-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E2fvu8xAbiq29dFcFOz49H7ktjX7plh/opb0AChQUHjM+k+9snOzk8mwsTmOu5bS rDfmAPCDLR3njZFQtDcHdA== 0000950133-99-001836.txt : 19990517 0000950133-99-001836.hdr.sgml : 19990517 ACCESSION NUMBER: 0000950133-99-001836 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SECURITY FIRST TECHNOLOGIES CORP CENTRAL INDEX KEY: 0001063254 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 582395199 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 000-24931 FILM NUMBER: 99624402 BUSINESS ADDRESS: STREET 1: 3390 PEACHTREE ROAD NE STREET 2: SUITE 1700 CITY: ATLANTA STATE: GA ZIP: 30326 BUSINESS PHONE: 4048126300 MAIL ADDRESS: STREET 1: 3390 PEACHTREE ROAD NE STREET 2: SUITE 1700 CITY: ATLANTA STATE: GA ZIP: 30326 10-K/A 1 FORM 10-K/A FOR SECURITY FIRST TECHNOLOGIES CORP. 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K/A [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER: 000-24931 SECURITY FIRST TECHNOLOGIES CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 58-2395199 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3390 PEACHTREE ROAD, NE, SUITE 1700 ATLANTA, GEORGIA 30326 (Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (404) 812-6200 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: Not Applicable SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock, par value $0.01 per share Title of Class Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X. No____. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] As of March 24, 1999, the aggregate market value of the shares of common stock of the registrant issued and outstanding on such date, excluding 2,084,011 shares held by all affiliates of the registrant, was approximately $642,391,000. This figure is based on the closing sales price of $62.50 per share of the registrant's common stock on March 24, 1999, and excludes shares held by directors and executive officers because such persons may be deemed to be affiliates. This reference to affiliate status is not necessarily a conclusive determination for other purposes. Shares of common stock outstanding as of March 24, 1999: 12,362,267 DOCUMENTS INCORPORATED BY REFERENCE List hereunder the following documents if incorporated by reference and the Part of the Form 10-K into which the document is incorporated: Not applicable. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. INFORMATION AS TO DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth the names of our current directors and executive officers. Also provided is information as to each person's age at December 31, 1998, the periods during which he has served as a director of S1 and its predecessor, Security First Network Bank, and positions currently held with S1.
AGE AT DECEMBER 31, DIRECTOR EXPIRATION NAME 1998 SINCE OF TERM POSITIONS HELD WITH S1 - ---- ------------ -------- ---------- ---------------------- Robert W. Copelan, D.V.M...... 72 1995 1999 Director Dorsey R. Gardner............. 56 1998 2001 Director James S. Mahan, III........... 47 1995 2000 Chairman, Chief Executive Officer and President Joseph S. McCall.............. 49 1998 2001 Director Howard J. Runnion, Jr......... 69 1995 2000 Director Robert F. Stockwell........... 44 -- -- Chief Financial Officer and Treasurer Daniel H. Drechsel............ 38 -- -- President and Chief Operating Officer of S1's operating subsidiary
The following information concerns the principal occupation of each of our directors and executive officers for the past five years. The executive officers are elected by the board to serve a one-year term. Robert W. Copelan, D.V.M. has been President of Copelan & Thornbury, Inc. in Paris, Kentucky since 1959 and President of R.W. Copelan, PSC in Paris, Kentucky since 1979. Dr. Copelan is a veterinarian in private practice. From 1987 through September 1996, Dr. Copelan served on the board of directors of Cardinal Bancshares, Inc. and some of its subsidiaries. He served on the board of Security First Network Bank from 1995 until its sale in 1998. He has served as a director of S1 since May 1998. Dr. Copelan is the stepfather of James S. Mahan, III, S1's Chairman, President and Chief Executive Officer. Dorsey R. Gardner has served as a director of S1 since his appointment in June 1998. Mr. Gardner has served as general partner of Hollybank Investments, LP from 1993 to the present. Since 1980, he has served as President of Kelso Management Co., Inc., advisor to Fidelity International Limited, Integrity Fund-FM&R private capital, American Values I-IV, Fidelity American Situations Trust, Fidelity Discovery Fund, Johnson family accounts, Johnson Foundation, and Fidelity Foundation from 1980 to 1993 and adviser to Hollybank Investments, LP from 1993 to the present. Mr. Gardner has served on the board of directors of several corporations, and is currently a member of the boards of Crane Company and Filene's Basement. James