<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (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):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:
<PAGE> 2
[Letterhead of A.D.A.M. Software, Inc.]
August 22, 1997
Dear Shareholder:
You are cordially invited to attend the 1997 Annual Meeting of Shareholders
of A.D.A.M. Software, Inc. to be held on September 24, 1997 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
Chief Executive Officer
<PAGE> 3
[A.D.A.M. LOGO]
- --------------------------------------------------------------------------------
A.D.A.M. SOFTWARE, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 24, 1997
- --------------------------------------------------------------------------------
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
24, 1997 at 9:00 a.m., local time, for the following purposes:
(i) To elect two directors to serve until the 2000 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, 1998;
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 31, 1997 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 31, 1997 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/ ROBERT S. CRAMER, JR
Robert S. Cramer, Jr.
Chairman of the Board and
Chief Executive Officer
Atlanta, Georgia
August 22, 1997
- --------------------------------------------------------------------------------
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 24, 1997
- --------------------------------------------------------------------------------
The 1997 Annual Meeting of Shareholders (the "Annual Meeting") of A.D.A.M.
Software, Inc. (the "Company") will be held on September 24, 1997, 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 31, 1997
(the "record date") will be entitled to vote at the Annual Meeting. As of that
date, the Company had outstanding 4,901,897 shares of Common Stock, $.01 par
value, excluding shares held in treasury by the Company ("Common Stock").
Shareholders of record as of the close of business on July 31, 1997 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 August 22, 1997.
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 two directors, Daniel S. Howe and Francisco J. Tedesco, M.D. who have been
nominated to stand for reelection as directors at the Annual Meeting. In
addition to the two nominees, there are five directors continuing to serve on
the Board, whose terms expire in 1998 and 1999.
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 three directors.
The following list sets forth the names of the two nominees for reelection
to the Board to serve until the annual meeting of shareholders in 2000, or until
their successors are 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 DANIEL S. HOWE AND FRANCIS J.
TEDESCO, M.D. TO HOLD OFFICE UNTIL THE ANNUAL MEETING OF SHAREHOLDERS IN 2000 OR
UNTIL THEIR SUCCESSORS ARE DULY ELECTED AND QUALIFIED.
NOMINEES FOR ELECTION -- TERM EXPIRING IN 2000
DANIEL S. HOWE. (Age 37) Mr. Howe has been a Director of the Company since
December 1996. Mr. Howe is President of DSH Enterprises, Inc., a real estate
development and investment company, and has served in that capacity since
January 1990.
FRANCIS J. TEDESCO. (Age 53) Dr. Tedesco has been a Director of the Company
since July 1996. He has served as Chief Executive Officer of Health Sciences
University and as President of the Medical College of Georgia ("MCG") since
1988, and has been a Professor of Medicine at MCG since 1981. He also is a
consultant to Dwight David Eisenhower Medical Center -- Fort Gordon, Georgia;
Veterans Administration Medical Center -- Augusta, Georgia and Walter Reed Army
Medical Center -- Washington, D.C. 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 URO Health, a medical products
manufacturer.
DIRECTORS CONTINUING IN OFFICE UNTIL 1998
SALLY D. ELLIOTT. (Age 44) Ms. Elliott has been a Director of the Company
since June 1993. Ms. Elliott has served since June 1991 as President of the
Consumer Publishing Group, Addison Wesley Longman formerly known as
Benjamin/Cummings Publishing Company ("Benjamin/Cummings"), a publisher of
college textbooks and a subsidiary of Addison Wesley Longman. 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 Longman.
GREGORY M. SWAYNE. (Age 39) Mr. Swayne, a co-founder of the Company, has
served as Vice President of Production and Vice-Chairman of the Company since
March 1997 and as a Director since March 1990.
2
<PAGE> 6
Previously, he served as President from March 1990 until March 1997. As the
original founder of Medical Legal Illustrations, Inc. ("MLI"), a predecessor to
the Company, he served as President 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.
