SCHEDULE 14C
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934
Check the appropriate box:
[ ] Preliminary Information Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14c-5(d)(2))
[X] Definitive Information Statement
SAFLINK Corporation
(Name of Registrant As Specified in Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g)
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>
SAFLINK CORPORATION
(FORMERLY THE NATIONAL REGISTRY, INC.)
2502 ROCKY POINT DRIVE, SUITE 100
TAMPA, FLORIDA 33607
INFORMATION STATEMENT
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY
This Information Statement has been filed with the Securities and
Exchange Commission (the "SEC") and transmitted on or about January 19, 2000 to
the holders of record on December 31, 1999 (the "Record Date") of shares of
common stock, par value $.01 per share (the "Common Stock"), of SAFLINK
Corporation, a Delaware corporation ("SAFLINK" or the "Company"). This
Information Statement is being furnished pursuant to Section 14(c) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), in connection
with the following actions:
(1) AMENDING THE 1992 STOCK INCENTIVE PLAN OF SAFLINK, AS
AMENDED (THE "PLAN") FOR THE PURPOSE OF INCREASING TO
4,000,000 THE NUMBER OF SHARES OF COMMON STOCK RESERVED
FOR ISSUANCE PURSUANT TO THE PLAN; AND
(2) AMENDING OUR CERTIFICATE OF INCORPORATION TO CHANGE THE
NAME OF THE COMPANY TO SAFLINK CORPORATION (THE "NAME
CHANGE").
VOTING SECURITIES
This Information Statement is being mailed on or about January 19, 2000
to all shareholders of record as of the Record Date.
On September 8, 1999, the Company's Board of Directors approved the
amendment of the Plan for the purpose of increasing to 4,000,000 the number of
shares of Common Stock reserved for issuance pursuant to the Plan, subject to
stockholder approval. On November 9, 1999, the Company's Board of Directors
approved the amendment to the Company's certificate of incorporation for the
purpose of changing the name of the Company to SAFLINK Corporation to more
accurately reflect its planned business, subject to stockholder approval.
As of the close of business on December 20, 1999, the Company had
18,570,655 shares of Common Stock issued and outstanding, each entitled to one
vote with respect to the actions to be taken.
Stockholders who hold a majority of the issued and outstanding shares
of Common Stock have executed written consents in favor of amending the Plan and
name change, respectively, which votes were sufficient to approve the actions.
Stockholders of the Company as of the Record Date are entitled to
notice of the corporate action taken by written consent of holders of the issued
and outstanding shares of Common Stock. Such action will be effective twenty
(20) days following the mailing of this Information Statement.
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of the Record Date by (i)
each person known by the Company to own beneficially 5% or more of any class of
the Company's voting stock, (ii) each director and executive officer of the
Company, and (iii) all directors and executive officers of the Company as a
group. All percentages in this section were calculated on the basis of
outstanding securities plus securities deemed outstanding under Rule 13d-3 of
the Exchange Act.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER AMOUNTS AND
NATURE OF
BENEFICIAL PERCENT OF
OWNERSHIP CLASS
<S> <C> <C>
RMS Limited Partnership ......................................... 11,621,305(1) 52.5
50 West Liberty Street
Suite 650
Reno, NV 89501
Francis R. Santangelo ........................................... 1,391,710 7.5
10926 Tamarisk Trail
Boynton Beach, FL 33436
Home Shopping Network, Inc. ..................................... 2,600,532 12.3
P. O. Box 9090
Clearwater, FL 34618
Jeffrey P. Anthony, President, Chief Executive Officer, Chairman
and Director .................................................... 366,667 1.9
Frank M. Devine, Director ....................................... 347,249 1.8
Donald C. Klosterman, Director .................................. 258,333 1.0
Hector J. Alcalde , Director .................................... 30,000 *
Robert J. Rosenblatt, Director .................................. 0 *
Walter Hamilton, Vice President of Sales and Marketing .......... 61,333 *
James W. Shepperd, Chief Financial Officer, Secretary ........... 110,000 *
and Treasurer
EXECUTIVE OFFICERS AND DIRECTORS AS A GROUP (6 PERSONS): ........ 2,668,542 13.8
</TABLE>
(1) Excludes 59,500 shares of Common Stock owned by certain trusts of which
Roy Speer's children and grandchildren are beneficiaries. Mr. Speer is
the sole stockholder and a director of Crystal Diamond, Inc., and a
limited partner of RMS. RMS and Mr. Speer disclaim beneficial ownership
of such shares of Common Stock. Includes 3.6 million shares of Common
Stock issuable upon conversion of 100,000 currently convertible shares
of Series D Preferred Stock.
