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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
American Software, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
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(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
AMERICAN SOFTWARE, INC.
470 East Paces Ferry Road
Atlanta, Georgia 30305
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of AMERICAN
SOFTWARE, INC. will be held at the offices of the Company, 470 East Paces
Ferry Road, Atlanta, Georgia 30305 on Wednesday, August 22, 2001 at 3:30 p.m.
for the following purposes:
1. To elect eight directors of the Company, three of whom will be elected
by the holders of Class A Common Shares, and five of whom will be
elected by the holders of Class B Common Shares.
2. To consider and transact such other business as may properly come before
the meeting.
Only shareholders of record of the Company at the close of business on July
12, 2001 will be entitled to vote at the meeting.
Shareholders are requested to vote, date, sign and mail their proxies in the
form enclosed even though they now plan to attend the meeting. If shareholders
are present at the meeting, their proxies may be withdrawn, and they may vote
personally on all matters brought before the meeting, as described more fully
in the enclosed Proxy Statement.
BY ORDER OF THE BOARD OF DIRECTORS
James R. McGuone,
Secretary
August 2, 2001
IMPORTANT
We encourage you to attend the shareholders' meeting. In order that there
may be a proper representation at the meeting, each shareholder is requested
to send in his or her proxy in the enclosed envelope, which requires no
postage if mailed in the United States. Attention by shareholders to this
request will reduce the Company's expense in soliciting proxies.
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
OF AMERICAN SOFTWARE, INC.
----------------
TO BE HELD AT
AMERICAN SOFTWARE, INC.
470 EAST PACES FERRY ROAD
ATLANTA, GEORGIA
ON AUGUST 22, 2001
This Proxy Statement is furnished to Class A shareholders by the Board of
Directors of AMERICAN SOFTWARE, INC., 470 East Paces Ferry Road, N.E.,
Atlanta, Georgia 30305 (the "Company"), in connection with the solicitation of
proxies by the Board of Directors for use at the Annual Meeting of
Shareholders on Wednesday, August 22, 2001 at 3:30 p.m., and at any
adjournment or adjournments thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders. This Proxy Statement
and accompanying proxy card and Notice of Annual Meeting are first being
mailed to shareholders on or about August 2, 2001.
If the enclosed form of proxy is properly executed and returned, the shares
represented thereby will be voted in accordance with its terms. If no choices
are specified, the proxy will be voted:
FOR--Election of Dennis Hogue, Dr. John J. Jarvis and Thomas R. Williams as
Class A Directors.
In addition, a properly executed and returned proxy card gives the authority
to vote in accordance with the proxy-holders' best judgment on such other
business as may properly come before the meeting or any adjournment thereof.
Any proxy given pursuant to this solicitation may be revoked, either in
writing furnished to the Secretary of the Company prior to the meeting or
personally by attendance at the meeting, by the person giving the proxy
insofar as the proxy has not been exercised at the meeting.
VOTING SECURITIES
Record Date and Voting of Securities
The Board of Directors has fixed the close of business on July 12, 2001 as
the record date for determining the holders of common stock entitled to notice
of and to vote at the meeting. On July 12, 2001, the Company had outstanding
and entitled to vote a total of 18,697,107 Class A Common Shares ("Class A
shares") and 4,082,289 Class B Common Shares ("Class B shares").
Other than in the election of directors, in which holders of Class A shares
and Class B shares vote as separate classes, each outstanding Class A share is
entitled to one-tenth vote per share and each outstanding Class B share is
entitled to one vote per share on all matters to be brought before the
meeting. The Class A directors and the Class B directors will be elected by a
majority of the votes cast by the respective classes. Any other matter
submitted to the meeting must be approved or ratified by a majority vote of
the outstanding shares (adjusted as described above). A one-third quorum of
6,232,369 Class A shares and of 1,360,763 Class B shares is required to be
present or represented by proxy at the meeting in order to conduct all of the
business expected to come before the meeting. A vote of abstention cast by any
shareholder on a particular action will be counted towards the quorum
requirement, but will not be counted as a vote for or against the action.
Security Ownership
Five Percent Shareholders. The only persons known by the Company to own
beneficially more than 5% of the outstanding shares of common stock of either
class of the Company are those set forth below. Unless otherwise noted, this
information is as of June 30, 2001. The statements as to securities
beneficially owned are, in each instance, based upon information provided by
the person(s) concerned. Except as disclosed in the notes to the table, each
person has sole voting and investment power with respect to the entire number
of shares shown as beneficially owned by that person.
Shares Percent
Name and Address of Beneficially of
Title of Class Beneficial Owner Owned Class(1)
-------------- ------------------- ------------ --------
CLASS A SHARES James C. Edenfield........... 191,500(2)(3) 1.0%(4)
c/o American Software, Inc.
470 East Paces Ferry Road,
N. E.
Atlanta, Georgia 30305
Thomas L. Newberry........... 173,000(2)(5) 0.9%(4)
c/o American Software, Inc.
470 East Paces Ferry Road,
N. E.
Atlanta, Georgia 30305
Dimensional Fund Advisors,
Inc.......................... 1,342,112(6) 7.2%
1299 Ocean Avenue, 11th Floor
Santa Monica, California
90401
Brown Capital Management,
Inc.......................... 3,160,000(7) 17.0%
1201 N. Calvert Street
Baltimore, MD 21202
CLASS B SHARES James C. Edenfield........... 2,146,352 52.6%
Thomas L. Newberry........... 1,935,937 47.4%
--------
(1) Based on a total of 18,551,096 Class A shares outstanding, plus any shares
issuable pursuant to options held by the person in question which may be
exercised within 60 days.
(2) Does not include the Class B shares beneficially owned by Mr. Edenfield
and Dr. Newberry, which shares are convertible into Class A shares on a
share for share basis.
(3) Includes 136,500 shares that may be acquired upon the exercise of stock
options exercisable within 60 days. Also includes 55,000 shares held by
the James C. and Norma T. Edenfield Foundation, Inc., as to which Mr.
Edenfield has shared voting and investment power.
(4) For all matters except the election of directors, which involves class
voting, Messrs. Edenfield and Newberry together beneficially own
approximately 69.1% of the combined, weighted voting rights of the
outstanding Class A and Class B shares. See "Record Date and Voting of
Securities," above. If their respective Class B shares were converted into
Class A shares, Mr. Edenfield would beneficially own 10.3% of the
outstanding Class A shares and Dr. Newberry would beneficially own 9.3% of
the outstanding Class A shares.
(5) Includes 70,000 shares that may be acquired upon the exercise of stock
options exercisable within 60 days.
(6) Based on Schedule 13G dated February 2, 2001.
(7) Based on Schedule 13G amendment dated February 15, 2001. Of these shares,
Brown Capital Management, Inc. has sole voting power over 2,891,500 shares
and sole dispositive power over 3,160,000 shares.
2
Directors and Executive Officers. The following table shows the shares of
common stock of the Company, both Class A and Class B, beneficially owned by
each nominee for director, by each executive officer named in the Summary
Compensation Table and by all directors and executive officers as a group as
of June 30, 2001. The statements as to securities beneficially owned are, in
each instance, based upon information provided by the person(s) concerned.
Except as disclosed in the notes to the table, each person has sole voting and
investment power with respect to the entire number of shares shown as
beneficially owned by that person.
Shares
Beneficially
Owned Percent of Class
Name of Beneficial Owner ------------------------ ------------------
or Description of Group Class A Class B Class A(1) Class B
------------------------ ------- --------- ---------- -------
James C. Edenfield................. 191,500(2)(3) 2,146,352 1.0%(4) 52.6%
Thomas L. Newberry................. 173,000(2)(5) 1,935,937 0.9%(4) 47.4%
David H. Gambrell.................. 60,000(6) -0- 0.3% --
Thomas R. Williams................. 60,000(6) -0- 0.3% --
John J. Jarvis..................... -0- -0- -- --
Dennis Hogue....................... -0- -0- -- --
Thomas L. Newberry, V.............. -0- -0- -- --
J. Michael Edenfield............... 155,500(6) -0- 0.8% --
Paul DiBono, Jr. (7)............... 127,500(6) -0- 0.7% --
Vincent C. Klinges................. 50,750(8) -0- 0.3% --
Jeffrey W. Coombs (9).............. 29,750(10) -0- 0.2% --
ALL DIRECTORS AND EXECUTIVE
OFFICERS AS A GROUP (12 PERSONS).. 853,000(2)(11) 4,082,289 3.9% 100%
--------
(1) Based on a total of 18,551,096 Class A shares outstanding, plus any
shares issuable pursuant to options held by the person or group in
question that may be exercised within 60 days.
