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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
INFORMATION MANAGEMENT RESOURCES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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INFORMATION MANAGEMENT RESOURCES, INC.
26750 U.S. Highway 19 North
Suite 500
Clearwater, Florida 33761
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May 29, 1998
----------------
TO THE SHAREHOLDERS OF INFORMATION MANAGEMENT RESOURCES, INC.:
Notice is hereby given that the Annual Meeting of Shareholders of
Information Management Resources, Inc. (the "Company") will be held on Friday,
May 29, 1998 at 10:00 a.m. local time, at the Double Tree Guest Suites, 3050 N.
Rocky Point Drive West, Tampa, Florida 33607, to consider and act upon the
following matters:
1. To elect two directors to hold office until the 2001 Annual Meeting of
Shareholders;
2. To approve an amendment to paragraph 4.1 of the Company's Amended and
Restated Articles of Incorporation to increase the number of shares of
the Company's Common Stock authorized for issuance from 40,000,000
shares to 100,000,000 shares;
3. To ratify and approve an increase in the number of shares of Common
Stock available for grant under the Company's Stock Incentive Plan from
12,225,455 shares to 16,003,455 shares;
4. To approve the Company's Amended and Restated Stock Incentive Plan;
5. To ratify and approve the selection by the Board of Directors for the
year ending December 31, 1998 of Coopers & Lybrand L.L.P. as independent
auditors for the Company; and
6. To transact such other business as may properly come before the meeting
or any adjournment of the meeting.
Shareholders of record at the close of business on April 1, 1998 will be
entitled to notice of and to vote at the meeting or any adjournment thereof.
All shareholders are cordially invited to attend the meeting.
By Order of the Board of Directors,
/s/ Dilip Patel
-----------------------------------
Dilip Patel,
Vice President General Counsel and Secretary
May 4, 1998
Clearwater, Florida
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO ASSURE YOUR REPRESENTATION AT THE MEETING. NO POSTAGE NEED BE AFFIXED IF
MAILED IN THE UNITED STATES. IN THE EVENT YOU ARE ABLE TO ATTEND THE MEETING,
YOU MAY REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON. PLEASE NOTE, HOWEVER,
THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER NOMINEE AND
YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD OWNER A PROXY
IN YOUR NAME.
<PAGE>
INFORMATION MANAGEMENT RESOURCES, INC.
26750 U.S. Highway 19 North
Suite 500
Clearwater, Florida 33761
--------------
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May 29, 1998
--------------
General
This Proxy Statement and the enclosed Proxy are furnished on behalf of the
Board of Directors of Information Management Resources, Inc., a Florida
corporation (the "Company") for use at the Annual Meeting of Shareholders to be
held on May 29, 1998 at 10:00 a.m. local time (the "Annual Meeting") or at any
adjournment or postponement of that meeting, for the purposes set forth herein
and in the accompanying Notice of Annual Meeting. The Annual Meeting will be
held at the Double Tree Guest Suites, 3050 N. Rocky Point Drive West, Tampa,
Florida 33607. The Company intends to mail this Proxy Statement and the
accompanying Proxy card on or about April 27, 1998, to all shareholders entitled
to vote at the Annual Meeting. All proxies will be voted in accordance with the
instructions contained therein, and if no choice is specified, the proxies will
be voted in favor of the proposals set forth in the accompanying Notice of
Meeting. Any proxy may be revoked by a shareholder at any time before it is
exercised by giving written notice to that effect to the Secretary of the
Company.
As used in this Proxy Statement, the terms "IMR" and the "Company" refer to
Information Management Resources, Inc. and its subsidiaries, unless the context
otherwise requires. Except as indicated to the contrary, all information in
this Proxy Statement has been restated to reflect a three-for-two stock split in
the form of a stock dividend paid on July 10, 1997 and a subsequent three-for-
two stock split in the form of a stock dividend paid on April 3, 1998.
Shareholders Entitled to Vote
The Board of Directors has fixed April 1, 1998 as the record date for
determining shareholders who are entitled to vote at the meeting. At the close
of business on April 1, 1998, there were outstanding and entitled to vote
25,792,025 shares of Common Stock of the Company, $0.10 par value per share
("Common Stock"). Each holder of record of Common Stock on such date will be
entitled to one vote for each share held on all matters to be voted upon at the
Annual Meeting.
The holders of at least one-third of the total shares of Common Stock
outstanding on the record date, whether present at the Annual Meeting or in
person, or represented by Proxy, will constitute a quorum for the transaction of
business at the Annual Meeting. The shares held by each shareholder who signs
and returns the enclosed form of Proxy will be counted for the purposes of
determining the presence of a quorum at the Annual Meeting, whether or not the
shareholder abstains on all or any matter to be acted on at the Annual Meeting.
Abstentions and broker non-votes will be counted toward fulfillment of quorum
requirements. A broker non-vote occurs when a nominee holding shares for a
beneficial owner does not vote on a particular proposal because the nominee does
not have discretionary voting power with respect to that proposal and has not
received instructions from the beneficial owner.
1
<PAGE>
Solicitation
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this Proxy Statement and the
accompanying Proxy card. Copies of solicitation materials will be furnished to
banks, brokerage houses, fiduciaries and custodians holding in their names
shares of Common Stock beneficially owned by others for forwarding to such
beneficial owners. The Company may reimburse persons representing beneficial
owners of Common Stock for their costs of forwarding solicitation materials to
such beneficial owners.
The Company will, upon written request of any shareholder, furnish without
charge a copy of its Annual Report on Form 10-K for the year ended December 31,
1997, as filed with the Securities and Exchange Commission, without exhibits.
Please address all such requests to the Company, Attention of Robert M.
Molsick, Chief Financial Officer, 26750 U.S. Highway 19 North, Suite 500,
Clearwater, Florida 33761. Exhibits will be provided upon written request and
payment of an appropriate processing fee.
Revocability of Proxies
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted by giving written notice of revocation
or a duly executed proxy bearing a later date to the Secretary of the Company,
or by attending the meeting and voting in person. Attendance at the meeting will
not, by itself, revoke a proxy.
Shareholder Proposals
Proposals of shareholders that are intended to be presented at the
Company's 1999 Annual Meeting of Shareholders must be received by the Company no
later than December 30, 1998 in order to be included in the proxy statement and
proxy relating to that Annual Meeting. Shareholders are also advised to review
the Company's Bylaws, which contain additional requirements with respect to
advance notice of shareholder proposals and director nominations.
2
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STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 1, 1998, the beneficial
ownership of the Company's outstanding Common Stock of (i) each person known by
the Company to own beneficially more than 5% of the Company's outstanding Common
Stock, (ii) each executive officer of the Company since January 1, 1997, (iii)
each director of the Company since January 1, 1997, and (iv) all executive
officers and directors as a group:
<TABLE>
<CAPTION>
COMMON STOCK BENEFICIALLY OWNED(1)
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NUMBER OF SHARES PERCENTAGE OF
Name and Address of Beneficial Owners OF COMMON STOCK CLASS
- ------------------------------------- ---------------- -------------
<S> <C> <C>
Essex Investment Management Company(2)............................... 2,416,280 9.4
%
125 High Street,
Boston, MA 02110
Pilgrim Baxter & Associates, Ltd.(2)................................. 2,032,050 7.9
825 Duportail Road
Wayne, PA 19087
Satish K. Sanan(3)................................................... 17,536,319 49.9
Jeffery S. Slowgrove(4).............................................. 1,226,482 4.8
Charles C. Luthin(5)................................................. 11,475 *
Philip Shipperlee(6)................................................. 94,621 *
Vincent Addonisio(7)................................................. 18,000 *
Michael J. Dean(8)................................................... 28,500 *
Dilip Patel(9)....................................................... 22,500 *
Kasi V. Sridharan(10)................................................ 15,000 *
John R. Hindman(11).................................................. 33,750 *
Robert M. Molsick.................................................... - -
All executive officers and directors as a group (10 persons)......... 18,986,647 53.8%
</TABLE>
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* Less than 1% of the outstanding Common Stock
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. For purposes of calculating
the percentage beneficially owned, the number of shares deemed outstanding
includes (i) 25,792,025 shares outstanding as of April 1, 1998 and (ii)
shares issuable by the Company pursuant to options held by the respective
person or group which may be exercised within 60 days following the date of
this Proxy Statement ("Presently Exercisable Options"). Presently
Exercisable Options are deemed to be outstanding and to be beneficially
owned by the person or group holding such options for the purpose of
computing the percentage ownership of such person or group but are not
treated as outstanding for the purpose of computing the percentage
ownership of any other person or group. Unless otherwise provided, the
street address of each beneficial owner is c/o Information Management
Resources, Inc., Suite 500, 26750 U.S. Highway 19 North, Clearwater,
Florida 33761.