* Less than 1%.
2
<PAGE>
DIRECTORS' COMPENSATION
During 1998, except as set forth below for Mr. Anthony, no cash
compensation was paid to any of the directors of the Company for being a
director of the Company, except that such persons are reimbursed for
out-of-pocket expenses incurred in attending meetings of the Board or committees
of the Board.
On March 11, 1998, the Board, on the recommendation of the Compensation
Committee, adopted a plan to grant options to acquire 33,333 shares of Common
Stock to each new director of the Company upon such persons' election and
qualification to the Board. Such stock options were scheduled to become
exercisable one-third on the date of grant and an additional one-third on each
of the first two anniversaries of the grant date, if such person was still
serving as a director of the Company, with an exercise price of the closing bid
price of the Common Stock on the NASDAQ SmallCap Market on the date of such
grant. Messrs. Anthony, Devine, Klosterman, Lyle (a director who resigned
effective December 30, 1998), and Santangelo received such grants on such date
at an exercise price of $4.68 (the closing bid price of the Common Stock on the
NASDAQ SmallCap Market on the date of such grant). Mr. Rosenblatt, because he
was nominated to serve on the Board by Home Shopping Network, declined the
options granted to him. As additional compensation for Messrs. Devine,
Klosterman and Lyle agreeing to join the Board in June 1997, the Board made such
options exercisable two-thirds on the date of the grant and an additional
one-third on the first anniversary of such grant. In addition, in recognition of
their past efforts and services to and on behalf of the Company without any
other compensation, the Board granted to each of Messrs. Anthony and Devine
options to acquire 15,000 shares of Common Stock at an exercise price of $4.68
exercisable two-thirds on the date of grant and an additional one-third on the
first anniversary of the date of grant. All 33,333 options granted to Mr. Lyle
prior to his resignation as a director of the Company have expired unexercised.
The Board elected Jeffrey P. Anthony as the new Chairman of the Board
("Chairman") on March 11, 1998. In connection with such election, the
responsibilities of the Chairman were expanded to include, among other duties,
assisting the executive officers of the Company in connection with the
operations of the Company as a means to facilitate the efficient operation of
the Company and communication with the Board. The Compensation Committee set Mr.
Anthony's compensation for serving as Chairman at $150,000 per year and Mr.
Anthony resigned as Director of Business Development upon acceptance of the
position of Chairman. J. Anthony Forstmann, the prior Chairman, did not receive
compensation for serving as Chairman.
On May 19, 1998, the Board requested that Mr. Anthony accept the
additional responsibilities of Chief Executive Officer and President of the
Company. In light of the Company's then financial condition and need for
additional financing, Mr. Anthony agreed to accept such additional
responsibilities with no increase in compensation during 1998.
All option amounts and exercise prices related to grants made prior to
May 27, 1998 have been adjusted to reflect the Company's May 27, 1998 6 for 1
reverse stock split. All options granted prior to June 16, 1998 became
immediately exercisable on the later of June 16, 1998 or the date six months
after the date of grant as the result of the occurrence on June 16, 1998 of a
"change in control" as defined in the Plan. See "Option Acceleration" below.
On July 1, 1998, the Board, on the recommendation of the Compensation
Committee, granted options to purchase shares of Common Stock to officers and
employees of the Company in order to provide long-term incentives in light of
the June 16, 1998 acceleration of exercisability of previously outstanding
options. Such options were scheduled to become exercisable pro rata on each of
the next three anniversaries of the grant date and the exercise price of such
options was set at $1.38 (the average of the closing bid and ask price of the
Common Stock on the NASDAQ SmallCap Market on the date of
3
<PAGE>
such grant). With the exception of Mr. Anthony, who was granted options to
purchase 150,000 shares of Common Stock at $1.38 per share, no options were
granted to directors.
On December 4, 1998, the Board, on the recommendation of the
Compensation Committee, granted options to purchase shares of Common Stock to
officers and employees of the Company in order to provide retention incentives
in light of the then existing cash flow concerns of the Company. Such options
were scheduled to become exercisable pro rata on each of the next three
anniversaries of the grant date and the exercise price of such options was set
at $0.64 (the average of the closing bid and ask price of the Common Stock on
the NASDAQ SmallCap Market on the date of such grant). With the exception of Mr.
