<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-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):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
MIDISOFT CORPORATION
1605 Sammamish Road, Suite 205
Issaquah, Washington 98027
August 21, 1998
Dear Shareholders:
On behalf of the Board of Directors and management, I cordially
invite you to attend the Midisoft Corporation 1998 Annual Meeting of
Shareholders to be held on Friday, October 30, 1998 at 2:00 p.m. Pacific
standard time at the Issaquah Holiday Inn, 1801 12th Avenue NW, Issaquah,
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.
While each of the matters you are being asked to decide is
important, the amendment to the Articles of Incorporation is particularly
significant. The purpose of the amendment is to provide the Company with
the flexibility to issue Common Stock for such corporate purposes as
raising equity capital or making acquisitions. The Board of Directors and
management believes acquisitions of certain technology, product lines and
in some cases a company's assets is an efficient method to expand market
opportunities, leverage brand equity and improve margins while eliminating
duplicate overhead. By pursuing a well-timed acquisition strategy, these
improved capabilities can lead to improved operating results. The Company's
ability to act quickly to undertake any of these actions and avoid the time
and expense of seeking shareholder approval for each contemplated action is
critical. The Board and management believes the growth and ultimate success
of the Company depends upon the ability to pursue opportunities which
require the availability of Common Stock as a medium of exchange.
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
1605 Sammamish Road, Suite 205
Issaquah, Washington 98027
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD October 30, 1998
To the Shareholders:
The Annual Meeting of the Shareholders of Midisoft Corporation
(the "Company") will be held at the Issaquah Holiday Inn, 1801 12th Avenue NW,
Issaquah, Washington on Friday, October 30, 1998, at 2:00 p.m. Pacific standard
time for the following purposes:
1. To elect two directors to the Company's Board of Directors;
2. To ratify the selection of Price Waterhouse LLP as the
Company's independent accountants;
3. To amend the Articles of Incorporation to authorize a total
of 25 million shares of Common Stock;
4. To approve a proposed amendment to the Company's 1989 Stock
Option Plan reserving an additional 500,000 shares of Common
Stock under the Plan;
5. 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 August 31, 1998. 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/ Marsha Murry
Secretary of the Corporation
Issaquah, Washington
August 21, 1998
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
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD October 30, 1998
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, 1997 (the
"Annual Meeting"), to be held at 2:00 p.m. (Pacific standard time) on Friday,
October 30, 1998, at the Issaquah Holiday Inn, 1801 12th Avenue NW, Issaquah,
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 Directors recommended by the Board
of Directors, (ii) "FOR" selection of Price Waterhouse LLP as the Company's
independent accountants, (iii) "FOR" amending the Articles of Incorporation to
authorize a total of 25 million shares of Common Stock, (iv) "FOR" ratification
of an amendment to the Company's 1989 Stock Option Plan reserving an additional
500,000 shares of Common Stock for issuance under the Plan, and (v) 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 being mailed to
shareholders on or about September 29, 1998.
<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 August 1, 1998, the Company had 6,313,797 shares of Common Stock
outstanding. Each share of Common Stock entitles the holder thereof to one vote.
Only shareholders of record at the close of business on August 31, 1998, will be
entitled to notice of, and to vote at, the Annual Meeting.
The Directors.
Information about the Nominees for terms expiring 2001
LARRY FOSTER (age 53), 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 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.
MARSHA MURRY (age 50), 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, 1981. 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.
The Board of Directors unanimously recommends a vote FOR the Director
Nominees.