DIRECTORS CONTINUING IN OFFICE UNTIL 1999
ROBERT S. CRAMER, JR. (Age 37) 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, and Chief Executive Officer since September 1996. From 1987 to 1992,
he served as Chairman of the Board of Directors of MLI. 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 the behalf of
homeless people.
ANTHONY J. GATTI. (Age 50) 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 38) Mr. McClaugherty, a co-founder of the
Company, has served as a Director of the Company since its inception in March
1990. Currently, Mr. McClaugherty serves as President of J.S.K., Inc., a medical
illustration company. 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 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."
MEETINGS OF THE BOARD OF DIRECTORS
During the fiscal year ended March 31, 1997 ("fiscal 1997"), the Board held
eight meetings. During fiscal 1997, each incumbent director attended at least
75% of all Board and the aggregate number of meetings held by all committees on
which the individual director served in fiscal 1997.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board has standing Audit and Stock Repurchase Committees that assist it
in discharging its responsibilities. In April 1997 the Company's Board of
Directors combined the Compensation and Stock Option Committees, which were
responsible for determining compensation issues relating to the Company's
executive officers, into the Compensation/Stock Option Committee. These
committees, their members and functions are discussed below.
The Audit Committee, which held two meetings during fiscal 1997, is
responsible for recommending independent accountants, reviewing with the
accountants the scope and results of the audit engagement, and consulting with
independent accountants and management with regard to the Company's accounting
methods and control procedures. The Audit Committee is composed of Messrs.
Cramer (Chairman), Howe and, prior to his resignation from the Board in August
1997, Mr. Jones.
The Compensation/Stock Option Committee, which held two meetings during
fiscal 1997, 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 and is responsible for operating and administering the
Company's 1991 Employee Stock Option
3
<PAGE> 7
Plan and its Amended and Restated 1992 Stock Option Plan. The Compensation/Stock
Option Committee is composed of Messrs. Gatti, Howe and, prior to his
resignation from the Board in August 1997, Mr. Jones.
The Stock Repurchase Committee, which held no meetings during fiscal 1997,
is responsible for the Company's repurchase of its own shares pursuant to the
Stock Repurchase Program. The Compensation/Stock Option Committee is composed of
Messrs. Cramer (Chairman), Swayne and Howe.
COMPENSATION OF DIRECTORS
To date, Directors have not received cash compensation for their services
as directors of the Company. In April 1997, the non-employee directors of the
Company were granted the following options to purchase Common Stock: Messrs.
McClaugherty and Gatti: 3,000 options; Messrs. Tedesco and Howe: 10,000 options.
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 1998, 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 1998. 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 31, 1997 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 1997
(collectively the "Named Executive Officers"), including three individuals who
are no longer employed by the Company, (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 upon exercise of
currently exercisable options and warrants.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED PERCENT OF CLASS(1)
- ------------------------------------ ---------------- -------------------
<S> <C> <C>
Robert S. Cramer, Jr.(2).................................... 683,557 13.6%
Gregory M. Swayne(3)........................................ 332,854 6.7
Curtis A. Cain(4)........................................... -- --
Robert DiProva(5)........................................... 5,500 *
David Tranberg(6)........................................... 2,000 *
Sally D. Elliott(7)......................................... -- --
Daniel S. Howe(8)........................................... 21,000 *
Dr. Anthony J. Gatti(9)..................................... 205,000 4.2
John W. McClaugherty........................................ 26,202 *
Francis J. Tedesco, M.D..................................... -- --
Addison-Wesley Longman...................................... 700,000 14.3
James D. Oelschlager(10).................................... 418,750 8.5
Firestone Tire and Rubber Master Trust(11).................. 356,250 7.2
All executive officers and directors as a group (8
persons)(12).............................................. 1,270,096 24.6%
</TABLE>
- ---------------
* Less than 1%.
(1) Assumes 4,901,897 shares outstanding, excluding shares held in treasury by
the Company. 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 95,500 shares issuable upon exercise of outstanding options and
42,938 shares issuable upon exercise of outstanding warrants. Mr. Cramer's
address is c/o A.D.A.M. Software, Inc., 1600 RiverEdge Parkway, Suite 800,
Atlanta, Georgia 30328.