Anthony, who was granted options to purchase 150,000 shares of Common Stock at
$0.64 per share, and Frank Devine, who was granted options to purchase 250,000
shares of Common Stock at $0.64 per share in consideration of certain marketing
efforts undertaken by Mr. Devine on behalf of the Company, no options were
granted to directors.
On December 17, 1998, as a result of a "change in control" as defined
in the Plan, all of the options granted on July 1, 1998 and December 4, 1998
became immediately exercisable, or became immediately exercisable, beginning six
months after the applicable grant date. See "Option Acceleration" below.
On February 1, 1999, the Board, on the recommendation of the
Compensation Committee, determined to increase the number of options to be
granted to each new non-employee director of the Company to 60,000 shares of
Common Stock. Such options shall become exercisable pro rata on each of the
first three anniversaries of the grant date. The Board determined to increase
the amount of the grant under its non-employee director option policy to provide
the directors with a more meaningful interest in the Company. On such date, the
Board granted options to acquire 60,000 shares of Common Stock to each of Hector
J. Alcalde and O.G. Greene (a director who resigned effective November 8, 1999)
for agreeing to join the Board and options to acquire 26,667 shares of Common
Stock to Donald Klosterman to increase the aggregate number of options granted
to Mr. Klosterman to 60,000. The exercise price of such options is $2.82 per
share (the average of the closing bid and ask price of the Common Stock on the
SmallCap Market on the date of the grant). All 60,000 options granted to Mr.
Greene prior to his resignation as a director of the Company have expired
unexercised.
4
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding all
compensation with respect to the Named Executive Officers receiving more than
$100,000 in aggregate compensation in 1998, including the Chief Executive
Officer of the Company:
SECURITIES
SALARY UNDERLYING
NAME AND PRINCIPAL POSITION YEAR ($) OPTIONS/SARs
- --------------------------- ---- ------ ------------
Jeffrey P. Anthony 1998 146,544 366,667
President and Chief Executive 1997 N/A N/A
Officer 1996 N/A N/A
John L. Gustafson 1998 101,020 42,778
Former President and Chief 1997 170,000 --
Executive Officer 1996 248,922(1) 50,000
Clinton C. Fuller (2) 1998 142,108 213,333
Former Chief Operating Officer 1997 128,465 --
1996 130,000 20,000
(1) Mr. Gustafson's salary in 1996 included $78,922 paid by the Company in
connection with Mr. Gustafson's relocation and a related "gross-up" for
the tax applicable to such reimbursement.
(2) Mr. Fuller's employment with the Company terminated effective October 26,
1999.
COMPENSATION PLAN
CONSULTING AGREEMENT
On May 20, 1998, the Company and James W. Shepperd entered into a
Consulting Agreement (the "Consulting Agreement") pursuant to which Mr. Shepperd
agreed to provide (on a part-time basis for up to six months) certain services
typically performed by a chief financial officer. Mr. Shepperd agreed to provide
such services to the Company for up to 80 hours per month at a rate of $50 per
hour and the Company granted Mr. Shepperd a three year, fully vested option to
purchase 15,000 shares of Common Stock at an exercise price of $2.64 per share,
the closing bid price on the NASDAQ SmallCap Market on May 19, 1998 (each
adjusted to reflect the Company's May 27, 1998 6 for 1 reverse stock split).
Such option became exercisable six months after the date of grant. On October 8,
1998, the Consulting Agreement was extended to December 31, 1998, the number of
hours Mr. Shepperd agreed to provide services was increased to 100 per month and
Mr. Shepperd's hourly rate was increased to $75. The term of the Consulting
Agreement has been extended through March 31, 2000.
401(K) PLAN
The Company offers a plan (the "401(k) Plan") pursuant to Section 401(k) of the
Internal Revenue Code of 1986, as amended (the "Code"), covering substantially
all employees, including the Named Executive Officers who are also employees.
Matching employer contributions are set at the discretion of the Board. There
were no employer contributions made for 1998, 1997 or 1996.