Information about Directors whose Terms of Office Continue After the
Annual Meeting
Terms expire 1999:
ROBERT ORBACH (age 45), is the President and founder of B. Orbach
Inc. founded in May 1990. The company's primary business is to establish and
create strategic alliances for technology companies. Working with start-up
and established companies, Mr. Orbach has developed business relationships
and technology licensing as well as funding and marketing activities. The
company has been profitable since its inception. Mr. Orbach is currently on
the Board of Innovus (INUS). He also serves on the boards of several private
companies, SiliconAlly.com, SecureWin Technology, in-10city, and K2B
Technologies. He is also on the advisory board of Toptier Software. From 1992
to 1995 Mr. Orbach was a founding board member of Digital Pictures, Inc.
based in San Mateo, CA. Six months after Mr. Orbach resigned from their
board, Digital Pictures filed for protection under Chapter 11 of the
bankruptcy code.
J. LARRY SMART, (age 50), has been a director since December, 1997. Mr.
Smart has served as President and Chief Executive Officer of Visioneer, Inc.
since April, 1997. Mr. Smart served as Chairman, President and Chief Executive
Officer of Micropolis/StreamLogic Corporation from July, 1995 to March, 1997.
Mr. Smart served as President and Chief Executive Officer of Maxtor Corporation
from April, 1994 through March, 1995. He also served as Chairman, President and
Chief Executive Officer of Savior Technologies and Southwall Technologies, Inc.
Mr. Smart is currently a Director of Savior Technology and International
Manufacturing Services.
Term expires 2000:
JOHN BAUER (age 58), has been a Director of the Company since March,
1997. Mr. Bauer has been Executive Vice President and Chief Financial Officer of
Nintendo of America Inc. since May, 1994 From 1979 to
2
<PAGE>
1994 he served as Managing Partner of the Seattle office and Northwest region of
Coopers & Lybrand. Mr. Bauer is 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.
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. In December, 1997 the Board of Directors
authorized the payment of a quarterly retainer of $1,500 to each independent
director in addition to fees described above. The by-laws provide for 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 30,000 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 30,000 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 are non-qualified stock options granted under
the Company's 1989 Stock Option Plan. A grant of 30,000 shares was awarded to
Mr. Smart on December 16, 1997 upon his appointment to the Board. Messrs. Bauer
and Parsons and Ms. Murry each received grants of 30,000 shares on January 2,
1998 for compensation for services during 1997.
For their service in 1997, Messrs. Bauer and Smart, directors; and A.
Peter Parsons and Stephen Sedmak, former directors, received $1,500, $500,
$1,500 and $1,500 respectively and Ms. Murry received $2,250 in compensation for
Board meetings and committee meetings attended.
In addition, Accelerated Edge, a firm in which Ms. Murry is
principal, and Davis Wright Tremaine, a firm in which Mr. Parsons is a partner,
provided services to the Company totaling $1,371.27 and $15,907.02 respectively
in 1997.
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 Ms. Murry and Mr. Smart. A third member will be
appointed at the next board meeting, tentatively scheduled for October 30, 1998.
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 once in 1997.
Audit Committee. The Audit Committee is comprised of Messrs.
Bauer and Ms. Murry. A third member will be appointed at the next
board meeting, tentatively scheduled for October 30, 1998. The Audit
Committee oversees the engagement of the Company's independent
auditors and, together with the Company's independent auditors,
reviews the Company's accounting practices, internal accounting
controls and financial results.
During 1997 there were 6 meetings of the Board of Directors and
committees and each director attended all Board Meetings and meetings of
Committees on which they served (excluding recusals), except Messrs. Bauer and
Parsons, who each missed one Board Meeting.
3
<PAGE>
Compensation and Option Committee Report on Executive Compensation
The Compensation and Option Committee of the Board of Directors is
responsible for establishing the compensation for the Company's executive
officers and making recommendations concerning such compensation to the Board of
Directors. The Committee is composed of two independent non-employee directors,
Ms. Murry and Mr. Smart.
