recordLab Corporation
(formerly, MIDISOFT CORPORATION)
1605 Sammamish Road, Suite 205
Issaquah, Washington 98027
December 6, 1999
Dear Shareholders:
On behalf of the Board of Directors and management, I cordially
invite you to attend the recordLab Corporation 1999 Annual Meeting of
Shareholders to be held on Monday, January 31, 2000 at 2:00 p.m. Pacific
Standard Time at the Doubletree Hotel, 300 112th Avenue S.E., Bellevue,
Washington.
The matters to be acted upon are described in the accompanying
Notice of Annual Meeting of Shareholders and Proxy Statement. At the Annual
Meeting, we will also report on the Company's operations and respond to any
questions you may have.
Each of the proposals you are being asked to decide is important.
The amendment to the Articles of Incorporation is particularly significant
and urgent. The amendment will provide the Company with the flexibility to
issue Common Stock for such corporate purposes as raising equity capital,
making acquisitions or expanding the business through investment or
strategic alliances. The Board of Directors and management believes
pursuing these strategies will be effective in leveraging its proprietary
technology and existing relationships. The Company's ability to act quickly
to undertake any of these actions and avoid the delay and expense of
seeking shareholder approval for each contemplated action is critical. 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. The success of the Company depends
upon the ability to pursue opportunities which require the availability of
Common Stock as a currency. 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 D. Foster
Larry D. Foster
President, Chief Executive Officer and
Chairman of the Board
<PAGE>
recordLab Corporation
(formerly, MIDISOFT CORPORATION)
1605 Sammamish Road, Suite 205
Issaquah, Washington 98027
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD January 31, 2000
To the Shareholders:
The Annual Meeting of the Shareholders of recordLab Corporation (the
"Company") will be held at the Doubletree Hotel, 300 112th Avenue S.E.,
Bellevue, Washington on Monday, January 31, 2000, at 2:00 p.m. Pacific standard
time for the following purposes:
1. To elect directors to the Company's Board of Directors;
2. To ratify the selection of PricewaterhouseCoopers LLP as the Company's
independent accountants for the fiscal year ending December 31, 1999;
3. To amend the Articles of Incorporation to authorize a total of 50
million shares of Common Stock;
4. To ratify the adoption of the Company's 1999 Stock Option Plan and
reserve 2,000,000 shares of Common Stock for use 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 December 6, 1999. 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
December 6, 1999
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>
recordLab Corporation
(formerly MIDISOFT CORPORATION)
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD January 31, 2000
General
This Proxy Statement is furnished by the Board of Directors of
recordLab 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 1999 Annual
Meeting of Shareholders of the Company (the "Annual Meeting"), to be held at
2:00 p.m. (Pacific Standard Time) on Monday, January 31, 2000, at the Doubletree
Hotel, 300 112th Avenue S.E., Bellevue, Washington and at any adjournment
thereof.
Revocability of Proxies
A proxy delivered pursuant to this solicitation is revocable at the
option of the person giving the same at any time before it is exercised. A proxy
may be revoked, prior to its exercise, by executing and delivering a later dated
proxy card to the Secretary of the Corporation 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 50 million shares of Common Stock, (iv)
"FOR" ratification of the adoption of the Company's 1999 Stock Option Plan and
reserving 2,000,000 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 and Bylaws, 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 American
Securities Transfer & Trust, the Company's transfer agent.
This Proxy Statement and the enclosed proxy card are being mailed to
shareholders on or about December 28, 1999.
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, e-mail 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.
Record Date and Outstanding Shares
At December 6, 1999, the Company had 16,371,233 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 December 6, 1999 will be
entitled to notice of and to vote at the Annual Meeting.
Board of Directors.
In November 1999, the Board of Directors was expanded to seven
positions. The Articles of Incorporation, as amended by the shareholders in 1994
and filed with the Secretary of State of the State of Washington on November 23,
1999 to correct an oversight, provides for a staggered Board of Directors
divided into three classes serving three-year terms each. In accordance with the
Articles of Incorporation and the Bylaws, the Board is reconstituted with seven
members. The shareholders are being asked to affirm the election of the
directors to their respective classes. Subsequent terms for all classes will be
three years. The Directors are divided into the following classes:
Class 1 (term expires at the 2000 Annual Meeting of Shareholders)
JOHN H. BAUER (age 59) has been a director of the Company since March
1997. Since May 1994, Mr. Bauer has served as Executive Vice President of
Nintendo of America Inc., a manufacturer and distributor of video games and
products. From 1979 to 1994, he served as Managing Partner of the Northwest
Group and the Seattle office of Coopers & Lybrand. Mr. Bauer serves on the
board of Multiple Zones International, Inc.(MZON).
