<PAGE> 1
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:
<TABLE>
<S> <C>
/ / 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
</TABLE>
A.D.A.M. SOFTWARE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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:
/X/ 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:
<PAGE> 2
[Letterhead of A.D.A.M. Software, Inc.]
July 29, 1996
Dear Shareholder:
You are cordially invited to attend the 1996 Annual Meeting of Shareholders
of A.D.A.M. Software, Inc. to be held on September 18, 1996 at 1600 RiverEdge
Parkway, Suite 800, Atlanta, Georgia 30328. The meeting will begin promptly at
9:00 a.m., local time, and we hope that it will be possible for you to attend.
The items of business are listed in the following Notice of Annual Meeting
and are more fully addressed in the Proxy Statement provided herewith.
Please date, sign and return your proxy card in the enclosed envelope at
your convenience to assure that your shares will be represented and voted at the
Annual Meeting even if you cannot attend. If you attend the annual meeting, you
may vote your shares in person even though you have previously signed and
returned your proxy.
On behalf of your Board of Directors, thank you for your continued support
and interest in A.D.A.M. Software, Inc.
Sincerely,
/s/ ROBERT S. CRAMER, JR.
----------------------------
Robert S. Cramer, Jr.
Chairman of the Board and
Co-Founder
<PAGE> 3
[Logo]
- --------------------------------------------------------------------------------
A.D.A.M. SOFTWARE, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 18, 1996
- --------------------------------------------------------------------------------
The Annual Meeting of Shareholders of A.D.A.M. Software, Inc. will be held
at 1600 RiverEdge Parkway, Suite 800, Atlanta, Georgia, on Wednesday, September
18, 1996 at 9:00 a.m., local time, for the following purposes:
(i) To elect three directors to serve until the 1999 Annual Meeting of
Shareholders and one director to serve until the 1997 Annual Meeting of
Shareholders;
(ii) To ratify the appointment of Price Waterhouse LLP as the
Company's independent auditors for the fiscal year ending March 31, 1997;
and
(iii) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only the holders of record of Common Stock of the Company at the close of
business on July 15, 1996 are entitled to notice of and to vote at the Annual
Meeting of Shareholders and any adjournment thereof. A list of shareholders as
of the close of business on July 15, 1996 will be available at the Annual
Meeting of Shareholders for examination by any shareholder, his agent or his
attorney.
Your attention is directed to the Proxy Statement provided with this
Notice.
By Order of the Board of Directors,
/s/ CURTIS A. CAIN
----------------------------------
Curtis A. Cain
Chief Executive Officer
Atlanta, Georgia
July 29, 1996
- --------------------------------------------------------------------------------
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE,
WHICH DOES NOT REQUIRE ANY POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND
THE MEETING, YOU MAY REVOKE THE PROXY AND VOTE YOUR SHARES IN PERSON.
- --------------------------------------------------------------------------------
<PAGE> 4
A.D.A.M. SOFTWARE, INC.
1600 RIVEREDGE PARKWAY, SUITE 800
ATLANTA, GEORGIA 30328
- --------------------------------------------------------------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 18, 1996
- --------------------------------------------------------------------------------
The 1996 Annual Meeting of Shareholders (the "Annual Meeting") of A.D.A.M.
Software, Inc. (the "Company") will be held on September 18, 1996, for the
purposes set forth in the Notice of Annual Meeting of Shareholders attached
hereto. The enclosed form of proxy is solicited by the Board of Directors of the
Company (the "Board" or "Board of Directors") and the cost of the solicitation
will be borne by the Company. When the proxy is properly executed and returned,
the shares it represents will be voted as directed at the Annual Meeting or any
adjournment thereof or, if no direction is indicated, such shares will be voted
in favor of the proposals set forth in the Notice of Annual Meeting of
Shareholders attached hereto. Any shareholder giving a proxy has the power to
revoke it at any time before it is voted. All proxies delivered pursuant to this
solicitation are revokable at any time at the option of the persons executing
them by giving written notice to the Secretary of the Company, by delivering a
later-dated proxy or by voting in person at the Annual Meeting.
RECORD DATE
Only shareholders of record as of the close of business on July 15, 1996
(the "record date") will be entitled to vote at the Annual Meeting. As of that
date, the Company had outstanding 5,274,647 shares of Common Stock. Shareholders
of record as of the close of business on July 15, 1996 are entitled to one vote
for each share of Common Stock held. No cumulative voting rights are authorized
and dissenters' rights for shareholders are not applicable to the matters being
proposed. It is anticipated that this Proxy Statement and the accompanying proxy
will first be mailed to shareholders of the Company on or about July 29, 1996.
VOTING AND PROXIES
The presence in person or by proxy of holders of a majority of the shares
of Common Stock outstanding on the record date will constitute a quorum for the
transaction of business at the Annual Meeting or any adjournment thereof. The
affirmative vote of a plurality of the shares present in person or by proxy and
entitled to vote is required to elect directors. With respect to any other
matter that may properly come before the Annual Meeting, the approval of any
such matter would require a greater number of votes cast in favor of the matter
than the number of votes cast opposing such matter. Shares held by nominees for
beneficial owners will be counted for purposes of determining whether a quorum
is present if the nominee has the discretion to vote on at least one of the
matters presented even if the nominee may not exercise discretionary voting
power with respect to other matters and voting instructions have not been
received from the beneficial owner (a "broker non-vote"). Broker non-votes will
not be counted as votes for or against matters presented for shareholder
consideration, including the election of directors. Abstentions with respect to
a proposal are counted for purposes of establishing a quorum. If a quorum is
present, abstentions have no effect on the outcome of any vote, including the
election of directors.
