SOFTECH, INC.
TWO HIGHWOOD DRIVE
TEWKSBURY, MA 01876
_______________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 16, 2003
_______________
To the Stockholders of SofTech, Inc.:
The Annual Meeting of Stockholders of SofTech, Inc. (the "Company"), a
Massachusetts company, will be held on Wednesday, April 16, 2003 at 10:00 a.m.,
at the Corporation's offices located at Two Highwood Drive, Tewksbury,
Massachusetts, 01876 for the following purposes:
1. To elect one (1) Class I director to serve for a three-year term
or until his successor is elected and qualified;
2. To elect two (2) Class II directors to serve for a one-year term
or until their successors are elected and qualified;
3. To elect two (2) Class III directors to serve for a two-year term
or until their successors are elected and qualified; and
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only stockholders of record at the close of business on February 28, 2003
are entitled to notice of and to vote at the meeting and any adjournments
thereof.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if such stockholder has returned a proxy.
By Order of the Board of Directors
/s/ Joseph P. Mullaney
Joseph P. Mullaney
PRESIDENT AND COO
Tewksbury, Massachusetts
March 22, 2003
SOFTECH, INC.
_________________
PROXY STATEMENT
March 22, 2003
Proxies in the form enclosed with this Proxy Statement are solicited by the
Board of Directors of SofTech, Inc. (the "Company"), a Massachusetts company,
for use at the Annual Meeting of Stockholders to be held on Wednesday, April 16,
2003, at 10:00 a.m., local time, at the Company's headquarters located at Two
Highwood Drive, Tewksbury, MA 01876.
Only stockholders of record at the close of business on February 28, 2003
(the "Record Date") will be entitled to receive notice of and to vote at the
meeting and any adjournments thereof. As of the Record Date, 12,205,236 shares
of common stock, $.10 par value per share (the "Common Stock"), of the Company
were issued and outstanding. The holders of Common Stock are entitled to one
vote per share on any proposal presented at the meeting. Stockholders may vote
in person or by proxy. Execution of a proxy will not in any way affect a
stockholder's right to attend the meeting and vote in person. Any stockholder
giving a proxy has the right to revoke it (i) by filing a later-dated proxy or a
written notice of revocation with the Secretary of the Company at any time
before it is exercised or (ii) by voting in person at the Annual Meeting
(although attendance at the Annual Meeting will not, in itself, constitute
revocation of a proxy). Any written notice of revocation or subsequent proxy
should be sent so as to be delivered to SofTech, Inc., Two Highwood Drive,
Tewksbury, MA 01876, Attention: Clerk, at or before the taking of the vote at
the Annual Meeting.
The representation in person or by proxy of at least a majority of the
outstanding Common Stock entitled to vote at the meeting is necessary to
constitute a quorum for the transaction of business. Votes withheld from a
nominee for election as a director, as well as abstentions and broker
"non-votes" with respect to all other matters being submitted to stockholders,
are counted as present or represented for purposes of determining the presence
or absence of a quorum for the meeting. A "non-vote" occurs when a nominee
holding shares for a beneficial owner votes on one proposal, but does not vote
on another proposal because, in respect to such other proposal, the nominee does
not have discretionary voting power and has not received instructions from the
beneficial owner.
In the election of the Class I, II and III directors, the nominee receiving
the highest number of affirmative votes of the shares present or represented and
entitled to vote at the meeting shall be elected as a director. On all other
matters being submitted to stockholders, an affirmative vote of a majority of
the shares present or represented and voting on each such matter is required for
approval. An automated system administered by the Company's transfer agent
tabulates the votes. The vote on each matter submitted to stockholders is
tabulated separately. Abstentions are included in the number of shares present
or represented and voting on each matter. Broker "non-votes" are not so
included.
The persons named as attorneys-in-fact in the proxies, Joseph P. Mullaney
and Bryan Smith, are employees and/or officers of the Company. All properly
executed proxies returned in time to be counted at the meeting will be voted as
stated below under "Election of Director." Any stockholder giving a proxy has
the right to withhold authority to vote for any individual nominee to the Board
of Directors by marking withheld in the space provided on the proxy. Where a
choice has been specified on the proxy with respect to the foregoing matter, the
shares represented by the proxy will be voted in accordance with the
specifications and will be voted FOR if no specification is indicated.
The Board of Directors knows of no other matters to be presented at the
meeting. If any other matter should be presented at the meeting upon which a
vote properly may be taken and upon which the proxies may exercise discretion
under applicable law, shares represented by all proxies received by the Board of
Directors will be voted with respect thereto in accordance with the judgment of
the persons named as attorneys in the proxies.
An Annual Report to Stockholders, containing financial statements for the
fiscal year ended May 31, 2002, is being mailed together with this Proxy
Statement to all stockholders entitled to vote. This Proxy Statement and the
form of proxy were first mailed to stockholders on or about March 22, 2003.
