MYSOFTWARE COMPANY
________________
2197 E. Bayshore Road
Palo Alto, CA 94303
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On May 21, 1998
TO THE STOCKHOLDERS OF MYSOFTWARE COMPANY:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
MySoftware Company, a Delaware corporation (the "Company"), will be held on
Thursday, May 21, 1998 at 2:30p.m. local time at 2197 E. Bayshore Road, Palo
Alto, California 94303, for the following purposes:
1. To elect directors to serve for the ensuing year and until their successors
are elected.
2. To ratify the selection of KPMG Peat Marwick LLP as independent auditors of
the Company for its fiscal year ending December 31, 1998.
The foregoing items of business are more fully described in the Proxy Statement
accompanying this Notice.
The Board of Directors has fixed the close of business on April 2, 1998, as the
record date for the determination of stockholders entitled to notice of and to
vote at this Annual Meeting and at any adjournment or postponement thereof.
By Order of the Board of Directors
Palo Alto, California Thomas C. Hoster
April 13, 1998 Secretary
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER
OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN
THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR REPRESEN-
TATION AT THE MEETING. EVEN IF YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE
IN PERSON IF YOU ATTEND THE MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES
ARE HELD OF RECORD BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT
THE MEETING, YOU MUST OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE>
MYSOFTWARE COMPANY
2197 E. BAYSHORE ROAD
PALO ALTO, CA 94303
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
MySoftware Company, a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders to be held on Thursday, May 21, 1998, at 2:30p.m.
local time(the "Annual Meeting"), or at any adjournment or postponement thereof,
for the purposes set forth herein and in the accompanying Notice of Annual
Meeting. The Annual Meeting will be held at 2197 E. Bayshore Road, Palo Alto,
California. The Company intends to mail this proxy statement and accompanying
proxy card on or about April 13, 1998 to all stockholders entitled to vote at
the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other employees of the Company. No
additional compensation will be paid to directors, officers or other employees
for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on April 2,
1998 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on April 2, 1998 the Company had outstanding and entitled to
vote 4,286,853 shares of Common Stock. Each holder of record of Common Stock on
such date will be entitled to one vote for each share held on all matters to be
voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards
a quorum, but are not counted for any purpose in determining whether a matter
has been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 2197 E.
Bayshore Road, Palo Alto, CA 94303, a written notice of revocation or a duly
executed proxy bearing a later date, or it may be revoked by attending the
meeting and voting in person. Attendance at the meeting will not, by itself,
revoke a proxy.
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 1999 Annual Meeting of Stockholders must be received by the Company
not later than December 14, 1998 in order to be included in the proxy
statement and proxy relating to that Annual Meeting.
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
There are five nominees for the Board positions presently authorized in the
Company's By-Laws. In December 1997, Michael H. Thoma, a director of the Company
since July 1988, resigned from the Board, and the Board appointed Gregory W.
Slayton to fill the vacancy created by Mr. Thoma's resignation. Each director
to be elected will hold office until the next annual meeting of stockholders and
until his successor is elected and has qualified, or until such director's
earlier death, resignation or removal. Each nominee listed below is currently
a director of the Company.
Shares represented by executed proxies will be voted, if authority to do
so is not withheld, for the election of the five nominees named below. In the
event that any nominee should be unavailable for election as a result of an
unexpected occurrence, such shares will be voted for the election of such
substitute nominee as management may propose. Each person nominated for
election has agreed to serve if elected and management has no reason to believe
that any nominee will be unable to serve.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
NOMINEES
The names of the nominees and certain information about them are set forth
below.
PRINCIPAL OCCUPATION/
NAME AGE POSITION HELD WITH THE COMPANY
------ ----- ------------------------------
David P. Mans.................. 55 Chairman of the Board
Gregory W. Slayton............. 38 President, Chief Executive
Officer, and Director
James F. Willenborg............ 53 Director
John J. Katsaros............... 46 Director
Donald F. Wood................. 43 Director
David P. Mans has served as a member of the Company's Board of Directors
since joining the Company in January 1988 and as its Chairman since March 1997.
From January 1988 to March 1997, he was President and Chief Executive Officer of
the Company. He also served as the Company's Chief Financial Officer from
January 1988 to July 1996. Prior to that time, Mr. Mans held the position of
Vice President of Power Projects with International Power Technologies, Inc., a
co-generation company, and Vice President of Finance at Qume Corp., a computer
peripherals company. Mr. Mans has a Bachelors in Electrical Engineering from
the University of Michigan and a Masters of Business Administration from
Stanford University.
