<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
INFORMATION MANAGEMENT RESOURCES, INC.
(Name of Registrant as specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X]No fee required.
[_]Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_]Fee paid previously with preliminary materials.
[_]Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
<PAGE>
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 May 4, 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.
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.
<PAGE>
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
<PAGE>
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)
---------------------------
NUMBER OF SHARES PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNERS OF COMMON STOCK OF 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>
- --------
*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 of 1934, as amended, as of April 1, 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
<PAGE>
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.
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.
4
<PAGE>
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.
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
5
<PAGE>
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.
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 also serves as a
6
<PAGE>
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.
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. 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.
7
<PAGE>
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.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
-------------------
ANNUAL
COMPENSATION
NAME AND PRINCIPAL ----------------- SECURITIES ALL OTHER
POSITION YEAR SALARY BONUS UNDERLYING 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 April 1998 Mr. Hindman was named Chief Operating
Officer.
(7) Mr. Patel commenced employment with the Company in March 1996.
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
8
<PAGE>
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 $37.17 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 VALUE
AT ASSUMED ANNUAL RATE
PERCENT OF TOTAL OF STOCK PRICE APPRECIATION
NUMBER OF SECURITIES GRANTED TO EXERCISE OR FOR OPTION TERM(2)
UNDERLYING EMPLOYEES IN BASE PRICE EXPIRATION ----------------------------
EXECUTIVE OFFICER OPTIONS 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.
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 VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT 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 MarketSM 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.
9
<PAGE>
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.
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
10
<PAGE>
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.
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. 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.
11
<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.
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
- --------
(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.
12
<PAGE>
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 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.
13
<PAGE>
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
14
<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.
<TABLE>
<CAPTION>
NOVEMBER 8, 1996 DECEMBER 31, 1997
---------------- -----------------
<S> <C> <C>
Information Management Resources, Inc........ 100 402
Russell 2000 Index........................... 100 131
Peer Group................................... 100 183
</TABLE>
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
COMPARISON OF 14 MONTH CUMULATIVE TOTAL RETURN*
AMONG INFORMATION MANAGEMENT RESOURCES, INC., THE RUSSELL 2000 INDEX
AND A PEER GROUP
Measurement period Measurement PT -
(Fiscal Year Covered) 11/8/96 FYE 12/31/96 FYE 12/31/97
- --------------------- ---------------- ------------ ------------
<S> <C> <C> <C>
INFORMATION MANAGEMENT $100 $151 $402
RESOURCES, INC.
PEER GROUP $100 $110 $183
RUSSELL 2000 $100 $107 $131
</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.
15
<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.
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.
16
<PAGE>
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
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 14,083,876 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
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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 12,253,455 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.
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.
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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 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 |
+-------------+
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[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.