(2) For purposes of this proxy statement, the Company has relied upon
information reported by the respective shareholder to the Securities and
Exchange Commission pursuant to Section 13(d) or 13(g) of the Securities
Exchange Act in February 1998.
(3) Includes 9,370,238 shares issuable upon the exercise of Presently
Exercisable Options. Also includes: (i) 8,001,828 shares held in the A&S
Family Limited Partnership, the sole general partner of which is a
corporation controlled by Mr. Sanan; and (ii) 164,253 shares held by a
charitable foundation with respect to which Mr. Sanan disclaims beneficial
ownership.
(4) Includes 8,032 shares issuable upon the exercise of Presently Exercisable
Options.
(5) Includes 11,250 shares issuable upon the exercise of Presently Exercisable
Options.
(6) Includes 11,250 shares issuable upon the exercise of Presently Exercisable
Options.
(7) Includes 11,250 shares issuable upon the exercise of Presently Exercisable
Options.
(8) Includes 28,500 shares issuable upon the exercise of Presently Exercisable
Options.
(9) Includes 22,500 shares issuable upon the exercise of Presently Exercisable
Options.
(10) Includes 15,000 shares issuable upon the exercise of Presently Exercisable
Options.
(11) Includes 33,750 shares issuable upon the exercise of Presently Exercisable
Options.
3
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Counting of Votes
The affirmative vote of the holders of a plurality of the votes cast at the
Annual Meeting is required for the election of directors and for the approval of
each of the other matters which are to be submitted to the shareholders at the
Annual Meeting. ("Plurality" means that more votes must be cast in favor of the
matter than those cast against it). Accordingly, the withholding of authority by
a shareholder (including broker non-votes) will not be counted in computing a
plurality and thus will have no effect on the vote. Shares of Common Stock
represented by executed proxies received by the Company will be counted for
purposes of establishing a quorum at the meeting, regardless of how or whether
such shares are voted on any specific proposal. Each Proxy will be voted in
accordance with the shareholder's directions. When the enclosed Proxy is
properly signed and returned, the shares which it represents will be voted at
the Annual Meeting in accordance with the instructions noted thereon. In the
absence of such instructions, the shares represented by a signed Proxy will be
voted in favor of the nominees for election to the Board of Directors, and in
favor of the approval of the remaining proposals. All votes will be tabulated by
the inspector of election appointed for the meeting, who will separately
tabulate affirmative and negative votes, abstentions and broker non-votes.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors consists of five directors. The Board of Directors
is divided into three classes, each of whose members will serve for a staggered
three-year term. The Board is comprised of two Class I directors (Messrs. Sanan
and Addonisio), two Class II directors (Messrs. Shipperlee and Luthin) and one
Class III director (Mr. Slowgrove). In accordance with Section 6.1 of the
Company's First Amended and Restated Articles of Incorporation, at each annual
meeting of shareholders a class of directors will be elected for a three-year
term to succeed the directors of the same class whose terms are then expiring.
The terms of the initial Class II directors and Class III directors and the re-
elected Class I directors will expire upon the election and qualification of
successor directors at the Annual Meeting of Shareholders held in 1998, 1999 and
2000, respectively. There are no family relationships between any of the
directors or executive officers of the Company.
There are two directors in the class whose term of office expires in 1998.
Each of the nominees for election to this class is currently a director of the
Company. If elected at the Annual Meeting, each of the nominees would serve
until the Annual Meeting held in 2001 and until his successor is duly elected
and qualified, or until such director's earlier death, resignation or removal.
Shares represented by executed proxies will be voted, if authority to do so
is not withheld, for the election of the two nominees named below. In the event
that either nominee should be unavailable for election as a result of an
unexpected occurrence, such shares will be voted for the election of such
substitute nominee as the Board of Directors may select. Each person nominated
for election has agreed to serve if elected, and management has no reason to
believe that either nominee will be unable to serve.
The Board of Directors recommends a vote FOR each named nominee.
4
<PAGE>
Nominees to Serve Until the 2001 Annual Meeting (Class II)
Philip Shipperlee
Mr. Shipperlee, age 51, has served as a Director of the Company since
August 1996 and has served as the Managing Director of Information Management
Resources, plc. ("IMR-U.K.") since January 1997. Prior to such time, Mr.
Shipperlee served as the Managing Director of Link Group Holdings, Ltd. ("Link")
from June 1980 until the Company's acquisition of Link in January 1997. Mr.
Shipperlee served as Managing Director of Information Management Resources
(U.K.) Ltd. from 1994 until January 1997 when operations were merged with Link.
Charles C. Luthin
Mr. Luthin, age 55, has been a Director of the Company since August 1995.
From October 1994 until July 1995, he served as Vice President-Finance of the
Company. Since 1995, Mr. Luthin has served as Vice President-Finance for Eckerd
Family Youth Alternatives, Inc., a not-for-profit entity located in Clearwater,
Florida. From 1993 until 1994, Mr. Luthin served as President of Dow Sherwood
Corporation, a corporation that owns and operates restaurants. From 1989 until
1993, Mr. Luthin served as Vice President-Finance and Chief Financial Officer of
Trans-marine Management Company, providing financial management and analysis for
business interests of George M. Steinbrenner. From 1980 until 1989, Mr. Luthin
served in various capacities for Walt Disney World Company, most recently as
Vice President, Finance and Planning-Parks, where he was responsible for
financial analysis and long-term planning for that company's theme park
operations.
Directors Continuing in Office Until the 1999 Annual Meeting (Class III)
Jeffery S. Slowgrove
Mr. Slowgrove, age 40, co-founded the Company in 1988 with Mr. Sanan and
has served as Treasurer and a Director of the Company since its inception. Mr.
Slowgrove also has served as a Director of Information Management Resources
(India) Limited ("IMR-India") since 1990.
Directors Continuing in Office Until the 2000 Annual Meeting (Class I)
Satish K. Sanan
Mr. Sanan, age 50, co-founded the Company in 1988 and has served as
President, Chief Executive Officer and a Director of the Company since its
inception. Mr. Sanan also has served as a Director of each of the Company's
subsidiaries since the date the respective subsidiary was formed or acquired by
the Company. Mr. Sanan serves as a director of Padua Stables, Inc. and is a
partner of Padua Stables, L.P. Prior to founding the Company, Mr. Sanan was
employed by SHL Systemhouse Limited from 1980 to 1988 where he was responsible
for planning, directing and controlling the achievement of sales and delivery
objectives.
5
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Vincent Addonisio
Mr. Addonisio, age 43, has been a Director of the Company since August
1996. Mr. Addonisio has served as President of Parker Communications Network,
Inc., a point of sale marketing network company, since January 1997. From July
1993 until November 1996, Mr. Addonisio was employed by ABR Information
Services, Inc., a benefits administration outsourcing company in various
positions that included Director, Executive Vice President, Chief Financial
Officer and Treasurer. Mr. Addonisio served as Chief Financial Officer of AER
Energy Resources, Inc., a battery manufacturing company, from October 1992 until
June 1993. From April 1991 until September 1992, Mr. Addonisio served as Vice
President and Chief Financial Officer of IQ Software, Inc., a software
development company.
