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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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:
[ 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
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(Name of Registrant as Specified in Its Charter)
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(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)(4) and 0-11
CALCULATION OF FILING FEE
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PER UNIT PRICE OR OTHER
UNDERLYING VALUE OF PROPOSED
TITLE OF EACH CLASS OF AGGREGATE NUMBER OF TRANSACTION COMPUTED MAXIMUM
SECURITIES TO WHICH SECURITIES TO WHICH PURSUANT TO EXCHANGE AGGREGATE VALUE OF
TRANSACTION APPLIES: TRANSACTION APPLIES: ACT RULE 0-11: TRANSACTION: 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.
Amount Previously Paid: Filing Party:
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Form, Schedule or
Registration Statement No: Date Filed:
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<PAGE>
MIDISOFT CORPORATION
1605 SAMMAMISH ROAD, SUITE 205
ISSAQUAH, WASHINGTON 98027
AUGUST 31, 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 and
urgent. 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 ULTIMATE SUCCESS OF THE
COMPANY DEPENDS UPON THE ABILITY TO PURSUE OPPORTUNITIES WHICH REQUIRE THE
AVAILABILITY OF COMMON STOCK AS A MEDIUM OF EXCHANGE. The Board of Directors
STRONGLY recommends a vote in favor of approving the amendment and I urge you to
vote FOR the amendment.
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 PriceWaterhouseCoopers 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 31, 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 PriceWaterhouseCoopers 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.
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. The Company may retain the services of a proxy solicitation
firm to assist with the solicitation of proxies in connection with this Proxy
Statement. Solicitation may be by means of mail, telephone or
<PAGE>
personal contact. If the Company elects to utilize the services of a proxy
solicitation firm, the Company would retain W. F. Doring & Company, which would
receive a fee estimated to be $3,000 plus out-of-pocket expenses. 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. 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 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.
<PAGE>
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.
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
<PAGE>
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:
<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 .
<PAGE>
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 $26,126 -- -- 125,000 --
Chairman (1)
</TABLE>
(1) Mr. Foster has been a Board member since May 1995 and an employee as of
September 1995 in the position of President and Chief Operating Officer.
Effective March 1996, Mr. Foster was appointed as Chief Executive Officer
and Chairman.
GRANTS OF STOCK OPTIONS
The following table sets forth certain information regarding stock
options granted during the fiscal year ended December 31, 1997 to Mr. Foster.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
-----------------
Number of Securities Percent of Total Options
Underlying Options Granted to Employees in
Granted (#) Fiscal Year Exercise Price($/Share) Expiration Date
----------- ----------- ----------------------- ---------------
<S> <C> <C> <C> <C>
Larry Foster 100,000 21.3% $1.09375 05/16/07
50,000 10.7% $1.09375 05/19/07
</TABLE>
EXERCISES OF STOCK OPTIONS AND YEAR-END VALUES
The following table sets forth certain information regarding stock options
exercised during the fiscal year ended December 31, 1997 and options held as of
December 31, 1997 by Mr. Foster.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
December 31, 1997 December 31, 1997
----------------- -----------------
<PAGE>
Shares
Acquired on Value
Name Exercise (#) Realized ($) 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%
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
<PAGE>
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 PriceWaterhouseCoopers LLP as its
independent accountants to report on the Company's financial statements for the
fiscal year ended December 31, 1997. PriceWaterhouseCoopers 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
PriceWaterhouseCoopers LLP as the independent accountants.
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.
The purpose of the proposal to authorize additional shares of Common Stock
is to provide the Company with the ability to convert debt to equity upon the
request of the debt holders, to sell shares to warrant holders upon their
election to exercise, flexibility to issue Common Stock for other proper
corporate purposes which may be identified in the future, such as to raise
equity capital, to support convertible debt issuance, 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.
Prior to effectiveness of this 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 an additional 1,221,506 were reserved
for issuance under the Company's equity compensation plans. In addition, the
Company has made obligations for 153,846 shares for issuance under stock
subscription agreements that were sold to three accredited investors for an
aggregate of $100,000. The Company would also be required to issue 6,474,359
shares if convertible debt totaling $3,750,000 is converted to equity; and
3,364,224 shares for warrants that are currently exercisable, of which 2,553,427
shares are exerciseable for $1.50 per share or less. For detailed discussions
of the convertible debt transactions, warrant obligations and the stock
subscription agreements, refer to the Liquidity and Capital Resources section of
Managements Discussion and Analysis in the 10-KSB for 1997 and the 10-QSB's for
the first and second quarters of 1998 and in Notes 9 & 11 to the audited
financial statements of the 10-KSB for 1997. The 10-KSB is enclosed with this
proxy statement. Copies of the 10-QSB's will be provided upon request to any
shareholder without charge. The Company's public filings are also accessable on
the Internet at the SEC's EDGAR website: www.sec.gov.
If all the debt were converted and all warrants and options were
exercised, the Company would need 7.5 million shares more than are currently
authorized. If the shares were not available for these obligations, the Company
would be in technical default of these agreements. The Board of Directors has
also authorized an additional 500,000 shares for the 1989 Stock Option Plan
shareholders are asked to authorize in ITEM NO. 4 below, leaving approximately 7
million shares for
<PAGE>
other uses upon passage of this amendment. In order to sustain continuing
operations until the Company achieves profitability, further equity and/or
convertible debt financing will be necessary.
Although the Company has no specific plans for immediate use of these
additional shares, 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.
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. Options for approximately 629,000 of
these shares have been exercised. 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. Although there are no
immediate plans to issue additional options, the Board and management believe it
is essential that shares be available under the Option Plan for additional
grants when it becomes necessary or desirable for the attraction or retention of
valuable employees. With the demand for highly-skilled professionalss 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
<PAGE>
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.
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
<PAGE>
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.
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 31, 1998
<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>
<S> <C>
WITHHOLD
AUTHORITY
FOR all to vote for
Nominees all nominees
(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 PriceWaterhouseCoopers 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 MILLION FOR AGAINST ABSTAIN
TO 25 MILLION SHARES [ ] [ ] [ ]
THE COMPANY STRONGLY RECOMMENDS A VOTE FOR THIS ITEM
(4) TO RATIFY THE AMENDMENT OF THE 1989 STOCK FOR AGAINST ABSTAIN
OPTION PLAN [ ] [ ] [ ]
THE COMPANY STRONGLY RECOMMENDS A VOTE FOR THIS ITEM
</TABLE>
Signature(s) Date
--------------------------- ---------------------------
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.