(2) Does not include the Class B shares beneficially owned by Mr. Edenfield
and Dr. Newberry, which shares are convertible into Class A shares on a
share for share basis.
(3) Includes 136,500 shares that may be acquired upon the exercise of stock
options exercisable within 60 days. Also includes 55,000 shares held by
the James C. and Norma T. Edenfield Foundation, Inc. as to which
Mr. Edenfield has shared voting and investment power.
(4) For all matters except the election of directors, which involves class
voting, Mr. Edenfield and Dr. Newberry together beneficially own
approximately 69.1% of the combined, weighted voting rights of the
outstanding Class A and Class B shares. See "Record Date and Voting of
Securities," above. If their respective Class B shares were converted
into Class A shares, Mr. Edenfield would beneficially own 10.3% of the
outstanding Class A shares and Dr. Newberry would beneficially own 9.3%
of the outstanding Class A shares.
(5) Includes 70,000 shares subject to options exercisable within 60 days.
(6) Represents shares subject to options exercisable within 60 days.
(7) Mr. DiBono retired from the Company effective October 31, 2000.
(8) Includes 48,750 shares subject to options exercisable within 60 days.
(9) Mr. Coombs became Executive Vice President and Chief Operating Officer of
the American Software USA, Inc., a wholly-owned subsidiary of the
Company, effective June 18, 2001. Prior to that time, he served as Senior
Vice President of American Software USA, Inc.
(10) Includes 29,250 shares subject to options exercisable within 60 days.
Also includes 500 shares held by Jeffrey J. Coombs, minor son of Mr.
Coombs, as to which Mr. Coombs may be deemed to share voting and
investment power.
(11) Includes 694,500 shares subject to options exercisable within 60 days.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's executive officers and directors, and persons who own
more than 10% of a registered class of the Company's
3
equity securities, to file reports of ownership and changes in ownership with
the Securities and Exchange Commission (the "Commission"). Officers, directors
and holders of more than 10% of the Class A shares are required under
regulations promulgated by the Commission to furnish the Company with copies
of all Section 16(a) forms they file.
Based upon a review by the Company of filings made under Section 16(a) of
the Exchange Act, all Section 16(a) filing requirements applicable to its
directors, officers and greater than 10% beneficial owners were complied with.
ELECTION OF DIRECTORS
The directors of the Company are elected annually to hold office until the
election and qualification of their successors at the next Annual Meeting. Of
the eight directors to be elected, three are to be elected by the holders of
the outstanding Class A shares and five are to be elected by the holders of
the outstanding Class B shares. The persons named in the enclosed proxy card
intend to vote Class A shares for the election of Dennis Hogue, Dr. John J.
Jarvis and Thomas R. Williams, the Class A director nominees. In the event any
of these individuals should be unavailable to serve as a director, the proxy
will be voted in accordance with the best judgment of the person or persons
acting under it. The Board of Directors has no reason to believe that any
director nominees will be unavailable for election as a director.
It is anticipated that Mr. Edenfield and Dr. Newberry, who together own all
of the Class B shares, will vote their Class B shares in favor of the election
of James C. Edenfield, J. Michael Edenfield, David H. Gambrell, Dr. Thomas L.
Newberry and Thomas L. Newberry, V as Class B directors. Thus, it is expected
that James C. Edenfield and Thomas L. Newberry will continue serving as Class
B directors and that J. Michael Edenfield, David H. Gambrell and Thomas L.
Newberry, V will be elected as Class B directors.
J. Michael Edenfield, Dennis Hogue, Dr. John J. Jarvis, and Thomas L.
Newberry, V were elected to the Board of Directors by the existing Board
members effective June 1, 2001, and have not previously been candidates for
election at an annual meeting of shareholders.
The nominees for director, their ages, their principal occupations for at
least the past five years, other public company directorships held by them and
the year each was first elected as a director of the Company are set forth
below.
Year First
Elected
Name of Nominee Age Principal Occupation; Directorships Director
--------------- --- ----------------------------------- ----------
CLASS A DIRECTORS:
Dennis Hogue(1) 48 Chief Executive Officer of Global 2001
Food Exchange.
John J. Jarvis(2) 59 Chair of the School of Industrial 2001
and System Engineering at the
Georgia Institute of Technology.
Thomas R. Williams(3) 72 President, The Wales Group, Inc. 1989
(management and financial advisory
services).
CLASS B DIRECTORS:
James C. Edenfield(4) 66 President, Chief Executive Officer 1971
and Treasurer of American Software,
Inc. and American Software USA,
Inc.; Chairman of Board of Directors
of Logility, Inc.
J. Michael Edenfield(5) 43 Senior Vice President of American 2001
Software, Inc. and President and
Chief Executive Officer of Logility,
Inc.; currently a Director of
Logility, Inc., INSIGHT, Inc.
David H. Gambrell(6) 71 Partner, Gambrell & Stolz, L.L.P., 1983
Attorneys at Law, Atlanta, Georgia.
Thomas L. Newberry(7) 68 Chairman of the Board of American 1971
Software, Inc.
Thomas L. Newberry, V(8) 34 Founder and Chief Executive Officer 2001
of The 1% Club, Inc.
4
--------
(1) Mr. Hogue became Chief Executive Officer of Global Food Exchange in
January 2001. Prior to joining Global Food Exchange, Mr. Hogue served as
President and Chief Executive Officer of E3 Corporation from December 1999
to December 2000. Prior to serving as President and Chief Executive
Officer of E3, Mr. Hogue served as Vice President of Sales from November
1996 until April 1997 and President of North America from April 1997 until
December 1999. He earned a Bachelor of Science degree in Psychology from
Florida State University in 1974.
(2) Dr. Jarvis is currently Chair of the School of Industrial and Systems
Engineering at the Georgia Institute of Technology, where he has been a
member of the faculty since 1968. Dr. Jarvis was co-founder of CAPS
Logistics, Inc., a provider of software and consulting services in
logistics, which was acquired by Baan NV in 1998. Dr. Jarvis has served as
President of the Institute of Industrial Engineers (IIE), President of the
Institute of Management Services (TIMS) and Secretary of the Operations
Research Society of America (ORSA). He has served on the Councils of ORSA
and TIMS and on the Boards of the Institute for Operations Research and
Management Sciences (INFORMS) and IIE. Dr. Jarvis earned a Bachelor of
Science degree in Industrial Engineering in 1963 and a Masters of Science
degree in Industrial Engineering in 1965, both from the University of
Alabama, and a Ph.D. from Johns Hopkins University in 1968.
(3) Mr. Williams is currently President of The Wales Group, Inc., a position
he has held since 1987. The Wales Group, Inc. is a closely held
corporation engaged in investments and venture capital. In addition to the
above directorships, Mr. Williams was a director of Southern Bell from
1980 to 1983 and is a former Chairman of the Board of First Wachovia
Corporation, First National Bank of Atlanta and First Atlanta Corporation.
He has also served as a trustee of Fidelity Group of Mutual Funds. He
holds a Bachelor of Science degree in Industrial Engineering from the
Georgia Institute of Technology and a Master of Science degree in
Industrial Management from the Massachusetts Institute of Technology.
(4) Mr. Edenfield is a co-founder of the Company and has served as Chief
Executive Officer since November 1989, and as Co-Chief Executive Officer
prior to that time. Prior to founding the Company, Mr. Edenfield held
several executive positions with and was a director of Management Science
America, Inc., an Atlanta-based applications software development and
sales company. He holds a Bachelor of Industrial Engineering degree from
the Georgia Institute of Technology. Mr. Edenfield is the father of J.
