<PAGE>
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
INNOSERV TECHNOLOGIES, 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)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
INNOSERV TECHNOLOGIES, INC.
320 WESTWAY, SUITE 520
ARLINGTON, TEXAS 76018
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 15, 1997
-----------------------------
Notice is hereby given that the Annual Meeting of Shareholders of InnoServ
Technologies, Inc. ("InnoServ") will be held in the El Dorado Meeting Room of
the Arlington Hilton Hotel, located at 2401 East Lamar Boulevard, Arlington,
Texas 76006, on September 15, 1997 at 9:00 a.m., Central Daylight Time, for
the following purposes:
1. To elect directors to hold office until the annual meeting of
shareholders in 1998 and until their successors are elected and qualified;
2. To take action with respect to any other matters which may properly
come before the meeting or any adjournment(s) thereof.
The Board of Directors' nominees for election as directors are: Thomas
E. Carroll, Bernard J. Korman, Michael G. Puls, Dudley A. Rauch, Michael M.
Sachs, Samuel Salen, M.D., Michael F. Sandler and David A. Wegmann.
The enclosed proxy is solicited by the Board of Directors of InnoServ.
Holders of common stock of record at the close of business on August 15, 1997
are entitled to notice of and to vote at the meeting or any adjournment(s)
thereof. In order to constitute a quorum for the conduct of business at the
meeting, holders of a majority of all the outstanding shares of InnoServ's
common stock must be present in person or be represented by proxy.
You are encouraged to attend the meeting in person, but if you cannot do
so, you are requested to complete, date and sign the enclosed proxy card and
to return it without delay in the enclosed postage-paid envelope. If you
attend the meeting, you may vote in person, if you wish, whether or not you
have returned your proxy. In any event, a proxy may be revoked at any time
before it is exercised.
By Order of the Board of Directors
Samuel Salen, M.D.
VICE CHAIRMAN AND SECRETARY
Arlington, Texas
August 22, 1997
<PAGE>
INNOSERV TECHNOLOGIES, INC.
320 WESTWAY, SUITE 520
ARLINGTON, TEXAS 76018
------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 15, 1997
------------
SOLICITATION AND REVOCATION OF PROXIES
This Proxy Statement is furnished to shareholders of InnoServ
Technologies, Inc., a California corporation ("InnoServ"), in connection with
the solicitation of proxies by and on behalf of the Board of Directors of
InnoServ (the "Board of Directors") for use at the Annual Meeting of
Shareholders of InnoServ to be held at 9:00 a.m., Central Daylight Time, on
September 15, 1997 in the El Dorado Meeting Room of the Arlington Hilton
Hotel, located at 2401 East Lamar Boulevard, Arlington, Texas 76006 or at any
adjournment(s) thereof (the "Annual Meeting") for the purposes set forth
below and in the accompanying Notice of Annual Meeting of Shareholders. This
Proxy Statement, together with the form of proxy, are being mailed on or
about August 22, 1997 to InnoServ's shareholders of record as of the close of
business on August 15, 1997.
A shareholder signing and returning the enclosed proxy has the power to
revoke it at any time before it is exercised by (1) attending the Annual
Meeting and voting in person, (2) duly executing and delivering a proxy for
the Annual Meeting bearing a later date, or (3) delivering written notice of
revocation to the Secretary of InnoServ at 320 Westway, Suite 520, Arlington,
Texas 76018 prior to exercise of the enclosed proxy at the Annual Meeting.
InnoServ will bear the entire cost of this solicitation of proxies,
including expenses in connection with preparing, assembling and mailing the
proxy solicitation materials and the charges and expenses of brokerage firms
and others for forwarding solicitation materials to beneficial owners. In
addition to solicitation by mail, proxies may be solicited personally or by
telephone by directors, officers or employees of InnoServ, who will receive
no additional compensation for such services.
ANNUAL REPORT
Concurrently herewith, InnoServ is providing to each shareholder of record
as of August 15, 1997, a copy of its Annual Report for the year ended April 30,
1997, including audited financial statements. The Annual Report does not
form any part of the material for the solicitation of proxies. Shareholders
of InnoServ may obtain, without charge, a copy of InnoServ's Annual Report on
Form 10-K filed with the Securities and Exchange Commission for the year
ended April 30, 1997, by writing to Investor Relations, InnoServ
Technologies, Inc., 320 Westway, Suite 520, Arlington, Texas 76018.
<PAGE>
PRINCIPAL SHAREHOLDERS
The close of business on August 15, 1997 is the record date for
determination of holders of InnoServ's common stock, $.01 par value (the
"Common Stock"), entitled to notice of and to vote at the Annual Meeting and
at any adjournment(s) thereof. On that date, there were outstanding and
entitled to vote 5,035,833 shares of Common Stock.
The following table sets forth information as of August 1, 1997 with
respect to beneficial ownership of InnoServ's Common Stock by (i) each
director and nominee for election as director, (ii) each Named Executive
Officer described under "Executive Compensation," (iii) all directors and
executive officers as a group, and (iv) each person known to InnoServ to be
the beneficial owner of five percent or more of the outstanding shares of
Common Stock.