(3) Includes 95,500 shares issuable upon exercise of outstanding options. Mr.
Swayne's address is c/o A.D.A.M. Software, Inc., 1600 RiverEdge Parkway,
Suite 800, Atlanta, Georgia 30328.
(4) Mr. Cain ceased to be an employee of the Company effective September 4,
1996.
(5) Mr. DiProva ceased to be an employee of the Company effective February 15,
1997.
(6) Mr. Tranberg ceased to be an employee of the Company effective March 31,
1997.
(7) Ms. Elliott is a director of Addison-Wesley Longman.
(8) Represents 3,000 shares issuable upon exercise of outstanding options and
18,000 shares issuable upon exercise of outstanding warrants.
5
<PAGE> 9
(9) 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. Dr.
Gatti's address is c/o A.D.A.M. Software, Inc., 1600 RiverEdge Parkway,
Suite 800, Atlanta, Georgia 30328.
(10) 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. The information included in the
table is based upon a Schedule 13G filed with the Securities and Exchange
Commission on February 12, 1997 pursuant to Section 13(d) or 13(g) of the
Securities and Exchange Act of 1934, as amended.
(11) 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. The information included in
the table is based upon a Schedule 13G filed with the Securities and
Exchange Commission on February 12, 1997 pursuant to Section 13(d) or 13(g)
of the Securities and Exchange Act of 1934, as amended.
(12) Includes, for each officer and director, their respective shares issuable
upon exercise of outstanding options and warrants.
6
<PAGE> 10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The table below sets forth certain information relating to the compensation
earned during fiscal 1997 and the fiscal year ended March 31, 1996 ("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($) OPTIONS(#) ($)
- ---------------------------- ------ --------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Robert S. Cramer, Jr..................... 1997 $155,000 -- -- $ 2,111(1)
(Chairman of the Board of Directors, 1996 $128,750 -- 75,000 $ 2,140(1)
Chief Executive Officer, 1995 $126,583 $ 4,500 20,000 --
Co-Founder and Director)
Gregory M. Swayne........................ 1997 $155,000 -- -- $ 4,185(1)
(Vice-Chairman, Vice President of 1996 $128,750 $ 9,000 75,000 $ 4,245(1)
Production and Director) 1995 $126,583 $ 4,500 20,000 --
Curtis A. Cain(2)........................ 1997 $ 76,973 -- -- $330,000(3)
(Former Chief Executive Officer) 1996 $135,000 $12,340 90,000 --
1995 $113,333 $ 9,500 20,000 --
Robert A. DiProva(4)..................... 1997 $100,625 -- -- $ 60,000(5)
(Former Chief Financial Officer) 1996 $135,000 $12,340 33,000 --
David Tranberg(6)........................ 1997 $132,494 -- 5,000 $ 80,000(5)
(Former Vice President of Sales and 1996 $ 23,872 -- 30,000 --
Marketing)
</TABLE>
- ---------------
(1) Represents life insurance premiums paid on behalf of such executive
officers.
(2) Mr. Cain ceased to be an employee of the Company effective September 4,
1996.
(3) Represents lump sum severance payment of $150,000 plus $180,000 payable in
twelve equal monthly installments through September 1997.
(4) Mr. DiProva ceased to be an employee of the Company effective February 15,
1997. Mr. DiProva joined the Company in September 1995, and therefore
received no compensation for fiscal 1995.
(5) Represents lump sum severance payment.
(6) Mr. Tranberg ceased to be an employee of the Company effective March 31,
1997. Mr. Tranberg joined the Company in January 1996, and therefore
received no compensation for fiscal 1995.