5
<PAGE>
STOCK INCENTIVE PLAN
THE 1992 STOCK INCENTIVE PLAN. The Plan, adopted by the Board and
approved by the Stockholders in January 1992, authorizes the granting of stock
incentive awards to qualified officers, employees, directors and third parties
providing valuable services to the Company (e.g., independent contractors,
consultants and advisors to the Company). At the Company's Annual Meeting of
Stockholders held on May 12, 1998, the Stockholders approved an amendment to the
Plan increasing the number of shares of Common Stock authorized for issuance
upon exercise of options granted pursuant to the Plan to 2,500,000 (adjusted to
reflect the Company's May 27, 1998 6 for 1 reverse stock split). The
Stockholders previously approved amendments to the Plan increasing the
authorized number of shares of Common Stock under the Plan at the Annual
Meetings of Stockholders in 1993, 1996 and 1997. For a complete discussion of
the Plan, see Approval of Amending the Plan for the purposes of increasing to
4,000,000 the number of shares of Common Stock reserved for issuance pursuant to
the Plan.
There were no awards of Stock Appreciation Rights ("SARs") made during
fiscal year 1998 to any of the Named Executive Officers. The following table
sets forth all options granted to any of the Named Executive Officers during
fiscal year 1998.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING GRANTED TO OR BASE GRANT DATE
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION PRESENT VALUE
NAME GRANTED (#)(1) FISCAL YEAR (%) ($)(2) DATE ($)
- ---- -------------- --------------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Jeffrey P. Anthony 48,333 3.3% 4.68 3/11/08 170,132
150,000 10.2% 1.38 7/01/08 157,500
150,000 10.2% 0.64 12/4/08 70,500
John L. Gustafson 41,667 2.8% 4.68 3/11/08(3) 146,668
Clinton C. Fuller 20,000 1.4% 4.68 3/11/08(4) 70,400
90,000 6.1% 1.38 7/01/08(4) 94,500
90,000 6.1% 0.64 12/4/08(4) 42,300
James W. Shepperd 15,000 1.0% 2.64 5/19/01 29,550
30,000 2.0% 1.38 7/01/08 31,500
30,000 2.0% 0.64 12/4/08 14,100
</TABLE>
(1) The options are adjusted to reflect the Company's May 27, 1998 6 for 1
reverse stock split.
(2) The exercise prices are adjusted to reflect the Company's May 27, 1998 6
for 1 reverse stock split.
(3) Expired unexercised as a result of Mr. Gustafson's termination of
employment in May 1998.
(4) Will now expire on 10/26/00 due to Mr. Fuller's termination of employment
on 10/26/99.
6
<PAGE>
All options, other than the May 19, 1998 option grant to Mr. Shepperd,
were scheduled to become exercisable pro rata on each of the first three
anniversaries of the grant date. The option granted to Mr. Shepperd vested upon
the issuance thereof and became exercisable six months after the grant date. The
exercisability of all options accelerated based upon the occurrence of the
change in control events discussed in "Option Acceleration" below. In addition,
on March 11, 1998, the Board determined to decrease the exercise price on all
outstanding stock options to purchase Common Stock held by employees or
directors of the Company to $4.68 (the closing bid price of the Common Stock on
the NASDAQ SmallCap Market on the date of repricing, as adjusted for the
Company's May 27, 1998 6 for 1 reverse stock split). See "Option Repricing"
below. During fiscal year 1998, no stock options were exercised by any director
or Named Executive Officer of the Company. The following table sets forth the
number and value of stock options outstanding as of December 31, 1998 for the
Named Executive Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS IN-THE-MONEY
SHARES AT FISCAL OPTIONS/SARS
ACQUIRED ON VALUE YEAR-END (#) YEAR-END ($)(1)
NAME EXERCISE (#) REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ------------ -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Jeffrey P. Anthony -- -- 216,667/150,000 0/63,375
John L. Gustafsen -- -- 42,778/0 0/0
Clinton C. Fuller -- -- 123,333/90,000 (2) 0/38,025
James W. Shepperd -- -- 45,000/30,000 0/12,675
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Assumes a market price equal to $1.0625 per share, the average of the
closing bid and ask price on the NASDAQ SmallCap Market on December 31,
1998.
(2) On January 19, 1999 an January 4, 2000, Mr. Fuller exercised options to
purchase 15,000 shares and 20,000 shares of Common Stock, respectively,
which options had previously become exercisable.