MARK CHASAN (age 41) has been a director of the Company since November
1999. He has served as Chief Executive Officer of LifeResort Corporation since
June 1999. From February 1999 until June 1999, Mr. Chasan served as Executive
Vice President of GoodNoise/Emusic.com (Nasdaq: EMUS) and as Chairman and Chief
Executive Officer of Creative Fulfillment, Inc., dba Emusic from April 1995 to
February 1999. Prior to that, Mr. Chasan owned and practiced law as Chasan &
Associates from July 1985 through August 1998 in California in the areas of
business, computer and entertainment law. Mr. Chasan is a director designee of
BP Software.
Class 2 (term expires at the 2001 Annual Meeting of Shareholders)
LARRY D. FOSTER (age 54) 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 Officer 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.
MICHAEL LLOYD (age 50) has been a director of the Company since
November 1999. He is a record producer with 37 years experience in the music
industry. He has scored and supervised music productions for thirty-eight
feature motion pictures, eleven television specials and twenty-seven television
series and has received over 100 gold and platinum record awards. Mr. Lloyd is a
director designee of BP Software.
MARSHA MURRY (age 52) 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. Ms. Murry served as Secretary of the Company
from February 1989 to July 1991 and from December 1997 to the present.
Class 3 (term expires at the 2002 Annual Meeting of Shareholders)
DALTON KAYE (age 37) has been a director of the Company since November
1999. He has served as Chief Executive Officer and Partner of Churchill & Kaye,
LP residential and commercial developers and has served as Chairman of D. M. Kay
& Sons, a transportation subsidiary since 1998. From 1989 until 1998 Mr. Kaye
was with Dell Computer Corporation, serving in various positions including
Treasurer and Vice President of Finance for Europe, Middle East and Africa.
Prior to this, Mr. Kaye served as Assistant Treasurer with Commodore Computer
Corporation. From 1983 until 1988 Mr. Kaye served in various treasury management
positions with Electronic Data Systems (NYSE: EDS), including a two year
assignment in Europe as Manager of the Belgium Coordination Center. Mr.
Kaye is a director designee of BP Software.
ROBERT ORBACH (age 47) has been a director of the Company since July
1998. He is the President and founder of B.Orbach Inc., which was founded in May
1990 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
serves as a director of eSynch Corporation (ESYN). 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 its board, Digital Pictures filed for
protection under Chapter 11 of the bankruptcy code.
The Board of Directors unanimously recommends a vote FOR the director
nominees.
Compensation of Directors
No employee of the Company receives any additional compensation for
services as a director. Non-management directors receive a quarterly retainer of
$1,500, a fee of $500 per meeting attended in person, $250 for participating by
telephone and $250 for attending committee meetings. The bylaws 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 1998 Stock Option Plan. A grant of 30,000
shares was awarded to Mr. Orbach on his appointment to the Board in July 1998.
Messrs. Bauer, Orbach and Smart each received grants of 30,000 shares on January
2, 1999 and Ms. Murry received a grant of 30,000 shares on June 2, 1999.
For their service in 1998, Messrs. Bauer, Orbach, Parsons, Smart, and
Ms. Murry, directors, earned $8,000, $3,500, $4,500, $7,750 and $8,500
respectively in compensation for Board meetings and committee meetings attended.
All of these fees were accrued in 1998. Messrs. Bauer, Orbach and Smart were
paid $1,500, $500 and $1,750 respectively of these fees in April 1999.
In 1998 Accelerated Edge, a firm in which director Ms. Murry is a
principal, was paid $15,833.34 and $30,250.01 for services provided to the
Company in 1997 and 1998 respectively. In April 1999 Ms. Murry also received
options to purchase 60,000 shares of the Company's common stock for services
provided in 1998. Former director, Mr. Smart received options to purchase 75,000
shares of the Company's stock in April 1999 for services provided to the Company
in 1998. Davis Wright Tremaine, a firm in which former director, Mr. A. Peter
Parsons is a partner, provided services to the Company totaling $5,987.80 in
1998.
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 was comprised of Messrs. Orbach and Smart. The Compensation and Option
Committee establishes salaries, incentives and other forms of compensation for
directors and officers of the Company, administers the Company's stock option
plans and recommends policies relating to the Company's benefit plans.