S. Mahan, III served as the Chief Executive Officer and a director of Security First Network Bank from 1995 until its sale in 1998. He has served as a director of S1 since May 1998, as Chief Executive Officer and President since June 1998 and as Chairman of the Board since February 1999. He also has served as Chairman of the Board of S1's operating subsidiary since May 1996. Mr. Mahan was the Chairman of the Board and Chief Executive Officer of Cardinal Bancshares, Inc., as well as some of its subsidiaries from November 1987 until September 1996. Mr. Mahan is the stepson of director Robert W. Copelan. Joseph S. McCall has served as a director of S1 since his appointment in October 1998. In 1986, Mr. McCall founded and remains the President of McCall Consulting Group, a company that provides consulting primarily to software companies that are building software products with new technology or transitioning old products to new technology. McCall Consulting also provides direct sales and training support to enabling technology software companies that are launching products with leading edge technologies. Since 1991, Mr. McCall has also served as a director of Clarus Corp. (formerly known as SQL Financials International, Inc.), a publicly traded software company that sells web-enabled financial and human resource application software. Mr. McCall founded SQL in 1991 and served as Chief Executive Officer until early 1998. In 1994, Mr. McCall founded Technology Ventures, LLC, which is an investment 1 3 company that owns all of McCall Consulting and is the largest single shareholder of Clarus Corp. Technology Ventures serves as Mr. McCall's vehicle for investing in new companies and providing equity incentives to employees of the companies in which Technology Ventures has invested. Mr. McCall currently is a member of the boards of directors of McCall Consulting and Technology Ventures. Howard J. Runnion, Jr. was Vice Chairman of the Board and Chief Financial Officer of The Wachovia Corporation in Winston-Salem, North Carolina from December 1985 to June 1990. Since 1992, Mr. Runnion has served as a consultant and an insurance broker. Mr. Runnion was a director of Cardinal Bancshares, Inc. and some of its subsidiaries until September 1996 and a director of Security First Network Bank from 1995 until its sale in 1998. He has served as a director of S1 since May 1998. Robert F. Stockwell served as the Treasurer and Chief Financial Officer of Security First Network Bank from 1995 until its sale in 1998, and has served as Treasurer and Chief Financial Officer of S1's operating subsidiary since May 1996. He has served as Chief Financial Officer and Treasurer of S1 since June 1998. From June 1998 to November 1998, he also served as Secretary of S1. From October 1996 through September 1998, he served as Acting President of Security First Network Bank. Mr. Stockwell served as Treasurer of Cardinal Bancshares, Inc. from January 1994 to September 1996 and as a director of Jefferson Banking Company during 1994. From 1987 to 1993, Mr. Stockwell was Executive Vice President and Chief Financial Officer of Security Financial Holding Company, a thrift holding company located in Durham, North Carolina. Daniel H. Drechsel has served as President and Chief Operating Officer of Security First Technologies, Inc., S1's operating subsidiary, since June 1998. In his position as our Chief Operating Officer, Mr. Drechsel oversees the day-to-day operations of S1's operating subsidiary. Prior to joining our operating subsidiary, Mr. Drechsel served as Vice President of Marketing with Meta4 Software, S.A., a Madrid-based enterprise software company from September 1997 to June 1998. Mr. Drechsel served as General Manager of ECPartners, a joint venture between Checkfree Corporation and Automatic Data Processing, Inc.'s Electronic Services Division from 1995 to 1997. Mr. Drechsel served on the board of directors of InfoWave Technologies, Inc. from 1997 to 1999. Mr. Drechsel's previous experience included a variety of management positions in sales, marketing and software development at both Automatic Data Processing and Dun & Bradstreet Corporation. SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934 requires our directors and officers, and persons who own more than 10% of our common stock, to file with the Securities and Exchange Commission initial reports of ownership of our equity securities and to file subsequent reports when there are changes in their ownership. Based on a review of reports submitted to us, we believe that during the fiscal year ended December 31, 1998, all Section 16(a) filing requirements applicable to our directors, officers and more than 10% owners were complied with on a timely basis, other than a Form 4 that was not timely filed by Mr. Stockwell for one transaction which was reflected in a Form 5 filing. ITEM 11. EXECUTIVE COMPENSATION. EXECUTIVE