7
<PAGE> 11
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information regarding stock options granted to
the Named Executive Officers during fiscal 1997.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED EXERCISE OR FOR OPTION TERM(1)
OPTIONS TO EMPLOYEES BASE PRICE EXPIRATION ---------------------
NAME GRANTED(#) IN FISCAL YEAR ($/SHARE)(1) DATE(2) 5%($) 10%($)
---- ---------- --------------- ------------ ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Robert S. Cramer, Jr. ...... -- -- -- -- -- --
Gregory M. Swayne........... -- -- -- -- -- --
Curtis A. Cain(3)........... -- -- -- -- -- --
Robert A. DiProva(4)........ 5,000 6.0% $2.50 (2) $7,075 $17,930
5,000 6.0% $2.25 3/25/2002 $7,075 $17,930
David Tranberg(5)........... 5,000 6.0% $2.50 (2) $7,075 $17,930
</TABLE>
- ---------------
(1) The potential realizable value portion of the foregoing table illustrates
value that might be realized upon exercise of the options immediately prior
to the expiration of their term, assuming the specified compounded rates of
appreciation on the Common Stock over the term of the options. These numbers
do not take into account plan provisions providing for termination of the
option following termination of employment or nontransferability.
(2) Forfeited in connection with such officer's cessation of employment.
(3) Mr. Cain ceased to be an employee of the Company effective September 4,
1997.
(4) Mr. DiProva ceased to be an employee of the Company effective February 15,
1997.
(5) Mr. Tranberg ceased to be an employee of the Company effective March 31,
1997.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUE
TABLE
The following table shows the number and value of exercisable and
unexercisable options held by the Company's Named Executive Officers as of the
end of fiscal 1997. Value is determined as the difference between exercise price
and fair market value. No stock appreciation rights were outstanding in fiscal
1997.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED
SHARES VALUE OPTIONS AT FISCAL
ACQUIRED ON REALIZED YEAR-END(#)
NAME EXERCISE(#) ($)(1) EXERCISABLE/UNEXERCISABLE
---- ----------- -------- -------------------------
<S> <C> <C> <C>
Robert S. Cramer, Jr. ............................... 20,000 $5,000 150,000/50,000(2)
Gregory M. Swayne.................................... -- -- 150,000/50,000
Curtis A. Cain....................................... -- -- None/None
Robert A. DiProva.................................... -- -- 5,000/None
David Tranberg....................................... -- -- None/None
</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) Does not include warrants to purchase 42,938 shares of Common Stock issued
in connection with the Subordinated Bridge Notes.
The Company has not awarded stock appreciation rights to any employee, has
had no long-term incentive plans, as that term is defined in SEC regulations,
and has no defined benefit or actuarial plans covering any employees of the
Company.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs. Cramer 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
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<PAGE> 12
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 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 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 1997, the Compensation Committee of the Company consisted of
Messrs. Cramer, Jones and Howe. During fiscal 1997, the Company sold
approximately $11,000 of product to Addison Wesley Longman. Mr. Jones is a
director of Addison Wesley Longman. Additionally, the Company had royalty
revenues of approximately $134,000 related to Benjamin/Cummings Publishing
Company, a subsidiary of Addison Wesley Longman. The Company purchased
approximately $22,000 of product from Benjamin/Cummings during fiscal 1997 and
paid royalty expense to Benjamin/Cummings of approximately $70,000.
LEGAL PROCEEDINGS
On April 25, 1996, a class action lawsuit was filed in Fulton County
Superior Court in Atlanta, Georgia by an owner of 1,000 shares of A.D.A.M.
common stock against the Company and certain of its then officers and directors
(Robert S. Cramer, Jr., Curtis A. Cain, Gregory M. Swayne, Holcombe P. Green,
Jr. and John W. McClaugherty). The complaint alleges violations of sections 11,
12(2) and 15 of the Securities Act of 1933, violations of the Georgia Securities
Act and negligent misrepresentation arising out of alleged disclosure
deficiencies in connection with the Company's initial public offering which was
completed on November 10, 1995. The complaint seeks compensatory damages and
reimbursements for plaintiff's fees and expenses. The Company and its officers
and directors intend to defend vigorously against the allegations.
