<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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 Section 240.14a-11(c) or Section 240.14a-12
AMERICAN SOFTWARE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(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):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] 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:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
AMERICAN SOFTWARE, INC.
470 EAST PACES FERRY ROAD
ATLANTA, GEORGIA 30305
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of AMERICAN
SOFTWARE, INC. will be held at the Swissotel, 3391 Peachtree Road, N.E.,
Atlanta, Georgia, on Thursday, August 27, 1998 at 4:00 p.m. for the following
purposes:
1. To elect four directors of the Company, two of whom will be elected by
the holders of Class A Common Shares, and two of whom will be elected
by the holders of Class B Common Shares.
2. To consider and vote upon an amendment to the Company's 1991 Employee
Stock Option Plan to increase the base number of Class A Common Shares
that may be subject to options granted under that Plan from 2,700,000
Shares to 3,600,000 Shares.
3. To consider and vote upon an amendment to the Company's Directors and
Officers Stock Option Plan to increase the number of Class A Common
Shares that may be subject to option granted under that Plan from
1,000,000 Shares to 1,200,000 Shares.
4. To consider and transact such other business as may properly come
before the meeting.
Only shareholders of the Company of record at the close of business on July
10, 1998 will be entitled to vote at the meeting.
Shareholders are requested to vote, date, sign and mail their proxies in the
form enclosed even though they now plan to attend the meeting. If shareholders
are present at the meeting, their proxies may be withdrawn, and they may vote
personally on all matters brought before the meeting, as described more fully
in the enclosed Proxy Statement.
BY ORDER OF THE BOARD OF DIRECTORS
James R. McGuone,
Secretary
August 3, 1998
IMPORTANT
We encourage you to attend the shareholders' meeting. In order that there
may be a proper representation at the meeting, each shareholder is requested
to send in his or her proxy in the enclosed envelope, which requires no
postage if mailed in the United States. Attention by shareholders to this
request will reduce the Company's expense in soliciting proxies.
<PAGE>
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
OF AMERICAN SOFTWARE, INC.
----------------
TO BE HELD AT THE
SWISSOTEL
3391 PEACHTREE ROAD, N.E.
ATLANTA, GEORGIA
ON AUGUST 27, 1998
This Proxy Statement is furnished to Class A shareholders by the Board of
Directors of AMERICAN SOFTWARE, INC., 470 East Paces Ferry Road, N.E.,
Atlanta, Georgia 30305 (the "Company"), in connection with the solicitation by
the Board of Directors of proxies for use at the Annual Meeting of
Shareholders on Thursday, August 27, 1998, at 4:00 p.m., and at any
adjournment or adjournments thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders. This Proxy Statement
and accompanying proxy card and Notice of Annual Meeting are first being
mailed to shareholders on or about August 3, 1998.
If the enclosed form of proxy is properly executed and returned, the shares
represented thereby will be voted in accordance with its terms. If no choices
are specified, the proxy will be voted -
FOR - Election of David H. Gambrell and Thomas R. Williams as Class A
Directors.
FOR - Adoption of proposed amendment to the Company's 1991 Employee Stock
Option Plan to increase the base number of Class A Common Shares that may
be subject to options granted under that Plan from 2,700,000 Shares to
3,600,000 Shares.
FOR - Adoption of proposed amendment to the Company's Directors and
Officers Stock Option Plan to increase the number of Class A Common Shares
that may be subject to options granted under that Plan from 1,000,000
Shares to 1,200,000 Shares.
In addition, a properly executed and returned proxy card gives the authority
to vote in accordance with the proxy-holders' best judgment on such other
business as may properly come before the meeting or any adjournment thereof.
Any proxy given pursuant to this solicitation may be revoked, either in
writing furnished to the Secretary of the Company prior to the meeting or
personally by attendance at the meeting, by the person giving the proxy
insofar as the proxy has not been exercised at the meeting.
VOTING SECURITIES
RECORD DATE AND VOTING OF SECURITIES
The Board of Directors has fixed the close of business on July 10, 1998 as
the record date for determining the holders of common stock entitled to notice
of and to vote at the meeting. On July 10, 1998, the Company had outstanding
and entitled to vote a total of 17,907,817 Class A Common Shares ("Class A
shares") and 4,797,289 Class B Common Shares ("Class B shares").
Other than in the election of directors, in which holders of Class A shares
and Class B shares vote as separate classes, each outstanding Class A share is
entitled to one-tenth vote per share and each outstanding Class B share is
entitled to one vote per share on all matters to be brought before the
meeting. The Class A directors and the Class B directors will be elected by a
majority of the votes cast by the respective classes. The proposed increases
in the number of shares authorized under the 1991 Employee Stock Option Plan
and the Directors and Officers Stock Option Plan require the affirmative vote
of a majority of the shares represented at the meeting (adjusted as described
above). Any other matter submitted to the meeting must be approved or ratified
by a majority vote of the outstanding shares (adjusted as described above). A
one-third quorum of
<PAGE>
5,969,272 Class A shares and of 1,599,096 Class B shares is required to be
present or represented by proxy at the meeting in order to conduct all of the
business expected to come before the meeting. A vote of abstention cast by any
shareholder on a particular action will be counted towards the quorum
requirement, but will not be counted as a vote for or against the action.
SECURITY OWNERSHIP
Five Percent Shareholders. The only persons known by the Company to own
beneficially more than 5% of the outstanding shares of common stock of either
class of the Company are those set forth below. Unless otherwise noted, this
information is as of June 30, 1998. The statements as to securities
beneficially owned are, in each instance, based upon information provided by
the person(s) concerned. Except as disclosed in the notes to the table, each
person has sole voting and investment power with respect to the entire number
of shares shown as beneficially owned by that person.
<TABLE>
<CAPTION>
SHARES PERCENT
NAME AND ADDRESS OF BENEFICIAL BENEFICIALLY OF
TITLE OF CLASS OWNER OWNED CLASS(1)
-------------- ------------------------------ ------------ --------
<C> <S> <C> <C>
CLASS A SHARES James C. Edenfield............ 99,375(2)(3) 0.6%(4)
c/o American Software, Inc.
470 East Paces Ferry Road, N.
E.
Atlanta, Georgia 30305
Thomas L. Newberry............ 51,425(2)(5) 0.3%(4)
c/o American Software, Inc.
470 East Paces Ferry Road, N.
E.
Atlanta, Georgia 30305
State of Wisconsin Investment
Board........................ 1,315,300 7.3%
P. O. Box 7842
Madison, Wisconsin 53707
CLASS B SHARES James C. Edenfield............ 2,562,352 53.4%
Thomas L. Newberry............ 2,234,937 46.6%
</TABLE>
- --------
(1) Based on a total of 17,901,292 Class A shares outstanding, plus any shares
issuable pursuant to options held by the person in question which may be
exercised within 60 days.
(2) Does not include the Class B shares beneficially owned by Mr. Edenfield
and Dr. Newberry, which shares are convertible into Class A shares on a
share for share basis.