COMPENSATION COMMITTEE REPORT ON OPTION REPRICING
On March 11, 1998, the Board, upon the recommendation of the
Compensation Committee, repriced the exercise price of all outstanding options
to purchase Common Stock held by employees and directors of the Company to
$4.68, the closing bid price of the Common Stock on the NASDAQ SmallCap Market
on such date (adjusted for the Company's May 27, 1998 6 for 1 reverse stock
split). The Board and the Compensation Committee undertook such option repricing
in order to restore the utility of the stock options as effective incentives. As
a result of a decline in the price of the Common Stock, outstanding stock
options granted to employees and directors had exercise prices above the then
recent historical trading prices for the Common Stock. The Board believed the
disparity between the exercise price of the stock options and the then current
market price no longer provided a meaningful long-term incentive to the option
holders. The Board believes that the issuance of stock options increases the
incentive of, and attracts and encourages the continued employment and service
of, qualified
7
<PAGE>
directors, officers and other key employees by facilitating their purchase of a
stock interest in the Company. In addition, the granting of stock options helps
align the financial interests of directors, officers and other key employees
receiving such options with the stockholders because such directors', officers'
and key employees' compensation increases as the price of the Common Stock
increases. In light of the Company's historical and then current cash flow
concerns limiting the amounts available to pay individuals as compensation, the
Board determined that it was advisable that the Company and its stockholders
continue to have the incentive of stock options available as a means of
attracting and retaining directors, officers and key employees. In its
deliberations over whether to authorize the repricing of all stock options, the
Compensation Committee considered at length the potential disadvantages of such
repricing, including the dilutive affect on, and possible negative reactions
among, the existing stockholders. While fully cognizant of the potential
disadvantages of the repricing of all stock options, the Board and the
Compensation Committee concluded that such repricing was necessary as a means
(i) to retain and attract directors, officers and other key employees, (ii) to
reward directors, officers and other employees who had continued to work hard
for the Company and its stockholders through what at times had been difficult
circumstances and (iii) to ensure that the directors, officers and other key
employees had an opportunity to acquire a meaningful equity interest in the
Company helping align their financial interests with those of the stockholders.
The repriced stock options have exercise prices of $4.68 per share, the closing
bid price of the Common Stock on the NASDAQ SmallCap Market on the date of their
pricing (adjusted for the Company's May 27, 1998 6 for 1 reverse stock split).
Except for the new exercise prices, the terms of the repriced stock options
remain the same.
Compensation Committee
Frank M. Devine
Donald C. Klosterman
Francis R. Santangelo
8
<PAGE>
10-YEAR OPTION REPRICINGS
The following table sets forth information regarding options held by the
Named Executive Officers that were repriced by the Company in fiscal year 1998.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
NAME DATE NUMBER OF MARKET PRICE OF EXERCISE PRICE NEW EXERCISE
SECURITIES STOCK AT TIME OF AT REPRICING PRICE
UNDERLYING OPTIONS REPRICING (1) TIME (1)
REPRICED
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
Jeffrey P. Anthony 3/11/98 12,500 $4.68 $ 9.00 $ 4.68
4,167 4.68 6.75 4.68
1,667 4.68 13.50 4.68
- ---------------------------------------------------------------------------------------------------------------------
John L. Gustafson 3/11/98 40,000 $ 4.68 $ 6.75 $ 4.68
2,778 4.68 9.00 4.68
- ---------------------------------------------------------------------------------------------------------------------
Clinton C. Fuller 3/11/98 10,000 $ 4.68 $10.68 $ 4.68
3,333 4.68 6.75 4.68
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The market price and new exercise price set forth above have been
adjusted to reflect the Company's May 27, 1998 6 for 1 reverse stock
split.
OPTION ACCELERATION
Effective June 16, 1998, due to a "change in control" as defined in the
Plan, all outstanding options granted and outstanding under the Plan became
immediately exercisable to the extent that they were granted at least six months
prior to June 16, 1998. Otherwise the options became exercisable six months
after the grant date. A "change in control" is deemed to have occurred under the
Plan if, among other things, any person is or becomes the beneficial owner,
directly or indirectly, of the Company's securities representing 35% or more of
the combined voting power of the Company's then outstanding securities. On June
16, 1998, Clearwater Fund III, L.P. ("Clearwater") owned 230,000 shares of the
Company's Series C Preferred Stock, $.01 par value per share (the "Series C
Preferred Stock"), which was convertible into approximately 3,795,400 shares of
Common Stock, or approximately 35.4% of the Company's then outstanding shares
based on the average closing price of the Common Stock on the NASDAQ SmallCap
Market for the five trading days ending on June 15, 1998. Such ownership
interest constituted a change in control under the Plan.