Michael Edenfield.
(5) Mr. Edenfield has served as President and Chief Executive Officer of
Logility, Inc., a majority-owned subsidiary of the Company, since January
1997. From June 1994 until October 1997, he served as Chief Operating
Officer of the Company. Mr. Edenfield has served as Executive Vice
President of the Company from June 1994 to the present. From May 1987 to
June 1994, Mr. Edenfield served in various positions with American
Software USA, Inc., a wholly-owned subsidiary of the Company. Mr.
Edenfield holds a Bachelor of Industrial Management degree from the
Georgia Institute of Technology.
(6) Mr. Gambrell has been a practicing attorney since 1952, and is a partner
in the law firm of Gambrell & Stolz, L.L.P., counsel to the Company. He
served as a member of the United States Senate from the State of Georgia
in 1971 and 1972. Mr. Gambrell holds a Bachelor of Science degree from
Davidson College and a J.D. from the Harvard Law School.
(7) Dr. Newberry is a co-founder of the Company and served as Co-Chief
Executive Officer of the Company until November 1989. Prior to founding
the Company, he held executive positions with several companies engaged in
computer systems analysis, software development and sales, including
Management Science America, Inc., where he was also a director. Dr.
Newberry holds Bachelor, Master of Science and Ph.D degrees in Industrial
Engineering from the Georgia Institute of Technology. He is the father of
Thomas L. Newberry, V.
(8) Mr. Newberry founded The 1% Club, Inc. in October 1992 and has acted as
its Chief Executive Officer since that time. The 1% Club sponsors programs
designed to assist entrepreneurs and their families in accomplishing their
goals. He is also the author of motivational books and audio programs
dedicated to improving performance in business operations and
salesmanship. Mr. Newberry earned a Bachelor of Science degree from
Georgia State University in 1989.
5
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT CLASS A SHAREHOLDERS VOTE
"FOR" MESSRS. HOGUE, JARVIS AND WILLIAMS.
From May 1, 2000 through April 30, 2001, the Board of Directors held four
meetings and acted by unanimous written consent on one occasion. No director
of the Company attended fewer than 75% of the total meetings of the Board of
Directors and committee meetings on which such Board member served and was
eligible to attend during this period.
The Board of Directors has an Audit Committee, which presently consists of
Messrs. Gambrell (Chairman), Hogue, Jarvis and Williams. The Audit Committee
held two meetings during fiscal 2001. The Securities and Exchange Commission
and National Association of Securities Dealers have promulgated rules that
require audit committees to be composed of not less than three members who are
"independent," as that term is defined in the rules. Three of the four Audit
Committee members--Messrs. Hogue, Jarvis and Williams--meet the definition of
"independent" set forth in the new rules.
The rules provide that a director who is a partner in or controlling
shareholder or executive officer of any business organization to which the
Company made, or from which the Company received, payments that exceed the
greater of 5% of the business organization's consolidated gross revenues or
$200,000 in any of the past three years is not considered "independent." Mr.
Gambrell is a partner in the law firm of Gambrell & Stolz, L.L.P., which
provides legal services to the Company and received payments in excess of the
above threshold amount. Accordingly, Mr. Gambrell would not be considered
"independent" under the rules. See Compensation Committee Interlocks and
Insider Participation, below.
An exception to the independence requirement allows one non-independent
director who is not a current employee of the Company or an immediate family
member of a current employee to serve on the Audit Committee if the Board,
under limited circumstances, determines that membership on the Committee by
the individual is in the best interest of the Company and its shareholders,
provided that the Board discloses in the next annual proxy statement the
nature of the relationship and the reasons for its determination. The Board
has determined that Mr. Gambrell's membership on the Committee is in the best
interest of the Company and its shareholders because his experience serving as
Chairman of the Committee will benefit the new Committee members.
The Company's Audit Committee Charter, attached as Exhibit "A" hereto,
outlines the composition requirements of the Audit Committee as described
above, as well as its duties and responsibilities. Under the current charter,
the primary responsibility of the Audit Committee is to oversee the Company's
financial reporting process on behalf of the Board. The functions of the Audit
Committee include making an annual recommendation of independent public
accountants to the Company, reviewing the scope and results of the independent
public accountants' audit, monitoring the adequacy of the Company's
accounting, financial and operating controls, reviewing from time to time the
Company's periodic financial statements and other financial reports with
management and with the independent auditors, and reviewing with management
and the independent auditors the financial statements to be included in the
Company's annual report.
Prior to the September 1, 2000 termination of the 1991 Employee Stock Option
Plan, the Board had a 1991 Employee Stock Option Plan Committee, consisting of
Messrs. Edenfield and Newberry. During fiscal 2001, this Committee met or
acted by written consent ten times to grant stock options or take other
actions with respect to the Company's 1991 Employee Stock Option Plan. The
members of this Committee were not eligible to participate in this Plan. The
functions of this Committee were to grant options and establish the terms of
those options, as well as to construe and interpret the Plan and to adopt
rules in connection therewith.
Two different committees of the Board administer the 2001 Stock Option Plan,
depending on whether the option grant is to an officer or director or to other
employees. The Special Stock Option Committee, which consists of David H.
Gambrell and Thomas R. Williams, as members of the Compensation Committee,
administers stock option grants to executive officers and directors. The Stock
Option Committee, which consists of James C. Edenfield and Thomas L. Newberry,
administers grants to other employees. During fiscal 2001, the
6
Stock Option Committee met or acted by written consent nine times to grant
stock options or take other actions with respect to the Company's 2001 Stock
Option Plan. The Special Stock Option Committee did not meet or act by written
consent during fiscal 2001 because all stock option grants to officers and
directors during fiscal 2001 were made under the Directors and Officers Stock
Option Plan prior to its termination. The Directors and Officers Stock Option
Plan was administered by the Compensation Committee. The function of these
Committees is to grant options and establish the terms of those options, as
well as to construe and interpret the Plan and to adopt rules in connection
therewith.
The Board has a Compensation Committee, consisting of Messrs. Williams
(Chairman) and Gambrell, described below in "Certain Information Regarding
Executive Officers and Directors--Report on Executive Compensation." The
Compensation Committee met or acted by written consent on two occasions during
fiscal 2001.
The Board has no nominating committee or any other committee performing
similar functions.
CERTAIN INFORMATION REGARDING EXECUTIVE OFFICERS AND DIRECTORS
Executive Compensation
The following table provides certain summary information concerning
compensation paid or accrued by the Company to or on behalf of the Company's
Chief Executive Officer and the other executive officers of the Company whose
annual compensation exceeded $100,000 during fiscal 2001 (referred to herein
as the "named executive officers") for the fiscal years ended April 30, 2001,
2000 and 1999:
SUMMARY COMPENSATION TABLE
--------------------------------------------------------------
Long-Term
Compensation
Bonus or Awards/Number
Annual Other Annual of Option All Other
Name and Principal Fiscal Salary Compensation Shares Compensation
Position Year ($) ($) Granted ($)(1)(2)
----------------------------------- ------ ------- ------------ ------------- ------------
James C. Edenfield................. 2001 434,500 -0- 120,000 97,226(4)(5)
President and Chief 2000 434,500 -0- 90,000 113,618(5)(6)
Executive Officer(3) 1999 434,500 -0- 123,000(7) 948(5)
J. Michael Edenfield............... 2001 259,200(9) -0- 130,000 4,690(10)(11)
Executive Vice 2000 259,200(9) -0- 140,000(12) 4,440(11)(13)
President; President of 1999 240,000(9) -0- 151,000(7)(14) 2,040(11)
Logility, Inc.(3)(8)
Paul DiBono, Jr.................... 2001 114,150 -0- 30,000 1,170(16)
Senior Vice President(15) 2000 155,052 -0- 30,000 2,324(16)
1999 143,951 10,000 90,000(7) -0-
Jeffrey W. Coombs.................. 2001 181,948 24,875 70,000 2,650(16)
Senior Vice 2000 175,948 15,000 30,000 2,400(16)
President of American 1999 164,799 35,000 67,000(7) -0-
Software USA, Inc.(17)
Vincent C. Klinges................. 2001 150,000(18) -0- 65,000 2,650(16)
Chief Financial Officer 2000 119,225(18) -0- 65,000(19) -0-
1999 97,023 10,000 40,000(7) -0-
--------
(1) The Company did not make any contributions for the accounts of these
individuals under the Company's Profit Sharing Plan during any of these
three years.