Gregory W. Slayton joined the Company as President and Chief Executive
Officer and has served as a member of the Company's Board of Directors since
December 1997. Mr. Slayton has been a director of Synesis Management Consulting
since July 1997 and of Digital Oil Technologies since August 1997. From March
1996 to July 1997, Mr. Slayton was the President, Chief Operating Officer, and
a member of the Board of ParaGraph International. From December 1995 to March
1996, Mr. Slayton also served as the Interim President and Chief Executive
Officer of Velocity, Inc. Mr. Slayton co-founded Worlds, Inc. in August 1994
and served as Senior Vice President and Chief Financial Officer from its
inception to November 1995. Prior to founding Worlds, Inc., Mr. Slayton served
as Vice President and Chief Financial Officer at Paramount Technology Group of
Paramount Communications Inc. Prior to that time, Mr. Slayton was a management
consultant with McKinsey & Company for four years. Mr. Slayton holds a Bachelors
of Arts in Economics from Dartmouth College magna cum laude and a Masters of
Business Administration with Honors from Harvard Business School.
<PAGE>
James F. Willenborg co-founded the Company and served as acting Chief
Executive Officer from March 1997 to December 1997. Mr. Willenborg is currently
a director of the Company and also served as Chairman of the Board of Directors
from its inception to March 1997. Since 1993, Mr. Willenborg also served as
Executive Vice President of Sales and Marketing. From 1990 until 1993, Mr.
Willenborg served as the Company's Vice President of Marketing. From 1981 to
1988, Mr. Willenborg was managing general partner of Crosspoint Venture
Partners, which he co-founded. Prior to that time, Mr. Willenborg co-founded and
was a director of Inmac Corporation. Mr. Willenborg has a Bachelors in
Electrical Engineering from Iowa State University and a Masters of Business
Administration from Stanford University.
John J. Katsaros has been President of Collaborative Marketing, a Silicon
Valley-based Internet marketing consulting firm since 1993. Prior to founding
Collaborative Marketing, Mr. Katsaros was a vice president from 1991 to 1993 at
Soft-Switch, a leading electronic messaging software provider. From 1988 to
1991, Mr. Katsaros served as Vice President of Marketing and Sales for Touch
Communications, a provider of message switching products. He has a Bachelors
and Masters in Electrical Engineering from Lehigh University and a Masters of
Business Administration from Santa Clara University.
Donald F. Wood has served as a director of the Company since November
1995. Mr. Wood is a General Partner at Vanguard Venture Partners in charge of
information technologies and communications. Mr. Wood served as the President
of Metricom, Inc. from May 1997 to February 1998 and was the Executive Vice
President and General Manager of the Ricochet Division of Metricom, Inc.
from November 1994 to May 1997. Prior to joining Metricom, Mr. Wood was Director
of Marketing at Octel Communications, Inc. from 1989 to November 1994. Mr. Wood
is a co-founder and has served as Chairman of the Board of Wood-Howard Products,
Inc., a consumer product publishing and licensing company, since its inception
in 1987. Prior to that time, Mr. Wood served as Vice President of Marketing
with International Power Technology, Inc. and was a management consultant with
McKinsey & Company. Mr. Wood holds a Bachelors of Arts in Economics and a
Masters of Business Administration, both from Stanford University.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1997 the Board of Directors held
six meetings. The Board has an Audit Committee and a Compensation Committee.
The Audit Committee meets with the Company's independent auditors at least
annually to review the results of the annual audit and discuss the financial
statements; recommends to the Board the independent auditors to be retained;
and receives and considers the accountants' comments as to internal controls,
adequacy of staff and management performance and procedures in connection with
audit and financial controls. The Audit Committee during the fiscal year ended
December 31, 1997 was composed of two non-employee directors: Kenneth A. Eldred,
who resigned from the Board in May 1997, and Donald F. Wood from January 1,
1997 to May 22, 1997, and John J. Katsaros and Donald F. Wood after May 22,
1997. The Audit Committee met once during 1997.
The Compensation Committee reviews and recommends to the Board of Directors
the compensation and benefits of all officers of the Company and reviews general
policy relating to compensation and benefits of employees of the Company. The
Compensation Committee also administers the issuance of stock options and other
awards under the Company's stock plans. The Compensation Committee during the
fiscal year ended December 31, 1997 was composed of two non-employee directors:
Kenneth A. Eldred and Donald F. Wood from January 1, 1997 to May 22, 1997, and
John J. Katsaros and Donald F. Wood after May 22, 1997. The Compensation
Committee met twice during 1997.
