SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant |X| Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14A-6(E)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SOFTECH, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
N/A
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was
determined):
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(5) Total fee paid:
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|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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2
SOFTECH, INC.
TWO HIGHWOOD DRIVE
TEWKSBURY, MA 01876
---------------
NOTICE OF 2005 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 28, 2006
---------------
To the Stockholders of SofTech, Inc.:
The Annual Meeting of Stockholders of SofTech, Inc. (the "Company"), a
Massachusetts company, will be held on June 28, 2006 at 10:00 a.m., at the
offices of Greenleaf Trust Company located at 100 West Michigan Avenue, Suite
100, Kalamazoo, MI 49007 for the following purposes:
1. To elect one (1) Class I director to serve for a
two-year term or until his successor is elected and
qualified;
2. To elect two (2) Class III directors to serve for a
three-year term or until their successors are elected
and qualified;
3. To ratify the appointment of Vitale, Caturano &
Company LTD. as the Company's independent public
accountant for the fiscal year ended May 31, 2006;
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 May 19, 2006
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
May 19, 2006
WE URGE YOU TO ATTEND THE ANNUAL MEETING. WHETHER OR NOT YOU PLAN TO ATTEND,
PLEASE COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. YOU MAY REVOKE THE PROXY AT ANY TIME BEFORE IT
IS VOTED.
3
SOFTECH, INC.
-----------------
PROXY STATEMENT
May 19, 2006
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 June 28,
2006, at 10:00 a.m., Eastern Time, at Greenleaf Trust, 100 West Michigan Avenue,
Suite 100, Kalamazoo, Michigan, 49007.
Only stockholders of record at the close of business on May 19, 2006
(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.
A COPY OF OUR ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED
MAY 31, 2005 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, EXCEPT FOR
EXHIBITS, WILL BE FURNISHED WITHOUT CHARGE TO ANY STOCKHOLDER UPON WRITTEN
REQUEST TO SOFTECH, INC., TWO HIGHWOOD DRIVE, TEWKSBURY, MA 01876, ATTENTION:
AMY MCGUIRE.
Regarding the election of the Class I and the Class III directors, the
nominees receiving the highest number of affirmative votes of the shares present
or represented and entitled to vote at the meeting shall be elected as
directors. 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 person named as attorney-in-fact in the proxies, Joseph P.
Mullaney, is an employee and officer 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" and "Ratification of Appointment of
Independent Public Accountants". 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 person named as attorney in the proxies.
4
A copy of our Annual Report to Stockholders, containing financial
statements for the fiscal year ended May 31, 2005 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 May 26,
2006.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of August 15, 2005: (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 Executive Compensation table set forth below under
"Compensation and Other Information Concerning Non-Employee 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 5,469,804(3)(4) 44.7 %
Joseph P. Mullaney 154,319(3) 1.3 %
Jean J. Croteau 40,000(3) *
Victor G. Bovey 32,350(3) *
Timothy L. Tyler 30,000(3) *
Ronald A. Elenbaas 67,700(3) *
Frederick A. Lake 16,200(3) *
Barry Bedford 16,200(3) *
All officers, directors and nominees as a group .....
(8 persons) (3) 5,826,573(5) 46.9 %
------------------------------
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 15, 2005 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 224,400 shares of Common Stock which may be purchased within
60 days of August 15, 2005 upon the exercise of stock options as
follows: Mr. Johnston - 25,000; Mr. Mullaney - 60,000: Mr. Croteau -
40,000; Mr. Bovey - 12,000; Mr. Tyler - 30,000; Mr. Elenbaas - 25,000;
Mr. Lake - 16,200; and Mr. Bedford - 16,200.
(4) Mr. Johnston's business address is Greenleaf Capital, 100 West Michigan
Avenue, Suite 100, Kalamazoo, Michigan, 49007.
(5) Includes 224,400 shares issuable upon exercise of stock options held by
all Directors and Executive Officers as a group.
5
PROPOSALS 1 AND 2
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 and there are two Class III directors
whose terms 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 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 a Class I director, to hold
office until the 2007 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. Johnston and
Bedford, who are currently Class III directors, be elected as Class III
directors, to hold office until the 2008 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 TIMOTHY L. TYLER AS A CLASS I DIRECTOR TO HOLD OFFICE UNTIL THE 2007 ANNUAL
MEETING OF STOCKHOLDERS AND A VOTE "FOR" THE ELECTION OF WILLIAM D. JOHNSTON AND
BARRY BEDFORD AS CLASS III DIRECTORS TO HOLD OFFICE UNTIL THE 2008 ANNUAL
MEETING OF STOCKHOLDERS.
