<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S) 240.14a-12
LOISLAW.COM, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
---------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------------
5) Total fee paid:
---------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously.
Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
---------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------------------
3) Filing Party:
---------------------------------------------------------------------------
4) Date Filed:
---------------------------------------------------------------------------
<PAGE>
LOISLAW.COM, INC.
105 N. 28th Street
VAN BUREN, ARKANSAS 72956
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 13, 2000
To the Stockholders of Loislaw.com, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders of
Loislaw.com, Inc. (the "Company") will be held at Park City Club, 5956 Sherry
Lane, 17th Floor, Dallas, Texas 75225, on June 13, 2000 at 9:00 a.m., local
time, for the following purposes:
1. Election of Director: To elect one director to serve for a three-year term
expiring in 2003.
2. 1999 Nonqualified Stock Option Plan for Nonemployee Directors: To consider
and vote upon a proposal to approve the adoption of the Company's 1999
Nonqualified Stock Option Plan for Nonemployee Directors.
3. 2000 Stock Option Plan: To consider and vote upon a proposal to approve
the adoption of the Company's 2000 Stock Option Plan for sales and marketing
personnel.
4. Amendment of 1996 Stock Option Plan: To consider and vote upon a proposal
to amend the Company's 1996 Stock Option Plan to increase from 1,500,000 to
1,950,000 the aggregate number of shares of Common Stock authorized for issuance
under such plan.
5. Other Business: To consider and act upon such other business as may
properly come before the Annual Meeting or any adjournments thereof.
Only holders of record of the Company's Common Stock at the close of
business on May 19, 2000 are entitled to notice of and to vote at the Annual
Meeting and any adjournments thereof.
The Annual Report for the year ended December 31, 1999 is being mailed to
stockholders simultaneously with the mailing of this Notice and Proxy Statement.
By Order of the Board of Directors
/s/ Douglas W. Parker, Sr.
Douglas W. Parker, Sr.,
Secretary
Van Buren, Arkansas
May 25, 2000
YOUR VOTE IS IMPORTANT.
YOU ARE URGED, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON,
TO DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE SO THAT YOUR SHARES MAY BE VOTED IN ACCORDANCE WITH YOUR WISHES AND IN
ORDER THAT THE PRESENCE OF A QUORUM MAY BE ASSURED. THE GIVING OF SUCH PROXY
DOES NOT AFFECT YOUR RIGHT TO REVOKE IT LATER OR VOTE YOUR SHARES IN PERSON IF
YOU ATTEND THE MEETING.
<PAGE>
LOISLAW.COM, INC.
105 N. 28th Street
VAN BUREN, ARKANSAS 72956
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 13, 2000
This Proxy Statement is furnished in connection with the solicitation of
proxies by and on behalf of the Board of Directors of Loislaw.com, Inc., a
Delaware corporation (the "Company"), for use at the Annual Meeting of
Stockholders of the Company to be held at the time and place and for the
purposes set forth in the foregoing notice.
The cost of soliciting proxies will be borne by the Company. In addition to
solicitation by mail, certain officers and employees of the Company, who will
receive no special compensation therefor, may solicit proxies in person, by
telephone, email or facsimile. The Company will reimburse banks, brokerage firms
and other custodians, nominees and fiduciaries for reasonable expenses incurred
by them in sending proxy material to the beneficial owners of the Company's
Common Stock, par value $0.001 per share (the "Common Stock").
The approximate date on which this Proxy Statement and the accompanying
proxy are first being mailed to stockholders is May 25, 2000.
REVOCABILITY OF PROXY
Any stockholder executing a proxy retains the right to revoke it at any
time prior to exercise at the Annual Meeting. A proxy may be revoked by delivery
of written notice of revocation to Douglas W. Parker, Sr., Secretary of the
Company, by execution and delivery to the Company of a later proxy or by voting
the shares in person at the Annual Meeting. If not revoked, all shares
represented at the Annual Meeting by properly executed proxies will be voted as
directed therein. If no direction is given, such shares will be voted for
election of the nominee for director and for approval of each of the other
proposals set forth herein.
VOTING SECURITIES
The close of business on May 19, 2000, has been fixed as the record date
for the determination of holders of record of the Company's Common Stock
entitled to notice of and to vote at the Annual Meeting. On the record date,
20,985,597 shares of the Company's Common Stock were outstanding and eligible to
be voted at the Annual Meeting.
For each share of Common Stock held on the record date, a shareholder is
entitled to one vote on all matters to be voted on at the Annual Meeting.
Stockholders are not entitled to cumulative voting with respect to the election
of directors.
VOTING PROCEDURES
The vote required for the election of directors and for the approval of
each of the other proposals to be acted on at the Annual Meeting is the
affirmative vote of a majority of the shares entitled to vote on the matter and
present or represented by proxy at the meeting, provided a quorum is present. A
quorum is established by the presence or representation at the meeting of the
holders of a majority of the Company's voting shares. Under the rules of the New
York Stock Exchange (the "Exchange"), brokers who are members of the Exchange
and who hold shares in street name have the authority to vote on certain items
when they have not received instructions from beneficial owners. Brokers that do
not receive instructions are entitled to vote on the election of directors and
each of the other proposals set forth in the proxy statement. The shares
represented by a broker non-vote (or other limited proxy) as to any proposal
will be considered present for quorum purposes, but will not be considered part
of the shares entitled to be voted on that proposal at the meeting. Thus, the
effect of such non-votes will be to reduce the number of affirmative votes
required to approve such proposal and the number of negative votes required to
defeat such proposal. An abstention with respect to any nominee or any proposal
will effectively count as a vote against the election of such nominee or such
proposal.
1
<PAGE>
BENEFICIAL OWNERSHIP OF THE COMPANY'S EQUITY SECURITIES
The following table sets forth information, as of May 19, 2000, with
respect to the shares of the Company's Common Stock beneficially owned (i) by
each person known to the Company to be the beneficial owner of more than 5% of
the Company's Common Stock, (ii) by each director, nominee for election as a
director and each executive officer named in the Summary Compensation Table, and
(iii) by all current directors and executive officers of the Company as a group.
The number of shares beneficially owned includes shares of Common Stock
with respect to which the persons named below have either investment or voting
power. A person is also deemed to be the beneficial owner of a security if that
person has the right to acquire beneficial ownership of that security within 60
days through the exercise of an option or through the conversion of another
security. Except as noted, each beneficial owner has sole investment and voting
power with respect to the Common Stock.
Common Stock not outstanding that is subject to options or conversion
privileges is deemed to be outstanding for the purpose of computing the
percentage of Common Stock beneficially owned by the person holding such options
or conversion privileges, but is not deemed to be outstanding for the purpose of
computing the percentage of Common Stock beneficially owned by any other person.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK PERCENT
NAME BENEFICIALLY OWNED OF CLASS
- ---- ------------------ --------
<S> <C> <C>
Kyle D. Parker (1) 3,349,200 16.0%
W. Clark Wigley (2) 230,000 1.1
Mark O. Beyland (3) 599,355 2.9
Robert C. Ammerman (4) 5,664,170 27.0
Hannah C. Stone (5) 2,237,520 10.7
D. Randy Laney -0- ---
Capital Resource Lenders III, L.P. (4) 5,664,170 27.0
Sandler Capital Partners IV, L.P. (5) 2,237,520 10.7
Sandler Capital Partners IV, FTE, L.P. (5) 2,237,520 10.7
Douglas W. Parker, Sr. (6) 1,479,600 7.1
Melissa A. Parker (7) 1,559,600 7.4
All directors and executive officers as a group (8) 13,388,711 62.6
(11 persons)
</TABLE>
__________________________
(1) Consists of 1,119,200 shares held of record by Kyle D. Parker, 2,000,000
shares held by a limited partnership in which an entity owned by him is the
sole general partner and 230,000 shares held by the Parker Trust, of which
he is the trustee. Under the terms of the trust, Mr. Parker has sole voting
power of all of the shares held of record by the trustee. W. Clark Wigley
has been granted an option to purchase all shares held by the Parker Trust.
Mr. Parker disclaims beneficial ownership of the shares held by the Parker
Trust. This information is based on a Schedule 13G filed on February 14,
2000 by Mr. Parker and on additional information provided to the Company by
Mr. Parker.
(2) Consists of an option to purchase 230,000 shares of Common Stock from the
Parker Trust that is fully vested.
(3) Includes 340,287 shares subject to options held by Mr. Beyland that are
presently exercisable or will be exercisable within 60 days.
(4) Consists of 5,659,542 shares of Common Stock held of record by Capital
Resource Lenders III, L.P., and 4,628 shares of Common Stock held of record
by CRP Investment Partners III, LLC. Mr. Ammerman is a managing member of
Capital Resource Partners III, LLC, which is the general partner of Capital
Resource Lenders III, L.P. Capital Resource Partners III, LLC has sole
voting and investment power with respect to the shares held of record by
Capital Resource Lenders III, L.P. Mr. Ammerman is also a managing member
of CRP Investment Partners III, LLC. Mr. Ammerman shares with three other
managing members the voting and investment power with respect to the shares
beneficially owned by CRP Investment Partners III, LLC. Mr. Ammerman
disclaims beneficial ownership of all shares owned by these entities,
except to the extent of his pecuniary interest in those shares. The address
for Mr. Ammerman, Capital Resource Lenders III, L.P. and CRP Investment
Partners III, LLC is 85 Merrimac Street, Suite 200, Boston, Massachusetts
02114. This information is based on a Schedule 13G filed on February 11,
2000 by Mr. Ammerman and the entities referred to in this footnote.
2
<PAGE>
(5) Consists of 1,587,360 shares of Common Stock held of record by Sandler
Capital Partners IV, L.P. and 650,160 shares of Common Stock held of record
by Sandler Capital Partners IV, FTE, L.P. Ms. Stone is a Managing Director
of Sandler Capital Management, a general partnership, which is the general
partner of Sandler Capital Partners IV, L.P. and Sandler Capital Partners
IV, FTE, L.P. Ms. Stone shares voting and investment power with respect to
the shares held of record by Sandler Capital Partners IV, L.P. and Sandler
Capital Partners IV, FTE, L.P. with several other managing directors. Ms.
Stone disclaims beneficial ownership of these shares, except to the extent
of her pecuniary interest therein. The address for Ms. Stone, Sandler
Capital Partners IV, L.P. and Sandler Capital Partners IV, FTE, L.P. is 767
Fifth Avenue, 45th Floor, New York, New York 10153. This information is
based on a Schedule 13D filed on October 19, 1999 by Ms. Stone and the
entities referred to in this footnote.
(6) Consists of 479,600 shares held of record by Douglas W. Parker, Sr. and
1,000,000 shares held by a limited partnership in which an entity owned by
him is the sole general partner. This information is based on a Schedule
13G filed on February 14, 2000 by Mr. Parker.
(7) Consists of 559,600 shares held of record by Ms. Parker and 1,000,000
shares held of record by a limited partnership in which an entity owned by
her is the sole general partner. This information is based on a Schedule
13G filed on February 14, 2000 by Ms. Parker.
(8) Includes options to purchase an aggregate of 398,123 shares that are
presently exercisable or will be exercisable within 60 days.
ITEM 1. ELECTION OF DIRECTOR
The Certificate of Incorporation of the Company provides that there shall
be four directors, subject to change in accordance with the Bylaws, classified
into three classes, and that members of the three classes shall be elected to
staggered terms of three years each. In accordance with the Bylaws, the number
of directors constituting the entire Board has been increased to five. The Board
of Directors presently consists of five persons.
The current term of office of the one Class I director will expire at the
2000 Annual Meeting and one director has been nominated for re-election at the
meeting for a term expiring at the 2003 Annual Meeting:
CLASS I
TERM EXPIRING 2003
------------------
Hannah C. Stone
Ms. Stone has consented to serve if elected and, if elected, will serve
until the 2003 Annual Meeting of Stockholders and until her successor is duly
elected and qualified.
Class II and Class III directors are currently serving terms expiring in
2001 and 2002, respectively. The Class II directors are D. Randy Laney and
Robert C. Ammerman and the Class III directors are Kyle D. Parker and Mark O.
Beyland.
