SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
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<PAGE>
SOFTECH, INC.
4695 44th Street, Suite B-130
Grand Rapids, Michigan 49512
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NOTICE OF ANNUAL MEETING
To be held December 11, 1998
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To the Stockholders of November 4, 1998
SOFTECH, INC.
Notice is hereby given that the Annual Meeting of Stockholders of SofTech,
Inc. (the "Company") will be held at the Company's headquarters located at 4695
44th Street S.E., Suite B-130, Grand Rapids, Michigan 49512, on Friday, December
11, 1998, at 2:00 p.m. for the following purposes:
1. To elect two Class III Directors to hold office until the Annual
Meeting of Stockholders in 2001;
2. To consider and act upon a proposal to amend the Company's Articles of
Organization to increase the number of authorized shares of common
stock of the Company, par value $.10 per share from 10 million to 20
million shares;
3. To consider and act upon a proposal to amend the Company's 1994
Employee Stock Option Plan (the "Plan") to increase the number of
shares authorized under the Plan from 1.0 million to 1.5 million
shares;
4. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending May 31, 1999; and
5. To consider and act upon any other matters which may properly come
before the meeting or any adjournments thereof.
By Order of the Board of Directors
Joseph P. Mullaney, Clerk
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, DATE, AND
SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
<PAGE>
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD December 11, 1998
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SOFTECH, INC.
4695 44th Street S.E., Suite B-130
Grand Rapids, Michigan 49512
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November 4, 1998
INFORMATION CONCERNING SOLICITATION AND VOTING
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of SofTech, Inc., a Massachusetts corporation
(the "Company"), for use at the Company's Annual Meeting of Stockholders (the
"Annual Meeting") to be held at the Company's headquarters located at 4695 44th
Street S.E., Suite B-130, Grand Rapids, Michigan 49512, on Friday, December 11,
1998, at 2:00 p.m. and at any adjournment thereof. This Proxy Statement and
enclosed form of proxy are first being sent or given to stockholders on or about
November 4, 1998.
Stock transfer books will not be closed, but the Board of Directors has
fixed the close of business on October 23, 1998 as the record date for
determining the stockholders entitled to notice of and to vote at the Annual
Meeting. As of the record date, there were outstanding 6,946,211 shares of the
Company's common stock, par value $.10 per share (the "Common Stock"), and the
holders thereof will be entitled to one vote for each share held by them.
All proxies in the enclosed form that are properly executed and returned to
the Company will be voted at the Annual Meeting or any adjournment thereof in
accordance with any specifications thereon, or, if no specifications are made,
will be voted FOR the nominees in proposal 1, FOR proposal 2, FOR proposal 3,
and FOR proposal 4. Any proxy may be revoked by any stockholder who attends the
meeting and gives oral notice of his or her intention to vote in person, without
compliance with any other formalities. In addition, any proxy given pursuant to
this solicitation may be revoked prior to the Annual Meeting by delivering a
written revocation or a duly executed proxy bearing a later date to the Clerk of
the Company.
A proxy may confer discretionary authority to vote with respect to any
matter which management does not know, a reasonable time before the date hereof,
is to be presented at the Annual Meeting. At the date hereof the management of
the Company has no knowledge of any business other than the matters set forth in
the Notice of Annual Meeting of Stockholders that will be presented for
consideration at the Annual Meeting and which would be required to be set forth
in this Proxy Statement or on the related Proxy Card. If any other matter is
properly presented to the Annual Meeting for action, it is intended that the
persons named in the enclosed form of proxy and acting thereunder will vote in
accordance with the discretion of the proxy holders.
<PAGE>
The presence, in person or by proxy of holders of at least a majority of
the total number of outstanding shares of Common Stock entitled to vote is
necessary to constitute a quorum for the transaction of business at the Annual
Meeting. Abstentions and broker non-votes are each included in the number of
shares present at the Annual Meeting for purposes of establishing a quorum.
Abstentions and broker non-votes will have no effect on the outcome of the
election of directors and will have the effect of a vote against the other
proposals.
The Company's Annual Report on Form 10-K, including the Company's financial
statements, for the fiscal year ended May 31, 1998 is enclosed.
PROPOSAL 1. NOMINATION AND ELECTION OF DIRECTORS
The Company's Articles of Organization provide that the Board of Directors
will be divided into three classes, each class to consist as nearly as possible
of one-third of the Directors. The term of office of the Directors of each class
expires at the Annual Meeting of Stockholders three years subsequent to their
election. Directors of only one class are elected at each Annual Meeting of
Stockholders.
