<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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 14a-12
SOFTLOCK.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: N/A
2) Aggregate number of securities to which transaction applies: N/A
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): N/A
4) Proposed maximum aggregate value of transaction: N/A
5) Total fee paid: N/A
[ ] 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: N/A
2) Form, Schedule or Registration Statement No.: N/A
3) Filing Party: N/A
4) Date Filed: N/A
<PAGE>
SOFTLOCK.COM, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Notice is hereby given that the SoftLock.Com, Incorporated (the "Company")
Annual Meeting of Shareholders will be held at the principal office of the
Company, Five Clock Tower Place, Suite 440, Maynard, Massachusetts 01754 on June
16, 2000 at Ten o'clock (10:00 a.m.) in the morning for the following purposes
as set forth in the accompanying proxy statement:
1. To elect two (2) Class I directors to serve on the board of directors for
the term of three-years or until their respective successor is duly elected
and qualified;
2. To approve an amendment to the Company's 1998 Stock Option Plan (i) to
increase the number of shares of common stock available for grant pursuant
to the exercise of options thereunder by 2,000,000 shares; and (ii) to
permit assignment of options by holders to entities qualified under ss.
501(c)(3) of the Internal Revenue Code as tax-exempt organizations entitled
to receive charitable contributions;
3. To ratify the selection of Deloitte & Touche LLP as independent certified
public accountants for the Company for the year ending December 31, 2000;
and
4. To transact such other business as may properly come before the meeting or
any adjournments thereof.
Holders of record of the Company's common stock at the close of business on
April 26, 2000, will be entitled to vote at the meeting. A list of such
shareholders will be available for examination by a shareholder for any purpose
germane to the meeting during ordinary business hours at the principal office of
the Company, Five Clock Tower Place, Suite 440, Maynard, Massachusetts 01754,
during the ten (10) business days prior to the meeting.
Whether or not you plan to attend the meeting, please date and sign the
enclosed proxy and return it in the envelope provided. Any person giving a proxy
has the power to revoke it at any time prior to its exercise and, if present at
the meeting, may withdraw it and vote in person. Attendance at the meeting is
limited to shareholders, their proxies and invited guests of the Company.
By Order of the Board of Directors
Douglas R. Johnson, Secretary
Dated: April 28, 2000
2
<PAGE>
SOFTLOCK.COM, INC.
Five Clock Tower Place, Suite 440
Maynard, Massachusetts 01754
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 16, 2000
PROXY STATEMENT
The Board of Directors is soliciting proxies for use at the 2000 Annual
Meeting of Shareholders of SoftLock.com, Inc. (the "Company" or "SoftLock"). The
annual meeting will be held on June 16, 2000 at Ten o'clock (10:00 a.m.) in the
morning at the principal office of the Company, Five Clock Tower Place, Suite
440, Maynard, Massachusetts 01754 and at any adjournments thereof. This proxy
statement and the form of proxy will be mailed to shareholders beginning April
29, 2000, together with a copy of the Company's 1999 annual report.
Only shareholders of record of the Company's common stock and the
Company's Series A and Series B Preferred Stock on April 26, 2000 are entitled
to vote at the annual meeting. On April 26, 2000, the Company had 12,862,841
shares of common stock issued and outstanding and 51,471 of Series A Preferred
Stock issued and outstanding and 46,876 of Series B Preferred Stock issued and
outstanding. Each share of Series A and Series B Preferred Stock is entitled to
100 votes per share. Holders of the common stock have 56.2% of the general
voting power, holders of Series A Preferred Stock have 21.3% of the general
voting power and holders of the Series B Preferred Stock have the remaining
22.5% of the general voting power. Holders of common stock and Series A and
Series B Preferred Stock will vote together, without regard to class, on all
matters to be voted upon at the annual meeting.
SHAREHOLDERS ARE URGED TO READ CAREFULLY EACH PROPOSAL CONTAINED IN
THIS PROXY STATEMENT BEFORE VOTING ON THE PROPOSALS, INCLUDING ANY ATTACHED
APPENDIX RELATING TO THE PROPOSALS.
HOW YOU CAN VOTE
If you return your signed proxy before the annual meeting, the proxy
holders will vote your shares as you direct. You can specify on your proxy
whether your shares should be voted for all, some or none of the nominees for
directors. If you do not specify on your proxy card how you want to vote your
shares, the proxy holders will vote them "for" the election of the nominees for
director under "Election of Director" and "for" the other proposals described in
this proxy statement.
Under rules followed by the National Association of Securities Dealers,
Inc., brokers who hold shares in street name for customers 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. With respect to the other proposals presented to
shareholders, no broker may vote shares held for customers without specific
instruction from such customers. A majority of the total outstanding shares will
constitute a quorum at the meeting. Abstentions and broker non-votes are counted
for purposes of determining the presence or absence of a quorum for the
transaction of business.
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<PAGE>
REVOCATION OF PROXIES
Any person giving a proxy in the form accompanying this proxy
statement has the power to revoke it at any time before its exercise. It may be
revoked:
- - by filing with the Secretary of the Company an instrument of
revocation;
- - by presenting at the meeting a duly executed proxy bearing a later
date; or
- - by attending the meeting and electing to vote in person.
REQUIRED VOTES
In the election of directors, the candidate receiving the highest
number of affirmative votes will be elected if a quorum of the Company's
outstanding shares of common stock and Series A and Series B Preferred Stock
exists. The affirmative vote of the holders of a majority of shares of common
stock and Series A and B Preferred Stock is required for any other proposals to
be taken at the meeting.
In determining the presence of a quorum, shares represented by proxies
that reflect "abstention" will be treated as present and entitled to vote. For
the proposals that require a majority of those shares present and voting,
abstentions do not constitute a vote "for" or "against" those proposals and,
thus, will be disregarded in the calculation of shares present and voting. For
the proposals that require approval of a majority of the outstanding shares,
abstentions are effectively treated as "no" votes.
The present officers and directors of the Company, together are
entitled to vote shares of the Company's common stock and Series A and Series
B Preferred Stock representing approximately 55.6% of the outstanding shares
of voting stock. The present officers and directors have indicated their
intent to vote in favor of the election of the nominees for director and in
favor of the other proposal described in this proxy statement.
EXPENSE OF SOLICITATION
The Company will bear the entire cost of preparing, assembling,
printing and mailing this proxy statement, the accompanying proxy and any
additional material that may be furnished to shareholders. The Company may also
retain the services of a proxy solicitation firm. The Company has not made any
arrangements to do so as of the date of this proxy statement, and does not
presently have estimates as to the cost of such services. Directors, officers
and regular employees of the Company may solicit proxies personally, by
telephone or telegram but no additional compensation will be paid to them. The
Company will request brokers and nominees to obtain voting instructions of
beneficial owners of stock registered in their names and will reimburse them for
any expenses incurred in connection therewith.
OTHER MATTERS TO BE ACTED UPON AT THE MEETING
The Company does not know of any other matters to be presented or acted
upon at the meeting. If any other matter is presented at the meeting on which a
vote may properly be taken, the shares represented by
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<PAGE>
proxies in the accompanying form will be voted in accordance with the judgment
of the person or persons voting those shares.
PROPOSALS OF SHAREHOLDERS
Shareholders of the Company who intend to present a proposal for
action at the 2001 Annual Meeting of Shareholders of the Company must notify the
Company's management of such intention by written notice received at the
Company's principal executive offices not later than December 30, 2000 for such
proposal to be included in the Company's proxy statement and form of proxy
relating to such meeting.
5
<PAGE>
PROPOSAL NO. 1
ELECTION OF CLASS I DIRECTORS
The Company's Board of Directors currently consists of eight (8)
directors. The Board of Directors is divided into three classes designated as
Class I, Class II and Class III, respectively. Two (2) directors serve as the
Class I directors, three (3) directors serve as Class II directors and three (3)
directors serve as Class III directors. Each director is elected for the term
assigned to each such class in the Company's Amended Bylaws and until his
respective successor is duly elected and qualified. Directors are elected on a
rotating basis at each succeeding annual meeting of the shareholders. Directors
shall be elected for a full term of three (3) years to succeed the directors of
each class whose terms expire at such annual meeting.
Two (2) Class I directors will be elected at this meeting. The Board of
Directors has proposed the following nominees for election as Class I directors
for a term of three (3) years or until their respective successors is duly
elected and qualified: Scott W. Griffith and Richard N. Gold.
The nominees have consented to be named and have indicated their intent
to serve, if elected. The Company has no reason to believe that the nominees are
unavailable for election. However, if either nominee or both nominees becomes
unavailable for any reason, the persons named as proxies may vote for the
election of such other person or persons for such office as the Board of
Directors of the Company may recommend in the place of such nominee or nominees.