During the fiscal year ended December 31, 1997, each director attended
75% or more of the aggregate of the meetings of the Board and of the committees
on which he served, held during the period for which he was a director or
committee member, respectively.
<PAGE>
MANAGEMENT
Executive officers are elected annually by the Board and serve at the
discretion of the Board. Set forth below is information regarding an executive
officer of the Company who is not a director.
NAME AGE POSITION HELD WITH THE COMPANY
------ ----- ------------------------------
Thomas C. Hoster ....... 47 Vice President, Chief Financial
Officer and Secretary
Thomas C. Hoster has served as Vice President and Chief Financial Officer
since joining the Company in July 1996 and as its Secretary since May 1997.
Prior to that time, Mr. Hoster held a number of Finance and Administration
positions at Octel Communications Corporation, a manufacturer of voice mail
equipment, including Treasurer, Director of Investor Relations, General Manager
of Octel Capital, and Director of Customer Administration. Prior to that, Mr.
Hoster was Executive Vice President of Mid-America Federal in Columbus, Ohio,
and Vice President of Chemical Bank in New York. Mr. Hoster has a Bachelors in
Electrical Engineering from Princeton University and a Masters of Business
Administration from Stanford University.
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP ("KPMG Peat
Marwick") as the Company's independent auditors for the fiscal year ending
December 31, 1998 and has further directed that management submit the selection
of independent auditors for ratification by the stockholders at the Annual
Meeting. KPMG Peat Marwick has audited the Company's financial statements since
1992. Representatives of KPMG Peat Marwick are expected to be present at the
Annual Meeting, will have an opportunity to make a statement if they so desire
and will be available to respond to appropriate questions.
Stockholder ratification of the selection of KPMG Peat Marwick as the
Company's independent auditors is not required by the Company's By-Laws or
otherwise. However, the Board is submitting the selection of KPMG Peat Marwick
to the stockholders for ratification as a matter of good corporate practice. If
the stockholders fail to ratify the selection, the Audit Committee and the Board
will reconsider whether or not to retain that firm. Even if the selection is
ratified, the Audit Committee and the Board in their discretion may direct the
appointment of different independent auditors at any time during the year if
they determine that such a change would be in the best interests of the Company
and its stockholders.
The affirmative vote of the holders of a majority of the shares present
in person or represented by proxy and entitled to vote at the Annual Meeting
will be required to ratify the selection of KPMG Peat Marwick.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of March 1, 1998 by: (i) each director of the
Company; (ii) each of the executive officers named in the Summary Compensation
Table in that capacity on March 1, 1998; (iii) all executive officers and
directors of the Company as a group; and (iv) all those known by the Company to
be beneficial owners of more than five percent of its Common Stock.
<TABLE>
<CAPTION>
Beneficial Ownership (1)
---------------------------
Number of Percent of
Directors, Officers and 5% Stockholders Shares Total
----------------------------------------- ---------- -----------
<S> <C> <C>
David P. Mans(2)....................... 765,233 18.0%
Mans/Spector Living Trust(3)........... 526,713 12.4%
James F. Willenborg(4)................. 503,067 11.8%
Okoboji Trust(4)....................... 503,067 11.8%
FMR Corp.
82 Devonshire Street
Boston, MA 02109 (5).................. 388,200 9.1%
Gregory W. Slayton (6) ................. 37,102 *
Thomas C. Hoster (7).................... 18,086 *
Donald F. Wood (8)...................... 23,576 *
John J. Katsaros (9) ................... 4,215 *
All executive officers and directors
as a group (6 persons)(10)............ 1,351,279 31.8%
</TABLE>
___________________
*Less than one percent.
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G filed with the Securities
and Exchange Commission (the "SEC"). Unless otherwise indicated in the
footnotes to this table, and subject to community property laws where
applicable, the Company believes that each of the stockholders named in
this table has sole voting and investment power with respect to the shares
indicated as beneficially owned. Applicable percentages are based on
4,256,152 shares outstanding on March 1, 1998, adjusted as required by
rules promulgated by the SEC.