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 through September 9, 1997, when the Company's stock was
delisted from the Nasdaq National Market. In September, 1997, after the
delisting, an ad hoc committee of three non-employee members of the Board met
and determined the fair market value of the common stock of the Company to be
$0.75 per share in accordance with Article VI of the Company's 1989 Incentive
Stock Option Plan and Nonstatutory Stock Option Plan. The committee agreed to
recommend to the Board of Directors the cancellation and reissue of options
outstanding under the program at that exercise price. The committee believes
that equity interests are a significant factor in the Company's ability to
attract and retain key employees that are critical to the Company's long-term
success and that the volatility of the stock price following the delisting has
significantly deminished the potential value of the existing options. The Board
agreed on December 16, 1997 to adopt the recommendation of the ad hoc committee,
subject to consultation with its auditors and legal counsel. Upon conclusion of
these consultations, the board authorized the cancellation of the old options
and grant of the re-issued options at its meeting on April 9, 1998. All options
have been granted at exercise prices at or above the closing bid price on the
date of grant. Vesting is used to encourage employees to continue in the employ
of the Company. In 1997, the Committee granted options to purchase 100,000
shares vesting immediately, options for 50,000 shares vesting over four years
and options for 100,000 shares to be granted upon achievement of certain
performance criteria to Mr. Larry Foster, Chief Executive Officer and Chairman
of the Company. The 100,000 fully vested options were exercised in August, 1997
at an exercise price of $1.09375 per share and will not be subject to the
cancellation-reissue program authorized by the Board. All other options held by
Mr. Foster were covered by the cancellation and reissue program. No other
options were awarded to any executive officer whose compensation exceeded
$100,000 in 1997.
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,
1998, are as follows:
4
<PAGE>
<TABLE>
<CAPTION>
Names Age Position
- ----- --- --------
<S> <C> <C>
Larry Foster 53 President, Chief Executive Officer and
Chairman of the Board of Directors
Gary Cully 47 Vice President, Finance and Chief
Financial Officer
</TABLE>
For information regarding Mr. Foster see "--Information About
Directors --."
Gary Cully (age 47), Vice President, Finance and Chief Financial
Officer joined the Company in January, 1998. From 1996 to 1998, Mr. Cully worked
as a consultant for Mentor Graphics, a major developer of design automation
software, in M&A integration and information technology. Mr. Cully was Chief
Financial Officer of Prism Group, Inc. from 1994 to 1996. After Mr. Cully's
departure, certain subsidiaries of Prism filed for protection under Chapter 7 of
the bankruptcy code and Prism Group, Inc. ceased all operations. Mr. Cully was
also Chief Financial Officer of Omega Environmental, where his responsibilities
included financial controls, M&A evaluation and establishing operations in Latin
America. He was Corporate Controller of North American Energy Services from 1989
to 1991 and Division Controller with Fletcher International from 1991 to 1993 .
He was employed by Tektronix, Inc. where he held financial management positions
in international operations, information systems development and manufacturing
operations from 1975 to 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 Company's outstanding 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 1997.
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, 1997 and
for the prior two fiscal years to Larry Foster, the Company's Chief Executive
Officer. No other executive officer received cash compensation in excess of
$100,000 for services performed during the fiscal year ended December 31, 1997.
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
Annual Compensation Securities
Name & Principal Other Annual Underlying All Other
Position Year Salary($) Bonus($) Compensation($) Options(#) Compensation($)
-------- ---- --------- -------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Larry Foster, 1997 $120,000 -- -- 150,000 --
President, Chief 1996 $117,692 -- -- 75,000 --
Executive Officer & 1995 $ 26,126 -- -- 125,000 --
Chairman (1)
</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 Chief
Executive Officer and Chairman.
5
<PAGE>
Grants of Stock Options
The following table sets forth certain information regarding stock
options granted during the fiscal year ended December 31, 1997 to Mr. Foster.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
Number of Percent of Total
Securities Options Granted
Underlying to Employees in Exercise Expiration
Options Granted (#) Fiscal Year Price($/Share) Date
------------------- ----------------- -------------- ----------
<S> <C> <C> <C> <C>
Larry Foster 100,000 21.3% $1.09375 05/16/07
50,000 10.7% $1.09375 05/19/07
</TABLE>
Exercises of Stock Options and Year-End Values
The following table sets forth certain information regarding stock
options exercised during the fiscal year ended December 31, 1997 and options
held as of December 31, 1997 by Mr. Foster.
