<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
MIDISOFT CORPORATION
-----------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)() and 0-11
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
PER UNIT PRICE
OR OTHER
UNDERLYING
AGGREGATE VALUE OF
NUMBER OF TRANSACTION PROPOSED
SECURITIES TO COMPUTED MAXIMUM
TITLE OF EACH CLASS OF WHICH PURSUANT TO AGGREGATE VALUE
SECURITIES TO WHICH TRANSACTION EXCHANGE ACT OF
TRANSACTION APPLIES: APPLIES: RULE 0-11: TRANSACTION: TOTAL FEE PAID
<S> <C> <C> <C> <C>
</TABLE>
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
<TABLE>
<S> <C> <C> <C>
Amount Previously Paid: Filing
Party:
Form, Schedule or
Registration Statement No: Date Filed:
</TABLE>
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<PAGE>
MIDISOFT CORPORATION
1605 SAMMAMISH ROAD, SUITE 205
ISSAQUAH, WASHINGTON 98027
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 16, 1997
------------------------
To the Shareholders:
The Annual Meeting of the Shareholders of Midisoft Corporation (the
"Company") will be held at Meydenbauer Center, 11100 Northeast Sixth Street,
Bellevue, Washington on Wednesday, July 16, 1997, at 2:00 p.m. Pacific daylight
time for the following purposes:
1. To elect one director to the Company's Board of Directors;
2. To approve a proposed amendment to the Company's 1989 Stock Option Plan
reserving an additional 300,000 shares of Common Stock under the Plan.
3. To transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
The record date for the Annual Meeting is June 2, 1997. Only shareholders of
record at the close of business on that date will be entitled to notice of, and
to vote at, the Annual meeting or any adjournment or postponement thereof.
By Order of the Board of Directors
/s/ Melinda A. Bryden
Melinda A. Bryden
SECRETARY
Issaquah, Washington
June 2, 1997
YOUR VOTE IS IMPORTANT
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. WHETHER OR
NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO COMPLETE, SIGN AND
DATE THE ENCLOSED PROXY CARD AND RETURN IT AS PROMPTLY AS POSSIBLE IN THE
ENCLOSED POSTAGE PREPAID ENVELOPE IN ORDER THAT THE PRESENCE OF A QUORUM MAY BE
ASSURED. THE GIVING OF SUCH PROXY DOES NOT AFFECT YOUR RIGHT TO REVOKE IT LATER
OR VOTE YOUR SHARES IN PERSON IN THE EVENT THAT YOU SHOULD ATTEND THE ANNUAL
MEETING.
<PAGE>
MIDISOFT CORPORATION
1605 SAMMAMISH ROAD, SUITE 205
ISSAQUAH, WASHINGTON 98027
JUNE 2, 1997
Dear Shareholders:
On behalf of the Board of Directors and management, I cordially invite you
to attend the Midisoft Corporation 1996 Annual Meeting of Shareholders to be
held on Wednesday, July 16, 1997 at 2:00 p.m. Pacific daylight time at
Meydenbauer Center, 11100 Northeast Sixth Street, Bellevue, Washington.
The matters to be acted upon are described in the accompanying Notice of
Annual Meeting of Shareholders and Proxy Statement. At the Annual Meeting, we
will also report on Midisoft's operations and respond to any questions you may
have.
YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING, IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED. PLEASE COMPLETE, SIGN,
DATE AND MAIL THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE TO ENSURE THAT YOUR VOTE IS COUNTED. IF YOU ATTEND THE
ANNUAL MEETING, YOU WILL OF COURSE, HAVE THE RIGHT TO VOTE YOUR SHARES IN
PERSON.