It is intended that proxies, unless marked to the contrary, will be voted in
favor of the election of the nominees. Directors will be elected by a plurality
of the votes of the shares of voting stock present in person or represented by
proxy properly cast at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
ELECTION OF THE FOLLOWING NOMINEES.
Certain information regarding the nominees is set forth in the table
and text below. The following table sets forth the name, age and term of office
as director for the nominees for election as directors and their present
position(s) with us:
<TABLE>
<CAPTION>
Director Term
Director Age Since Expires Position
- -------------------- --- ------ --------- -----------------
<S> <C> <C> <C> <C>
Scott W. Griffith { } 1999 2000 Director, Chief Executive Officer
Richard N. Gold 55 1999 2000 Director
</TABLE>
BIOGRAPHY OF DIRECTOR NOMINEES
SCOTT W. GRIFFITH, {AGE} , has been the Chief Executive Officer of the Company
since April 17, 2000 and has been a director of the Company since September
1999. Previous to his employment with the Company, Mr. Griffith was the
President and CEO of Information America from {DATE) to September 1999, a
leading provider of on-line information. Under his leadership, the company
experienced a dramatic turnaround of its core online public records business and
launched the leading Internet directory KnowX.com. From {DATES}, Mr. Griffith
was a founding partner at Treacy & Company, a boutique business strategy and
investment firm. Previously, from {DATES}, he was a Principal at The Parthenon
Group where he was actively involved in
6
<PAGE>
principal investing and senior advisory services to Fortune 1000 companies
and institutional investors. Mr. Griffith has held operating positions at The
Boeing Company and Hughes Electronics. Mr. Griffith earned his BS in
engineering from Carnegie Mellon University in 1981 and his MBA from the
University of Chicago in 1990.
RICHARD N. GOLD, has been a director of the Company since September 1999. From
1981 to the present, Mr. Gold has served as President of R.N. Gold & Company,
Inc., a strategic planning and marketing management consulting firm. From 1977
to 1981, Mr. Gold held the position of Executive Vice President and Director of
Glendinning Associates, also a management consulting firm. Mr. Gold worked for
Procter and Gamble, Inc. as a Brand Manager from 1971 to 1976, and previously
was employed as a teacher with the New York City Public Schools from 1968 to
1971. Mr. Gold attended the University of Wisconsin, where he earned his BS
degree in 1967 and also attended Columbia University, earning his MBA in 1971
and New York University, earning his MA in 1971.
NOMINATION OF DIRECTORS
In accordance with the Company's Amended Bylaws, if a shareholder
entitled to vote for the election of directors at a meeting wishes to make a
director nomination at a shareholder meeting, then such shareholder must give
written notice (a "Nomination Notice") of his or her intent to make such
nomination. A Nomination Notice must be delivered in person or by United States
mail, postage prepaid, to SoftLock.com, Inc., Attention: Secretary or Assistant
Secretary, Five Clock Tower Place, Suite 440, Maynard, Massachusetts 01754.
To be valid, a Nomination Notice must be received (i) on or before
April 1st of the year in which the meeting will be held if the meeting is to
be annual meeting, (ii) not less than sixty (60) days before an annual
meeting if the date of the annual meeting has been changed by more than
thirty (30) days, or (iii) not later than the close of business on the 10th
day following the day on which notice of a special meeting of shareholders
called for the purpose of electing directors was first given to shareholders.
Each Nomination Notice must set forth as to each person who the
shareholder proposes to nominate:
- the name, age, business address and residence address of such
person,
- the principal occupation or employment of such person,
- the class and number of shares of the Company which are
beneficially owned by such person,
- all other information that is required to be disclosed about
nominees for election as directors in solicitations of proxies
for the election of directors under the rules and regulations of
the Securities and Exchange Commission.
Each such Nominee Notice must also set forth as to the shareholder
giving notice:
- the name and address of such shareholder as they appear on the
Company's transfer books,
- the class and number of shares of the Company beneficially owned
by such shareholder,
7
<PAGE>
- a representation that such shareholder is a shareholder of record
at the time of giving the Nomination Notice and intends to appear
in person or by proxy at the meeting to nominate the person or
persons specified in the notice, and
- a description of all arrangements or understandings, if any,
between such shareholder and each nominee and any other person or
persons (including their names) pursuant to which the nomination
or nominations are to be made.
Each such Nomination Notice shall be accompanied by the written
consent of each proposed nominee to serve as director if elected and such
consent shall contain a statement from the proposed nominee to the effect that
the information about him contained in the Nomination Notice is correct. The
presiding officer of the meeting of shareholders may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing procedures.
DIRECTORS NOT STANDING FOR ELECTION
The following persons are the present directors of the Company. The
table sets forth their name, age, term of office as director and their present
positions with us.
<TABLE>
<CAPTION>
Director Term
Director Age Since Expires Position
- -------------------- --- ------ --------- -----------------
<S> <C> <C> <C> <C>
Keith Loris 40 1998 2002 Director, President and Chief
Executive Officer
Francis J. Knott 53 1996 2002 Director, Chairman of the Board
Geoffrey de Lesseps { } { } 2001 Director
Jonathan Schull 47 1992 2001 Director
Leigh E. Michl 38 2000 2001 Director
N. Adam Rin 50 1999 2002 Director
Scott W. Griffith { } 1999 2000 Director
Richard N. Gold 55 1999 2000 Director
</TABLE>
EXECUTIVE OFFICERS
Following are the persons who are the executive officers of Company,
their age, their current title and their positions held during the last five
years:
SCOTT W. GRIFFITH, {AGE} , has been the Chief Executive Officer of the
Company since April 17, 2000 and has been a director of the Company since
September 1999. Previous to his employment with the Company, Mr. Griffith was
the President and CEO of Information America from {DATE) to September 1999, a
leading provider of on-line information. Under his leadership, the company
experienced a dramatic turnaround of its core online public records business and
launched the leading Internet directory KnowX.com. From {DATES}, Mr. Griffith
was a founding partner at Treacy & Company, a boutique business strategy and
investment firm. Previously, from {DATES}, he was also a Principal at The
Parthenon Group where he was actively involved in principal investing and senior
advisory services to Fortune 1000 companies and institutional investors. Mr.
Griffith has held operating positions at The Boeing Company and Hughes
8
<PAGE>
Electronics from (DATES). Mr. Griffith earned his BS in engineering from
Carnegie Mellon University in {DATE} and his MBA from the University of Chicago
in {DATE}.
KEITH LORIS, 40, the President, has been an officer and director of
the Company since September 1998, and served as Chief Executive Officer until
April 17, 2000. From 1995 until he joined the Company, Mr. Loris was vice
president of marketing and new business development at ServiceSoft Corporation
of Boston, Massachusetts. Previously, Mr. Loris was vice president of technology
for the Desktop Document Systems Division of Xerox Corporation from 1991 to
1995, and vice president of technology for NYNEX Image Recognition Systems,
Corp. from 1986 to 1991.
JONATHAN SCHULL, Ph.D., 46, founded SoftLock Services in 1992, and has
since served as its president and as a director. Dr. Schull has been a director
of the Company since July 1998. Prior to founding SoftLock Services, Dr. Schull
was a tenured professor of Biological Psychology at Haverford College in
Haverford, Pennsylvania.
DOUGLAS R. JOHNSON, 46, the Executive Vice President, Chief Financial
Officer and Treasurer, has been with the Company since May 1999. From March 1998
to April 1999, he was the Executive Vice President of Aztec Technology Partners,
Inc., a publicly traded information technology service provider. During 1997,
Mr. Johnson held the position of Vice President and Chief Financial Officer of
Clam Associates Incorporated, an information technology service provider. Mr.
Johnson was Executive Vice President and Chief Financial Officer of Discreet
Logic Incorporated, a computer software development and marketing company in the
interactive media area from 1995 to 1996. He also held the position of Vice
President of Finance and Administration and Chief Financial Officer of Fusion
Systems Corporation, a semiconductor equipment manufacturing company, from 1993
to 1995.
JOHN F. MACHONIS, 38, the Vice President of Sales, has been with the
Company since May 1999. From November 1996 to March 1999, he was with UNIFI
Communications, Inc., most recently as Vice President of Sales. Previously, Mr.
Machonis was Director of National Account Sales at Standard Microsystems
Corporation from 1991 to 1996, and Director of LAN Sales at Western Digital
Corporation from 1987 to 1991.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held {NUMBER} meetings during the calendar year
1999, acted by written consent {NUMBER} times during the year and also met
informally. The Company has standing Audit, Compensation and Executive
Committees of the Board of Directors. The Company has no other standing
committees. During 1999, except as set forth below, no member of the Board
attended fewer than seventy-five percent (75%) of the total number of full Board
or Committee meetings convened by the Board of Directors after being appointed.