(2) Represents (i) 526,713 shares held in Mans/Spector Living Trust u/a, dated
August 23, 1990 (the "Mans/Spector Living Trust"), (ii) 119,260 shares held
in the Nicole Zeanette Spector Mans Trust, dated August 23, 1990 (the
"Nicole Zeanette Spector Mans Trust") and (iii) 119,260 shares held in
the Paul Sydney Spector Mans Trust, dated August 23, 1990 (the "Paul
Sydney Spector Mans Trust"). David P. Mans is a co-trustee of the Mans/
Spector Living Trust and has sole voting and dispositive power with
respect to 526,713 shares of the Company's Common Stock. Nicole Zeanette
Spector Mans and Paul Sydney Spector Mans, beneficiaries of the Nicole
Zeanette Spector Mans Trust and the Paul Sydney Spector Mans Trust,
respectively, are children of David P. Mans, Chairman of the Board of the
Company. David P. Mans disclaims beneficial ownership of the shares held
by the Nicole Zeanette Spector Mans Trust and the Paul Sydney Spector Mans
Trust and has no voting and dispositive power with respect to these shares.
David P. Mans is a director of the Company.
(3) David P. Mans is a co-trustee of the Mans/Spector Living Trust and has sole
voting and dispositive power with respect to the 526,713 shares of the
Company's Common Stock.
(4) Represents 503,067 shares held in the Okoboji Trust, dated June 19, 1985
(the "Okoboji Trust"). James F. Willenborg, a director of the Company is
trustee of the Okoboji Trust, a revocable trust for the benefit of James F.
Willenborg and his spouse.
(5) Based on a Schedule 13G filed by FMR Corp. on February 10, 1998, FMR Corp.
reported that it had sole voting and dispositive power with respect to
388,200 shares of the Company's Common Stock.
<PAGE>
(6) Includes 20,436 shares of Common Stock of the Company and 16,666 shares
under options exercisable on March 1, 1998 or within 60 days thereafter.
Gregory W. Slayton is the President and Chief Executive Officer, and a
director of the Company.
(7) Includes 4,000 shares of Common Stock of the Company and 14,086 shares
under options exercisable on March 1, 1998 or within 60 days thereafter.
Thomas C. Hoster is Vice President, Chief Financial Officer and Secretary
of the Company.
(8) Includes 4,000 shares of Common Stock of the Company and 19,576 shares
under options exercisable on March 1, 1998 or within 60 days thereafter.
Donald F. Wood is a director of the Company.
(9) Represents 4,215 shares under options exercisable on March 1, 1998 or
within 60 days thereafter. John J. Katsaros is a director of the Company.
(10) Includes shares described in notes 2 through 4, and 6 through 9 above.
COMPLIANCE WITH THE REPORTING REQUIREMENTS OF SECTION 16(a)
Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity securities,
to file with the SEC initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
directors and greater than ten percent stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1997 all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with; except that the
initial reports of ownership were filed late by Mr. Slayton and Mr. Katsaros
due to an administrative oversight by the Company.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Directors do not currently receive any cash compensation from the Company
for their service as members of the Board of Directors, although they are
reimbursed for certain expenses in connection with attendance at Board and
Committee meetings.
Each non-employee director of the Company who is first elected as a
director after the date of adoption of the 1995 Non-Employee Directors' Stock
Option Plan ("the Directors' Plan") automatically will be granted an option to
purchase 20,000 shares of the Common Stock upon such election. In addition,
each non-employee director will be granted an option to purchase 5,000 shares
of Common Stock on each anniversary of the date of his initial grant. All such
options vest in 48 equal monthly installments commencing on the date of grant.
Option grants under the Directors' Plan are non-discretionary.
During the last fiscal year, Messrs. Wood and Katsaros, two non-employee
directors were granted options under the Directors' Plan to purchase 5,000
shares and 20,000 shares, respectively, at exercise prices of $1.94 and $2.25
per share, respectively. The fair market values of such Common Stock on the
dates of grant were $1.94 per share and $2.25 per share, respectively (based
on the closing sales price reported on the Nasdaq National Market for the date
of grant). As of March 1, 1998, no options had been exercised under the
Directors' Plan.