Board of Directors Meetings and Committees
During the year ended December 31, 1997, the Board of Directors of the
Company held five meetings. Each of the Directors attended at least 75% of the
aggregate of (i) the total number of meetings of the Board of Directors and (ii)
the total number of meetings held by all committees of the Board on which he
served.
The Company's Board of Directors has established an Executive Committee, a
Compensation Committee and an Audit Committee. The Executive Committee is
comprised of Messrs. Sanan, Luthin and Addonisio. Messrs. Luthin and Addonisio
currently comprise the members of the Compensation Committee and Audit Committee
of the Board of Directors. The Executive Committee is empowered to exercise all
authority of the Board of Directors of the Company, except as limited by the
Florida Business Corporation Act. Under Florida law, an Executive Committee may
not, among other things, recommend to shareholders actions required to be
approved by shareholders, fill vacancies on the Board of Directors, amend the
bylaws or approve the reacquisition or issuance of shares of the Company's
capital stock. The Compensation Committee is responsible for reviewing and
recommending salaries, bonuses and other compensation for the Company's
executive officers. The Compensation Committee also is responsible for
administering the Company's stock option plans and for establishing the terms
and conditions of all stock options granted under these plans. The Audit
Committee is responsible for recommending independent auditors, reviewing with
the independent auditors the scope and results of the audit engagement,
monitoring the Company's financial policies and control procedures, and
reviewing and monitoring the provisions of nonaudit services by the Company's
auditors.
The Company does not have a standing nominating committee.
Directors' Compensation
Compensation of the Company's Directors who are not also employees of the
Company ("Nonemployee Directors") currently consist of an annual Director's fee
of $5,000 plus $1,000 and expenses for each meeting of the Board of Directors
attended and $500 for each committee meeting attended which is held
independently of a board meeting. Each director is entitled to receive
reimbursement of out-of-pocket expenses incurred to attend meetings of the Board
of Directors. Nonemployee Directors also are eligible to receive options under
the Company's 1996 Directors Stock Option Plan (the "Directors Stock Option
Plan"). Directors who are officers or employees of the Company do not receive
any additional compensation for their services as directors.
6
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The terms of the options granted under the Directors Stock Option Plan,
including the exercise price, dates and number of shares subject to the options,
are specified in the Directors Stock Option Plan. The Directors Stock Option
Plan provides for the automatic grant of non-qualified stock options to
Nonemployee Directors. Each Nonemployee Director receives an option to purchase
22,500 shares of Common Stock on the date of, and at the time immediately
following, every other annual meeting of the Company's shareholders (the "Bi-
Annual Grant"). The next Bi-Annual Grant will be made immediately following the
Annual Meeting to be held on May 29, 1998. Each Nonemployee Director who is
first appointed or elected to the Board at any time other than at an Annual
Meeting of the Company's Shareholders at which a Bi-Annual Grant is made, will
be granted an option to purchase a number of shares of Common Stock equal to the
product of (i) 22,500 multiplied by (ii) a fraction, the numerator of which is
the number of days during the period beginning on such date and ending on the
date of the next Bi-Annual Grant, and the denominator of which is 730 (the
"Interim Grant"). On the consummation of the Company's initial public offering
in November 1996, each of Messrs. Addonisio, Luthin and Shipperlee received an
option to purchase 22,500 shares of the Company's common stock (the "Initial
Grant").
Bi-Annual Grants and Interim Grants vest 50% on the date the Nonemployee
Director completes 12 months of continuous service on the Board of Directors,
and 100% on the date the Nonemployee Director completes 24 months of continuous
service on the Board of Directors. The Initial Grant vested 50% on the date of
the annual meeting of the Company's shareholders held on May 30, 1997, and will
vest 100% on the date of the annual meeting of the Company's shareholders to be
held on May 29, 1998. No option is transferable by the Nonemployee Director
other than by will or laws of descent and distribution, or pursuant to a
qualified domestic relations order. The exercise price of all options is equal
to the fair market value of the shares on the date of grant as defined under the
Directors Stock Option Plan, and the term of each option is ten years. The
Directors Stock Option Plan will continue in effect for a period of ten years
unless sooner terminated by the Board of Directors.
Executive Officers
In addition to the individuals who serve on the Company's Board of
Directors who are also executive officers of the Company, the following
individuals presently serve as executive officers of the Company:
John R. Hindman
Mr. Hindman, age 49, has served as Chief Operating Officer of the Company
since April 1998 and served as the Company's Chief Financial Officer from March
1997 until April 1998. Mr. Hindman has also served as a Director for various
subsidiaries of the Company. From November 1993 until September 1996, Mr.
Hindman served as Chief Operating Officer and Chief Financial Officer of
Precision Systems, Inc. ("PSI"), a software systems provider to the
telecommunications industry. From September 1996 until February 1997, Mr.
Hindman served as a financial consultant to PSI. From July 1988 until October
1993, Mr. Hindman served as Chief Financial Officer of Kimmins Environmental, a
specialty contracting firm.
7
<PAGE>
Robert M. Molsick
Mr. Molsick, age 43, has served as Chief Financial Officer of the Company
since April 1998. From June 1995 until March 1998, Mr. Molsick served as Chief
Financial officer of Kvaerner Construction, Inc., a commercial construction
company. From February 1993 until June 1995, Mr. Molsick served as Chief
Financial Officer of Foley & Associates Construction Company, a commercial
construction company. From August 1979 until February 1993 Mr. Molsick was
employed by Brown & Root Building Company, also a commercial construction
company, where he served as Chief Financial Officer from June 1983 to February
1993. Mr. Molsick is a Certified Public Accountant.
Michael J. Dean
Mr. Dean, age 38, has served as Vice President-Finance since March 1997.
Mr. Dean served as Chief Financial Officer of the Company from July 1996 until
March 1997 and as Controller of the Company from July 1994 to the present. Prior
to joining the Company, Mr. Dean served for ten years as a Manager for Harper,
Van Scoik & Company, a Certified Public Accounting firm in Clearwater, Florida.
Mr. Dean is a Certified Public Accountant.
Kasi V. Sridharan
Mr. Sridharan, age 43, has served as Executive Vice President of the
Company since March 1997. Mr. Sridharan served as Vice President-Finance of the
Company from October 1995 until March 1997. Mr. Sridharan also serves as a
Director for various subsidiaries of the Company. He served as Vice President-
Finance of IMR-India from April 1992 until October 1995. From November 1988
until March 1992, Mr. Sridharan served as Chief Financial Officer for the Centre
for Development of Advanced Computing in Pune, India. Mr. Sridharan is a
Chartered Accountant.
Dilip Patel
Mr. Patel, age 39, has served as Vice President-General Counsel and
Secretary of the Company since March 1996. Presently, Mr. Patel serves as a
Director and Secretary for various subsidiaries of the Company, and as a
Director of Sanan Family Foundation, Inc., a charitable foundation. From August
1990 until March 1996, Mr. Patel was an attorney in the International Department
of the Tampa, Florida law firm Fowler, White, Gillen, Boggs, Villareal & Banker,
P.A. From 1983 until 1988 he practiced law as a Solicitor with Cartwright,
Cunningham, Haselgrove & Co. in London, England. Mr. Patel is a member of and
is Board Certified in Immigration and Nationality Law by the Florida Bar. He is
admitted as a Solicitor of the Supreme Court of England and Wales.