The Company's Board of Directors has nominated William Johnston and Timothy
Weatherford for election as Directors at the Annual Meeting. The persons named
in the enclosed proxy intend to vote to elect each such Nominee as a Director
unless otherwise instructed. Each of the Class III Nominees is to be elected to
hold office until the Annual Meeting of Stockholders in 2001 or until his or her
successor is chosen and qualified. Each of the Class I Directors was elected to
hold office until the Annual Meeting of Stockholders in 1999 or until his or her
successor is chosen and qualified. Each of the Class II Directors was elected to
hold office until the Annual Meeting of Stockholders in 2000 or until his or her
successor is chosen and qualified. Information regarding the nominees and
incumbent Directors of the Company is set forth below.
Class III Nominees for Election as Director
William Johnston, 51, for a term to expire in 2001; Mr. Johnston has served
since 1991 as President of Greenleaf Asset Management, a Michigan-based
investment advisory and venture capital firm. Mr. Johnston was appointed as a
Director of the Company in September 1996.
Timothy Weatherford, 34, for a term to expire in 2001; Mr. Weatherford has
served as Vice President of the Company since September 1996. Mr. Weatherford
served as Branch Manager of the Indiana office of the Company's Computer Aided
Design ("CAD") Division from his hiring in April 1990 until September 1996.
Prior to joining the Company, Mr. Weatherford was employed by CAD/CAM
Engineering from 1987 to 1990 in various capacities and by General Motors from
1982 to 1987 in various capacities. Mr. Weatherford was appointed as a Director
of the Company in September 1996.
The Company believes that the above-named nominees for Director will be
able to serve. If any nominee should be unable to serve, the individuals named
in the enclosed proxy may vote for a substitute nominee designated by the Board
of Directors at the time, or the size of the Board will be reduced. The Company
currently knows of no reason why any nominee will be unable to serve.
The affirmative votes of plurality of the shares of Common Stock present or
presented at the Annual Meeting is required for the election of directors.
The Board of Directors recommends a vote "FOR" the election of these
nominees.
2
<PAGE>
Incumbent Directors
Class I
Timothy L. Tyler, 45, term expires in 1999; Mr. Tyler has served since 1995
as President of Borroughs Corporation, a privately held, Michigan-based business
that designs, manufactures and markets industrial and library shelving units,
metal office furniture and check out stands primarily in the United States.
Prior to 1995, Mr. Tyler served as General Manager of Tyler Supply Company from
1979 to 1995. Mr. Tyler was appointed as a Director of the Company in September
1996.
Mark R. Sweetland, 49, term expires in 1999; Mr. Sweetland has served as
President and Chief Executive Officer of the Company since September 1996. Mr.
Sweetland served as Vice President of the Company from March 1994 until
September 1996. Since March 1992 Mr. Sweetland has served the Company as
President of Information Decisions, Inc. ("IDI"), a wholly owned subsidiary of
the Company. Mr. Sweetland has been employed by IDI since 1980 in various
account representative and management roles. Mr. Sweetland was appointed as a
Director of the Company in September 1996.
Class II
Ronald Elenbaas, 45, term expires in 2000; Mr. Elenbaas is President of
Stryker Surgical Group, a division of Stryker Corporation. He has been employed
by Stryker Corporation in various positions since 1975 and was promoted to his
present position in 1986. Mr. Elenbaas also serves on the Board of the American
Red Cross (Kalamazoo and Cass County). Mr. Elenbaas was appointed as a Director
of the Company in September 1996.
Kenneth Ledeen, 52, term expires in 2000; Mr. Ledeen is Chairman and CEO of
Nevo Technologies, Inc., a Massachusetts-based computer software consulting and
services firm. From 1993 to 1997, Mr. Ledeen was a consultant with Covington
Associates, a Massachusetts-based investment advisor. From 1986 to 1993, Mr.
Ledeen was President of Sigma Design, a company that developed CAD/CAM software
products, and from 1980 to 1986 he served as Vice President at Computervision
Corporation. Mr. Ledeen was appointed as Director of the Company in September
1996.
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
Information concerning beneficial ownership of the Company's Common Stock,
as of August 15, 1998, for (i) each person named in the "Summary Compensation
Table" below as an executive officer of the Company during the fiscal year ended
May 31, 1998, (ii) each Director and each of the Company's Nominees to the Board
of Directors, (iii) all Directors and executive officers of the Company as a
group, and (iv) all persons known to the Company to be the beneficial owners of
more than 5% of the Company's Common Stock, is set forth below.