AND DIRECTOR COMPENSATION The following table shows the cash compensation paid by S1 for the last three fiscal years, as well as compensation paid or accrued for those years, to the Chief Executive Officer and the one other highest paid executive officer serving at December 31, 1998, whose total annual salary and bonus for the fiscal year ended December 31, 1998 exceeded $100,000. We refer to these two officers as our named executive officers. No stock appreciation rights have been granted by S1 or its predecessor, Security First Network Bank. 2 4 SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION ------------- AWARDS ANNUAL COMPENSATION ------------- ------------------------------------------- SECURITIES NAME AND OTHER ANNUAL UNDERLYING ALL OTHER PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(B) OPTIONS($)(C) COMPENSATION($)(D) - ------------------ ---- --------- -------- ------------------ ------------- ------------------ James S. Mahan, III........... 1998 $200,000 -- $ -- -- $7,872 Chairman, Chief Executive 1997 200,000 -- 9,861 -- 9,756 Officer and President 1996 87,535(a) -- 68,080 -- 3,131 Robert F. Stockwell........... 1998 $150,000 -- $ -- 100,000 $5,950 Chief Financial Officer 1997 119,141 -- -- 40,000 6,392 and Treasurer 1996 104,962 -- 70,009 -- 2,272
- --------------- (a) During the first nine months of 1996, Mr. Mahan's annual rate of salary was $50,000. During that time, he also served as the Chairman and Chief Executive Officer of Cardinal Bancshares, Inc., which was then the parent of Security First Network Bank. (b) For 1996, other annual compensation includes reimbursement of moving expenses of $56,880 for Mr. Mahan and $70,009 for Mr. Stockwell, including applicable taxes associated with these reimbursements. (c) Reflects the two-for-one split of our common stock paid on May 7, 1999. (d) All other compensation includes contributions to S1's 401(k) plan and insurance premiums. 401(k) contributions for 1996, 1997 and 1998 were $2,501, $2,667 and $2,666 for Mr. Mahan; and $2,002, $3,292 and $2,750 for Mr. Stockwell. Insurance premiums for 1996, 1997 and 1998 were $630, $7,089 and $5,206 for Mr. Mahan; and $270, $3,100 and $3,200 for Mr. Stockwell. Our directors do not receive any fees or other compensation for their service as directors. Directors, however, are reimbursed for travel and other expenses incurred in connection with attending meetings of our board of directors. Upon joining the board of directors in 1998, Mr. Gardner and Mr. McCall were awarded options to acquire 60,000 shares of our common stock under our 1998 Directors' Stock Option Plan, as adjusted to reflect the two-for-one split of our common stock paid on May 7, 1999. EMPLOYMENT CONTRACTS We currently do not have any employment contracts or other compensatory plans or arrangements relating to resignation, retirement or any other termination of a named executive officers' employment with S1 or our operating subsidiary or from a change in control of S1 or a change of the named executive officer's responsibilities following a change in control of S1. Unvested stock options, however, generally vest upon a change in control, as defined. OPTION GRANTS The following table contains information concerning the grant of stock options to the named executive officers during fiscal year 1998. The information set forth in this table reflects the two-for-one split of our common stock paid on May 7, 1999. 3 5 OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS ------------------------------------------------------------------------------------ POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES NUMBER % OF TOTAL OF STOCK PRICE OF SECURITIES OPTIONS APPRECIATION UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM OPTIONS EMPLOYEES OR BASE EXPIRATION --------------------- NAME GRANTED(#) IN FISCAL YEAR PRICE($/SHARE) DATE 5% 10% - ---- ------------- -------------- -------------- ---------- --------- --------- Robert F. Stockwell............ 100,000 5% $3.3125 1/9/09 $208,321 $527,927 Chief Financial Officer and Treasurer
1998 OPTION EXERCISES AND VALUES The following table provides information on exercises of stock options during fiscal year 1998 by the named executive officers and the value of unexercised options at the end of the year. The information set forth in this table reflects the two-for-one split of our common stock paid on May 7, 1999. AGGREGATED OPTION EXERCISES IN 1998 AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE SHARES OPTIONS AT FY-END(#) MONEY OPTIONS AT FY-END($)(b) ACQUIRED ON VALUE ------------------------- ----------------------------- NAME EXERCISE(#) REALIZED($)(a) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE - ---- ----------- -------------- ------------------------- ----------------------------- James S. Mahan, III..... -- -- 1,393,800/464,600 $20,819,888/$6,939,963 Robert F. Stockwell..... 50,000 $253,125 69,380/176,460 $ 1,009,174/$2,254,301
