
which he has agreed to serve as Chairman of our Board of Directors. As
compensation for his services, Mr. Cannavino was granted options to purchase
1,200,000 shares of common stock, 600,000 of which are Type I options and
600,000 of which are Type II options. "Type I" options vested one-half on the
earlier of (i) the closing date of our initial public offering (August 7, 1998),
or (ii) December 31, 1998 and one-half on December 31, 1998. "Type II" options
vest on December 31, 2002, subject to earlier vesting based upon the company
reaching certain defined levels of net income. The agreement with Mr. Cannavino
further provides for the issuance of a $500,000 full recourse loan to him for
relocation or other purposes upon the effective date of our initial public
offering. The money was lent to Mr. Cannavino and the loan is due on December 1,
2000. Mr. Cannavino also receives a monthly salary of $2,000 and is reimbursed
for certain expenses.
We have entered into employment agreements with each of Judy G. Carter,
C.R. Kinsey, III and Robert C. McLaughlin, which started on the effective date
of our initial public offering. The employment agreements with Ms. Carter and
Mr. Kinsey terminate December 31, 2002 and the employment agreement for Mr.
McLaughlin is for a three year term. The agreements automatically renew for
additional one year periods unless we or the employee notifies the other party
at least ninety days prior to the end of any renewal term that we or they desire
to terminate such agreement. Pursuant to the agreements, Ms. Carter, Mr. Kinsey,
Mr. McLaughlin, receive annual compensation of $200,000, $200,000, and $120,000,
respectively and an incentive bonus based on meeting or exceeding annual or
quarterly net income targets to be established by the board of directors. The
incentive payments to Ms. Carter and Mr. Kinsey were up to $150,000 for 1998 and
4
<PAGE> 7
are up to $200,000 for each of the years 1999 through 2002. Each employment
agreement also provides for certain payments following death or disability and
further provides, in the event of a change in control of SOFTWORKS, as defined
therein, the right, at the employee's election, to terminate the agreement and
receive a lump sum payment of approximately three times his or her annual
salary.
401(K) SAVINGS PLAN
We sponsor a retirement plan (the "401(k) Savings Plan") intended to be
qualified under section 401(k) of the Internal Revenue Code of 1986, as amended.
All employees over age 21 who have completed at least 1,000 hours in their first
year of employment by us are eligible to participate in the 401(k) Savings Plan.
Employees may contribute to the 401(k) Savings Plan on a tax deferred basis up
to 20% of their total annual salary, but in no event more than the maximum
permitted by the Code ($10,000 in calendar 1998). After an employee has been
with us for two years, we match 25% of all employee contributions up to $2,500
per year per employee, and all company contributions are fully vested. As of
December 31, 1998, 161 employees participated in the 401(k) Savings Plan. For
the fiscal year ended December 31, 1998, our contribution on behalf of 76
eligible participants was an aggregate approximately $78,000 to the 401(k)
Savings Plan, of which an aggregate $4,700 was a contribution for Judy G. Carter
and C.R. Kinsey.
1998 LONG TERM INCENTIVE PLAN
In May 1998, we adopted the SOFTWORKS, Inc. 1998 Long Term Incentive Plan
(the "1998 Incentive Plan") in order to motivate our qualified employees, to
help us attract employees and to align the interests of those employees with our
stockholders' interests.
The 1998 Incentive Plan provides for the grant of "incentive stock options"
within the meaning of the Section 422 of the Internal Revenue Code of 1986, as
amended, "non-qualified stock options," restricted stock, performance grants and
other types of awards to our and our affiliates' officers, key employees,
consultants and independent contractors.
The 1998 Incentive Plan, which is administered by the Long Term Incentive
Plan Administrative Committee of our board of directors, authorizes the issuance
of a maximum of 3,727,000 shares of common stock, which may be either newly
issued shares, treasury shares, reacquired shares, shares purchased in the open
market or any combination thereof. If any award under the 1998 Incentive Plan
terminates, expires unexercised, or is cancelled, the shares of common stock
that would otherwise have been issuable pursuant thereto will be available for
issuance pursuant to the grant of new awards. We have outstanding options to
purchase 3,727,000 shares of common stock under the 1998 Incentive Plan. Of the
3,727,000 options, James A. Cannavino has been granted 600,000 Type I options
and 600,000 Type II options, Judy Carter has been granted 150,000 Type I options
and 200,000 Type II options, C.R. Kinsey has been granted 200,000 Type I options
and 250,000 Type II options and Robert McLaughlin has been granted 20,000 Type I
options and 80,000 Type II options. Mr. Cannavino has exercised 200,000 Type I
options.
1999 STOCK OPTION PLAN
In January 1999, we adopted the 1999 Stock Option Plan (the "1999 Plan") in
order to motivate our employees, and to help us attract employees and to align
the interests of those employees with our stockholders' interests.