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<PAGE>
Shares of Common Percentage of Outstanding
Stock Beneficially Common Stock Beneficially
Owned as of Owned as of
Name of Beneficial Owner August 15, 1998 (1) August 15, 1998 (2)
- - --------------------------------------------------------------------------------
Mark R. Sweetland 304,486(3) 4.31%
Timothy J. Weatherford 229,141(3) 3.25%
Joseph P. Mullaney 197,464 2.80%
Jeanne Naysmith 141,429(3) 2.00%
Andrew Bristol 50,000 *
William Johnston 209,600(3)(4) 2.97%
Timothy L. Tyler 6,600(3) *
Ronald Elenbaas 4,600(3) *
Kenneth Ledeen 4,600(3) *
All Directors and executive
officers as a group (9 persons) 1,147,920(5) 16.26%
- - ----------
* Represents less than 1% ownership.
(1) Based upon information furnished by the persons listed. Except as otherwise
noted, all persons have sole voting and investment power over the shares
listed. A person is deemed, as of any date, to have "beneficial ownership"
of any security that such person has the right to acquire within 60 days
after such date.
(2) There were 6,822,842 shares outstanding on August 15, 1998. In addition,
115,900 shares issuable upon exercise of stock options held by Directors
and executive officers of the Company are deemed to be outstanding as of
August 15, 1998 for purposes of certain calculations in this table. See
notes 3 and 4 below.
(3) Includes shares issuable under stock options as follows: Mr. Sweetland -
43,000 shares; Mr. Weatherford - 2,500 shares; Mr. Naysmith - 50,000; Mr.
Tyler - 6,600; Mr. Johnston - 4,600; Mr. Elenbaas - 4,600; Mr. Ledeen -
4,600.
(4) Includes warrants for 120,000 shares issuable in exchange for $8.00 per
share.
(5) Includes 115,900 shares issuable upon exercise of stock options and 120,000
shares issuable upon exercise of warrants held by all Directors and
executive officers as a group.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended ("Section
16(a)") requires the Company's Directors and executive officers, and persons who
own more than ten percent of a registered class of the Company's equity
securities (collectively, "Section 16 reporting persons"), to file with the
Securities and Exchange Commission ("SEC") initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Company. Section 16 reporting persons are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and on written representations that no other
reports were required, during the fiscal year ended
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<PAGE>
May 31, 1998, the Section 16 reporting persons complied with all Section 16(a)
filing requirements applicable to them.
Board of Directors and Committee Meetings
During the fiscal year ended May 31, 1998, the Board of Directors of the
Company held six meetings, and the Audit Committee and the Compensation
Committee held one meeting. Each Director attended more than 75% of the
aggregate number of Board meetings and meetings of committees held on which the
Director served.
Each member of the Board of Directors also serves on the Audit Committee of
the Board of Directors. The Audit Committee recommends the engagement of the
Company's independent auditors. In addition, the Audit Committee reviews
comments made by the independent auditors with respect to internal controls and
considers any corrective action to be taken by management; reviews internal
accounting procedures and controls within the Company's financial and accounting
staff; and reviews the need for any non-audit services to be provided by the
independent auditors.
Each member of the Board of Directors also serves on the Compensation
Committee of the Board of Directors. The Compensation Committee recommends
salaries and bonuses for officers and general managers and establishes general
policies and procedures for salary and performance reviews and the granting of
bonuses to other employees. It also administers the Company's 1994 Stock Option
Plan (the "Plan") and the SofTech Employee Stock Purchase Plan.
COMPENSATION OF NON-EMPLOYEE DIRECTORS
For the 1998 fiscal year, non-employee Directors received options in lieu
of cash remuneration for their services. Employee Directors are not paid any
fees or additional compensation for service as members of the Board of Directors
or any committee thereof.
Pursuant to the Company's 1994 Stock Option Plan (the "1994 Stock Option
Plan"), non-employee Directors may be granted non-qualified options to purchase
shares of Common Stock of the Company. The Compensation Committee of the Board
of Directors administers the 1994 Stock Option Plan and determines which
Directors will receive stock options, the number of shares subject to each stock
option, the vesting schedule of the options, and the other terms and provisions
of the options granted. Stock options typically terminate upon a Director
leaving his or her position for any reason other than death or disability. No
option may be exercised after the expiration of ten years from its date of
grant. Under the Plan, all non-employee Directors receive 10,000 options upon
appointment to the Board and receive 3,000 options on the anniversary date of
the initial award for as long as the Director serves as a Director of the
Company. During the fiscal year ended May 31, 1998 there were 12,000 options
granted to non-employee Directors.