Aggregated Option Exercises in Last Fiscal Year and Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
December 31, 1997 December 31, 1997
------------------------------- -----------------------
Shares
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Larry Foster 100,000 $78,125 (1) 81,250 168,750 -- --
</TABLE>
(1) Based on the closing bid price of the Common Stock on the date of exercise
minus the exercise price.
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 August 12,
1998, (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) 181,250 2.8%
Gary Cully 0 *
John Bauer(2) 40,000 *
Marsha Murry(3) 104,208 1.6%
Bobby Orbach (4) 37,500 *
J. Larry Smart (5) 30,000 *
B. P. Software, Ltd. (6)
15851 Dallas Parkway, St. 1120
Dallas, Texas 75248 8,384,615 57.0%
Dimensional Fund Advisors, Inc.
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401 334,400 5.0%
</TABLE>
6
<PAGE>
<TABLE>
<S> <C> <C>
All directors and executive officers
as a group (six persons)(7) 392,958 5.9%
</TABLE>
* Less than 1%.
- ---------------------------
(1) Includes 81,250 shares issuable upon exercise of options that are
exercisable within 60 days.
(2) Consists of 40,000 shares issuable upon exercise of options that are
exercisable within 60 days.
(3) Includes 63,875 shares issuable upon exercise of options that are
exercisable within 60 days.
(4) Consists of 37,500 shares issuable upon exercise of options that are
exercisable within 60 days.
(5) Consists of 30,000 shares issuable upon exercise of options that are
exercisable within 60 days
(6) Consists of 6,089,744 shares issuable upon conversion of debentures
that are convertible within 60 days and 2,294,871 shares issuable upon
exercise of warrants that are exercisable within 60 days.
(7) Includes 254,672 shares issuable upon exercise of options that are
exercisable within 60 days.
BP Software, Ltd. has the right to purchase an additional $500,000 of
convertible debentures by December 31, 1998 and another$1,000,000 in
June, 1999. If BP Software, Ltd. were to exercise all its warrants
and convert all the debt it holds and has a right to acquire, a change
in control of the Company could result.
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, although there are six positions, with two positions in each
class. 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
selected and qualified.
The nominees, Mr. Larry Foster and Ms. Marsha Murry, comprise the class
to be elected at the 1998 Annual Meeting for a three-year term expiring at the
2001 Annual Meeting. Mr. Foster and Ms. Murry are currently directors of the
Company. Unless otherwise directed, the persons named in the proxy intend to
cast all proxies in favor of Mr. Foster and Ms Murry to serve as directors of
the Company. The Board recommends a vote IN FAVOR OF the nominees.
ITEM NO. 2 SELECTION OF INDEPENDENT ACCOUNTANTS
On January 15, 1998 the Company retained Price Waterhouse LLP as its
independent accountants to report on the Company's financial statements for the
fiscal year ended December 31, 1997. Price Waterhouse LLP reported on the
Company's financial statements for the fiscal years ended December 31, 1994 and
1995. The Board of Directors unanimously recommends a vote FOR the selection of
Price Waterhouse LLP as the independent accountants.
7
<PAGE>
ITEM NO. 3 PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION TO INCREASE THE
AUTHORIZED COMMON SHARES TO 25 MILLION
The Board of Directors has adopted, subject to stockholder approval, an
amendment to the Company's Articles of Incorporation to increase the number of
authorized shares of Common Stock of the Company from 10,000,000 to 25,000,000
(the "Amendment").