<PAGE> 5
ELECTION OF DIRECTORS
(ITEM 1)
Under the Bylaws of the Company, the number of directors constituting the
Board is fixed at no greater than nine. The Bylaws divide the Board into three
classes with the directors in each class serving a term of three years. There
are three directors, Robert S. Cramer, Jr., Anthony J. Gatti, M.D. and John W.
McClaugherty, who have been nominated to stand for reelection as directors at
the Annual Meeting and one director, Francis J. Tedesco, M.D., who has been
nominated to stand for election as director at the Annual Meeting. Dr. Tedesco
was elected by the Board of Directors to fill the remaining term for Dr. C.
Everett Koop, who resigned from the Board in July 1996. In addition to the four
nominees, there are four directors continuing to serve on the Board, whose terms
expire in 1997 and 1998.
Except as otherwise provided herein, the proxy solicited hereby cannot be
voted for the election of a person to fill a directorship for which no nominee
is named in this Proxy Statement. The Board has no reason to believe that any of
the nominees for the office of director will be unavailable for election as a
director. However, if at the time of the Annual Meeting any of the nominees
should be unable to serve or, for good cause, will not serve, the persons named
in the proxy will vote as recommended by the Board to elect substitute nominees
recommended by the Board. In no event, however, can a proxy be voted to elect
more than four directors.
The following list sets forth the names of the three nominees for
reelection to the Board to serve until the annual meeting of shareholders in
1999, or until their successors are duly elected and qualified, and one nominee
for election to the Board to serve until the annual meeting of shareholders in
1997, or until his successor is duly elected and qualified. Such list also
contains, as to each nominee and incumbent director, certain biographical
information, a brief description of principal occupation and business experience
during the past five years, directorships of companies (other than the Company)
presently held, and certain other information, which information has been
furnished by the respective individuals.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR ROBERT S. CRAMER, JR., ANTHONY
J. GATTI, M.D. AND JOHN W. MCCLAUGHERTY TO HOLD OFFICE UNTIL THE ANNUAL MEETING
OF SHAREHOLDERS IN 1999 OR UNTIL THEIR SUCCESSORS ARE DULY ELECTED AND QUALIFIED
AND FOR FRANCIS J. TEDESCO, M.D. TO HOLD OFFICE UNTIL THE ANNUAL MEETING OF
SHAREHOLDERS IN 1997 OR UNTIL HIS SUCCESSOR IS DULY ELECTED AND QUALIFIED.
NOMINEES FOR ELECTION -- TERM EXPIRING IN 1999
ROBERT S. CRAMER, JR. (Age 35) Mr. Cramer, a co-founder of the Company, has
served as Chairman of the Board and a Director since the Company's inception in
March 1990. From 1987 to 1992, he served as Chairman of the Board of Directors
of Medical Legal Illustrations, Inc. ("MLI"), a predecessor to the Company. In
1989, Mr. Cramer served as an Executive Editor and Co-Publisher of Atlanta
Computer Spectrum, a regional technology publication he helped to create. Also,
since 1994 Mr. Cramer has served as Chairman of the Board of the Atlanta Task
Force for the Homeless, a community-wide non profit organization working with,
and on behalf of, homeless people.
ANTHONY J. GATTI, M.D. (Age 47) Dr. Gatti has been a Director of the
Company since May 1993. Dr. Gatti has been a doctor of podiatric medicine in
private practice since 1974. He is President and a director of National Podiatry
Management, a preferred provider organization offering podiatry services to
major health providers, and a director of several other national and state
podiatric medicine groups.
JOHN W. MCCLAUGHERTY. (Age 36) Mr. McClaugherty, a co-founder of the
Company, has served as a Director of the Company since its inception in March
1990. Mr. McClaugherty served as Chief Executive Officer of the Company from its
inception until March 1994. Prior thereto, Mr. McClaugherty was the Vice
President of Sales and Marketing and a director of MLI, predecessor to the
Company, from March 1985 until March 1990. Since 1994, Mr. McClaugherty has
served as President of J.S.K., Inc., a provider of medical illustrations to the
legal profession and a licensee of the Company. See "Certain Transactions."
2
<PAGE> 6
NOMINEE FOR ELECTION -- TERM EXPIRING IN 1997
FRANCIS J. TEDESCO, M.D. (Age 52) Dr. Tedesco has been a Director of the
Company since July 1996. He has served as President of the Medical College of
Georgia (MCG) since 1988 and has been a Professor of Medicine there since 1981.
He also is a consultant to Dwight David Eisenhower Army Medical Center -- Fort
Gordon Georgia, Veterans Administration Medical Center -- Augusta, Georgia and
Walter Reed Army Medical Center -- Washington, DC. Prior to coming to MCG in
1978, Dr. Tedesco held academic appointments beginning in 1971 at the Hospital
of the University of Pennsylvania, Washington University School of Medicine, St.
Louis, Missouri and University of Miami School of Medicine. Dr. Tedesco
currently serves on the Board of Directors and is Vice President of the Georgia
Division of the American Cancer Society, and he is a director of UROHealth, a
medical products manufacturer.
