<PAGE>
ANY ACQUISITIONS WE MAKE MAY POSE A NUMBER OF RISKS THAT COULD MATERIALLY
ADVERSELY AFFECT OUR STRATEGY.
To the extent that we complete acquisitions, such acquisitions could pose a
number of special risks, including the diversion of management's attention, the
assimilation of the operation and personnel of the acquired companies, the
integration of acquired assets with existing assets, adverse short-term effect
on reported operating results, the amortization of acquired intangible assets
and the loss of key employees. Additionally, with respect to potential future
acquisitions by us, our stockholders are not expected to have the right to vote
on such acquisitions.
IT MAY BE DIFFICULT FOR A THIRD PARTY TO ACQUIRE OUR COMPANY AND THIS COULD
DEPRESS OUR STOCK PRICE.
Nevada corporate law and our amended and restated certificate of
incorporation and our by-laws contain provisions that could have the effect of
delaying, deferring or preventing a change in control of booktech.com or a
change of our management that stockholders may consider favorable or beneficial.
These provisions could discourage proxy contests and make it more difficult for
you and other stockholders to elect directors and take other corporate actions.
These provisions could also limit the price that investors might be willing to
pay in the future for shares of our common stock. These provisions include those
which:
o Authorize the issuance of "blank check" preferred stock, which is
preferred stock that can be created and issued by the Board of
Directors without prior stockholder approval, with rights senior to
those of common stock;
o Provide for a staggered Board of Directors, so that it would take
three successive annual meetings to replace all directors;
o Prohibit stockholder action by written consent; and
o Establish advance notice requirements for submitting nominations for
election to the Board of Directors and for proposing matters that can
be acted upon by stockholders at a meeting.
ITEM 7. FINANCIAL STATEMENTS
Incorporated by reference from the consolidated financial statements and
notes thereto of booktech.com, inc., which are attached hereto beginning on page
41.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The registrant filed a report on Form 8-K on May 15, 2000 which reported
that the Board of Directors of the Company approved the dismissal of Barry L.
Friedman P.C. as its independent auditor and appointed Deloitte & Touche LLP.
There were no disagreements between booktech.com, inc. and Barry L.
Friedman P.C. on any matter of accounting principle or practice, financial
statement disclosures, auditing scope or procedure which, if not resolved to his
satisfaction of would have caused Barry L. Friedman P.C. to make reference to
the subject matter of the disagreement in connection with their report. The
audit opinion of Barry L. Friedman P.C. contained an explanatory paragraph
emphasizing the Company's status as a development stage enterprise and
uncertainty regarding the Company's ability to continue as a going concern.
It should also be noted that Deloitte & Touche LLP provided independent
auditing services to booktechmass prior to the Merger.
29
<PAGE>
PART III.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT
IDENTIFY DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
Directors are elected by the stockholders or by affirmative vote of a
majority of the directors then in office, and hold office until the next annual
meeting of the stockholders. Officers and other employees serve at the will of
the Board of Directors. The following table sets forth certain information
regarding our directors and executive officers:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Directors and Executive Officers
William G. Christie 53 President, Chief Executive Officer, and Chairman
Morris A. Shepard, Ph.D.* 63 President, Chief Executive Officer, and Chairman
Joel Dumaresq 37 Director
Ajmal Khan 39 Director
Barry Romeril 56 Director
Sherry Turkle 52 Director
Ted Bernhardt 49 Chief Financial Officer, Treasurer and Secretary
Key employees
October Ivins 49 Chief Knowledge Officer
Steven Lewers 52 Chief Trade Book Officer
</TABLE>
Directors and Executive Officers
William G. Christie has been our President, Chief Executive Officer, and
Chairman of the Board since May 14, 2001. Immediately prior to these positions,
Mr. Christie was the Chief Operating Officer of !heyinc, with responsibility for
sales, business development, and shared responsibility for investment and
investor relations. In August, 1998, Mr. Christie was part of an investor group
which acquired Contact Dynamics. The company was renamed icontact.com and he
last served as Chief Executive Officer before it merged with hey Software to
form !heyinc. in August, 2000. From 1997 until 1998, Mr. Christie was the
principal of his own consulting firm, W. G. Christie Associates. The company
worked in the data warehousing/data mining and Internet applications areas. For
the preceding 12 years, he was responsible for MIS and Merchandising Support of
the CALDOR Corporation.