Under an Amended and Restated Stockholders' Agreement dated as of May 25,
1999, as long as each of (a) Capital Resource Lenders III, L.P. and (b) Sandler
Capital Partners IV, L.P. and Sandler Capital Partners IV, FTE, L.P.,
collectively, hold at least 10% of the outstanding shares of the Company's
Common Stock, persons who were stockholders on that date have agreed to vote
their shares to elect one representative of Capital Resource Lenders III, L.P.
and one representative of the Sandler parties to the Board of Directors. Ms.
Stone was selected as a director of Loislaw.com in connection with this
agreement. Mr. Ammerman will continue as a director pursuant to this agreement.
For more information regarding the Amended and Restated Stockholders Agreement,
see "Compensation Committee Interlocks and Insider Participation" on pages 5-7.
All duly submitted and unrevoked proxies will be voted FOR the nominee
listed above, unless otherwise instructed. It is expected that the nominee will
be available for election, but if for any unforeseen reason she should decline
or be unavailable for election, the persons designated as proxies will have full
discretionary authority to vote for another person designated by the Board of
Directors.
The directors and executive officers of the Company beneficially owned more
than 50% of the outstanding shares of the Company's Common Stock as of the
record date and therefore collectively have the ability to control the outcome
of the vote on the election of a director and each of the other proposals at the
Annual Meeting.
3
<PAGE>
Directors
The following table sets forth certain information with respect to the
nominee and each current director of the Company, including the name, age and
term of office as a director for each individual.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE POSITION
---- --- -------- --------
<S> <C> <C> <C>
Kyle D. Parker (1)....... 43 1987 Chief Executive Officer and Chairman of the Board
Mark O. Beyland (2)...... 49 1999 President, Chief Financial Officer and Director
Robert C. Ammerman (1)... 46 1997 Director
D. Randy Laney (2)....... 45 1999 Director
Hannah C. Stone* (1)(2).. 34 1999 Director
</TABLE>
- ----------------------
* Current nominee for re-election as a director.
(1) Member of the compensation committee
(2) Member of the audit committee
Kyle D. Parker founded Loislaw.com in 1987 and has served as Chief
Executive Officer and Chairman of the Board since that time. Mr. Parker also
served as President of Loislaw.com from 1987 to May 1999. Since 1985 Mr. Parker
has been a partner in the Parker Law Firm in Fort Smith, Arkansas. Mr. Parker
served on the Legal Automation Committee of the Arkansas Bar Association and the
American Association of Law Librarian's Task Force on Citation Formats. Mr.
Parker holds a J.D., with highest honors, from Franklin Pierce Law Center and a
B.A., cum laude, from Arkansas Tech University. Mr. Parker is the son of Douglas
W. Parker, Sr.
Mark O. Beyland joined Loislaw.com as President, Chief Financial Officer
and a director in May 1999. Mr. Beyland served as President and Chief Executive
Officer of Reed Technology and Information Services, Inc., a subsidiary of Reed-
Elsevier, from September 1993 to March 1998. Mr. Beyland holds a B.S. in
Business from Ohio State University and an M.B.A. from the University of Dayton.
Robert C. Ammerman has served as a director of Loislaw.com since November
1997. Since 1987 Mr. Ammerman has served as Treasurer of Capital Resource
Management, Inc., a private capital investment firm, and as general partner of
several private capital funds affiliated with Capital Resource Management. Mr.
Ammerman holds a B.A. and an M.S. from Carnegie Mellon University.
D. Randy Laney has served as a director of Loislaw.com since June 1999.
Since October 1998 Mr. Laney has served as Chief Executive Officer, President
and Chairman of BAV Software, Inc., a web-enabled supply chain software
development company. From August 1995 to October 1998, Mr. Laney served as a
partner of Bentonville Associates Ventures, LLC, a financial and business
consulting company. Mr. Laney was employed by Wal-Mart Corporation from 1970 to
1993 and served as Vice President of Finance and Treasurer for a portion of that
time. He holds a B.S. and a J.D. from the University of Arkansas.
Hannah C. Stone has served as a director of Loislaw.com since June 1999. In
1993, Ms. Stone joined Sandler Capital Management, a private capital investment
firm, and she is a general partner of various partnerships associated with
Sandler Capital Management. She holds a B.A. from Stanford University and an
M.B.A. from Harvard Business School. She is also a director of Millbrook Press.
Committees of the Board of Directors
The Board of Directors has appointed a compensation committee consisting of
Messrs. Ammerman and Parker and Ms. Stone. The compensation committee reviews
and evaluates the compensation and benefits of all officers of Loislaw.com,
reviews general policy matters relating to compensation and benefits of
Loislaw.com employees and makes recommendations concerning these matters to the
Board of Directors. The compensation committee also administers the Company's
1996 Stock Option Plan. The compensation committee met five times during 1999.
The Board of Directors has also appointed an audit committee consisting of
Messrs. Laney and Beyland and Ms. Stone. The audit committee reviews, with the
Company's independent auditors, the scope and timing of the auditors' services,
the auditors' report on the Company's financial statements following completion
of their audit,
4
<PAGE>
and the Company's policies and procedures with respect to internal accounting
and financial controls. In addition, the audit committee makes annual
recommendations to the Board of Directors for the appointment of independent
auditors for the ensuing year. The audit committee met one time during 1999.
Meetings of the Board of Directors
The total number of meetings of the Board of Directors during 1999 was
seven. No director attended fewer than 75% of the aggregate of (i) the total
number of meetings of the Board of Directors (held during the period for which
he or she has been a director) and (ii) the total number of meetings held by all
committees of the Board of Directors on which he or she served.
Compensation of Directors
The Company pays each nonemployee director an annual fee of $10,000 and
reimburses each director for reasonable expenses incurred in attending Board
meetings. In addition, directors who are not officers or employees of
Loislaw.com are eligible to receive options under the Company's Nonqualified
Stock Option Plan for Nonemployee Directors.
The Board of Directors adopted the Nonqualified Stock Option Plan for
Nonemployee Directors on July 22, 1999. This plan provides for the issuance of a
maximum of 320,000 shares of Common Stock. For more information regarding the
Nonqualified Stock Option Plan for Nonemployee Directors, see "Proposal to
Approve Adoption of 1999 Nonqualified Stock Option Plan for Nonemployee
Directors" on pages 11-14.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee is comprised of Messrs. Parker and Ammerman and
Ms. Stone. Mr. Parker is an executive officer of Loislaw.com. Ms. Melissa A.
Parker, Mr. Parker's sister-in-law, loaned Loislaw.com $4,000,000, which was
subsequently converted into Series B redeemable preferred stock. The Company
redeemed the Series B preferred stock held by Ms. Parker for $5.0 million on
October 5, 1999.
Three of the Company's Board members are affiliated with the Company's
significant stockholders. The persons named below are members of the Company's
Board of Directors and are also affiliated with certain of the Company's
stockholders.
<TABLE>
<CAPTION>
Name of Board Member Entity with Whom Board Member is Affiliated Relationship
-------------------- ------------------------------------------- ------------
<S> <C> <C>
Robert C. Ammerman Capital Resource Partners III, LLC, the general partner of Managing Member
Capital Resource Lenders III, L.P.
CRP Investment Partners III, LLC Managing Member
Hannah C. Stone Sandler Capital Management, an affiliate of Sandler Capital Managing Director
Partners IV, L.P. and Sandler Capital Partners IV, FTE, L.P.
Kyle D. Parker Douglas W. Parker, Sr. Son
Melissa A. Parker Brother-in-Law
</TABLE>
The other three managing members of Capital Resource Partners with whom Mr.
Ammerman shares voting and dispositive power with respect to shares held by
Capital Resource Lenders are Mr. Fred C. Danforth, Mr. Stephen M. Jenks and Mr.
Alexander S. McGrath. Messrs. Danforth, Jenks and McGrath are also the only
other managing members of CRP Investment Partners. Investment decisions are
determined by a majority vote.
The persons who share voting and dispositive power with respect to the
shares held by Sandler Capital Partners IV, L.P. and Sandler Capital Partners
IV, FTE, L.P. are Mr. Harvey Sandler, Mr. John Kornreich and Mr. Michael
Marocco.
Series A convertible preferred stock. On November 24, 1997, the Company
entered into a Senior Subordinated Note and Securities Purchase Agreement with
Capital Resource Lenders III, L.P. Under the terms of this agreement, the
Company sold $3.0 million of Series A convertible preferred stock and issued a
warrant for the right to purchase 1,944,586 shares of Loislaw.com Common Stock
at $0.005 per share to Capital Resource Lenders
5
<PAGE>
III, L.P. In connection with this sale, the Company entered into a Stockholders'
Agreement and a Registration Rights Agreement. Both of these agreements were
amended and restated on May 25, 1999 and are described below.
Series C convertible preferred stock. On May 25, 1999, the Company sold
2,495,697 shares of Series C convertible preferred stock to a limited number of
investors for a total of $14.5 million. The names of the investors and the
number of shares purchased by them for $5.81 per share are set forth below:
<TABLE>
<CAPTION>
Name of Investor Number of Shares
- ---------------- -----------------
<S> <C>
Capital Resource Lenders III, L.P. ................... 857,509
Sandler Capital Partners IV, L.P. .................... 793,680
Sandler Capital Partners IV, FTE, L.P. ............... 325,080
Mark O. Beyland ...................................... 129,088
Exeter Capital Partners IV, L.P. ..................... 390,340
</TABLE>
Capital Resource Lenders III, L.P. is one of the holders of the Company's
Series A convertible preferred stock, and it purchased its portion of the Series
C convertible preferred stock by converting notes issued to it by the Company
with a total outstanding principal balance of $5 million. Capital Resource
Lenders III and its affiliate, CRP Investment Partners III, also have guaranteed
a portion of the Company's lines of credit with the Company's bank. Mark O.
Beyland is the Company's President and Chief Financial Officer.
Amended and Restated Registration Rights Agreement. On May 25, 1999, the
Company entered into an Amended and Restated Registration Rights Agreement with
the Company's stockholders. This agreement gives Capital Resource Lenders III,
L.P., CRP Investment Partners III, LLC, Mark O. Beyland, Sandler Capital
Partners IV, L.P., Sandler Capital Partners IV, FTE, L.P., Exeter Capital
Partners IV, L.P. and Rowland T. Moriarty the right to require the Company to
use its best efforts to register under the Securities Act all or any part of the
shares of the Company's Common Stock that they own. This right is subject to
limitations and conditions, including that the Company will not be required to
effect a registration:
. more than one time for the former holders of the Series A convertible
preferred stock;
. more than one time for the former holders of the Series C convertible
preferred stock; and
. if the reasonably anticipated total price of the offering to the public
will not exceed $5 million.
Additionally, if the Company proposes to register Common Stock under the
Securities Act, the above stockholders as well as Charles J. Lindsay, George P.
Lindsay, Charles M. Dubroff, Nester J. Olivier and Dublind Partners, Inc., or
their assignees, may have the right to request the inclusion of their shares of
Common Stock in the registration.
Finally, all former holders of Series A convertible preferred stock and
Series C convertible preferred stock have the right to request any number of
registrations on Form S-3, subject to limitations and conditions, including that
the reasonably anticipated total price to the public must exceed $500,000.
The Company has agreed to pay the expenses of the registrations described
above. These costs include filing fees, printing expenses, and up to $10,000 in
fees of legal counsel for the selling stockholders. The selling stockholders
would pay any underwriting discounts and commissions associated with the sale of
their securities.
The Company has agreed that in the event of any registration of securities
under the Amended and Restated Registration Rights Agreement, the Company will
indemnify the selling stockholders against Securities Act liabilities incurred
in connection with the registration.
Subject to some limitations and conditions, the registration rights held by
these stockholders may be transferred with their securities.
Rowland T. Moriarty is a holder of Common Stock, which he acquired upon
conversion of Series A convertible preferred stock, a warrant holder and, on
occasion, a marketing consultant to the Company. He also has guaranteed a
portion of the Company's lines of credit with the Company's bank.