2
MANAGEMENT AND PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth as of August 23, 2002: (i) the name and
address of each person who, to the knowledge of the Company, owned beneficially
more than 5% of the Common Stock of the Company outstanding at such date; (ii)
the name of each director or nominee; and (iii) the name of each executive
officer identified in the Summary Compensation Table set forth below under
"Compensation and Other Information Concerning Directors and Officers," the
number of shares owned by each of such persons and the percentage of the
outstanding shares represented thereby, and also sets forth such information for
all officers, directors and nominees as a group.
NAME AND ADDRESS AMOUNT AND NATURE PERCENT
OF BENEFICIAL OWNER OF OWNERSHIP (1) OF CLASS (2)
------------------- ----------------- ------------
William D. Johnston 5,315,372(3)(4) 43.1 %
Joseph P. Mullaney 94,319 *
Jean J. Croteau 10,000(3) *
Victor G. Bovey 23,350(3) *
Timothy L. Tyler 21,000(3) *
Ronald A. Elenbaas 58,700(3) *
Frederick A. Lake 5,800(3) *
Barry Bedford 5,000(3) *
All officers, directors and nominees as a group .....
(8 persons) (3) 5,533,541(5) 44.8%
------------------------------
o Less than 1.0%.
(1) Except as otherwise noted, each person or entity named in the table has
sole voting and investment power with respect to the shares. The
inclusion herein of any shares of Common Stock deemed beneficially owned
does not constitute an admission of beneficial ownership of those shares.
(2) Applicable percentage of ownership as of the Record Date is based upon
12,205,236 shares of Common Stock outstanding on such date. Beneficial
ownership is determined in accordance with the rules of the Securities
and Exchange Commission (the "Commission"), and includes voting and
investment power with respect to shares. Shares of Common Stock subject
to options currently exercisable or exercisable within 60 days of
August 23, 2002 are deemed outstanding for computing the percentage
ownership of the person holding such options, but are not deemed
outstanding for computing the percentage of any other person.
(3) Includes 77,600 shares of Common Stock which may be purchased within 60
days of August 23, 2002 upon the exercise of stock options as follows:
Mr. Johnston - 16,000; Mr. Croteau - 10,000; Mr. Bovey - 3,000; Mr.
Tyler - 21,000; Mr. Elenbaas - 16,000; Mr. Lake - 5,800; and Mr.
Bedford - 5,000.
(4) Includes warrants for 60,000 shares issuable in exchange for $8.00 per
share.
(5) Includes 77,600 shares issuable upon exercise of stock options and 60,000
shares issuable upon exercise of warrants held by all Directors and
executive officers as a group.
3
PROPOSALS 1, 2 and 3
ELECTION OF DIRECTORS
The Board of Directors is currently fixed at five members. The Board of
Directors is divided into three classes, each class of which may consist as
nearly as possible of one-third of the directors. As of the date of this Proxy
Statement, there is one Class I director, two Class II directors and two Class
III directors. The terms of each of the Classes of directors will expire at this
Meeting. All directors will hold office until their successors have been duly
elected and qualified or until their earlier death, resignation or removal. Mr.
Tyler is the current Class I director; Messrs. Elenbaas and Lake the current
Class II directors; and Messrs. Johnston and Bedford are the current Class III
directors.
The Board of Directors has nominated and recommended that Mr. Tyler, who is
currently a Class I Director, be elected as Class I director, to hold office
until the 2005 Annual Meeting of Stockholders or until his successor has been
duly elected and qualified or until his earlier resignation or removal. The
Board of Directors has nominated and recommended that Messrs. Elenbaas and Lake,
who are currently a Class II Directors, be elected as Class II directors, to
hold office until the 2003 Annual Meeting of Stockholders or until their
successors have been duly elected and qualified or until their earlier
resignation or removal. The Board of Directors has nominated and recommended
that Messrs. Johnston and Bedford, who are currently a Class III Directors, be
elected as Class III directors, to hold office until the 2004 Annual Meeting of
Stockholders or until their successors have been duly elected and qualified or
until their earlier resignation or removal. The Board of Directors knows of no
reason why these nominees should be unable or unwilling to serve, but if the
nominees should for any reason be unable or unwilling to serve, the proxies will
be voted for the election of such other persons for the office of director as
the Board of Directors may recommend in the place of such nominee.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE "FOR" THE ELECTION OF THESE NOMINEES.