On December 17, 1998, due to the occurrence of another "change in
control," any options granted and outstanding under the Plan became immediately
exercisable to the extent that they were granted at least six months prior to
December 17, 1998. Otherwise the options became exercisable six months after the
applicable grant date. On December 17, 1998, RMS Limited Partnership, a Nevada
limited partnership ("RMS"), Francis R. Santangelo and Clearwater entered into a
stock purchase agreement. Under the terms of such stock purchase agreement, RMS
and Mr. Santangelo purchased 195,500 and 34,500 shares, respectively, of the
Series C Preferred Stock from Clearwater. RMS and Mr. Santangelo converted all
of their respective shares of Series C Preferred Stock into 8,264,138 shares and
1,458,377 shares, respectively, of Common Stock (representing approximately
49.6% and 8.7% of the then issued and outstanding shares of Common Stock). The
transfer of such securities constituted a change in control under the Plan.
9
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee presently consists of Messrs. Devine,
Klosterman and Santangelo. During the most recently completed fiscal year, the
Board did not have an option committee. The full Board, based upon
recommendations of the Compensation Committee, determined whether to make option
grants.
APPROVAL OF AMENDING THE PLAN FOR THE PURPOSE OF INCREASING TO 4,000,000 THE
NUMBER OF SHARES OF COMMON STOCK RESERVED FOR ISSUANCE PURSUANT TO THE PLAN
The previously amended Plan authorized 2,500,000 shares of Common Stock
for issuance upon exercise of stock options. The Company's Board of Directors
has unanimously adopted a resolution to approve amending the Plan for the
purpose of increasing to 4,000,000 the number of shares of Common Stock
reserved for issuance pursuant to the Plan (the "Plan Amendment"). Three
stockholders holding approximately 54.0% of the outstanding shares of Common
Stock, have voted all of such shares in favor of the Plan Amendment which vote
was sufficient to approve the increase. The Plan Amendment is attached hereto as
Exhibit 1.1.
The following table sets forth, as of the Record Date, certain
information regarding options granted under the Plan to the persons and groups
indicated.
NEW PLAN BENEFITS TABLE
<TABLE>
<CAPTION>
AGGRIGATE
NUMBER OF SHARES EXERCISE
SUBJECT TO OPTIONS PRICE DOLLAR
NAME AND POSITION (#) ($) VALUE($) (1)
----------------- ------------------ -------- ------------
<S> <C> <C> <C>
Jeffrey P. Anthony 546,677 856,202 117,549
President and CEO
Walter Hamilton 139,667 176,882 71,900
VP of Sales and Marketing
James W. Shepperd 120,000 160,500 53,250
Chief Financial Officer
Executive Officers as a 806,334 1,193,584 242,698
group (3 persons)
Non-Employee Directors 226,666 841,095 0
as a group (5 persons)
All Non-Executive Employees 1,341,110 1,950,425 438,427
as a group
</TABLE>
(1) Determined by multiplying the number of options held by the individual
times the difference between the exercise price of the option and the
average of the closing bid and ask price of Company common stock at
December 20, 1999 which was $1.78125. The amount reported is net of the
negative value of any options that have exercise prices greater than
the average of the closing bid and ask price.
10
<PAGE>
INTRODUCTION
The Board has authorized, and the holders of a majority of the
Company's outstanding voting stock have approved, the increase in the number of
shares of Common Stock authorized for issuance under the Plan from 2,500,000 to
4,000,000. Except as amended, the provisions of the Plan will remain unchanged.
REASONS FOR THE PLAN AMENDMENT
The Board believes that the issuance of stock options increases the
incentive of, and attracts and encourages the continued employment and service
of qualified directors, officers and other key employees by facilitating their
purchase of a stock interest in the Company. In addition, the granting of stock
options helps align the financial interests of directors, officers and other key
employees receiving such options with the stockholders because such directors',
officers' and key employees' compensation increases as the price of the Common
Stock increases. As of the Record Date, excluding the increase resulting from
the amendment to the Plan and options granted subject to approval of such
amendment, only 518,920 shares remain available for future option grants under
the Plan. The amendment increases to 4,000,000 the number of shares of Common
Stock authorized for issuance under the Plan (equal to approximately 8.0% of the
authorized Common Stock), including 1,223,920 shares reserved for future option
grants. The Board concluded that more shares than those that had been available
under the Plan were needed as an incentive to attract the directors, officers
and key employees it will need to implement its business objectives in what it
expects to be a rapidly changing environment. The Board believes that an initial
or increased stock option grant will be a valuable tool in attracting and
retaining such individuals and providing added incentives for their continued
contributions to the Company which will, in turn, serve to the ultimate benefit
of the Stockholders.