The additional Common Stock to be authorized by adoption of the
Amendment would have rights identical to the currently outstanding Common Stock
of the Company. Adoption of the proposed Amendment and issuance of the Common
Stock would not affect the rights of the holders of currently outstanding Common
Stock of the Company, except for the effects incidental to increasing the number
of shares of the Company's Common Stock outstanding to the extent additional
shares are actually used. If the Amendment is adopted, it will become effective
upon filing of a Certificate of Amendment of the Company's Certificate of
Incorporation with the Secretary of Sate of the State of Washington.
Prior to effectiveness of the Amendment, the Company has 10,000,000
authorized shares of Common Stock. Of this authorized number 6,313,797 shares
were outstanding as of the Record Date, and 2,350,000 were reserved for issuance
under the Company's equity compensation plans (after taking into account the
amendments to such plans submitted to the stockholders for approval hereunder),
leaving 1,336,203 shares unissued as of the Record Date.
During 1997, the Company made commitments to lending sources for
convertible debt and warrants to finance ongoing operations. If all the debt
were converted and all warrants and options were exercised, the Company would
have over 14 million shares outstanding. In order to sustain continuing
operations until the Company achieves profitability, further equity and/or
convertible debt will be necessary.
The purpose of the proposal to authorize additional shares of Common
Stock is to provide the Company with the flexibility to issue Common Stock for
other proper corporate purposes which may be identified in the future, such as
to raise equity capital or to make acquisitions through use of stock. The Board
of Directors and management believes acquisitions of certain technology, product
lines and in some cases a company's assets, is an efficient method to expand
market opportunities, leverage brand equity, and improve margins, while
eliminating duplicate overhead. By pursuing a well-timed acquisition strategy,
these improved capabilities can lead to improved operating results. The
Company's ability to pursue these opportunities depends upon the availability
of Common Stock as a medium of exchange.
The availability of additional shares of Common Stock is
particularly important in the event that the Board of Directors needs to
undertake any of the foregoing actions on an expedited basis and thus to
avoid the time (and expense) of seeking stockholder approval in connection
with the contemplated action. If the amendment is approved by the
stockholders, the Board of Directors does not intend to solicit further
stockholder approval prior to the issuance of any additional shares of Common
Stock, except as may be required by applicable law.
The affirmative vote of the holders of a majority of the outstanding
shares of the Common Stock will be required to approve this amendment to the
Company's Articles of Incorporation. As a result, abstentions and broker
non-votes will have the same effect as negative votes. Unless otherwise
directed, the person named in the proxy intends to cast all proxies in favor of
the Amendment.
The Board of Directors unanimously strongly recommends a vote IN FAVOR
OF approving the Amendment of the Company's Articles of Incorporation.
8
<PAGE>
ITEM NO. 4 PROPOSAL TO RESERVE AN ADDITIONAL 500,000 SHARES UNDER
THE 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 500,000 shares of Common Stock will be reserved for grants
to officers 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
the best 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 no shares
available for future grants under the Option Plan. With the demand for
highly-skilled employees at an all time high, especially in the technology
industries, the Board and management believe it is critical to the Company's
success to maintain competitive employee compensation programs. In order to
continue to provide necessary incentives to 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 1,850,000 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 Compensation and
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 non-qualified 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 Compensation and
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. 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.
9
<PAGE>
As of April 1, 1998, a total of 776,047, ISOs and non-qualified options
were outstanding with exercise prices ranging from $.10 to $2.75 per share and a
weighted average exercise price per share of $1.00. At April 1, 1998, options
for 298,299 shares of Common Stock were vested and options for no shares of
Common Stock were available for future grants under the Option Plan. The Company
has approximately 26 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 deduction in the same amount.
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 closing price of the stock on
the date 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 the holding period following
exercise. The Company does not receive a tax deduction for this gain. The
disposition of stock acquired through the exercise of non-qualified stock
options does not impact the Company for income tax purposes.