(3) Represents shares that may be acquired upon the exercise of stock options
exercisable within 60 days.
(4) For all matters except the election of directors, which involves class
voting, Messrs. Edenfield and Newberry together beneficially own
approximately 73% of the combined, weighted voting rights of the
outstanding Class A and Class B shares. See "Record Date and Voting of
Securities," above. If their respective Class B shares were converted into
Class A shares, Mr. Edenfield would beneficially own 11.7% of the
outstanding Class A shares and Dr. Newberry would beneficially own 10.1%
of the outstanding Class A shares.
(5) Includes 49,000 shares that may be acquired upon the exercise of stock
options exercisable within 60 days.
Directors and Executive Officers. The following table shows the shares of
common stock of the Company, both Class A and Class B, beneficially owned by
each nominee for director, by each executive officer named in the Summary
Compensation Table and by all directors and executive officers as a group as
of June 30, 1998. The statements as to securities beneficially owned are, in
each instance, based upon information provided by the person(s) concerned.
Except as disclosed in the notes to the table, each person has sole voting and
investment power with respect to the entire number of shares shown as
beneficially owned by that person.
2
<PAGE>
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED PERCENT OF CLASS
----------------------- -------------------
NAME OF BENEFICIAL OWNER
OR DESCRIPTION OF GROUP CLASS A CLASS B CLASS A(1) CLASS B
------------------------ ------- --------- ---------- -------
<S> <C> <C> <C> <C>
James C. Edenfield.................. 99,375(2)(3) 2,562,352 0.6%(4) 53.4%
Thomas L. Newberry.................. 51,425(2)(5) 2,234,937 0.3%(4) 46.6%
David H. Gambrell................... 36,000(3) -0- 0.2% --
Thomas R. Williams.................. 36,000(3) -0- 0.2% --
J. Michael Edenfield................ 126,514(6) -0- 0.7% --
Paul DiBono, Jr..................... 68,500(7) -0- 0.4% --
ALL DIRECTORS AND EXECUTIVE OFFICERS
AS A GROUP (8 PERSONS)............. 430,783(2)(8) 4,797,289 2.4% 100%
</TABLE>
- --------
(1) Based on a total of 17,901,292 Class A shares outstanding, plus any shares
issuable pursuant to options held by the person or group in question which
may be exercised within 60 days.
(2) Does not include the Class B shares beneficially owned by Mr. Edenfield
and Dr. Newberry, which shares are convertible into Class A shares on a
share for share basis.
(3) Represents shares subject to options exercisable within 60 days.
(4) For all matters except the election of directors, which involves class
voting, Messrs. Edenfield and Newberry together beneficially own
approximately 73% of the combined, weighted voting rights of the
outstanding Class A and Class B shares. See "Record Date and Voting of
Securities," above. If their respective Class B shares were converted into
Class A shares, Mr. Edenfield would beneficially own 11.7% of the
outstanding Class A shares and Dr. Newberry would beneficially own 10.1%
of the outstanding Class A shares.
(5) Includes 49,000 shares subject to options exercisable within 60 days.
(6) Includes 120,046 shares subject to options exercisable within 60 days.
(7) Includes 67,500 shares subject to options exercisable within 60 days.
(8) Includes 420,890 shares subject to options exercisable within 60 days.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's executive officers and directors, and persons who own
more than 10% of a registered class of the Company's equity securities, to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission (the "Commission"). Officers, directors and holders of
more than 10% of the Class A shares are required under regulations promulgated
by the Commission to furnish the Company with copies of all Section 16(a)
forms they file.
Based upon a review by the Company of filings made under Section 16(a) of
the Exchange Act, not all of the reports required to be filed during fiscal
1998 were filed on a timely basis. The Company is aware of the following
reports that were filed with the Commission by officers or directors of the
Company after their respective due dates: Vincent Klinges (initial statement
of beneficial ownership of securities, required to be filed following his
election as Chief Accounting Officer and Acting Chief Financial Officer of the
Company), Thomas L. Newberry (three reports: two reporting gifts of stock and
one annual statement of beneficial ownership), and Thomas R. Williams (two
reports: one reporting a sale of stock and one annual statement of beneficial
ownership). To the knowledge of the Company, all of such reports have been
filed at this time. Based upon its review of copies of filings received by it,
the Company believes that since May 1, 1997 all other Section 16(a) filing
requirements applicable to its directors, officers and greater than 10%
beneficial owners were complied with.
3
<PAGE>
ELECTION OF DIRECTORS
The directors of the Company are elected annually to hold office until the
election and qualification of their successors at the next Annual Meeting. Of
the four directors to be elected, two are to be elected by the holders of the
outstanding Class A shares and two are to be elected by the holders of the
outstanding Class B shares. The persons named in the enclosed proxy card
intend to vote Class A shares for the election of David H. Gambrell and Thomas
R. Williams, the Class A director nominees. In the event either of these
individuals should be unavailable to serve as a director, the proxy will be
voted in accordance with the best judgment of the person or persons acting
under it. The Board of Directors has no reason to believe that any director
nominees will be unavailable for election as a director.
It is anticipated that Messrs. Edenfield and Newberry, who together own all
of the Class B shares, will vote their Class B shares in favor of the election
of Messrs. Edenfield and Newberry as Class B directors. Thus, it is expected
that Messrs. Edenfield and Newberry will continue to serve as the Class B
directors.
The nominees for directors, their ages, their principal occupations for at
least the past five years, other public company directorships held by them and
the year each was first elected a director of the Company are set forth below.
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION; DIRECTORSHIPS DIRECTOR
--------------- --- ----------------------------------- ----------
<C> <C> <S> <C>
CLASS A DIRECTORS:
Partner, Gambrell & Stolz, L.L.P.,
David H. Gambrell (1) 68 Attorneys-at-law, Atlanta, GA. 1983
Thomas R. Williams (2) 69 President, The Wales Group, Inc.; 1989
director of BellSouth Corporation,
Georgia Power Company, National Life
Insurance Company of Vermont, ConAgra,
Inc. and AppleSouth, Inc.; a trustee
of The Fidelity Group of Mutual Funds;
and retired director, Equifax, Inc.
and National Service Industries, Inc.
CLASS B DIRECTORS:
James C. Edenfield (3) 63 President, Chief Executive Officer and 1971
Treasurer of American Software, Inc.
and American Software USA, Inc.;
Director of Logility, Inc.
Chairman of the Board of American
Thomas L. Newberry (4) 65 Software, Inc. 1971
</TABLE>
- --------
(1) Mr. Gambrell has been a practicing attorney since 1952, and is a partner
in the firm of Gambrell & Stolz, L.L.P., counsel to the Company. He served
as a member of the United States Senate from the State of Georgia in 1971
and 1972. Mr. Gambrell holds a Bachelor of Science degree from Davidson
College and a J.D. from the Harvard Law School.