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<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation paid to the President and
Chief Executive Officer of the Company and each of the Company's two other most
highly compensated executive officers (the "Named Executives") during or with
respect to the 1996, 1997 and 1998 fiscal years for services in all capacities
to the Company.
<TABLE>
<CAPTION>
Long Term
Compensation Awards
Securities
Under- All Other
Other Annual lying Compen-
Name and Fiscal Salary ($) Bonus Compensation Options sation
Principal Position Year (1) ($) ($) (#) ($)(2)
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mark R. Sweetland (3) 1998 80,000 -- -- -- 1,600
President and 1997 156,000 -- -- -- 379,993(4)
Chief Executive Officer 1996 156,000 -- -- -- 3,120
Joseph P. Mullaney 1998 80,000 -- -- -- 1,600
Vice President and 1997 125,000 233,125 -- 150,000 4,582
Chief Financial Officer 1996 125,000 -- -- -- 1,667
Timothy J. Weatherford(5) 1998 80,000 -- -- -- 1,600
Executive Vice 1997 81,667 37,500 83,329(6) -- 378,531(4)
President, Sales 1996 30,000 -- 261,998(6) -- 3,000
</TABLE>
(1) Includes amounts deferred by Messrs. Sweetland, Mullaney and Weatherford
under the Company's 401(k) plan.
(2) Amounts listed in this column includes the Company's contributions to each
of the Named Executive's accounts under the Company's 401(k) plan and other
compensation as noted.
(3) Mr. Sweetland was appointed as Director, President and Chief Executive
Officer in September 1996. Prior to September 1996, Mr. Sweetland served as
Vice President of the Company.
(4) Represents 204,750 shares, fully vested, of the Company's Common Stock
awarded on April 17, 1997.
(5) Mr. Weatherford was appointed as Director, Executive Vice President, Sales,
in September 1996. Prior to September 1996, Mr. Weatherford served as
Branch Manager of the Company's Indianapolis sales office.
(6) Represents sales commissions paid under Branch Manager Sales Compensation
Plan.
OPTION GRANTS IN THE LAST FISCAL YEAR
No stock options or stock appreciation rights ("SAR's") were granted to
Names Executives of the Company during fiscal year 1998.
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AGGREGATE OPTION EXERCISES IN THE LAST FISCAL YEAR AND OPTION VALUE AT MAY 31,
1998.
The following table sets forth the shares acquired and the value realized
upon exercise of stock options during the 1998 fiscal year by the President and
Chief Executive Officer and each Named Executive and certain information
concerning the number and value of unexercised options.
<TABLE>
<CAPTION>
Number of Value of Unexercised
Shares Value Number of Unexercised In-the-Money Option
Name Acquired on Realized Options at May 31, 1998 at May 31, 1998 ($)
Exercise ($)(1) Exercisable/Unexercisable Exercisable/Unexercisable(2)
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mark R. Sweetland (4) --- --- 43,000 / --- 244,939 / ---
Timothy J. Weatherford (5) --- --- 2,500 / --- 4,058 / ---
Joseph P. Mullaney 180,000 758,402 --- / --- --- / ---
</TABLE>
(1) Market value on exercise date less the exercise price.
(2) Market value of underlying securities at May 31, 1998 based on a per share
value of $6.063 less the aggregate exercise price.
EMPLOYMENT CONTRACTS
The Company has not executed any employment contracts with its Executive
Officers.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Each of the members of the Board of Directors served as members of the
Compensation Committee of the Company's Board of Directors during the fiscal
year ended May 31, 1998. Messrs. Sweetland and Weatherford participated in the
deliberations concerning compensation of all executive officers other than
themselves.
Report of the Board Compensation Committee on Executive Compensation
General. The Compensation Committee of the Board of Directors (the
"Committee") is currently composed of all of the members of the Board of
Directors and meets or takes action as many times during a year as is deemed
necessary. The Committee's responsibilities include making recommendations to
the Board for officers and general managers on the key components of the
Company's executive compensation program, base salary, annual incentive awards,
long-term incentives in the form of stock options, and other benefits typically
offered to executives by comparable corporations.
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<PAGE>
Compensation Philosophy. The Company's compensation program has been
designed to:
o Support a pay for performance policy that differentiates in
compensation amounts based on Company and individual performance;
o Provide compensation opportunities that are comparable to those
offered by other leading companies, thus allowing the Company to
retain and compete for fully qualified executives who are in the very
competitive high technology and professional services marketplace; and
o Align the interests of executives with the long-term interests of
stockholders through award opportunities that can result in ownership
of Common Stock of the Company.