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
Annual Meeting at which 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 2006 II
1996
Frederick A. Lake Director 2006 II
2000
William D. Johnston Chairman and Director 2005 III
1996
Barry Bedford Director 2005 III
2000
6
PROPOSAL 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Vitale, Caturano & Company LTD. as
the independent public accountants of the Company for the fiscal year ending May
31, 2006. The Board believes, however, that it is desirable to obtain
stockholder ratification of the selection of the Company's independent public
accountants. A representative of Vitale, Caturano & Company LTD. is expected to
be available by teleconference at the Annual Meeting to make a statement if he
wishes to do so and to respond to appropriate questions.
During the fiscal year ended May 31, 2005, the Company engaged Vitale,
Caturano & Company LTD. for the purpose of performing "audit services". For this
purpose, "audit services" include: examination of annual fiscal statements;
review and consultation in connection with filings of annual reports and
registration statements with the SEC; consultation on accounting matters;
preparation of reports to management covering recommendations on accounting,
internal control and similar matters; and meetings with the Audit Committee.
This was the second consecutive year in which this firm has acted as independent
public accountants for the Company.
Ratification will require the affirmative vote of the holders of a
majority of the shares represented in person or by proxy and entitled to vote at
the meeting. If the stockholders do not ratify the selection of the Company's
independent public accountants, the Board of Directors will reconsider its
selection.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF VITALE, CATURANO & COMPANY LTD. AS THE
COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Set forth below is certain information regarding the Directors and
Executive Officers of the Company as of August 15, 2005, based on information
furnished by them to the Company.
DIRECTORS
The following provides biographical information with respect to the Directors:
Ronald A. Elenbaas, 52, term expires at the 2006 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 Ocean Reef Medical Center as well as director of Greenleaf
Trust and a Special Consultant to Keystone Bank. Mr. Elenbaas was appointed a
Director of the Company in September 1996.
William D. Johnston, 58, 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 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. Mr. Johnston has served as President, Chairman and CEO of
the Greenleaf Companies since 1991.
Timothy L. Tyler, 51, 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, 47, 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
7
Johnson and Rauhofs, a Michigan advertising firm, since 1991. Mr. Bedford was
appointed a Director of the Company in July 2000.
Frederick A. Lake, 70, term expires at the 2006 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. 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 public accountants. In addition, the Audit Committee
reviews comments made by the independent public 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 public accountants. The Audit Committee
operates under a written charter.
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.
EXECUTIVE OFFICERS
The following provides biographical information with respect to the Executive
Officers:
Joseph P. Mullaney, 49, 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, 50, 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, 48, 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.
CERTAIN RELATIONSHIPS AND RELATED 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 $1.2 million in fiscal
2005 and $1.4 million in fiscal 2004 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.
8
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, 2005, the Section 16
reporting persons complied with all Section 16(a) filing requirements applicable
to them.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met four times during the fiscal year ended May 31,
2005 and six times during the fiscal year ended May 31, 2004. 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 except Mr.
Elenbaas who attended two of the four Board meetings held during fiscal 2005 and
Messrs. Bedford and Tyler each of whom attended four of the six Board meetings
held during fiscal 2004. 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 2004 and 2005, the Audit Committee, which consisted of all members of the
Board of Directors of the Company, met two times each fiscal year and each
meeting was attended by all committee members. 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 years 2004 and 2005, 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. The Board of Directors currently has the responsibility of selecting
individuals to be nominated for election to the Board of Directors.
Qualifications considered by the Directors in nominating an individual may
include, without limitation, independence, integrity, business experience,
education, accounting and financial expertise, reputation, civic and community
relationships and industry knowledge. In nominating an existing Director for
re-election to the Board of Directors, the Directors will consider and review an
existing director's Board and Committee attendance, performance and length of
service.
COMMUNICATING WITH NON-EMPLOYEE DIRECTORS
The Board of Directors will give appropriate attention to written
communications that are submitted by stockholders, and will respond if
appropriate. Stockholders who wish to send communications on any topic to the
Board of Directors should address such communications to the Board of Directors,
c/o Joseph Mullaney, SofTech, Inc. Two Highwood Drive, Tewksbury, MA, 01876.