DESCRIPTION OF THE PLAN
The following summary of the Plan is qualified in its entirety by
express reference to the text of the Plan.
The Plan, adopted by the Board and approved by the stockholders in
January 1992, as amended by the Board and approved by the stockholders at the
Company's Annual Meetings of Stockholders held on August 12, 1993, June 25,
1996, June 27, 1997 and May 12, 1998 authorizes the granting of Awards of up to
2,500,000 shares of Common Stock to qualified officers, employees, directors,
and third parties providing valuable services to the Company, e.g., independent
contractors, consultants and advisors to the Company. The Plan provides for the
granting of options that are intended to qualify as "incentive stock options"
("ISOs") under Section 422 of the Code, as well as non-incentive stock options.
The Plan also provides that Awards can be Stock Options ("Options"), Stock
Appreciation Rights ("SARs"), Performance Share Awards ("PSAs") and Restricted
Share Awards ("RSAs"). The number and kind of shares available under the Plan
are subject to adjustment in certain events. Shares relating to Options and SARs
which are not exercised in full, shares relating to RSAs which do not vest and
shares relating to PSAs which are not issued will again be available for
issuance under the Plan. No SARs, RSAs or PSAs have been granted under the Plan.
The Plan may be administered by the Board or by a committee appointed
by the Board and consisting of two or more members, each of whom must be a
director and disinterested. The Plan is currently administered by the Board,
based upon recommendations made by the Compensation Committee. The Compensation
Committee currently consists of Messrs. Devine, Klosterman, and Santangelo. The
Compensation Committee evaluates the needs of the Company and recommends the
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number of shares to be covered by an Award, the term and exercise price, if any,
of the Award and other terms and provisions of Awards to the Board which
authorizes all grants of Awards.
The exercise price for Options is to be determined by the Board, but
in the case of an ISO is not to be less than fair market value on the date the
Option is granted (110% of fair market value in the case of an ISO granted to
any person who owns more than 10% of the Common Stock). The purchase price is
payable in any combination of cash, shares of Common Stock already owned by the
participant for at least six months or, if authorized by the Compensation
Committee, a promissory note secured by the Common Stock issuable upon exercise
of the Option. In addition, the Award agreement may provide for "cashless"
exercise and payment. Subject to certain early termination or acceleration
provisions, an Option is exercisable, in whole or in part, from the date
specified in the related Award agreement (which may be six months after the date
of grant) until the expiration date determined by the Board, but not to exceed
ten years (five years for any person who owns more than 10% of the outstanding
Common Stock).
Persons to whom Options are granted prior to the expiration of a resale
restriction period must execute a letter agreement agreeing to certain
restrictions on the sale of the shares issuable upon exercise of such Options.
The Company has registered under the Securities Act of 1933, as amended, the
shares issuable pursuant to the Plan, which shares are freely tradable subject
to certain limitations on shares held by affiliates.
As of the Record Date, the Board had granted, and as of the Record Date
there is still outstanding, non-qualified stock options with respect to
2,369,943 shares at various exercise prices. The vesting of Options varies with
respect to each grant of Options.
A SAR is the right to receive payment based on the appreciation in the
fair market value of Common Stock from the date of grant to the date of
exercise. In its discretion, the Compensation Committee may grant a SAR
concurrently with the grant of an Option. A SAR is only exercisable at such
time, and to the extent, that the related Option is exercisable. Upon exercise
of a SAR, the holder receives for each share with respect to which the SAR is
exercised an amount equal to the difference between the exercise price under the
related Option and the fair market value of a share of Common Stock on the date
of exercise of the SAR. The Board, in its discretion, may pay the amount in
cash, shares of Common Stock or a combination thereof.
A RSA is an Award of a fixed number of shares of Common stock subject
to restrictions. The Compensation Committee specifies the price, if any, the
recipient must pay for such shares. Shares included in a RSA may not be sold,
assigned, transferred, pledged or otherwise disposed of or encumbered until they
have vested. These restrictions may not terminate earlier than six months after
the Award date. The recipient is entitled to dividend and voting rights
pertaining to such RSA shares even though they have not vested, so long as such
shares have not been forfeited.
A PSA is an Award of a fixed number of shares of Common Stock the
issuance of which is contingent upon the attainment of certain performance
objectives, and the payment of certain consideration, if any, as is specified by
the Board. Issuance shall, in any case, not be earlier than six months after the
Award date.
The Plan also provides for certain stock depreciation protection,
tax-offset bonuses and tax withholding using shares of Common Stock instead of
cash.