Amended and Restated Stockholders' Agreement. On May 25, 1999, the Company
and its existing stockholders entered into an Amended and Restated Stockholders'
Agreement. This agreement provides that the
6
<PAGE>
existing stockholders will vote their shares to elect to the Board of Directors
of Loislaw.com one person designated by each of (a) Capital Resource Lenders
III, L.P. and (b) Sandler Capital Partners IV, L.P. and Sandler Capital Partners
IV, FTE, L.P., collectively, so long as they each hold at least 10% of the
Company's outstanding shares of Common Stock. In addition, these stockholders,
as well as the Parker Trust, Kyle D. Parker, Douglas W. Parker, Sr., and Melissa
A. Parker, have co-sale rights entitling them to include shares of their stock
in the following sales:
. the sale by any party to the stockholders' agreement of a control block
of securities of Loislaw.com; or
. the sale of securities of Loislaw.com by any party to the stockholders'
agreement to a designated competitor of Loislaw.com.
The existence of this co-sale right could allow these stockholders to sell
their shares of stock at a premium over the fair market value of the Common
Stock and could transfer control of Loislaw.com.
Stockholders that are parties to this agreement may not sell their
securities of Loislaw.com in a control block sale or a private sale to a
designated competitor except in compliance with the co-sale right.
Loans from the Company's stockholders. The Company has borrowed money from
Capital Resource Lenders III, L.P., CRP Investment Partners III, LLC and Rowland
T. Moriarty and has executed several senior subordinated notes, which as of
September 30, 1999 had a combined outstanding principal balance of $9,989,434.
These notes accrued interest at a rate of 12.5% per annum and were due on
November 30, 2003. The Company repaid these notes in full on October 5, 1999
with a portion of the proceeds of its initial public offering.
The following table sets forth certain information regarding these notes.
1999 Subordinated Debt
<TABLE>
<CAPTION>
Amount Total Interest Paid and
Borrowed Principal Repaid Amount Owed at
Stockholder During 1999 During 1999 October 5, 1999
----------- ----------- ----------- ---------------
<S> <C> <C> <C>
Capital Resource Lenders III, L.P. .......... $1,966,924 $10,759,139 $10,155,474
CRP Investment Partners III, LLC ............ 2,308 12,624 11,928
Rowland Moriarty ............................ 30,768 168,315 159,034
</TABLE>
On February 9, 1999, the Company granted Capital Resource Lenders III, CRP
Investment Partners III and Rowland Moriarty warrants to purchase a total of
204,182 shares of the Company's Common Stock in connection with a limited
guaranty of the Company's credit agreement with Fleet National Bank provided by
these parties. The amount the Company repaid to Capital Resource Lenders III on
May 19, 1999 includes a $10,566 reduction of principal in connection with the
exercise of warrants.
1999 Convertible Debt
<TABLE>
<CAPTION>
Amount Amount Converted into Shares of
Borrowed Series C Convertible Preferred Stock Amount of Interest
Stockholder During 1999 During 1999 Paid on May 25, 1999
- ----------- ------------ ------------ ---------------------
<S> <C> <C> <C>
Capital Resource Lenders III, L.P. .......... $5,000,000 $4,982,127 $89,931
</TABLE>
On May 25, 1999, the notes described in the table above were converted into
857,509 shares of Series C convertible preferred stock, which were in turn
converted into 1,715,018 shares of Common Stock on October 5,
1999.
Lease with the Parker Law Firm. The Company leases the Company's principal
executive office and operations facility in Van Buren, Arkansas from the Parker
Law Firm, of which Douglas W. Parker, Sr. and Kyle D. Parker are partners. The
lease provides for a five-year term expiring in May 2004 with two five-year
renewals at the option of Loislaw.com. Monthly payments under the lease were
increased to $14,100 in May 1999 as a result of expansion of space under the
lease. During 1999, the Company paid $102,797 under this lease.
7
<PAGE>
EXECUTIVE COMPENSATION
Report of Compensation Committee on Annual Compensation
The following paragraphs constitute the report of the Compensation
Committee of the Board of Directors (the "Committee") on executive compensation
policies for fiscal year 1999. In accordance with Securities and Exchange
Commission rules, this report shall not be deemed to be incorporated by
reference into any statements or reports filed by the Company with the
Commission that do not specifically incorporate this report by reference,
notwithstanding the incorporation of this Proxy Statement into any such reports.
The Committee administers the compensation program for executive officers
and other management level employees of the Company and makes all related
decisions.
The principal elements of the compensation program for executive officers
are base salary, performance-based annual bonuses, and options granted under the
Company's Employee Stock Option Plan (the "Option Plan"). The goals of the
program are to give the executive officers incentives to work toward the
improved financial performance of the Company and to reward them for their
contributions to the Company's success. The program is also designed to retain
the Company's key executives, each of whom plays an important role in enabling
the Company to maintain its commitment to providing comprehensive, affordable
and easy to use legal information to its customers. For a summary of 1999
compensation, see the Summary Compensation Table below.
Base Salary
- -----------
Annual salaries for the Company's executive officers, including the CEO,
are generally reviewed at various times each year based on a number of factors,
both objective and subjective, with any change to be effective as directed by
the Compensation Committee. Objective factors considered include increases in
the cost of living, the Company's current performance and, to a lesser extent,
the Company's overall historical performance, although no specific formulas
based on such factors are used to determine salaries. Salary decisions are based
primarily on the Committee's subjective analysis of the factors contributing to
the Company's long-term success and of the executives' individual contributions
to such success.
The CEO's salary is determined based on the factors and analysis described
above. Specific factors considered by the Committee in establishing the CEO's
salary include his current responsibilities with the Company and continuing
contributions to the successful expansion of the Company's operations and its
financial growth over recent periods.
Performance-Based Annual Bonuses
- --------------------------------
The Company also offers to its key executives the ability to earn
performance-based annual bonuses. The bonuses are generally entirely
discretionary with the Compensation Committee, and any performance-based bonus
is awarded based upon predefined goals, including, but not limited to, the
executive's contribution toward achieving certain financial goals, the
executive's assumption of additional job duties, and the number of hours that
the executive dedicates toward performance of his or her duties.
Performance-based bonuses help the Company attract qualified executives,
provide an incentive to executives to work toward improving the financial
success of the Company and help to ensure a commitment of each executive to
long-term employment with the Company. The bonuses are also necessary to enable
the Company to compete for quality executive candidates with its major
competitors.
For 1999, the bonus paid to the CEO was based in part on his efforts in
connection with the Company's successful initial public offering and the
completion of 31 of the Company's state law databases during the year.
Stock Options
- -------------
Awards of stock options strengthen the ability of the Company to attract,
motivate and retain executives of superior capability and more closely align the
interests of management with those of shareholders. The Committee considers on
an annual basis the grant of options to executive officers and key managers.
When circumstances warrant, options may be granted on a more frequent basis.
Some factors utilized in determining frequency of the grant of stock options
include individual employee contributions, the need to be competitive in
attracting employees and in retaining key employees. The number of options
granted is generally based upon the position held by a
8
<PAGE>
participant and the Committee's subjective evaluation of such participant's
contribution to the Company's future growth and profitability. The Committee may
also consider the size of past awards and the total amounts outstanding in
making such a determination.
Unlike cash, the value of a stock option is not immediately realized and
does not result in a current expense to the Company. Stock options are granted
with an exercise price equal to the current market price of the Company's stock
and will have value only if the Company's stock price increases, resulting in a
commensurate benefit for the Company's shareholders.
The Compensation Committee believes that linking executive compensation to
corporate performance results in a better alignment of compensation with
corporate goals and shareholder interests. As performance goals are met or
exceeded, resulting in increased value to shareholders, executives are rewarded
commensurately. The Committee believes that compensation levels during 1999
adequately reflect the Company's compensation goals and policies.
April 28, 2000
Compensation Committee:
- -----------------------
Kyle D. Parker (Chairman)
Robert C. Ammerman
Hannah C. Stone
Compensation of Certain Officers
The following table sets forth certain information with respect to annual
and long-term compensation paid or awarded to the Company's CEO and each of the
other executive officers of the Company who met the minimum compensation
threshold of $100,000 for inclusion in the table for or with respect to the last
two fiscal years.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------- ------------
Awards
------
Other Annual Securities Underlying
Name and Principal Position Year Salary ($) Bonus ($) Compensation ($) Options/SARs (#)
--------------------------- ---- ---------- --------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Kyle D. Parker, Chief Executive Officer............ 1999 197,453 50,000 -- --
1998 153,905 -- -- --
Mark O. Beyland, President and Chief Financial
Officer(1)........................................ 1999 112,689 37,500 94,085(2) 340,287
1998 -- -- --
W. Clark Wigley, Vice President of Business
Development(3).................................... 1999 144,000 -- 6,000(4) --
1998 144,000 -- 6,000(4) --
</TABLE>
__________________________
(1) Mr. Beyland joined the Company in May 1999.
(2) Consists of relocation expenses paid on behalf of Mr. Beyland in connection
with his hiring.
(3) Mr. Wigley resigned from his position as an officer of the Company
effective April 27, 2000.
(4) Consists of a car allowance of $500 per month.
9
<PAGE>
Option Grants in Last Fiscal Yearat
The following tables set forth certain information with respect to all
options granted to the named executive officers during 1999.
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock Price
Individual Grants Appreciation for Option Term (1)
--------------------------------------------------------- --------------------------------
Number of Percent of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price Expiration 5% 10%
Name Granted (#) Fiscal Year ($/Sh) Date --- ---
---- ----------- ----------- ------ ---- ($) ($)
<S> <C> <C> <C> <C> <C>
Kyle D. Parker, Chief Executive
Officer........................ -0- -0-
Mark O. Beyland, President and
Chief Financial Officer........ 441,454(2) 61.87% $2.91 5/25/09 807,898 2,047,371
W. Clark Wigley, Vice President
of Business Development........ -0- -0-
</TABLE>
___________________________
(1) Represents the hypothetical appreciation in value of the underlying shares
over ten years (the term of the option) at the assumed annual rates of
appreciation of 5% and 10%.
(2) These nonqualified stock options were granted to Mr. Beyland on May 25,
1999 and vested with respect to 220,727 shares on the date of grant and the
remaining 220,727 shares vest in equal monthly installments over the
following 24 months. The exercise price is equal to the fair market value
of the Common Stock on the grant date.
Aggregated Option/SAR Exercises and FY-End Option/SAR Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-The-
Options/SARs at FY-End (#) Money Options/SARs at FY-End
-------------------------- ----------------------------
Name Exercisable/Unexercisable ($) Exercisable/Unexercisable(1)
---- --------------------------- --------------------------------
<S> <C> <C>
Kyle D. Parker, Chief Executive Officer -0- -0-
Mark O. Beyland, President and Chief Financial
Officer............................................. 285,106/156,348 10,325,114/5,662,143
W. Clark Wigley, Vice President of Business
Development........................................ -0- -0-
</TABLE>
____________________________
(1) Market value of the Common Stock at December 31, 1999 ($39.125) less the by
the number of shares. option exercise price, multiplied
None of the named executive officers exercised any options during 1999.
Employment Agreements
The Company has entered into the following employment agreements with the
Company's Chairman and Chief Executive Officer and the Company's President and
Chief Financial Officer:
<TABLE>
<CAPTION>
Officer Term Base Salary Position
------- -------------------- ----------- -------------------------------------
<S> <C> <C> <C>
Kyle D. Parker.......... June 1999-June 2002 $225,000 Chairman and Chief Executive Officer
Mark O. Beyland......... June 1999-June 2002 $175,000 President and Chief Financial Officer
</TABLE>
The employment agreements permit increases in base salary in the discretion
of the Compensation Committee. The Compensation Committee also has discretion to
grant annual bonuses to Mr. Parker and Mr. Beyland in amounts not exceeding 50%
of their respective base salaries. The employment agreements also entitle Mr.
Parker and Mr. Beyland to participate in any bonus or employee benefit plans or
arrangements from time to time in effect. If the Company terminates the
employment of Mr. Parker or Mr. Beyland without "cause," as defined in the
agreements, Mr. Parker or Mr. Beyland will be entitled to receive payments equal
to one year's annual salary. If the termination of their employment is in
connection with a change of control of Loislaw.com, Mr. Parker and Mr.
10
<PAGE>
Beyland each will be entitled to receive a lump-sum payment equal to two times
his annual salary plus bonuses and continuing coverage under the Company's
medical plan for one year. Under the employment agreements, Messrs. Parker and
Beyland each agree not to engage, directly or indirectly, in activities in
competition with Loislaw.com either as an employee, employer, consultant, agent,
principal, partner, stockholder, corporate officer, director, or in any other
capacity during the term of the employment agreement and for 12 months after
termination of his employment, if the termination occurs during the term of the
agreement.