AUDIT COMMITTEE. Francis J. Knott, Scott W. Griffith and Leigh Michl
are independent Directors and currently serve on the Audit Committee. The Audit
Committee is charged with, among other things, the review with our auditors of
the general scope of our annual audit; review of the annual audit, review of the
auditor's report on the adequacy of internal controls and other findings; review
of the auditor's management letter; and the implementation of any corrective
measures, if so required. The Board of Directors has currently
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adopted a written charter for the Audit Committee. The Audit Committee met one
(1) time, and from time to time had informal discussions, during the fiscal year
ended December 31, 1999.
COMPENSATION COMMITTEE. Geoffrey de Lesseps, N. Adam Rin and Richard
N. Gold currently serve on the Compensation Committee. The Compensation
Committee is charged with the review of officers' compensation, bonuses and
the granting of stock options. The Compensation Committee has met informally
five (5) times during the fiscal year ended December 31, 1999.
EXECUTIVE COMMITTEE. Geoffrey de Lesseps, Francis J. Knott and Scott
W. Griffith currently serve on the Executive Committee. The Executive Committee
has all power and authority of the Board in the management of the business and
affairs of the Company. During fiscal 1999, the Executive Committee did not
meet.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who beneficially own more than ten
percent (10%) of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission. Officers, directors and greater than ten percent (10%) shareholders
are required by regulation of the Securities and Exchange Commission to furnish
the Company with copies of all Section 16(a) forms which they file. Based solely
on its review of the copies of such forms furnished to the Company during the
fiscal year ended December 31, 1999, the Company believes that during the fiscal
year ended December 31, 1999, its officers, directors and holders of more than
ten percent (10%) of the Company's common stock complied with all Section 16(a)
filing requirements.
The Company believes that all other transactions required to be
reported under Section 16(a) of the Securities Exchange Act were reported in a
timely manner on reports filed by the affected individuals.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table discloses compensation received by the
Company's President and former Chief Executive Officer, the Executive Vice
President and Chief Financial Officer and the Vice President of Sales for the
fiscal year ended December 31, 1999, as well as their compensation for each
of the fiscal years ended December 31, 1998 and December 31, 1997. No other
officer received annual compensation in excess of One Hundred Thousand
dollars ($100,000).
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<TABLE>
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------ -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Re- All
Other stricted Securities Other
Annual Stock Underlying LTIP Compen-
Principal Compen- Awarded Options/ Payouts sation
Name/Position Year Salary($) Bonus($) sation($) ($) SARs(#) ($) ($)
- ------------------ ------- ---- --------- -------- --------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
KEITH LORIS(1) 1999 146,250 45,000 - - - - -
Director, Pres./CEO 1998 32,192 - - - 1,182,870 - -
1997 - - - - - - -
DOUGLAS R. JOHNSON 1999 92,308 33,500 - - 250,000 - -
Executive Vice- 1998 - - - - - - -
President, CFO 1997 - - - - - - -
JOHN MACHONIS 1999 115,039 34,00 - - 100,000 - -
Vice-President Sales 1998 - - - - - - -
1997 - - - - - - -
</TABLE>
(1) Although Mr. Loris no longer serves as Chief Executive Officer, April
17, 2000, pursuant to his employment agreement, he is entitled to severance
pay at his current base salary during a six (6) month period in 2000.
SUMMARY OF STOCK OPTION COMPENSATION
The Company's 1998 Stock Option Plan allows grants of stock options
and other rights relating to common stock. The Company granted options to
purchase up to Three Hundred Fifty Thousand (350,000) shares of common stock
under the 1998 Stock Option Plan in 1999 and no options were exercised to
purchase shares of common stock during 1999.
The stock options granted to or exercised by Named Executive Officers
during the year ended December 31, 1999 are as follows:
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
- -----------------------------------------------------------------------------------------------
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term
- ----------------- -----------
(a) (b) (c) (d) (e) (f) (g)
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise
Options/SARs Employees in Price Expiration
Name Granted (#) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
- ---- ----------- ----------- ------- ----------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Keith Loris - - - - - -
Douglas R. Johnson 250,000 21.7% 2.0145 04/05/09(1)
John Machonis 100,000 8.7% 2.7876 05/03/09(2)
</TABLE>
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<PAGE>
AGGREGATE OPTION EXERCISES FISCAL YEAR END OPTION VALUES
The following table sets forth information regarding stock option
exercises in 1999 and unexercised stock options held by the officers listed in
the Summary Compensation Table during the fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised in-the-money options/SARs
Options/SARS at FY end at FY end ($)
---------------------- -------------------------
(a) (b) (c) (d) (e) (f) (g)
Shares Acquired Value
Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ----------- ------- ----------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Keith Loris - - 473,148 709,722 1,262,879 1,894,319
Douglas R. Johnson - - - 250,000 - 386,375
John Machonis - - - 100,000 - 77,240
Jonathan Schull - - - - - -
</TABLE>
(1) Amounts are based on the December 31, 1999 last reported closing price of
our common stock of $3.56 per share as reported on the OTC Bulletin Board.
OTHER INCENTIVE PLANS
The Company currently does not have any long-term incentive plans or
compensation plans for its executive officers and directors.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with the following
executive officers: Keith Loris and Scott W. Griffith.
Keith Loris. On September 2, 1998, the Company entered into an
employment agreement with Keith Loris, who was serving as President and Chief
Executive Officer. That agreement provided for an initial annual salary of
$135,000 in 1998 and an annual slary of $146,250 in 1999, payable in equal
semi-monthly installments. Mr. Loris was also eligible to receive a bonus,
equivalent to 25% of his base salary, upon the accomplishment of specific
objectives established by the Board of Directors. In addition, Mr. Loris
received an option grant for 1,182,870 shares of common stock, vesting over a
period of five (5) years. On {DATE}, the Company elected to terminate Mr. Loris'
employment as Chief Executive Officer. Pursuant to his employment agreement, Mr.
Loris is entitled to receive his current base salary during a six (6) month
severance period, which will expire on {DATE}. At present, Mr. Loris continues
to serve as President of the Company at the discretion of the Board of
Directors.
Scott W. Griffith. On April 17, 2000, the Company retained Scott W.
Griffith to serve as its Chief Executive Officer and executed an employment
agreement with him. Pursuant to this employment agreement dated April 17, 2000,
Mr. Griffith will receive an annual base compensation for fiscal 2000 of
$250,000. Mr. Griffith is also eligible to receive an annual incentive award, up
to a maximum of 50% of his annual base compensation, pending the satisfaction of
certain criteria specified in his employment agreement. In connection with the
employment agreement, Mr. Griffith also received an option grant for 1,168,670
shares of common stock at an exercise price of $8.50 per share on April 17,
2000. The options will become exercisable over a period of four (4) years in
accordance with the schedule set forth in the stock option agreement.
REPORT OF THE COMPENSATION COMMITTEES ON EXECUTIVE COMPENSATION
The Company's Board of Directors approves all compensation decisions
with regard to executive officers, including the Chief Executive Officer, based
on recommendations from the Compensation Committee. The Compensation Committee
is responsible for the establishment of all compensation and benefit programs,
as well as the overall monitoring of those programs. The Company's compensation
philosophy and executive compensation programs are discussed in this report.
Executive Compensation Philosophy. In general, executive officers who
are in a position to make a substantial contribution to the success and growth
of the Company should have interests similar to those of the
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<PAGE>
shareholders. Executive officers should be motivated by and benefit from
increased shareholder value. Therefore, the Company believes that executive
officers should hold a meaningful equity position in the Company through the
purchase of common stock or the award of options to purchase common stock. The
Company's Board of Directors believes that the executive compensation program
must be competitive with those of other companies of comparable size and
complexity in order to attract, retain and motivate talented individuals.
Executive Compensation Program. The Company's compensation program
consists of base salary and long-term incentives, generally in the form of
options to purchase common stock.
Base Salary. The Compensation Committee generally reviews and
determines the relative levels of base salary for executive officers on an
annual basis. In determining the levels of base salary for an executive officer,
except with respect to the Chief Executive Officer, the Compensation Committee
considers relative levels of responsibility and individual and Company
performance. The Committee believes that base salaries of the Company's
executive officers are below average relative to its national and regional peer
companies as the Company continues its transition from a start up company to a
more mature status. As the Company continues its growth, the Committee will
continue to review the base salary levels of executive management to bring them
more in line with national and regional peer companies.
Stock Options. An additional important aspect of the Company's
compensation program is its use of stock options. As the Company has grown,
it has sought to retain and attract key executives through the grant of stock
options. Under the 1998 Stock Option Plan, the Committee may grant options to
purchase common stock to Company employees, including executive officers.