(2) Mr. Williams is currently the President of The Wales Group, Inc., a
closely held corporation engaged in investments and venture capital. He
has held such position since 1987. In addition to the above directorships,
Mr. Williams was a director of Southern Bell from 1980 to 1983 and is a
former Chairman of the Board of First Wachovia Corporation, First National
Bank of Atlanta and First Atlanta Corporation. He holds a Bachelor of
Science degree in Industrial Engineering from the Georgia Institute of
Technology and a Master of Science degree in Industrial Management from
the Massachusetts Institute of Technology.
(3) Mr. Edenfield is a co-founder of the Company and has served as Chief
Executive Officer since November 1989, and as Co-Chief Executive Officer
for more than five years prior to that time. Prior to founding the
Company, Mr. Edenfield held several executive positions with and was a
director of Management Science America, Inc., an Atlanta-based
applications software development and sales company. He holds a Bachelor
of Industrial Engineering degree from the Georgia Institute of Technology.
4
<PAGE>
(4) Dr. Newberry is a co-founder of the Company and served as Co-Chief
Executive Officer of the Company until November 1989. Prior to founding
the Company, he held executive positions with several companies engaged in
computer systems analysis, software development and sales, including
Management Science America, Inc., where he was also a director. Dr.
Newberry holds Bachelor, Master of Science and Ph.D degrees in Industrial
Engineering from the Georgia Institute of Technology.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT CLASS A SHAREHOLDERS VOTE
"FOR" MESSRS. GAMBRELL AND WILLIAMS.
From May 1, 1997 through April 30, 1998, the Board of Directors held four
meetings. No director of the Company attended fewer than 75% of the total
meetings of the Board of Directors and committee meetings on which such Board
member served and was eligible to attend during this period.
The Board of Directors has an Audit Committee, which consists of Messrs.
Gambrell (Chairman) and Williams. The functions of the Audit Committee include
recommending independent public accountants to the Company, reviewing the
scope and results of the independent public accountants' audit, and monitoring
the adequacy of the Company's accounting, financial and operating controls.
The Audit Committee held two meetings during fiscal 1998.
The Company has a 1991 Employee Stock Option Plan Committee, consisting of
Messrs. Edenfield and Newberry. During fiscal 1998, this Committee met or
acted by written consent eight times. The members of this Committee are not
eligible to participate in this Plan. The functions of this Committee are to
grant options and establish the terms of those options, as well as to construe
and interpret the Plan and to adopt rules in connection therewith.
The Company has a Compensation Committee, consisting of Messrs. Williams
(Chairman) and Gambrell, described below in "Certain Information Regarding
Executive Officers and Directors--Report on Executive Compensation." The
Compensation Committee met or acted by written consent on four occasions
during fiscal 1998, including two actions relating solely to stock option
grants.
The Board has no nominating committee or any other committee performing
similar functions.
5
<PAGE>
CERTAIN INFORMATION REGARDING EXECUTIVE OFFICERS AND DIRECTORS
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning
compensation paid or accrued by the Company to or on behalf of the Company's
Chief Executive Officer and the other executive officers of the Company whose
annual compensation exceeded $100,000 during fiscal 1998 (referred to herein
as the "named executive officers") for the fiscal years ended April 30, 1996,
1997 and 1998:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION ALL
BONUS OR AWARDS/NUMBER OTHER
ANNUAL OTHER ANNUAL OF OPTION COMPEN-
NAME AND PRINCIPAL FISCAL SALARY COMPENSATION SHARES SATION
POSITION YEAR ($) ($) GRANTED ($)(1)(2)
------------------ ------ ------- ------------ ------------- ---------
<S> <C> <C> <C> <C> <C>
James C. Edenfield...... 1998 434,500 450,850 35,000 -0-
President and Chief 1997 434,500 171,225 35,000 -0-
Executive Officer(3) 1996 434,500 -0- 18,000 -0-
J. Michael Edenfield.... 1998 240,000(4) 345,669(4) 70,000(5) -0-
Executive Vice
President; 1997 240,000 102,735 30,000 -0-
President of Logility,
Inc.(3) 1996 240,000 -0- 16,000 -0-
Paul DiBono, Jr......... 1998 142,000 10,000 30,000 -0-
Senior Vice President 1997 135,000 5,000 20,000 -0-
1996 126,250 -0- 10,000 -0-
Ellen Valentine(6)...... 1998 111,382 -0- 30,000 -0-
1997 116,600 14,382 15,000 -0-
</TABLE>
- --------
(1) The Company did not make any contributions for the accounts of these
individuals under the Company's Profit Sharing Plan.
(2) The aggregate amount of perquisites and other personal benefits,
securities or property given to each named executive officer, valued on
the basis of aggregate incremental cost to the Company, was less than
either $50,000 or 10% of the total annual salary and bonus for that
executive officer during each of these years.
(3) James C. Edenfield is the father of J. Michael Edenfield.
(4) All of the annual salary amount was paid by Logility, Inc., a majority-
owned subsidiary of the Company. Of the bonus amount, $282,136 was paid by
the Company for services prior to his resignation as Chief Operating
Officer of the Company in October 1997 and $63,533 was paid by Logility.
(5) Of these shares, 50,000 were Company stock options and 20,000 were stock
options granted by Logility.
(6) Ms. Valentine became an executive officer of the Company in February 1996.
Her employment with the Company terminated in March 1998.
STOCK OPTION PLANS
The Company has granted stock options pursuant to four stock option plans.
Two of these plans, the Incentive Stock Option Plan (the "Incentive Plan") and
the Nonqualified Stock Option Plan (the "Nonqualified Plan"), were terminated
effective August 22, 1991 (the "Terminated Plans"), at which time the
shareholders of the Company approved two new option plans: The 1991 Employee
Stock Option Plan (the "Employee Option Plan") and the Directors and Officers
Stock Option Plan (the "D&O Option Plan"). Options outstanding under the
Terminated Plans remain in effect, but no new options may be granted under
those plans. The Employee Option Plan and the D&O Option Plan are proposed to
be amended and are described in "Amendment of Stock Option Plans" below. The
following sections describe the other two stock option plans.
6
<PAGE>
Incentive Stock Option Plan. On January 13, 1983, the Company adopted and
the shareholders approved the Incentive Plan. The Incentive Plan was designed
to qualify as an "incentive stock option plan" under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). As incentive stock
options, options granted under the Incentive Plan are subject to substantially
the same terms as incentive stock options that may be granted under the
Employee Option Plan and the D&O Option Plan. As of April 30, 1998, there were
outstanding under the Incentive Plan options to purchase 6,175 Class A shares.
Nonqualified Stock Option Plan. Effective June 3, 1986, the Company adopted
the Nonqualified Plan. Options granted under the Nonqualified Plan do not
receive the favorable tax treatment afforded to incentive stock options.
Options granted under this Plan were not, however, subject to restrictions on
exercise price and other restrictions applicable to incentive stock options.