Equity Plans
The Company has reserved 1,500,000 shares of Common Stock for issuance upon
the exercise of incentive or nonqualified options granted under its 1996 Stock
Option Plan, as amended. The Board has approved an amendment to this plan to
increase the total number of shares that may be issued thereunder to 1,950,000,
subject to approval by the stockholders of at this Annual Meeting. See "Proposal
to Approve an Amendment of the 1996 Stock Option Plan." The Company has reserved
300,000 shares of Common Stock for issuance under a payroll-deduction Employee
Stock Purchase Plan adopted in September 1999, as amended. The Company has also
reserved 320,000 shares of Common Stock for issuance upon the exercise of
options granted under the 1999 Nonqualified Stock Option Plan for Nonemployee
Directors, subject to approval of that plan at this Annual Meeting. See
"Proposal to Approve Adoption of 1999 Nonqualified Stock Option Plan for
Nonemployee Directors." Finally, the Company's Board of Directors has recently
adopted the 2000 Stock Option Plan, which provides for the grant of incentive
and nonqualified options to purchase up to 250,000 shares of Common Stock to the
Company's sales and marketing personnel, excluding officers and directors of the
Company, subject to approval of that plan by the stockholders at this Annual
Meeting. See "Proposal to Approve Adoption of 2000 Stock Option Plan for Sales
and Marketing Personnel."
401(k) Plan
The Company has established a tax-qualified employee savings and retirement
plan. Employees must complete 12 months of service before they are eligible to
participate. Employees may contribute a percentage of their pre-tax compensation
and the Company may, in the Company's discretion from year-to-year, make
matching and profit sharing contributions to the retirement plan. Amounts
contributed by the Company vest over six years. This plan does not provide for
the investment of any funds in Common Stock or other securities of the Company.
ITEM 2. PROPOSAL TO APPROVE ADOPTION OF 1999 NONQUALIFIED STOCK OPTION PLAN
FOR NONEMPLOYEE DIRECTORS
At the Annual Meeting, holders of Common Stock will also be asked to
consider and approve the adoption of the 1999 Nonqualified Stock Option Plan for
Nonemployee Directors (the "Directors' Plan"). The Directors' Plan was adopted,
subject to shareholder approval, by the Board of Directors on July 22, 1999.
The Directors' Plan is summarized below, however, this summary is qualified
in its entirety by the full text of the Directors' Plan, which is set forth as
Exhibit A to this Proxy Statement.
Reasons for the Adoption of the Directors' Plan
The purpose of the Directors' Plan is to promote the interests of the
Company and its stockholders by attracting and retaining qualified nonemployee
directors by giving them the opportunity to acquire a proprietary interest in
the Company and an increased personal interest in its continued success and
progress. The options granted under the Directors' Plan will not be qualified
as "incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
Description of Directors' Plan
General. The Directors' Plan provides for the issuance of a maximum of
320,000 shares of Common Stock. The Company has reserved 320,000 shares of
Common Stock for issuance under the Directors' Plan to nonemployee directors of
the Company. Options may be granted under the Directors' Plan only to
nonemployee directors of the Company.
Administration. The Directors' Plan is administered by a committee of
employee directors. Directors may be granted options at the discretion of the
committee of the Board administering the plan.
11
<PAGE>
Stock Options. Subject to the provisions of the Directors' Plan, the
committee designated by the Board will have the authority to select the
individuals to whom options may be granted and determine the terms of each
award, including the number of shares of Common Stock subject to any option, the
exercise date and the vesting requirements. However, no option granted under the
Directors' Plan may be exercised more than 5 years after the grant date.
Furthermore, the unvested portion of any option granted under the Directors'
Plan will expire upon the termination of the grantee's service as a director of
the Company for any reason.
All options granted to nonemployee directors will be nonstatutory options
with an exercise price equal to 100% of the fair market value of the Common
Stock on the date of grant. Fair market value, for this purpose, is generally
the closing sales price for the Common Stock as quoted on the Nasdaq National
Market for the last market trading day prior to the time of determination, as
reported in the The Wall Street Journal or such other source as the committee
deems reliable. Payment of the exercise price may be made in cash or with
shares of Common Stock having a fair market value on the date of exercise equal
to the exercise price of the shares being purchased, or by a combination of
those methods of payment.
In the event that any outstanding stock option is cancelled by mutual
consent or terminates or expires for any reason without having been exercised in
full, the shares of Common Stock not purchased under the stock option are again
available for purposes of the Directors' Plan. The Directors' Plan also
contains antidilution provisions that provide in certain events for
proportionate adjustments in the number of shares of Common Stock that may be
offered under the Directors' Plan.
Options granted under the Directors' Plan are not transferable or
assignable other than (i) by will or the laws of descent and distribution, (ii)
by gift or a domestic relations order to a "family member" of the grantee, as
such term is defined in the instructions to Form S-8 under the Securities Act of
1933, as amended or (iii) to an entity in which more than 50% of the voting
interests are owned by the grantee or the grantee's family members in exchange
for an interest or interests in that entity.
Miscellaneous. The Board of Directors will have the authority to alter or
amend the Directors' Plan at any time except that no alteration or amendment
will adversely affect the rights of a grantee under a previously granted option,
except with the consent of such grantee.
The Board of Directors may also terminate the Directors' Plan at any time,
but termination of the Directors' Plan would not terminate any outstanding stock
options granted under the Directors' Plan. Subject to the right of the Board of
Directors to terminate the Directors' Plan prior thereto, the Directors' Plan
will terminate at the expiration of ten years from July 22, 1999, the date of
adoption of the Directors' Plan by the Board.
Notwithstanding the preceding paragraphs, the Board has the power to amend
the Directors' Plan in any manner deemed necessary or advisable for stock
options granted under the Directors' Plan to qualify for the exemption provided
by Rule 16b-3 under the Exchange Act, and any such amendment will, to the extent
deemed necessary or advisable by the Board, be applicable to any outstanding
stock options theretofore granted under the Directors' Plan.
Because the nonemployee directors of the Company may receive additional
options if the Directors' Plan is approved, and will forfeit options previously
granted to them if it is not approved, each of the nonemployee directors may be
deemed to have a personal interest in the proposal to approve the adoption of
the Directors' Plan.
Federal Income Tax Consequences
The following summary is based upon an analysis of the Code, existing laws,
judicial decisions, administrative rulings, regulations and proposed
regulations, all of which are subject to change. Moreover, the following is
only a summary of federal income tax consequences, and the federal income tax
consequences to grantees may be either more or less favorable than those
described below depending on their particular circumstances.
Nonqualified Stock Options. No income will be recognized by a grantee for
federal income tax purposes upon the grant of a nonqualified stock option.
Except as described below in the case of an "insider" subject to Section 16(b)
of the 1934 Act, who exercises his or her option less than six months from the
date of grant, upon exercise of a nonqualified stock option, the grantee will
recognize ordinary income in an amount equal to the excess of the fair market
value of the shares on the date of exercise over the option price of the shares.
In the absence of an election under Section 83(b) of the Code, an "insider"
subject to Section 16(b) of the 1934 Act who exercises a
12
<PAGE>
nonqualified stock option less than six months from the date the option was
granted will recognize income on the date six months after the date of grant in
an amount equal to the excess of the fair market value of the shares on such
date over the option price of the shares. A grantee subject to Section 16(b) of
the 1934 Act can avoid such deferral by making an election under Section 83(b)
of the Code, no later than 30 days after the date of exercise. Executive
officers, directors and 10% stockholders of the Company will generally be deemed
to be "insiders" for purposes of Section 16(b) of the 1934 Act. Therefore, all
grantees under the Directors' Plan should be considered "insiders."
Income recognized upon the exercise of nonqualified stock options will be
considered compensation subject to withholding at the time the income is
recognized, and, therefore, the Company must make the necessary arrangements
with the grantee to ensure that the amount of the tax required to be withheld is
available for payment. Nonqualified stock options are designed to provide the
Company with a deduction equal to the amount of ordinary income recognized by
the grantee at the time of such recognition by the grantee.
The basis of shares transferred to a grantee pursuant to exercise of a
nonqualified stock option is the price paid for such shares plus an amount equal
to any income recognized by the grantee as a result of the exercise of the
option. If a grantee thereafter sells shares acquired upon exercise of a
nonqualified stock option, any amount realized over the basis of the shares will
generally constitute short-term or long-term capital gain to the grantee,
depending on the holding period, for federal income tax purposes. The grantee's
holding period for shares acquired pursuant to the exercise of a nonqualified
stock option will begin on the date of exercise of such option.
If a grantee uses already owned shares of Common Stock to pay the exercise
price for shares under a nonqualified stock option, the number of shares
received pursuant to the option which is equal to the number of shares delivered
in payment of the exercise price will be considered received in a nontaxable
exchange, and the fair market value of the remaining shares received by the
grantee upon such exercise will be taxable to the grantee as ordinary income.
If such already owned shares of Common Stock are not "statutory option stock"
(which is defined in Section 424(c)(3)(B) of the Code to include any stock
acquired through the exercise of an incentive stock option, a qualified stock
option, an option granted pursuant to an employee stock purchase plan or a
restricted stock option, but not through the exercise of a nonqualified stock
option), or are statutory option stock with respect to which the applicable
holding period referred to in Section 424(c)(3)(A) of the Code has been
satisfied, the shares received pursuant to the exercise of the option will not
be statutory option stock and the grantee's basis in the number of shares
delivered in payment of the exercise price will be equal to the basis of the
shares delivered in payment. The basis of the remaining shares received upon
such exercise will be equal to the fair market value of such shares. However,
if such already-owned shares of Common Stock are statutory option stock with
respect to which the applicable holding period has not been satisfied, it is not
presently clear whether such exercise will be considered a disqualifying
disposition of the statutory option stock, whether the shares received upon such
exercise will be statutory option stock or how the grantee's basis will be
allocated among the shares received.
Subject to limited exceptions, a director or former director will recognize
compensation income on the date of the exercise of a nonstatutory stock option
in the amount by which the fair market value of the shares received, determined
as of the date of exercise, exceeds the exercise price. If the exercise price
of a nonstatutory stock option is paid in whole or in part in shares, no income,
gain or loss is recognized by the director or former director on the receipt of
shares equal in value on the date of exercise to the shares delivered in payment
of the exercise price. Subject to limited exceptions, the fair market value of
the remainder of the shares received upon exercise of the nonstatutory stock
option, determined as of the date of exercise, less the amount of cash, if any,
paid upon exercise, is treated as compensation income received by the director
or former director on the date of exercise of the stock option.
The Company generally will be entitled to a deduction for compensation paid
in the same amount treated as compensation received by a director or former
director.
Grants Under the Directors' Plan
In July 1999, the committee approved a grant of options to each of the
Company's three nonemployee directors to purchase 40,000 shares of Common Stock
at an exercise price equal to the initial public offering price of the Company's
Common Stock on September 29, 1999. Subject to the director's continued
membership on the Board and the approval of the plan by the Company's
stockholders, each option will vest in annual increments of 25% beginning one
year from September 29, 1999.
13
<PAGE>
New Plan Benefits
1999 Nonqualified Stock Option Plan For Nonemployee Directors
-------------------------------------------------------------
<TABLE>
<CAPTION>
Number of Shares Exercise Price
Name(1) Underlying Options Granted ($/Share)
---- -------------------------- ---------
<S> <C> <C>
Robert C. Ammerman........................... 40,000 $14.00
D. Randy Laney............................... 40,000 $14.00
Hannah C. Stone(2)........................... 40,000 $14.00
Executive Group.............................. -0- ---
Non-Executive Director Group................. 120,000 $14.00
Non-Executive Officer Employee Group......... -0- ---
</TABLE>
___________________________
(1) Only nonemployee directors may participate in the Directors' Plan. Thus, no
executive officers or other employees of the Company are listed in the
table.
(2) Hannah C. Stone is the sole director nominee for the 2000 annual meeting.
An approval of the Directors' Plan by the stockholders will also have the
effect of approving the outstanding options granted under the plan. If the
adoption of the Directors' Plan is not approved by the stockholders at the
Annual Meeting, each of the foregoing options will be null and void.