Consistent with the objectives of the compensation philosophy, the
percentage of an executive's potential total compensation that is based on
performance incentives increases with their level of responsibility. This
results in an executive's total compensation varying from year to year based on
the performance of the Company and the individual.
Base Salaries. Base salary levels for the President and CEO, other
officers, and general managers are reviewed annually by the Committee. Certain
of the general managers were granted base salary increases effective during the
year based upon a number of factors, including individual performance, and
contributions towards the growth of the Company.
Annual Cash Incentives. All officers participate in an Executive Incentive
Plan, which compensates these individuals in the form of cash bonuses. Awards
under this plan are based on the attainment of specific Company and/or business
unit performance measures established by the Compensation Committee at the
beginning of the fiscal year. For the fiscal year ended May 31, 1998, the
Company did not pay any bonuses to those officers participating in the Executive
Incentive Plan.
Long Term Incentives. 1994 Stock Option Plan. The Company's 1994 Stock
Option Plan is designed to align a portion of the executive compensation program
with stockholder interests by providing for the grant of options to employees,
directors, officers and consultants to purchase up to 1,000,000 shares of Common
Stock of the Company. The 1994 Stock Option Plan was adopted at the Annual
Meeting of Stockholders on November 1, 1994.
The Committee believes that stock options provide greater incentives to
executives to improve the performance of the Company and thereby increase the
value of its stock. It is only by increasing the Company's stock price that
executives are able to realize the economic value of stock options. The
Committee believes that this more closely aligns the interests of the Company's
officers with those of the Company's stockholders.
The Committee administers the Plan and determines which officers will
receive stock options, the number of shares subject to each stock option, the
vesting schedule of the options, and the other terms and provisions of the
options granted. When recommending option awards, the following guidelines were
used: (i) the individual's current contribution to Company performance, (ii) the
anticipated contribution in meeting the Company's long term strategic
performance goals, (iii) the employee's ability to impact corporate and/or
business unit results; and (iv) the employee's current incentive to maximize
operating results based on stock ownership and option awards.
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<PAGE>
CEO Compensation. Mr. Sweetland's compensation for fiscal year 1998 was
composed of base compensation and incentive bonuses based on both quarterly and
annual earnings per share from continuing operations before taxes and the
investment gain but including all bonuses ("EPS Goals"). Base compensation was
$80,000. Quarterly bonuses of $47,500 per quarter were earned if EPS Goals of
$.04, $.05, $.06 and $.07 were attained for Q1, Q2, Q3 and Q4, respectively. The
quarterly bonus would be reduced by 50% for attainment of the EPS Goals greater
than 50% but less than 100%. An annual bonus of $50,000 would be earned if
annual earnings per share from continuing operations before taxes and the
investment gain but including all bonuses (Annual EPS Goal") was in excess of
$.30. Lastly, no bonuses would be earned and any previous quarterly bonuses paid
would be recovered if the Annual EPS was less than $.20. Lastly, Mr. Sweetland
was allowed a recoverable draw of $3,350 per pay period, or $87,100 annually.
This draw was fully recoverable against bonuses and other forms of compensation.
During fiscal 1998 Mr. Sweetland earned quarterly bonuses of $62,500.
However, the Company failed to meet its minimum annual EPS goal of $.20 per
share from continuing operations before taxes and the investment gain but
including all bonuses. As a result, subsequent to fiscal year end Mr. Sweetland
repaid the Company for $62,500 in quarterly bonuses received during the year. In
addition, Mr. Sweetland executed a one year note, payable to the Company, to
repay advances during fiscal year 1998 that were not earned based on annual EPS
attainment below the minimum required to earn such advances.
The Compensation Committee of the
Board of Directors
9
<PAGE>
PERFORMANCE COMPARISON
The following graph illustrates the return that would have been realized
over the past five fiscal years of the Company (assuming reinvestment of
dividends) by an investor who invested on May 31, 1993 in each of (i) the
Company's Common Stock, (ii) the NASDAQ Stock Market--US Index, and (iii) The
NASDAQ Computer & Data Processing Index. The historical information set forth
below is not necessarily indicative of future performance.
[GRAPH]
[THE FOLLOWING TABLE IS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* AMONG SOFTECH, INC., THE NASDAQ
STOCK MARKET-US INDEX, AND THE NASDAQ COMPUTER & DATA PROCESSING INDEX.
NASDAQ
Computer &
NASDAQ Stock Data
SofTech, Inc. Market-US Processing
May - 93 100 100 100
May - 94 216 105 106
May - 95 135 125 146
May - 96 98 182 224
May - 97 160 205 266
May - 98 466 261 348
* $100 INVESTED ON 5/31/93 IN STOCK OR INDEX-- INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING MAY 31.