The 1999 Plan provides for the grant of non-qualified stock options to our
officers, key employees, consultants and independent contractors.
The 1999 Plan, as amended, which will be administered by our board of
directors or a committee of our board, authorizes the issuance of a maximum of
1,500,000 shares of common stock, which may be either newly issued shares,
treasury shares, reacquired shares, shares purchased in the open market or any
combination thereof. If any award under the 1999 Plan terminates, expires,
unexercised, or is cancelled, the shares of the common stock that would
otherwise have been issuable pursuant thereto will be available for
5
<PAGE> 8
issuance pursuant to the grant of new awards. We have outstanding options to
purchase 1,310,000 shares of common stock under the 1999 Plan. Of the 1,310,000
options, Judy G. Carter has been granted 175,000 options, C.R. Kinsey has been
granted 40,000 options and Robert McLaughlin has been granted 15,000 options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During our last fiscal year, our Compensation Committee consisted of James
A. Cannavino, Charles Feld and Robert Devine. Neither Mr. Feld nor Mr. Devine is
our employee.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth details regarding the options granted during
our last fiscal year to Judy G. Carter and C.R. Kinsey, III, the persons listed
in the Summary Compensation Table.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE AT ASSUMED
---------------------------------------------- ANNUAL RATES OF STOCK PRICE APPRECIATION
PERCENT OF EXERCISE FOR OPTION TERM(2)
TOTAL OPTIONS PRICE OR ------------------------------------------
OPTIONS GRANTED TO BASE PRICE EXPIRATION
NAME GRANTED(#) EMPLOYEES(1) PER SHARE DATE 5% 10%
- ---- --------------- ------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Judy G. Carter(3)..... 150,000 Type I 6-30-01 $126,758 $ 296,720
200,000 Type II 12-31-02 288,146 671,595
------- --------- -----------
350,000 9.7% $7.00 $414,904 $ 968,315
C.R. Kinsey, III(3)... 200,000 Type I 6-30-01 $169,011 $ 395,626
250,000 Type II 12-31-02 360,183 839,494
------- --------- -----------
450,000 12.4% $7.00 $529,194 $1,235,120
</TABLE>
- ---------------
(1) We granted options for 3,613,850 shares to employees during our fiscal year
ended December 31, 1998.
(2) Potential realizable value assumes that our stock price increases from the
date the options were granted until the end of the option term at the annual
rate specified. Annual compounding results in total appreciation of 15.2%
(at 5% per year) for the Type I options with a term of 2.9 years and total
appreciation (at 5% per year) of 24.0% for the Type II options with a term
of 4.4 years; and 31.8% total appreciation (at 10% per year) for Type I
options with a term of 2.9 years and total appreciation (at 10% per year) of
52.1% for the Type II Options with a term of 4.4 years. If the price of our
common stock increased at such rates from the price at the end of our 1998
fiscal year ($7.06 per share) over the next three years, our stock price
with 5% appreciation would be $8.23 per share and with 10% appreciation
would be $9.46 per share. These assumed rates of appreciation are specified
in the Commission's rules and are not our estimate or projection of our
future stock price growth.
(3) We granted options for 125,000 shares to Judy G. Carter and 40,000 shares to
C.R. Kinsey III in February 1999 and 50,000 shares to Judy G. Carter in May
1999, which amounts are not included in this table.
6
<PAGE> 9
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table sets forth information concerning options exercised
during the year ended December 31, 1998, by the named executive officers and the
value of unexercised options held by them as of December 31, 1998:
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FISCAL YEAR END FISCAL YEAR END(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Judy G. Carter............................ 150,000 200,000 $1,059,375 $1,412,500
C.R. Kinsey III........................... 200,000 250,000 1,412,500 1,765,625
</TABLE>
- ---------------
(1) Based upon the closing price of our common stock of $7.0625 on December 31,
1998.
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
Our compensation committee did not take action during 1998 and all
compensation decisions were made by our entire Board of Directors, subject to
applicable employment agreements.
GENERAL POLICIES
Our compensation programs are intended to enable us to attract, motivate,
reward and retain the management talent which we require to achieve our
corporate objectives, and thereby increase stockholder value. Our policy is to
provide incentives to our senior management to achieve both short-term and
long-term objectives and to reward exceptional performance and contributions to
the development of our businesses. To attempt to attain these objectives, our
executive compensation program includes a competitive base salary and
stock-based compensation. See "Management -- Employment Agreements" on page 4.