The following table sets forth the nominees to be elected at the meeting
and the year such nominee or director was first elected a director, the position
currently held by the nominee and each director with the Company, the year the
nominee's or director's term will expire and class of director of the nominee
and each director:
NOMINEE'S OR DIRECTOR'S NAME
AND YEAR NOMINEE OR DIRECTOR POSITION WITH YEAR TERM CLASS OF
FIRST BECAME A DIRECTOR THE COMPANY WILL EXPIRE DIRECTOR
-------------------------------- ----------- ----------- --------
NOMINEES:
---------
Timothy L. Tyler Director 2005 I
1996
Ronald A. Elenbaas Director 2003 II
1996
Frederick A. Lake Director 2003 II
2000
William D. Johnston Chairman and Director 2004 III
1996
Barry Bedford Director 2004 III
2000
4
OCCUPATIONS OF DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information regarding the Directors and
Executive Officers of the Company as of February 28, 2003, based on information
furnished by them to the Company.
DIRECTORS
The following provides biographical information with respect to the Directors:
Ronald A. Elenbaas, 49, term expires at this Annual Meeting; Mr. Elenbaas
is currently retired. From 1975 to 2000, Mr. Elenbaas was employed by Stryker
Corporation in various positions, most recently as President of Stryker Surgical
Group, a division of Stryker Corporation. Mr. Elenbaas also serves on the Board
of the American Red Cross (Kalamazoo and Cass County, Michigan). Mr. Elenbaas
was appointed a Director of the Company in September 1996.
William D. Johnston, 56, term expires at this Annual Meeting; Mr. Johnston
serves as Chairman of the Company and has been a Director since 1996. Mr.
Johnston is President, Chairman and CEO of the Greenleaf Companies. Included in
the Greenleaf Companies are Greenleaf Trust, a Michigan chartered bank,
Greenleaf Capital, Inc., a venture capital company and primary and secondary
lender to SofTech, Greenleaf Ventures, Inc., a management company delivering
management services to the host industry and Greenleaf Holdings L.L.C., a
commercial real estate development company.
Timothy L. Tyler, 48, term expires at this Annual Meeting; Mr. Tyler has
served since 1995 as President of Borroughs corporation, a privately held,
Michigan-based business that designs, manufactures and markets industrial and
library shelving units, metal office furniture and check out stands primarily in
the United States. Mr. Tyler served as President and General Manager of Tyler
Supply Company from 1979 to 1995. Mr. Tyler was appointed a Director of the
Company in September 1996.
Barry Bedford, 44, term expires at this Annual Meeting; Mr. Bedford has
served as Chief Financial Officer of the Greenleaf Companies since April 2000.
Prior to joining Greenleaf, Mr. Bedford was the Chief Financial Officer of
Johnson and Rauhofs, a Michigan advertising firm, since 1991. Mr. Bedford was
appointed a Director of the Company in July 2000.
Frederick A. Lake, 67, term expires at this Annual Meeting; Mr. Lake is a
partner in the law firm of Lake, Stover & Schau, PLC, a Michigan based law firm.
Mr. Lake has been with Lake, Stover & Schau, PLC, and its predecessors for more
than five years. Mr. Lake also serves as corporate counsel for Greenleaf
Companies and other entities. Mr. Lake was appointed a Director of the Company
in July 2000.
Each member of the Board of Directors also serves on the Audit Committee of
the Board of Directors. The Audit Committee recommends the engagement of the
Company's independent accountants. In addition, the Audit Committee reviews
comments made by the independent accountants with respect to internal controls
and considers any corrective action to be taken by management; reviews internal
accounting procedures and controls within the Company's financial and accounting
staff; and reviews the need for any non-audit services to be provided by the
independent accountants. The Audit Committee operates under a written charter, a
copy of which is attached as an Exhibit to this proxy.
Each member of the Board of Directors also serves on the Compensation
Committee of the Board of Directors. The Compensation Committee recommends
salaries and bonuses for officers and general managers and establishes general
policies and procedures for salary and performance reviews and the granting of
bonuses to other employees. It also administers the Company's 1994 Stock Option
Plan (the "Plan") and the SofTech Employee Stock Purchase Plan.
5
EXECUTIVE OFFICERS
The following provides biographical information with respect to the Executive
Officers:
Joseph P. Mullaney was appointed President and Chief Operating Officer in
June 2001. Previously he served as Vice President, Treasurer, and Chief
Financial Officer of the Company from November 1993 to June 2001. He joined the
Company in May 1990 as Assistant Controller and was promoted to Corporate
Controller in June 1990. Prior to his employment with SofTech he was employed
for seven years at the Boston office of Coopers & Lybrand LLP (now
PriceWaterhouseCoopers LLP) as an auditor in various staff and management
positions.
Jean J. Croteau was appointed Vice President, Operations at the July 2001.
He started with the Company in 1981 as Senior Contracts Administrator and was
promoted to various positions of greater responsibilities until his departure in
1995. Mr. Croteau rejoined SofTech in 1998. From 1995 through 1998 he served as
the Director of Business Operations for the Energy Services Division of XENERGY,
Inc.