DIRECTORS CONTINUING IN OFFICE UNTIL 1997
J. LARRY JONES. (Age 54) Mr. Jones has been a Director of the Company since
August 1995. Mr. Jones became a director of Addison-Wesley Publishing Company,
Inc. ("Addison-Wesley") and President of its Educational Publishing Division in
1988, President of Addison-Wesley in October 1992, Chief Executive Officer of
Addison-Wesley in October 1994 and Chairman of the Board of Addison-Wesley in
January 1995.
DIRECTORS CONTINUING IN OFFICE UNTIL 1998
HOLCOMBE T. GREEN, JR. (Age 56) Mr. Green has been a Director of the
Company since June 1992. Mr. Green has been the principal of Green Capital
Investors, L.P., an investment partnership, since its organization in January
1988. Mr. Green is currently Chairman and Chief Executive Officer of West Point
Stevens, Inc., a textile manufacturer and Chairman of the Board of Directors of
HBO & Co., Inc., a healthcare software developer. He is also a director of
Georgia Gulf Corporation, a chemical manufacturer, American Buildings Company, a
metal buildings manufacturer and Rhodes, Inc., a furniture retailer.
SALLY D. ELLIOTT. (Age 43) Ms. Elliott has been a Director of the Company
since June 1993. Ms. Elliott has served since June 1991 as President of
Benjamin/Cummings Publishing Company, Inc., a publisher of college textbooks and
a subsidiary of Addison-Wesley, a minority shareholder of the Company. Prior
thereto, Ms. Elliott served as General Manager of Benjamin/Cummings from June
1989 to June 1991 and Editorial Director of Benjamin/Cummings from June 1987 to
June 1989. Ms. Elliott is also a director of Addison-Wesley.
GREGORY M. SWAYNE. (Age 38) Mr. Swayne, a co-founder of the Company, has
served as President, Vice President of Production and a Director of the Company
since its inception in March 1990. As the original founder of MLI, he served as
President of MLI from 1985 until February 1992, and as a director of MLI from
1985 until the merger of MLI and the Company in May 1992. Mr. Swayne is a master
degreed medical illustrator who completed a three year graduate program in
medical illustration that required him to participate in all the first year
medical school courses (including gross anatomy, histology, embryology and
neuroanatomy) as well as a full year of direct surgical observation and
illustration.
MEETINGS OF THE BOARD OF DIRECTORS
During the fiscal year ended March 31, 1996 ("fiscal 1996"), the Board held
five regular meetings and each Board committee held one meeting. With the
exception of Mr. Jones, who attended at least 75% of all Board meetings from the
date of his election through the end of fiscal 1996, and Dr. Tedesco, who was
not a director of the Company during fiscal 1996, all directors attended at
least 75% of all Board and committee meetings in fiscal 1996.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board has established an Audit Committee, a Compensation Committee and
a Stock Option Committee. The Audit Committee is responsible for recommending
independent accountants, reviewing with the accountants the scope and results of
the audit engagement, and consulting with independent accountants
3
<PAGE> 7
and management with regard to the Company's accounting methods and control
procedures. Mr. Green is the chairman of the Audit Committee. The Compensation
Committee is responsible for reviewing recommendations from the Chairman of the
Board of Directors with regard to the compensation of officers of the Company
and reporting to the Board of Directors its recommendations with regard to such
compensation. Mr. Cramer is the chairman of the Compensation Committee. The
Stock Option Committee is responsible for operating and administering the
Company's 1991 Employee Stock Option Plan and its Amended and Restated 1992
Stock Option Plan. The Company does not have a nominating committee.
COMPENSATION OF DIRECTORS
To date, directors have not received compensation for their services as
directors of the Company. The Company intends to adopt a stock option plan for
non-employee directors, but the terms of this plan have not yet been determined.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(ITEM 2)
The Board of Directors of the Company, upon the recommendation of the Audit
Committee, has appointed the firm of Price Waterhouse LLP to serve as
independent auditors of the Company for fiscal 1997, subject to ratification of
this appointment by the shareholders of the Company. Price Waterhouse LLP has
served as independent auditors of the Company for many years and is considered
by management of the Company to be well qualified. The Company has been advised
by Price Waterhouse LLP that neither it nor any member thereof has any financial
interest, direct or indirect, in the Company or any of its subsidiaries in any
capacity. One or more representatives of Price Waterhouse LLP will be present at
the Annual Meeting, will have an opportunity to make a statement if he or she
desires to do so and will be available to respond to appropriate questions.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE PROPOSAL TO
RATIFY THE APPOINTMENT OF PRICE WATERHOUSE LLP AS INDEPENDENT AUDITORS OF THE
COMPANY FOR FISCAL 1997. PROXIES RECEIVED BY THE BOARD OF DIRECTORS WILL BE SO
VOTED UNLESS SHAREHOLDERS SPECIFY IN THEIR PROXIES A CONTRARY CHOICE.
4
<PAGE> 8
COMMON STOCK OWNERSHIP BY MANAGEMENT
AND PRINCIPAL SHAREHOLDERS
The following table sets forth the beneficial ownership of shares of Common
Stock as of July 1, 1996 for (i) directors of the Company, (ii) the Chief
Executive Officer and each of the other highest paid executive officers of the
Company whose total annual salary and bonus exceeded $100,000 during fiscal 1996
(collectively the "Named Executive Officers"), (iii) the directors and executive
officers of the Company as a group and (iv) each person who is a shareholder of
the Company holding more than a 5% interest in the Company. Unless otherwise
indicated in the footnotes, all of such interests are owned directly, and the
indicated person or entity has sole voting and disposition power. The number of
shares represents (a) the number of shares of Common Stock the person
beneficially owns plus (b) the number of shares issuable to such person upon
exercise of currently exercisable options and warrants.