8
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Executive Compensation
The following table sets forth information concerning the compensation of
the Chief Executive Officer of the Company and each of the four other most
highly compensated executive officers of the Company determined as of the end of
the last year (hereafter referred to as the "named executive officers") for the
years ended December 31, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Awards
------------
Securities
Annual Compensation Underlying All Other
Name and Principal Position Year Salary Bonus Options Compensation(1)
- -------------------------------- ---- ------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Satish K. Sanan................. 1997 $ 406,000 $ 354,558 - $ 97,792(2)
Chairman of the Board and 1996 316,667 320,018 6,172,515 59,327(3)
Chief Executive Officer 1995 253,285 261,241 3,009,465 58,368(4)
Philip Shipperlee (5)........... 1997 154,100 - 60,000 -
Managing Director of IMR-U.K.
John R. Hindman (6)............. 1997 96,921 50,000 101,250 -
Chief Operating Officer
Dilip Patel (7)................. 1997 92,998 20,000 - -
Vice President - General Counsel 1996 67,018 25,000 112,500 -
Kasi V. Sridharan............... 1997 77,387 24,000 - -
Executive Vice President 1996 69,999 25,000 112,500 -
1995 44,099 - - -
</TABLE>
- --------
(1) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of perquisites and other personal benefits
has been omitted because such perquisites and other personal benefits
constituted less than the lesser of $50,000 or 10% of the total annual
salary and bonus for the Named Executive Officer for such year.
(2) Includes (i) $96,792 representing premiums for life insurance policies with
benefits payable to beneficiaries designated by Mr. Sanan; and (ii) a
$1,000 contribution on behalf of Mr. Sanan to the Company=s 401(k) Plan.
(3) Includes (i) $58,327 representing premiums paid for life insurance policies
with benefits payable to beneficiaries designated by Mr. Sanan; and (ii) a
$1,000 contribution on behalf of Mr. Sanan to the Company's 401(k) Plan.
(4) Includes (i) $57,368 representing premiums paid for life insurance policies
with benefits payable to beneficiaries designated by Mr. Sanan; and (ii) a
$1,000 contribution on behalf of Mr. Sanan to the Company's 401(k) Plan.
(5) Mr. Shipperlee commenced employment with the Company in January 1997.
(6) Mr. Hindman commenced employment with the Company in March 1997 as Chief
Financial Officer. In February 1998 Mr. Hindman was named Chief Operating
Officer.
(7) Mr. Patel commenced employment with the Company in March 1996.
9
<PAGE>
Effective as of October 31, 1996, Mr. Sanan entered into a five year
employment agreement with the Company. The employment agreement expires on the
fifth anniversary of the effective date, and shall renew automatically for
additional one year periods until either the Company or Mr. Sanan serves a 180
day notice of non-renewal. The employment agreement may be terminated by the
Company only with cause. Cause is defined as including: (i) theft or
embezzlement with regard to material property of the Company; or (ii) continued
neglect by the employee in fulfilling his duties as Chief Executive Officer of
the Company as a result of alcoholism, drug addiction or excessive unauthorized
absenteeism, after written notification from the Board of Directors of such
neglect and the employee's failure to cure within a reasonable time. Under the
employment agreement, Mr. Sanan received an initial base salary of $400,000 plus
automobile expenses, subject to annual increases at the discretion of the
Compensation Committee. Effective January 1, 1998, the Compensation Committee
increased Mr. Sanan's base annual compensation to $500,000. The employment
agreement also provides for an annual incentive bonus equal to 2% of pre-tax net
income (determined without regard to the charge resulting from this payment). In
addition, on November 14, 1996, Mr. Sanan received a ten-year option to purchase
225,000 shares at an exercise price of $6.22 per share. Such option vested in
full on November 14, 1997. On March 31, 1998, Mr. Sanan received a ten-year
option to purchase 150,000 shares at an exercise price of $43.18 per share.
Such option vests over three years. Mr. Sanan will be eligible to receive
additional stock options exercisable at fair market value on the grant date, in
such amounts and subject to such vesting provisions as determined by the
Compensation Committee. The Company also has agreed to maintain and to pay the
premiums for approximately $10.6 million of life insurance policies with
benefits payable to beneficiaries designated by Mr. Sanan. The anticipated
annual premium is approximately $100,000. Mr. Sanan will receive all standard
benefits made available to other executive employees of the Company. In the
event that the Company terminates Mr. Sanan's employment without cause, Mr.
Sanan will receive a severance payment equal to three times the greater of (i)
Mr. Sanan's then current base salary plus the amount of his prior year bonus and
the annualized value of any current benefits, or (ii) his compensation as
reported for tax purposes for the immediately preceding calendar year. The
employment agreement contains a noncompetition covenant for a period of three
years following termination of employment by Mr. Sanan for any reason or by the
Company for cause.
Option Grants in Last Fiscal Year
The following table sets forth information concerning options granted to
the Named Executive Officers during the year ended December 31, 1997:
<TABLE>
<CAPTION>
--------------------------------------------------------
Individual Grants Potential Realizable
Number of Percent of Value at Assumed
Securities Total Annual Rate of Stock
Underlying Granted to Exercise or Price Appreciation for
Options Employees In Base Price Expiration Option Term(2)
Executive Officer Granted(1) Fiscal Year Per Share Date 5% 10%
- ----------------- ----------- ------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Philip Shipperlee(3) 60,000 3.0% $15.08 11/14/04 $368,589 $858,968
John R. Hindman(4) 101,250 5.0% $ 5.06 3/20/07 $321,562 $814,900
</TABLE>
- -------------------
(1) These options were granted with an exercise price equal to the fair market
value of the Common Stock on the date of grant as determined by the Board
of Directors.
(2) The potential realizable value is calculated based on the ten-year or
seven-year term of the option at the time of its grant. It is calculated
by assuming that the stock price on the date of grant appreciates at the
indicated annual rate, compounded annually for the entire term of the
option. The actual realizable value of the options based on the actual
market price may substantially exceed the potential realizable value shown
in the table.
(3) The option is a nonqualified stock option and vests over five years from
the date of the grant.
(4) The option is a nonqualified stock option and vests over three years from
the date of the grant.
10
<PAGE>
Option Exercises in Last Fiscal and Year-end Option Values
The following table sets forth the aggregate dollar value of all options
exercised and the total number of unexercised options held, on December 31,
1997, by the Named Executive Officers:
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
Shares December 31, 1997 December 31, 1997(1)
Acquired Value --------------------------- --------------------------------
Executive Officer on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------ ----------- -------- ----------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Satish K. Sanan...... - - 9,370,238 - $231,392,669 $ -
Philip Shipperlee.... - - 11,250 71,250 $ 211,275 $ 806,075
John R. Hindman...... - - - 101,250 $ - $2,019,600
Dilip Patel.......... 18,000 $264,510 4,500 90,000 $ 111,500 $2,230,000
Kasi V. Sridharan.... 22,500 $380,025 - 90,000 $ - $2,230,000
</TABLE>
- ---------
(1) The closing price for the Company's Common Stock as reported by The Nasdaq
Stock MarketK on December 31, 1997 was $25.00. Value is calculated on the
basis of the difference between the option exercise price and $25.00,
multiplied by the number of shares of Common Stock underlying the option.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee is comprised of Messrs. Luthin and Addonisio.
Mr. Addonisio was not an officer or employee of the Company, or of any
subsidiary of the Company, at any time during or prior to the year ended
December 31, 1997. Mr. Luthin served as Vice President-Finance of the Company
from October 1994 until July 1995. He was not an officer or employee of the
Company or of any subsidiary of the Company, at any time during 1997.
Employee Benefit Plans
Employee Stock Incentive Plan
The Company's Amended and Restated Stock Incentive Plan (the "Stock Option
Plan") was approved by the Company's Board of Directors on November 8, 1997 and
became effective on such date, subject to approval by the Company's shareholders
- - (see Proposal 3 herein). The purpose of the Stock Option Plan is to provide
incentives for officers, directors, consultants and key employees to promote the
success of the Company, and to enhance the Company's ability to attract and
retain the services of such persons. Options granted under the Stock Option Plan
may be either: (i) options intended to qualify as "incentive stock options"
under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code");
or (ii) non-qualified stock options. The Stock Option Plan also permits the
grant of stock appreciation rights in connection with the grant of stock
options, and the grant of restricted stock awards. Stock options and stock
awards may be granted under the Stock Option Plan for all employees of the
Company, or of any present or future subsidiary or parent of the Company, or
other "key persons" to the Company.