(2) The aggregate amount of perquisites and other personal benefits,
securities or property given to each named executive officer, valued on
the basis of aggregate incremental cost to the Company, was less than
either $50,000 or 10% of the total annual salary and bonus for that
executive officer during each of these years.
(3) James C. Edenfield is the father of J. Michael Edenfield.
7
(4) This amount includes $93,628 representing the economic benefit in fiscal
2001 of a split dollar life insurance policy acquired by the Company in
fiscal 2000 on the life of Mr. Edenfield (the "split dollar policy") and
$2,650 as the matching payment amount contributed by the Company into Mr.
Edenfield's 401(k) Plan account.
(5) Each of these amounts includes $948 reimbursed to Mr. Edenfield for
medical insurance coverage obtained through the Company and paid by him.
(6) This amount includes $110,270 representing the economic benefit of the
split dollar policy and $2,400 as the matching payment amount contributed
by the Company into Mr. Edenfield's 401(k) Plan account.
(7) These stock options do not include other stock options granted in fiscal
1999 that were subsequently canceled pursuant to the stock option
repricing that occurred on August 31, 1998. The amounts of these options
were 35,000 shares for James C. Edenfield, 50,000 shares for J. Michael
Edenfield, 30,000 shares for Mr. DiBono, 67,000 shares for Mr. Coombs and
30,000 shares for Mr. Klinges.
(8) Logility, Inc. is an 85%-owned subsidiary of the Company.
(9) All of the fiscal 2001, 2000 and 1999 annual salary amounts were paid by
Logility, Inc., a majority-owned subsidiary of the Company.
(10) This amount includes $2,650 as the matching payment amount contributed by
the Company into Mr. Edenfield's 401(k) Plan account.
(11) Each of these amounts includes $2,040 reimbursed to Mr. Edenfield for
medical insurance coverage obtained through the Company and paid by him.
(12) Includes 45,000 stock option shares granted by Logility, Inc.
(13) This amount includes $2,400 as the matching payment amount contributed by
the Company into Mr. Edenfield's 401(k) Plan account.
(14) Includes 70,000 stock option shares granted by Logility, Inc.
(15) Mr. DiBono retired from the Company effective October 31, 2000.
(16) This amount represents the matching payment amount contributed by the
Company into the officer's 401(k) Plan account.
(17) Mr. Coombs became Chief Operating Officer of American Software USA, Inc.,
a wholly-owned subsidiary of the Company, effective June 18, 2001. His
compensation information is included in this table for informational
purposes.
(18) Thirty percent ($45,000) of Mr. Klinges salary was paid by Logility, Inc.
in fiscal 2001 and thirty percent ($36,379.50) was paid by Logility, Inc.
in fiscal 2000.
(19) Includes 5,000 stock option shares granted by Logility, Inc.
Stock Option Plans
The Company has outstanding stock options granted pursuant to three stock
option plans. The 1991 Employee Stock Option Plan (the "Employee Option Plan")
and the Directors and Officers Stock Option Plan (the "Directors and Officers
Option Plan") were adopted in 1991. These Plans were terminated effective
September 1, 2000 and replaced by the 2001 Stock Option Plan (the "2001 Option
Plan"). Options outstanding under the Employee Option Plan and the Directors
and Officers Option Plan remain in effect, but no new options may be granted
under those plans. The following sections describe these three stock option
plans.
1991 Employee Stock Option Plan. On August 22, 1991, the Company adopted the
1991 Employee Stock Option Plan. The Employee Option Plan was designed to
provide certain key employees of the Company and its subsidiaries with
additional incentives to increase their efforts on the Company's behalf and
remain in the employ of the Company. Options to purchase Class A common shares
were granted in the form of both incentive stock options and non-qualified
stock options. Participants in this plan were selected from key personnel of
the Company or a subsidiary, provided, however, that no director, officer or
10% shareholder of the Company was eligible to participate. The number of
options granted under this plan was determined with each grant. Options are
exercisable at any time within the option period, but no more than ten years
from the date of grant. As of April 30, 2001, there were outstanding under the
Employee Stock Option Plan options to purchase 2,048,430 Class A shares.
8
Directors and Officers Stock Option Plan. On August 22, 1991, the Company
adopted the Directors and Officers Stock Option Plan. The Directors and
Officers Option Plan was designed to provide directors and officers of the
Company and its subsidiaries with additional incentives to increase their
efforts on the Company's behalf and to remain in the employ of the Company or
to remain as directors of the Company. Options to purchase Class A common
shares were granted in the form of both incentive stock options and non-
qualified stock options. Participants in this plan were selected from among
the directors and officers of the Company or a subsidiary. The number of
options granted under this plan was determined with each grant. Further, each
non-employee member of the Board of Directors received an automatic grant of
nonqualified options to purchase 5,000 shares on April 30 and October 31 of
each year. The option price for such grant was equal to the closing market
price of the shares on the date of grant and were exercisable one year after
grant. Options are exercisable at any time within the option period, but no
more than ten years from the date of grant. As of April 30, 2001, there were
outstanding under the Directors and Officers Stock Option Plan options to
purchase 1,208,469 Class A shares.
2001 Stock Option Plan. The 2001 Option Plan became effective September 1,
2000. This plan is designed to attract and retain the best available talent
and encourage the highest level of performance by officers, employees,
directors, advisors and consultants, and to provide them with incentives to
put forth maximum efforts for the success of the Company's business. Options
to purchase Class A common shares are granted in the form of both incentive
stock options and non-qualified stock options. The number of options granted
under this plan is determined with each grant, except with respect to non-
employee directors, who receive grants of non-qualified options to purchase
5,000 shares upon election and 3,000 shares at the end of each fiscal quarter.
The price of such grants is equal to the closing market price of the shares on
the date of grant. Options are exercised at any time within the option period,
but no more than 10 years after the date of grant (or 5 years for incentive
stock options granted to any person who owns 10% or more of the combined
voting power of all classes of capital stock of the Company at the time of
grant). A total of 2,000,000 shares are authorized for issuance pursuant to
options granted under the 2001 Option Plan. As of April 30, 2001, there were
outstanding under the 2001 Option Plan options to purchase 511,250 Class A
shares.
Stock Option Committees. Prior to its termination, the Employee Stock Option
Plan was administered by the 1991 Employee Stock Option Plan Committee,
consisting of Mr. Edenfield and Dr. Newberry. Prior to its termination, the
Directors and Officers Option Plan was administered by the Compensation
Committee, consisting of Messrs. Gambrell and Williams. The 2001 Option Plan
is administered by two separate committees: (i) the Special Stock Option
Committee (comprised of Messrs. Gambrell and Williams, as members of the
Compensation Committee) is responsible for option grants to officers and
directors, and (ii) the Stock Option Committee (comprised of Mr. Edenfield and
Dr. Newberry) is responsible for other option grants.
The members of these Committees are not eligible to participate in the
portion of the Plan that they administer, except pursuant to the formula
option grant program for non-employee directors under the 2001 Option Plan.
Under the Plans, the functions of these Committees are to grant options and
establish the terms of those options, as well as to construe and interpret the
respective Plans and adopt rules in connection therewith.
9
Stock Option Grants
The following table sets forth information with respect to options granted
during fiscal 2001 to each of the named executive officers.