Very truly yours,
/s/ Larry Foster
Larry Foster
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
CHAIRMAN OF THE BOARD
<PAGE>
MIDISOFT CORPORATION
----------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 16, 1997
------------------------
GENERAL
This Proxy Statement is furnished by the Board of Directors of Midisoft
Corporation, a Washington corporation (the "Company"), to the holders of common
stock of the Company (the "Common Stock"), in connection with the solicitation
of proxies by the Board of Directors for use at the Annual Meeting of
Shareholders of the Company for the fiscal year ended December 31, 1996 (the
"Annual Meeting"), to be held at 2:00 p.m. (Pacific daylight time) on Wednesday,
July 16, 1997, at Meydenbauer Center, 11100 Northeast Sixth Street, Bellevue,
Washington and at any adjournment thereof.
REVOCABILITY OF PROXIES
A proxy delivered pursuant to this solicitation is revocable at the option
of the person giving the same at any time before it is exercised. A proxy may be
revoked, prior to its exercise, by executing and delivering a later dated proxy
card to the Secretary of the Company prior to the Annual Meeting, or attending
and voting at the Annual Meeting. Attendance at the Annual Meeting, in and of
itself, will not constitute a revocation of a proxy. Unless previously revoked,
the shares represented by the enclosed proxy will be voted in accordance with
the shareholder's directions if the proxy is duly executed and returned prior to
the Annual Meeting. If no directions are specified, the shares will be voted (i)
"FOR" the election of the Director recommended by the Board of Directors, (ii)
"FOR" ratification of an amendment to the Company's 1989 Stock Option Plan
reserving an additional 300,000 shares of Common Stock for issuance under the
Plan, and (iii) in accordance with the discretion of the named proxies on other
matters properly brought before the Annual Meeting.
QUORUM AND VOTING
The presence in person or by proxy of holders of record of a majority of the
outstanding shares of Common Stock is required to constitute a quorum for the
transaction of business at the Annual Meeting. Under Washington law and the
Company's Articles of Incorporation, if a quorum is present, a nominee for
election to a position on the Board of Directors will be elected as a Director
if the votes cast for the nominee exceed the votes cast against the nominee and
exceed the votes cast for any other nominee for that position. Abstentions and
"broker non-votes" (shares held by a broker or nominee as to which a broker or
nominee indicates on the proxy that it does not have the authority, either
express or discretionary, to vote on a particular matter) are counted for
purposes of determining the presence or absence of a quorum for the transaction
of business at the Annual Meeting. An abstention from voting and broker non-
votes will have the legal effect of neither a vote for nor against the nominee.
Proxies and ballots will be received and tabulated by TransSecurities
International, Inc., the Company's transfer agent.
This Proxy Statement and the enclosed proxy card are first being mailed to
shareholders on or about June 2, 1997.
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<PAGE>
SOLICITATION OF PROXIES
The expense 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 directors, officers, and other employees
of the Company, without additional remuneration, in person, or by telephone, or
facsimile transmission. The Company will also request brokerage firms, banks
nominees, custodians, and fiduciaries to forward proxy materials to the
beneficial owners of Common Stock as of the record date and will provide
reimbursement for the cost of forwarding the proxy materials in accordance with
customary practice. Your cooperation in promptly signing and returning the
enclosed proxy card will help avoid additional expense.
RECORD DATE AND OUTSTANDING SHARES
At April 25, 1997, the Company had 5,805,402 shares of Common Stock
outstanding, and there were 340 outstanding shares of Series A Preferred Stock.
Each share of Common Stock entitles the holder thereof to one vote, whereas the
Preferred Shares are not entitled to vote. Only shareholders of record at the
close of business on June 2, 1997, will be entitled to notice of, and to vote
at, the Annual Meeting.
ITEM NO. 1 ELECTION OF DIRECTORS AND MANAGEMENT INFORMATION
The Company's Articles of Incorporation provide that the members of the
Board of Directors be divided into three classes, as nearly equal as possible.
Each class is elected for a three-year term. At each annual meeting of
shareholders, one class of the Board of Directors is elected for a three-year
term and directors in the other classes remain in office until their respective
three-year terms expire. The Company's Board of Directors presently consists of
five members, with two members in Classes 1 and 2 and one member in Class 3. At
the expiration of each class' term, directors are to be elected to serve for a
term of three years or until their respective successors have been elected and
qualified.