11
<PAGE>
An incentive stock option that is granted under the Stock Option Plan may
not be granted at a price less than the fair market value of the Company's
Common Stock on the date of grant (or less than 110% of fair market value in the
case of holders of 10% or more of the total combined voting power of all classes
of stock of the Company or a subsidiary or parent of the Company). Non-
qualified stock options may be granted at the exercise price established by the
Administrator, which may be less than the fair market value of the Company's
Common Stock on the date of grant. All grants to date have been, and the policy
of the Compensation Committee is that all future grants will be, at fair market
value on the grant date.
Each option granted under the Stock Option Plan is exercisable for a period
not to exceed ten years from the date of grant (or, in the case of incentive
stock options, five years in the case of a holder of more than 10% of the total
combined power of all classes of stock of the Company or of a subsidiary or
parent of the Company), is subject to approval of the Company's shareholders and
shall lapse upon expiration of such period, or earlier upon termination of the
recipient's employment with the Company, or as determined by the Compensation
Committee.
The number of shares of the Company's Common Stock reserved for issuance
under the Stock Option Plan is 16,003,455 shares. As of April 1, 1998, options
to purchase 14,835,918 shares of Common Stock were outstanding under the Stock
Option Plan or the earlier version of the plan and 1,167,537 shares of Common
Stock had been issued upon exercise of options granted under the Stock Option
Plan or the earlier version of the plan.
The Stock Option Plan is administered by the Company's Board of Directors,
the Compensation Committee of the Board of Directors and/or the Company's Chief
Executive officer (each an "Administrator"). The Stock Option Plan is
administered by the Compensation committee with respect to (i) any stock
incentives granted to any employee or key person (as defined in the Stock Option
Plan) who shall be subject to Section 16(b) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or any person whose stock incentive must
be approved by a committee of disinterested directors in order to entitle the
Company and the recipient of the stock incentive to the exemption provided by
Rule 16b-3 promulgated under the Exchange Act; and (ii) any other person for
whom the Chief Executive Officer is not specifically designated as the
Administrator. The Board of Directors has designated the Company's Chief
Executive Officer as the Administrator with respect to the grant and
administration of non-statutory stock options to (i) employees and key persons
who have been recently hired or who have agreed to become employed by or provide
services to the Company; (ii) employees and key persons upon and in connection
with their promotion from one job category to another; and (iii) any employee or
key person, if in the sole discretion of the Chief Executive Officer, the grant
of a stock option to such person is appropriate or advisable in order to retain
such person. Any option grants approved by the Chief Executive Officer are
subject to any limitations which may be imposed by the Company's Restated Bylaws
or any applicable laws and are subject to the following additional limitations:
(i) the number of shares that may be subject to any option granted by the
authority of the Chief Executive Officer shall not exceed the number of shares
set forth in those guidelines set forth from time to time by the Compensation
Committee with respect to various classifications of employment or service; (ii)
all options or purchase rights granted or approved by the Chief Executive
Officer must be granted pursuant to the Stock Option Plan; (iii) the number of
shares subject to options approved by the Chief Executive Officer may not exceed
the total number of shares authorized for issuance under the Stock Option Plan,
or such lesser number as the Board of Directors or the Compensation Committee
may determine in its sole discretion; (iv) options must be granted at a price
not less than the fair market value of the underlying shares of Common Stock on
the date of grant; (v) such officer shall not have the authority to grant
options to consultants or employees who are or will be subject to the
requirements of Section 16(b) of the Exchange Act; and (vi) the authority
granted to the Chief Executive Officer by the Board of Directors may be further
limited by the written directive of the Compensation Committee from time to
time.
12
<PAGE>
The Administrators have the authority to determine exercise prices
applicable to the options, the eligible employees or other key persons to whom
options may be granted, the number of shares of the Company's Common Stock
subject to each option, and the extent to which options may be exercisable. The
Compensation Committee also has the authority to determine the recipients and
the terms of grants of stock appreciation rights and restricted stock awards
under the Stock Option Plan. The Administrators are empowered to interpret the
Stock Option Plan and to prescribe, amend and rescind the rules and regulations
pertaining to the Stock Option Plan. Options granted under the Stock Option Plan
generally vest over three to five years. Unless determined otherwise by an
Administrator, no option is transferable by the optionee other than by will or
the laws of descent and distribution, and each option is exercisable, during the
lifetime of the optionee, only by such optionee.
Employee Stock Purchase Plan
The Company's Employee Stock Purchase Plan, as amended, (the "Stock
Purchase Plan") became effective on October 1, 1996. A total of 450,000 shares
of the Company's Common Stock have been reserved for issuance under the Stock
Purchase Plan. The Stock Purchase Plan is intended to qualify under Section 423
of the Code. An employee electing to participate in the Stock Purchase Plan must
authorize a stated dollar amount or percentage of the employee's regular pay to
be deducted by the Company from the employee's pay each three month period for
the purpose of purchasing shares of Common Stock (the "Purchase Period"). The
price at which employees may purchase Common Stock is 85% of the closing price
of the Common Stock on the Nasdaq National Market on the first day of the
Purchase Period or the last day of the Purchase Period, whichever is lower. An
employee may not sell shares of Common Stock purchased under the Stock Purchase
Plan until the first day of the second Purchase Period following the Purchase
Period in which the right to purchase such shares was granted. Employees of the
Company who have completed six full months of service with the Company and whose
customary employment is at least 20 hours per week for more than five months per
calendar year are eligible to participate in the Stock Purchase Plan. An
employee may not be granted an option under the Stock Purchase Plan if after the
granting of the option such employee would be deemed to own 5% or more of the
combined voting power of value of all classes of stock of the Company. As of
April 1, 1998, 115,875 shares of Common Stock had been issued pursuant to the
Stock Purchase Plan. The Stock Purchase Plan is administered by the Vice
President-General Counsel of the Company, or any such other persons so
designated by the Company's Board of Directors.
Agreements with Employees
The Company's software development professionals working in the U.S. and
U.K., as well as executive officers, are required to sign an agreement with the
Company restricting the ability of the employee to compete with the Company
during his or her employment and for a period of one year thereafter,
restricting solicitation of customers and employees following employment with
the Company, and providing for ownership and assignment of intellectual property
rights to the Company.
13
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION(1)
The Board of Directors of the Company (the "Board") has delegated to the
Compensation Committee of the Board (the "Committee") the authority to establish
and administer the Company's compensation programs. The Compensation Committee
is comprised of two nonemployee directors: Vincent Addonisio and Charles L.
Luthin. The Committee is responsible for: (i) determining the most effective
total executive compensation strategy based upon the business needs of the
Company and consistent with shareholders' interests; (ii) administering the
Company's executive compensation plans, programs and policies; (iii) monitoring
corporate performance and its relationship to compensation of executive
officers; and (iv) making appropriate recommendations concerning matters of
executive compensation.
Compensation Philosophy
The policies of the Committee with respect to executive officers, including
the Chief Executive Officer, are to provide compensation sufficient to attract,
motivate and retain executives of outstanding ability and potential. To
emphasize sustained performance of the Company's executive officers, the
Committee has adopted policies to align executive compensation with the creation
of shareholder value as measured in the equity markets. These policies are
implemented using a mix of the following key elements.