Option grants become exercisable over a period of time and generally have an
exercise price equal to the fair market value of the common stock on the
grant date, creating long term incentives to enhance the value of Company's
common stock. The Committee considers the grant of options to executive
officers and key managers on an annual basis. The number of options awarded
and the related vesting periods are determined based upon management's
contribution to Company's future growth and profitability. The options are
also intended (a) as additional possible compensation that does not require
the Company to pay additional cash expenses as it grows in revenues and (b)
to provide flexibility to the Company in its ability to motivate, attract and
retain the services of participants upon whose judgment, interest and special
effort the successful conduct of its operation is largely dependent. The
Committee believes that the use of stock-based incentives ensures that the
executive's interests are aligned with the long-term interests of the
Company's shareholders. At this meeting, the Company proposes to amend the
1998 Stock Option Plan by increasing the number of shares of common stock
which the Company has authority to issue from five million (5,000,000) shares
to seven million (7,000,000) shares and by permitting the transfer or
assignment of options by the option holder to entities qualifying under
Section 501(c)(3) of the Internal Revenue Code as a tax-exempt organization
entitled tO receive charitable contributions.
Chief Executive Officer Compensation. Keith Loris served as Chief
Executive Officer in 1999. The Compensation Committee determined Mr. Loris' base
salary after evaluating a number of factors, including salaries of chief
executive officers of companies of comparable size in the industry, his
performance and the Company's performance generally. Mr. Loris' base salary in
1999 was $146,250. In addition, during fiscal 1999, Mr. Loris received an annual
incentive award of $45,000. The Compensation Committee considered the time and
efforts Mr. Loris had expended in raising capital for the Company and promoting
the Company's new strategic direction and believed that an annual incentive
award and grant of options to reward Mr. Loris were
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<PAGE>
appropriate. Although Mr. Loris no longer serves as Chief Executive Officer,
pursuant to his employment agreement, he is entitled to receive his current
base salary during a six month severance period in fiscal 2000.
At present, Scott W. Griffith serves as the Company's Chief Executive
Officer and will continue to serve in this capacity in 2000. Mr. Griffiths'
compensation for fiscal 2000 was determined by the terms of an employment
agreement entered into by and between the Company and Mr. Griffith on April 17,
2000. Under the terms of this employment agreement, Mr. Griffith will receive an
annual base compensation for fiscal 2000 of $250,000. Mr. Griffith is also
eligible to receive an annual incentive award, up to a maximum of 50% of his
annual base compensation, pending the satisfaction of specific objectives set by
the Board of Directors. In addition, Mr. Griffith was granted a stock option to
purchase 1,168,670 shares of common stock at an exercise price of $8.50 per
share, the fair market value of the Company's common stock on the date of the
grant. Mr. Griffith's base salary and annual incentive award for future years
will be determined by the Compensation Committee based upon the same factors
employed by the Compensation Committee for executive officers generally.
This report is submitted by the Compensation Committee, which currently
consists of Geoffrey de Lesseps, Richard N. Gold, and N. Adam Rin.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are no "interlocks" as defined by the Securities and Exchange
Commission with respect to any director who currently serves as a member of the
Compensation Committee. Geoffrey de Lesseps, Richard N. Gold, and N. Adam Rin
currently serve on the Compensation Committee and none of such persons have ever
been an executive officer or employee of the Company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The number of shares beneficially owned by each nominee and the
executive officers are listed below under "Security Ownership of Certain
Beneficial Owners and Management." The following table sets forth information
regarding the beneficial ownership of our common stock as of April 26, 2000 by
(i) each person or entity who is known by us to own beneficially more than five
percent (5%) of our outstanding common stock; (ii) each of our officers and
directors and (iii) all of our officers and directors as a group:
14
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<TABLE>
<CAPTION>
Name and Address Title Amount of
Of Beneficial Owner of Class Beneficial Ownership Percent of Class
- --------------------------------------------------------------------------------------------------------------
PRINCIPAL SHAREHOLDERS
<S> <C> <C> <C>
SI VENTURE FUND II, L.P.(1) Series A Preferred 19,117 35.76%
160 Linden Tree Road, Suite 100 Series B Preferred 4,688 10.00%
Wilton, Connecticut 06897
APEX INVESTMENT FUND IV, LP(2) Series A Preferred 14,260 26.67%
225 W. Washington Street Series B Preferred 4,547 9.70%
Suite 1450
Chicago, Illinois 60606
APEX STRATEGIC PARTNERS IV, LLC(2) Series A Preferred 14,260 26.67%
225 W. Washington Street Series B Preferred 4,547 9.70%
Suite 1450
Chicago, Illinois 60606
RSA SECURITY, INC. Series A Preferred 2,942 5.50%
36 Crosby Drive
Bedford, MA 01730
ASCENT VENTURE PARTNERS(3) Series A Preferred 14,706 27.51%
255 State Street, 5th Floor
Boston, Massachusetts 02109
RITCHIE CAPITAL MANAGEMENT, LLC(4) Series B Preferred 2,500 5.33%
210 East State Street
Batavia, Illinois 60510
TUDOR INVESTMENT CORPORATION(5) Series B Preferred 18,750 40.00%
RAPTOR GLOBAL PORTFOLIO, LTD.
ALTAR ROCK FUND, L.P.
40 Rowes Wharf, 2nd Floor
Boston, Massachusetts 02110
RC CAPITAL, LLC(4) Common Stock 1,750,000 9.9%
210 East State Street
Batavia, Illinois 60510
RAM TRADING, LTD.(4) Common Stock 1,750,000 9.9%
210 East State Street
Batavia, Illinois 60510
MAURICE R. LAFLAMME Common Stock 919,333
34 Weatherly Court
Jamestown, Rhode Island 02385
OFFICERS AND DIRECTORS(6)
JONATHAN SCHULL Common Stock 2,484,612 23.3%
N. ADAM RIN(7) Common Stock 2,396,500 18.63%
160 Linden Tree Road, Suite 100
Wilton, Connecticut 06897
KEITH LORIS Common Stock
FRANCIS J. KNOTT Common Stock 118,553 *
GEOFFREY DE LESSEPS Common Stock
SCOTT W. GRIFFITH Common Stock
RICHARD N. GOLD Common Stock 45,000 *
DOUGLAS R. JOHNSON Common Stock 16,000 *
LEIGH E. MICHL Common Stock 1,470,600 11.43%
JOHN F. MACHONIS Common Stock 6,400 *
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<PAGE>
ALL OFFICERS AND DIRECTORS
AS A GROUP(6)
</TABLE>
1. N. Adam Rin serves as a director of the Company and is a managing
member of SI Venture Management II, L.L.C., the general partner of SI
Venture Fund II, L.P.
2. Because Apex Investment Fund IV, L.L.C. and Apex Strategic Partners IV,
L.P. are affiliates of each other under applicable securities laws, the
percentage of outstanding shares of common stock benefically owned
includes all of the shares owned by both entities.
3. Leigh E. Michl serves as a director of the Company and is the managing
director of Ascent Venture Management, Inc.
4. Because Ritchie Capital Management, LLC, RC Capital, LLC and RAM
Trading, Ltd. are affiliates of each other under applicable securities
laws, the percentage of outstanding shares of common stock beneficially
owned includes all of the shares owned by each entity. Pursuant to
letter agreements between the foregoing entities and us, these entities
disclaim any beneficial ownership in excess of 9.9%.
5. Because Tudor Investment Corporation, Raptor Global Portfolio, Ltd. and
Altar Rock Fund, L.P. are affiliates of each other under applicable
securities laws, the percentage of outstanding shares of common stock
beneficially owned includes all of the shares owned by both entities.
6. Unless otherwise indicated, the officers and directors can be reached
at the principal office of the Company, Five Clock Tower Place, Suite
440, Maynard, Massachusetts 01754.
7. Includes common stock issuable upon conversion of Series A Preferred
Stock and Series B Preferred Stock held by SI Venture Fund II, L.P., of
which N. Adam Rin is a managing member and the beneficial holder of
those shares.
8. Includes common stock issuable upon conversion of Series A Preferred
Stock held by Ascent Venture Partners, of which Leigh E. Michl is the
managing director and the beneficial holder of those shares.
* Less than 1%.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On September 22, 1999, the Company entered into a Note and Warrant
Purchase Agreement (the "Warrant Purchase Agreement") with SI Venture
Associates, LLC to acquire shares of the Company's Series A preferred stock for
$1.25 million, provided that the Company can identify a second venture capital
investor to contribute at least another $1.25 million. The Warrant Purchase
Agreement further provides the right to appoint one (1) director to the
Company's Board.