The nominee, Mr. John Bauer, comprises the class to be elected at the 1997
Annual Meeting for a three-year term expiring at the 2000 Annual Meeting. Mr.
Bauer is currently a director of the Company. Unless otherwise directed, the
persons named in the proxy intend to cast all proxies in favor of Mr. Bauer to
serve as a director of the Company.
INFORMATION ABOUT THE NOMINEE
JOHN BAUER (age 57), has been a Director of the Company since March, 1997.
Mr. Bauer has served as Executive Vice President of Nintendo of America Inc.
since May, 1994. From 1979 to 1994 he served as Managing Partner of the Seattle
office and Northwest region of Coopers & Lybrand. Mr. Bauer is the immediate
past President of the Chief Seattle Council of the Boy Scouts of America, and
previously served as Chairman of the Board of Trustees of Saint Edward's
University in Austin, Texas. He is also a member of the Board of Directors of
Odyssey, a contemporary maritime museum, and the Accounting Development Fund at
the University of Washington.
The Board of Directors unanimously recommends a vote FOR the Director
Nominee.
INFORMATION ABOUT DIRECTORS WHOSE TERMS OF OFFICE CONTINUE AFTER THE ANNUAL
MEETING
TERMS EXPIRE 1998:
LARRY FOSTER (age 52), has been a Director of the Company since May 1995. He
has served as the Company's President and Chief Operating Officer since
September 1995 and as the Company's Chief Executive Officer and acting Chairman
of the Board since March 1996. From November 1992 until July, 1995, Mr. Foster
served as President and Chief Executive Office of Remote Input Solutions, Inc.
Prior to that, Mr. Foster was the founder and Chief Executive Officer of genSoft
Corporation. From February 1985 to August 1990, he was Senior Vice President of
Merchandising for Egghead Software.
3
<PAGE>
MARSHA MURRY, (age 48), has been a Director of the Company since July 1993.
Ms. Murry is the principal of Accelerated Edge, a privately held consulting firm
which she founded in January, 1994. From May 1992 to August 1994, she was
Strategic Product Manager for Autodesk, Inc. Ms. Murry served as Vice President
of Marketing and Business Development of the Company from February 1988 to
August 1990 and as its Secretary from February 1989 to July 1991. From August
1990 to October 1991, she was a Product Manager for Teltone Corporation and
between April 1985 and March 1987 a Resource Manager for ESCA Corporation.
TERMS EXPIRE 1999:
STEPHEN V. SEDMAK, (age 47), has been a Director since July 1993. Mr. Sedmak
has been President of SRS Labs, a publicly-held company since June 1993. From
September 1988 to June 1993 he was Vice President of Sales and Marketing for
Wolfe & Associates. From March 1982 to September 1985 Mr. Sedmak held executive
marketing and sales position with ROLM Corporation. Mr. Sedmak also serves on
the Board of Directors of SRS Laboratories.
A. PETER PARSONS, (age 50), has been a Director of the Company since January
1996. Mr. Parsons is a partner with the law firm Davis Wright Tremaine and is
Chairman of their Technology Section. Mr. Parsons has practiced law since 1973
and has been a partner with Davis Wright Tremaine since January, 1988.