- --------------- (a) Based on the market value of our common stock at date of exercise, less the exercise price. (b) Based on the closing price per share of our common stock on December 31, 1998 of $15.25 on the Nasdaq National Market, as adjusted to reflect the two-for-one split of our common stock paid on May 7, 1999, less the exercise price, of all unexercised stock options having an adjusted exercise price less than that market value. COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION Since 1996 through the corporate reorganization of Security First Network Bank in September 1998, the full board of directors of Security First Network Bank served as a compensation committee. In the fourth quarter of 1998, a separate compensation committee of the S1 board was established. The Chairman of the compensation committee is Mr. McCall and the other members are Mr. Gardner and Mr. Runnion. The compensation committee recommends to the full board of directors, which has ultimate responsibility over compensation matters. Set forth below is a report of the compensation committee addressing S1's compensation policies for fiscal year 1998 as they affected our executive officers. Compensation Policies for Executive Officers. S1's executive compensation policies are designed to provide competitive levels of compensation, to assist S1 in attracting and retaining qualified executives and to encourage superior performance. In determining levels of executive officers' overall compensation, the qualifications and experience of the persons concerned, the size of the company and the complexity of its operation, the financial condition, including revenues, the compensation paid to other persons employed by the company and the compensation paid to persons having similar duties and responsibilities in the technology industry were considered. Compensation paid to our executive officers in 1998 consisted of the following components: base salary, long-term incentives (awards of stock options) and participation in S1's other employee benefit plans. No bonuses were paid to executive officers for 1998. While each of these components has a separate purpose and may have a different relative value to the total, a significant portion of the total compensation package for 1998 for the executive officers is highly dependent on the public market value of S1 and total return to shareholders. Our executive officers have significant equity interests in S1's success by virtue of stock based compensation. 4 6 The compensation committee currently is re-evaluating S1's executive compensation structure, and is likely to propose significant revisions. No determination has been made regarding this matter and no date has been set for making this determination. Base Salary. Base salary is intended to signal the internal value of the position. In establishing the 1998 salary for each executive officer, the officer's responsibilities, qualifications and experience were considered. The base salary for one of our executive officers increased in 1998 in recognition of the responsibilities of that officer. Long-Term Incentive Compensation. S1 uses stock options to provide long-term incentive compensation. The compensation committee endorses the position that stock ownership by management is beneficial in aligning management's and shareholders' interests in the enhancement of shareholder value. The purpose of stock option awards is to provide an opportunity for the recipients to acquire or increase a proprietary interest in S1, thereby creating a stronger incentive to expend maximum effort for the long-term growth and success of S1 and encouraging recipients to remain in the employ of S1. Officers and other full-time employees of S1 and its subsidiaries are eligible for grants under our 1995 and 1997 stock option plans. Stock options are normally granted each year with the size of the grants generally tied to and weighted approximately equally based on an officer's responsibility level and performance. During 1998, 400,000 stock options were granted to our executive officers, as adjusted to reflect the two-for-one split of our common stock paid on May 7, 1999. Other. In addition to the compensation paid to executive officers described above, executive officers received, along with and on the same terms as other employees, certain benefits such as health insurance and participation in S1's 401(k) Plan. CEO Compensation. Since the company began its current internet business in 1995, the compensation for the Chief Executive Officer has been primarily cash compensation in the form of a base salary, and stock-based in the form of options. In 1998, the Chief Executive Officer's 1998 base salary was $200,000, which was the same as his 1997 base salary. The Chief Executive Officer did not receive a bonus or an award of stock options in 1997 