On January 10, 2000, the Company issued 36,765 shares of Series A
Preferred Stock to a group of four investors: SI Venture Fund II, L.P. ("SI"),
Apex Investment Fund IV, L.P., Apex Strategic Partners IV, LLC (collectively,
"Apex") and RSA Security Inc. ("RSA") for a purchase price of $102 per share for
an aggregate purchase price of $3,750,030. In connection with the Series A
Preferred Stock transaction, the Company entered into a Series A Preferred Stock
Purchase Agreement dated as of December 30, 1999 as supplemented on January 7,
2000 with SI, Apex and RSA (collectively, the "Purchasers") and a Shareholders'
and Rights Agreement with the Purchasers. The Company also filed a Certificate
of Designation with the Delaware
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<PAGE>
Secretary of State that provides the powers, preferences and rights of the
Series A Preferred Stock, including, but not limited to, voting rights,
redemption rights, liquidation preference, and dividend rights. Each share of
Series A Preferred Stock is initially convertible into 100 shares of the
Company's common stock, subject to certain anti-dilution adjustments, at any
time at the holder's option at a conversion price of $1.02 per share of common
stock and, further, is automatically convertible into common stock upon the
occurrence of certain events.
On February 14, 2000, the Company issued 46,875 shares of Series B
Preferred Stock to a group of ten investors including, affiliates of Tudor
Investment Corporation, Ritchie Capital as well as investors in an earlier round
of financing, SI Venture Fund II, L.P. and Apex Investment Fund IV, L.P. for a
purchase price of $160 per share for an aggregate purchase price of $7,500,000.
These investors were also issued two warrants, one of which becomes exercisable
for an aggregate of 312,500 shares of common stock if as of August 15, 2000 the
Company's registration statement for the shares of common stock issuable upon
conversion of the Series B Preferred Stock was not declared effective and Nasdaq
listing application for the common stock was not accepted and the second of
which would become exercisable for an aggregate of an additional 312,500 shares
of common stock if as of November 15, 2000 these two conditions were not met.
In connection with the Series B Preferred transaction, the Company
entered into a Series B Preferred Stock and Warrant Purchase Agreement dated as
of February 10, 2000 with the investors (collectively, the "Purchasers") and an
Amended and Restated Shareholders' and Rights Agreement with the Purchasers, the
holders of the Series A Preferred Stock. The Company also filed a Certificate of
Designation with the Delaware Secretary of State that states the powers,
preferences and rights of the Series B Preferred Stock including, but not
limited to, voting rights, redemption rights, liquidation preference, and
dividend rights. Each share of Series B Preferred Stock is initially convertible
into 100 shares of the Company's common stock, subject to certain anti-dilution
adjustments, at any time at the holder's option and, further, is automatically
convertible into common stock upon the occurrence of certain events.
Concurrent with the Series B Preferred Stock transaction, the Company
issued 14,706 shares of Series A Preferred Stock to Ascent Venture Partners III,
L.P. ("Ascent") for $102 per share for an aggregate purchase price of
$1,500,000. In connection with the investment by Ascent, the Company agreed to
appoint an Ascent representative to its Board of Directors.
The Company has adopted a policy providing that all transactions
between the Company and related parties will be subject to approval by a
majority of all disinterested directors and must be on terms no less favorable
than those that could otherwise be obtained from unrelated third parties.
COMPANY PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on
the common stock of the Company from December 31, 1995 to December 31, 1999 with
the cumulative total return on the Nasdaq Stock Market for United States
Companies ("Nasdaq Stock Market Index") and the Hambrocht & Quist Internet Index
("H&Q Index") over the same period. This graph assumes a $100 investment at June
2, 1997 (when the Company first started trading) in the Company's common stock
and in each of the indices and reinvestment of all dividends, if any.
The graph displayed below is presented in accordance with the
Securities and Exchange Commission requirements. You are cautioned against
drawing any conclusions from the data contained therein, as past
17
<PAGE>
results are not necessarily indicative of future performance. This graph is not
intended to reflect the Company's forecast of future financial performance. The
graph was prepared by Carl Thompson Associates with data from Bloomberg
Financial Markets.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL NO. 1
----------------------------
[PERFORMANCE GRAPH APPEARS HERE]
SOFTLOCK.COM, INC. ...................................
NASDAQ STOCK MARKET INDEX ............................
H&Q INTERNET INDEX ...................................
PROPOSAL NO. 2
AMENDMENT TO THE COMPANY'S 1998 STOCK OPTION PLAN
1998 STOCK OPTION PLAN
Holders of the Company's Common Stock are being asked to consider and
vote upon two (2) amendments to the Company's 1998 Stock Option Plan (the
"Plan"), which was adopted on July 28, 1998. The Plan provides for the issuance
of options ("Options") to purchase shares of Common Stock to key employees,
officers, directors and consultants of the Company. A total of five million
(5,000,000) shares have been reserved for grant under the Plan and Options to
purchase (NUMBER} shares had been granted as of the Record Date. The purposes of
the Plan are to encourage stock ownership by employees, officers, directors and
consultants of the Company so that they may acquire or increase their
proprietary interest in the Company, to reward employees, officers, directors
and consultants for past services to the Company and to encourage such persons
to become employed by or remain in the employ of or otherwise continue their
association with the Company and to put forth maximum efforts for the success of
the business of the Company.
The Plan is administered by the Board of Directors. At its discretion,
the Board may determine the persons to whom Options may be granted and the terms
thereof. As noted above, the Board may issue Options to members of the Board.
The terms of any Options granted under the Plan are not required to be
identical as long as they are not inconsistent with the express provisions of
the Plan. In addition, the Board may interpret the Plan and may adopt, amend and
rescind rules and regulations for the administration of the Plan.
Options may be granted as incentive stock options ("Incentive Options")
intended to qualify for special treatment under the Internal Revenue Code of
1986, as amended (the "Code"), or as non-qualified stock options ("Non-Qualified
Options") which are not intended to so qualify. Only employees of the Company,
or any subsidiary of the Company, are eligible to receive Incentive Options. The
period during which Options may be exercised may not exceed ten years. The
exercise price for the Incentive Options may not be less than one hundred
percent (100%) of the fair market value of the Common Stock on the date of
grant; except that the exercise price for Incentive Options granted to persons
owning more than ten percent (10%) of the total combined voting power of the
Common Stock may not be less than one hundred ten percent (110%) of the fair
market value of the Common Stock on the date of grant and may not be exercisable
for more than five (5) years.
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<PAGE>
The exercise price for Non-Qualified Options may not be less than ten percent
(10%) of the fair market value of the Common Stock on the date of grant. The
Plan defines "fair market value" as (i) the mean between the highest and lowest
quoted selling price of the Company's Common Stock as reported on a national
securities exchange; provided that at least one sale of the Company's Common
Stock occurred on such exchange on such date, and, if not, then the closing
price on the last preceding date on which at least one sale on such exchange did
occur, or (ii) if the shares of Common Stock are not listed on a national
securities exchange, the value as determined by the Board in accordance with its
discretion in making a bona fide, good faith determination of fair market value.
The Plan contains provisions for proportionate adjustment of the number
of shares issuable upon the exercise of outstanding Options and the exercise
price per share in the event of stock dividends, recapitalizations resulting in
stock splits or combinations or exchanges of shares.
In the event of the proposed dissolution or liquidation of the
Company, or any corporate separation or division, including, but not limited
to, split-up, split-off or spin-off, merger or consolidation of the Company
with another company in which the Company is not the survivor, or any sale or
transfer by the Company of all or substantially all its assets or any tender
offer or exchange offer for or the acquisition, directly or indirectly, by
any person or group for more than fifty percent 50% of the then outstanding
voting securities of the Company, the Board may provide that the holder of
each Option then exercisable will have the right to exercise such Option (at
its then current Option Price) solely for the kind and amount of shares of
stock and other securities, property, cash or any combination thereof
receivable upon such dissolution, liquidation, corporate separation or
division, merger or consolidation, sale or transfer of assets or tender offer
or exchange offer, by a holder of the number of shares of Common Stock for
which such Option might have been exercised immediately prior to such
dissolution, liquidation, or corporate separation or division, merger or
consolidation, sale or transfer of assets or tender offer or exchange offer;
or in the alternative the Board may provide that each Option granted under
the Plan will terminate as of a date fixed by the Board; provided, however,
that not less than thirty (30) days written notice of the date so fixed will
be given to each recipient, who will have the right, during the period of
thirty (30) days preceding such termination, to exercise the Option to the
extent then exercisable. To the extent that Section 422(d) of the Code would
not permit this provision to apply to any outstanding Incentive Options, such
Incentive Options will immediately upon the occurrence of the dissolution or
liquidation, etc., be treated for all purposes of the Plan as Non-Qualified
Options and shall be immediately exercisable as such.
If the recipient ceases to be an employee, officer or director of, or
consultant to, the Company or a subsidiary (other than by reason of death,
disability, or retirement), other than for cause, all Options theretofore
granted to such recipient but not theretofore exercised will terminate three (3)
months after the date the recipient ceased to be an employee, officer or
director of, or consultant to, the Company except as authorized by the Board in
the case of the grant of non-qualified stock options.