COMPENSATION OF DIRECTORS
No employee of the Company receives any additional compensation for his
services as a director. Non-management directors receive a fee of $500 per
meeting attended in person, $250 for participating by telephone and $250 for
attending committee meetings. The Board of Directors has also authorized payment
of reasonable travel or other out-of-pocket expenses incurred by non-management
directors in attending meetings of the Board of Directors. Upon being appointed
or elected to the Board of Directors, a non-employee director receives a
one-time stock option grant to purchase 10,000 shares of Common Stock at an
exercise price which is equal to the market price of the Common Stock as of the
date of grant. At the end of each year of service on the Board, non-employee
directors receive an additional option to purchase 10,000 shares of Common Stock
at an exercise price which is equal to the market price of the Common Stock as
of the date of grant. All options have been nonqualified stock options granted
under the Company's 1989 Stock Option Plan. A grant of 10,000 shares was awarded
to Mr. Bauer on March 6, 1997 upon his appointment to the Board. Messrs. Sedmak
and Parsons and Ms. Murry each received grants of 10,000 shares on January 2,
1997 for compensation for services during 1996.
In 1996, Messrs. Sedmak and Parsons received $2,250 and $3,500 respectively,
and Ms. Murry received $4,500 in compensation for Board meetings and committee
meetings attended.
INFORMATION ON COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors has standing a Compensation and Option
Committee and an Audit Committee. The members of each Committee and the
functions performed thereby are described below:
COMPENSATION AND OPTION COMMITTEE. The Compensation and Option Committee is
comprised of Mr. Sedmak and Ms. Murry. The Compensation and Option Committee
establishes salaries, incentives and other forms of compensation for directors
and officers of the Company, administers the 1989 Option Plan and recommends
policies relating to the Company's benefit plans. The Compensation and Option
Committee met twice in 1996.
AUDIT COMMITTEE. The Audit Committee is comprised of Messrs. Bauer and
Parsons. The Audit Committee oversees the engagement of the Company's
independent auditors and, together with the
4
<PAGE>
Company's independent auditors, reviews the Company's accounting practices,
internal accounting controls and financial results. The Audit Committee met
twice in 1996.
During 1996 there were 10 meetings of the Board of Directors and each
director attended all Board Meetings and meetings of Committees on which they
served except Mr. Sedmak, who attended seventy percent of the Board Meetings.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
establishing the compensation for the Company's executive officers and making
recommendations concerning such compensation of the Board of Directors. The
Committee is composed of two independent non-employee directors, Ms. Murry and
Mr. Sedmak.
The underlying objectives of the Company's compensation strategy are to
attract and retain the best possible executive talent, to motivate those
executives to achieve optimum operating performance for the Company, to link
executive and stockholder interests through equity-based plans and to provide a
compensation package that recognizes individual contributions as well as overall
business results. There are three components to the Company's executive
compensation: base salary, long-term incentives in the form of stock options,
and incentive (bonus) payments.
BASE SALARY: Base salary for each executive officer was subjectively
determined by an assessment of his or her sustained performance, advancement
potential, experience, responsibility, scope and complexity of the position, and
current salary in relation to salary levels for comparable positions at software
companies, based on the Committee's general awareness of such salary levels.
LONG-TERM INCENTIVES: The long-term performance-based compensation of
executive officers takes the form of option awards under the Company's 1989
Stock Option Plan. The Compensation and Option Committee believes that the
equity-based compensation ensures that the Company's executive officers have a
continuing stake in the long-term success of the Company. All options granted by
the Company have been granted with an exercise price equal to or in excess of
the market price of the Company's Common Stock as determined by the Compensation
and Option Committee prior to the Company's initial public offering and by the
Nasdaq closing price thereafter. Accordingly, options will have value only if
the Company's stock price increases. Vesting is used to encourage employees to
continue in the employ of the Company. In 1996, the Committee granted an
additional option to purchase 75,000 shares to Mr. Larry Foster in connection
with his assumption of the duties and responsibilities as Chief Executive
Officer and Chairman of the Company. No other options were awarded to any
executive officer whose compensation exceeded $100,000 in 1996.
ANNUAL INCENTIVES: To date, the Committee has not established an annual
incentive or bonus plan for the Company's executive officers.