*Morris A. Shepard, Ph.D. was our Chairman of the Board of Directors, Chief
Executive Officer, and President from March 31, 2000 through May 11, 2001.
Immediately prior to holding those positions, Mr. Shepard had been President,
Director and Chief Executive Officer of booktech.com, inc., a Massachusetts
corporation ("booktechmass") since 1995, which formerly carried on the business
now carried on by our company. Prior to founding booktechmass in 1995, he taught
graduate and undergraduate courses in Boston and in Europe.
Joel Dumaresq was elected a Director on January 17, 2000. Mr. Dumaresq is
an experienced business executive and investment specialist. His experience
ranges from running public and private corporations to working for a national
investment-banking firm. From 1994 until its being sold in 1998, Mr. Dumaresq
was president of Westair Aviation Inc., a regional charter airline service. For
the past two years, he has worked with the Verus Group on public equity
financings and mergers and acquisitions. He holds a degree in economics from the
University of British Columbia.
30
<PAGE>
Ajmal Khan was elected a Director on March 31, 2000. Since 1992, Mr. Khan
has been the President of Verus International Group Ltd., a diversified
investment group, which he founded in 1990. Verus International Group Ltd.. is
involved in the ownership of hotels, venture capital financing, corporate
acquisitions, and several joint venture interests, including Barakaat Holdings
Ltd., a sports marketing company.
Barry Romeril was elected a Director on March 31, 2000. From 1993 to the
present, he has served as Chief Financial Officer of Xerox Corporation
("Xerox"). In April 1999, he was elected to the Board of Directors of Xerox and
was named its vice chairman. Mr. Romeril is responsible for all finance,
treasury, tax and audit activities at Xerox as well as its internal services and
real estate operations. In addition, he is responsible for (a) Xerox Technology
Enterprises, which oversees emerging businesses; (b) Xerox's intellectual
property unit and (c) Xerox Engineering Services.
Sherry Turkle was elected a Director on March 31, 2000. From 1999 to the
present, she has served as the Abby Rockefeller Mauze Professor in the Program
in Science, Technology, and Society at the Massachusetts Institute of Technology
("MIT"). From 1991 through 1999, Ms. Turkle served as Professor of the Sociology
of Science at MIT. She has published books and articles on a variety of subjects
and is a frequent speaker on the digital revolution.
Ted Bernhardt has been our Chief Financial Officer and Treasurer since
March 31, 2000, and Secretary since September, 2000. From June 1999 to March 31,
2000, he was Chief Financial Officer of booktechmass. From 1998 to May 1999, he
provided financial and business development consulting services for INSO
Corporation and Custom Communications Partners. From 1993 to 1998, Mr. Bernhardt
was Chief Financial Officer of the custom publishing division of Cadmus
Communications Corporation. He received his bachelor's degree in Finance from
Boston College and his Masters in Business Administration from Suffolk Business
School.
October Ivins has been our Chief Knowledge Officer since March 6, 2000.
From June 1998 to December 1999, Ms. Ivins served as Director of Strategic
Relationships for PubList.com, an on-line directory of publications and related
services. From 1995 to 1998, she taught courses on information access and
Internet use as a doctoral student at the University of Texas at Austin. Ms.
Ivins brings 20 years of experience in academic libraries at Louisiana State
University and the University of North Carolina at Chapel Hill where she earned
her Bachelor of Arts degree and her Masters in Library Sciences.
Steven Lewers has been our Chief Trade Book Officer since January 31, 2000.