If the recipient ceases to be an employee, officer or director of, or
consultant to, the Company or a subsidiary or parent to the Company by reason of
termination for cause, all Options theretofore granted to such recipient but not
theretofore exercised will terminate on the date the recipient ceases to be an
employee, officer or director of, or consultant to, the Company.
If a recipient dies while an employee, officer or director of or a
consultant to the Company, or within three (3) months after termination thereof
(other than for cause), all Options theretofore granted to such recipient,
whether or not otherwise exercisable, unless earlier terminated in accordance
with their terms, may be
19
<PAGE>
exercised by the recipient or by the recipient's estate or by a person who
acquired the right to exercise such Options by bequest or inheritance or
otherwise by reason of the death or disability of the recipient, at any such
time within one year after the date of death of the recipient.
Options granted under the Plan are not transferable other than by will
or by the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee Retirement
Income Security Act of 1974, or the rules thereunder. Options may be exercised,
during the lifetime of the recipient, only by the recipient and thereafter only
by the recipient's legal representative.
The Board may suspend, terminate, modify or amend the Plan, but without
shareholder approval the Board may not materially increase the number of shares
as to which Options may be granted, change the eligibility requirements for
persons entitled to participate in the Plan or materially increase the benefits
to be received by any participant under the Plan. The Board may not adversely
affect any Option previously granted without the consent of the participant.
Unless sooner terminated, the Plan will expire on July 28, 2008.
PROPOSED PLAN AMENDMENTS
The Board of Directors has unanimously adopted, subject to shareholder
approval, the following amendments (the "Plan Amendments"):
(i) to increase the number of shares of stock that the Company has
authority to issue under the Plan from five million (5,000,000)
shares to seven million (7,000,000) shares; and
(ii) to authorize the transfer or assignment of options, at the
election of the option holder, to an entity qualified under
Section 501(c)(3) of the Internal Revenue Code as a tax-exempt
organization entitled to receive charitable contributions.
Other than the foregoing, no other changes to the Plan have been submitted for
stockholders' consideration at the annual meeting.
If approved by the stockholders, the Plan Amendments will become
effective on the date it is approved. The Board of Directors, through a written
consent dated April 28, 2000, determined the Plan Amendments to be in the best
interest of the Company and its shareholders, declared the Plan Amendments
advisable, and recommended that the Plan Amendments be submitted to the
Company's shareholders for consideration.
INCREASE IN AUTHORIZED SHARES
As of the Record Date, five million (5,000,000) shares of Common Stock were
authorized for issuance under the Plan, of which {NUMBER }were issued and
outstanding on such date. If approved, the Plan Amendment will increase the
total number of shares of Common Stock which the Company has authority to issue
under the 1998 Plan from five million shares (5,000,000) shares to seven million
(7,000,000) shares. The Board of Directors believes that it is in the best
interest of the Company to have a sufficient number of shares of Common Stock to
issue to directors, consultants, officers and other key employees in exchange
for their valuable services to the Company in order to provide long term
incentives and rewards to those persons who are responsible for the growth and
success of the Company. Adoption of this amendment would provide additional
flexibility with respect to the Company's compensation alternatives and
practices and permit the Company to continue to utilize the 1998 Plan.
20
<PAGE>
APPROVAL OF OPTION TRANSFERABILITY
Pursuant to the Plan, option holders are prohibited to transfer or
assign options other than by will or by the laws of descent and distribution.
If approved, the Plan Amendment will permit an option holder to assign
options to entities qualifying under Section 501(c)(3) of the Internal
Revenue Code as a tax-exempt organization entitled to receive charitable
contributions including, without limitation, religious, charitable,
educational and other publicly supported organizations. The Board of
Directors believes that the addition of transferability to outstanding and
prospective options provides executive officers and directors with a
significant benefit at little cost to the Company, impacts the incentive
value of the options, and encourages charitable giving. Accordingly, the
Board of Director believes that the adoption of this Plan Amendment is in the
best interest of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL NO. 2
----------------------------
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Subject to approval by the shareholders, the Board of Directors has
appointed Deloitte & Touche LLP as the independent public accountants to audit
the financial statements of the Company for the year ending December 31, 2000.
During the two most recent fiscal years and through January 7, 2000,
the Company has not consulted with Deloitte & Touche LLP concerning the
Company's financial statements. Upon its engagement on January 7, 2000, Deloitte
& Touche prepared audited financial statements for fiscal years ended 1997 and
1998. It is expected that a representative of Deloitte & Touche will be present
at the Meeting, have an opportunity to make a statement if they desire to do so
and be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL NO. 3
----------------------------
ANNUAL REPORT TO SHAREHOLDERS AND INCORPORATION BY REFERENCE
The Company's Annual Report on Form 10-KSB-A for the year ended
December 31, 1999 as filed with the Securities and Exchange Commission is being
delivered with this proxy statement to the Company's shareholders and is
incorporated by reference into this proxy statement.
PLEASE DATE, SIGN AND RETURN THE PROXY CARD AT YOUR EARLIEST CONVENIENCE IN THE
ENCLOSED RETURN ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
A PROMPT RETURN OF YOUR PROXY CARD WILL BE APPRECIATED, AS IT WILL SAVE THE
EXPENSE OF FURTHER MAILINGS.
By Order of the Board of Directors
Douglas R. Johnson, Secretary
21
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SOFTLOCK.COM, INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
June 16, 2000 10:00 a.m.
The undersigned shareholders of SoftLock.com, Inc. hereby acknowledge
receipt of the Notice of Annual Meeting of Shareholders and proxy statement
dated April 28, 2000 and hereby appoints Scott W. Griffith and Francis J. Knott
and each of them as proxies and attorneys-in-fact for the undersigned, with full
power of substitution, to act and to vote all the shares of common stock and
Series A and Series B Preferred Stock of SoftLock.com, Inc. held of record by
the undersigned on April 26, 2000 at the Annual Meeting of Shareholders to be
held on June 16, 2000, or any postponement or adjournment thereof and to vote
all shares of common stock or Series A or Series B Preferred Stock at the Annual
Meeting that the undersigned would be entitled to vote if personally present, on
the matters set forth below:
1. ELECTION OF DIRECTORS.
FOR all the nominees listed below [ ]
WITHHOLD AUTHORITY to vote for all nominees listed below [ ]
(INSTRUCTION: To withhold authority to vote for any individual nominee, mark the
box next to the nominee's name below.)
Scott W. Griffith [ ]
Richard N. Gold [ ]
2. PROPOSAL TO AMEND THE 1998 STOCK OPTION PLAN TO INCREASE THE NUMBER
OF RESERVED SHARES AND TO ADD TRANSFERABILITY TO PERMITTED ENTITIES
TO OPTIONS.
FOR both Plan Amendments.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
FOR Plan Amendment to increase the number of reserved shares.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
FOR Plan Amendment to add transferability to permitted
entities to options.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. PROPOSAL TO RATIFY APPOINTMENT OF DELOITTE & TOUCHE LLP, AS
THE INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY FOR THE YEAR
ENDING DECEMBER 31, 2000.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
In his discretion, the proxy is authorized to vote upon such other
business as may properly come before the meeting or any adjournment(s) thereof.
(Continued and to be signed on reverse side.)
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<PAGE>
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE MANNER
DIRECTED BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED TO ELECT SCOTT W. GRIFFITH AND RICHARD N. GOLD AS CLASS I
DIRECTORS (PROPOSAL NO. 1); TO AMEND THE COMPANY'S 1998 STOCK OPTION PLAN
DESCRIBED HEREIN (PROPOSAL NO. 2); TO (PROPOSAL NO. 3); AND TO RATIFY THE
COMPANY'S INDEPENDENT AUDITORS FOR THE YEAR ENDING DECEMBER 31, 2000 (PROPOSAL
NO. 4).
--------------------------------------------------
Dated
-------------------------------------------------
Signature
------------------------------------------------
Signature if held jointly
(Please sign exactly as ownership appears on this proxy. Where stock is held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized
person.)
Please mark, date, sign and return proxy in the enclosed envelope.
23
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1998 STOCK OPTION PLAN
OF
SOFTLOCK.COM, INC.
Amended effective as of April 28, 2000
1. PURPOSE. The purpose of this Stock Option Plan (the "Plan") is to
advance the interests of SoftLock.com, Inc. (the "Company") and its shareholders
by permitting the Company to provide, through options to purchase the Common
Shares, $0.01 par value ("Shares"), of the Company, long-term incentives and
rewards to directors, consultants, officers and other key employees responsible
for the success and growth of the Company and to attract and retain such persons
on a competitive basis. It is the intent of the Company that such individuals be
encouraged to obtain and retain an equity interest in the Company and each
optionee will be specifically apprised of said intent.