EXECUTIVE OFFICERS
The executive officers of the Company, and their ages as of April 25, 1997,
are as follows:
<TABLE>
<CAPTION>
NAMES AGE POSITION
- ------------------------------ --- -------------------------------------------------------
<S> <C> <C>
Larry Foster.................. 52 President, Chief Executive Officer and Chairman of the
Board of Directors
Melinda A. Bryden............. 41 Vice President, Finance, Chief Financial Officer and
Secretary
</TABLE>
For information regarding Mr. Foster see "--Information About Directors --."
5
<PAGE>
Melinda A. Bryden, Vice President, Finance, Chief Financial Officer and
Secretary, joined the Company in October 1995. Ms. Bryden was Controller and
Assistant Secretary of NeoPath, Inc., a publicly-held company, from March 1994
to September 1995. From June 1988 to June of 1992 Ms. Bryden served as Director
of Audit for Westmark International. She was with the private business advisory
services of Peat Marwick and Touche Ross from September 1982 to June 1988.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (The
"Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than 10% of the Common Stock , to file with the Securities
and Exchange Commission (the "SEC") initial reports of beneficial ownership
("Forms 3") and reports of changes in beneficial ownership of Common Stock and
other equity securities of the Company ("Forms 4"). Officers, directors, and
greater than 10% shareholders of the Company are required by SEC regulations to
furnish to the Company copies of all Section 16(a) reports that they file. To
the Company's knowledge, based solely on a review of the copies of such reports
furnished to the Company and written representations that no other reports were
required, all Section 16(a) filing requirements applicable to its officers,
directors, and greater than 10% beneficial owners were complied with during
1996.
EXECUTIVE COMPENSATION
SUMMARY OF COMPENSATION
The following table sets forth certain information with respect to
compensation paid by the Company for the fiscal year ended December 31, 1996 and
for the prior two fiscal years to (i) the Company's Chief Executive Officer and
(ii) its most highly compensated executive officers whose cash compensation
exceeded $100,000 for services performed during the fiscal year ended December
31, 1996.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
ANNUAL COMPENSATION SECURITIES
--------------------- OTHER ANNUAL UNDERLYING ALL OTHER
NAME & PRINCIPAL POSITION(1) YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(#) COMPENSATION($)
- -------------------------------- --------- ---------- --------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Larry Foster, .................. 1996 $ 117,692 -- -- 75,000 --
President, Chief Executive 1995 26,126 -- -- 125,000 --
Officer & Chairman(1)
Raymond Bily(2) ................ 1996 28,231 -- -- -- $ 108,860
1995 117,083 $ 10,000 -- 40,764 --
1994 96,667 10,000 -- 40,764 --
</TABLE>
- ------------------------
(1) Mr. Foster has been a Board member since May, 1995 and an employee as of
September, 1995 in the position of President and Chief Operating Officer.
Effective March 1996 Mr. Foster was appointed as to Chief Executive Officer
and Chairman.
(2) Mr. Bily was Chief Executive Officer and Chairman until March 1996. All
Other Compensation represents severance payments.
6
<PAGE>
GRANTS OF STOCK OPTIONS
The following table sets forth certain information regarding stock options
granted during the fiscal year ended December 31, 1996 to executive officers of
the Company whose compensation in 1996 exceeded $100,000.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF PERCENT OF ASSUMED
SECURITIES TOTAL OPTIONS ANNUAL RATES OF STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN EXERCISE FAIR MARKET EXPIRATION ---------------------------------
GRANTED(#) FISCAL YEAR PRICE($/SH) VALUE(1) DATE 0% ($) 5%($) 10%($)
----------- ------------- ------------- ----------- ----------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Larry Foster...... 75,000 21.2% $ 2.50 $ 2.48 04/12/06 -- $ 117,918 $ 298,827
</TABLE>
- ------------------------
(1) Represents the fair market value of the underlying Common Stock as December
31, 1996.
(2) The 5% and 10% assumed annual rates of stock appreciation are established by
rules of the Securities and Exchange Commission and do not represent the
Company's forecast of future appreciation of the Common Stock or total
shareholder return.