Immediately prior to joining the Company, he managed Steven Lewers & Associates,
a consulting firm for the consumer book industry, which he founded in 1999. He
also serves as Vice President of the Waldorf School of Lexington (MA). From 1997
to 1999, he served as Vice President, Marketing and Strategic Planning for the
On-Demand Machine Corporation. From 1990 to 1997, Mr. Lewers served as Vice
President, Director of Sales, Marketing and New Business development for
Houghton Mifflin Co. He received his bachelors degree in Economics from Harvard
University.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
No present director or officer of the Company: (1) has had any petition
filed, within the past five years, in Federal Bankruptcy or state insolvency
proceedings on such person's behalf or on behalf of any entity of which such
person was an officer or general partner either at the time of the bankruptcy or
within two years prior to that time; or (2) has been convicted in a criminal
proceeding within the past five years or is currently a named subject of a
pending criminal proceeding (excluding traffic violations and other minor
offenses); or (3) has been the subject, within the past five years, of any
order, judgment, decree or finding (not subsequently reversed, suspended, or
vacated) of any court or regulatory authority involving violation of securities
or commodities laws, or barring, suspending, enjoining or limiting any activity
relating to securities, commodities or other business practice.
31
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires the Company's executive officers and directors, and persons who own
more than 10% of the Company's common shares to file with the Securities and
Exchange Commission initial statements of beneficial ownership, reports of
changes in ownership and annual reports concerning their ownership of Common
Shares and other equity securities of the Company, on Form 3, 4, and 5,
respectively.
To the best of our knowledge, all executive officers, directors and persons
owning more than 10% of our common stock filed the required reports in a timely
manner, with the exception of the following:
Name Number of Late Reports
---- ----------------------
William G. Christie 1(1)
Ajmal Khan 1(2)
Joel Dumaresq 1(2)
Sherry Turkle 1(3)
----------
(1) Mr. Christie did not timely file a Form 3- Initial Statement of Beneficial
Ownership. However, Mr. Christie filed a Form 3- Initial Statement of
Beneficial Ownership and a Form 4- Statement of Changes in Beneficial
Ownership on June 21, 2001.
(2) The named director did not timely file a Form 3- Initial Statement of
Beneficial Ownership. However, the named director subsequently late filed a
Form 3- Initial Statement of Beneficial Ownership and Form 5- Annual
Statement of Changes in Beneficial Ownership on June 21, 2001.
(3) The named director did not file a Form 3- Initial Statement of Beneficial
Ownership. However, we expect that the named director will file the
appropriate forms within ten (10) days of the date of this report.
ITEM 10. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table sets forth the total compensation paid to our Chief
Executive Officer and our two most highly compensated executive officers, other
than our Chief Executive Officer, for the year ended December 31, 2000, whose
salary and bonus for such fiscal year was greater than $100,000:
<TABLE>
<CAPTION>
Long Term Compensation
Period --------------------------------------- (2)
For the Compensation (1) $Restricted Securities All
Name and Principal Period ------------------- Stock Underlying $ LTP Other
Position Ended $ Salary $ Bonus Awards Options/SARs Payouts Comp.
-------- ------- -------- ------- ------ ------------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Morris A. Shepard 12/31/2000 $155,953 -- -- 66,667 -- $2,960
President, CEO (3)
Joel Dumaresq (4) 12/31/2000 -- -- -- -- -- --
Ted Bernhardt 12/31/2000 118,746 -- -- 344,828 -- 7,200
CFO
Thomas F. Delano 12/31/2000 116,365 -- -- 344,828 -- 7,200
Chief Business
Development Officer
</TABLE>
32
<PAGE>
(1) Salary compensation for the year ended December 31, 2000 represents paid
compensation only, reported amounts exclude accrued but unpaid salaries for
the year ended December 31, 2000 as follows: Shepard, $27,692; Bernhardt,
$23,078; and Delano, $23,078.
(2) All other compensation represents automobile allowances paid to executives.
(3) Dr. Shepard resigned as President, Chief Executive Officer and Chairman of
the Board of Directors on May 11, 2001.
(4) Mr. Dumaresq served from January 17, 2000 until March 31, 2000 as the
President of Ebony and Gold Ventures, Inc. prior to the Merger.