1. The Company pays base salaries that are generally competitive with
other leading information technology ("IT") services companies with which the
Company competes for talent. To ensure that its salaries are sufficient to
attract and retain highly qualified executives and other key employees, the
Company regularly compares its salaries with those of its competitors and sets
salary parameters based on this review;
2. The Company pays cash bonuses based on the achievement of specific
operating goals and high levels of performance; and
3. The Company provides significant equity-based incentives pursuant to
the Company's Amended and Restated Stock Incentive Plan and Employee Stock
Purchase Plan, as amended, to ensure that the Company's executive officers and
key employees are motivated to achieve the Company's long-term goals.
Base Salary
The Committee recognizes the importance of maintaining compensation
practices and levels of compensation competitive with other leading companies
and other software development firms with which the Company competes for
personnel. Base salary represents the fixed component of the executive
compensation program. Base salary levels are established based on an annual
review of published executive salary levels at similar IT services companies and
on the basis of individual performance. The industry group index shown on the
Company's Stock Performance Graph includes certain of the IT services companies
included in the Company's compensation survey. Periodic increases in base salary
are the result of individual contributions evaluated against established annual
long-term performance objectives and an annual salary survey of comparable
companies in the Company's industry. Base salaries for the Company's executives
were increased during 1997 and they remain within the range of the comparable
companies surveyed.
- --------
(1) This Section is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the Company
under the Securities Act of 1933, as amended (the "1933 Act") or the
Exchange Act whether made before or after the date hereof and irrespective
of any general incorporation language in any such filing.
14
<PAGE>
Cash Bonuses
Cash bonus awards are another component of the Company's compensation
program and are designed to reward the Company's executives and other senior
managers for assisting the Company in achieving its operational goals through
exemplary individual performance. Bonuses, if any, are both linked to the
achievement of specified individual and corporate goals as well as a review of
personal performance which is determined at the discretion of the Committee.
Corporate performance goals upon which 1997 bonuses were based included: the
successful completion of the Company's secondary public offering which provided
the Company with additional financing necessary to support anticipated future
growth; the execution of agreements with a number of significant new customers;
the award of transitional outsourcing engagements by Year 2000 customers;
continued high customer satisfaction levels; the diversification of the
Company's revenue base; establishment of additional software development
centers to support increased capacity to provide IT services; completion of
numerous existing client engagements within the scope of budgeted time and cost;
the development and introduction of additional software tools to improve the
Company's existing services offerings; and the meeting of quarterly and annual
revenue, profitability and other financial goals, including an increase in
annual revenue from $27.9 million in 1996 to $83.6 million in 1997. In 1998, the
Committee reviewed the Company's 1997 corporate performance goals and determined
that the goals had been achieved or exceeded. Based on such achievement, the
Committee awarded bonuses to most of its executive officers, which were
generally within targeted bonus levels.
Equity Compensation
The Company's Stock Option Plan and Stock Purchase Plan have been
established to provide all employees, including executive officers, of the
Company with an opportunity to share, along with the shareholders of the
Company, in the long-term performance of the Company. The Committee strongly
believes that a primary goal of the compensation program should be to provide
key employees who have significant responsibility for the management, growth and
future success of the Company with an opportunity to increase their ownership of
the Company and potentially gain financially from increases in the price of the
Company's Common Stock. The interests of shareholders, executives and employees
should thereby be closely aligned. Executives are eligible to receive stock
options generally not more often than once a year, giving them the right to
purchase shares of Common Stock of the Company in the future at a price equal to
fair market value at the date of grant. All grants must be exercised according
to the provisions of the Company's Stock Option Plan. All options granted to
executive officers are exercisable at the fair market value of the Common Stock
at the grant date, generally vest over a period of years and expire no later
than ten years from the date of grant.
Chief Executive Officer Compensation
The Committee uses the same procedures described above for the other
executive officers in setting the annual salary, bonus and stock option awards
for Satish K. Sanan, the Company's Chief Executive Officer. In accordance with
an existing Employment Agreement effective October 31, 1996, Mr. Sanan's 1997
base salary was set at $400,000. Under Mr. Sanan's Employment Agreement with the
Company, he is entitled to an annual incentive bonus equal to 2% of pre-tax net
income (determined without regard to the charge resulting from this bonus). For
1997, this bonus amount was $354,558. In addition, the Company also has agreed
to pay the premiums for approximately $10.6 million of life insurance policies
with benefits payable to beneficiaries designated by Mr. Sanan. The amount of
these payments in 1997 was $96,792. During 1997, the Company
15
<PAGE>
achieved substantially all of its corporate objectives. The Committee concluded
that Mr. Sanan was responsible for accomplishing many of these objectives. The
Committee believed that the total compensation payable to Mr. Sanan in 1997 of
$760,558 was appropriate and consistent with the quality of leadership he offers
to the Company. Accordingly, the Committee adjusted Mr. Sanan's 1998 base salary
effective January 1, 1998 in accordance with his employment agreement to
$500,000. In addition, all other provisions of Mr. Sanan's employment
agreement, including the incentive bonus equal to 2% of pre-tax net income
remain unchanged.
Under the Company's executive compensation program, the total compensation
mix for senior executives emphasizes long-term rewards in the form of stock
options. On March 31, 1998, the Compensation Committee approved the grant to
Mr. Sanan of an option to purchase 150,000 shares of Common Stock at an exercise
price of $37.17 per share. This option vests over three years. In determining
the grant to Mr. Sanan, the Committee reviewed the stock option grants to chief
executive officers of other comparable IT services companies in connection with
their employment services.
Section 162(m) of the Code limits the Company to a deduction for federal
income tax purposes of no more than $1 million of compensation paid to certain
Named Executive Officers in a taxable year. Compensation above $1 million may be
deducted if it is "performance-based compensation" within the meaning of the
Code. The Committee has determined to satisfy the requirements for "performance-
based compensation" with respect to compensation awarded to its Named Executive
Officers whenever possible and to the extent then practicable.
Compensation Committee,
Vincent Addonisio
Charles C. Luthin
16
<PAGE>
Performance Graph
Performance Comparison. The following graph and table compare the
cumulative total shareholder return on the Company's Common Stock from November
8, 1996, the date of the initial public offering of the Common Stock, through
December 31, 1997 with (a) the Russell 2000 Index (which does not include the
Company), and (b) a peer group index* selected by the Company which includes
seven publicly traded companies in the Company's industry. The information
included in the table was supplied by the Nasdaq Stock Market. The comparisons
reflected in the graph and table, however, are not intended to forecast the
future performance of the Common Stock and may not be indicative of such future
performance. The graph and table assume an investment of $100 in the Common
Stock and each index on November 8, 1996, and the reinvestment of all dividends.
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG INFORMATION MANAGEMENT RESOURCES, RUSSELL 2000 INDEX AND PEER GROUP
<TABLE>
<CAPTION>
INFORMATION
Measurement Period MANAGEMENT RUSSELL
(Fiscal Year Covered) RESOURCES, INC. 2000 INDEX PEER GROUP
- ------------------- --------------- ---------- ----------
<S> <C> <C> <C>
Measurement Pt-
11/08/1996 $100 $100 $100
FYE 12/31/1997 $402 $131 $183
</TABLE>
- --------
* The peer group index reflects the stock performance of the following
companies: Computer Horizons Corp., Cambridge Technology Partners, Inc., Sapient
Corporation, CIBER, Inc., Computer Management Sciences, Inc., Keane, Inc. and
Whittman-Hart, Inc.
17
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
IMR-U.K. and Link Transactions
Pursuant to an agreement effective January 8, 1997, the Company acquired
100% of the outstanding shares of Link Group Holdings Limited ("Link"), a U.K.-
based software services provider, from its two owners, Philip and Sheila
Shipperlee. Philip Shipperlee serves as a Director of the Company. Under the
terms of the agreement, the Company paid the Shipperlees $2.1 million in cash
and 161,343 shares of the Company's Common Stock at closing and an additional
$1.6 million in cash on February 10, 1998. The acquisition was approved by the
disinterested members of the Board of Directors.