On May 18, 2000, the closing sale price of the Company's Common Stock as
reported on the Nasdaq National Market was $7.31 per share.
Recommendation of the Board of Directors
The Board of Directors believes that the Directors' Plan is in the best
interests of the Company and its stockholders and unanimously recommends that
stockholders vote FOR the proposal to approve the adoption of the Directors'
Plan. If the Directors' Plan is not approved by the stockholders, the plan, and
all options granted under the plan, will become null and void.
ITEM 3. PROPOSAL TO APPROVE ADOPTION OF 2000 STOCK OPTION PLAN FOR SALES AND
MARKETING PERSONNEL
At the Annual Meeting, holders of Common Stock will also be asked to
consider and approve the adoption of the 2000 Stock Option Plan (the "2000
Plan"). The 2000 Plan was adopted, subject to shareholder approval, by the Board
of Directors on March 6, 2000. No options have yet been granted under the 2000
Plan.
The 2000 Plan is summarized below, however, this summary is qualified in
its entirety by the full text of the 2000 Plan, which is set forth as Exhibit B
to this Proxy Statement.
Reasons for the Adoption of the 2000 Plan
The purposes of the 2000 Plan are to attract and retain the best available
sales and marketing personnel and to provide such persons with additional
incentive to promote the success of the Company's business.
Description of the 2000 Plan
General. The Company has reserved 250,000 shares of Common Stock for
issuance under the 2000 Plan to sales and marketing personnel. The 2000 Plan
provides for the grant of options that are intended to qualify as incentive
stock options within the meaning of Section 422 of the Code as well as options
not intended to qualify as incentive stock options.
Options may be granted under the 2000 Plan to employees of the Company
whose employment is primarily in the sales or marketing department of the
Company and to persons engaged as independent contractors to perform sales or
marketing services for the Company, but excluding officers and directors of the
Company and persons engaged in connection with sales of the Company's
securities. The maximum number of shares with respect to which the Company may
grant awards to any eligible person under the 2000 Plan may not exceed 10,000
shares of Common Stock during any fiscal year plus up to an additional 10,000
shares upon the person's initial employment or engagement by the Company.
14
<PAGE>
Administration. The 2000 Plan will be administered by a committee of
directors appointed by the Board of Directors. None of the members of such
committee are eligible to participate in the 2000 Plan. The committee will have
the power to interpret the 2000 Plan, and all questions of interpretation and
application of the 2000 Plan, or as to stock options granted under the 2000
Plan, will be subject to the determination of the committee, which will be final
and binding.
Stock Options. Subject to the provisions of the 2000 Plan, the committee
will have the authority to select the individuals to whom options may be granted
and determine the terms of each award, including the number of shares of Common
Stock subject to any option, the exercise date and the vesting requirements.
However, no option granted under the 2000 Plan may be exercised more than 10
years after the grant date, or five years after the grant date for any incentive
stock option granted to an employee who owns more than 10% of the outstanding
voting stock of the Company. Nonqualified options may be granted to eligible
employees and independent sales and marketing representatives, and incentive
stock options may be granted only to eligible employees of the Company.
The exercise price for each option is established by the committee, but the
exercise price of each incentive stock option must be no less than the fair
market value of the Common Stock on the date the option is granted, or 110% of
such amount for any incentive stock option granted to an employee who owns more
than 10% of the outstanding voting stock of the Company. Fair market value, for
this purpose, is generally the closing sales price for the Common Stock as
quoted on the Nasdaq National Market for the last market trading day prior to
the time of determination, as reported in the The Wall Street Journal or such
other source as the committee deems reliable. Payment of the exercise price may
be made in cash or with shares of Common Stock having a fair market value on the
date of exercise equal to the exercise price of the shares being purchased, or
by a combination of those methods of payment. On May 18, 2000, the closing sale
price of the Company's Common Stock as reported on the Nasdaq National Market
was $7.31 per share.
In the event that any outstanding stock option is cancelled by mutual
consent or terminates or expires for any reason without having been exercised in
full, the shares of Common Stock not purchased under the stock option are again
available for purposes of the 2000 Plan. The 2000 Plan also contains
antidilution provisions that provide in certain events for proportionate
adjustments in the number of shares of Common Stock that may be offered under
the 2000 Plan.
If the Company merges with or into another corporation or sells all or
substantially all its assets, each outstanding option under the 2000 Plan will
automatically vest and become fully exercisable if the successor corporation
does not assume or provide for the substitution of each outstanding option.
Options granted under the 2000 Plan are not transferable or assignable
other than by will or the laws of descent and distribution and may be exercised
during the grantee's lifetime only by the grantee.
Possible Anti-Takeover Effect. The provisions of the 2000 Plan providing
for the acceleration of vesting of the outstanding options granted under the
plan in the event of a merger of the Company with or into another corporation or
the sale of substantially all of the assets of the Company if the successor
corporation does not assume or substitute for the outstanding options may be
considered as having an anti-takeover effect.
Miscellaneous. The Board of Directors will have the authority to alter or
amend the 2000 Plan at any time except that no alteration or amendment may be
made without stockholder approval if stockholder approval of the amendment is at
the time required for stock options under the 2000 Plan to comply with Section
422 of the Code or the rules of the Nasdaq National Market System. In addition,
no alteration or amendment of the 2000 Plan may, without the written consent of
the holder of a stock option theretofore granted under the 2000 Plan, adversely
affect the rights of such holder with respect thereto.
The Board of Directors may also terminate the 2000 Plan at any time, but
termination of the 2000 Plan would not terminate any outstanding stock options
granted under the 2000 Plan.
Federal Income Tax Consequences
The following summary is based upon an analysis of the Code, existing laws,
judicial decisions, administrative rulings, regulations and proposed
regulations, all of which are subject to change. Moreover, the following is only
a summary of federal income tax consequences, and the federal income tax
consequences to
15
<PAGE>
grantees may be either more or less favorable than those described below
depending on their particular circumstances.
Incentive Stock Options. No income will be recognized by a grantee for
federal income tax purposes upon the grant or exercise of an incentive stock
option. The basis of shares transferred to a grantee pursuant to the exercise of
an incentive stock option is the price paid for the shares. If the grantee holds
the shares for at least one year after transfer of the shares to the grantee and
two years after the grant of the option, the grantee will recognize capital gain
or loss upon sale of the shares in an amount equal to the difference between the
amount realized on the sale and the exercise price. Generally, if the shares are
not held for that period, the grantee will recognized ordinary income upon
disposition in an amount equal to the excess of the fair market value of the
shares on the date of exercise over the option price of such shares, or if less
(and if the disposition is a transaction in which loss, if any, will be
recognized), the gain on disposition. Any additional gain realized by the
grantee upon such disposition will be a capital gain.
The excess of the fair market value of shares received upon the exercise of
an incentive stock option over the option price for the shares may in certain
circumstances be an item of adjustment for the grantee for purposes of the
alternative minimum tax.
The Company is not entitled to a deduction upon the exercise of an
incentive stock option by a grantee. If the grantee disposes of the shares
received pursuant to such exercise prior to the expiration of one year following
transfer of the shares to the grantee or two years after grant of the option,
however, the Company may, subject to the deduction limitation described below,
deduct an amount equal to the ordinary income recognized by the grantee upon
disposition of the shares at the time such income is recognized by the grantee.
If a grantee uses already owned shares of Common Stock to pay the exercise
price for shares under an incentive stock option, the resulting tax consequences
will depend upon whether the already owned shares of Common Stock are "statutory
option stock," and, if so, whether such statutory option stock has been held by
the grantee for the applicable holding period referred to in Section
424(c)(3)(A) of the Code. In general, "statutory option stock" (as defined in
Section 424(c)(3)(B) of the Code) is any stock acquired through the exercise of
an incentive stock option, a qualified stock option, an option granted pursuant
to an employee stock purchase plan or a restricted stock option, but not through
the exercise of a nonqualified stock option. If the stock is statutory option
stock with respect to which the applicable holding period has been satisfied, no
income will be recognized by the grantee upon the transfer of such stock in
payment of the exercise price of an incentive stock option. If the stock is not
statutory option stock, no income will be recognized by the grantee upon the
transfer of the stock unless the stock is not substantially vested within the
meaning of the regulations under Section 83 of the Code (in which event it
appears that the grantee will recognize ordinary income upon the transfer equal
to the amount by which the fair market value of the transferred shares exceeds
their basis). If the stock used to pay the exercise price of an incentive stock
option is statutory option stock with respect to which the applicable holding
period has not been satisfied, the transfer of such stock will be a
disqualifying disposition described in Section 421(b) of the Code which will
result in the recognition of ordinary income by the grantee in an amount equal
to the excess of the fair market value of the statutory option stock at the time
the incentive stock option covering such stock was exercised over the option
price of such stock. Under the present provisions of the Code, it is not clear
whether all shares received upon the exercise of an incentive stock option with
already owned shares will be statutory option stock or how the grantee's basis
will be allocated among such shares.
Nonqualified Stock Options. The principal federal income tax consequences
of the grant and exercise of nonqualified stock options under the 2000 Plan are
the same as those described above in connection with the proposal to approve the
adoption of the Directors' Plan. However, since directors and officers are not
eligible to receive options under the 2000 Plan, the Company believes it is
unlikely that any grantee under the 2000 Plan will be considered an "insider"
for purposes of Section 16(b) under the Exchange Act.
Recommendation of the Board of Directors
The Board of Directors believes that the 2000 Plan is in the best interests
of the Company and its stockholders and unanimously recommends that the
stockholders vote FOR the proposal to approve the adoption of the 2000 Plan. If
the 2000 Plan adopted by the Board of Directors is not approved by the
stockholders, such plan will become null and void.
16
<PAGE>
ITEM 4. PROPOSAL TO APPROVE AN AMENDMENT OF THE 1996 STOCK OPTION PLAN
At the Annual Meeting, holders of Common Stock will also be asked to
consider and approve the adoption of an amendment to increase from 1,500,000 to
1,950,000 the number of shares of Common Stock reserved for issuance under the
Company's 1996 Stock Option Plan (the "1996 Plan"). This amendment was adopted,
subject to shareholder approval, by the Board of Directors on March 6, 2000.
Reasons for the Amendments to the 1996 Plan
As of May 1, 2000, options to purchase which were outstanding or which had
been exercised pursuant to the 1996 Plan equaled 1,269,871 shares of Common
Stock and only 230,129 shares remained available for future awards under the
1996 Plan. The purpose of the proposal is to continue the 1996 Plan by
increasing by 450,000 shares the aggregate number of shares of Common Stock that
may be issued under the 1996 Plan, which will allow the Company to continue to
grant options under the 1996 Plan to recruit and retain qualified personnel.
Description of 1996 Plan as Currently in Effect
The terms of the 1996 Plan are substantially identical to the terms of the
2000 Plan, except for the number of shares that may be issued and the category
of persons eligible to receive options under the 1996 Plan. The 1996 Plan
provides for the grant of incentive stock options to employees of Loislaw.com
and of nonqualified stock options to employees and consultants, including
directors, of Loislaw.com. Under the 1996 Plan, no grantee may be granted
options to purchase more than 200,000 shares compared to 10,000 shares under the
2000 Plan in any fiscal year, plus up to an additional 200,000 shares compared
to 10,000 shares under the 2000 Plan in connection with his or her initial
employment or engagement by the Company.
In addition, the 1996 Plan contains certain provisions regarding the
administration of the Plan with respect to participants subject to the
provisions of Section 16(b) of the Exchange Act that are not included in the
2000 Plan, since the 2000 Plan does not permit participation by directors or
officers of the Company.
The 1996 Plan is administered by the Compensation Committee of the Board.
Because members of the Compensation Committee who are also employees or
consultants of the Company may be eligible to receive future grants under the
1996 Plan, certain members of the committee may be deemed to have a personal
interest in the approval of the proposal to amend the 1996 Plan. As of May 18,
2000, the only member of the Compensation Committee who is eligible to be
granted options under the 1996 Plan is Kyle D. Parker. To date, no options have
been granted to Mr. Parker.