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
---------------------------- Potential
Realized Value at
Percent of Assumed Annual
Total Options Rates of Stock
Granted to Price
Number of Employees and Exercise Appreciation for
Options Directors in Price Expiration Option Term(2)
Name Granted(1) Fiscal 2001 (Per Share)($) Date 5% 10%($)
------------------------ --------- ------------- -------------- ---------- -----------------
James C. Edenfield...... 85,640 4.68% 3.938 06/22/10 212,095 / 537,490
34,360 1.88% 4.3318 06/22/05 23,853 / 69,077
J. Michael Edenfield.... 130,000 7.11% 3.938 06/22/10 321,956 / 815,901
Thomas L. Newberry...... 3,000 0.16% 3.25 10/31/10 6,132 / 15,539
3,000 0.16% 2.50 01/31/11 4,717 / 11,953
3,000 0.16% 1.47 04/30/11 2,773 / 7,028
Thomas R. Williams...... 3,000 0.16% 3.25 10/31/10 6,132 / 15,539
3,000 0.16% 2.50 01/31/11 4,717 / 11,953
3,000 0.16% 1.47 04/30/11 2,773 / 7,028
David H. Gambrell....... 3,000 0.16% 3.25 10/31/10 6,132 / 15,539
3,000 0.16% 2.50 01/31/11 4,717 / 11,953
3,000 0.16% 1.47 04/30/11 2,773 / 7,028
Paul DiBono, Jr......... 30,000 1.64% 3.938 10/31/01(3) 5,907 / 11,814
Jeffrey W. Coombs....... 50,000 2.73% 4.50 05/19/10 56,601 / 143,437
20,000 1.09% 1.906 11/22/10 59,934 / 151,884
Vincent C. Klinges...... 65,000 3.56% 3.938 06/22/10 160,978 / 407,950
--------
(1) Such options may not be exercised earlier than one year after the date of
grant. Options vest ratably over a period of four years, except for
options granted to Messrs. Newberry, Gambrell and Williams as nonemployee
directors, which become fully exercisable after one year.
(2) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises are dependent on the future
performance of the Company's Class A shares and overall market conditions.
The amounts reflected in this table may not necessarily be achieved.
(3) Mr. DiBono retired from the Company effective October 31, 2000. His stock
options expire one year after his retirement date.
10
Stock Option Exercises and Outstanding Options
The following table contains information, with respect to (i) the number of
stock options exercised during the last fiscal year, and the values realized
in respect thereof, by the named executive officers, and (ii) the number of
stock options and the value of said stock options held by the named executive
officers as of April 30, 2001.
Number of Value of Unexercised
Shares Unexercised Options In-the-Money Options
Acquired Value at 04/30/01 at 04/30/01
on Realized Exercisable/ Exercisable/
Name Exercise(#) ($) Unexercisable Unexercisable(1)($)
---- ----------- -------- ------------------- --------------------
James C. Edenfield...... -0- 0.00 84,000 / 249,000 -0- / -0-
J. Michael Edenfield.... -0- 0.00 99,250 / 276,750 -0- / -0-
-0- 0.00 46,250 / 68,750(2) -0- / -0-
Paul DiBono, Jr. ....... -0- 0.00 127,500 / -0- -0- / -0-
Vincent C. Klinges...... -0- 0.00 25,000 / 130,000 -0- / -0-
-0- 0.00 1,250 / 3,750(2) -0- / -0-
Jeffrey W. Coombs....... -0- 0.00 24,250 / 118,500 -0- / -0-
--------
(1)The market price of Class A shares on April 30, 2001 was $1.47.
(2) Represents number of unexercised stock options of Logility, Inc. The
market price of Logility's common stock on April 30, 2001 was $2.64.
Employment Agreement and Bonus Policy
From May 1, 1983 through April 30, 1995, the compensation of James C.
Edenfield, President and Chief Executive Officer of the Company, was
determined under an employment contract entered into by him and the Company on
January 17, 1983. This contract provided for an annual base salary of
$434,500, payable monthly, plus expenses and normal employee fringe benefits.
In addition, the contract provided for an annual bonus of 5% of the increase
of each fiscal year's pre-tax earnings over the pre-tax earnings of the
preceding fiscal year. The contract expired at the end of fiscal 1995, and
since that time Mr. Edenfield has continued to be compensated on the same
basis as applied under the contract. The Board of Directors, after consulting
with the Compensation Committee, determined that the same contract terms would
continue through fiscal 2001. Accordingly, during fiscal 2001, Mr. Edenfield's
salary was $434,500. He received no bonus under the bonus formula with respect
to fiscal 2001. See "Report on Executive Compensation" for a detailed
discussion of Mr. Edenfield's compensation in fiscal 2001 and fiscal 2002.
Pursuant to written plans, Jeffrey W. Coombs, Paul DiBono, Jr. and Vincent
C. Klinges had the potential to receive certain cash bonuses, the amounts of
which were determined on the basis of fiscal 2001 performance standards.
Accordingly, Mr. Coombs received a bonus in the amount of $24,875 in fiscal
2001. Neither Mr. DiBono nor Mr. Klinges, however, qualified for a bonus under
performance standards applicable during fiscal 2001. For fiscal 2002, the
bonus plans for Messrs. Coombs and Klinges again will have individualized
incentive goals tied to increases in revenues and/or net income, either
Company-wide or related to specific areas over which they have responsibility,
or both. Mr. DiBono retired from the Company effective October 31, 2000.
Certain Transactions
The Company leases one of its office facilities from a partnership that is
owned entirely by James C. Edenfield and Thomas L. Newberry under a lease that
by its terms expired December 31, 1996. An extension of that lease, on a
month-to-month basis, has been approved by the disinterested members of the
Board of Directors, pending negotiation of a new long-term lease. The Company
incurred expenses of approximately $300,000 in fiscal 2000, and approximately
$300,000 in fiscal 2001 pursuant to this lease. The current rental rate is
$17.00 per square foot. Management believes that the terms of the lease are
fair to the Company.
11
The Company and Logility have previously entered into various agreements
(the "Intercompany Agreements"), including a Services Agreement, a Facilities
Agreement, a Marketing License Agreement and a Tax Sharing Agreement. These
Agreements and the other Intercompany Agreements are further described in the
Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2001,
filed with the Securities and Exchange Commission. In fiscal 2001, Logility
paid the following aggregate amounts to the Company under the terms of the
Intercompany Agreements: Services Agreement--$1,552,000; Facilities
Agreement--$763,000; and Marketing License Agreement--$367,000. Under the Tax
Sharing Agreement, Logility received no allocation of federal, state and local
taxes for fiscal 2001.
As a result of the various transactions between the Company and Logility,
amounts payable to and receivable from Logility arise from time to time. At
April 30, 2001, there was a payable from the Company to Logility in the amount
of $2,916,000.
Director Compensation
During fiscal 2001, the Company compensated Dr. Newberry, the Chairman of
the Board, at the rate of $18,000 per annum, and other Directors who are not
employed by the Company at the rate of $12,000 per annum, plus $600 for each
half-day or $1,200 for each full day meeting of the Board of Directors or any
committee of the Board that they attended.
Directors are eligible to receive stock option grants under the Company's
2001 Option Plan, which became effective September 1, 2000. Under the terms of
that Plan, newly-elected Directors who are not employed by the Company
automatically receive stock option grants of 5,000 shares each upon their
initial election and 3,000 shares each as of the end of each fiscal quarter,
with exercise prices equal to the market price on the dates of such grants.
These options become exercisable one year after the date of grant and expire
ten years after the date of grant. They do not terminate if the Director
ceases to serve on the Board of the Company after the options become
exercisable. Under this program, Messrs. Gambrell, Newberry and Williams each
received options to purchase an aggregate of 9,000 shares in fiscal 2001.
Compensation Committee Interlocks and Insider Participation
Messrs. Gambrell and Williams have been selected by the Board of Directors
to serve on the Compensation Committee. Mr. Gambrell is a partner in the law
firm of Gambrell & Stolz, L.L.P., which performs legal services for the
Company, Logility and AmQUEST, Inc., a wholly-owned subsidiary of the Company.