Victor G. Bovey was appointed Vice President of Engineering of the Company
in March 2000. He started with the Company in November 1997 as Director of
Product Development. Prior to his employment with SofTech he was employed for
thirteen years with CIMLINC Incorporated in various engineering and product
development positions.
Executive officers of the Company are elected at the first Board of
Directors meeting following the Stockholders' meeting at which the Directors are
elected.
RELATED PARTY TRANSACTIONS
Greenleaf Capital, Inc. has been and continues to be the Company's primary
source of capital. Mr. Johnston, SofTech's Chairman, its largest shareholder and
a Director since 1996, is also the President, Chairman and CEO of Greenleaf
Capital. The Company paid Greenleaf Capital approximately $1.7 million in fiscal
2002 in interest payments on borrowings from Greenleaf and in management fees
for services provided by them. Greenleaf Trust also serves as the trustee and
investment advisor for the Company's 401-K Plan.
The President of the Company was extended a non-interest bearing note in
the amount of $134,000 related to a stock transaction from May 1998. The note is
secured by all Company shares and stock options held by that Officer.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended ("Section
16(a)") 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 (collectively, "Section 16 reporting persons"), to file with the
Securities and Exchange Commission ("SEC") initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Company. Section 16 reporting persons are required by SEC regulations 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 on written representations that no other
reports were required, during the fiscal year ended May 31, 2002, the Section 16
reporting persons complied with all Section 16(a) filing requirements applicable
to them.
6
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met nine times during the fiscal year ended May 31,
2002. Each of the directors, attended more than 75% of the regularly scheduled
and special meetings of the Board of Directors and the Committees on which they
served. The Audit Committee of the Board of Directors reviews with management
and the Company's independent public accountants the Company's financial
statements, the accounting principles applied in their preparation, the scope of
the audit, any comments made by the independent accountants upon the financial
condition of the Company and its accounting controls and procedures and such
other matters as the committee deems appropriate. During fiscal 2002, the Audit
Committee, which consisted of all members of the Board of Directors of the
Company, met two times. The Compensation Committee makes recommendations
concerning the salaries and incentive compensation of executive officers of the
Corporation and administers the Corporation's stock plans. During fiscal 2002,
the Compensation Committee, which consisted of all members of the Board of
Directors, dealt with these compensation issues as part of the regularly
scheduled Board meetings. The Board of Directors does not currently have a
standing nominating committee.
COMPENSATION AND OTHER INFORMATION
CONCERNING DIRECTORS AND OFFICERS
EXECUTIVE COMPENSATION SUMMARY
The following table sets forth summary information concerning the
compensation paid or earned for services rendered to the Company in all
capacities during the fiscal years ended May 31, 2002, 2001 and 2000 as
applicable, to the (i) Company's President and (ii) each of the other executive
officers of the Company. These five individuals are collectively referred to as
the "Named Executive Officers."
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION (1) AWARDS
----------------------- ------
SECURITIES
FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION(2)
--------------------------- ---- ------ ----- ------------ ------- ---------------
Joseph P. Mullaney(3) 2002 $195,000 $45,000 - - $ 16,000(8)
President and Chief Operating 2001 160,000 - - - 13,920(8)
Officer, Former Vice President 2000 144,000 - - 50,000 1,231
and Chief Financial Officer
Jean J. Croteau(5)................. 2002 127,348 33,000 - 50,000 1,573
Vice President, Operations 2001 121,275 20,000 - - 2,820
2000 115,500 20,000 - 50,000 1,158
Victor G. Bovey(4)................. 2002 125,000 4,000 - 15,000 2,604
Vice President, Research & 2001 125,000 - - - 2,500
Development 2000 96,922 - - 50,000 1,000
Mark R. Sweetland (6).............. 2002 80,388 - - - -
Former President and CEO 2001 190,000 - - - 1,169
2000 171,000 - - 50,000 -
Timothy J. Weatherford(7).......... 2002 25,960 - - - -
Former Vice President, Sales 2001 167,231 - - - 21,345
2000 153,000 - - 50,000 1,569
------------
(1) The compensation described in this table does not include medical, group
life insurance or other benefits received by the Named Executive Officers
which are available to all employees of the Company. Annual compensation
includes amounts deferred under the Company's 401(k) plan.
(2) Except as otherwise noted, amounts listed in this column reflect the
Company's contributions to each of the Named Executive Officers accounts
under the Company's 401(k) plan.
7
(3) Mr. Mullaney was appointed President and COO in June 2001. Prior to June
2001, Mr. Mullaney served as Vice President and CFO.
(4) Mr. Bovey was appointed Vice President, Research & Development in March
2000. Prior to March 2000, Mr. Bovey served as Director of Product
Development
(5) Mr. Croteau was appointed Vice President of Operations in July 2001.