Stock options are granted to employees, including our executive officers,
under the SOFTWORKS 1998 Long Term Incentive Plan and 1999 Stock Option Plan. We
believe that stock options provide an incentive that focuses an executive's
attention on managing from the perspective of an owner with an equity stake in
the business. Options granted at the time of our initial public offering were
awarded at the initial public offering price. Options awarded after that date
were awarded at the market price on the date of the grant. Among our executive
officers, the number of shares subject to options granted to each individual
generally depends upon the level of that officer's responsibility. The largest
grants are awarded to the most senior officers who, in the view of the Board of
Directors, have the greatest potential impact on our profitability and growth.
COMPENSATION POLICIES FOR OUR EXECUTIVE OFFICERS
The Board of Directors established, subject to any applicable employment
agreements, the salaries which were paid to our executive officers for the past
fiscal year. We expect that the Compensation Committee will establish salaries
to be paid to our executive officers, subject to their employment agreements,
during the coming year. In setting salaries, the Board's decisions concerning
the specific 1998 compensation elements for individual executive officers,
including our President and Chief Executive Officer, were made taking into
account several factors, including competitive compensation data, the extent to
which an individual may participate in our stock plans, and qualitative factors
bearing on an individual's experience, responsibilities, management and
leadership abilities, and job performance. In all cases, specific decisions
involving executive officer compensation were based upon the Board's judgement
about the individual executive officer's performance and potential future
contributions, and about whether each particular payment or award would be an
appropriate reward and incentive for the executive to sustain or enhance our
long-term performance.
7
<PAGE> 10
BASIS FOR COMPENSATION OF OUR CHIEF EXECUTIVE OFFICER
For fiscal 1998, pursuant to the terms of her employment agreement with us,
Judy G. Carter, our President and chief executive officer, received a base
salary of $170,833. In light of this employment agreement, the Board of
Directors was not required to make any decision regarding Ms. Carter's base
compensation. Ms. Carter also received options to purchase 350,000 shares of
common stock at the initial public offering price of $7.00 per share. The Board
of Directors believes that stock options provide an incentive for Ms. Carter to
maximize long-term shareholder value.
THE BOARD OF DIRECTORS:
James A. Cannavino
Judy G. Carter
Robert Devine
Charles Feld
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Exchange Act requires our executive officers,
directors and persons who own more than ten percent of a registered class of our
equity securities ("Reporting Persons") to file reports of ownership and changes
in ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission
(the "SEC"). These Reporting Persons are required by SEC regulation to furnish
us with copies of all Forms 3, 4 and 5 they file with the SEC. Based solely upon
our review of the copies of the forms we have received, we believe that all
Reporting Persons complied on a timely basis with all filing requirements
applicable to them with respect to transactions during fiscal 1998.
COMMON STOCK PERFORMANCE
The following graph provides a comparison of cumulative stockholder return
among SOFTWORKS, The Nasdaq Stock Market index and the Standard and Poors'
Computers (Software and Services) index from August 3, 1998 to March 31, 1999:
COMPARISON OF 8 MONTH CUMULATIVE TOTAL RETURN*
AMONG SOFTWORKS, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE S&P COMPUTERS (SOFTWARE & SERVICES) INDEX
[LINE GRAPH]
<TABLE>
<CAPTION>
SOFTWORKS, INC. S & P COMPUTERS
--------------- NASDAQ STOCK (SOFTWARE &
MARKET (U.S.) SERVICES)
------------- ---------------
<S> <C> <C> <C>
8/3/98 100.00 100.00 100.00
9/98 71.00 91.00 100.00
12/98 101.00 119.00 124.00
3/99 204.00 133.00 159.00
</TABLE>
- ---------------
* $100 invested on 8/3/98 in stock or index -- including reinvestment of
dividends. Fiscal year ending December 31.
8
<PAGE> 11
PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION TO
DECREASE AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has proposed and recommended that you approve an
amendment to Article "FOURTH" of our certificate of incorporation decreasing the
total number of shares of common stock which we are authorized to issue from
152,000,000 shares to 52,000,000 shares, of which 50,000,000 shares shall be
shares of common stock of the par value of $.001 per share and 2,000,000 shares
shall be shares of Preferred Stock of the par value of $.001 per share. This
proposed amendment to our certificate of incorporation is indicated on Exhibit
"A" annexed to this proxy statement.
The Board of Directors has proposed this amendment to our certificate of
incorporation in order to reduce the amount of annual franchise taxes which we
pay to the State of Delaware. At the time that we were reincorporated in
Delaware, it was determined that it was advisable to have a large number of
authorized shares to provide us with additional flexibility for possible capital
reorganization, acquisitions, refinancings, exchanges of securities, public
offerings and other corporate purposes. We subsequently discovered that the
franchise taxes payable for 152,000,000 authorized shares are approximately
$90,000 a year. We believe that we are unlikely to need such a large number of
authorized shares in the near future. If this amendment is approved, based on
the 17,139,734 shares of common stock presently outstanding and the 5,227,000
shares reserved for issuance under our stock option plans, we will have
27,633,266 shares available for issuance, which we believe will be sufficient
for the near future.