Other terms of these options are, in general, substantially the same as
incentive stock options granted by the Company. As of April 30, 1998, there
were outstanding under the Nonqualified Plan options to purchase 46,063 Class
A shares.
Stock Option Committees. Prior to termination of the Incentive Plan and the
Nonqualified Plan, these Plans were administered by the Stock Option
Committee, consisting of Mr. Edenfield and Dr. Newberry. As discussed in
"Amendment of Stock Option Plans--Administration," below, Messrs. Edenfield
and Newberry also comprise the Employee Option Plan Committee. The D&O Option
Plan is administered by the Compensation Committee, consisting of Messrs.
Gambrell and Williams.
The members of these Committees are not eligible to participate in the Plan
that they administer, except pursuant to the formula option grant program for
non-employee directors under the D&O Option Plan. The Compensation Committee
and the Employee Stock Option Committee consist of "disinterested persons" as
defined in Rule 16b-3 under the Exchange Act. Under the Plans, the functions
of these Committees are to grant options and establish the terms of those
options, as well as to construe and interpret the respective Plans and adopt
rules in connection therewith.
STOCK OPTION GRANTS
The following table sets forth information with respect to options granted
during fiscal 1998 to each of the named executive officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------
POTENTIAL
REALIZED VALUE
AT ASSUMED
PERCENT OF ANNUAL RATES OF
TOTAL STOCK PRICE
OPTIONS APPRECIATION
NUMBER OF GRANTED TO EXERCISE OR FOR OPTION
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION TERM(2)($)
NAME GRANTED(1) FISCAL 1998 (PER SHARE)($) DATE 5% 10%
---- ---------- ------------ -------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
James C. Edenfield ..... 35,000 3.27% 6.125 5/1/2007 134,819/341,659
J. Michael Edenfield.... 50,000 4.67% 6.125 5/1/2007 192,599/488,084
20,000(3) 7.47%(3) 14.50 10/7/2007 182,379/462,185
Paul DiBono, Jr......... 30,000 2.8% 6.125 5/1/2007 115,559/292,850
Ellen Valentine......... 30,000 2.8% 6.125 3/31/1998 9,188/18,375(4)
</TABLE>
- --------
(1) Such options may not be exercised earlier than one year after the date of
grant. Options vest ratably over a period of four years.
(2) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises are dependent on the future
performance of the Company's Class A shares (and, in the case of the
20,000-share option grant to J. Michael Edenfield, Logility's common
stock) and overall market conditions. The amounts reflected in this table
may not necessarily be achieved.
(3) This 20,000 grant was a grant of Logility stock options and the percentage
and fair market value information for that option grant relates to
Logility stock options and Logility Common Stock.
(4) Computed as of actual date of expiration.
7
<PAGE>
STOCK OPTION EXERCISES AND OUTSTANDING OPTIONS
The following table contains information, with respect to the named
executive officers, regarding stock options outstanding as of April 30, 1998.
No stock options were exercised by these executive officers during fiscal
1998.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED IN-THE-
OPTIONS AT MONEY OPTIONS AT
04/30/98 04/30/98
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE(1)($)
---- ------------------ -------------------
<S> <C> <C>
James C. Edenfield...................... 81,875/82,250 389,406/260,259
J. Michael Edenfield.................... 103,983/127,017(2) 545,636/366,520(3)
Paul DiBono, Jr......................... 55,000/65,000 284,637/221,517
Ellen Valentine......................... -0-/-0- -0-/-0-
</TABLE>
- --------
(1) The market price of Class A shares on April 30, 1998 was $8.188.
(2) Includes options to purchase 20,000 shares of common stock of Logility,
none of which are exercisable.
(3) Does not include any amount related to Logility stock options.
EMPLOYMENT AGREEMENT AND BONUS POLICY
From May 1, 1983 through April 30, 1995, the compensation of James C.
Edenfield, President and Chief Executive Officer of the Company, was
determined under an employment contract entered into between him and the
Company on January 17, 1983. This contract provided for an annual base salary
of $434,500, payable monthly, plus expenses and normal employee fringe
benefits. In addition, the contract provided for an annual bonus of 5% of the
increase of each fiscal year's pre-tax earnings over the pre-tax earnings of
the preceding fiscal year. The contract expired at the end of fiscal 1995, and
since such time Mr. Edenfield has continued to be compensated on the same
basis as applied under the Contract. The Board of Directors, after consulting
with the Compensation Committee, determined that the same contract terms would
continue through fiscal 1999. Accordingly, during fiscal 1998, Mr. Edenfield's
salary remained at $434,500. He received a bonus of $450,850 under the bonus
formula with respect to fiscal 1998.
Pursuant to written plans, J. Michael Edenfield and Paul DiBono had the
potential to receive certain cash bonuses, stock options and other
compensation, the amounts of which were determined on the basis of fiscal 1998
performance standards. Each of these individuals qualified for a bonus under
performance standards applicable during fiscal 1998. For fiscal 1999, the
bonus plans for these officers again will have individualized incentive goals
tied to increases in revenues and/or net income, either Company-wide or
related to specific areas over which they have responsibility, or both. The
incentive plan of J. Michael Edenfield has been revised for fiscal 1999 as
determined by the compensation committee of the Logility board of directors.
CERTAIN TRANSACTIONS
The Company leases one of its office facilities from a partnership that is
owned entirely by Messrs. Edenfield and Newberry under a lease that by its
terms expired December 31, 1996. An extension of that lease, on a month-to-
month basis, has been approved by the disinterested members of the Board of
Directors for the balance of calendar year 1998 and for subsequent years,
pending negotiation of a new long-term lease. The Company incurred expenses of
approximately $274,000 in fiscal 1997 and approximately $300,000 in fiscal
1998 pursuant to this lease. The current rental rate is $17.14 per square
foot. Management believes that the terms of the lease are fair to the Company.
In anticipation of the initial public offering of Logility Common Stock in
October 1997, the Company and Logility entered into various agreements (the
"Intercompany Agreements"), including a Services Agreement, a Facilities
Agreement, a Marketing License Agreement and a Tax Sharing Agreement. These
Agreements and the
8
<PAGE>
other Intercompany Agreements are further described in the Company's Annual
Report on Form 10-K for the fiscal year ended April 30, 1998, filed with the
Securities and Exchange Commission. In fiscal 1998, Logility paid the
following aggregate amounts to the Company under the terms of the Intercompany
Agreements: Services Agreement--$1,067,000; Facilities Agreement--$330,000;
and Marketing License Agreement--$1,108,000. Under the Tax Sharing Agreement,
Logility was allocated $1,052,000 in federal, state and local taxes for fiscal
1998.
In addition, during fiscal 1998, Logility acquired from the Company the
assets of Distribution Sciences, Inc., a former subsidiary of the Company, as
well as the WarehousePRO Division of the Company. At the time of those
acquisitions, Logility was a wholly-owned subsidiary of the Company. For
purposes of the Company's financial statements, the acquisition of
Distribution Sciences assets by Logility was valued at $676,000 and the
acquisition of WarehousePRO assets by Logility was valued at $1,580,000.