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF COMPENSATION
The following table shows for the fiscal years ended December 31, 1997,
1996 and 1995, compensation awarded or paid to, or earned by, the Company's
Chief Executive Officer and its two other named executive officers (the "Named
Executive Officers"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Number of
Long-Term
Compensation
Awards and
Securities
Name Year Ended Annual Compensation Underlying All Other
Principal Position December 31, Salary Bonus Options Compensation(1)
- ------------------ ------------ ------- --------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
David P. Mans
Chairman of the 1997 $112,137 $ 9,886(2) --- $1,799(3)
Board, President 1996 142,000 10,238 --- 3,927
and Chief Executive 1995 142,000 16,893 --- 3,667
Officer until
March 18, 1997
James F. Willenborg
Director, Acting 1997 152,376 9,886(4) --- 1,833(5)
Chief Executive 1996 142,000 10,238 --- 2,510
Officer from March 1995 142,000 16,489 --- 2,254
18 to December 2,
1997
Gregory W. Slayton
President and Chief 1997 7,692 --- --- 24(7)
Executive Officer(6)
Thomas C. Hoster
Vice President, 1997 120,462 --- --- 293(8)
Chief Financial 1996 41,633 --- --- 123
Officer and
Secretary
</TABLE>
____________________________
(1) Except as otherwise noted, consists of payments made as matching
contributions, pursuant to the Company's 401(k) Plan (a " Matching 401(k)
Contribution") and premium paid on life insurance for the benefit of the
named executive officers. The Company's Matching 401(k) Contribution is
applied to all 401(k) participating employees.
(2) Consists of $9,886 paid pursuant to a 1992 executive bonus plan (an
"Executive Bonus").
(3) Consists of $1,500 paid as a Matching 401(k) Contribution and $299 paid as
premium on the Company-wide term life insurance policy (a "Life Insurance
Policy").
(4) Consists of an Executive Bonus of $9,886.
(5) Consists of $1,500 as a Matching 401(k) Contribution and $233 premium on a
Life Insurance Policy.
(6) Mr. Slayton joined the Company in December 1997.
(7) Consists of $24 premium on a Life Insurance Policy.
(8) Consists of $293 premium on a Life Insurance Policy.
<PAGE>
STOCK OPTION GRANTS AND EXERCISES
The following table sets forth details regarding stock options granted to
the Named Officers in fiscal year 1997. The Company granted no SARs in fiscal
year 1997.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Individual Grants
Percent of
Number Total Options
of Securities Granted to Exercise
Underlying Employees or Base
Options in Fiscal Price Expiration
Name Granted(#)(1) Year(2) ($/Share ) Date
- ---------------- ------------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
David P. Mans 0 -- -- --
James F. Willenborg 0 -- -- --
Gregory W. Slayton 200,000 34.2% $2.375 12/02/07
Thomas C. Hoster 15,000 2.6% $2.69 04/17/07
</TABLE>
_____________________
(1) The options in this table have an exercise price equal to the fair market
value of the Company's Common Stock on the date of grant. For each grant,
100% of the options become exercisable 36 months after grant date with the
exception of Mr. Slayton's option has an accelerated vesting schedule tied
with the Company's stock price in the event of certain changes in control
of the Company. All these options expire ten years from the original date
of grant. These options were granted under the Company's 1995 Equity
Incentive Plan.
(2) The Company granted options for 584,000 shares to employees and non-
employee directors in fiscal year 1997 under the 1995 Equity Incentive Plan
and 1995 Non-Employee Directors' Plan.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR,
AND FY-END OPTION VALUES
The following table provides information on option exercises in fiscal 1997
by the Named Executive Officers and the value of such officers' unexercised
options at December 31, 1997.
<TABLE>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End (#) FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized($) Unexercisable Unexercisable(1)
- ------------------ --------------- ----------- --------------- ----------------
<S> <C> <C> <C> <C>
David P. Mans -- -- -- --
James F. Willenborg -- -- -- --
Gregory W. Slayton -- -- 0/200,000 $0/0
Thomas C. Hoster -- -- 11,336/45,000 $0/0
</TABLE>
____________________
(1) Market value of underlying securities based on the closing price of the
Company's Common Stock on December 31, 1997 on the Nasdaq National Market
of $2.00 minus the exercise price.
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION(1)
The Compensation Committee of the Board of Directors ("Committee") for
1997 was composed of Messrs. Eldred and Wood from January 1, 1997 to May 22,
1997, and Messrs. Wood and Katsaros after May 22, 1997, none of whom is
currently an officer or employee of the Company. The Committee for 1998 will
be composed of Messrs. Wood and Katsaros. The Committee is responsible for
setting and administering the policies and program governing annual
compensation of the executive officers of the Company.
Compensation Philosophy
The objectives of the compensation program are to align compensation with
business objectives and performance and to enable the Company to attract,
develop, reward and retain executive officers and key employees who contribute
to the long-term success of the Company and to motivate them to enhance long-
term stockholder value. A key element of this philosophy is that the Company
will compensate its executive officers and key employees competitively with
other leading publicly traded technology companies of similar size and will
offer stock options and bonuses. The Company relies in part on the Radford
Associates salary survey to ensure that its compensation remains competitive.