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<PAGE>
PROPOSAL 2. AMEND THE COMPANY'S ARTICLES OF ORGANIZATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK OF THE COMPANY, PAR
VALUE $.10 PER SHARE, FROM 10 MILLION TO 20 MILLION
The Company is currently authorized to issue up to 10,000,000 shares of its
Common Stock. There are currently issued and outstanding 6,946,211 shares of
Common Stock. In addition, there are currently 144,167 shares of Common Stock
reserved for issuance under the Company's Stock Option Plan, 150,000 shares of
Common Stock reserved for issuance under the Company's Employee Stock Purchase
Program and 600,000 shares of Common Stock reserved for issuance under certain
warrants associated with the Senior and Subordinated debt facilities described
in the Annual Report.
In addition, on October 26, 1998, the Company's Board of Directors approved
the issuance of 1,099,948 restricted shares in a private placement to Greenleaf
Asset Management ("Greenleaf") in exchange for the conversion of the $1.5
million short term note due Greenleaf and $1.5 million of cash to be used for
working capital purposes. This transaction is described in the Company's 8-K
filing on November 4, 1998 with the Securities and Exchange Commission.
Proposed Amendment of the Articles of Organization
The Board of Directors proposes that the Company's Articles of Organization
be amended to increase the number of authorized shares of Common Stock of the
Company, par value $.10 per share, 20 million, an increase of 10 million shares.
The Board of Directors believes that such an increase will enhance the
Company's ability to pursue acquisitions and permit the Board of Directors
increased flexibility should it determine in the future to raise additional
capital, declare stock dividends and splits, or engage in other general
corporate activities. The Company, however, has no present arrangements,
agreements, or understandings for any acquisition or for the issuance of any
portion of the increased number of shares of Common Stock to be authorized.
A possible effect of the increase in the number of authorized shares of
Common Stock may be to enable Directors, through the issuance of additional
shares of Common Stock, to attempt to block or discourage a tender offer or
other takeover attempt that might be favored by a majority of the stockholders.
It should be noted in this regard that the Company's Articles of Organization
already contain a provision which requires, unless otherwise approved by the
Board of Directors or unless certain price and procedure guidelines are met, a
90% stockholder vote to effect a merger, consolidation, sale of assets, or
certain other "Business Combinations" with any "Interested Stockholder" (as such
terms are defined in the Company's Articles of Organization).
The Board of Directors or a committee thereof is authorized to issue all or
any part of the authorized but unissued Common Stock, without further
stockholder votes, at such times to such persons and for such consideration as
the Board or a committee thereof may determine in its discretion. The Company's
stockholders should be aware that the issuance of any additional shares of
Common Stock could cause a dilution of voting rights, net income per share and
net book value of the Common Stock. Holders of the Common Stock of the Company
do not have preemptive rights to subscribe to additional securities that may be
issued by the Company.
11
<PAGE>
Vote Required for Approval
The affirmative vote of the holders of a majority of the outstanding shares
of the Company's Common Stock entitled to notice of and to vote at the Annual
Meeting is required for approval of the amendment to increase the number of
shares of authorized Common Stock.
The Board of Directors believes that the proposed amendment is in the best
interests of the Company and therefore recommends a vote "FOR" this proposal.
PROPOSAL 3. AMENDMENT TO THE COMPANY'S 1994 EMPLOYEE STOCK OPTION PLAN
TO INCREASE THE NUMBER OF SHARES AUTHORIZED UNDER THE PLAN FROM 1.0
MILLION TO 1.5M MILLION SHARES
Background of the Plan
The Plan was adopted by the Board of Directors of the Company in August
1994 and was approved by the Company's stockholders at the 1994 Annual Meeting.
The Plan provides for the granting of "incentive stock options" under the
Internal Revenue Code of 1986, as amended (the "Code") and non-qualified options
to purchase shares of Common Stock. Options under the Plan may be granted to
non-employee Directors, officers, employees, and consultants of the Company and
its subsidiaries.
Proposed Amendment of the Plan
As originally adopted and subsequently amended in April 1997, the Plan
provided for the issuance of up to 1,000,000 shares of Common Stock pursuant to
the exercise of options granted under the Plan. The Company has granted options
to substantially all of its employees. In addition, options under the Plan have
been utilized as an incentive to certain employees of entities acquired by the
Company over the last two years. Lastly, options under the Plan have been
utilized to attract new hires especially in the intensely competitive market for
engineering talent to support the Company's growth. As a result of the Board of
Director's belief that stock options should be granted as a performance
incentive throughout the organization in order to align the interests of the
Company's employees with the performance of the Company, the Company has only
approximately 144,000 shares available to issue under the Plan. It is the
opinion of the Board of Directors that this number of options is not sufficient
to meet its hiring needs over the coming year.