Accordingly, the Board of Directors, which recommends that you approve this
amendment, believes it would be to our advantage to reduce the number of
authorized shares in order to reduce related expenses.
The proposed amendment to our certificate of incorporation, as amended,
must be approved by a majority of our outstanding common stock entitled to vote
on this matter at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSED AMENDMENT.
MISCELLANEOUS INFORMATION
Arthur Andersen LLP, our independent auditors for the fiscal year ended
December 31, 1998, has advised us that a representative of the firm plans to be
present at the annual meeting, with the opportunity to make a statement if he or
she desires to do so, and will be available to respond to appropriate questions.
As of the date of this proxy statement, the Board of Directors does not intend
to present at the meeting any matters not referred to in the form of proxy. If
any proposal not set forth in this proxy statement should be presented for
action at the meeting, we intend that the shares represented by proxies will be
voted with respect to such matters in accordance with the judgment of the
persons voting them.
We will pay the cost of soliciting proxies in the accompanying form. In
addition to solicitation by use of the mails, certain of our officers and
regular employees may solicit proxies by telephone, telegraph or personal
interview. We may also request brokerage houses, other custodians, nominees and
fiduciaries to forward soliciting material to the beneficial owners of stock
held of record by such persons, and may make reimbursement for payments made for
their expense in forwarding soliciting material to such beneficial owners.
Stockholder proposals with respect to our next annual meeting of
stockholders must be received by us no later than February 20, 2000 to be
considered for inclusion in our next proxy statement.
A copy of our annual report has been mailed to every stockholder as of the
Record Date. Our annual report is not to be considered proxy soliciting
material.
By Order of the Board of Directors,
JUDY G. CARTER
President and Chief Executive Officer
Dated: June 25, 1999
Alexandria, Virginia
9
<PAGE> 12
EXHIBIT "A"
PROPOSED AMENDMENT TO SOFTWORKS'
CERTIFICATE OF INCORPORATION
The following sets forth the changes to paragraph (a) of Article "FOURTH"
of SOFTWORKS' Certificate of Incorporation if the proposed amendment is
approved:
"FOURTH: (a) The total number of shares of all classes of stock which
the corporation shall have authority to issue is FIFTY-TWO MILLION
(52,000,000) shares. Of these (i) FIFTY MILLION (50,000,000) shares shall
be shares of common stock of the par value of $.001 per share; and (ii) TWO
MILLION (2,000,000) shares shall be shares of Preferred Stock of the par
value of $.001 per share.
A-1
<PAGE> 13
SOFTWORKS, INC.
The undersigned hereby appoints James A. Cannavino and Judy G. Carter,
or either of them, attorneys and Proxies with full power of substitution in each
of them, in the name and stead of the undersigned to vote as Proxy all the stock
of the undersigned in SOFTWORKS, Inc., a Delaware corporation, at the Annual
Meeting of Stockholders scheduled to be held on August 9, 1999 and any
adjournments thereof.
(Continued and to be signed on reverse side)
SEE REVERSE
SIDE
<PAGE> 14
PLEASE MARK YOUR
/X/ VOTES AS IN THIS
EXAMPLE
The Board of Directors recommends a vote FOR the following proposals:
1. Election of the following nominees, as set forth in the proxy statement
NOMINEE: Robert Devine
Charles Feld
FOR WITHHOLD
/ / / /
all nominees authority
listed above to vote
(Instruction: To withhold authority to vote for any individual nominee,
print the nominee's name on the line provided below)
-----------------------------------------------------------------------
2. Proposal to amend our Certificate of Incorporation to decrease the number of
authorized shares of the Corporation from 152,000,000 to 52,000,000
For Against Abstain
/ / / / / /
3. Upon such other business as may properly come before the meeting or any
adjournment thereof.
THE SHARES REPRESENTED HEREBY SHALL BE VOTED BY PROXIES, AND EACH OF THEM, AS
SPECIFIED AND, IN THEIR DISCRETION, UPON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING. STOCKHOLDERS MAY WITHHOLD THE VOTE FOR ONE OR MORE
NOMINEE(S) BY WRITING THE NOMINEE(S) NAME(S) IN THE BLANK SPACE PROVIDED ABOVE.
IF NO SPECIFICATION IS MADE, THE SHARES WILL BE VOTED FOR THE PROPOSALS SET
FORTH ABOVE.
PLEASE DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE
SIGNATURE _____________________________________________________________________
SIGNATURE(S) __________________________________________________________________
DATED: __________________________________________________________________, 1999
(Note: Please sign exactly as your name appears hereon. Executors,
administrators, trustees, etc. should so indicate when signing, giving full
title as such. If a signer is a corporation, execute in full corporate name
by authorized officer. If shares are held in the name of two or more
persons, all should sign.)