Audit Committee. The Audit Committee was comprised of Messrs. Bauer,
Orbach and Smart. 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 1998 there were eight meetings of the Board of Directors and
committees and all directors attended all Board meetings and meetings of
Committees on which they served, except Messrs. Bauer and Smart, who each missed
two Board meetings.
Executive Officers
The executive officers of the Company and their ages as of October,
1999 are as follows:
Names Age Position
- ----- --- --------
Larry Foster 54 President, Chief Executive Officer and Chairman of
the Board of Directors
Gary Cully 48 Vice President, Finance and Chief Financial Officer
For information regarding Mr. Foster see "--Board of Directors - Class 2 --."
GARY M. CULLY (age 48) Vice President, Finance and Chief Financial
Officer joined the Company in January 1998. For two years prior to joining the
Company, Mr. Cully consulted with Mentor Graphics, a publicly held developer of
electronic 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, some subsidiaries of Prism filed for
protection under Chapter 7 of the bankruptcy code and the company ceased all
operations. Mr. Cully was also Chief Financial Officer of Omega Environmental
where his primary focus areas were financial controls, M&A evaluation and
setting up operations in Latin America. Previously, Mr. Cully held financial
management and information technology positions with Tektronix, Inc., a publicly
held developer and manufacturer of computer peripherals and scientific
instrumentation.
Section 16(a) Beneficial Ownership Reporting Compliance
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 1998.
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, 1998 and
for the prior two fiscal years to Larry D. Foster, the Company's Chief Executive
Officer and Gary M. Cully, the Company's Chief Financial Officer. No other
executive officer received cash compensation in excess of $100,000 for services
performed during the fiscal year ended December 31, 1998.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Long-Term
Compensation
Awards
Annual Compensation Securities
Name & Principal Other Annual Underlying All Other
Position Year Salary($) Bonus($) Compensation($) Options(#) Compensation($)
-------- ---- --------- -------- --------------- ---------- ---------------
Larry D. Foster, 1998 $133,750 $33,678 -- -- --
President, Chief 1997 $120,000 -- -- 150,000 --
Executive Officer & 1996 $117,692 -- -- 75,000 --
Chairman
Gary M. Cully, 1998 $103,372 -- -- 50,000 --
Vice President,
Finance & Chief
Financial Officer
</TABLE>
Grants of Stock Options
The following table sets forth certain information regarding stock
options granted during the fiscal year ended December 31, 1998 to Mr. Cully.
<TABLE>
Option Grants in Last Fiscal Year
Individual Grants
<S> <C> <C> <C> <C>
Number of
Securities Percent of Total Options
Underlying Options Granted to Employees in Exercise Expiration
Granted (#) Fiscal Year Price($/Share) Date
----------- ----------- -------------- ----
Gary M. Cully (1) 50,000 14.7% $0.8125 01/07/2008
(1) The option vests 25% per year on the option anniversary date.
</TABLE>
Exercises of Stock Options and Year-End Values
The following table sets forth certain information regarding stock
options held as of December 31, 1998 by Mr. Foster and Mr. Cully.
<TABLE>
Aggregated Option Exercises in Last Fiscal Year and Year-End Option Values
<S> <C> <C> <C> <C> <C> <C>
Number of Securities
Underlying Unexercised Options Value of Unexercised
at In-the-Money Options at
Shares December 31, 1998 December 31, 1998
Acquired on Value ----------------- -----------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ ------------ ----------- ------------- ----------- -------------
Larry D. Foster 0 $0 143,750 106,250 -- --
Gary M. Cully 0 $0 0 50,000 -- --
</TABLE>
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 December 6,
1999, (ii) each director and nominee, (iii) each executive officer, and (iv) all
executive officers, directors and nominees as a group. Unless otherwise stated,
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.
Shares
Beneficially Percent of
Name and Address Owned Class
---------------- ------------ ----------
Larry Foster (1) 406,250 2.44%
Gary Cully (2) 25,000 *
John Bauer(3) 70,000 *
Mark Chasan(4) 40,000 *
Dalton Kaye(5) 330,000 1.98%
Michael Lloyd(6) 40,000 *
Marsha Murry(7) 193,161 1.17%
Bobby Orbach (8) 67,500 *
B. P. Software, Ltd. (9)
15851 Dallas Parkway, St. 1120
Dallas, Texas 75248 12,425,104 61.67%
All directors and executive officers
as a group (8 persons)(10) 1,151,911 6.74%
* Less than 1%.