The Board believes that the Plan has been and continues to be an important
incentive in attracting, maintaining and motivating key employees, consultants
and Directors of the Company. The Board believes that the ability to grant
additional options will help retain and attract such personnel. The Company,
however, has no present arrangements, agreements, or understandings for the
issuance of any portion of the increased number of shares under the Plan.
The Board of Directors proposes that the 1994 Employee Stock Option Plan be
amended to increase the number of shares authorized for issuance under the Plan
by 500,000 shares to 1,500,000 shares. A copy of the amendment to the Plan is
attached to this Proxy Statement as Exhibit A.
Plan Benefits
The benefits or amounts that will be received or allocated to any
individual under the Plan are not determinable at this time since the Company
has no present arrangements, agreements, or understandings for the issuance of
any portion of the increased number of shares under the Plan.
12
<PAGE>
Vote Required for Approval
The proposed amendment of the Plan requires the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock entitled to vote
at the Annual Meeting.
The Board of Directors believes that the proposed amendment is in the best
interests of the Company and therefore recommends a vote "FOR" the approval of
the amendment of the Plan.
PROPOSAL 4. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP as the independent
auditors of the Company for the fiscal year ending May 31, 1999. The Board
believes, however, that it is desirable to obtain stockholder ratification of
the selection of the Company's auditors. A representative of Ernst & Young LLP
is expected to be present at the Annual Meeting to make a statement if he wishes
to do so and to respond to appropriate questions.
During the fiscal year ended May 31, 1998, the Company engaged Ernst &
Young LLP for the purpose of performing "audit services". For this purpose,
"audit services" include: examination of annual fiscal statements; review and
consultation in connection with filings of annual reports and registration
statements with the SEC; consultation on accounting matters; preparation of
reports to management covering recommendations on accounting, internal control
and similar matters; meetings with the Audit Committee; and audits of employee
benefit plans. This was the first year in which this firm has acted as
independent auditors for the Company.
Ratification will require the affirmative vote of the holders of a majority
of the shares represented in person or by proxy and entitled to vote at the
meeting. If the stockholders do not ratify the selection of the Company's
independent accountants, the Board of Directors will reconsider its selection.
The Board of Directors recommends a vote "FOR" this proposal.
Solicitation of Proxies
The expenses of preparing, printing and mailing this proxy statement and
the proxies solicited hereby will be borne by the Company. In addition to the
use of the mails, proxies may be solicited by officers and directors and regular
employees of the Company, without additional remuneration, in person or by
telephone. The Company will also request brokerage firms, nominees, custodians
and fiduciaries to forward proxy materials to the beneficial owners of shares
held of record and will provide reimbursement for the cost of forwarding the
material in accordance with customary charges. The Company may retain a proxy
solicitor to aid in the solicitation of proxies.
Submission of Proposals for the 1999 Annual Meeting
In order for any stockholder proposal to be considered for inclusion in the
Board of Directors' proxy statement for the Company's 1999 Annual Meeting, it
must be received by the Clerk of the Company at the principal executive offices
of the Company, at 4695 44th Street, Suite B-130, Grand Rapids, Michigan 49512,
on or before July 1, 1999. Such a proposal must comply with the requirements as
to form and substance established by the Company's By-Laws and applicable laws
and regulations in order to be included in the proxy statement.
REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS IMPORTANT TO THE
COMPANY. PLEASE COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY CARD
TODAY.
13
<PAGE>
APPENDIX A
SECOND AMENDMENT
TO
SOFTECH, INC.
1994 STOCK OPTION PLAN
WHEREAS, the SofTech, Inc. 1994 Stock Option Plan (the "Plan") was adopted
by the Board of Directors and the stockholders of SofTech, Inc. (the "Company")
on November 2, 1994 as a performance incentive for officers, employees,
consultants and other key persons of the Company;
WHEREAS, Section 3(a) of the Plan, as amended, provides that the total
number of shares of the Company's common stock, $.10 par value per share (the
"Stock"), which may be issued pursuant to stock options granted under the Plan
shall not exceed an aggregate of 1,000,000 shares of Stock;
WHEREAS, The Board of Directors of the Company believes that the number of
shares of Stock remaining available for issuance under the Plan has become
insufficient for the Company's current and anticipated future needs;
WHEREAS, Section 10 of the Plan provides that the Board of Directors of the
Company may amend the Plan at any time, subject to certain conditions set forth
therein; and
WHEREAS, the Board of Directors of the Company has determined that it is in
the best interests of the Company to amend the Plan to provide that an
additional 500,000 shares of Stock be made available for issuance under the
Plan.