<TABLE>
<CAPTION>
NUMBER
OF SHARES
NAME AND ADDRESS BENEFICIALLY
OF BENEFICIAL OWNER OWNED PERCENT OF CLASS(1)
- ---------------------------------------------------------------- ------------ -------------------
<S> <C> <C>
Robert S. Cramer, Jr.(2)........................................ 686,391 12.6%
Curtis A. Cain(3)............................................... 127,000 2.4
Gregory M. Swayne(4)............................................ 382,354 7.1
Sally D. Elliott(5)............................................. -- --
Anthony J. Gatti, M.D.(6)....................................... 205,000 3.9
Holcombe T. Green, Jr.(7)....................................... 178,286 3.3
J. Larry Jones(8)............................................... 764,658 14.3
John W. McClaugherty............................................ 26,202 *
Francis J. Tedesco, M.D......................................... -- --
Addison-Wesley Publishing Company, Inc.......................... 764,658 14.3
James D. Oelschlager(9)......................................... 418,750 7.9
Firestone Tire and Rubber Master Trust(10)...................... 356,250 6.8
All executive officers and directors as a group (12
persons)(11).................................................. 2,377,391 40.9%
</TABLE>
- ---------------
* Less than 1%.
(1) Assumes 5,274,647 shares outstanding. Except as indicated in the footnotes
set forth below, the persons named in the table, to the Company's
knowledge, have sole voting and investment power with respect to all shares
of Common Stock shown as beneficially owned by them. The number of shares
shown as owned by, and the voting power of, individual shareholders include
shares which are not currently outstanding but which such shareholders are
entitled to acquire or will be entitled to acquire within 60 days. Such
shares are deemed to be outstanding for the purpose of computing the
percentage of outstanding Common Stock owned by the particular shareholder,
but are not deemed to be outstanding for the purpose of computing the
percentage ownership of any other person.
(2) Includes 125,000 shares issuable upon exercise of outstanding options and
42,938 shares issuable upon exercise of outstanding warrants.
(3) Includes 119,000 shares issuable upon exercise of outstanding options.
Includes 6,000 shares owned by Mr. Cain's mother and deemed beneficially
owned by Mr. Cain by virtue of his dispositive power as power of attorney
over such shares. Mr. Cain disclaims beneficial ownership of such shares.
(4) Includes 125,000 shares issuable upon exercise of outstanding options.
(5) Ms. Elliott is a director of Addison-Wesley. See "Certain Transactions."
(6) Includes 108,500 shares jointly held by Dr. Gatti and his wife. Dr. Gatti
shares voting and dispositive power with respect to the 108,500 shares and
disclaims beneficial ownership of such shares. Includes 70,250 shares held
by Anthony J. Gatti, D.P.M., P.C. Money Pension Plan of which Dr. Gatti is
Trustee and over which Dr. Gatti holds sole voting and dispositive power.
Dr. Gatti disclaims beneficial ownership of such shares. Includes 16,250
shares held by Anthony J. Gatti, D.P.M., P.C. Profit Sharing Plan, of which
Dr. Gatti is Trustee and over which Dr. Gatti holds sole voting and
dispositive power. Dr. Gatti disclaims beneficial ownership of such shares.
Includes 5,000 shares issuable upon exercise of outstanding options.
5
<PAGE> 9
(7) Includes 64,286 shares held by HTG Corp. Profit Sharing Plan. Mr. Green is
the Trustee of HTG Corp. Profit Sharing Plan, has sole voting and
dispositive power and disclaims beneficial ownership of such shares.
Includes 50,000 shares held by Hall Family Investments, L.P. Mr. Green's
wife is a general partner in Hall Family Investments, L.P. and shares
voting and dispositive power. Mr. Green disclaims beneficial ownership of
such shares. Includes 55,000 shares issuable upon exercise of outstanding
warrants.
(8) Includes 700,000 shares of Common Stock beneficially owned by
Addison-Wesley and 64,658 shares issuable to Addison-Wesley upon exercise
of outstanding options. Mr. Jones chief executive officer and a director of
Addison-Wesley disclaims beneficial ownership of these shares. Mr. Jones'
address is c/o A.D.A.M. Software, Inc., 1600 River Edge Parkway, Suite 800,
Atlanta, Georgia 30328.
(9) Includes 356,250 shares held by the Firestone Tire and Rubber Master Trust
(the "Firestone Trust"), for which Oak Associates, of which Mr. Oelschlager
is President, is the fund manager. Includes 12,500 shares held by the Oak
Associates Profit Sharing Plan and Trust, of which Mr. Oelschlager is the
trustee. Mr. Oelschlager's address is c/o Oak Associates, 3875 Embassy
Parkway, Suite 250, Akron, Ohio 44333.
(10) The Firestone Trust's address is Chemical Bank, as trustee for Firestone
Rubber and Tire Master Trust (R.D. 4615504) c/o Oak Associates, 3875
Embassy Parkway, Suite 250, Akron, Ohio 44333.