or 1998. Nonetheless, as noted above, a significant portion of S1's total compensation package is highly dependent on the public market value of S1 and total return to shareholders. This has been the case since the company began its operations as an internet business in 1995. Notwithstanding that the Chief Executive Officer did not receive an increase in base salary, a bonus or an award of stock options in 1998, the public market value of S1 common stock did increase significantly during 1998, thereby considerably enhancing the value of long-term stock awards granted to the Chief Executive Officer in previous years. At the beginning of 1998, the reported per share price of our common stock was $3.75, and at year-end 1998 it was $15.25, in both cases, as adjusted for the two-for-one split of our common stock paid on May 7, 1999. As noted above, the compensation committee is re-evaluating the compensation structure for all the executive officers, including the Chief Executive Officer. Internal Revenue Code Section 162(m). In 1993, the Internal Revenue Code of 1986, as amended, was amended to disallow publicly traded companies from receiving a tax deduction on compensation paid to executive officers in excess of $1 million (section 162(m) of the Code), unless, among other things, the compensation meets the requirements for performance-based compensation. S1 has not taken this limitation into account in the past in structuring most of its equity compensation programs and in determining executive compensation. The compensation committee expects to take the deductibility limit for compensation into consideration when awarding equity-based compensation beginning in fiscal 1999. Compensation Committee ------------------------------ Dorsey R. Gardner Joseph S. McCall (Chairman) Howard J. Runnion, Jr. PERFORMANCE OF OUR COMMON STOCK The following table sets forth comparative information regarding the cumulative shareholder return on our common stock since May 26, 1996. Share information from May 26, 1996 to September 30, 1998 is based 5 7 on the common stock of our predecessor, Security First Network Bank. Total shareholder return is measured by dividing cumulative dividends for the measurement period (assuming dividend reinvestment) plus share price change for the period by the share price at the beginning of the measurement period. Neither S1 nor Security First Network Bank has paid dividends on its common stock from May 26, 1996 to December 31, 1998. Our cumulative shareholder return over this period is based on an investment of $100 on May 26, 1996 and is compared to the cumulative total return of the Interactive Week Internet Index and the Nasdaq Composite Index. COMPARISON OF CUMULATIVE TOTAL RETURN AMONG S1, INTERACTIVE WEEK INTERNET INDEX AND NASDAQ COMPOSITE INDEX FROM MAY 26, 1996 TO DECEMBER 31, 1998
PERIOD ENDING ------------------------------ COMPANY/INDEX NAME 5/26/96 12/31/96 12/31/97 12/31/98 - ------------------ ------- -------- -------- -------- Security First Technologies Corporation......... $100.00 $ 25.00 $ 17.68 $ 74.39 Interactive Week Internet Index................. 100.00 92.89 100.10 238.53 Nasdaq Composite Index.......................... 100.00 106.02 128.94 177.36
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Chairman of our compensation committee is Mr. McCall and the other members of the committee are Mr. Gardner and Mr. Runnion. None of the members of this committee have served as an officer or employee of S1 or its operating subsidiary. During 1998, S1 used technology consulting services from McCall Consulting Group. Mr. McCall is the president of McCall Consulting. During 1998, the total amount paid to McCall Consulting was $1.1 million. At December 31, 1998, S1 had outstanding payables to McCall Consulting Group of $282,000. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. STOCK OWNED BY DIRECTORS AND MANAGEMENT The following table sets forth information known to us regarding the beneficial ownership of our common stock as of April 21, 1999 by each of our directors and the named executive officers and by all of our directors and executive officers as a group. At April 21, 1999, there were 25,172,160 shares of our common stock outstanding, as adjusted to reflect the two-for-one split of our common stock paid on May 7, 1999. Information for Mr. Michael C. McChesney, who resigned as Chairman of the Board of S1 in February 1999, is not included in this table and is set forth in the table under the caption "Principal Shareholders." All information as to beneficial ownership has been provided to us by the directors and executive officers, and unless otherwise indicated, each of the directors and executive officers has sole voting and investment power over all of shares that they beneficially own. The information set forth in this table reflects the two-for-one split of our common stock paid on May 7, 1999.