NOW, THEREFORE:
1. Increase in Authorized Shares. Section 3(a) of the Plan is hereby
amended and restated to provide in its entirety as follows:
(a) The maximum number of shares of Stock reserved and available for
issuance under the Plan shall be 1,500,000 shares of Stock, subject to
adjustments for changes in the Company's capitalization. For purposes of this
limitation, the shares of Stock underlying any portion of any Awards which are
forfeited, canceled, reacquired by the Company, satisfied without the issuance
of Stock or otherwise terminated (other than by exercise) shall be added back to
the Shares of Stock available for issuance under the Plan as long as the
participants to whom such Awards have been previously granted received no
benefit of ownership of the underlying shares of Stock to which such portion of
the Award related. Subject to such overall limitation, shares may be issued up
to such maximum number pursuant to any type or types of Award including
Incentive Stock Options. Shares issued under the Plan may be authorized but
unissued shares or shares reacquired by the Company.
IN WITNESS WHEREOF, this Second Amendment to the Plan has been adopted by
the Board of Directors of the Company this 26th day of October, 1998, to be
submitted for approval by the Company's stockholders at the Company's 1998
Annual Meeting of Stockholders to be held on December 11, 1998.
14
<PAGE>
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
- - -----------------------------------
SOFTECH, INC.
- - -----------------------------------
Mark box at right if an address changes or comment has been noted [_]
on the reverse side of this card.
RECORD DATE SHARES:
1. Election of Directors
For All With- For All
Nominees hold Except
[_] [_] [_]
William Johnston
Timothy Weatherford
NOTE: If you do not wish your shares voted "For" a particular nominee, mark the
"For All Except" box and strike a line through the name of the nominee. Your
shares will be voted for the remaining nominee.
2. Approval of the increase in the number of authorized shares of common stock
of the Company, par value $.10 per share from 10 million to 1.5 million.
For Against Abstain
[_] [_] [_]
3. Approval of the increase in the number of shares authorized under the
Company's 1994 Employee Stock Option Plan form 1.0 million to 1.5 million.
For Against Abstain
[_] [_] [_]
4. Ratification of the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending May 31, 1999.
For Against Abstain
[_] [_] [_]
Please be sure to sign and date this Proxy. Date:_________________________
__________________________________________
Stockholder sign here
__________________________________________
Co-owner sign here
DETACH CARD DETACH CARD
<PAGE>
SOFTECH, INC.
Dear Stockholder,
Please take note of the important information enclosed with this Proxy Ballot.
There are a number of issues related to the management and operation of your
Corporation that require your immediate attention and approval. These are
discussed in detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the boxes on this proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy vote in the enclosed
postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders, December
11, 1998.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
SofTech, Inc.
<PAGE>
SOFTECH, INC.
Proxy for the Annual Meeting of Stockholders, December 11, 1998
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Mark R. Sweetland and Joseph P. Mullaney, and
each of them, proxies with power of substitution to vote for and on behalf of
the undersigned all shares of capital stock of SofTech, Inc. registered in the
name of the undersigned at the 1998 Annual Meeting of Stockholders to be held at
4695 44th Street S.E., Suite B-130, Grand Rapids, Michigan on Friday, December
11, 1998 at 2:00p.m., and at any adjournment thereof. In their discretion, the
proxies are authorized to vote upon such other business as may properly come
before the meeting or any adjournment thereof.
The undersigned hereby revokes any proxy previously given and acknowledges
receipt of the Notice of Annual Meeting and Proxy Statement and a copy of the
Annual Report for the fiscal year ended May 31, 1998.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder(s). If no direction is given, the proxy will
voted "FOR" Proposals 1, 2, 3 and 4.
- - --------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE
AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Please sign this Proxy exactly as your name(s) appear(s) on the books of the
Company. Joint owners should each sign personally. Trustees and other
fiduciaries should indicate the capacity in which they sign, and where more than
one name appears, a majority must sign. If a corporation, this signature should
be that of an authorized officer who should state his or her title.
- - --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED DO YOU HAVE ANY COMMENTS
__________________________________________ _________________________________
__________________________________________ _________________________________
__________________________________________ _________________________________