Federal Income Tax Consequences
The federal income tax consequences of the 1996 Plan are substantially
identical to the federal income tax consequences of the 2000 Plan described
above. Both incentive stock options as defined in section 422(b) of the Code
and which are entitled to special tax treatment under section 422 of the Code
and non-statutory, or nonqualified, stock options which are not entitled to
special tax treatment under section 422 of the Code may be granted under the
1996 Plan. See "Proposal to Approve Adoption of 2000 Stock Option Plan for
Sales and Marketing Personnel--Federal Income Tax Consequences."
Grants Under the 1996 Plan
To date, Loislaw.com has granted stock options to purchase a total of
1,269,871 shares of Common Stock under the 1996 Plan excluding options that have
expired without exercise. The Company has not granted any options under the
1996 Plan to any of the officers named in the Summary Compensation Table, other
than Mr. Beyland. On May 25, 1999, in connection with the Company's hiring of
Mark O. Beyland to serve as its President and Chief Financial Officer, the
Company granted him stock options under the 1996 Plan covering a total of
441,454 shares of its Common Stock at an exercise price of $2.91, which was
equal to the fair market value of the Common Stock on the date of grant. One-
half of these options vested on the date of grant and the remaining options vest
in equal monthly installments over the following 24 months.
The following table sets forth certain information about all options
granted under the 1996 Plan since the date of its adoption in 1996.
17
<PAGE>
New Plan Benefits
1996 Employee Stock Option Plan
--------------------------------
<TABLE>
<CAPTION>
Weighted Average
Number of Shares % of Total Options Exercise Price
Name and Position Underlying Options Granted Granted to Employees ($/Share)
----------------- -------------------------- -------------------- ---------
<S> <C> <C> <C>
Kyle D. Parker, Chief Executive Officer......... -0- --- ---
Mark O. Beyland, President and Chief Financial
Officer........................................ 441,454 34.8% $ 2.91
W. Clark Wigley, Vice President of Business
Development.................................... -0- --- ---
Current Executive Officer Group................. 1,018,454 80.2% $11.13
Non-Executive Director Group.................... -0- --- ---
Hannah C. Stone, Director nominee............... -0- --- ---
Non-Executive Officer Employee Group............ 251,417 19.8% $13.88
</TABLE>
On May 18, 2000, the closing sale price of the Company's Common Stock as
reported on the Nasdaq National Market was $7.31 per share.
Recommendation of the Board of Directors
The Board of Directors believes that the proposed amendment of the 1996
Plan is in the best interests of the Company and its stockholders and
unanimously recommends that the stockholders vote FOR the proposal to approve
the adoption of the amendment of the 1996 Plan. If the amendment adopted by the
Board of Directors is not approved by the stockholders, such amendment will
become null and void.
COMPARISON OF RETURN ON EQUITY
The following graph reflects the total return, which assumes reinvestment
of dividends, of a $100 investment in the Company's Common Stock, the Russell
2000 Index, and the MG Group Index, a published peer group index of companies in
the internet information provider industry, on September 30, 1999, the first
trading day after effectiveness of the Company's initial public offering.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
September 30, 1999 October 31, 1999 November 30, 1999 December 31, 1999
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Company 100.00 120.69 210.34 269.83
MG Group Index 100.00 103.49 124.11 158.84
Russell 2000 Index 100.00 100.31 106.17 118.01
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
INDEPENDENT AUDITOR
KPMG LLP has been the independent auditor for the Company since 1996 and
has been appointed by the Company to serve as its independent auditor for the
2000 calendar year. A representative of KPMG LLP is expected to be present at
the 2000 Annual Meeting and will have the opportunity to make a statement and
will be available to respond to appropriate questions from stockholders.
CERTAIN TRANSACTIONS
The Company sold Series A convertible preferred stock to Capital Resource
Lenders III, L.P. For information relating to the sale of Series A convertible
preferred stock, see "Compensation Committee Interlocks and Insider
Participation" on pages 5-7.
The Company redeemed shares of Series B redeemable preferred stock. On
November 1, 1995, the Company borrowed $2.0 million from Melissa A. Parker,
sister-in-law of Kyle D. Parker and daughter-in-law of Douglas W. Parker, Sr.
Further, the Company borrowed additional funds from Ms. Parker and as of June
30, 1997 the outstanding principal balance borrowed was $4.0 million. In
November 1997, the $4.0 million loan plus accrued interest in the amount of
$395,891 was converted into 439,589 shares of Series B redeemable preferred
stock. These shares earned dividends at a rate of 7.735% per year and dividends
were paid as and when declared by the Board. Upon the completion of the
Company's initial public offering on October 5, 1999, the Company redeemed these
shares of Series B redeemable preferred stock for $5.0 million.
In May 1999, the Company sold shares of Series C convertible preferred
stock and Common Stock to a limited number of investors. For more information
relating to the sale of Series C convertible preferred stock see "Compensation
Committee Interlocks and Insider Participation" on pages 5-7.
The Company entered into a registration rights agreement that requires the
Company to register shares held by the Company's existing stockholders for
resale. For information relating to the terms of this Amended and Restated
Registration Rights Agreement see "Compensation Committee Interlocks and Insider
Participation" on pages 5-7.
The Company entered into a stockholders agreement that grants special
rights to the Company's existing stockholders. For information relating to the
terms of the Amended and Restated Stockholders' Agreement see "Compensation
Interlocks and Insider Participation" on pages 5-7.
The Company has borrowed money from some of the Company's stockholders. For
information relating to the Company's loans from stockholders see "Compensation
Committee Interlocks and Insider Participation" on pages 5-7.
Three of the Company's Board members are affiliated with the Company's
significant stockholders. For information relating to the Company's Board
members' affiliations with the Company's stockholders see "Compensation
Committee Interlocks and Insider Participation" on pages 5-7.
The Company leased its offices from the Parker Law Firm. For information
relating to the Company's lease see "Compensation Committee Interlocks and
Insider Participation" on pages 5-7.
All future transactions will be approved by a majority of the Company's
disinterested directors. All future transactions, including loans, between the
Company and the Company's officers, directors, principal stockholders and their
affiliates will be approved by a majority of the Board of Directors, including a
majority of the disinterested directors of the Board of Directors, and will be
on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.
SECTION 16(a) COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
officers, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes of
ownership with the Commission. Based solely on its review of the copies of such
forms received by it, and written representations from certain reporting
persons, the Company believes that during fiscal 1999 all filing requirements
applicable to its directors, officers and greater than 10% beneficial owners
were complied with.
19
<PAGE>
STOCKHOLDER PROPOSALS
The 2001 Annual Meeting of the Company is tentatively scheduled to be held
during the first week of May 2001. In accordance with Securities and Exchange
Commission rules, in order to be considered for inclusion in the proxy material
for an annual meeting, stockholder proposals, including proposals nominating
persons for election to the Board of Directors of the Company, must be received
at the Company's principal executive offices no later than 120 days before the
date of the Company's proxy statement released to stockholders in connection
with the previous year's annual meeting. Accordingly, proposals submitted for
inclusion in the proxy statement relating to the 2001 Annual Meeting must be
received by the Company no later than January 25, 2001. If the date of the 2001
Annual Meeting is changed by more than 30 calendar days from the date
contemplated by this paragraph, a stockholder proposal must be received by the
Company a reasonable time before the proxy statement for such meeting is sent to
stockholders to be considered for inclusion. Any such proposal must be set forth
in a notice containing certain information specified in the rules of the
Securities and Exchange Commission.
In addition, the Company's bylaws provide that in order for stockholder
proposals, including proposals nominating persons for election as directors, to
be properly brought before an annual meeting, the stockholder must have given
timely notice of such proposal(s) in writing to the secretary of the Company and
such business must be a proper matter for stockholder action under the Delaware
General Corporation Law. Furthermore, the bylaws provide that to be timely, a
stockholder's notice must be delivered to the secretary of the Company at the
principal executive offices of the Company not less than 30 days nor more than
90 days prior to the first anniversary of the preceding year's annual meeting of
stockholders; provided, however, that in the event that the date of the annual
meeting is more than 30 days prior to or more than 60 days after such
anniversary date, notice by the stockholder to be timely must be so delivered
not earlier than the 90th day prior to such annual meeting and not later than
the close of business on the later of the 20th day prior to such annual meeting
or the 10th day following the day on which public announcement of the date of
such meeting is first made. Any such proposal must be set forth in a notice
containing certain information specified in the bylaws of the Company.
OTHER MATTERS
So far as now known, there is no business other than that described above
to be presented to the stockholders for action at the 2000 Annual Meeting.
Should other business come before the 2000 Annual Meeting, votes may be cast
pursuant to proxies with respect to any such business in the best judgment of
the persons acting under the proxies.
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING ARE URGED TO SIGN, DATE,
AND RETURN PROMPTLY THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED, WHICH REQUIRES
NO ADDITIONAL POSTAGE IF MAILED IN THE UNITED STATES.
By Order of the Board of Directors
/s/ Douglas W. Parker, Sr.
Douglas W. Parker, Sr.,
Secretary
May 25, 2000
A COPY OF THE COMPANY'S FORM 10-K ANNUAL REPORT FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1999, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, IS
AVAILABLE WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS SOLICITED HEREBY UPON
WRITTEN REQUEST TO DOUGLAS W. PARKER, SR., SECRETARY, LOISLAW.COM, INC., 105
NORTH 28TH STREET, VAN BUREN, ARKANSAS 72956.
20
<PAGE>
Exhibit A
---------
1999 NONQUALIFIED STOCK OPTION PLAN
FOR NONEMPLOYEE DIRECTORS
OF
LOISLAW.COM, INC.
Section 1. Purpose. It is the purpose of the Plan to promote the
-------
interests of Loislaw.com, Inc., a Delaware corporation (the "Company"), and its
stockholders by attracting and retaining qualified Nonemployee Directors by
giving them the opportunity to acquire a proprietary interest in the Company and
an increased personal interest in its continued success and progress. The
Options granted under the Plan shall not be qualified as "incentive stock
options" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code").
Section 2. Definitions. As used herein the following terms have the
-----------
following meanings:
(a) "Affiliate" means any parent or subsidiary corporation of the
Company within the meaning of Rule 12b-2 under the Securities Exchange Act
of 1934, as amended; provided, however, that an entity shall not be deemed
a parent of the Company unless such entity owns at least 50% of the
outstanding voting securities of the Company.
(b) "Board" means the Board of Directors of the Company.
(c) "Committee" means the Nonemployee Directors Stock Option
Committee described in Section 4 hereof.
(d) "Common Stock" means the Common Stock, par value $0.01 per
share, of the Company.
(e) "Fair Market Value" means, unless the Committee determines
otherwise in good faith, the closing sale price of the Common Stock on the
last market trading day preceding the date in question as reported on the
Nasdaq National Market or any national stock exchange or other stock market
on which the Common Stock is then traded, or if the Common Stock is not
listed or admitted to trading on the Nasdaq National Market or any national
stock exchange but is quoted as an over-the-counter security on Nasdaq or
any similar system then in use, "Fair Market Value" shall mean the average
of the closing high bid and low asked quotations on such system for the
Common Stock on the last market trading day preceding the date in question.
(f) "Nonemployee Director" means an individual who (i) is now, or
hereafter becomes, a member of the Board of Directors of the Company, and
(ii) is neither an employee nor an officer of the Company or of an
Affiliate of the Company. For purposes
1
<PAGE>
of this Plan, "employee" shall mean an individual whose wages are subject
to the withholding of federal income tax under Section 3401 of the Code,
and "officer" shall mean an individual elected or appointed by the Board of
Directors or chosen in such other manner as may be prescribed in the Bylaws
of the Company or an Affiliate to serve as such.
(g) "Option" means any option to purchase shares of Common Stock
granted pursuant to the provisions of the Plan.
(h) "Optionee" means a Nonemployee Director who has been granted an
Option under the Plan.
(i) "Plan" means this 1999 Nonqualified Stock Option Plan for
Nonemployee Directors of Loislaw.com, Inc.
Section 3. Number of Shares. Options may be granted by the Company from
----------------
time to time under the Plan to purchase an aggregate of 320,000 shares of
Common Stock. If an Option expires or terminates for any reason without having
been exercised in full, the unpurchased shares subject to such expired or
terminated Option shall again be available for purposes of the Plan. The shares
may be authorized but unissued or reacquired shares of Common Stock.