Our 2000 Stock Option Plan (the "Plan") allows us to grant stock options,
restricted stock and other stock-based awards, including stock appreciation
rights to employees, officers, directors, consultants and advisors of the
Company. The maximum number of shares of common stock that may be issued under
the Plan is 5,000,000. The Plan is administered by the Board of Directors, which
has the authority to designate the nature of the award, the number of shares and
the vesting period, among other terms. The stock options expire no later than
ten years from the date of grant. As of December 31, 2000, there were 2,883,853
shares of common stock available for future issuance under the Plan.
The following table sets forth information concerning individual grants,
including adjustments resulting from the Merger, of stock options made to each
of the executive officers and key employees in 2000:
<TABLE>
<CAPTION>
Fair
Number of Market Potential Realizable
Securities Percent of Value at Value at Assumed
Underlying Total Options/ Option Date of Annual Rates of
Options SARs Granted Exercise Grant Stock Appreciation Option
SARs To Employees Price Per or For the Option Term Expiration
Name Granted In 2000 Share Adjustment 5% 10% Date
---- ------- ------- ----- ----- -- --- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Morris A. Shepard 66,667 3.8% $1.50 $ .72 $ -- $ -- 3/31/06
Ted Bernhardt 344,828 19.4 .29 .72 177,084 207,658 6/30/02
Thomas F. Delano 344,828 19.4 .58 .72 68,172 88,626 11/8/01
October Ivins 330,334 18.6 .66 .72 48,455 78,962 6/30/02
Steven Lewers 344,828 19.4 .58 .72 104,250 169,333 3/31/04
Joseph Short, Ph.D. 166,667 9.4 1.25 .72 -- -- 1/17/03
</TABLE>
None of the named executives exercised any stock options in the year ended
December 31, 2000. The following table sets forth information concerning the
unexercised options / SARs for each of the above named executives at December
31, 2000. The Value of the Unexercised In-The-Money-Options is based on the
closing sales price ($1.125) of the Company's common stock on the American Stock
Exchange on December 31, 2000.
<TABLE>
<CAPTION>
Shares
Acquired Number of Securities Underlying Value of Unexercised
On Value Unexercised Options In-The-Money Options
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Morris A. Shepard -- $ -- -- 66,667 $ -- $ --
Ted Bernhardt -- -- 344,828 -- 287,931 --
Thomas F. Delano -- -- 344,828 -- 187,931 --
October Ivins -- -- -- 330,334 -- 153,605
Steven Lewers -- -- 344,828 -- 187,931 --
Joseph Short, Ph.D. -- -- -- 166,667 -- --
</TABLE>
In connection with the Merger on March 31, 2000, the Company adjusted the
number and exercise price of the unexercised options previously granted to Mr.
Delano and Mr. Lewers.
33
<PAGE>
The Company also cancelled a previously issued stock option to Mr.
Bernhardt and issued to Mr. Bernhardt a new option with a cashless exercise
feature. The following table sets forth information concerning the adjustment of
the unexercised options for each of the executives.
<TABLE>
<CAPTION>
Length of
Original
Number of Exercise Option Term
Securities Market Price Price at Remaining
Underlying of Stock at Time of at Date of
Options/SARs Time of Issue, Issue, New Issue,
Issued, Adjusted, Adjustment, Adjustment, Exercise Adjustment,
Name Date or Amended or Amendment or Amendment Price or Amendment
---- ---- ---------- ------------ ------------ ----- ------------
<S> <C> <C> <C> <C> <C> <C>
Ted Bernhardt 3/31/00 344,828 $ .72 $ .29 $ .29 27 months
Thomas F. Delano 3/31/00 344,828 .72 .58 .58 21 months
Steven Lewers 3/31/00 344,828 .72 .58 .58 36 months
</TABLE>
DIRECTORS' COMPENSATION
The Company's inside directors receive no compensation for their services
as members of the Board. Non-employee directors receive an annual retainer of
$10,000. In addition, non-employee directors annually receive 1,000 shares of
the Company's common stock and options to purchase 2,000 additional shares of
the Company's common stock. All directors receive reimbursement of their actual
expenses incurred in connection with attending each meeting of the Board and
each meeting of any committee of the Board.