DIRECTORS ATTENDANCE AT ANNUAL MEETINGS OF STOCKHOLDERS
Directors are responsible for attending the Annual Meeting of stockholders
either in person or by teleconference.
9
COMPENSATION AND OTHER INFORMATION CONCERNING
NON-EMPLOYEE DIRECTORS AND OFFICERS
EXECUTIVE COMPENSATION
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, 2005, 2004 and 2003 as
applicable, to the (i) Company's President and (ii) each of the other executive
officers of the Company. These three 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).................... 2005 $225,000 $ 50,000 - - $13,489(6)
President and Chief Operating 2004 216,300 - - - 13,001(6)
Officer, Former Vice President 2003 210,000 75,000 - 100,000 16,005(6)
and Chief Financial Officer
Jean J. Croteau(5)....................... 2005 163,770 45,000 - - 1,558
Vice President, Operations 2004 154,500 62,799 - - 3,982
2003 150,000 103,515 - - 1,805
Victor G. Bovey(4)....................... 2005 137,917 - - - 2,758
Vice President, Research & 2004 133,900 - - - 2,690
Development 2003 130,000 9,486 - 2,840
(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.
(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) Includes imputed compensation related to a non-interest bearing note
receivable.
OPTION GRANTS IN LAST FISCAL YEAR
There were no stock option grants during fiscal years 2004 or 2005.
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,
2005 and (ii) unexercised options outstanding at May 31, 2005 and the value of
such unexercised in-the-money options at May 31, 2005.
10
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, 2005 OPTIONS/SARS AT
ACQUIRED (#) MAY 31, 2005 ($)(1)
ON VALUE --------------------------- ------------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
Joseph P. Mullaney - - 40,000 60,000 8,400 12,600
Victor G. Bovey - - 12,000 3,000 2,520 630
Jean J. Croteau - - 40,000 10,000 8,400 2,100
(1) Market value of the underlying securities at May 31, 2005 based on a per
share value of $.30 less the aggregate exercise price.
EMPLOYMENT CONTRACTS
The Company has not executed any employment contracts with its Named
Executive Officers.
COMPENSATION OF NON-EMPLOYEE DIRECTORS
Since fiscal 1998 through fiscal year 2004, 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 were 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 received 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 served the Company in that capacity. Such options vested 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, 2004 there were 15,000 options granted to non-employee Directors.
The 1994 Stock Option Plan terminated in 2004 therefore no additional
stock option awards could be made from that Plan. It is the intention of the
Compensation Committee to establish a cash remuneration award for Directors in
exchange for their Board services, however, no plan has been established at this
time.
11
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, 2005, 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.
Long Term Incentives. 1994 Stock Option Plan. The Company's 1994 Stock
Option Plan was 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 and was closed to new
awards during 2004.
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.
Each of the executive officers of the Company was awarded stock options
under the 1994 Stock Option Plan in prior years. While the 1994 Stock Option
Plan is closed to new stock option awards it is the Committee's belief that the
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existing awards to the executive officers provide the proper incentive for
Company performance. At this point in time, the Committee does not contemplate
establishing an additional stock option plan.
President and COO Compensation. Mr. Mullaney's compensation for fiscal
year 2004 and 2005 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 2004
and 2005 bonus was awarded by the Compensation Committee after the fiscal year
end after reviewing his performance against those established goals. His base
compensation for the fiscal year 2004 and 2005 was $216,300 and $225,000,
respectively. Mr. Mullaney's bonus award for fiscal year 2004 and 2005 was $0
and $50,000, respectively.
Respectfully submitted by the Compensation Committee this 19th day of May 2006:
William D. Johnston
Ronald A. Elenbaas
Timothy L. Tyler
Barry Bedford
Frederick A. Lake
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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 public accountants 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 public accountants, recommends
the retention of the independent public accountants to the Board and
periodically reviews the Company's accounting policies and internal accounting
and financial controls for the fiscal years ended May 31, 2004 and 2005. Messrs.
Johnston, Elenbass, Bedford, Lake and Tyler served on the Audit Committee for
the fiscal years ended May 31, 2004 and 2005. 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, 2004 and 2005, and the audited statements of operations,
stockholders' equity and cash flows for each of the two years ended May 31,
2005, and have discussed them with both management and Vitale, Caturano &
Company LTD., the Company's independent public accountants. The Audit Committee
has also discussed with the independent public accountants 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 public accountants
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees), as currently in effect, and has discussed
with Vitale, Caturano & Company LTD. 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, 2004 and 2005.