Upon the date a participant is no longer employed by the Company for
any reason, shares subject to the participant's RSAs which have not become
vested by such date or shares subject to the participant's PSAs which have not
been issued by such date shall be forfeited in accordance with the terms of the
related Award agreements. Options which have become exercisable by the date of
termination of
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employment must be exercised within certain specified periods of
time from the date of such termination, the period of time depending on the
reason for termination. Options which have not yet become exercisable on the
date the participant terminates employment for a reason other than retirement,
death or total disability shall terminate on such date.
The Board may, at any time, terminate, amend or suspend the Plan.
However, the Board may not amend the Plan, except subject to the approval of the
Company's stockholders, if such amendment would (i) materially increase the
benefits accruing to eligible individuals under the Plan, (ii) increase the
aggregate number of shares which may be issued under the Plan or (iii) modify
the requirements of eligibility for participation in the Plan. Accordingly, and
in order to seek to continue to take advantage of the exemption from the
short-swing profit rules under Section 16(b) (which may be applicable to certain
participants in the Plan) under the Exchange Act pursuant to Rule 16b-3
promulgated thereunder, stockholders' approval is being sought for the amendment
to the Plan. No amendment, suspension or termination of the Plan may, without
the consent of the optionee to whom an Award has been granted, in any way
modify, amend, alter or impair any rights or obligations under any Award
previously granted under the Plan.
MARKET VALUE
On December 21, 1999, the closing bid price for the Common Stock on the NASDAQ
SmallCap Market was $1.6875.
APPROVAL OF AMENDING THE CERTIFICATE OF INCORPORATION TO CHANGE THE
COMPANY NAME TO SAFLINK CORPORATION
The Company (formerly The National Registry Inc.) had previously
proposed the name change to SAFLINK Corporation on July 7, 1998 but stockholder
action on the initiative had been deferred by the Board of Directors until
recently. On November 10, 1999, the Company filed a Certificate of Amendment
with the Secretary of State of Delaware to change its legal name to SAFLINK
Corporation. The Board of Directors of the Company and the holders of a majority
of the Company's outstanding voting securities approved the Company's name
change. The effective date of the amendment relating to the name change will be
the 20th day following the mailing of a definitive copy of this Information
Statement to the stockholders.
STOCK CERTIFICATES
New stock certificates taking into account the name change will only be
issued upon a transfer of share ownership. All currently outstanding stock
certificates represent ownership in SAFLINK Corporation.
NAME CHANGE
Section 242 of Delaware Law provides an outline of the scope of
amendments that a Delaware corporation can make to its Certificate of
Incorporation. This includes the name change as proposed.
The procedure and requirements to effect an amendment to the
Certificate of Incorporation of a Delaware corporation are set forth in this
Section. This Section provides that the proposed amendments must first be
adopted by the Board of Directors, submitted to the stockholders for their
consideration at a
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special or annual meeting and must be approved by persons owning a majority of
the outstanding voting securities.
Section 228 provides that any action required to be taken at a special
or annual meeting of the stockholders of a Delaware corporation may be taken by
written consent, in lieu of a meeting if the consent is signed by stockholders
owning at least a majority of the voting power.
The Board of Directors of the Company and persons owning approximately
54.0% of the outstanding voting securities of the Company have adopted, ratified
and approved the name change. No further votes are required or necessary to
effect the proposed amendments.
ADDITIONAL INFORMATION
Additional information concerning the Company, including its annual and
quarterly reports for the past twelve months which have been previously filed
with the Securities and Exchange Commission, may be accessed through the EDGAR
Archives, at www.sec.gov.
EXHIBIT INDEX
-------------
1.1 Amendment to the 1992 Stock Incentive Plan.
BY ORDER OF THE BOARD OF DIRECTORS
January 19, 2000 /s/ JEFFREY P. ANTHONY
------------------------------
Jeffrey P. Anthony
President and CEO and Director
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
1.1 Amendment to the 1992 Stock Incentive Plan.
EXHIBIT 1.1
AMENDMENT TO SAFLINK CORPORATION'S 1992 STOCK INCENTIVE PLAN
The second sentence of Section 2.4 of the Plan is hereby amended and
restated to read as follows:
2.4 STOCK SUBJECT TO THE PLAN.
The aggregate amount of Common Stock that may be issued or transferred
pursuant to Awards granted under this Plan shall not exceed 4,000,000 shares,
subject to adjustment as set forth in Section 7.2.