CERTAIN TRANSACTIONS
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, a Director of the Company, 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 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 1997, the Company sold approximately $64,000
of product to JSK pursuant to the Reseller Agreement. JSK paid the Company
approximately $68,000 in licensing and rental fees during fiscal 1997 pursuant
to the MLI License Agreement. The MLI License Agreement was terminated in late
March, 1997.
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<PAGE> 13
During fiscal 1997, the Company sold approximately $11,000 of product to
Addison Wesley Longman. Mr. Jones and Ms. Elliot are directors of Addison Wesley
Longman. Additionally, the Company had royalty revenues of approximately
$134,000 related to Benjamin/Cummings, a subsidiary of Addison Wesley Longman.
The Company purchased approximately $22,000 of product from Benjamin/Cummings
during fiscal 1997 and paid royalty expense to Benjamin/Cummings of
approximately $70,000.
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.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
In April 1997 the Company's Board of Directors combined the Compensation
and Stock Option Committees, which were responsible for determining compensation
issues relating to the Company's executive officers, into the Compensation/Stock
Option Committee. The Compensation/Stock Option Committee (the "Compensation
Committee"), which is composed of three non-employee directors, is responsible
for developing and making recommendations to the Board with respect to the
Company's compensation plans and policies for the Company's executive officers
as well as the Board of Directors. In carrying out this responsibility, the
Compensation Committee approves the design of all compensation plans applicable
to executive officers and directors, reviews and approves performance goals,
establishes award opportunities, oversees the ongoing operation of the various
plans and makes recommendations to the Board regarding certain of these matters.
In addition, the Compensation Committee, pursuant to authority delegated by the
Board, determines on an annual basis the base salaries to be paid to the Chief
Executive Officer and each of the other executive officers. The Compensation
Committee also, in conjunction with the Board, reviews compensation policies
applicable to executive officers as well as directors and considers the
relationship of corporate performance to that compensation.
EXECUTIVE OFFICER COMPENSATION PHILOSOPHY
The objectives of the Company's executive compensation program are to:
- Support the achievement of desired Company performance; and
- Provide compensation that will attract and retain superior talent and
reward performance.
In carrying out these objectives, the Compensation 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
periodically at the discretion of the Compensation Committee. As a result, the
Company's executive compensation provides an overall level of compensation
opportunity that is competitive with software companies of comparable size and
complexity. The Compensation Committee will use its discretion to set executive
compensation at a level that, in its judgment, is warranted by external,
internal or individual circumstances.
The Compensation Committee also endorses the position that stock ownership
by management and stock-based performance compensation arrangements are
beneficial in aligning management's and shareholders' interests in the
enhancement of shareholder value. The Chairman of the Board and Chief Executive
Officer and the Vice-Chairman of the Board are relatively substantial
shareholders in the Company and are thus motivated to act on behalf of all
shareholders to optimize overall Company performance.
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<PAGE> 14
EXECUTIVE OFFICER COMPENSATION
The Company's executive officer compensation is comprised of base salary,
grants under the 1991 Employee Stock Option Plan and the Amended and Restated
1992 Stock Option Plan, and various benefits, including medical plans which are
generally available to employees of the Company.
BASE SALARY. Base salaries for the Company's key executive officers are
established under employment contracts. The salaries are reviewed annually and
are approved by the Compensation Committee. In determining base salaries, the
Compensation Committee takes into consideration individual experience and
performance as well as other circumstances particular to the Company.
VARIABLE COMPENSATION. Variable compensation is keyed to Company
performance for officers and is based on achievement of pre-established 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.
STOCK OPTION PROGRAM. 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
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 the 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/Stock Option Committee
Philosophy, Base Salary and Variable Compensation paragraphs above. During
fiscal 1997, the former Stock Option Committee granted 15,000 options to the
Named Executive Officers, none of which were granted to the Chief Executive
Officer.
OTHER BENEFITS. The Company provides medical benefits to executive
officers. These benefits are comparable to those generally available to company
employees. The Company also funds life insurance policies on the behalf of its
executive officers. The amount funded under the policies and the amount of
insurance provided to the executive is commensurate with the executive's salary
and level of responsibility.