(11) Includes, for each officer and director, their respective shares issuable
upon exercise of outstanding options and warrants.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The table below sets forth certain information relating to the compensation
earned during fiscal 1996 and the fiscal year ended March 31, 1995 ("fiscal
1995") by the Named Executive Officers.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------- ------------
SECURITIES ALL OTHER
FISCAL UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITIONS YEAR SALARY($) BONUS($) OPTIONS(#) ($)(1)
- ----------------------------------------- ------ --------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Robert S. Cramer, Jr..................... 1996 $ 128,750 -- 75,000 $2,140
(Chairman of the Board of Directors, 1995 $ 126,583 $ 4,500 20,000 --
Co-Founder and Director)
Curtis A. Cain........................... 1996 $ 135,000 $12,340 90,000 --
(Chief Executive Officer) 1995 $ 113,333 $ 9,500 20,000 --
Gregory M. Swayne........................ 1996 $ 128,750 $ 9,000 75,000 $4,245
(President, Co-Founder, Vice President 1995 $ 126,583 $ 4,500 20,000 --
of Production and Director)
</TABLE>
- ---------------
(1) Represents life insurance premiums paid on behalf of such executive
officers.
6
<PAGE> 10
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information regarding stock options granted to
the Named Executive Officers during fiscal 1996.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------------ VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED EXERCISE OR FOR OPTION TERM
OPTIONS TO EMPLOYEES BASE PRICE EXPIRATION ---------------------
NAME GRANTED(#) IN FISCAL YEAR ($/SHARE)(1) DATE(2) 5%($)(3) 10%($)(3)
- ------------------------ ---------- --------------- ------------ -------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert S. Cramer, Jr.... 75,000 19.9% 8.50 March 15, 2006 $400,920 $1,016,010
Curtis A. Cain.......... 90,000 23.9% 8.50 March 15, 2006 $481,104 $1,219,213
Gregory M. Swayne....... 75,000 19.9% 8.50 March 15, 2006 $400,920 $1,016,010
</TABLE>
- ---------------
(1) These options were granted on March 15, 1996.
(2) These options become exercisable at the rate of one-third per year
commencing on March 15, 1997.
(3) The potential realizable value portion of the foregoing table illustrates
value that might be realized upon exercise of the options immediately prior
to the expiration of their term, assuming the specified compounded rates of
appreciation on the Common Stock over the term of the options. These
numbers do not take into account plan provisions providing for termination
of the option following termination of employment or nontransferability.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUE
TABLE
The following table shows the number and value of exercisable and
unexercisable options held by the Company's Named Executive Officers as of the
end of fiscal 1996. Value is determined as the difference between exercise price
and fair market value. No stock appreciation rights were outstanding in fiscal
1996.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES VALUE OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
ACQUIRED ON REALIZED YEAR-END(#) FISCAL YEAR-END($)
NAME EXERCISE(#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(2)
- ----------------------------- ----------- -------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Robert S. Cramer, Jr......... 70,000 $350,000 145,000/75,000(3) $40,000/--
Curtis A. Cain............... 0 0 119,000/90,000 --/--
Gregory M. Swayne............ 0 0 215,000/75,000 $180,000/--
</TABLE>
- ---------------
(1) Based on the difference between the fair market value of the Company's
Common Stock at the date of exercise, less the exercise price.
(2) Based on the market price of the Company's Common Stock on March 31, 1996
($5.00), less the exercise price of "in-the-money" options.
(3) Does not include warrants to purchase 42,938 shares of Common Stock issued
in connection with the Subordinated Bridge Notes. See "Certain
Transactions."
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs. Cramer,
Cain and Swayne. Each agreement expires on December 31, 1997 (the "Expiration
Date") and is automatically renewable for successive one-year periods unless
written notice of non-renewal is given by either party. Each agreement also may
be terminated by the Company with or without cause or upon the employee's death
or inability to perform his duties on account of a disability for a period of
twelve consecutive months or by the employee. If any agreement is terminated
prior to the Expiration Date for any reason, except by the employee, by the
Company for cause or upon the employee's death or disability, the Company must
continue to pay the employee's base salary and bonus either (i) for the period
from the date of termination through the Expiration Date if the agreement is
terminated prior to the first anniversary thereof or (ii) for the two year
period following the date of termination if the agreement is terminated after
the first anniversary thereof. If the agreement is terminated because of the
death or disability of the employee, the Company must pay the employee or his
beneficiaries his base salary and bonus for a period of one year following the
date of termination; provided, however, that, in the case of termination for
disability, the Company may elect, in lieu
7
<PAGE> 11
of making such payments, to provide the employee with disability insurance
coverage. The agreements provide for a minimum base salary of $120,000 for each
of Messrs. Cramer, Cain and Swayne, and for annual discretionary bonuses. Each
agreement also contains a two year noncompetition, customer and employee
nonsolicitation and confidentiality provision. In addition, the Company has
executed Employee Confidentiality, Nondisclosure and Noncompetition Agreements
with all of its employees.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1996, the Compensation Committee of the Company consisted of
Messrs. Cramer and Green and Ms. Elliott.
The Company borrowed $400,015 from Charter Bank and Trust Company on March
10, 1993. The loan is secured by a first lien on the Company's accounts
receivables, inventory and equipment and is personally guaranteed by Messrs.
Cramer, McClaugherty and Swayne. The loan accrues interest at 8.5% per annum, is
self-amortizing and is due on March 15, 1998. The outstanding principal balance
was $0 as of March 31, 1996.