Legal fees in the amount of $746,290 were paid by the Company (including fees
paid by Logility and AmQUEST) to that firm during fiscal year 2001 for legal
services rendered, in addition to $16,800 in Director fees paid during that
year for Mr. Gambrell's service as a Director of the Company and as a member
of Board Committees.
Report on Executive Compensation
The following is the report of the Compensation Committee of the Board of
Directors of American Software, Inc. for the fiscal year ended April 30, 2001.
Meetings. The Compensation Committee met two times formally and conferred
informally a number of times during fiscal year 2001. Informal conferences
have been held among the members of the Committee, as well as with the Chief
Executive Officer, concerning the authority and responsibilities of the
Committee.
Executive Compensation Philosophy. The Committee believes that a
compensation program that enables the Company to attract, retain and motivate
outstanding executives will assist the Company in meeting its long-range
objectives, thereby serving the interests of the Company's shareholders. The
compensation program of the Company is designed to achieve the following
objectives:
. Provide compensation opportunities that are competitive with those of
companies of a similar size.
12
. Create a strong link between the executive's compensation and the
Company's annual and long-term financial performance.
. Include above-average elements of financial risk through performance-
based incentive compensation that offers an opportunity for above-
average financial reward to the executives.
Fiscal Year 2002 Compensation of Chief Executive Officer. The Compensation
Committee has the responsibility and authority to review and establish
compensation for the Chief Executive Officer of the Company, including his
participation in stock option plans and the re-evaluation and negotiation of
his employment contract. In the previous three fiscal years, the Compensation
Committee and the Chief Executive Officer, James C. Edenfield, agreed to
extend his existing compensation arrangement on a year-to-year basis. For the
fiscal year 2002, the Committee has again decided to continue the Chief
Executive Officer's current level of compensation, so that Mr. Edenfield will
continue to receive a base salary of $434,500 and a bonus equal to 5% of the
increase in the Company's pre-tax earnings for fiscal 2002 over the pre-tax
earnings for fiscal 2001. The Compensation Committee's decision to continue
this basis for compensation in fiscal 2002 reflects the belief of the
Committee and Mr. Edenfield that the Chief Executive Officer's compensation
should continue to be tied substantially to growth in earnings and that the
existing compensation arrangement meets that objective.
In extending this basis for compensation of the Chief Executive Officer, the
Committee is expressing its view that Mr. Edenfield is paid a reasonable
current salary, and that any potential bonus is based on an important
corporate financial goal, growth in earnings, which aligns his interests with
those of other shareholders. Moreover, Mr. Edenfield is one of the largest
shareholders of the Company, and to the extent his performance as CEO
translates into an increase in the value of the Company's shares, all
shareholders, including Mr. Edenfield, share the benefits.
As described below under "Split-Dollar Insurance Agreement," Mr. Edenfield's
compensation package also includes a split-dollar life insurance policy,
established in fiscal 2000.
Fiscal Year 2001 Compensation of the Chief Executive Officer. The Chief
Executive Officer's cash compensation in fiscal year 2001, both salary and
bonus, was determined under the terms of the compensation arrangement
described above. Accordingly, the Chief Executive Officer did not receive a
bonus with respect to fiscal year 2001 as the Company did not have pre-tax
earnings in fiscal 2001. During fiscal 2001, the Chief Executive Officer was
granted stock options covering 120,000 Class A shares pursuant to the
Directors and Officers Stock Option Plan, which was in effect at that time and
administered by this Committee. A portion of those stock options (32,208
shares) are classified as incentive stock options, the exercise price for
which is $4.33, or 10% above the market price of Class A shares on the date of
grant. The remaining option shares are nonqualified stock options, priced at
$3.9375 per share, which was the market price on the date of grant. The
participation of the Chief Executive Officer and other executive officers of
the Company in the 2001 Option Plan is determined by the Compensation
Committee, as members of the Special Stock Option Committee, based upon its
authority to grant options under that Plan. The Committee did not grant stock
options to the current executive officers during fiscal 2001 under this Plan.
Split-Dollar Insurance Agreement. During the early part of fiscal year 2000,
the Committee completed its study of the long-range compensation plan for the
Chief Executive Officer of the Company and proposed that the Company provide
additional life insurance for the Chief Executive Officer, comparable to
coverage provided by other companies to their chief executives. Pursuant to
this plan, the Company purchased life insurance policies on the life of Mr.
Edenfield having a total face amount of $3,158,833, of which the Company is
the owner and co-beneficiary and Mr. Edenfield's designee is co-beneficiary.
This "Split Dollar" plan provides obligations and benefits under which the
employer and employee divide not only the costs of the policies, but the
benefits thereunder, similar to such arrangements made between other like
companies and their chief executive officers. The policies are assets of the
Company, against which death benefits accrue to Mr. Edenfield.
Other Executive Officers. The Compensation Committee has responsibility for
the review of compensation of other executive officers of the Company,
including certain executive officers of operating subsidiaries. (The
13
American Software Compensation Committee does not have oversight over the
compensation of J. Michael Edenfield or any other Logility officers by
Logility, Inc., as their Logility compensation is established or reviewed by
the compensation committee of Logility's Board of Directors. The American
Software Compensation Committee, however, does retain the authority to grant
stock options to these officers under the Company's 2001 Stock Option Plan.)
To assist in this process, the Committee has reviewed compensation of officers
having similar responsibilities with peer group companies, based upon publicly
available information. In this regard, the Compensation Committee also
consults with the Chief Executive Officer. Through its oversight and control
of the 2001 Option Plan, the Compensation Committee has direct authority over
the granting of stock options to executive officers. In addition, the
Compensation Committee assists the Chief Executive Officer in evaluating and
establishing executive bonus plans, which are customized for each executive
officer.
It has been the policy of the Company in consultation with the Compensation
Committee to base a substantial portion of executive officer compensation upon
the achievement of Company-wide and divisional goals, relating in some cases
to growth in revenues, in some cases to growth in net income and in some cases
to both of these factors, as well as other factors. Currently, these other
factors include the effectiveness of the executive officers in executing the
Company's plans for cutbacks and efficiencies in operations. The bonus plans
for each of the most highly compensated executive officers reflect this
approach.
Stock option grants are utilized as both a motivating and a compensating
factor. Because the performance of executive officers can substantially
influence performance of the entire enterprise, grants of stock options have
been utilized to create greater incentives for improving Company performance,
which the Compensation Committee believes may positively influence the market
price for Company stock.
On June 22, 2000, the Compensation Committee exercised its authority under
the Directors and Officers Stock Option Plan, which was in effect at that
time, to grant new stock options to various executive officers of the Company,
including the Chief Executive Officer, as discussed above. In each instance,
the term and size of the options were intended and calculated by the
Compensation Committee to reward these officers for their prior performance,
to serve as incentive for promotion of Company profitability and other long-
term objectives and to maintain their overall compensation at competitive
levels.
During fiscal 2002, as required by its Charter, the Compensation Committee
will continue to consult with the Chief Executive Officer with respect to
executive officer compensation packages, including salary, bonus, stock
options and fringe benefits, to ensure that compensation is appropriately
related to individual and Company performance, as well as to competitive
compensation standards and other relevant criteria.
Limitations on Deductibility of Executive Compensation. Since 1994, the
Omnibus Budget Reconciliation Act of 1993 has limited the deductibility of
executive compensation paid by publicly held corporations to $1 million per
employee, subject to various exceptions, including compensation based on
performance goals.
The Company has not adopted a policy with respect to deductibility of
compensation since no executive officer currently receives, or has previously
received, taxable income in excess of $1 million per year from the Company.
The Compensation Committee will continue to monitor compensation levels
closely, particularly in areas of incentive compensation. If the Company's
performance improves substantially, incentive compensation also can be
expected to increase and it may become necessary to adopt a long-term
incentive compensation plan structured to take advantage of the tax
deductibility provided for plans qualifying under the Act of 1993.