Base Salary
The salary levels for the Company's executive officers are reviewed on an
annual basis, comparing executive salary ranges against market data of companies
that compete for the same talent pool (predominantly high-technology and
software companies) and with other companies with annual revenues similar to
those of the Company. The Committee also takes into account the overall level of
performance of the Company as measured by its operating income. All executive
salaries for fiscal year 1997 remained at 1996 levels. Consistent with this
policy, the base salaries for David P. Mans, who resigned as Chief Executive
Officer in March 1997 and James F. Willenborg, acting Chief Executive Officer
from March 1997 to December 1997 were unchanged from 1996 to 1997. The base
salary for Gregory W. Slayton, Chief Executive Officer starting December 2,
1997, was set at $200,000 per year (prorated in 1997) to be competitive with
the compensation for chief executive officers of comparable companies
consistent with its compensation philosophy described above.
Effective January 1, 1996, the Company adopted the "Senior Management
Bonus Plan" to focus the efforts of MySoftware's management toward specific
goals and objectives. No bonuses under Senior Management Bonus Plan were paid
to any executive in 1997 because the performance objectives were not met. The
Company has previously discontinued the Executive Bonus Plan which was adopted
in 1992. Bonus amounts shown in "Summary of Compensation Table" represent
bonuses earned in prior years.
Profit Sharing Plan
The Company-wide profit sharing plan applies to all of the Company's
regular employees. Effective January 1, 1996, the profit sharing plan does not
apply to senior management. This profit sharing plan has two payment periods-
December through May and June through November. At the close of business on
May 31 and November 30, a profit sharing pool is determined by taking 8% of the
previous six months' operating profit. The 8% level was set in at the discretion
of the Board of Directors and can be changed at any time. The profit sharing
rate for each individual is pro rata based on qualifying salaries. Distributions
for the two periods are made on June 15 and December 15, respectively. There was
no profit sharing payment for any executive officers in 1997.
___________________________
(1) The material in this report is not "soliciting material," is not deemed
filed with the SEC and is not to be incorporated by reference on any filing
of the Company under the Securities Act of 1933, as amended (the "1933
Act"), or the 1934 Act, whether made before or after the date hereof and
irrespective of any general incorporation language in any such filing.
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Long Term Compensation
No officers received grants under the Company's stock option plans in 1997
with the exceptions of Mr. Slayton, who joined the company as President and
Chief Executive Officer in December 1997, and Mr. Hoster, Chief Financial
Officer and Secretary. Mr. Hoster was granted an additional option because
his original option exercise price was substantially over the current market
value, and the Compensation Committee determined that additional options were
necessary to provide adequate incentives. The number of options granted to Mr.
Slayton was based on what the Compensation Committee deemed appropriate and
adequate equity incentive based on those granted to chief executive officers of
comparable companies. The Compensation Committee determined that the existing
equity ownership of the other officers provided adequate incentive to such
officers at that time and that their overall compensation package, including
equity ownership, was competitive. Stock options are granted to provide long-
term incentives that correlate to the growth, success and profitability of the
Company, aligning the interest of the Company's executives with its stock-
holders. Options granted to date are exercisable in the future at the fair
market value of the Company's Common Stock as of the date of the grant, so that
an executive officer granted an option is rewarded only in the event there is
appreciation in the price of the Company's stock.
Compensation Committee
Donald F. Wood, Chairman
John J. Katsaros
CERTAIN TRANSACTIONS
As permitted by the Delaware General Corporation Law, the Company's
Certificate of Incorporation provides that no director of the Company will be
personally liable to the Company or its stockholders for monetary damage for
breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not made in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware Law, relating to prohibited dividends or distributions or the
repurchase or redemption of stock, or (iv) for any transactions from which the
director derives an improper personal benefits. In addition, the Company's
Certificate of Incorporation provides that any director or officer who was or is
a party or is threatened to be made a party to any action or proceeding by
reason of his or her services to the Company will be indemnified to the fullest
extent permitted by the Delaware Law.
The Company obtained directors' and officers' liability insurance ("D&O
Insurance") with a policy limit of $3.0 million per year, and expects to
continue to carry D&O Insurance for the foreseeable future. In addition, the
Company has entered into indemnification agreements with each of its directors
and officers under which the Company has indemnified each of them against
expenses and losses incurred for claims brought against them by reason of their
being a director or officer of the Company.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
Thomas C. Hoster
Secretary
April 13, 1998
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