The Company maintained a line of credit with Charter Bank and Trust Company
for $450,000. The term of this facility commenced on March 10, 1993 and expired
on May 15, 1995. Repayment of this facility was personally guaranteed by Messrs.
Cramer, McClaugherty, Swayne and another director of the Company. As payment for
their guarantees, on March 10, 1993 each guarantor received options to purchase
5,000 shares of Common Stock at $7.00 per share.
During fiscal 1996, the Company sold approximately $308,000 of product to
Benjamin/Cummings, a subsidiary of Addison-Wesley. Ms. Elliot is a director of
Addison-Wesley. Additionally, the Company had royalty revenues of approximately
$93,000 related to Benjamin/Cummings. The Company purchased approximately
$30,000 of product from Benjamin/Cummings during fiscal 1996 and paid royalty
expense to Benjamin/Cummings of approximately $47,000.
CERTAIN TRANSACTIONS
On May 23, 1995, the Company issued 106,250 shares of Convertible Preferred
Stock at $8.00 per share to Chemical Bank, as trustee for the Firestone Tire and
Rubber Master Trust (R.D. 4615504) (the "Firestone Trust"), 6,250 shares to
Oelschlager, as trustee for the Oak Associates Profit Sharing Plan and Trust
(the "Oak Trust") and 12,500 shares to James D. Oelschlager, an individual
resident of Ohio ("Oelschlager"). The Firestone Trust, Oelschlager and the Oak
Trust are referred to herein collectively as "Oak Associates." All of the
outstanding shares of Convertible Preferred Stock were automatically converted
to Common Stock upon consummation of the Company's initial public offering (the
"IPO").
On March 31, 1994, the Company entered into a license agreement (the "MLI
License Agreement") with J.S.K., Inc. ("JSK"), a company controlled by Mr.
McClaugherty, pursuant to which JSK was granted the right to use the A.D.A.M.
Image Database to produce printed customized medical illustrations and
videotapes for use by lawyers as demonstrative evidence pieces for a two-year
term in return for a fixed fee. JSK was also granted a license to use the
"Medical-Legal Illustrations" service mark for a two-year term. The Company
continues to hold all legal title in the A.D.A.M. Image Database and owns all
copyright interest in illustrations and videotapes produced by JSK pursuant to
the MLI License Agreement. The MLI License Agreement was amended on August 30,
1995 to extend the initial term to July 15, 1997 and to fix the monthly license
fee payable to the Company at $6,200 per month. The Company also authorized JSK
to act as a reseller of the Company's products pursuant to a Reseller Agreement
dated April 24, 1994. During fiscal 1996, the Company sold approximately $64,000
of product to JSK pursuant to the Reseller Agreement. JSK paid the Company
approximately $86,000 in licensing and rental fees during fiscal 1996 pursuant
to the MLI License Agreement.
Pursuant to a contractual obligation with Mr. McClaugherty, on August 30,
1995 the Company redeemed 125,000 shares of Common Stock held by Mr.
McClaugherty at a price per share of $8.00 and an aggregate price of $1,000,000.
The Company raised money for the redemption through the sale of 125,000 shares
of Convertible Preferred Stock. Upon such redemption, options to purchase 54,500
shares of Common Stock at a
8
<PAGE> 12
purchase price of $5.50 per share and options to purchase 35,500 shares of
Common Stock at a purchase price of $5.00 per share held by Mr. McClaugherty
were canceled and terminated without exercise.
On April 17, 1995, Mr. Swayne borrowed $15,000 from the Company, as
evidenced by a Promissory Note due April 17, 1997, which bears interest at 12%
per annum. On June 23, 1995, Mr. Swayne borrowed $10,000 from the Company as
evidenced by a Promissory Note due June 23, 1997, which bears interest at 12%
per annum. These notes were paid off on November 15, 1995.
On August 22, 1995, the Company issued an aggregate of 250,000 shares of
Convertible Preferred Stock to Addison-Wesley at a price of $8.00 per share. In
connection with such sale, the Company granted to Addison-Wesley options to
purchase 64,658 shares of the Company's Common Stock at an exercise price of
$11.11 per share, exercisable for one year from the date of issuance of the
option. Addison-Wesley was granted certain registration rights in connection
with its purchase of Convertible Preferred Stock. All of the outstanding shares
of Convertible Preferred Stock were automatically converted to Common Stock upon
consummation of the IPO.
See "Executive Compensation -- Compensation Committee Interlocks and
Insider Participation" for a description of certain other transactions among the
Company and certain of its affiliates.
It is the Company's policy that all future transactions, if any, with
affiliated parties will be approved by the disinterested members of the
Company's Board of Directors (or a committee thereof) or by the shareholders of
the Company.
REPORT ON EXECUTIVE COMPENSATION
The Company's Board of Directors has two committees that are responsible
for determining compensation issues relating to the Company's executive
officers. During fiscal 1996, the Compensation Committee, which was comprised of
one employee and two non-employee directors, was responsible for:
- Reviewing recommendations from the Chairman of the Board with regard to
the compensation of officers of the Company;
- Reporting to the Board its recommendations with regard to the
compensation of officers of the Company; and
- Monitoring the performance and compensation of executive officers.
During fiscal 1996, the Stock Option Committee, which was comprised of two
independent, non-employee directors, was responsible for:
- Operating and administering the Company's 1991 Employee Stock Option Plan
and its Amended and Restated 1992 Stock Option Plan; and
- Reviewing compensation plans, programs and policies.