As a result of the various transactions between the Company and Logility,
amounts payable to and receivable from Logility arise from time to time. At
April 30, 1998, amounts due to the Company by Logility totaled $961,000.
DIRECTOR COMPENSATION
During fiscal 1998, the Company compensated Dr. Newberry, the Chairman of
the Board, at the rate of $18,000 per annum, and other Directors who are not
employed by the Company at the rate of $12,000 per annum, plus $600 for each
half-day or $1,200 for each full day meeting of the Board of Directors or any
committee of the Board that they attended.
Directors are eligible to receive stock option grants under the Company's
D&O Option Plan, adopted in 1991. Under the terms of that Plan, Directors who
are not employed by the Company automatically receive stock option grants of
5,000 shares each, effective at six-month intervals, on each October 31 and
April 30, with exercise prices equal to the market price on those respective
dates. These options become exercisable one year after the date of grant and
expire ten years after the date of grant. They do not terminate if the
Director ceases to serve on the Board of the Company. Under this program,
Messrs. Gambrell, Newberry and Williams each received options to purchase an
aggregate of 10,000 shares in fiscal 1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Gambrell and Williams have been selected by the Board of Directors
to serve on the Compensation Committee. Mr. Gambrell and James R. McGuone,
Secretary of the Company, are partners in the firm of Gambrell & Stolz,
L.L.P., general counsel to the Company. Legal fees in the amount of $593,053
were paid by the Company (including fees paid by Logility) to that firm during
calendar year 1997 for legal services rendered as general counsel to the
Company and to Logility, in addition to $18,000 in Director fees paid during
that year for Mr. Gambrell's serving as a Director of the Company and as a
member of Board Committees.
REPORT ON EXECUTIVE COMPENSATION
The following is the report of the Compensation Committee of the Board of
Directors of American Software, Inc. for the fiscal year ended April 30, 1998.
Meetings. The Compensation Committee has met two times formally and has
conferred informally a number of times during fiscal year 1998, among the
members of the Committee and with management and the Board of Directors
concerning the authority and responsibilities of the Committee.
Executive Compensation Philosophy. The Committee believes that a
compensation program which enables the Company to attract and retain
outstanding executives will assist the Company in meeting its long-range
objectives, thereby serving the interest of the Company's shareholders. The
compensation program of the Company is designed to achieve the following
objectives:
1. Provide compensation opportunities that are competitive with those of
companies of a similar size.
9
<PAGE>
2. Create a strong link between the executive's compensation and the
Company's annual and long-term financial performance.
3. Include above average elements of financial risk through performance-
based incentive compensation that offers an opportunity for above average
financial reward to the executives.
Compensation of Chief Executive Officer. The Compensation Committee has the
responsibility and authority to review and establish compensation for the
Chief Executive Officer of the Company, including his participation in the D&O
Option Plan and the re-evaluation and negotiation of his employment contract.
Effective May 1, 1997, the Compensation Committee and the Chief Executive
Officer, James C. Edenfield, agreed to extend his previous compensation
arrangement on a year-to-year basis, on the same terms as had been in effect.
For the fiscal year 1999, the Committee has decided to continue the Chief
Executive Officer's compensation plan, so that Mr. Edenfield will continue to
receive a base salary of $434,500 and a bonus equal to 5% of the increase in
the Company's pre-tax earnings for fiscal 1999 over the pre-tax earnings for
fiscal 1998. The Committee's decision to continue this basis for compensation
in fiscal 1999 reflects the belief of the Compensation Committee and Mr.
Edenfield that the Chief Executive Officer's compensation should be tied
substantially to growth in earnings and that the existing compensation
arrangement meets that objective.
The participation of the Chief Executive Officer in the D&O Option Plan
during fiscal 1999 will be determined by the Compensation Committee based upon
its authority to grant options under that Plan.
The Chief Executive Officer's cash compensation in fiscal year 1998, both
salary and bonus, was determined under the terms of the compensation
arrangement described above. Accordingly, the Chief Executive Officer received
a bonus with respect to fiscal year 1998 equal to 5% of the increase in pre-
tax earnings from the previous year. As the Company had $3,425,000 in pre-tax
earnings in fiscal 1997 and $12,442,000 in pre-tax earnings in fiscal 1998,
the bonus for fiscal 1998 was equal to 5% of the $9,017,000 increase, or
$450,850.
The Chief Executive Officer received a grant of a stock option on May 1,
1997, consisting of 35,000 Class A shares exercisable at the then-current
market price, or $6.125, with a term of ten years. This option was granted
under the D&O Option Plan, which is administered by the Compensation
Committee. The terms and size of this option, which was a nonqualified stock
option, were based upon the Committee's evaluation of the performance of the
Chief Executive Officer, the over-all extent of his compensation and incentive
package and the terms and size of options granted to other officers.
The Committee believes Mr. Edenfield is paid a reasonable salary, and any
potential bonus is based on corporate financial goals that align his interests
with those of other shareholders. In addition, Mr. Edenfield is the largest
shareholder in the Company, and to the extent his performance as CEO
translates into an increase in the value of the Company's shares, all
shareholders, including Mr. Edenfield, share the benefits.
Other Executive Officers. The Compensation Committee has responsibility for
the review of compensation of other executive officers of the Company,
including certain executive officers of operating subsidiaries. (The
Compensation Committee does not review or have oversight over compensation of
J. Michael Edenfield by Logility, Inc., or the compensation of any other
Logility officers, as their compensation is reviewed by the compensation
committee of Logility, Inc.'s Board of Directors.) To assist in this process,
the Committee has reviewed compensation of officers having similar
responsibilities with peer group companies, based upon publicly available
information. In that regard, the Compensation Committee consults with the
Chief Executive Officer. Through its oversight and control of the D&O Option
Plan, the Compensation Committee has direct authority over the granting of
stock options to executive officers. In addition, the Compensation Committee
assists the Chief Executive Officer in evaluating and establishing executive
bonus plans, which are customized for each executive officer.
It has been the policy of the Company in consultation with the Compensation
Committee to base a substantial portion of executive officer compensation upon
the achievement of Company-wide and/or divisional goals, relating in some
cases to growth in revenues, in some cases to growth in net income and in some
cases to
10
<PAGE>
both of these factors, as well as other factors. The bonus plans for each of
the most highly compensated executive officers (other than the Chief Executive
Officer) reflect this approach.
Stock option grants under the D&O Option Plan are utilized as both a
motivating and a compensating factor. Because the performance of executive
officers can substantially influence performance of the entire enterprise, in
several instances grants of stock options have been utilized to create greater
incentives for improving Company performance, which the Compensation Committee
believes may positively influence the market price for Company stock.