Respectfully submitted by the Audit Committee this 19th day of May 2006:
William D. Johnston
Ronald A. Elenbaas
Timothy L. Tyler
Barry Bedford
Frederick A. Lake
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PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table presents the aggregate fees of the principal
accountants for professional services rendered for the audit of the Company's
annual financial statements and review of the financial statements included in
the Company's Form 10-QSB's for the years ended May 31,:
2005 2004
-------- --------
Audit and quarterly review fees (1) $ 89,000 $ 88,605
Tax related fees (2) 20,000 17,500
-------- --------
Total fees $109,000 $106,105
(1) Audit and quarterly review fees consisted of audit work performed in
the preparation of the financial statements to be included in the Company's Form
10-KSB and reviews of the financial statements to be included in the Company's
Form 10-QSB's filed with the Securities and Exchange Commission for the
respective years.
(2) Tax related fees consisted of preparation of the Company's tax returns
for each of the fiscal years.
PRE-APPROVAL POLICIES AND PROCEDURES
The Company's Audit Committee has adopted a policy related to audit and
permissible non-audit services that are to be provided by the independent public
accountants. The policy generally provides that the Company will not engage our
independent public accountants to perform any audit or permissible non-audit
services unless the Audit Committee has approved such services in advance.
During fiscal year 2004 and 2005 all such audit and permissible non-audit
services provided by our independent public accountants were approved in
advance.
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.
HOUSEHOLDING OF ANNUAL MEETING MATERIALS
Some banks, brokers and other nominee record holders may be participating
in the practice of "householding" proxy statements and annual reports. This
means that only one copy of our proxy statement and annual report to
stockholders may have been sent to multiple stockholders in your household. We
will promptly deliver a separate copy of these documents to you upon written or
verbal request to SofTech, Inc., Two Highwood Drive, Tewksbury, MA 01876
Attention: Amy McGuire, telephone (978)640-6222 extension 193. If you want to
receive separate copies of the proxy statement and annual report in the future,
or if you are receiving multiple copies and would like to receive only one copy
per household, you should contact your bank, broker or other nominee record
holder, or you may contact us at the above address and phone number.
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 January 26, 2007. 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.
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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.
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REVOCABLE PROXY
SOFTECH, INC.
Proxy for the Annual Meeting of Stockholders
To be held June 28, 2006
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Joseph P. Mullaney, proxy, with full power of
substitution, to vote all shares of stock of SofTech, Inc. (the "Company") which
the undersigned is entitled to vote at the Annual Meeting of Stockholders of the
Company to be held on Wednesday, June 28, 2006, at 10:00 a.m., local time, at
the offices of Greenleaf Trust Company located at 100 West Michigan Avenue,
Suite 100, Kalamazoo, MI 49007 and at any adjournments thereof, upon matters set
forth in the Notice of Annual Meeting of Stockholders and Proxy Statement dated
May 19, 2006, a copy of which has been received by the undersigned. Execution of
a proxy will not in any way affect a stockholder's right to attend the meeting
and vote in person. The proxies are further authorized to vote, in their
discretion, upon such other business as may properly come before the meeting or
any adjournments thereof, and upon which the persons named as attorneys in the
proxies may exercise discretion under applicable law.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SIDE
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[X] Please mark votes as in this example.
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.
1. To elect one (1) members to the Board of 3. To ratify the appointment of Vitale,
Directors for the specified term or until his successor Caturano and Company LTD. as the Company's
is elected and and qualified: independent public accountant for
fiscal year ended May 31, 2006.
Class I Nominee (two-year term): Timothy L. Tyler
FOR WITHHELD FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] [ ]
2. To elect two (2) members to the Board of 4. To transact such other business as
Directors for the specified term or until his successor may properly come before the meeting or
is elected and qualified: any adjournments thereof.
Class III Nominee (three-year term): William D. Johnston
FOR WITHHELD FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] [ ]
Class III Nominee (three-year term): Barry Bedford
FOR WITHHELD
[ ] [ ]
[ ] MARK HERE IF YOU PLAN TO ATTEND THE MEETING If signing as attorney, executor, trustee or
guardian, please give your full title as such. If
[ ] MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW stock is held jointly, each owner should sign.
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Signature Date
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Signature Date
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