In performing these duties, each of the Compensation Committee and the
Stock Option Committee considers recommendations from management along with
other factors.
THE COMPENSATION COMMITTEE
PHILOSOPHY. The Compensation Committee seeks to attract, retain and
motivate executive officers by providing competitive and incentive based
compensation keyed to both individual and Company performance. In carrying out
this policy, the Committee considers current corporate performance, the
potential for future performance gains, whether shareholder value has been or
will be enhanced, and competitive market conditions for executives in similar
positions at local, regional and national software companies having similar
revenues and number of employees. Those factors are evaluated and considered for
each officer on an annual basis, including consideration of the contribution
made by each officer over the prior fiscal year. The Company's compensation
package for its officers includes both short-term and long-term features in the
form of base salary, variable compensation keyed to Company performance and
stock options which are granted
9
<PAGE> 13
periodically at the discretion of the Stock Option Committee. Base salary and
variable compensation award targets for executive officers are determined at the
beginning of the fiscal year.
BASE SALARY. Each executive's base salary, including the Chief Executive
Officer's base salary, was determined by the Compensation Committee by taking
into consideration the factors described above together with recommendations
from the Chief Executive Officer for the executive officers other than himself
and other factors as deemed appropriate by the Compensation Committee.
Variable compensation is keyed to Company performance for officers and is
based on achievement of pre-established financial targets relative to the
Company's budget which includes sales growth, expense control and profitability
and the timely development and market reception of new products.
POLICY WITH RESPECT TO THE $1 MILLION DEDUCTION LIMIT. The Omnibus Budget
Reconciliation Act of 1993 placed certain limits on the deductibility of
non-performance based executive compensation for a company's employees, unless
certain requirements are met. The Compensation Committee does not believe that
there is currently any risk of losing deductions under the new law. However, in
the future, the Compensation Committee intends to consider carefully any plan or
compensation arrangement that might result in the disallowance of compensation
deductions. It will use its best judgment, taking all factors into account,
including the materiality of any deductions that may be lost versus the broader
interests of the Company to be served by paying adequate compensation for
services rendered, before adopting any plan or compensation arrangement.
Robert S. Cramer, Jr.
Sally D. Elliott
Holcombe T. Green, Jr.
THE STOCK OPTION COMMITTEE
The grant of stock options is designed to align the interests of executive
officers with those of shareholders in the Company's long-term performance.
Options granted under the plans have an exercise price that is at least equal to
100% of the fair market value of the Company's Common Stock on the date of grant
and expire not later than ten years from the date of grant. It has been the
practice of the Committee to grant stock options which vest ratably over a three
year period from the date of grant. Option awards for officers other than the
Chief Executive Officer are based on recommendations made by the Chief Executive
Officer and on the Committee's assessment of how the respective individual
contributes to the Company. The factors considered in this assessment are
identical to those set forth in the Compensation Committee Philosophy and Base
Salary paragraphs above. In fiscal 1996, the Committee granted 240,000 options
to the Named Executive Officers, including 90,000 to the Chief Executive
Officer.
Holcombe T. Green, Jr.
J. Larry Jones
THE FOREGOING REPORTS SHOULD NOT BE DEEMED INCORPORATED BY REFERENCE BY ANY
GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO ANY
FILING UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES EXCHANGE ACT OF
1934 (TOGETHER, THE "ACTS"), EXCEPT TO THE EXTENT THAT THE COMPANY SPECIFICALLY
INCORPORATES THIS INFORMATION BY REFERENCE, AND SHALL NOT OTHERWISE BE DEEMED
FILED UNDER SUCH ACTS.
10
<PAGE> 14
STOCK PRICE PERFORMANCE GRAPH
The following stock price performance graph compares the Company's
performance to the Nasdaq Stock Market-U.S. and the Hambrecht & Quist
Technology Index. The stock price performance graph assumes an investment of
$100 in the Company on November 10, 1995 and an investment of $100 in the two
indexes on October 31, 1995 and further assumes the reinvestment of all
dividends. The difference in the initial start date is due to the fact that the
Company's Common Stock did not start trading publicly until mid-November. The
Company believes that the net effect of this difference in start dates will not
have a material effect on the performance graph. Stock price performance,
presented monthly for the period from November 10, 1995 through March 31, 1996,
is not necessarily indicative of future results.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG A.D.A.M. SOFTWARE, INC., THE NASDAQ STOCK MARKET-US INDEX
AND THE HAMBRECHT & QUIST TECHNOLOGY INDEX
<TABLE>
<CAPTION>
[GRAPH]
A.D.A.M.
MEASUREMENT PERIOD SOFTWARE, NASDAQ STOCK H&Q TECH-
(FISCAL YEAR COVERED) INC. MARKET-US NOLOGY
<S> <C> <C> <C>
10/95 100 100 100
11/95 89 102 99
12/95 54 102 96
1/96 52 102 99
2/96 41 106 102
3/96 42 106 98
</TABLE>
- ---------------
* November 10, 1995 for A.D.A.M. Software, Inc.
THE STOCK PRICE PERFORMANCE GRAPH SHALL NOT BE DEEMED INCORPORATED BY
REFERENCE BY ANY GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY
STATEMENT INTO ANY FILING UNDER THE ACTS EXCEPT TO THE EXTENT THAT THE COMPANY
SPECIFICALLY INCORPORATES THIS INFORMATION BY REFERENCE, AND SHALL NOT OTHERWISE
BE DEEMED FILED UNDER SUCH ACTS.
