SECURITIES AND EXCHANGE COMMISION
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 (FEE REQUIRED)
For the fiscal year ended May 31, 1998
Commission file number 0-10665
SofTech, Inc.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2453033
(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification Number)
4695 44th Street SE, Suite B-130, Grand Rapids, MI 49512
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (616) 957-2330
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 par value
(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 II of this Form 10-K or any amendment to this
Form 10-K. [X]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant: $27,706,000 as of August 18, 1998. On August 18, 1998 the
registrant had outstanding 6,822,842 shares of common stock of $.10 par value,
which is the registrant's only class of common stock.
<PAGE>
Part III, Items 10, 11, 12, and 13 of this report on Form 10-K are hereby
amended and restated in full by adding those items as follows:
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is certain information regarding the Directors and
executive officers of SofTech, Inc. (the "Company") as of August 15, 1998, based
on information furnished by them to the Company.
DIRECTORS
Mark R. Sweetland, 49, term expires in 1999; Mr. Sweetland was appointed
President and Chief Executive Officer of the Company in September 1996. Mr.
Sweetland served as Vice President of the Company from March 1994 until such
appointment. 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 a Director of
the Company in September 1996.
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. Mr.
Tyler served as President and General Manager of Tyler Supply Company from 1979
to 1995. Mr. Tyler was appointed a Director of the Company in September 1996.
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, Michigan). Mr. Elenbaas was appointed 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 a Director of the Company in September
1996.
William Johnston, 51, terms expires in 1998; Mr. Johnston has served since
1991 as President of Green Leaf Asset Management, a Michigan-based investment
advisory and venture capital firm. Mr. Johnston was appointed a Director of the
Company in September 1996.
Timothy J. Weatherford, 34, term expires in 1998; 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 such appointment.
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 a Director of
the Company in September 1996.
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 accountants. In addition, the Audit Committee reviews
comments made by the independent accountants 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 accountants.
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.
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 May 31, 1998, the Section 16
reporting persons complied with all Section 16(a) filing requirements applicable
to them.
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<PAGE>
ITEM 11 - EXECUTIVE COMPENSATION
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 were 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.
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 three 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>
Annual Compensation Long Term Compensation Awards
------------------- -----------------------------
Other Annual Securities All Other
Name and Fiscal Salary ($) Bonus Compensation Underlying Compensation ($)(2)
Principal Position Year (1) ($) ($) Options (#)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mark R. Sweetland(3) 1998 80,000 -- -- -- 1,600
President and 1997 156,000 25,000 -- -- 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, Weatherford and
Naysmith under the Company's 401(k) plan.
(2) Except as otherwise noted, amounts listed in this column reflect the
Company's contributions to each of the Named Executive's accounts under the
Company's 401(k) plan.
(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 ("SARs") were granted to
Named Executives of the Company during fiscal year 1998.
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<PAGE>
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>
Value of Unexercised
Number of Number of Unexercised In-the-Money Option
Shares Acquired Value Realized Options at May 31, 1998 At May 31, 1998 ($)
Name on Exercise ($)(1) Exercisable/Unexercisable Exercisable/Unexercisable(2)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mark R. Sweetland -- -- 43,000 / --- 244,939 / ---
Timothy J. Weatherford -- -- 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 does not have employment contracts with its Named Executives.
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, officers of the
Company, participated in the deliberations concerning compensation of all
executive officers other than themselves.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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 a Named Executive 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 and (iii) all Directors and executive officers of the Company as a
group is set forth below. There were no beneficial owners of five percent or
more of the Company's issued and outstanding Common Stock.
<TABLE>
<CAPTION>
Percentage of
Outstanding Common
Shares of Common Stock Stock Beneficially
Beneficially Owned as of Owned as of
Name of Beneficial Owner August 15, 1998 (1) August 15, 1998 (2)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
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
Andy 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 1,147,920(5) 16.26%
officers as a group (9 persons)
</TABLE>
- ----------
* Less than one percent (1%).
(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 and 120,000 shares
issuable upon exercise of warrants held by certain 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, 4 and 5
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.
4
<PAGE>
(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.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANACTIONS
As disclosed in Footnote F to the Company's 1998 Form 10-K, the Company has
a subordinated note to Greenleaf Capital ("Greenleaf") in the amount of $5
million and a short-term bridge note payable to Greenleaf in the amount of $1.5
million that was used to fund the acquisition of ADRA. William D. Johnston, a
director of SofTech since September 1996, is the President of Greenleaf.
Management.
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.
5
<PAGE>
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.
SofTech, Inc.
By /S/ Joseph P. Mullaney
Joseph P. Mullaney, Vice President
and Chief Financial Officer
Date: September 30, 1998
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