Concurrently with the Link acquisition, the Company executed an agreement
with Satish K. Sanan, the Company's President and Chief Executive Officer, and
his spouse to acquire 10.5% of Information Management Resources (U.K.) Ltd.
("IMR, Ltd.") for $520,000 in cash. The acquisition was approved by the
disinterested members of the Board of Directors. Prior to this acquisition, and
prior to the acquisition by the Company of Link, the Company owned 39.5% of IMR-
Ltd., Link owned 50.0% of IMR-Ltd. and Mr. and Mrs. Sanan together owned 10.5%
of IMR-Ltd. After the acquisition of Link and this acquisition from the Sanans,
the Company owns 100% of both Link and IMR-Ltd. Operations of these two
companies have been combined and operate under Information Management Resources,
plc. ("IMR-U.K."). Mr. Shipperlee serves as Managing Director of IMR-U.K.
Other Transactions
In October 1995, the Company entered into a Sublease Agreement with ABR
Information Services, Inc. ("ABR") pursuant to which ABR subleased from the
Company 11,000 square feet of office space in the Company's Clearwater, Florida
offices through October 31, 1997. This lease was terminated by mutual agreement
of the parties on June 30, 1997. In 1997, ABR paid to the Company approximately
$72,000 in rent pursuant to the sublease. Mr. Vincent Addonisio, a Director of
the Company, served as Executive Vice President, Chief Financial Officer,
Treasurer and a director of ABR from July 1993 until November 1996.
During 1997, the Company maintained insurance on the life of Mr. Sanan. The
proceeds from the insurance policies on the life of Mr. Sanan will be payable to
beneficiaries designated by Mr. Sanan. The annual payment by the Company for
insurance policies on the life of Mr. Sanan was approximately $97,000 in 1997.
Mr. Sanan has personally guaranteed IMR-India's credit facilities with
Canara Bank and Export-Import Bank of India.
18
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Exchange Act requires the Company's directors and
officers and persons who own more than 10% of a registered class of the
Company's equity securities, to file initial reports of ownership and reports of
changes in ownership with the United States Securities and Exchange Commission
(the "Commission"). Such persons are required by Commission regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms furnished to the
Company and written representations from the executive officers and directors of
the Company, the Company believes that all Section 16(a) filing requirements
were met during 1997.
PROPOSAL 2
APPROVAL OF INCREASE IN NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
On April 20, 1998 the Board of Directors adopted, subject to shareholder
approval, an amendment to Paragraph 4.1 of the Company's Amended and Restated
Articles of Incorporation, to increase the number of shares of Common Stock
authorized for issuance by the Company from 40,000,000 shares to 100,000,000
shares.
The additional shares of Common Stock to be authorized by adoption of the
amendment would have rights identical to the currently outstanding Common Stock
of the Company. Adoption of the proposed amendments and issuance of the Common
Stock would not affect the rights of the holders of currently outstanding Common
Stock of the Company, except for effects incidental to increasing the number of
shares of the Company's Common Stock outstanding. If the amendment is adopted,
it will become effective upon filing of a Certificate of Amendment of the
Company's Amended and Restated Articles of Incorporation with the Secretary of
State of the State of Florida.
In addition to the 25,799,900 shares of Common Stock outstanding at
April 1, 1998, 12,253,455 shares are reserved for issuance upon the grant and
exercise of options and rights under the Company's Stock Incentive Plan, 450,000
shares are reserved for issuance under the Company's Employee Stock Purchase
Plan and 337,500 shares are reserved for issuance upon the grant and exercise of
options under the Company's Directors Stock Option Plan. Additionally, upon
approval of Proposals 3 or 4, another 3,750,000 shares will be reserved for
future grants under the Company's Stock Incentive Plan, as amended, leaving a
remainder of 57,409,145 authorized shares available for future issuances.
On April 3, 1998, the Company effected a three-for-two stock split in the
form of a stock dividend. Although at present the Board of Directors has no
other plans to issue the additional shares of Common Stock, it desires to have
such shares available to provide additional flexibility to use its capital stock
for business and financial purposes in the future. The additional shares may be
used, without further shareholder approval, for various purposes including,
acquisitions, raising capital, providing equity incentives to employees,
officers or directors and establishing strategic relationships with other
companies.
The additional shares of Common Stock that would become available for
issuance if this proposal is adopted could also be used by the Company to oppose
a hostile takeover attempt or delay or prevent changes in control or management
of the Company. For example, without further shareholder approval, the Board
could strategically sell shares of Common Stock in a private transaction to
purchasers who would oppose a takeover or favor the current Board. Although this
proposal to increase the authorized Common Stock has been
19
<PAGE>
prompted by business and financial considerations and not by the threat of any
hostile takeover attempt (and the Board currently is not aware of any such
attempts directed at the Company), nevertheless, shareholders should be aware
that approval of this proposal could facilitate future efforts by the Company to
deter or prevent changes in control of the Company, including transactions in
which the shareholders might otherwise receive a premium for their shares over
then current market prices.
The affirmative vote of the holders of 66-2/3% of the outstanding shares
of the Company's Common Stock entitled to vote will be required to approve this
amendment to the Company's Amended and Restated Articles of Incorporation.
For purposes of the vote, abstentions and broker non-votes will have the same
effect as negative votes.
The Board of Directors recommends a vote FOR approval of the amendment to
the Company's Amended and Restated Articles of Incorporation to increase the
number of authorized shares of Common Stock.
PROPOSAL 3
APPROVAL OF INCREASE IN SHARES AVAILABLE FOR GRANT
UNDER THE STOCK INCENTIVE PLAN
The Company's Stock Incentive Plan became effective on July 15, 1996 (the
"1996 Plan") to provide incentives for officers, directors, consultants and key
employees of the Company to promote the success of the Company and to enhance
the Company's ability to attract and retain the services of such persons. Under
the 1996 Plan 12,253,455 shares of Common Stock were reserved for issuance upon
the grant and exercise of options or rights thereunder. Effective October 2,
1997, the Company's Board of Directors approved an amendment to the 1996 Plan
increasing the number of shares issuable under such plan by 3,750,000 shares to
16,003,455 shares, subject to shareholder approval.
An aggregate of 14,083,877 Shares of Common Stock are issuable upon the
vesting and exercise of outstanding options under the 1996 Plan. During the
fiscal year ended December 31, 1997, the Company granted to current executive
officers of the Company options to purchase 161,250 shares of Common Stock at
exercise prices ranging from $5.05 per share to $15.09 per share. In addition,
the Company granted to all employees as a group (excluding executive officers)
options to purchase 1,854,450 shares of Common Stock at exercise prices ranging
from $5.05 per share to $20.05 per share. All options granted in excess of the
12,253,445 shares initially reserved are subject to shareholder approval of this
proposal 3 or of proposal 4.
The shareholders are being requested to approve the amendment to the 1996
Plan approved by the Board of Directors on November 8, 1997 to increase the
number of shares reserved for issuance thereunder from 12,253,455 shares to
16,003,455 shares, of which options to purchase 1,919,579 shares would be
available for future grants under the 1996 Plan. The amendment to increase the
number of shares reserved under such plan is proposed in order to give the Board
of Directors greater flexibility to grant stock options and stock purchase
rights. The Company believes that granting stock options motivates high levels
of performance and provides an effective means of recognizing employee
contributions to the success of the Company. The Company believes that the
ability to grant options and stock purchase rights will be important to the
future success of the Company by allowing it to accomplish these objectives.
The Board of Directors recommends a vote FOR ratification and approval of
the amendment to the 1996 Plan to increase the number of shares available for
grant thereunder.