COMPENSATION OF THE CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
Mr. Cramer serves as the Chairman of the Board and Chief Executive Officer
under an employment contract, dated December 21, 1994, which was approved by the
Compensation Committee. Under the employment contract, Mr. Cramer's compensation
is principally composed of a base salary of $155,000 and annual discretionary
bonuses.
During fiscal 1997, the Company made contributions to a life insurance
policy on the behalf of Mr. Cramer. The value of the benefit related to such
policy was estimated to be $2,000,000 and is included in the All Other
Compensation in the summary compensation table on page 6 of this Proxy
Statement.
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/Stock Option Committee does not
believe that there is a risk of losing deductions under the new law. However, in
the future, the Compensation/Stock Option 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.
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<PAGE> 15
The Compensation Committee believes that its compensation philosophies are
suited to retaining and rewarding executives who contribute to the success of
the Company in achieving its business objectives and increasing stockholder
value. The Company further believes that the program strikes an appropriate
balance among the interests and needs of the Company, its stockholders and its
executives.
The Compensation/Stock Option Committee
Anthony J. Gatti, M.D.
Daniel S. Howe
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.
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<PAGE> 16
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 and the Hambrecht & Quist Technology Index on November 10, 1995 and an
investment of $100 in the Nasdaq Stock Market-U.S. on October 31, 1995 and
further assumes the reinvestment of all dividends. Stock price performance,
presented monthly for the period from November 10, 1995 through March 31, 1997
is not necessarily indicative of future results.
<TABLE>
<CAPTION>
A.D.A.M. NASDAQ
Measurement Period SOFTWARE, STOCK H&Q
(Fiscal Year Covered) INC. MARKET-US TECHNOLOGY
<S> <C> <C> <C>
10/95* 100 100 100
11/95 89 102 95
12/95 54 102 90
1/96 52 102 91
2/96 41 106 96
3/96 42 107 92
4/96 29 115 104
5/96 31 121 106
6/96 25 115 98
7/96 28 105 88
8/96 26 111 93
9/96 29 119 104
10/96 23 118 103
11/96 25 125 115
12/96 22 125 112
1/97 21 134 124
2/97 17 127 114
3/97 17 118 107
</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 ACT.
OTHER MATTERS
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 have
complied with the applicable reporting requirements, except for Michael Fisher,
Corporate Secretary and Director of Finance and Administration, who
inadvertently filed his Form 3 approximately one month late.
INDEPENDENT PUBLIC ACCOUNTANTS
Price Waterhouse LLP has audited the accounts of the Company and its
subsidiaries for fiscal year 1997 and has been appointed by the Board of
Directors to continue in that capacity for the Company's fiscal year
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<PAGE> 17
ending March 31, 1998. 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 1997, 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 31, 1997, 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 ON JUNE 30, 1997, 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: Corporate Secretary
SHAREHOLDER PROPOSALS
Any shareholder proposals intended to be presented at the Company's 1998
Annual Meeting of Shareholders must be received by the Company on or before
April 16, 1998 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/ ROBERT S. CRAMER, JR
------------------------
Robert S. Cramer, Jr.
Chairman of the Board and
Chief Executive Officer
Atlanta, Georgia
August 22, 1997
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<PAGE> 18
APPENDIX
A.D.A.M. SOFTWARE, INC.
PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
ON SEPTEMBER 24, 1997
The undersigned hereby appoints Robert S. Cramer, Jr. and Gregory M. Swayne
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 24, 1997, 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 two (2) directors to serve until the 2000 Annual Meeting of
Shareholders:
[ ] FOR all nominees listed (except as marked below to the contrary)
To serve until the 2000 Annual Meeting of Shareholders:
Daniel S. Howe
Francis J. Tedesco, M.D.
(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 1998.
[ ] 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:_________________, 1997
____________________________
____________________________
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 24,
1997. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN
IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY.