OTHER MATTERS
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires executive officers and directors
of the Company and persons who beneficially own more than ten percent of the
Company's Common Stock to file with the Securities and Exchange Commission
certain reports, and to furnish copies thereof to the Company, with respect to
each such person's beneficial ownership of the Company's equity securities.
Based solely upon a review of the copies of such reports furnished to the
Company and certain representations of such persons, all such persons
11
<PAGE> 15
have complied with the applicable reporting requirements, except for Joseph
Fuller and David Tranberg who inadvertently filed their Form 3s late.
INDEPENDENT PUBLIC ACCOUNTANTS
Price Waterhouse LLP has audited the accounts of the Company and its
subsidiaries for fiscal year 1996 and has been appointed by the Board of
Directors to continue in that capacity for the Company's fiscal year ending
March 31, 1997. A representative of Price Waterhouse LLP will be present at the
Annual Meeting, will have the opportunity to make a statement and will be
available to respond to appropriate questions.
ANNUAL REPORT TO SHAREHOLDERS
The Annual Report of the Company for fiscal 1996, including audited
financial statements, accompanies this Proxy Statement. The Annual Report does
not form any part of the material for the solicitation of proxies.
ANNUAL REPORT ON FORM 10-K
THE COMPANY WILL PROVIDE WITHOUT CHARGE, AT THE WRITTEN REQUEST OF ANY
SHAREHOLDER OF RECORD AS OF THE CLOSE OF BUSINESS ON JULY 15, 1996, A COPY OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, EXCEPT EXHIBITS THERETO. The Company will provide copies of the
exhibits, should they be requested by eligible shareholders, and the Company may
impose a reasonable fee for providing such exhibits. Request for copies of the
Company's Annual Report on Form 10-K should be mailed to:
A.D.A.M. Software, Inc.
1600 RiverEdge Parkway
Suite 800
Atlanta, Georgia 30328
Attention: Secretary
SHAREHOLDER PROPOSALS
Any shareholder proposals intended to be presented at the Company's 1997
Annual Meeting of Shareholders must be received by the Company on or before
March 28, 1997 to be eligible for inclusion in the Proxy Statement and form of
proxy to be distributed by the Board of Directors in connection with such
meeting.
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before the
Annual Meeting.
EXPENSES OF SOLICITATION
The cost of solicitation of proxies will be borne by the Company. In an
effort to have as large a representation at the meeting as possible, special
solicitation of proxies may, in certain instances, be made personally or by
telephone, telegraph or mail by one or more employees of the Company. The
Company also will reimburse brokers, banks, nominees and other fiduciaries for
postage and reasonable clerical expenses of forwarding the proxy material to
their principals who are beneficial owners of the Company's Common Stock.
By Order of the Board of Directors,
/s/ CURTIS A. CAIN
----------------------------------
Curtis A. Cain
Chief Executive Officer
Atlanta, Georgia
July 29, 1996
12
<PAGE> 16
APPENDIX A
A.D.A.M. SOFTWARE, INC.
PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
ON SEPTEMBER 18, 1996
The undersigned hereby appoints Curtis A. Cain and Robert A. DiProva and each
of them, proxies, with full power of substitution and resubstitution, for and in
the name of the undersigned, to vote all shares of common stock of A.D.A.M.
Software, Inc. which the undersigned would be entitled to vote if personally
present at the Annual Meeting of Shareholders to be held on Wednesday, September
18, 1996, at 9:00 a.m., local time, at 1600 RiverEdge Parkway, Suite 800,
Atlanta, Georgia, or at any adjournment thereof, upon the matters described in
the accompanying Notice of Annual Meeting of Shareholders and Proxy Statement,
receipt of which is hereby acknowledged, and upon any other business that may
properly come before the Annual Meeting of Shareholders or any adjournment
thereof. Said proxies are directed to vote on the matters described in the
Notice of Annual Meeting of Shareholders and Proxy Statement as follows, and
otherwise in their discretion upon such other business as may properly come
before the Annual Meeting of Shareholders or any adjournment thereof.
1. To elect three (3) directors to serve until the 1999 Annual Meeting of
Shareholders and one (1) director to serve until the 1997 Annual Meeting
of Shareholders:
/ / FOR all nominees listed (except as marked below to the contrary)
To serve until the 1999 Annual Meeting of Shareholders:
Robert S. Cramer, Jr.
Dr. Anthony J. Gatti
John W. McClaugherty
To serve until the 1997 Annual Meeting of Shareholders:
Dr. Francis J. Tedesco
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.)
/ / WITHHOLD AUTHORITY to vote for all nominees listed
2. To ratify the appointment of Price Waterhouse LLP as the Company's
independent auditors for fiscal 1997.
/ / FOR / / AGAINST / / ABSTAIN
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO DIRECTION IS INDICATED, THE
PROXY WILL BE VOTED FOR THE ABOVE-STATED PROPOSALS.
Date: , 1996
-----------------
----------------------------
----------------------------
Please sign exactly as your
name or names appear hereon.
For more than one owner as
shown above, each should
sign. When signing in a
fiduciary or representative
capacity, please give full
title. If this proxy is
submitted by a corporation,
it should be executed in the
full corporate name by a duly
authorized officer, if a
partnership, please sign in
partnership name by
authorized person.
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING ON SEPTEMBER 18,
1996. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN
IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY.