2. EFFECTIVE DATE. The effective date of the Plan shall be the date on
which the Plan is adopted by the Board of Directors of the Company. Options may
be granted to optionees on and after such date, but all such options shall be
conditioned upon ratification of the Plan by the shareholders within twelve
months after the date of its adoption by the Board of Directors.
3. SHARES OF STOCK SUBJECT TO THE PLAN. Subject to adjustment as provided
in Section 9(g) below, an aggregate of 7,000,000 Shares shall be available for
grant under the Plan. Such Shares may be authorized but previously unissued
Shares or Shares repurchased by the Company, including Shares purchased in the
open market. In the event that any outstanding option under the Plan for any
reason expires or is terminated, the Shares allocable to the unexercised portion
of such option may again be available for subsequent option grants under the
Plan.
4. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Board
of Directors ("Board") of the Company, and the Board shall select the optionees
to whom options may be granted, determine the number of Shares to be offered to
each such optionee, determine when options may be exercised, and interpret,
construe and implement the provisions of the Plan.
Subject to the express provisions and limitations of the Plan, the Board
shall also have authority to construe the respective options and the Plan, to
prescribe, amend and rescind rules and regulations relating to the Plan, to
determine the term and provisions not specified in or incorporated with the Plan
to be included in the respective options (which need not be uniform) and to make
all other determinations necessary or advisable for administering the Plan.
<PAGE>
The Board may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any option in the manner and to the extent
appropriate, and it shall be the sole and final judge in such circumstances. All
actions or determinations of the Board on the matters referred to in this
section shall be conclusive. No member of the Board shall be liable for any
action or determination made in good faith with respect to the Plan or any
option granted under it.
5. ELIGIBLE PERSONS. The class of persons eligible to receive options under
the Plan will consist of officers, directors, consultants and key employees of
the Company. In making its determination as to whether an option will be granted
under the Plan and the number of Shares to be subject to each option, the Board
will take into account the duties of the director, consultant, officer or
employee, the present and potential contributions of that person to the success
of the Company and other factors which the Board, in its discretion, consider to
be reasonable and appropriate in connection with accomplishing the purposes of
the Plan.
The Board also may authorize the granting of options to prospective
employees of the Company. In the case of a prospective employee, grant of the
option shall be on the condition of employment by the Company in a key position,
and the date of the grant of the option shall be the date such employment begins
or such later date as the Board may have specified when authorizing the grant.
If the Board shall so determine, additional options under the Plan may be
granted to optionees who hold or have held options under this or other stock
option plans of the Company, and options under the Plan may be granted in
substitution for options granted under this or other stock option plans of the
Company.
6. GRANT OF OPTIONS. Options may be granted to such eligible key employees,
consultants, directors, and officers, and in such amounts, as the Board, in its
discretion may from time to time determine. These options may be either
Incentive Stock Options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code") or Non-Qualified Stock Options
(i.e., stock options which are not incentive stock options), or a combination of
both; provided, however, that Incentive Stock Options shall be awarded only to
employees of the Company or any subsidiary of the Company. Options may contain
dissimilar provisions provided that all such provisions are consistent with the
Plan.
The options shall be evidenced by Stock Option Agreements in such form as
the Board shall approve from time to time, which Agreements shall conform to the
Plan.
7. PROVISIONS OF INCENTIVE STOCK OPTIONS. Each Incentive Stock Option
granted under the Plan will contain the provisions of Section 9, and in
addition, such terms, conditions and restrictions as the Board deems to be
reasonable and appropriate and in the best interests of the Company, including
the following:
(a) NUMBER OF SHARES. Each option will specify the number of Shares
which may be acquired.
<PAGE>
(b) PURCHASE PRICE. The option price per Share shall be not less than
100% of the fair market value of the Company's Shares at the time such option is
granted, as determined in good faith by the Board, provided that, in the event
the option holder owns more than 10% of the combined voting power of all classes
of stock of the Company or of a parent or subsidiary of the Company ("Ten
Percent Shareholder") at the time of the grant, then the purchase price will be
not less than 110% of such fair market value. Subject to the foregoing, the
Board shall have full authority and discretion to fix the option price and shall
be fully protected in so doing.
(c) TRANSFER. Each option by its terms will be exercisable, during the
lifetime of the option holder to whom it is granted, only by the option holder
and will not be transferable otherwise than by will or the laws of descent and
distribution.
(d) FAIR MARKET VALUE LIMITATION. The fair market value (determined as
of the date the option is granted) of Shares for which Incentive Stock Options
are exercisable for the first time by an employee in any calendar year (under
this Plan or any other plan that provides for the granting of Incentive Stock
Options) may not exceed $100,000.
(e) DISQUALIFYING DISPOSITION. In the event of a disposition of Shares
acquired upon exercise of an option which is deemed "disqualifying" under
Section 422 of the Code, so as to require the withholding of federal, state or
local taxes, the option holder agrees promptly to pay to the Company the amount
of such taxes if the Company is unable to withhold the necessary sums.
8. PROVISIONS OF NON-QUALIFIED STOCK OPTIONS. Each Non-Qualified Stock
Option granted under the Plan will contain the provisions of Section 9 and in
addition, such terms, conditions and restrictions as the Board deems to be
reasonable and appropriate and in the best interests of the Company, including
the following:
(a) NUMBER OF SHARES. Each option will specify the number of Shares
which may be acquired.
(b) PURCHASE PRICE. The purchase price of the Shares under each option
shall be determined by the Board in its sole discretion. The purchase price may
be less than the fair market value of the Shares at the time of granting, but
may not be less than ten (10%) thereof.
(c) WITHHOLDING. Each option shall provide that the option holder shall
agree to pay to the Company upon exercise of the option all federal, state and
local taxes required to be withheld. The Board may, nevertheless, determine to
withhold from the Shares to be issued that number of Shares valued at their fair
market value at the time, that would satisfy the amount required to be withheld.
9. PROVISIONS APPLICABLE TO ALL STOCK OPTIONS.
(a) TERM. Each option granted pursuant to this Plan shall be exercisable
in full or in installments at such time or times and during such periods as the
Board, in its sole discretion, may determine at the time such option is granted,
provided, however, that no option shall be exercised after the expiration of ten
(10) years from the date it is granted and provided further that no incentive
stock option granted to a Ten Percent Shareholder shall be exercisable more than
five years from the time it is granted.
<PAGE>
(b) EXERCISE AND PAYMENT. To exercise an option, the option holder shall
deliver to the Company a written notice specifying the number of Shares being
purchased accompanied by payment in full for the Shares being purchased. Each
option will provide that the purchase price of any Shares purchased upon
exercise of the option shall be payable in full on the exercise date, in cash or
by check, or, in the discretion of the Board, by delivery of Shares owned by the
option holder (with appropriate documents of transfer), by surrender of
exercisable options to purchase Shares, or by any combination of the foregoing.
Any Shares so delivered shall be valued at the fair market value of the Shares
on such date. Any options so surrendered shall be valued at the difference
between the fair market value of the Shares at the time of surrender and the
exercise price thereof.
(c) TERMINATION EXCEPT DEATH. In the event that the directorship or
employment or other relationship underlying the issuance of the option of an
optionee is terminated for cause, such optionee's option rights both accrued and
future under any then outstanding option shall be forfeited and terminated
medially and may not thereafter be exercised to any extent.
In the event that the directorship or employment or other
relationship underlying the issuance of the option of the optionee is terminated
for any reason other than cause, or optionee's death, subject to the condition
that no option shall be exercisable after the expiration of ten (10) years from
the date it is granted, such optionee shall have the right to exercise the
option at any time within three (3) months after such termination of
directorship or employment or other relationship underlying the issuance of the
option or resignation or removal from office, unless with respect to
non-qualified stock options the Board shall otherwise provide. This right of
exercise shall exist to the extent the optionee's right to exercise such option
has accrued pursuant to subparagraph 9(a) of the Plan and had not previously
been exercised at the date of such termination except that in the case of a
permanent disability or a retirement approved by the Board, the Board may
accelerate the vesting of such option at the time of the disability or at the
time the retirement is approved. The granting of an option to an eligible person
does not alter in any way the Company's right to terminate such person's
employment or office or other relationship at any time for any reason, nor does
it confer upon such person any rights or privileges except as specifically
provided for in the Plan.