On two occasions during fiscal 1998, the Compensation Committee exercised
its authority under the D&O Option Plan to grant options to various executive
officers of the Company, including the Chief Executive Officer, as discussed
above. In each instance, the term and size of the options were intended and
calculated by the Compensation Committee to reward these officers for their
prior performance, to serve as incentive for promotion of Company
profitability and other long-term objectives and to maintain their overall
compensation at competitive levels.
During fiscal 1999, the Compensation Committee will continue to consult with
the Chief Executive Officer with respect to executive officer compensation
packages, including salary, bonus, stock options and fringe benefits, to
ensure that compensation is appropriately related to individual and Company
performance, as well as to competitive compensation standards and other
relevant criteria.
Limitations on Deductibility of Executive Compensation. Since 1994, the
Omnibus Budget Reconciliation Act of 1993 has limited the deductibility of
executive compensation paid by publicly held corporations to $1 million per
employee, subject to various exceptions, including compensation based on
performance goals.
The deductibility limitation does not apply to compensation based on
performance goals where (1) the performance goals are established by a
compensation committee which is comprised solely of two or more outside
directors; (2) the material terms are disclosed to shareholders and approved
by majority vote of the shareholders eligible to vote thereon before the
compensation is paid; and (3) before the compensation is paid, the
compensation committee certifies that the performance goals and other material
terms have been satisfied. The Company has not adopted a policy with respect
to deductibility of compensation since no executive officer currently
receives, or has previously received, taxable income in excess of $1 million
per year from the Company. The Compensation Committee will monitor
compensation levels closely, particularly in areas of incentive compensation.
If the Company's performance continues to improve, incentive compensation also
can be expected to increase and it may become necessary to adopt a long-term
incentive compensation plan in compliance with the foregoing criteria.
BY THE COMPENSATION COMMITTEE:
Thomas R. Williams, Chairman
David H. Gambrell
11
<PAGE>
AMENDMENT OF STOCK OPTION PLANS
GENERAL
On May 19, 1998, the Board of Directors approved, subject to shareholder
approval, an amendment to the Employee Option Plan which would increase the
base number of Class A shares that may be subject to options granted under the
Employee Option Plan by 900,000 shares, from 2,700,000 shares to 3,600,000
shares. On that same date, the Board of Directors approved, subject to
shareholder approval, an amendment to the D&O Option Plan, which would
increase the number of Class A shares that may be subject to options granted
under the D&O Option Plan by 200,000 shares, from 1,000,000 shares to
1,200,000 shares.
The Employee Option Plan, as of June 30, 1998, provided that only 3,417,553
Class A shares may be issued pursuant to options granted under the Employee
Option Plan, consisting of the 2,700,000 base number of authorized shares,
plus 717,553 shares transferred from prior stock option plans due to lapsed
options. Of this amount, as of June 30, 1998, 602,235 shares have been issued
pursuant to the exercise of stock options and 2,703,841 shares were subject to
outstanding options, leaving only 111,477 shares available for new options.
The proposed amendment would increase the number of available shares under the
Employee Option Plan to 1,011,477 as of June 30, 1998.
As of June 30, 1998, of the 1,000,000 shares of Class A stock authorized
under the D&O Option Plan, 62,687 shares have been purchased pursuant to the
exercise of stock options and 661,000 shares were subject to outstanding
options, leaving only 276,313 shares available for new options. The proposed
amendment would increase the number of available shares under the D&O Option
Plan to 476,313 shares as of June 30, 1998.
The following summary of the Plans is qualified in its entirety by reference
to the full text of the Employee Option Plan and D&O Option Plan, which govern
in the event of any conflict. Copies of the Plans are available from the
Company, upon written request, to the attention of Pat McManus, Investor
Relations, 470 East Paces Ferry Road, Atlanta, Georgia 30305.
PURPOSE OF PLANS
The purpose of both of the Plans is to promote the interests of the Company
by providing eligible employees and Directors with incentives to become owners
of Class A shares and thereby enable them to benefit directly from the
Company's growth, development and financial success.
SHARES SUBJECT TO THE PLAN
As of June 30, 1998, there were 111,477 and 276,313 Class A shares available
for option grants under the Employee Option Plan and D&O Option Plan,
respectively, and 2,703,841 and 661,000 Class A shares subject to outstanding
options granted under the Employee Option Plan and D&O Option Plan,
respectively. The terms of both Plans provide that if an option expires or is
canceled without having been fully exercised, the shares subject to the
unexercised portion of such option will be available for future grant.
ADMINISTRATION
Each of the Plans is administered by a committee of the Board of Directors.
The Employee Option Plan Committee consists of Messrs. Edenfield and Newberry.
The D&O Option Plan is administered by the Compensation Committee, consisting
of Messrs. Gambrell and Williams. The members of the Employee Option Plan
Committee are not eligible to receive options under such Plan. Members of the
Compensation Committee are deemed by the Board of Directors to be
disinterested persons within the meaning of Rule 16b-3 of the Securities
Exchange Act of 1934. The Board appoints the members of these Committees,
fills vacancies on these Committees and has the power to replace members of
these Committees with other eligible persons at any time. The Committees are
authorized to grant options under the Plans, to determine the terms and
conditions of such options and to otherwise administer the Plans.
12
<PAGE>
ELIGIBILITY
All employees (approximately 671 persons as of June 30, 1998, including
employees of Logility, Inc.), other than executive officers and Directors of
the Company, are eligible to participate in the Employee Option Plan. All
executive officers and Directors of the Company (including members of the
Compensation Committee) are eligible to participate in the D&O Option Plan.
EXERCISE PRICE
The exercise price per share of any option granted under either of the Plans
is set in each case by the respective Committee. For incentive stock options
granted under either Plan, the exercise price must be at least 100% of the
fair market value of Class A shares on the date of grant (110% for 10%
shareholders). For nonqualified stock options granted under either Plan, the
exercise price may be less than the fair market value per share of Common
Stock on the date upon which the option is granted. As of the close of
business on June 30, 1998, the market value of Class A share was $7.00 per
share.
TERMS OF OPTIONS
Options granted pursuant to either Plan generally expire on the tenth
anniversary of the grant date, except for incentive stock options granted to
10% shareholders, which expire on the fifth anniversary of the date of grant.
EXERCISE OF OPTIONS
Options granted pursuant to either Plan generally become exercisable in
equal portions over a four-year period (other than formula options granted to
non-employee directors, which fully vest after one year). Upon the exercise of
an option, the optionee may either make payment in full in cash to the Company
of the exercise price and any required tax withholding payment or may deliver
to the Company a properly executed exercise notice, together with irrevocable
instructions to a broker to promptly deliver to the Company the amount of sale
or loan proceeds to pay the exercise price.
NON-ASSIGNABILITY OF OPTIONS
An option granted under either of the Plans is not transferable other than
by will, the applicable laws of descent and distribution, or a qualified
domestic relations order. During the lifetime of an optionee, options may be
exercised only by such optionee or his guardian or legal representative.