NUMBER OF SHARES PERCENT OF AND NATURE OF COMMON STOCK NAME AND POSITION(S) WITH S1 BENEFICIAL OWNERSHIP(a) OUTSTANDING - ---------------------------- ----------------------- ------------ James S. Mahan, III......................................... 2,019,442(b) 7.47% Chairman, Chief Executive Officer and President Robert F. Stockwell......................................... 243,388(c) * Chief Financial Officer and Treasurer Daniel H. Drechsel.......................................... 80(d) * President and Chief Operating Officer of S1's operating subsidiary
6 8
NUMBER OF SHARES PERCENT OF AND NATURE OF COMMON STOCK NAME AND POSITION(S) WITH S1 BENEFICIAL OWNERSHIP(a) OUTSTANDING - ---------------------------- ----------------------- ------------ Robert W. Copelan, D.V.M.................................... 287,064(e) 1.13% Director Dorsey R. Gardner........................................... 1,370,200(f) 5.44% Director Joseph S. McCall............................................ 27,000(g) * Director Howard J. Runnion, Jr....................................... 220,848(h) * Director All directors and executive officers of S1 as a group (7 persons).................................... 4,168,022 15.22%
- --------------- * Less than one percent. (a) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934, a person is deemed to be the beneficial owner, for purposes of this table, of any shares of common stock if that person has or shares voting power or investment power over the security, or has the right to acquire beneficial ownership at any time within 60 days from April 21, 1999. For this table, voting power includes the power to vote or direct the voting of shares and investment power includes the power to dispose or direct the disposition of shares. (b) The share ownership of Mr. Mahan includes 1,858,400 shares of common stock that would be issued upon the exercise of options exercisable within 60 days of April 21, 1999, 1,224 shares that are held directly by Mr. Mahan, 9,570 shares held in S1's 401(k) plan and 150,248 shares held by his wife. (c) The share ownership of Mr. Stockwell includes 140,840 shares of common stock that would be issued upon the exercise of options exercisable within 60 days of April 21, 1999, 90,576 shares held jointly with his wife, 6,410 shares held in S1's 401(k) plan, 3,728 shares held in an IRA and 1,834 shares held by his mother in an IRA. (d) The share ownership of Mr. Drechsel includes 80 shares held in S1's 401(k) plan. (e) The share ownership of Dr. Copelan includes 185,840 shares of common stock that would be issued upon the exercise of options exercisable within 60 days of April 21, 1999, 83,872 shares that are held directly by Dr. Copelan, 14,904 shares that are held by the Robert W. Copelan D.V.M. Retirement Plan and 2,448 shares that are held by his wife. (f) The share ownership of Mr. Gardner includes 153,000 shares held directly by Mr. Gardner and 1,217,200 shares held by Hollybank Investments, LP, a limited partnership of which Mr. Gardner is the general partner. (g) The share ownership of Mr. McCall includes 25,000 shares held directly by Mr. McCall and 2,000 shares held by Mr. McCall in an IRA. (h) The share ownership of Mr. Runnion includes 20,848 shares of common stock that would be issued upon the exercise of options exercisable within 60 days of April 21, 1999 and 200,000 shares owned directly by Mr. Runnion. 7 9 PRINCIPAL SHAREHOLDERS The following table sets forth information known to us regarding beneficial ownership of our common stock as of April 21, 1999 by each person believed by management to be the beneficial owner of more than 5% of our outstanding common stock. The information set forth in this table reflects the two-for-one split of our common stock paid on May 7, 1999.