EXERCISES OF STOCK OPTIONS AND YEAR-END VALUES
The following table sets forth certain information regarding stock options
exercised during the fiscal year ended December 31, 1996 and options held as of
December 31, 1996 by executive officers of the Company whose compensation in
1996 exceeded $100,000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES VALUE DECEMBER 31, 1996 DECEMBER 31, 1996
ACQUIRED ON REALIZED -------------------------- -------------------------
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- ------------ ----------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Larry Foster................... -- -- 31,250 168,750 -- --
Raymond Bily................... -- -- 40,764 81,528 -- --
</TABLE>
7
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning beneficial
ownership of the Common Stock by (i) persons known by the Company to
beneficially own 5% or more of the outstanding Common Stock as of April 25,
1997, (ii) each Director, (iii) each Executive Officer, and (iv) all Executive
Officers and Directors of the Company as a group. The Company believes that the
beneficial owners of the Common Stock listed below, based on information
furnished by such owners, have sole voting and investment power with respect to
such shares.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT OF
NAME AND ADDRESS OWNED CLASS
- ---------------------------------------------------------------------- ----------- -------------
<S> <C> <C>
Larry Foster (1)...................................................... 50,000 *
Melinda A. Bryden (2)................................................. 31,250 *
John Bauer (3)........................................................ 10,000 *
Marsha Murry (4)...................................................... 71,661 1.2%
A. Peter Parsons (5).................................................. 34,410 *
Stephen V. Sedmak (6)................................................. 14,500 *
Raymond Bily.......................................................... 846,500 14.6%
15513 NE 52nd Street
Redmond, WA 98052
Dimensional Fund Advisors, Inc........................................ 334,400 5.8%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
All directors and executive officers
as a group (six persons) (7)......................................... 211,821 3.6%
</TABLE>
- ------------------------
*Less than 1%.
(1) Includes 50,000 shares issuable upon exercise of options that are
exercisable within 60 days.
(2) Includes 21,250 shares issuable upon exercise of options that are
exercisable within 60 days.
(3) Includes 10,000 shares issuable upon exercise of options that are
exercisable within 60 days.
(4) Includes 33,375 shares issuable upon exercise of options that are
exercisable within 60 days.
(5) Includes 20,000 shares issuable upon exercise of options that are
exercisable within 60 days.
(6) Includes 14,500 shares issuable upon exercise of options that are
exercisable within 60 days.
(7) Includes 149,125 shares issuable upon exercise of options that are
exercisable within 60 days.
ITEM NO. 2 PROPOSAL FOR AMENDMENT OF 1989 STOCK OPTION PLAN
GENERAL
In February 1989, the Company's shareholders approved the adoption of the
Midisoft Corporation 1989 Stock Option Plan (the "Option Plan"). The Company is
currently authorized to issue 1,350,000 shares of Common Stock upon exercise of
options granted under the Option Plan. The shareholders will be asked at the
Annual Meeting to consider and approve an amendment to the Option Plan under
which an additional 300,000 shares of Common Stock will be reserved for grants
to officers, directors and employees pursuant to the Option Plan. The Option
Plan provides for the granting of incentive stock options and non-qualified
stock options.
The Board of Directors believes that the attraction and retention of key
employees is essential to the Company's growth and success and that the grant of
stock options to such employees is necessary for the company to remain
competitive in its compensation practices. Currently, there are 249,000 shares
available for future grants under the Option Plan. In order to continue to
provide necessary incentives to key
8
<PAGE>
employees, the Board of Directors has approved this amendment, which will become
effective upon shareholder approval.
DESCRIPTION OF THE STOCK OPTION PLAN
The Company's 1989 Stock Option Plan was adopted by the Board of Directors
and approved by the shareholders of the Company in February 1989. An aggregate
of 1,350,000 shares of Common Stock are currently reserved for issuance under
the Option Plan. The Board of Directors, subject to shareholder approval, has
proposed that the number of shares available under the Option Plan be increased
to 1,650,000 shares.