DEATH, DISABILITY, RETIREMENT OR TERMINATION OF EMPLOYMENT
Following an optionee's termination of employment, options held by such
person pursuant to either of the Plans are generally exercisable only with
respect to the portions thereof in which the optionee is then vested. Under
each of the Plans, upon termination of employment, options remain exercisable
for 90 days, or 12 months if termination results from death or disability, but
in any event not beyond the original option term. In the case of retirement,
the Committees for both Plans have the discretion to permit the exercise of
options more than 90 days beyond termination of employment.
CHANGE OF CONTROL
Currently, option agreements relating to options granted under the Plans
generally provide that in the event of a dissolution, liquidation or sale of
substantially all of the assets of the Company or a merger or consolidation in
which the Company is not the surviving corporation, the options terminate,
except that immediately prior to such an event, the options become fully
exercisable without regard to vesting requirements.
13
<PAGE>
RIGHTS AS A SHAREHOLDER; STATUS OF EMPLOYEE
No person shall have any rights or privileges of a shareholder of the
Company as to shares subject to an option granted pursuant to either of the
Plans until such option is exercised in accordance with the terms of such
Plan. Furthermore, nothing in either of the Plans or any agreement entered
into pursuant thereto, confers upon an optionee any right to continue in the
employment of the Company or its subsidiaries.
TAX CONSEQUENCES
The following is a brief summary of the principal federal income tax
consequences of the grant and exercise of an option under the Plans and the
subsequent disposition of Class A shares acquired upon such exercise. Under
the Plans, at the time of grant the respective Committee designates each
option either as an incentive stock option or a nonqualified stock option,
with differing tax consequences to the optionee and to the Company for each
type of option.
Nonqualified Options. The grant of a nonqualified option will not result in
any immediate tax consequence to the Company or the optionee. Upon exercise of
a nonqualified option granted under either of the Plans, the amount by which
the fair market value on the date of exercise of the shares received upon such
exercise exceeds the option price will be taxed as ordinary income to the
optionee, and the Company will generally be entitled to a deduction in an
equal amount in the year the option is executed. Such amount will not be an
item of tax preference to an optionee.
Upon the subsequent disposition of shares acquired upon the exercise of an
option ("Option Stock"), an optionee may realize short-term or long-term
capital gain or loss, assuming such shares of Option Stock constitute capital
assets in an optionee's hands and depending upon the holding period of such
shares of Option Stock, equal to the difference between the selling price and
the tax basis of the shares of Option Stock sold. The tax basis for this
purpose will equal the sum of the exercise price and the amount of ordinary
income realized by the optionee as a result of such exercise.
Incentive Options. Neither the grant nor the exercise of an incentive stock
option will have any immediate tax consequences to the Company or the
optionee. (However, in calculating income for purposes of computing an
individual optionee's alternative minimum tax, the favorable tax treatment
generally accorded incentive stock options is not applicable.)
When an optionee sells Option Stock received upon the exercise of his
incentive stock options, any amount he receives in excess of the option price
will be taxed as a long-term capital gain at the maximum applicable tax rate
(and any loss will be a long-term capital loss) if he has held his shares for
at least two years from the date of granting the option to him and for at
least one year after the issuance of such shares to him. If the shares are not
held for more than two years from the date of granting the option to him or
are not held for more than one year after the issuance of such shares, (i)
ordinary income will be realized in the year of the disposition in an amount
equal to the difference between the fair market value of the shares on the
date the option was exercised and the option price, and (ii) either capital
gain or loss will be recognized in an amount equal to the difference between
the selling price and the fair market value of the shares on the date the
option was exercised. If the selling price is less than the fair market value
on the date the option is exercised, but more than the exercise price, (i)
ordinary income equal to the difference between the exercise price and the
fair market value on the date of exercise is recognized, and (ii) a capital
loss equal to the difference between the fair market value on the date of
exercise and the sales price results.
The Company is not permitted to take a deduction for federal income tax
purposes because of the granting or exercise of any incentive stock option,
except to the extent that ordinary income may be realized by an optionee on
the sale of option shares.
14
<PAGE>
TERMINATION
Both the Employee Option Plan and the D&O Option Plan terminate on May 12,
2001, unless sooner terminated by the Board of Directors. Except as expressly
contemplated by the terms of each of the Plans, no amendment, discontinuance
or termination of such Plan will have any effect on options outstanding
thereunder at the time of termination.
OTHER OPTION PLANS
In addition, the Company has two other stock option plans: the Incentive
Stock Option Plan and the Nonqualified Stock Option Plan. Neither of these
Plans are proposed for amendment. In 1991, the Incentive Stock Option Plan and
the Nonqualified Stock Option Plan were replaced by the Employee Option Plan
and the D&O Option Plan. As of June 30, 1998, there were outstanding under the
other Plans options to purchase the following numbers of shares:
<TABLE>
<S> <C>
Incentive Stock Option Plan................................. 2,300 Shares
Nonqualified Stock Option Plan.............................. 42,125 Shares
</TABLE>
To the extent that any of the options under these plans terminate or expire
unexercised, the unused option shares automatically become available under the
Employee Option Plan. The terms of those options are substantially similar to
the terms of options granted under the Employee Option Plan and the D&O Option
Plan.
BOARD RECOMMENDATION
The Board of Directors believes it is in the best interest of the Company to
approve the proposed amendments so that the Company will be able to continue
to provide adequate incentives and to attract and retain the services of
competent personnel. Therefore, the Board of Directors recommends the adoption
of the proposed stock option plan amendments to the shareholders of the
Company.
The affirmative vote of a majority of the combined Class A and Class B
shares in attendance or represented by proxy and entitled to vote at the
Shareholders Meeting is required for approval of the amendments. This vote
will be adjusted for the relative Class A shares and Class B shares voting
weights, as described in "Voting Securities--Record Date and Voting of
Securities," above. If all of the Class B shares (which are held by Messrs.
Edenfield and Newberry) are voted in favor of these amendments, no additional
affirmative votes will be required. Messrs. Edenfield and Newberry intend to
vote their Class A and Class B shares in favor of these amendments.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSED AMENDMENTS.
15
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The graph below reflects the cumulative stockholder return (assuming the
reinvestment of dividends) on the Company's Class A shares compared to the
return of the Nasdaq Composite Index and a peer group index for the periods
indicated. The graph reflects the investment of $100 on April 30, 1993 in the
Company's Class A shares, the Nasdaq Stock Market--U.S. Companies ("Nasdaq
Composite Index") and in a published industry peer group index. The peer group
is the Robertson Stephens Hi-Tech Index--Software Group, which is an index of
the stock price performance of 50 software companies maintained by Robertson
Stephens & Company, an investment banking firm. The Company changed from the
peer group index utilized in the 1997 proxy statement to the above-described
index because the previous index has been discontinued and thus is not
available.