The following table sets forth information concerning individual grants of
common stock and stock options made to the outside directors in 2000:
<TABLE>
<CAPTION>
Restricted Stock Grants Common Stock Option Grants
--------------------------- -----------------------------------------------------------
Number of Fair Market Number of Exercise Fair Market Option
Shares Value At Options / Price Per Value At Expiration
Name Granted Date of Grant SARs Granted Share Date of Grant Date
---- ------- ------------- ------------ --------- ------------- ----
<S> <C> <C> <C> <C> <C> <C>
Barry Romeril 1,500 $4,320 2,000 $ 2.88 $ 2.88 3/31/2006
Sherry Turkle 1,000 2,880 2,000 2.88 2.88 3/31/2006
</TABLE>
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee
The Audit Committee is responsible for making recommendations to the Board
of Directors as to the selection of our independent auditor, maintaining
communication between the Board and the independent auditor, reviewing the
annual audit report submitted by the independent auditor, and determining the
nature and extent of issues, if any, presented by such audit warranting
consideration by the Board. The current member of this Committee is Joel
Dumaresq.
The Compensation Committee
The Compensation Committee is responsible for determining the compensation
payable to officers and directors. The current members of the Compensation
Committee are Sherry Turkle, Ajmal Khan and Joel Dumaresq.
The Nominating Committee
34
<PAGE>
The Nominating Committee is responsible for recommending candidates to the
stockholders for election to the Board of Directors. The current members of the
Nominating Committee are Sherry Turkle and Ajmal Khan..
EMPLOYMENT AGREEMENTS
William G. Christie was named President, Chief Executive Officer and
Chairman of the Board on May 14, 2001. Mr. Christie was appointed by the Board
upon his verbal acceptance of an offer of employment at an annual salary of
$250,000. We anticipate that an employment agreement with Mr. Christie will be
concluded within 30 days of the date of this report.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's common stock as of April 30, 2001 by (i) each person
who is known to the Company to own beneficially more than 5% of the Company's
common stock on a fully diluted basis; (ii) all directors, officers and key
employees of the Company; and (iii) all directors, officers and key employees of
the Company as a group. The number of shares beneficially owned by each named
person and the number of shares of common stock outstanding used in calculating
the percentage for each named person assumes the conversion of all preferred
stock outstanding into common stock. The number of shares of common stock
outstanding used in calculating the percentage for each named person includes
the shares of common stock underlying options and warrants held by that person
which are exercisable within 60 days of April 30, 2001.
Shares Percent
of Common Stock of Common Stock
Name and Address of Beneficial Owner (1) Beneficially Owned Owned
---------------------------------------- ------------------ -----
Morris A. Shepard (2) 3,235,744 15.2%
Joel Dumaresq (3) 1,445,800 6.7%
Ruth Anne Shepard (4) 2,387,123 11.2%
Dennis Hershey (5) 2,858,544 13.6%
Ajmal Khan (6) 2,268,800 10.5%
Bonnie Hershey (7) 1,499,124 7.2%
Frank Challant (8) 1,202,184 5.8%
Ted Bernhardt (9) 344,828 1.6%
Thomas F. Delano (9) 344,828 1.6%
Steven Lewers (9) 344,828 1.6%
Joseph Short, Ph.D. (9) 166,667 *
October Ivins (9) 100,000 *
Barry Romeril (10) 6,500 *
Sherry Turkle (10) 6,000 *
All Officers, Directors and Key
Employees as a Group (10 persons) 6,978,195 29.6%
----
* Less than 1%
(1) The address for each individual is c/o booktech.com, inc., 42 Cummings
Park, Woburn Massachusetts 01801.
(2) Includes 2,387,123 shares jointly held with Ruth Anne Shepard; 848,621
shares held in trust for Aaron and Heather Shepard, the children of Morris
Shepard; and options to purchase 66,667 shares of common stock.
(3) Includes 60,000 shares held by his wife Marousa Dumaresq; 100,000 shares
held by Pashleth Investments; and 402,467 shares and warrants to purchase
883,333 held by Verus over which Joel Dumaresq has control.
(4) All shares jointly owned with Morris Shepard, including options to purchase
66,667 shares of common stock.
35 |