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PROPOSAL 4
APPROVAL OF THE AMENDED AND RESTATED
STOCK INCENTIVE PLAN
Subsequent to approving the amendment to the 1996 Plan increasing the
number of shares issuable thereunder, on November 8, 1997 the Board of Directors
approved the Amended and Restated Stock Incentive Plan (the "Stock Option
Plan"), subject to shareholder approval. The Stock Option Plan, if approved by
the shareholders, would supersede the Company's 1996 Plan. The Stock Option Plan
is identical in most respects to the 1996 Plan, as amended by the Board of
Directors on October 2, 1997. The material difference between the 1996 Plan and
the Stock Option Plan is that the Stock Option Plan allows the Company's Board
of Directors to appoint the Company's Chief Executive Officer as an
administrator of such plan for certain limited purposes. This and other features
of the Stock Option Plan are discussed more fully elsewhere in this Proxy
Statement under the caption "Employee Benefit Plans--Employee Stock Incentive
Plan."
The Board of Directors believes that it is important to provide the
Company's Chief Executive Officer with the ability, under certain limited
circumstances, to grant stock options to (i) employees or key persons who have
been recently hired or who have agreed to become employed by or provide services
to the Company; (ii) employees and key persons upon and in connection with their
promotion from one job category to another; and (iii) any employee or key
person, if in the sole discretion of the Chief Executive Officer, the grant of
the stock option to such person is appropriate or advisable in order to retain
such person. The Board of Directors believes that this feature will be of great
value in recruiting and retaining highly qualified technical and other key
personnel who are in great demand as well as rewarding and incenting current
employees.
Summary of Federal Income Tax Consequences of the Stock Option Plan
The following summary is intended only as a general guide as to the United
States federal income tax consequences under current law with respect to
participation in the Stock Option Plan and does not attempt to describe all
possible federal or other tax consequences of such participation. Furthermore,
the tax consequences of options are complex and subject to change, and a
taxpayer's particular situation may be such that some variation of the described
rules is applicable. Optionees are advised to consult their own tax advisors
prior to the exercise of any option and prior to the disposition of any shares
of Common Stock acquired upon the exercise of an option.
Nonstatutory Stock Options. Nonstatutory stock options have no special tax
status. An optionee generally recognizes no taxable income as the result of the
grant of such an option. All options granted under the Stock Option Plan to
date are intended to be nonstatutory stock options.
Upon exercise of a nonstatutory stock option, the optionee normally
recognizes ordinary income in the amount of the difference between the option
exercise price and the fair market value of the shares on the determination date
(as defined below). If the optionee is an employee, such ordinary income
generally is subject to withholding of income and employment taxes. The
"determination date" is the date on which the option is exercised unless the
shares are not vested and/or the sale of the shares at a profit would subject
the optionee to suit under Section 16(b) of the Exchange Act, in which case the
determination date is the later of (i) the date on which the shares vest, or
(ii) the date the sale of the shares at a profit would no longer subject the
optionee to suit under Section 16(b) of the Exchange Act. Section 16(b) of the
Exchange Act generally is applicable only
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to officers, directors, and beneficial owners of more than 10% of the Common
Stock of the Company. If the determination date is after the exercise date, the
optionee may elect, pursuant to Section 83(b) of the Code, to have the exercise
date be the determination date by filing an election with the Internal Revenue
Service not later than 30 days after the date the option is exercised. Upon the
sale of stock acquired by the exercise of a nonstatutory stock option, any gain
or loss, based on the differences between the sale price and the fair market
value on the date of recognition of income, will be taxed as capital gain or
loss. A capital gain or loss will be long-term if the optionee's holding period
is more than 18 months. No tax deduction is available to the Company with
respect to the grant of a nonstatutory option or the sale of the stock acquired
pursuant to such grant. The Company is generally entitled to a deduction equal
to the amount of ordinary income recognized by the optionee as a result of the
exercise of a nonstatutory option, except to the extent such deduction is
limited by Section 162(m) of the Code, as described above.
Withholding. Under the Incentive Plan, a participant must pay the Company,
no later than the date on which an amount first becomes includable in the
participant's gross income for federal income tax purposes with respect to an
Award, any taxes required to be withheld with respect to such amount. Such
withholding obligation may be settled with already owned shares, including
shares that constitute part of the Award giving rise to the withholding
obligations, unless otherwise determined by the Company. The amount of income
recognized is not reduced by the delivery of already owned shares or the
retention by the Company of shares issuable under an Award to satisfy
withholding obligations; the transaction is taxed as if the shares were sold for
the amount of the withholding tax.
Shareholders are requested in this Proposal 4 to approve the Stock Option
Plan. The affirmative vote of the holders of a majority of the outstanding
shares of the Company's Common Stock present in person or represented by proxy
and voting at the Annual Meeting will be required to approve the Stock Option
Plan. For purposes of the vote, abstentions and broker non-votes will not be
counted for any purpose in determining whether this matter has been approved.
The Board of Directors recommends a vote FOR approval of the Amended and
Restated Stock Incentive Plan.
PROPOSAL 5
SELECTION OF INDEPENDENT ACCOUNTANTS
Subject to ratification by the shareholders, the Board of Directors has
selected, for the year ending December 31, 1998, the firm of Coopers & Lybrand,
L.L.P. as independent accountants for the Company. If the shareholders do not
ratify the selection of Coopers & Lybrand L.L.P., the Board of Directors will
reconsider the matter. Representatives of Coopers & Lybrand L.L.P. are expected
to be present at the Annual Meeting of Shareholders. They will have an
opportunity to make a statement if they desire to do so, and will also be
available to respond to appropriate questions from shareholders.
The Board of Directors recommends a vote FOR ratification and approval of
Coopers & Lybrand L.L.P. as independent auditors for the Company.
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OTHER MATTERS
The Board of Directors does not know of any matters which may come before
the Company's shareholders at the Annual Meeting other than those mentioned in
the Notice of Annual Meeting of Shareholders and referred to in this Proxy
Statement. However, if any other matters are properly presented to the meeting,
it is the intention of the persons named in the accompanying Proxy to vote, or
otherwise act, in accordance with their judgment on such matters.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Satish K. Sanan
----------------------------------
Satish K. Sanan
Chairman, President and Chief Executive Officer
May 4, 1998
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INFORMATION MANAGEMENT RESOURCES--ANNUAL MEETING
Proxy solicited on behalf of the Board of Directors
P The undersigned hereby appoints Satish K. Sanan, Robert M. Molsick and
Dilip Patel and each of them, with power of substitution, proxies to
R represent and to vote all shares of Common Stock of Information Management
Resources, Inc., which the undersigned is entitled to vote, at the Annual
O Meeting of Shareholders to be held in Clearwater, Florida on Friday May 29,
1997, at 10 A.M., EDT, and at any and all adjournments thereof, and hereby
X revokes any prior proxies given with respect to such stock, and the
undersigned authorizes the voting of such stock as follows on the reverse
Y side.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
+-------------+
| SEE REVERSE |
| SIDE |
+-------------+
<PAGE>
[X] Please mark
your votes
as this example
FOR WITHHELD
1. Election of Directors [ ] [ ]
Nominees: Philip Shipperlee, Charles C. Luthin
FOR vote withheld for the following nominee(s):
______________________________________________
The Board of Directors recommends a vote FOR the nominees and FOR Proposals 2,
3, 4 and 5.
2. Approval of Amendment to the Company's FOR AGAINST ABSTAIN
Amended and Restated Articles of [ ] [ ] [ ]
Incorporation
3. Approval of Increase in Shares Issuable FOR AGAINST ABSTAIN
Under the Stock Incentive Plan [ ] [ ] [ ]
4. Approval of the Amended and Restated FOR AGAINST ABSTAIN
Stock Incentive Plan [ ] [ ] [ ]
5. Approval of Independent Accountants FOR AGAINST ABSTAIN
[ ] [ ] [ ]
I plan to attend the meeting [ ] I do not plan to attend the meeting [ ]
Change of Address/comments on reverse side [ ]
SIGNATURE(S)_____________________________________ DATE ____________________
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