- ---------------------------
(1) Includes 306,250 shares issuable upon exercise of options exercisable
within 60 days of December 6, 1999.
(2) Includes 25,000 shares issuable upon exercise of options exercisable
within 60 days of December 6, 1999.
(3) Consists of 70,000 shares issuable upon exercise of options exercisable
within 60 days of December 6, 1999.
(4) Consists of 30,000 shares issuable upon exercise of options exercisable
within 60 days of December 6, 1999.
(5) Consists of 300,000 shares issuable upon exercise of warrants
exercisable within 60 days of December 6, 1999 and 30,000 shares
issuable upon exercise of options exercisable within 60 days of
December 6, 1999.
(6) Consists of 30,000 shares issuable upon exercise of options exercisable
within 60 days of December 6, 1999.
(7) Includes 132,000 shares issuable upon exercise of options exercisable
within 60 days of December 6, 1999.
(8) Consists of 67,500 shares issuable upon exercise of options exercisable
within 60 days of December 6, 1999.
(9) Includes 3,668,050 shares issuable upon exercise of warrants that are
exercisable within 60 days of December 6, 1999, 110,000 shares issuable
upon exercise of warrants owned by Baruch Properties and exercisable
within 60 days of December 6, 1999 and 250,000 shares owned personally
by the managing partner of BP Software, Ltd.
(10) Includes 600,750 shares issuable upon exercise of options that are
exercisable within 60 days of December 6, 1999.
BP Software, Ltd. converted $3.2 million of the Company's debt to
8,397,054 shares of the Company's common stock. With this conversion more than
50% of the Company's outstanding common stock is owned by BP Software, Inc.
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 was recently
reconstituted and consists of seven members with two positions in each class,
except for class two which has three positions. The election of each class is to
be affirmed at the 1999 Annual Shareholder Meeting for their respective terms.
At the expiration of each class' term, directors are to be elected to serve for
a term of three-years or until their respective successors have been elected and
qualified.
The nominees for class one consist of Directors John Bauer and Mark
Chasan to be elected for a one-year term expiring at the 2000 Annual Meeting of
Shareholders. Mr. Bauer and Mr. Chasan are currently directors of the Company.
Mr. Chasan is a designee of BP Software. Class two consists of Directors Larry
Foster, Michael Lloyd and Marsha Murry. The class is to be elected for a two-
year term expiring at the 2001 Annual Meeting of Shareholders. Mr. Foster, Mr.
Lloyd and Ms. Murry are currently directors of the Company. Mr. Lloyd is a
designee of BP Software. Class three consists of Directors Robert Orbach and
Dalton Kaye and is to be elected for a three year term expiring at the 2002
Annual Meeting of Shareholders. Mr. Orbach and Mr. Kaye are currently directors
of the Company. Mr. Kaye is a designee of BP Software.
Unless otherwise directed, the persons named in the proxy intend to
cast all proxies in favor of all the nominees for directors of the Company. The
Board of Directors unanimously recommends a vote FOR all the nominees.
ITEM NO. 2 SELECTION OF INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP reported on the Company's financial
statements for the fiscal years ended December 31, 1994, 1995, 1997 and 1998.
The Board of Directors unanimously recommends a vote FOR ratification of the
selection of PricewaterhouseCoopers LLP as the Company's independent accountants
for its fiscal year ending December 31, 1999.
ITEM NO. 3 PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION TO INCREASE THE
AUTHORIZED COMMON SHARES TO 50 MILLION
The Board of Directors has adopted, subject to shareholder approval, an
amendment to the Company's Articles of Incorporation to increase the number of
authorized shares of Common Stock of the Company from 25,000,000 to 50,000,000
(the "Amendment").
The additional Common Stock to be authorized by adoption of the
Amendment would have rights identical to the currently outstanding Common Stock.
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 Articles of Amendment with the Secretary of Sate of the State of Washington.
The Board of Directors and management believes that the authorization
of additional shares is desirable so that as the need may arise the Company will
have financial flexibility in connection with possible future equity financings,
strategic ventures and acquisitions, to support issuances of convertible debt
and compensatory stock options, and other general corporate purposes which may
be identified in the future. Under the proposed increase, the Company will be
able to issue shares of Common Stock without the expense and delay of a special
shareholder's meeting in connection with possible equity financing, future
opportunities for expanding the business through investments or acquisitions and
for other purposes. If this amendment is approved, the Board of Directors will
have additional shares of Common Stock available to effect a sale of shares
either in public or private transactions, mergers, consolidations or similar
transactions which would increase the number of outstanding shares and would
thereby dilute the interest of current shareholders or a party attempting to
obtain control of the Company. The Company has no existing understanding or
agreement for the issuance of any shares of Common Stock (other than the shares
currently reserved for issuance as described below), nor is the Company aware of
any existing or threatened efforts to obtain control of the Company. The
ultimate success of the Company depends upon the ability to pursue opportunities
which require the availability of Common Stock.