BY THE COMPENSATION COMMITTEE:
Thomas R. Williams, Chairman
David H. Gambrell
14
AUDIT COMMITTEE REPORT
The Board of Directors has adopted a written audit committee charter, a copy
of which is attached as Exhibit "A" hereto. Under the current charter, the
primary responsibility of the Audit Committee is to oversee the Company's
financial reporting process on behalf of the Board and report the results of
the Committee's activities to the Board. In fulfilling its responsibilities
with respect to the fiscal year 2001 audit, the Audit Committee:
. Reviewed and discussed the audited financial statements for the fiscal
year ended April 30, 2001 with Company management and KPMG LLP ("KPMG"),
the Company's independent auditors;
. Discussed with KPMG the matters required to be discussed by Statement on
Auditing Standards No. 61 relating to the conduct of the audit; and
. Received written disclosures and the letter from KPMG regarding its
independence as required by Independence Standards Board No. 1. The Audit
Committee discussed with KPMG their independence from the Company.
Based on the Audit Committee's review of the audited financial statements
and discussions with management and KPMG, the Audit Committee recommended to
the Board that the audited financial statements be included in the
Corporation's Annual Report on Form 10-K for the fiscal year ended April 30,
2001 for filing with the Securities and Exchange Commission.
The Securities and Exchange Commission and National Association of
Securities Dealers have promulgated rules that require audit committees to be
composed of not less than three members who are "independent," as that term is
defined in the rules. Three of the four Audit Committee members--Messrs.
Hogue, Jarvis and Williams--meet the definition of "independent" set forth in
the new rules.
Mr. Gambrell is a partner in the law firm of Gambrell & Stolz, L.L.P., which
provides legal services to the Company and has received from the Company
compensation for legal services in excess of the threshold amount set forth in
the NASD's definition of "independent." Accordingly, Mr. Gambrell ordinarily
would not be considered as an "independent" director for this purpose.
However, an exception to the independence requirement allows one director,
who is not "independent" and is not a current employee or an immediate family
member of a current employee, to serve on the Audit Committee if the Board,
under exceptional and limited circumstances, determines that membership on the
Committee by the individual is required in the best interest of the Company
and its shareholders and the Board discloses in the next annual proxy
statement the nature of the relationship and the reasons for that
determination. The Board has determined that Mr. Gambrell's membership on the
Committee is required in the best interest of the Company and its shareholders
because his significant past experience serving on this Committee and acting
as its Chairman will be beneficial to the Committee. Therefore, the Board
believes that Mr. Gambrell may continue to serve on the Audit Committee
pursuant to this exception and has so advised the NASD.
BY THE AUDIT COMMITTEE:
David H. Gambrell (Chairman)
Dennis Hogue
John J. Jarvis
Thomas R. Williams
15
STOCK PRICE PERFORMANCE GRAPH
The graph below reflects the cumulative stockholder return (assuming the
reinvestment of dividends) on the Company's Class A shares compared to the
return of the Nasdaq Composite Index and a peer group index on a monthly
basis. The graph reflects the investment of $100 on April 30, 1996 in the
Company's Class A shares, the Nasdaq Stock Market--U.S. Companies ("Nasdaq
Composite Index") and in a published industry peer group index. The peer group
is the Robertson Stephens Hi-Tech Index--Software Group, which is an index of
the stock price performance of 67 software companies maintained by Robertson
Stephens & Company, an investment banking firm.
[STOCK PRICE PERFORMANCE GRAPH]
Index 4/30/96 7/31/96 10/31/96 1/31/97 4/30/97
------- -------- -------- -------- -------- --------
American Software
Actual value 5.5000 4.0000 5.5000 6.9375 5.7500
Multipler 18.1818 18.1818 18.1818 18.1818 18.1818
100 base index 100.00 72.73 100.00 126.14 104.55
NASDAQ Composite
Actual value 1,190.52 1,080.59 1,221.51 1,379.85 1,260.76
Multipler 0.0840 0.0840 0.0840 0.0840 0.0840
100 base index 100.00 90.77 102.60 115.90 150.90
Robertson Stephens
Actual value 629.98 518.26 555.32 614.98 533.49
Multiplier 0.1587 0.1587 0.1587 0.1587 0.1587
100 base index 100.00 82.27 88.15 97.62 84.86
Index 7/31/97 10/31/97 1/31/98 4/30/98 7/31/98
------- -------- -------- -------- -------- --------
American Software
Actual value 8.5000 11.7500 9.3750 8.1875 5.7500
Multipler 18.1818 18.1818 18.1818 18.1818 18.1818
100 base index 154.55 213.64 170.45 148.86 104.55
NASDAQ Composite
Actual value 1,593.81 1,593.61 1,619.36 1,868.41 1,872.39
Multipler 0.0840 0.0840 0.0840 0.0840 0.0840
100 base index 133.88 133.86 136.02 156.94 157.27
Robertson Stephens
Actual value 717.73 762.76 753.97 960.43 851.94
Multiplier 0.1587 0.1587 0.1587 0.1587 0.1587
100 base index 113.93 121.08 119.68 152.45 135.23
Index 10/31/98 1/31/99 4/30/99 7/31/99 10/31/99
------- -------- -------- -------- -------- --------
American Software
Actual value 2.8125 2.8750 2.7500 3.6250 3.0625
Multipler 18.1818 18.1818 18.1818 18.1818 18.1818
100 base index 51.14 52.27 50.00 65.91 55.68
NASDAQ Composite
Actual value 1,771.39 2,505.89 2,542.86 2,638.49 2,966.43
Multipler 0.0840 0.0840 0.0840 0.0840 0.0840
100 base index 148.79 210.49 213.59 221.63 249.17
Robertson Stephens
Actual value 845.88 1,143.64 1,109.17 1,178.87 1,421.55
Multiplier 0.1587 0.1587 0.1587 0.1587 0.1587
100 base index 134.27 181.54 176.06 187.13 225.65
Index 1/31/00 4/30/00 7/31/00 10/31/00 1/31/01 4/30/01
------- -------- -------- -------- -------- -------- --------
American Software
Actual value 11.9375 7.5000 6.0000 3.2500 2.5000 1.4700
Multipler 18.1818 18.1818 18.1818 18.1818 18.1818 18.1818
100 base index 217.05 136.36 109.09 59.09 45.45 26.73
NASDAQ Composite
Actual value 3,940.35 3,860.66 3,766.99 3,369.63 2,772.73 2,116.24
Multipler 0.0840 0.0840 0.0840 0.0840 0.0840 0.0840
100 base index 330.98 324.28 316.42 283.04 232.90 177.76
Robertson Stephens
Actual value 2,220.83 2,618.15 999.27 1,054.44 1,222.39 1,038.02
Multiplier 0.1587 0.1587 0.1587 0.1587 0.1587 0.1587
100 base index 352.52 415.59 158.62 167.38 194.04 164.77
INDEPENDENT AUDITORS
General
During the fiscal year ended April 30, 2001, the Company engaged KPMG LLP
("KPMG") to provide certain audit services, including the audit of the annual
financial statements, a review of the quarterly financial data furnished by
the Company to the SEC for the quarters ended July 31, 2000, October 31, 2000
and January 31, 2001, services performed in connection with filing this Proxy
Statement and the Annual Report on Form 10-K by the Company with the SEC,
attendance at meetings with the Audit Committee and consultation on matters
relating to accounting, tax and financial reporting. KPMG has acted as
independent certified public accountants for the Company since 1983. Neither
KPMG nor any of its associates has any relationship to the Company or any of
its subsidiaries except in its capacity as independent certified public
accountants.
The Company expects that representatives of KPMG will attend the Annual
Meeting of Shareholders. These representatives will be available to respond to
appropriate questions raised orally and will be given the opportunity to make
a statement if they so desire. The Board of Directors has appointed KPMG to
act as the Company's independent auditors for the fiscal year ending April 30,
2002.
16
Principal Accounting Firm Fees
The aggregate fees billed to the Company for the fiscal year ended April 30,
2001 for services rendered are as follows:
Type of Services Amount of Fee
---------------- -------------
Audit Fees.............. $159,000
Financial Information
Systems Design and
Implementation Fees.... -0-
All Other Fees.......... $363,562
The Audit Committee has considered the compatibility of the non-audit
services performed by and fees paid to KPMG in fiscal 2001 and the proposed
non-audit services and proposed fees for fiscal 2002 and determined that such
services and fees were compatible with the independence of the auditors.