(6) Mr. Sweetland was appointed as Director, President and Chief Executive
Officer in September 1996. In June 2001, Mr. Sweetland resigned his
employment and his position as a Director.
(7) Mr. Weatherford was appointed as Director and as Vice President, Sales in
September 1996. In July 2001, Mr. Weatherford departed his employment with
the Company and shortly thereafter was removed as a Director at the
regularly scheduled meeting of the Board of Directors in July 2001.
(8) Includes imputed compensation related to a non-interest bearing note
receivable.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options made during the year
ended May 31, 2002 pursuant to the Corporation's 1994 Stock Plan to the Named
Executive Officers.
INDIVIDUAL GRANTS(1)(2)
---------------------------------------------------------- POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED EXERCISE FOR OPTION TERM (4)
OPTIONS IN FISCAL PRICE(3) EXPIRATION ------------------
NAME GRANTED(#) YEAR ($/SHARE) DATE 5%($) 10%($)
---- ---------- ---- --------- ---- ------- -------
Victor G. Bovey 15,000 11.2% $.09 11/28/11 $ 810 $ 2,152
Jean J. Croteau 50,000 37.3% $.09 11/28/11 $ 2,850 $ 7,172
(1) The Company granted options representing an aggregate of 134,000 shares to
13 employees and directors of the Corporation in fiscal 2002 under its 1994
Stock Plan.
(2) The options vest at the rate of 20% of the shares underlying the options
each year on the anniversary date of the award.
(3) The exercise price per share of each option was equal to the fair market
value per share of Common Stock on the date of grant.
(4) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compounded rates of appreciation of the
Company's Common Stock over the term of the options. These numbers are
calculated based on rules promulgated by the Securities and Exchange
Commission and do not reflect the Company's estimate of future stock price
growth. Actual gains, if any, on stock option exercises and Common Stock
holdings are dependent on the timing of such exercises and the future
performance of the Company's Common Stock. There can be no assurance that
the rates of appreciation assumed in this table can be achieved or that the
amounts reflected will be received by the individuals.
AGGREGATE OPTION EXERCISES AND YEAR-END VALUES
Shown below is information with respect to (i) exercises of stock options
of the Named Executive Officers during the fiscal year ended May 31, 2002 and
(ii) unexercised options outstanding at May 31, 2002 and the value of such
unexercised in-the-money options at May 31, 2002.
8
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY
SHARES MAY 31, 2002 OPTIONS/SARS AT
ACQUIRED (#) MAY 31, 2002 ($)(1)
ON VALUE --- -------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
Joseph P. Mullaney - - - - - -
Victor G. Bovey - - 3,000 12,000 - -
Jean J. Croteau - - 10,000 40,000 - -
(1) As of May 31, 2002, the exercise price of the options were equal to the
fair market value of the Corporation's Common Stock.
EMPLOYMENT CONTRACTS
The Company has not executed any employment contracts with its Named
Executive Officers.
COMPENSATION OF DIRECTORS
Since fiscal 1998, non-employee Directors have received options in lieu of
cash remuneration for their services. Employee Directors are not paid any fees
or additional compensation for service as members of the Board of Directors or
any committee thereof.
Pursuant to the Company's 1994 Stock Option Plan (the "1994 Stock Option
Plan"), non-employee Directors may be granted non-qualified options to purchase
shares of Common Stock of the Company. The Compensation Committee of the Board
of Directors administers the 1994 Stock Option Plan. Under the Plan, all
non-employee Directors receive 10,000 options upon appointment to the Board and
receive 3,000 options on the anniversary date of the initial award for as long
as the Director serves the Company in that capacity. Such options vest over a
five year period in equal increments and have an expiration date ten years after
award. Stock options typically terminate upon a Director leaving his or her
position for any reason other than death or disability. During the fiscal year
ended May 31, 2002 there were 24,000 options granted to non-employee Directors.
9
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
General. The Compensation Committee of the Board of Directors (the
"Committee") is currently composed of all of the members of the Board of
Directors and meets or takes action as many times during the year as is deemed
necessary. The Committee's responsibilities include making recommendations to
the Board for officers on the key components of the Company's executive
compensation program, base salary, annual incentive awards, long-term incentives
in the form of stock options, and other benefits typically offered to executives
by comparable companies.
Compensation Philosophy. The Company's compensation program has been
designed to:
o Support a pay for performance policy that differentiates in
compensation amounts based on Company and individual performance;
o Provide compensation opportunities that are comparable to those
offered by comparable companies, thus allowing the Company to retain
and compete for fully qualified executives who are in the competitive
high technology and professional services marketplace; and
o Align the interests of executives with the long-term interests of
stockholders through award opportunities that can result in ownership
of Common Stock of the Company.