The Company currently has 25,000,000 authorized shares of Common Stock.
Of this authorized number 16,371,233 shares were outstanding as of December 6,
1999 and an additional 2,973,000 were reserved for issuance under the Company's
equity compensation plans. The Company also has outstanding warrants to purchase
4,208,050 shares of Common Stock. Most of these warrants were issued in
connection with convertible debt transactions. The total shares issued and
obligated at December 6, 1999 were about 24,200,000, leaving about 800,000
shares available for future needs.
The Company needs to raise additional capital, through one or more
private offerings of its securities, in order to enable the Company to pursue
its Internet commerce strategy and for other general corporate purposes. The
securities offered will likely be shares of the Company's Common Stock or other
debt or equity securities convertible into Common Stock. These offerings will
not be registered under the Securities Act of 1933 but will be conducted in
reliance upon exemptions from the registration requirements of that act.
Securities sold in these offerings, if any, may not be resold in the United
States without registration or an exemption from registration.
The Company is currently pursuing a private placement of its Common
Stock in which it is seeking to raise $23,000,000. The Company is also
discussing a possible private placement of its convertible preferred stock with
a private investment group. The price per share in these offerings, the number
of shares to be offered, and the other financial terms of the offerings are not
known at this time and will be determined by future negotiation with potential
investors. Approval of the increase in the authorized shares of Common Stock
will likely be required in order to pursue these offerings. There is no
assurance that any offering will be consummated. Placement of equity under these
offerings may be at a discount from the current market price and could cause
material dilution to current shareholders.
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 shareholder approval in connection with the contemplated action. If
the amendment is approved by the shareholders, the Board of Directors does not
intend to solicit further shareholder 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 Common Stock will be required to approve the Amendment. 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 and strongly recommends a vote IN
FAVOR OF approving the Amendment of the Company's Articles of Incorporation.
ITEM NO. 4 PROPOSAL TO APPROVE THE ADOPTION OF THE 1999 STOCK OPTION PLAN
General
In February 1989, the Company's shareholders approved the adoption of
the Midisoft Corporation 1989 Stock Option Plan. This plan expired in February
1999 and no further grants of options may be made from this plan.
The Company believes that long-term equity compensation in the form of
stock options is vital in order to attract and retain the highest caliber
individuals to the Company. The objectives are to motivate employees to the
fullest extent possible by encouraging their dedication to the Company and
aligning their interests with that of the Company's and to provide incentives,
particularly in the light of the increasingly competitive environment for
talented personnel. The Board of Directors believes that one of the best ways to
attain these objectives is to give individuals an opportunity to acquire a
proprietary interest in the Company's growth and success by purchasing shares of
Common Stock through the exercise of options granted under arrangements such as
the 1999 Stock Option Plan (the "Plan").
The purpose of the Plan is to assist the Company in attracting and
retaining high-quality individuals who will contribute to the Company's success
and achieve long-term objectives which will inure to the benefit of all
shareholders of the Company through the additional incentive inherent in the
ownership of the Common Stock. The Board of Directors believes that stock
options provide performance incentives to eligible participants to the benefit
of the Company and its shareholders, and recommends approval of the Plan by the
shareholders.
Description of the Stock Option Plan
The Plan was adopted by the Board of Directors in June 1999, subject to
shareholder approval. The Board of Directors, subject to shareholder approval,
has proposed that the number of shares available under the Plan be 2,000,000
shares.
Options granted under the Stock Plan may be either "incentive stock
options" ("ISOs") within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), or non-statutory stock options, at the
discretion of the Board of Directors as reflected in the terms of the written
option agreement. 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 Plan subsequent to June 2009.
The 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 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 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
Plan shall be determined by the Compensation and Option Committee. The term of
all non-qualified options granted under the 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 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
of three months following the termination date.
The 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 options 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 December 6, 1999, a total of 679,500 ISOs were outstanding under
the Plan, with exercise prices ranging from $1.97 to $4.03 per share and with a
weighted average exercise price per share of $2.28. At December 6, 1999, no
options to purchase shares of Common Stock were vested and options to purchase
1,320,500 shares of Common Stock were available for future grants under the
Plan.