NUMBER OF SHARES PERCENT OF AND NATURE OF COMMON STOCK NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(a) OUTSTANDING - ------------------------------------ ----------------------- ------------ Michael C. McChesney............................... 2,384,032(b) 9.13% 37 Muscogee Avenue Atlanta, GA 30305 Lord, Abbett & Co.................................. 2,037,390(c) 8.09% 767 Fifth Avenue New York, NY 10153 James S. Mahan, III................................ 2,019,442(d) 7.47% 3390 Peachtree Road, NE Atlanta, GA 30326 Dorsey R. Gardner.................................. 1,370,200(e) 5.44% One International Place Suite 2401 Boston, MA 02110
- --------------- (a) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934, a person is deemed to be the beneficial owner, for purposes of this table, of any shares of common stock if that person has or shares voting power or investment power over the security, or has the right to acquire beneficial ownership at any time within 60 days from April 21, 1999. For this table, voting power includes the power to vote or direct the voting of shares and investment power includes the power to dispose or direct the disposition of shares. (b) The share ownership of Mr. McChesney includes 928,800 shares issuable upon the exercise of options that are exercisable within 60 days of April 21, 1999, 1,438,692 shares owned directly by Mr. McChesney, 1,180 shares held in S1's 401(k) plan and 15,360 shares held by two members of his family. Mr. McChesney served as Chairman of the Board of S1 until his resignation in February 1999. (c) Lord, Abbett & Co. filed a Schedule 13G with the Securities and Exchange Commission dated February 12, 1999 reporting sole voting and dispositive power over the shares listed above. (d) The share ownership of Mr. Mahan includes 1,858,400 shares of common stock that would be issued upon the exercise of options exercisable within 60 days of April 21, 1999, 1,224 shares that are held directly by Mr. Mahan, 9,570 shares held in S1's 401(k) plan and 150,248 shares held by his wife. (e) The share ownership of Mr. Gardner includes 153,000 shares held directly by Mr. Gardner and 1,217,200 shares held by Hollybank Investments, LP, a limited partnership of which Mr. Gardner is the general partner. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Prior to our 1998 sale of Security First Network Bank, the bank made loans to its directors and executive officers for the financing of their homes, as well as home improvement and consumer loans. It is the belief of management that these loans were made in the ordinary course of business, were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons, and neither involved more than normal risk of collectability nor presented other unfavorable features. 8 10 During the latter part of 1996, among its ordinary course research and development activities, the company that is now S1's operating subsidiary started a project known as "Webtone." The Webtone project was established to assess the customer care issues raised as a result of interacting with retail customers over new delivery channels and subsequently to develop software solutions to resolve these issues more efficiently. In November 1997, after the assessment phase of the project was completed at a cost of approximately $300,000, the board of directors determined not to proceed with Webtone, primarily because of the board's uncertainty about the potential profitability of the project and because of the limited resources, both capital and personnel, of the operating subsidiary. The board believes this decision is consistent with the determination to discontinue the banking business of Security First Network Bank and focus resources on the Virtual Financial Manager suite of products and related services. With the board's full knowledge and agreement, Michael C. McChesney created and funded his own company to develop Webtone. Mr. McChesney resigned as the Chairman of the Board of S1 in February 1999. In undertaking these activities, Mr. McChesney and the board of directors have acknowledged that Webtone and Mr. McChesney should enter into some form of arrangement for a future business relationship. However, the parties have not determined what that arrangement should be. Since abandoning the Webtone project, S1's operating subsidiary has provided Webtone with administrative and technical services on a time and materials basis amounting to approximately $192,000 in 1998 and $80,000 in 1997. As of December 31, 1998, the operating subsidiary had a receivable from Webtone related to these services of $173,000. During 1998, S1 used technology consulting services from McCall Consulting Group. The president of McCall Consulting, Mr. Joseph S. McCall, is one of our directors. During 1998, the total amount paid to McCall Consulting was approximately $1.1 million. At December 31, 1998 S1 had outstanding payables to McCall Consulting of $282,000. 9 11 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, as of May 13, 1999. SECURITY FIRST TECHNOLOGIES CORPORATION By: /s/ ROBERT F. STOCKWELL ------------------------------------ Robert F. Stockwell Chief Financial Officer and Treasurer 10 -----END PRIVACY-ENHANCED MESSAGE-----