During fiscal 2001, KPMG did not utilize any leased personnel in connection
with the audit.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the 2002 Annual
Meeting of Shareholders must be forwarded in writing and received at the
principal executive offices of the Company no later than April 4, 2002,
directed to the attention of the Secretary, for consideration for inclusion in
the Company's proxy statement for the 2002 Annual Meeting of Shareholders. Any
such proposals must comply in all respects with the rules and regulations of
the Securities and Exchange Commission.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not
intend to present, and has not been informed that any other person intends to
present, any matter for action at the Annual Meeting other than those
specifically referred to in this Proxy Statement. If other matters properly
come before the meeting, it is intended that the holders of the proxies will
act in respect thereto in accordance with their best judgment.
The cost of this solicitation of proxies will be borne by the Company. In
addition to solicitation by mail, employees of the Company may solicit proxies
by telephone, in writing or in person. The Company may request brokerage
houses, nominees, custodians and fiduciaries to forward soliciting material to
the beneficial owners of stock held of record and will reimburse such persons
for any reasonable expense in forwarding the material.
Copies of the 2001 Annual Report of the Company are being mailed to
shareholders together with this Proxy Statement, proxy card and Notice of
Annual Meeting of Shareholders. Additional copies may be obtained from Pat
McManus, Investor Relations, 470 East Paces Ferry Road, Atlanta, Georgia
30305.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED APRIL 30, 2001, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, WILL BE FURNISHED WITHOUT CHARGE TO SHAREHOLDERS
BENEFICIALLY OR OF RECORD AT THE CLOSE OF BUSINESS ON JULY 12, 2001, ON
REQUEST TO PAT McMANUS, INVESTOR RELATIONS, 470 EAST PACES FERRY ROAD,
ATLANTA, GEORGIA 30305.
By Order of the Board of Directors,
James R. McGuone, Secretary
Atlanta, Georgia
August 2, 2001
17
EXHIBIT "A"
AMERICAN SOFTWARE, INC.
AUDIT COMMITTEE CHARTER
I. Organization.
There shall be an Audit Committee (the "Committee") selected by the Board of
Directors (the "Board") as soon as practicable, which shall be composed of not
less than three members of the Board, each of whom is independent of Company
management. Committee members shall be considered independent if they have no
relationship that may interfere with the exercise of their independence from
management and the Company. All Committee members, either at the time of their
appointment to the Committee or within a reasonable time thereafter, must be
able to read and understand fundamental financial statements, including the
Company's balance sheet, income statement, and cash flow statement. At least
one Committee member must have past employment experience in finance or
accounting, requisite professional certification in accounting or any other
comparable experience or background.
II. Statement of Policy.
The Audit Committee shall provide assistance to the Board of Directors in
fulfilling its oversight responsibility to the shareholders, potential
shareholders, the investment community and others relating to the Company's
financial statements and the financial reporting process, the systems of
internal accounting and financial controls, the internal audit function, the
annual independent audit of the Company's financial statements, and the legal
compliance and ethics programs as established by management and the Board. In
so doing, it is the responsibility of the Committee to maintain free and open
communication between the Committee, independent auditors, the internal
accountants and management of the Company. In discharging its oversight role,
the Committee is empowered to investigate any matter brought to its attention,
with full access to all books, records, facilities, and personnel of the
Company and the power to retain outside counsel or other experts for this
purpose.
III. Responsibilities and Processes.
The primary responsibility of the Audit Committee is to oversee the
Company's financial reporting process on behalf of the Board and report the
results of the Committee's activities to the Board. Management is responsible
for preparing the Company's financial statements and the independent auditors
are responsible for auditing those financial statements. In carrying out its
responsibilities, the Committee believes its policies and procedures should
remain flexible in order to best react to changing conditions and
circumstances. The Committee should take the appropriate actions to set the
overall corporate "tone" for quality financial reporting, sound business risk
practices and ethical behavior.
The following are the principal recurring processes of the Audit Committee
in carrying out its oversight responsibilities. These processes are a guide
and may be supplemented by the Committee or the Board as it deems appropriate.
(1) The Audit Committee shall recommend annually to the Board of Directors
the accounting firm to be selected by the Board to act as independent
auditors of the Company, who shall be accountable to the Board and the
Committee as representatives of the Company's shareholders. The
Committee shall have authority to evaluate and replace the independent
auditors if appropriate. The Committee shall discuss with the auditors
their independence from management and the Company and the matters
included in the written disclosures required by the Independence
Standard Board.
(2) The Committee shall discuss with both the Company's internal
accountants and the independent auditors the overall scope and plans
for all audits, including the adequacy of staffing and compensation.
Also, the Committee shall discuss with management, the internal
accountants, and the independent
A-1
auditors the adequacy and effectiveness of the accounting and financial
controls, including the Company's system to monitor and manage business
risk, and legal and ethical compliance programs. Further, the Committee
shall meet separately with the internal accountants and the independent
auditors, with and without management present, to discuss the results of
their examinations.
(3) The Committee shall from time to time review the periodic financial
statements and other financial reports of the Company with management,
and with the independent auditors. The Chair of the Committee may
represent the entire Committee for the purposes of any such review. The
Committee shall also discuss matters required to be communicated to the
Company by the independent auditors under generally accepted auditing
standards.
(4) The Committee shall review with management and the independent auditors
the financial statements to be included in the Company's Annual Report
on Form 10-K (or the annual report to shareholders if distributed prior
to the filing of Form 10-K), including their judgment about the
quality, not just acceptability, of accounting principles, the
reasonableness of significant judgments, and the clarity of the
disclosures in the financial statements. Also, the Committee shall
discuss the results of the annual audit and any other matters required
to be communicated to the Committee by the independent auditors under
generally accepted auditing standards.
A-2
FOLD AND DETACH HERE
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AMERICAN SOFTWARE, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
AUGUST 22, 2001 AT 3:30 P.M.
AT THE OFFICES OF THE COMPANY
470 EAST PACES FERRY ROAD, N.E.
ATLANTA, GEORGIA
FOR HOLDERS OF CLASS A COMMON SHARES
The undersigned hereby appoints James C. Edenfield and Thomas L. Newberry, or
either of them, attorneys and proxies, each with full power of substitution to
vote, in the absence of the other, all Class A Common Shares of AMERICAN
SOFTWARE, INC. held by the undersigned and entitled to vote at the Annual
Meeting of Shareholders to be held on August 22, 2001 and at any adjournment
or adjournments thereof, in the transaction of such business as may properly
come before the meeting, and particularly the proposals stated below, all in
accordance with and as more fully described in the accompanying Proxy
Statement.
It is understood that this proxy may be revoked at any time insofar as it has
not been exercised and that the shares may be voted in person if the
undersigned attends the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSAL:
Election of Class A Directors. Three Class A Directors to be elected.
Nominees: Dennis Hogue [_] FOR [_] WITHHOLD AUTHORITY
John J. Jarvis [_] FOR [_] WITHHOLD AUTHORITY
Thomas R. Williams [_] FOR [_] WITHHOLD AUTHORITY
FOLD AND DETACH HERE
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THE CLASS A SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED SHAREHOLDER ON THE REVERSE OF THIS PROXY CARD, OR IF NO DIRECTION
IS GIVEN, THEY WILL BE VOTED FOR THE ABOVE PROPOSAL. IN THEIR DISCRETION, THE
PROXYHOLDERS ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING.
---------------------------------
Signature
---------------------------------
Signature if held jointly
Please vote, sign, date and
return this proxy card promptly,
using the enclosed envelope.
Dated: ____________________, 2001
IMPORTANT:
Please sign this Proxy
exactly as your name or
names appear hereon. If
shares are held
jointly, signatures
should include both
names. Executors,
administrators,
trustees, guardians and
others signing in a
representative capacity
should please give
their full titles.