The Company has approximately 22 employees who are eligible to participate in
the Plan.
<TABLE>
Options Granted under the Plan
<S> <C> <C> <C> <C>
Number of
Securities
Positions Underlying
Options Exercise Price
Granted (#) ($/Share) Expiration Date Vesting Period
- ----------------------------------- ------------- ------------------- -------------------------- --------------
Non-Employee Directors (6 persons) 0 N/A N/A N/A
- ----------------------------------- ------------- ------------------- -------------------------- --------------
Executive Group (2 persons) 50,000 $0.81 8/17/09 4 years
- ----------------------------------- ------------- ------------------- -------------------------- --------------
Other Employees 406,500 $1.97 - $2.06 8/9/09 thru 8/17/09 4 years
- ----------------------------------- ------------- ------------------- -------------------------- --------------
Other Employees 100,000 $2.13 6/2/09 4 years
- ----------------------------------- ------------- ------------------- -------------------------- --------------
Other Employees 123,000 $2.56 - $4.03 7/16/09 thru 11/8/09 4 years
- ----------------------------------- ------------- ------------------- -------------------------- --------------
</TABLE>
Most options granted under the Plan through December 6, 1999 are
incentive stock options (ISO's), which vest 25% per year from the date of grant
and qualify for special tax treatment as described below. If the Plan is not
approved by the shareholders, these options will become non-qualified options,
also described below, which may be less attractive to the employees we hope to
retain and attract. The options granted in the Executive Group above are
non-qualified options.
There are no further specific grants contemplated under the Plan at
this time. Future grants will be made to provide incentives and to retain and
attract talented personnel, as determined appropriate by management and the
Board of Directors.
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. If
the optionee is an employee of the Company, 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 Common
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 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.
Upon exercise of an ISO, the difference between the fair market value
of the shares acquired and the exercise price for those shares 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
On August 23, 1999 the Company filed a registration statement on Form
S-8 to register the shares underlying all options granted or available for
grant, including the Plan. Such registration, in most cases permits the
unrestricted resale in the public market of shares issued pursuant to the Plan.
Shareholder Vote Required
For purposes of qualification as an ISO plan, the approval of the
ratification of the adoption of the 1999 Stock Option Plan requires the
affirmative vote of the holders of a majority of the shares of Common Stock
voted on the proposal.
The Board of Directors unanimously recommends a vote IN FAVOR OF
approval of the adoption of the Company's 1999 Stock Option Plan authorizing
issuances of up to 2,000,000 shares of the Company's Common Stock.
PROPOSALS OF SHAREHOLDERS
Shareholder proposals to be presented at the Company's 2000 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 June 26, 2000.
Such proposals should be directed to the Secretary of the Corporation at
recordLab 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 1998 Annual Report on Form 10-KSB, 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.
/s/ Marsha Murry
Secretary of the Corporation
Issaquah, Washington
December 6, 1999
<PAGE>
PROXY PROXY
recordLab CORPORATION
This Proxy is solicited by the Board of Directors for the
Annual Meeting of Shareholders - January 31, 2000
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 recordLab Corporation held of record
by the undersigned on December 6, 1999 at the 1999 Annual Meeting of
Shareholders of the Company to be held at the Doubletree Hotel, 300 112th Avenue
S.E., Bellevue, Washington at 2:00 p.m. (Pacific standard time) on Monday,
January 31, 2000, 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.
WITHHOLD
AUTHORITY
FOR all to vote for
Nominees all nominees
(1) ELECTION OF DIRECTORS [ ] [ ]
Nominees:
Class 1 (term expires at the 2000 Annual Meeting of Shareholders)
JOHN H. BAUER
MARK CHASAN
Class 2 (term expires at the 2001 Annual Meeting of Shareholders)
LARRY D. FOSTER
MICHAEL LLOYD
MARSHA MURRY
Class 3 (term expires at the 2002 Annual Meeting of Shareholders)
DALTON KAYE
ROBERT ORBACH
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 TO 50 MILLION FOR AGAINST ABSTAIN
SHARES [ ] [ ] [ ]
The Company STRONGLY recommends a vote FOR this item
(4) RATIFY THE ADOPTION OF THE 1999 STOCK FOR AGAINST ABSTAIN
OPTION PLAN [ ] [ ] [ ]
The Company STRONGLY recommends a vote FOR this item
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.