Section 4. Administration of the Plan. The Plan shall be administered by
--------------------------
a Nonemployee Directors Stock Option Committee which shall consist of two or
more members of the Board, a majority of which shall not be Nonemployee
Directors. Each member of the Committee shall be appointed by and shall serve
at the pleasure of the Board. The Board shall have the sole continuing
authority to appoint members of the Committee both in substitution for members
previously appointed and to fill vacancies however caused. The following
provisions shall apply to the administration of the Plan:
(a) The Committee shall designate one of its members as Chairman and
shall hold meetings at such times and places as it may determine. Each
member of the Committee shall be notified in writing of the time and place
of any meeting of the Committee at least two days prior to such meeting,
provided that such notice may be waived by a Committee member. A majority
of the members of the Committee shall constitute a quorum and any action
taken by a majority of the members of the Committee present at any duly
called meeting at which a quorum is present (as well as any action
unanimously approved in writing) shall constitute action by the Committee.
(b) The Committee may appoint a Secretary (who need not be a member
of the Committee) who shall keep minutes of its meetings. The Committee may
make such rules and regulations for the conduct of its business as it may
determine.
(c) The Committee shall have full authority subject to the express
provisions of the Plan to interpret the Plan and any Option granted
hereunder, to provide, modify and
2
<PAGE>
rescind rules and regulations relating to the Plan, to determine the terms
and provisions of each Option and the form of each option agreement
evidencing an Option granted under the Plan and to make all other
determinations and perform such actions as the Committee deems necessary or
advisable to administer the Plan. In addition, the Committee shall have
full authority, subject to the express provisions of the Plan, to determine
the Nonemployee Directors to whom Options shall be granted, the time or
date of grant of each such Option, the number of shares subject thereto,
and the price at which such shares may be purchased, and the nature and
extent of restrictions, if any, on such shares. In making such
determinations, the Committee may take into account such facts as the
Committee in its discretion shall deem appropriate to carry out the
purposes of the Plan.
(d) No member of the Committee or the Board shall be liable for any
action taken or determination made in good faith with respect to the Plan
or any Option granted hereunder.
Section 5. Grant of Options. At any time and from time to time during the
----------------
term of the Plan and subject to the express provisions hereof, Options may be
granted by the Committee to any Nonemployee Director for such number of shares
of Common Stock as the Committee in its discretion shall deem to be in the best
interest of the Company and which will serve to further the purposes of the
Plan.
Section 6. Option Price and Payment. The purchase price per share of
------------------------
Common Stock under each Option shall be determined by the Committee in its
discretion, but in no event shall such price be less than 100% of the Fair
Market Value per share of Common Stock on the date the Option is granted. Upon
exercise of an Option, the purchase price shall be paid in full in cash or by
such of the following methods as the Committee may specify at the time of grant
and as shall be included in the option agreement: (i) by personal check of the
Optionee; (ii) by the delivery of shares of Common Stock having an aggregate
Fair Market Value on the date of exercise equal to the aggregate exercise price
of the shares as to which the Option is being exercised; (iii) by means of a
broker-assisted exercise whereby the Optionee delivers to the Company, together
with a properly executed exercise notice, such other documentation as the
Committee and the broker assisting in the transaction shall require to effect an
exercise of the Option, a sale of the shares of Common Stock acquired upon
exercise and the delivery to the Company of the proceeds of such sale in full
payment of the exercise price; or (iv) any combination of the foregoing methods
of payment. The proceeds of a sale of Common Stock upon exercise of an Option
shall constitute general funds of the Company. Upon exercise of an Option, the
Optionee will be required to pay to the Company the amount of federal, state or
local taxes, if any, required by law to be withheld in connection with such
exercise.
Section 7. Option Period and Terms of Exercise of Options. Each Option
----------------------------------------------
granted under the Plan shall vest and become exercisable on such date or dates
(each, a "Vesting Date") as the Committee shall determine. Except as otherwise
provided herein, each Option granted under the Plan shall be exercisable during
such period commencing on the Vesting Date(s) of such Option as the Committee
shall determine; provided, however, that the otherwise unexpired portion of any
3
<PAGE>
Option shall expire and become null and void upon the expiration of five years
from the date such Option was granted. Anything herein to the contrary
notwithstanding, the otherwise unexpired portion of any Option granted hereunder
shall expire and become null and void immediately upon an Optionee's termination
of service as a director of the Company by reason of such Optionee's fraud,
dishonesty or performance of other acts detrimental to the Company or an
Affiliate (as determined by the Committee in its sole discretion). The unvested
portion of any Option shall expire and become null and void upon the termination
of the Optionee's service as a director of the Company for any reason (including
without limitation a failure by the Board of Directors to nominate, or by the
stockholders to re-elect, the Optionee as a director). Under the provisions of
any option agreement evidencing an Option, the Committee may limit the number of
shares purchasable thereunder in any period or periods of time during which the
Option is exercisable and may impose such other terms and conditions upon the
exercise of an Option as are not inconsistent with the terms of the Plan;
provided, however, that the Committee, in its discretion, may accelerate the
exercise date of any such Option consistent with the terms of the Plan.
Section 8. Limited Transferability of Options. An Option granted under
----------------------------------
the Plan shall be exercisable only by the Optionee or by a person or entity to
which the Optionee is permitted to transfer the Option in accordance with this
Section 8. An Option granted under the Plan shall be transferrable by the
Optionee only as follows:
(a) By will or the laws of descent and distribution upon the death
of the Optionee;
(b) By gift or a domestic relations order to a "family member" of
the Optionee, as such term is defined in the instructions to Form S-8 under
the Securities Act of 1933, as amended, including without limitation trusts
in which family members of the Optionee have more than 50% of the
beneficial interest, foundations in which such family members control the
management of assets, and any other entity in which such family members or
the Optionee own more than 50% of the voting interests; or
(c) To an entity in which more than 50% of the voting interests are
owned by the Optionee or the Optionee's family members in exchange for an
interest or interests in that entity.
As a condition to any such transfer, each permitted transferee shall execute an
agreement satisfactory to the Company agreeing to be bound by the terms and
provisions of this Plan and the Optionee's original option agreement relating to
the Option.
Section 9. Agreement to Continue in Service. Each Optionee shall agree to
--------------------------------
remain in the service of the Company, at the pleasure of the Company's
stockholders, for a continuous period of at least four years after the date of
the grant to such Optionee of any Option, at the retainer rate and fee schedule,
if any, then in effect or at such changed rate or schedule as the Company from
time to time may establish.
4
<PAGE>
Section 10. Adjustments Upon Changes in Common Stock. In the event the
----------------------------------------
Company shall effect a split of the Common Stock or dividend payable in Common
Stock, or in the event the outstanding Common Stock shall be combined into a
smaller number of shares, the maximum number of shares as to which Options may
be granted under the Plan shall be decreased or increased proportionately. In
the event that before delivery by the Company of all of the shares of Common
Stock for which any Option has been granted under the Plan, the Company shall
have effected such a split, dividend or combination, the shares still subject to
such Option shall be increased or decreased proportionately and the purchase
price per share shall be decreased or increased proportionately so that the
aggregate purchase price for all of the shares then subject to such Option shall
remain the same as immediately prior to such split, dividend or combination.
In the event of a reclassification of Common Stock not covered by the
foregoing, or in the event of a liquidation or reorganization (including a
merger, consolidation, spinoff or sale of assets) of the Company, including a
transaction in which the Company is not the survivor, the Board shall make such
adjustments, if any, as it may deem appropriate in the number, purchase price
and kind of shares covered by the unexercised portions of Options theretofore
granted under the Plan. The provisions of this Section shall only be applicable
if, and only to the extent that, the application thereof does not conflict with
any valid governmental statute, regulation or rule.
Section 11. Amendment and Termination of the Plan. Subject to the right
-------------------------------------
of the Board to terminate the Plan prior thereto, the Plan shall terminate at
the expiration of ten years from July 22, 1999, the date of adoption of the Plan
by the Board. No Options may be granted after termination of the Plan. The
Board may alter or amend the Plan in any respect, except that no termination or
amendment of the Plan shall adversely affect the rights of an Optionee under a
previously granted Option, except with the consent of such Optionee.
Section 12. Modification of Options. Subject to the terms and conditions
-----------------------
of and within the limitations of the Plan, the Committee may modify, extend or
renew outstanding Options granted under the Plan, or accept the surrender of
Options outstanding hereunder (to the extent not theretofore exercised) and
authorize the granting of new Options in substitution therefor. Notwithstanding
the foregoing, no modification of an Option shall, without the consent of the
Optionee, alter or impair any rights or obligations under any Option theretofore
granted to such Optionee.
Section 13. Requirements of Law. The granting of Options and the issuance
-------------------
of Common Stock upon the exercise of an Option shall be subject to all
applicable laws, rules and regulations and to such approval by governmental
agencies as may be required.
Section 14. Investment Letter. If the Company so elects, the Company's
-----------------
obligation to deliver Common Stock with respect to an Option shall be
conditioned upon its receipt from the Optionee to whom such Common Stock is to
be delivered of an executed investment letter containing such representations
and agreements as the Committee may determine to be necessary or advisable in
order to enable the Company to issue and deliver such Common Stock to such
5
<PAGE>
Optionee in compliance with the Securities Act of 1933 and other applicable
federal, state or local securities laws or regulations.
Section 15. Effective Date of the Plan. The Plan shall be effective as of
--------------------------
the date of its adoption by the Board.
IN WITNESS WHEREOF, this Plan has been executed at Van Buren, Arkansas on,
and is effective as of, this 22nd day of July, 1999.
LOISLAW.COM, INC.
By: /s/ Kyle D. Parker
------------------
Kyle D. Parker, Chairman
of the Board and Chief
Executive Officer
6
<PAGE>
Exhibit B
---------
LOISLAW.COM, INC.
2000 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Plan are to attract and
--------------------
retain the best available sales and marketing personnel and to provide such
persons, including those employed by the Company or any Parent or Subsidiary and
independent sales representatives, additional incentive to promote the success
of the Company's business. Options granted under the Plan shall be Incentive
Stock Options or Nonstatutory Stock Options, as determined by the Administrator
at the time of grant of an option and subject to the applicable provisions of
Section 422 of the Code and the regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees appointed
-------------
pursuant to Section 4 of the Plan.
(b) "Agent" means any person engaged as an independent contractor to
-----
perform sales or marketing services for the Company or any Parent or Subsidiary,
excluding officers and directors of the Company and persons engaged in
connection with sales of the Company's securities.
(c) "Board" means the Board of Directors of the Company.
-----
(d) "Code" means the Internal Revenue Code of 1986, as amended.
----
(e) "Committee" means a Committee appointed by the Board of Directors
---------
in accordance with Section 4 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
------------
(g) "Company" means Loislaw.com, Inc.
-------
(h) "Continuous Status as an Employee or Agent" means that the
-----------------------------------------
employment or independent contractor relationship with the Company, any Parent
or Subsidiary is not interrupted or terminated. Continuous Status as an
Employee or Agent shall not be considered interrupted in the case of (i) any
leave of absence approved by the Company, (ii) transfers between locations of
the Company or between the Company, its Parent, any Subsidiary, or any successor
or (iii) any termination of status as an Employee solely by virtue of a transfer
out of the sales or marketing department of the employer if the Employee remains
employed by the Company or any Parent or Subsidiary. A leave of absence
approved by the Company shall include sick leave, military leave, or any other
personal leave. For purposes of Incentive Stock Options, no such leave may
exceed 90 days, unless reemployment upon expiration of such leave is guaranteed
by statute or contract, including Company policies. If reemployment upon
expiration of a leave of absence approved by the Company is not so guaranteed,
on the 181st day of such leave any Incentive Stock Option held by the Optionee
shall cease to be treated as an Incentive Stock Option and shall be treated for
tax purposes as a Nonstatutory Stock Option.
(i) "Disability" means total and permanent disability, as defined in
----------
Section 22(e)(3) of the Code.
(j) "Employee" means any person, excluding officers and directors of
--------
the Company, employed by the Company or any Parent or Subsidiary of the Company
whose employment is primarily in the sales or marketing department of his or her
employer.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
-------------
amended.