Consistent with the objectives of the compensation philosophy, the
percentage of an executive's potential total compensation that is based on
performance incentives increases with their level of responsibility. This
results in an executive's total compensation varying from year to year based on
the performance of the Company and the individual.
Base Salaries. Base salary levels for the President and COO, and other
executive officers are reviewed annually by the Committee. Certain of the
officers were granted base salary increases during the year based upon a number
of factors, including individual performance, contributions towards the growth
of the Company, and increases in responsibilities.
Annual Cash Incentives. All officers participate in incentive plans which
compensate these individuals in the form of cash bonuses. Awards under these
plans are based on the attainment of specific Company and individual performance
measures established by the Compensation Committee at the beginning of the
fiscal year. For the fiscal year ended May 31, 2002, these executive officers
earned bonuses calculated in accordance with those plans as identified within
this proxy in the table appearing under the heading Executive Compensation
Summary.
Long Term Incentives. 1994 Stock Option Plan. The Company's 1994 Stock
Option Plan is designed to align a portion of the executive compensation program
with stockholder interests by providing for the grant of options to employees,
directors, officers and consultants to purchase up to 1,000,000 shares of Common
Stock of the Company. The 1994 Stock Option Plan was adopted at the Annual
Meeting of Stockholders on November 1, 1994.
The Committee believes that stock options provide greater incentives to
executives to improve the performance of the Company and thereby increase the
value of its stock. It is only by increasing the Company's stock price that
executives are able to realize the economic value of stock options. The
Committee believes that this more closely aligns the interests of the Company's
officers with those of the Company's stockholders.
The Committee administers the Plan and determines which officers will
receive stock options, the number of shares subject to each stock option, the
vesting schedule of the options, and the other terms and provisions of the
options granted. When recommending option awards, the following guidelines were
used: (i) the individual's current contribution to Company performance, (ii) the
anticipated contribution in meeting the Company's long term strategic
performance goals, (iii) the employee's ability to impact corporate and/or
business unit results; and (iv) the employee's current incentive to maximize
operating results based on stock ownership and option awards.
President and COO Compensation. Mr. Mullaney's compensation for fiscal year
2002 was composed of base salary compensation and a discretionary incentive
bonus based on overall achievement of budget and other goals established for him
at the beginning of the fiscal year. The discretionary 2002 bonus was awarded by
the Compensation Committee
10
after the fiscal year end after reviewing his performance against those
established goals. His base compensation for the fiscal year was $195,000. Mr.
Mullaney's bonus award for fiscal year 2002 was $45,000.
Respectfully submitted by the Compensation Committee this 28th day of February
2003:
William D. Johnston
Ronald A. Elenbaas
Timothy L. Tyler
Barry Bedford
Frederick A. Lake
11
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
This report is submitted by the Audit Committee of the Board, which reviews
with the independent auditors and management the annual financial statements and
independent auditors' opinion, reviews the results of the audit of the Company's
annual financial statements and the results of the reviews of the quarterly
financial statements for each of the first three quarters in the fiscal year
with the independent auditors, recommends the retention of the independent
auditors to the Board and periodically reviews the Company's accounting policies
and internal accounting and financial controls for the fiscal year ended May 31,
2002. Messrs. Johnston, Elenbass, Bedford, Lake and Tyler served on the Audit
Committee for the fiscal year ended May 31, 2002. None of Messrs. Johnston,
Elenbass, Bedford, Lake or Tyler are officers or employees of the Company, and
aside from being directors of the Company, each is otherwise independent of the
Company (as independence is defined pursuant to Rule 4200(a)(15) of the National
Association of Securities Dealers' listing standards). The Audit Committee
operates under a written charter adopted by the Board of Directors.
The Audit Committee has reviewed the audited balance sheets of the Company
as of May 31, 2002 and 2001, and the audited statements of operations,
stockholders' equity and cash flows for each of the three years ended May 31,
2002, and has discussed them with both management and Grant Thornton LLP, the
Company's independent auditors. The Audit Committee has also discussed with the
independent auditors the matters required to be discussed by Statement on
Auditing Standards No. 61 (Communications with Audit Committees), as currently
in effect. The Audit Committee has received the written disclosures and the
letter from the independent auditors required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), as currently in
effect, and has discussed with Grant Thornton LLP that firm's independence.
Based on its review of the financial statements and these discussions, the Audit
Committee concluded that it would be reasonable to recommend, and on that basis
did recommend, to the Board of Directors that the audited financial statements
be included in the Company's Annual Report on Form 10-KSB for the fiscal year
ended May 31, 2002.
Respectfully submitted by the Audit Committee this 28th day of February 2003:
William D. Johnston
Ronald A. Elenbaas
Timothy L. Tyler
Barry Bedford
Frederick A. Lake
12
AUDIT FEES
The aggregate fees billed by Grant Thornton LLP for professional services
rendered for the audit of the Company's annual financial statements for the
fiscal year ended May 31, 2002 and for the review of the financial statements
included in the Company's Forms 10-QSB for the fiscal year ended May 31, 2002
were approximately $68,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no fees billed by Grant Thornton LLP for financial information
systems design and implementation professional services for the fiscal year
ended May 31, 2002.