(d) DEATH OF OPTIONEE. If the optionee shall die while a director of the
Company or while in the employ of the Company or while in office or within a
period of three (3) months after the termination, other than for cause, of
optionee's duties with the Company, and optionee shall not have fully exercised
the option, the option may be exercised, subject to the condition that no option
shall be exercisable after the expiration of ten (10) years from the date it is
granted, to the extent that the optionee's right to exercise such option had
accrued pursuant to subparagraph 9(a) of the Plan at the time of optionee's
death and had not previously been exercised, (or to the extent that the Board
within thirty (30) days of the date of death shall have accelerated the vesting
of the option) at any time within one (1) year after the optionee's death, by
the executors of administrators of the optionee or by any person or persons who
shall have acquired the option directly from the optionee by bequest or
inheritance.
(e) ACCELERATION UNDER CERTAIN CIRCUMSTANCES. Notwithstanding any
provisions contained in this Plan or in a Stock Option Agreement deferring the
right of an optionee to exercise an option, the option shall, at the discretion
of the Board, become fully vested and optionee shall be entitled to exercise
such option, in whole or in part, during the 30-day period (i) following the
first purchase of Shares of the Company pursuant to a tender offer or exchange
offer (other than an offer
<PAGE>
by the Company) for all, or any part of, the Company's Shares or (ii) commencing
on the date of approval by the shareholders of the Company of an agreement for
(a) a merger or consolidation or similar transaction in which the Company will
not survive as an independent corporation, or (b) a sale, exchange or other
disposition of all or substantially all of the Company's assets.
(f) ADJUSTMENT UPON CHANGES IN CAPITALIZATION. In the event of a
reorganization, recapitalization, stock split, stock dividend, stock
distribution, combination of shares, merger, consolidation, rights offering, or
any other change in the corporate structure or Shares of the Company, the Board
shall make such adjustment, if any, as it may deem appropriate in the number and
kind of Shares authorized by the Plan, in the number and kind of Shares covered
by the options granted and in the option price. Any such adjustment may provide
for the elimination of any fractional shares which otherwise might become
subject to any option without payment therefor.
(g) MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to the terms
and conditions and within the limitations of the Plan, the Board may modify,
extend or renew outstanding options granted under the Plan, or accept the
surrender of outstanding options under the Plan or under any other stock option
plan of the Company (to the extent not theretofore exercised) and authorize the
granting of new options under the Plan in substitution therefor (to the extent
not theretofore exercised).
10. RIGHTS AS A SHAREHOLDER. No rights as a shareholder shall exist with
respect to any Shares covered by an option until the date of the issuance of a
stock certificate for such Shares. Stock certificates will be issued within
thirty (30) days of option exercise.
11. GOVERNMENT REGULATIONS. The Plan, the options and the Shares so
affected will be subject to all applicable federal and state statutes, rules and
regulations, including, without limitation, all applicable federal and state
securities laws. If, in the opinion of the Company's counsel, the transfer,
issue or sale of any Shares under the Plan is not lawful for any reason, the
Company will not be obliged to transfer, issue or sell any Shares.
12. INVESTMENT PURPOSE. Each option under the Plan shall be granted only on
the condition that all purchases of Shares thereunder shall be for investment
purposes, and not with a view to resale or distribution, except that the Board
may make such provision in options granted under this Plan as it deems necessary
or advisable for the release of such condition upon the registration with the
Securities and Exchange Commission of Shares subject to the option, or upon the
happening of any other contingency warranting the release of such condition.
13. RESTRICTIONS ON ISSUING SHARES. The exercise of each option shall be
subject to the condition that if at any time the Company shall determine in its
discretion that the listing, registration or qualification of any Shares
otherwise deliverable upon such exercise upon any securities exchange or under
any state or federal law, or that the consent or approval of any regulatory
body, is necessary or desirable as a condition of, or in connection with, such
exercise or the delivery or purchase of Shares pursuant thereto, then in any
such event, such exercise shall not be effective unless such
<PAGE>
listing, resignation, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the Company.
14. AMENDMENT AND TERMINATION OF THE PLAN. The Board may terminate the Plan
or make such modifications or amendments thereof as it shall deem advisable, or
in order to conform to any change in any law or regulation applicable thereto,
except that no such amendment or modification shall change the number or
characteristics of the Shares issuable under the Plan (subject to adjustment
pursuant to Section 9(g) hereof) unless such amendment or modification shall
have the approval of the holders of a majority of the then outstanding Shares of
the Company. No amendment or modification shall apply to adversely affect any
optionee with respect to whom an option shall heretofore have been granted.
15. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of Shares pursuant to options may be used for any corporate purposes.
16. NO OBLIGATION TO EXERCISE OPTIONS. The granting of an option shall
impose no obligation upon the optionee to exercise such option.
17. FAIR MARKET VALUE. For purposes of this Plan, the "fair market value"
of the Company's Shares on a given date shall be (i) if the Shares are listed on
a National Exchange, the mean between the highest and the lowest quoted selling
price of said Shares on such stock exchange on such date, provided at least one
sale of said Shares took place on such exchange on such date, and, if not, then
on the basis of the closing price on the last preceding date on which at least
one sale on such exchange did occur, or (ii) if the Shares are not listed on a
National Exchange, the value as determined by the Board in good faith.
18. TIME OF GRANTING. Neither anything contained in the Plan or in any
resolution adopted or to be adopted by the Board or the shareholders of the
Company nor any action taken by the Board shall constitute the granting of any
option. The granting of an option shall take place only when a written option
agreement substantially in the form of the option agreement which is attached
hereto and marked Exhibit A shall have been duly executed and delivered by or on
behalf of the Company and the optionee to whom such option shall be granted.
19. FINANCING. In the discretion of the Board, the Company may guarantee
bank loans or make loans to an option holder to finance the option price of the
shares purchased upon the exercise of an option and also to finance payment by
the option holder of income taxes incurred with such exercise upon the following
terms and conditions:
(a) TERM OF LOAN. Each loan or guaranty will extend for a period of not
more than five (5) years.
<PAGE>
(b) PROMISSORY NOTE. Each loan will be evidenced by a promissory note
given by the option holder and for which the option holder shall have full
personal liability. Each such note shall bear interest at such rate per annum as
determined by the Board which interest shall be not less than the rate in effect
for the Company's senior indebtedness to a financial institution and shall be
payable at such times as determined by the Board but at least no less frequently
then annually. Payments of principal, or installments hereof, need not be
required by the terms of the notes, but may be required thereby if so determined
by the Board. Principal and interest may be prepaid in whole or in part, from
time to time, without penalty. Each such note shall in all events become due and
payable without demand on the fifth anniversary of the date of the note, or upon
the option holder's failure to pay any installment of principal and interest
when due or within 30 days thereafter, or immediately upon the insolvency or
bankruptcy of the option holder, or within 30 days from the date of termination
of his employment or directorship or office for whatever cause, excepting only
death, disability and retirement. In the event of the death of an option holder,
such note shall become due and payable without demand 9 months from the date of
such death. In the event of the disability or retirement of a participant such
note shall become due and payable without demand 3 months from the date of such
permanent disability or approved retirement.
(c) PLEDGE OF SHARES. Each note or guaranty will be secured by a pledge
of the shares purchased with the proceeds of the loan which shall be deposited
with the Company. Dividends paid on shares subject to the pledge shall be first
applied against interest charges due upon the bank loan, or the note secured,
with any balance applied to reduce the principal thereof. Regardless of any
other provision of this Plan, shares pledged to secure the guaranty or note may
not be withdrawn from the pledge unless the proportionate amount of the
guaranteed bank loan or the note scurried thereby shall be immediately repaid.
(d) OTHER TERMS AND CONDITIONS. All such notes, guaranty and pledges may
contain such further terms and conditions consistent with this Plan, including
provisions for additional collateral security, as may be determined by the Board
from time to time.
(e) APPROVAL BY SHAREHOLDERS. Approval and adoption of this Plan by the
stockholders of the Company shall constitute full and complete authorization for
any guaranty, loan or interest reimbursement made to or on behalf of the option
holder.
LOANS TO NON-EMPLOYEE DIRECTORS AND CONSULTANTS. Notwithstanding anything
contained herein to the contrary, if at the time such loan is granted the
Company's shares are traded publicly, each note or guaranty representing a loan
or guaranty to a Non-Employee Director or Consultant shall be secured by a
pledge of shares as then applicable federal regulations may require, or by such
other or additional collateral security as the Board deems appropriate and in
the best interests of the Company.
20. GOVERNING LAW. The Plan shall be construed and enforced in
accordance with the laws of the Commonwealth of Massachusetts.
21. NO RIGHT TO CONTINUED EMPLOYMENT. Participation in the Plan shall not
give any employee any right to remain in the employ of the Company. The Company
reserves the right to terminate any participant at any time.
<PAGE>
22. TERM OF PLAN. Options may be granted pursuant to the Plan from time to
time within a period of ten (10) years from the date the Plan is adopted by the
Board of Directors.
Date Plan adopted by Board of Directors: July 28, 1998
Date Plan ratified by Shareholders: July 28, 1998