The Option Plan provides for the granting of incentive stock options ("ISO")
within the meaning of Section 422 of the Internal revenue Code of 1986, as
amended (the "Code") and nonqualified stock options. Nonqualified stock options
may be granted to employees, directors and consultants of the company, while
ISOs may be granted only to employees. No options may be granted under the
Option Plan subsequent to February 1999.
The Option Plan is currently administered by the Option Committee of the
Board of Directors, which determines the terms and conditions of the options
granted under the Option Plan, including the exercise price, number of shares
subject to the option and the exercisability thereof.
The exercise price of all ISOs granted under the Option Plan must be at
least equal to the fair market value of the Common Stock of the Company on the
date of grant. The exercise price of all nonqualified stock options granted
under the Option Plan shall be determined by the Option Committee. The term of
all non-qualified options granted under the Option Plan may be amended or
terminated by the Board of Directors, but no such action may impair the rights
of a participant under a previously granted option.
The Option Plan provides the Board of Directors or the Option Committee the
discretion to determine when options granted thereunder shall become exercisable
and the vesting period of such options. Upon termination of a participant's
employment or consulting relationship with the Company, all unvested options
terminate and are no longer exercisable. All vested options remain exercisable
for a period not to exceed three months following the termination date.
The Option Plan provides that, in the event the Company enters into an
agreement providing for the merger of the Company into another corporation or
the sale of substantially all of the Company's assets, any outstanding
unexercised option shall become immediately exercisable as of the date of such
agreement. Upon the consummation of the merger or sale of assets such options
shall terminate unless they are assumed or another option is substituted
therefor by the successor corporation.
As of April 25, 1997, a total of 647,922, nonqualified and ISOs were
outstanding with exercise prices ranging from $.10 to $8.19 per share and a
weighted average exercise price per share of $2.83. At April 25, 1997, options
for 199,925 shares of Common Stock were vested and options for 248,584 shares of
Common Stock were available for future grants under the Option Plan. The Company
has approximately 45 employees who are eligible to participate in the Option
Plan.
TAX CONSEQUENCES
The following summarizes federal income tax consequences of stock options
issued under the Option Plan. State and local tax consequences may differ.
The grant of either an ISO or a non-qualified stock option under the Option
Plan in general will not result in any federal income tax consequences to the
optionee or to the Company. Upon exercise of a non-qualified stock option, the
optionee is subject to ordinary income taxes on the difference between the
option price and the fair market value of the shares on the date of exercise.
This income is subject to withholding for federal income and employment tax
purposes. The Company is entitled to an income tax
9
<PAGE>
deduction in the same amount, provided the deduction is not allowed under the
Internal Revenue Code of 1986, as amended (the "Code").
The optionee's basis for determining the amount of gain or loss upon the
subsequent disposition of the shares acquired pursuant to the exercise of a
non-qualified stock option, will be equal to the amount paid for such shares
plus any ordinary income recognized as a result of the exercise of the option.
Upon the disposition of the shares acquired through exercise of a non-qualified
stock option, the difference between the sales price and the optionee's basis
will be treated as a long-term or short-term capital gain or loss depending on
whether the shares are held for more than or less than twelve months following
exercise. The Company does not receive a tax deduction for this gain.
An optionee who is a reporting person for purposes of Section 16(a) of the
Securities Exchange Act of 1934, as amended, is taxed six months after exercise
of a non-qualified stock option unless the optionee elects within 30 days of
exercise to be treated in the same manner as the other optionees. Absent such an
election, the measure of the optionee's ordinary income is the difference
between the fair market value of the stock at the end of the six-month period
and the option price. The Company is entitled to an income tax deduction in the
same amount. Any gain realized by the optionee on subsequent disposition of the
stock will receive long-term or short-term capital treatment depending on
whether the stock is held for more than twelve months or twelve months or less,
respectively, following lapse of the six-month period unless the special
election discussed above is made, in which case the stock must be held for more
than 12 months following exercise to yield long-term capital gain treatment.