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 gain
treatment depending on the holding period, following lapse of the six-month
period unless the special election discussed above is made, in which case the
holding period for determining long-term or short-term capital gain treatment
begins on the date of exercise.
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, and within one year after the ISO
was exercised, 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 a 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-term or short-term
capital gain, depending on the holding period. If no gain is realized, there
generally will be no ordinary income, and any loss will be long-term or
short-term capital loss (depending on the holding period). 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.
10
<PAGE>
The "spread" under an ISO is the difference between the fair market
value of the shares at exercise and the exercise price, and 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 not registered under the Securities Act 750,000 of the
shares previously authorized. The Company expects all shares under the Option
Plan, including the 500,000 additional shares for which approval is now sought
will be registered under the Securities Act as soon as practicable following
approval by shareholders. Such registration, when 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 amendment 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 amendment to the Company's 1989 Stock Option Plan authorizing
issuances of up to an additional 500,000 shares of the Company's Common Stock.
PROPOSALS OF SHAREHOLDERS
Shareholder proposals to be presented at the Company's 1999 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, 1999.
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 1997 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
/s/ Marsha Murry
Secretary of the Corporation
Issaquah, Washington
August 21, 1998
11
<PAGE>
PROXY PROXY
MIDISOFT CORPORATION
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS - OCTOBER 30, 1998
The undersigned hereby appoint(s) Larry Foster and Marsha Murry and
each of them as proxies, with full power of substitution, to represent and
vote as designated all shares of Common Stock of Midisoft Corporation held of
record by the undersigned on August 31, 1998 at the Annual Meeting of
Shareholders of the Company to be held at the Issaquah Holiday Inn, 1801
12th Avenue NW, Issaquah, Washington at 2:00 p.m. (Pacific standard time) on
Friday, October 30, 1998, with authority to vote upon the matters listed on
this Proxy Card and with discretionary authority as to any other matters that
may properly come before the meeting or any adjournment or postponement
thereof.
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE SHAREHOLDERS
IN THE SPACE PROVIDED. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED "FOR
ALL NOMINEES" IN ITEM 1 AND "FOR" ITEMS 2, 3 AND 4.
<TABLE>
<CAPTION>
WITHHOLD
AUTHORITY
FOR all to vote for
Nominees all nominees
<S> <C> <C> <C>
(1) ELECTION OF DIRECTORS [ ] [ ]
Nominees: Larry Foster and Marsha Murry
THE COMPANY RECOMMENDS A VOTE FOR ALL NOMINEES
WITHHOLD FOR THE FOLLOWING ONLY: (Write the
name of the nominee(s) in the space below)
----------------------------------------
(2) SELECTION OF PRICE WATERHOUSE, LLP FOR AGAINST ABSTAIN
AS INDEPENDENT ACCOUNTANTS [ ] [ ] [ ]
THE COMPANY RECOMMENDS A VOTE FOR THIS ITEM
(3) AMEND THE ARTICLES OF INCORPORATION TO INCREASE
THE AUTHORIZED COMMON SHARES FROM 10 FOR AGAINST ABSTAIN
MILLION TO 25 MILLION SHARES [ ] [ ] [ ]
THE COMPANY RECOMMENDS A VOTE FOR THIS ITEM
(4) TO RATIFY THE AMENDMENT OF THE 1989 STOCK FOR AGAINST ABSTAIN
OPTION PLAN [ ] [ ] [ ]
THE COMPANY RECOMMENDS A VOTE FOR THIS ITEM
Signature(s) Date
------------------------------- ---------------------------------
</TABLE>
Please sign exactly as your name appears hereon. Attorneys, trustees, executors
and other fiduciaries acting in a representative capacity should sign their
names and give their titles. An authorized person should sign on behalf of
corporations, partnerships, associations, etc. and give his or her title. If
your shares are held by two or more persons, each person must sign. Receipt of
notice of meeting and proxy statement is hereby acknowledged.
[ ] I plan to attend the Annual Meeting.