ALL OTHER FEES
The aggregate fees billed by Grant Thornton LLP for services other than
those described above for the fiscal year ended May 31, 2002 totaled
approximately $23,000 and were primarily for the preparation of the Company's
state and federal tax returns and the audit of the Company's 401-K. The
Company's Audit Committee has determined that the provision of the services
provided by Grant Thornton LLP as set forth herein are compatible with
maintaining their independence.
AUDITORS FOR FISCAL 2003
The Board of Directors has selected the firm of Grant Thornton LLP,
independent certified public accountants, to serve as auditors for the fiscal
year ending May 31, 2003. Grant Thornton LLP, has served as the Company's
auditors since fiscal 2001. It is expected that a member of Grant Thornton LLP
will be present at the Annual Meeting with the opportunity to make a statement
if so desired and will be available to respond to appropriate questions.
OTHER MATTERS
The Board of Directors does not intend to bring any matters before the
Annual Meeting other than those specifically set forth in the Notice of Meeting
and it knows of no matters to be brought before the Annual Meeting by others. If
any other matters properly come before the Annual Meeting, it is the intention
of the persons named in the accompanying proxies to vote such proxies in
accordance with the judgment of the Board of Directors.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended for inclusion in the Proxy Statement to
be furnished to all stockholders entitled to vote at the next Annual Meeting of
Stockholders of the Company must be received at the Company's principal
executive offices no later than July 1, 2003. Further, any proposals must comply
with the other procedural requirements set forth in the Company's By-laws, a
copy of which is on file with the Commission, and as set forth by the
Commission. In order to curtail any controversy as to the date on which a
proposal was received by the Company, it is suggested that proponents submit
their proposals by Certified Mail, Return Receipt Requested to SofTech, Inc.,
Two Highwood Drive, Tewksbury, MA, 01876, Attention: Corporate Secretary.
13
INCORPORATION BY REFERENCE
To the extent that this Proxy Statement has been or will be specifically
incorporated by reference into any filing by the Company under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, the
sections of the Proxy Statement entitled "Report on Executive Compensation"
shall not be deemed to be so incorporated, unless specifically otherwise
provided in any such filing.
EXPENSES AND SOLICITATION
The cost of solicitation of proxies will be borne by the Company, and in
addition to soliciting Stockholders by mail through its regular employees, the
Company may request banks, brokers and other custodians, nominees and
fiduciaries to solicit their customers who have stock of the Company registered
in the names of a nominee and, if so, will reimburse such banks, brokers and
other custodians, nominees and fiduciaries for their reasonable out-of-pocket
costs. Solicitation by officers and employees of the Company may also be made of
some Stockholders in person or by mail, telephone or telegraph following the
original solicitation.
The contents and the sending of this Proxy Statement have been approved by
the Board of Directors of the Company.
14
APPENDIX A
SOFTECH, INC.
AUDIT COMMITTEE CHARTER
A. PURPOSE AND SCOPE
The primary function of the Audit Committee (the "Committee") is to assist
the Board of Directors (the Board") in fulfilling its responsibilities by
reviewing: (i) the financial reports provided by the Company to the Securities
and Exchange Commission ("SEC"), the Company's shareholders or to the general
public, and (ii) the Company's internal financial and accounting controls.
B. COMPOSITION
The Committee shall be comprised of all members of the Company's Board of
Directors who shall meet the independence and audit committee composition
requirements under any rules or regulations of The Nasdaq National Market, as in
effect and applicable to the Company from time to time, and each such director
shall be free from any relationship that, in the opinion of the Board of
Directors, would interfere with the exercise of his or her independent judgment
as a member of the Committee.
All members of the Committee shall either (i) be able to read and
understand fundamental financial statements, including a balance sheet, cash
flow statement and income statement, or (ii) be able to do so within a
reasonable period of time after appointment to the Committee. At least one
member of the Committee shall have employment experience in finance or
accounting, requisite professional certification in accounting, or other
comparable experience or background which results in the individual's financial
sophistication, including being or having been a chief executive officer, chief
financial officer or other senior officer with financial oversight
responsibilities.
The members of the Committee shall be elected by the Board at the meeting
of the Board following each annual meeting of stockholders and shall serve until
their successors shall be duly elected and qualified or until their earlier
resignation or removal.
C. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Committee shall:
DOCUMENT REVIEW
1. Review and assess the adequacy of this Charter periodically as
conditions dictate, but at least annually (and update this Charter if and when
appropriate).