(l) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:
1
<PAGE>
(i) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq National
Market or The Nasdaq Small Cap Market of the Nasdaq Stock Market, its Fair
Market Value shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such exchange or system for the
last market trading day prior to the time of determination, as reported in The
Wall Street Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination; or
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value shall be determined in good faith by the Administrator.
(m) "Incentive Stock Option" means an Option intended to qualify as
----------------------
an incentive stock option within the meaning of Section 422 of the Code.
(n) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option.
(o) "Option" means a stock option granted pursuant to the Plan.
------
(p) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(q) "Optionee" means an Employee or Agent who receives an Option.
--------
(r) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(s) "Plan" means this 2000 Stock Option Plan.
----
(t) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 11 below.
(u) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 100,000 Shares. The Shares may be authorized, but unissued,
or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been exercised
in full, or is surrendered pursuant to an option exchange program authorized by
the Administrator, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
the Plan shall not be returned to the Plan and shall not become available for
future distribution under the Plan, except that if unvested Shares are
repurchased by the Company at their original purchase price, and the original
purchaser of such Shares did not receive any benefits of ownership of such
Shares, such Shares shall become available for future grant under the Plan. For
purposes of the preceding sentence, voting rights shall not be considered a
benefit of Share ownership.
4. Administration of the Plan.
--------------------------
(a) Administration. The Plan shall be administered by (A) the Board
--------------
or (B) a committee of directors designated by the Board, which committee shall
be constituted to satisfy the legal requirements, if any, relating to the
administration of incentive stock option plans of state corporate and securities
laws, of the Code, and of any stock exchange or national market system upon
which the Common Stock is then listed or traded (the "Applicable Laws"). Once
appointed, such Committee shall serve in its designated capacity until otherwise
directed by the Board. The Board
2
<PAGE>
may increase the size of the Committee and appoint additional members, remove
members (with or without cause) and substitute new members, fill vacancies
(however caused), and remove all members of the Committee and thereafter
directly administer the Plan, all to the extent permitted by Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any stock exchange or national market
system upon which the Common Stock is then listed, the Administrator shall have
the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(l) of the Plan;
(ii) to select the Agents and Employees to whom Options may from
time to time be granted hereunder;
(iii) to determine whether and to what extent Options are granted
hereunder;
(iv) to determine the number of shares of Common Stock to be covered
by each Option granted hereunder.
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any Option granted hereunder. Such terms and
conditions may include, but are not limited to, the exercise price, the time or
times when Options may be exercised, any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any Option
or the Shares relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;
(vii) to determine whether and under what circumstances an Option may
be settled in cash under Section 9(e) instead of Common Stock.
(viii) to reduce the exercise price of any Option to the then current
Fair Market Value if the Fair Market Value of the Common Stock covered by such
Option has declined since the date the Option was granted;
(ix) to provide for the early exercise of Options for the purchase
of unvested Shares, subject to such terms and conditions as the Administrator
may determine; and
(x) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.
(c) Effect of Administrator's Decision. All decisions,
----------------------------------
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.
5. Eligibility.
-----------
(a) Nonstatutory Stock Options may be granted to Employees and
Agents. Incentive Stock Options may be granted only to Employees. An Employee or
Agent who has been granted an Option may, if otherwise eligible, be granted
additional Options.
(b) Each Option shall be designated in the written option agreement
as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 5(b), Incentive Stock Options shall be taken into account in the order
in which they were granted, and the Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
3
<PAGE>
(c) The Plan shall not confer upon any Optionee any right with
respect to the continuation of the Optionee's employment or independent
contractor relationship with the Company, nor shall it interfere in any way with
the Optionee's right or the Company's right to terminate the Optionee's
employment or independent contractor relationship at any time, with or without
cause.
(d) The following limitations shall apply to grants of Options:
(i) No Employee or Agent shall be granted, in any fiscal year of
the Company, Options to purchase more than 10,000 Shares.
(ii) In connection with his or her initial employment with or
engagement by the Company, an Employee or Agent may be granted Options to
purchase up to an additional 10,000 Shares, which shall not count against the
fiscal year limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted proportionately in
connection with any change in the Company's capitalization as described in
Section 11.
(iv) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 11), the cancelled Option will be counted against the limit
set forth in subsection (i) above. For this purpose, if the exercise price of an
Option is reduced, the transaction will be treated as a cancellation of the
Option and the grant of a new Option.
6. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company, as described in Section 17 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 13 of the Plan.
7. Term of Options. The term of each Option shall be the term stated in
---------------
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. However, in the case of an Incentive
Stock Option granted to an Optionee who, at the time of the Option is granted,
owns stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
---------------------------------------
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the
grant of such Incentive Stock Option, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee
described in the preceding paragraph, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per share
exercise price shall be determined by the Administrator.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option have been owned by the Optionee for more
than six months on the date of surrender and (y) have a Fair Market Value on the
date of surrender equal to the aggregate exercise
4
<PAGE>
price of the Shares as to which such Option shall be exercised, (5) delivery of
a properly executed exercise notice together with such other documentation as
the Administrator and the broker, if applicable, shall require to effect an
exercise of the Option and delivery to the Company of the sale or loan proceeds
required to pay the exercise price, or (6) any combination of the foregoing
methods of payment. In making its determination as to the type of consideration
to accept, the Administrator shall consider if acceptance of such consideration
may be reasonably expected to benefit the Company.
9. Exercise of Option.
------------------
(a) Procedure for Exercise, Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permissible under the terms
of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment or Agent Relationship. Upon
-----------------------------------------------
termination of an Optionee's Continuous Status as an Employee or Agent, other
than upon the Optionee's death or Disability, the Optionee may exercise his or
her Option, but only within such period of time as is specified in the Notice of
Grant, and only to the extent that the Optionee was entitled to exercise it at
the date of termination (but in no event later than the expiration of the term
of such Option as set forth in the Notice of Grant). In the absence of a
specified time in the Notice of Grant, the Option shall remain exercisable for
three (3) months following the Optionee's termination. In the case of any
Incentive Stock Option, such period of time for exercise shall not exceed three
(3) months from the date of termination. If, on the date of termination, the
Optionee is not entitled to exercise the Optionee's entire Option, the Shares
covered by the unexercisable portion of the Option shall revert to the Plan. If,
after termination, the Optionee does not exercise his or her Option within the
time specified by the Administrator, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
Notwithstanding the above, in the event of an Optionee's change in
status from Agent to Employee or Employee to Agent, an Optionee's Continuous
Status as an Employee or Agent shall not automatically terminate solely as a
result of such change in status. However, in such event, an Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option
three months and one day following such change of status.
(c) Disability of Optionee. In the event of termination of an
----------------------
Optionee's Continuous Status as an Employee or Agent as a result of his or her
Disability, the Optionee may, but only within twelve (12) months from the date
of such termination (and in no event later than the expiration date of the term
of his or her Option as set forth in the Option Agreement), exercise the Option
to the extent the Optionee was otherwise entitled to exercise it on the date of
such termination. To the extent that the Optionee is not entitled to exercise
the Option on the date of termination, or if the Optionee does not exercise the
Option to the extent so entitled within the time specified herein, the Option
shall terminate, and the Shares covered by the Option shall revert to the Plan.
5
<PAGE>
(d) Death of Optionee. In the event of the death of an Optionee,
-----------------
the Option may be exercised at any time within twelve (12) months following the
date of death (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), by the Optionee's estate or by a
person who has acquired the right to exercise the Option by bequest or
inheritance, but only to the extent that the Optionee was entitled to exercise
the Option at the date of death. If, at the time of death, the Optionee was not
entitled to exercise his or her entire Option, the Shares covered by the
unexercisable portion of the Option shall immediately revert to the Plan. If,
after death, the Optionee's estate or a person who acquires the right to
exercise the Option by bequest or inheritance does not exercise the Option
within the time specified herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
(e) Buyout Provisions. Administrator may at any time offer to buy
-----------------
out, for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
10. Non-Transferability of Options. Options may not be sold, pledged,
------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization or Merger.
----------------------------------------------------
(a) Changes in Capitalization. Subject to any required action by
-------------------------
the shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option shall lapse as to all such Shares,
provided the proposed dissolution or liquidation takes place at the time and in
the manner contemplated. To the extent it has not been previously exercised, an
Option will terminate immediately prior to the consummation of such proposed
action.
(c) Merger or Asset Sale. In the event of a merger of the Company
--------------------
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option shall be assumed or an equivalent option
substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. In the event that the successor corporation refuses to
assume or substitute for the Option, the Optionee shall have the right to
exercise the Option as to all of the Optioned Stock, including Shares as to
which it would not otherwise be exercisable. If an Option is exercisable in lieu
of assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee that the Option shall be fully
exercisable for a period of fifteen (15) days from the date of such notice, and
the Option shall terminate upon the expiration of such period. For the purposes
of this paragraph, the Option shall be considered assumed if, following the
merger or sale of assets, the Option confers the right to purchase or receive,
for each Share of Optioned Stock subject to the Option immediately prior to the
merger or sale of assets, the consideration (whether stock, cash, or other
securities or property) received in the merger or sale of assets by holders of
Common Stock for each Share held on the effective date of the transaction (and
if holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding Shares);
6
<PAGE>
provided, however, that if such consideration received in the merger or sale of
assets was not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option, for each
Share of Optioned Stock subject to the Option, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
12. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Employee or Agent to whom an
Option is so granted within a reasonable time after the date of such grant.
13. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Section 422 of the Code (or
any other applicable law or regulation, including the requirements of any stock
exchange or national market system upon which the Common Stock is then listed),
the Company shall obtain shareholder approval of any Plan amendment in such a
manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options already granted, and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange or national market system
upon which the Common Stock is then listed or traded, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
15. Reservation of Shares. The Company, during the term of this Plan,
---------------------
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
16. Agreements. Options shall be evidenced by written agreements in such
----------
form as the Administrator shall approve from time to time.
17. Shareholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange or national market system upon which the Common
Stock is then listed or traded.
7
<PAGE>
This Proxy is Solicited on Behalf of the
Board of Directors
The undersigned hereby appoints Kyle D. Parker, Mark O.
Beyland and Sam Sexton, III, and each of them, proxy
with power of substitution and hereby authorizes such
persons to represent and to vote, as designated below,
all shares of common stock of Loislaw.com, Inc. (the
"Company") standing in the name of the undersigned on
LOISLAW.COM, INC. May 19, 2000, at the annual meeting of stockholders to
be held on June 13, 2000 at 9:00 a.m., local time, in
Dallas, Texas, and at any adjournment thereof and
especially to vote on the items of business specified
below, as more fully described in the notice of the
meeting dated May 25, 2000, and the proxy statement
accompanying the same, receipt of which is hereby
acknowledged.
1. Election of Director
FOR NOMINEE HANNAH C. STONE [ ] WITHHOLD AUTHORITY FOR NOMINEE HANNAH C.
STONE [ ]
2. Proposal to approve the adoption of the Company's 1999 Nonqualified Stock
Option Plan for Nonemployee Directors:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Proposal to approve the adoption of the Company's 2000 Stock Option Plan for
sales and marketing personnel:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Proposal to amend the Company's 1996 Stock Option Plan to increase from
1,500,000 to 1,950,000 the aggregate number of shares of Common Stock
authorized for issuance under such plan:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. In their discretion, the proxies are authorized to vote upon such other
business or matters as may properly come before the meeting or any
adjournment thereof.
THIS PROXY, WHEN DULY EXECUTED AND RETURNED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF THIS PROXY IS DULY EXECUTED
AND RETURNED, BUT WITHOUT CLEAR VOTING DIRECTION, IT WILL BE VOTED FOR THE
NOMINEE AND FOR EACH OF THE PROPOSALS SET FORTH ABOVE.
The undersigned hereby revokes any proxy or proxies heretofore
given to represent or vote such common stock and hereby
ratifies and confirms all actions that said proxies or their
substitutes may lawfully take in accordance with the terms
hereof.
Dated: , 2000
-----------------------------
-----------------------------------------
-----------------------------------------
Signature(s) of Stockholder(s)
This proxy should be signed exactly as
your name appears hereon. Joint owners
should both sign. If signed as attorney,
executor, guardian or in some other
representative capacity, or as officer of
a corporation, please indicate your
capacity or title.
Please complete, date and sign this proxy
and return it promptly in the enclosed
envelope, which requires no postage if
mailed in the United States.