[PERFORMANCE GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE STOCKHOLDER RETURNS AMONG
AMERICAN SOFTWARE, INC., NASDAQ COMPOSITE AND PEER GROUP
<TABLE>
<CAPTION>
Measurement period Measurement PT -
(Fiscal Year Covered) 04/30/93 07/31/93 10/31/93 01/31/94 04/30/94 07/31/94 10/31/94
- --------------------- ---------------- ----------- ----------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
AMERICAN SOFTWARE,
INC. $ 100 $106.00 $116.00 $ 96.00 $ 90.00 $ 76.00 $ 74.00
NASDAQ COMPOSITE $ 100 $106.54 $117.82 $121.02 $110.95 $109.18 $117.55
PEER GROUP $ 100 $110.47 $120.30 $128.91 $128.89 $121.20 $151.89
01/31/95 04/30/95 07/31/95 10/31/95 01/31/96 04/30/96 07/31/96
- --------------------- ---------------- ----------- ----------- ----------- ------------ ------------ -----------
AMERICAN SOFTWARE,
INC. $ 48.00 $ 66.00 $ 92.00 $124.00 $ 78.00 $ 88.00 $ 64.00
NASDAQ COMPOSITE $114.18 $127.60 $151.37 $156.64 $160.25 $179.99 $163.37
PEER GROUP $154.31 $176.49 $228.32 $251.96 $235.93 $270.54 $237.56
10/31/96 01/31/97 04/30/97 07/31/97 10/31/97 01/31/98 04/30/98
- --------------------- ---------------- ----------- ----------- ----------- ------------ ------------ -----------
AMERICAN SOFTWARE,
INC. $ 88.00 $111.00 $ 92.00 $136.00 $188.00 $150.00 $131.00
NASDAQ COMPOSITE $184.68 $208.62 $190.61 $240.97 $240.94 $245.67 $282.48
PEER GROUP $263.03 $292.22 $253.94 $330.91 $336.78 $331.18 $423.07
</TABLE>
16
<PAGE>
INDEPENDENT AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP, who were auditors
for fiscal 1998, to continue as independent auditors of the Company.
Representatives of KPMG Peat Marwick LLP are expected to attend the
Shareholders Meeting. These representatives will be available to respond to
appropriate questions raised orally and will be given the opportunity to make
a statement if they so desire.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the 1999 Annual
Meeting of Shareholders must be forwarded in writing and received at the
principal executive offices of the Company no later than April 6, 1999,
directed to the attention of the Secretary, for consideration for inclusion in
the Company's proxy statement for the 1999 Annual Meeting of Shareholders. Any
such proposals must comply in all respects with the rules and regulations of
the Securities and Exchange Commission.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not
intend to present, and has not been informed that any other person intends to
present, any matter for action at the Annual Meeting other than those
specifically referred to in this Proxy Statement. If other matters properly
come before the meeting, it is intended that the holders of the proxies will
act in respect thereto in accordance with their best judgment.
The cost of this solicitation of proxies will be borne by the Company. In
addition to solicitation by mail, employees of the Company may solicit proxies
by telephone, in writing or in person. The Company may request brokerage
houses, nominees, custodians and fiduciaries to forward soliciting material to
the beneficial owners of stock held of record and will reimburse such persons
for any reasonable expense in forwarding the material.
Copies of the 1998 Annual Report of the Company are being mailed to
shareholders together with this Proxy Statement, proxy card and Notice of
Annual Meeting of Shareholders. Additional copies may be obtained from Pat
McManus, Investor Relations, 470 East Paces Ferry Road, Atlanta, Georgia
30305.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED APRIL 30, 1998, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, WILL BE FURNISHED WITHOUT CHARGE TO SHAREHOLDERS
BENEFICIALLY OR OF RECORD AT THE CLOSE OF BUSINESS ON JULY 10, 1998, ON
REQUEST TO PAT MCMANUS, INVESTOR RELATIONS, 470 EAST PACES FERRY ROAD,
ATLANTA, GEORGIA 30305.
By Order of the Board of Directors,
James R. McGuone, Secretary
Atlanta, Georgia
August 3, 1998
17
<PAGE>
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
- --------------------------------------------------------------------------------
AMERICAN SOFTWARE, INC.
- --------------------------------------------------------------------------------
CLASS A
Mark box at right if an address change or comment has been noted on the [_]
reverse side of this card.
----------------------
Please be sure to sign and date this Proxy. Date
- --------------------------------------------------------------------------------
- ---------Shareholder sign here-------------------Co-owner sign here-------------
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE "FOR" EACH OF THE FOLLOWING PROPOSALS:
For All With- For All
Election of Class A Directors. Nominees hold Except
- -----------------------------
Two Class A Directors to be elected. [_] [_] [_]
Nominees:
David H. Gambrell
Thomas R. Williams
NOTE: If you do not wish your shares voted "For" a particular nominee, mark the
"For All Except" box and strike a line through the name of the nominee. Your
shares will be voted for the remaining nominee.
For Against Abstain
Amendment to 1991 Employee Stock Option Plan.
- -------------------------------------------- [_] [_] [_]
To increase the base number of shares that may be
subject to options under that Plan from 2,700,000
shares to 3,600,000 shares.
For Against Abstain
Amendment to Directors and Officers Stock Option
- ------------------------------------------------- [_] [_] [_]
Plan.
- -----
To increase the number of shares that may be
subject to options under that Plan from 1,000,000
shares to 1,200,000 shares.
<PAGE>
CLASS A AMERICAN SOFTWARE, INC. CLASS A
Proxy Solicited by the Board of Directors for
the Annual Meeting of Shareholders to be held
August 27, 1998 at 4:00 p.m. at
Swissotel
3391 Peachtree Road, N.E.
Atlanta, Georgia 30326
FOR HOLDERS OF CLASS A COMMON SHARES
The undersigned hereby appoints James C. Edenfield and Thomas L. Newberry, or
either of them, attorneys and proxies, each with full power of substitution to
vote, in the absence of the other, all Class A Common Shares of AMERICAN
SOFTWARE, INC. held by the undersigned and entitled to vote at the Annual
Meeting of Shareholders to be held on August 27, 1998 and at any adjournment or
adjournments thereof, in the transaction of such business as may properly come
before the meeting, and particularly the proposals stated on the reverse side
hereof, all in accordance with and as more fully described in the accompanying
Proxy Statement.
It is understood that this proxy may be revoked at any time insofar as it has
not been exercised and that the shares may be voted in person if the undersigned
attends the meeting.
THE CLASS A SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED SHAREHOLDER ON THE REVERSE OF THIS PROXY CARD OR, IF NO DIRECTION IS
GIVEN, THEY WILL BE VOTED FOR EACH OF THE PROPOSALS LISTED ON THE REVERSE SIDE.
IN THEIR DISCRETION, THE PROXYHOLDERS ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
- --------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IMPORTANT: Please sign this Proxy exactly as your name(s) appear(s) hereon. If
shares are held jointly, signatures should include both names. Executors,
administrators, trustees, guardians, and others signing in a representative
capacity should please give their full titles.
- --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- --------------------------------- -------------------------------------------
- --------------------------------- -------------------------------------------
- --------------------------------- -------------------------------------------