2. Review with representatives of management and representatives of the
independent accounting firm the Company's audited annual financial statements
prior to their filing as part of the Annual Report on Form 10-KSB. After such
review and discussion, the Committee shall recommend to the Board whether such
audited financial statements should be published in the Company's Annual Report
on Form 10-KSB. The Committee shall also review the Company's quarterly
financial statements prior to their inclusion in the Company's quarterly SEC
filings on Form 10-QSB and shall communicate with the independent accountants as
necessary.
3. Take steps designed to insure that the independent accounting firm
reviews the Company's interim financial statements prior to their inclusion in
the Company's quarterly reports on Form 10-QSB.
INDEPENDENT ACCOUNTING FIRM
4. Recommend to the Board the selection of the independent accounting firm,
and approve the fees and other compensation to be paid to the independent
accounting firm. The Committee shall have the ultimate authority and
15
responsibility to select, evaluate and, when warranted, replace such independent
accounting firm (or to recommend such replacement for shareholder approval in
any proxy statement).
5. On an annual basis, receive from the independent accounting firm a
formal written statement identifying all relationships between the independent
accounting firm and the Company consistent with Independence Standards Board
("ISB") Standard 1, as it may be modified or supplemented. The Committee shall
actively engage in a dialogue with the independent accounting firm as to any
disclosed relationships or services that may impact its independence. The
Committee shall take, or recommend that the Board take, appropriate action to
oversee the independence of the independent accounting firm.
6. On an annual basis, discuss with representatives of the independent
accounting firm the matters required to be discussed by Statement on Auditing
Standards ("SAS") 61, as it may be modified or supplemented.
7. Meet with the independent accounting firm prior to the audit to review
the planning and staffing of the audit.
8. Evaluate the performance of the independent accounting firm and
recommend to the Board any proposed discharge of the independent accounting firm
when circumstances warrant. The independent accounting firm shall be ultimately
accountable to the Board and the Committee.
FINANCIAL REPORTING PROCESSES
9. In consultation with the independent accounting firm and management,
review annually the adequacy of the Company's internal financial and accounting
controls.
COMPLIANCE
10. To the extent deemed necessary by the Committee, it shall have the
authority to engage outside counsel and/or independent accounting consultants to
review any matter under its responsibility.
REPORTING
11. Prepare, in accordance with the rules of the SEC as modified or
supplemented from time to time, a written report of the Committee to be included
in the Company's annual proxy statement for each annual meeting of stockholders.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
16
REVOCABLE PROXY
SOFTECH, INC.
/ X / PLEASE MARK VOTES
AS IN THIS EXAMPLE
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS WITH- FOR ALL
TO BE HELD APRIL 16, 2003 FOR HOLD EXCEPT
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
1.-3. To elect a member to the Board / / / / / /
The undersigned hereby appoints Joseph P. Mullaney and Bryan of Directors for the specified
Smith, and each of them, proxies, with full power of term or until his successor
substitution, to vote all shares of stock of SofTech, Inc. is elected and qualified:
(the "Company") which the undersigned is entitled to vote at
the Annual Meeting of Stockholders of the Company to be held CLASS I NOMINEE (THREE-YEAR TERM): TIMOTHY L. TYLER
on Wednesday, April 16, 2003, at 10:00 a.m., local time, at
the Company's offices located at Two Highwood Drive, CLASS II NOMINEES (ONE-YEAR TERM): RONALD A. ELENBAAS AND
Tewksbury, Massachusetts, 01876, and at any adjournments FREDERICK A. LAKE
thereof, upon matters set forth in the Notice of Annual
Meeting of Stockholders and Proxy Statement dated March 22, CLASS III NOMINEES (TWO-YEAR TERM): WILLIAM D. JOHNSTON AND
2003, a copy of which has been received by the undersigned. BARRY BEDFORD
Execution of a proxy will not in any way affect a
stockholder's right to attend the meeting and vote in INSTRUCTION: To withhold authority to vote for any individual
person. The proxies are further authorized to vote, in their nominee, mark "For All Except" and write that nominee's name
discretion, upon such other business as may properly come in the space provided below.
before the meeting or any adjournments thereof, and upon
which the persons named as attorneys in the proxies may 4. To transact such other business as may properly come before
exercise discretion under applicable law the meeting or any adjournments thereof.
PLEASE CHECK BOX IF YOU PLAN TO ATTEND THE MEETING. --> / /
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED
OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED "FOR" PROPOSALS 1
through 4.
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Please be sure to sign and date Date
this Proxy in the box below.
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--- Stockholder sign above ---- Co-holder (if any) sign above
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^ DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED. ^
SOFTECH, INC.
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If signing as attorney, executor, trustee or guardian, please give your full title as such. If stock is held
jointly, each owner should sign.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
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If your address has changed, please correct the address in the space provided below and return this portion with the proxy in
the envelope provided.
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