An optionee recognizes no federal taxable income upon exercising an ISO
(subject to the alternative minimum tax rules discussed below), and the Company
receives no deduction at the time of exercise. In the event of a disposition of
stock acquired upon exercise of an ISO, the tax consequences depend on how long
the optionee has held the shares. If the optionee does not dispose of the shares
within two years after the ISO was granted, nor within one years after the ISO
was exercised and shares were purchased, the optionee will recognize a long-term
capital gain (or loss) equal to the difference between the sale price of the
share and the exercise price. The Company is not entitled to any deduction under
these circumstances.
If the optionee fails to satisfy either of the foregoing holding periods,
part or all of any gain recognized upon the disposition of stock will constitute
ordinary income in the year of the disposition (referred to as a "disqualifying
disposition"). The amount of such ordinary income generally is the lesser of (i)
the difference between the amount realized on the disposition and the exercise
price, or (ii) the difference between the fair market value of the stock on the
exercise date and the exercise price. Any gain in excess of the amount taxed as
ordinary income will be treated as a long- or short-term capital gain, depending
on whether the stock was held for more than twelve months or twelve months or
less, respectively. If no gain is realized, there generally will be no ordinary
income, and any loss will be long- or short-term capital loss (depending on
whether or not the stock has been held for more than 12 months at the date of
disposition). The Company, in the year of the disqualifying disposition, is
entitled to a deduction equal to the amount of ordinary income recognized by the
optionee.
The "spread" under an ISO--i.e., the difference between the fair market
value of the shares at exercise and the exercise price--is treated as an item of
alternative minimum taxable income in the year of exercise for purposes of the
alternative minimum tax. Optionees are advised to consult their tax advisors
prior to the exercise of options, or disposition of stock acquired pursuant to
exercise of option, with respect to the alternative minimum and regular tax
consequences thereof.
REGISTRATION OF OPTION SHARES
The Company has registered the 1,350,000 shares previously authorized under
the Option Plan under the Securities Act. The Company expects that the 300,000
additional shares for which approval is now sought will also be registered under
the Securities Act as soon as practicable following approval by
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shareholders. Such registration, if completed, would in most cases permit the
unrestricted resale in the public market of shares issued pursuant to the Option
Plan.
SHAREHOLDER VOTE REQUIRED
Approval of the amendments to the Option Plan requires the affirmative vote
of the holders of a majority of the shares of Common Stock represented at the
Annual Meeting.
The Board of Directors unanimously recommends a vote IN FAVOR OF approval of
the amendments to the Company's 1989 Stock Option Plan authorizing issuances of
up to an additional 300,000 shares of the Company's Common Stock.
PROPOSALS OF SHAREHOLDERS
Shareholder proposals to be presented at the Company's 1998 Annual Meeting
of Shareholders and included in the Company's Proxy Statement relating to such
meeting must be received by the Company no later than January 24, 1998. Such
proposals should be directed to the Corporate Secretary of Midisoft Corporation,
1605 Sammamish Road, Suite 205, Issaquah, Washington 98027.
OTHER BUSINESS
It is not intended by the Board of Directors to bring any other business
before the meeting, and so far as is known to the Board, no matters are to be
brought before the meeting except as specified in the notice of the meeting.
However, as to any other business which may properly come before the meeting, it
is intended that proxies, in the form enclosed, will be voted in respect
thereto, in accordance with the judgment of the persons voting such proxies.
ANNUAL REPORT
A copy of the Company's 1996 Annual Report on Form 10-K, as filed with the
Securities and Exchange Commission, is enclosed. Shareholders not receiving a
copy of such annual report may obtain one, without charge, upon request to the
Company.
By Order of the Board of Directors
Melinda A. Bryden
SECRETARY
Issaquah, Washington
April 30, 1997
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