Number of Shares Percentage
Name and Address (1) Beneficially Owned Ownership (2)
- ------------------------------------- ------------------- -----------------
Dudley A. Rauch 1,066,932 (3) 21%
Samuel Salen, M.D. 338,857 (4) 7%
Michael G. Puls 52,400 (5) 1%
Thomas E. Carroll 2,352,438 (6)(7) 44%
Michael F. Sandler 2,359,438 (6)(8) 44%
Bernard J. Korman 26,000 (8) *
Michael M. Sachs 134,012 (9) 3%
David A. Wegmann 13,661 (10) *
Thomas E. Hoefert 0 (11) *
MEDIQ Incorporated
One MEDIQ Plaza
Pennsauken, NJ 08110 2,351,438 (12) 44%
All directors and officers as a group
(8 persons)
3,992,300 (13) 73%
- --------------------------
* Less than one percent
NOTES:
(1) Except as otherwise indicated, the address of each person is c/o InnoServ
Technologies, Inc., 320 Westway, Suite 520, Arlington, Texas 76018 and
each person has sole voting and investment control with respect to the
shares listed.
(2) Percent of shares of Common Stock outstanding at August 1, 1997. Shares
subject to purchase pursuant to warrants and stock options exercisable at
such date or within 60 days thereafter are deemed to be outstanding for
purposes of calculating the percentage, where applicable.
2
<PAGE>
(3) Includes 52,868 shares held by Cecilia B. Rauch, Mr. Rauch's spouse; 13,743
shares held by the Rauch Family Foundation over which Mr. Rauch exercises
shared voting and investment powers; and 26,322 shares held by the Henry E.
Rauch Trust of 1994 over which Mr. Rauch exercises sole voting and
investment powers. Mr. Rauch disclaims beneficial ownership of all such
shares. Also includes 11,600 shares of Common Stock subject to outstanding
options issued pursuant to the 1992 Stock Incentive Plan which were, or
become, exercisable within 60 days of August 1, 1997.
(4) Of such shares (i) 121,962 shares of Common Stock are held by the Salen
Family Trust of 1995 (ii) 97,105 shares are owned by MSB Radiology Medical
Group, Inc. Profit Sharing Trust, (iii) 96,990 shares are owned by MSB
Radiology Medical Group, Inc. Pension Trust, (iv) 11,000 shares are owned
by MSB Radiology Medical Group, Inc. ("MSB"), and (v) 2,200 shares are held
by Dr. Salen's son. Also includes 9,600 shares subject to outstanding
options issued pursuant to the 1992 Stock Incentive Plan which were, or
become, exercisable within 60 days of August 1, 1997. Dr. Salen, as a
trustee, exercises shared voting and investment control over the shares
held by the Salen Family Trust of 1995, MSB Radiology Medical Group, Inc.
Profit Sharing Trust and MSB Radiology Medical Group, Inc. Pension Trust.
Dr. Salen exercises shared voting and investment control over the shares
held by MSB. Dr. Salen disclaims beneficial ownership of the 2,200 shares
held by his son.
(5) Includes 50,000 shares of Common Stock subject to outstanding options
issued pursuant to the Stock Option Agreement dated December 11, 1996 which
were exercisable at August 1, 1997.
(6) Includes 2,026,438 shares of Common Stock and 325,000 shares of Common
Stock issuable upon exercise of a warrant held by MEDIQ Incorporated
("MEDIQ"). Messrs. Carroll and Sandler are directors, executive officers
and shareholders of MEDIQ and, as such, share voting and investment control
over such shares. Messrs. Carroll and Sandler disclaim beneficial
ownership of such shares.
(7) Includes 1,000 shares of Common Stock subject to outstanding options
issued pursuant to the 1992 Stock Incentive Plan which are exercisable
within 60 days of August 1, 1997.
(8) Includes 5,000 shares of Common Stock subject to outstanding options
issued pursuant to the 1992 Stock Incentive Plan which were, or become,
exercisable within 60 days of August 1, 1997.
(9) Includes 2,860 shares of Common Stock owned by Mr. Sachs' spouse and 1,210
shares held by Mr. Sachs as trustee of a trust, as to which shares Mr.
Sachs disclaims beneficial ownership. Also includes 11,600 shares of
Common Stock subject to outstanding options issued pursuant to the 1992
Stock Incentive Plan which were, or become, exercisable within 60 days of
August 1, 1997.
(10) Includes 11,600 shares of Common Stock subject to outstanding options
issued pursuant to the 1992 Stock Incentive Plan which were, or become,
exercisable within 60 days of August 1, 1997.
(11) Resigned as Vice President and Chief Financial Officer of InnoServ
effective April 30, 1997.
3
<PAGE>
(12) Includes 325,000 shares of Common Stock issuable upon exercise of a warrant
held by MEDIQ. Bessie G. Rotko, Michael J. Rotko, Judith M. Shipon, and
PNC Bank, National Association, as Trustees under an Agreement of Trust
dated November 18, 1983, are the indirect beneficial owners of shares of
common and preferred stock representing approximately 19% and 56% of
MEDIQ's shares outstanding, respectively, and may therefore be deemed
"controlling persons" of MEDIQ. The address of the Trustees is c/o MEDIQ
Incorporated, One MEDIQ Plaza, Pennsauken, New Jersey, 08110.
(13) Includes 50,400 shares of Common Stock subject to outstanding options
issued pursuant to stock options which were, or become, exercisable within
60 days of August 1, 1997. Directors and officers, as a group, disclaim
beneficial ownership of 2,450,641 shares.
VOTING
Holders of Common Stock are entitled to one vote per share on each
matter submitted to or acted upon by the shareholders at the Annual Meeting
except for cumulative voting rights with respect to the election of directors
(see "Election of Directors"). The presence, either in person or by proxy,
of the holders of 2,517,917 shares of Common Stock, being a majority of the
outstanding shares of Common Stock entitled to vote, is necessary to
constitute a quorum for the transaction of business at the Annual Meeting.
Except for the election of directors (see "Election of Directors") the
affirmative vote of the majority of shares represented will be required to
approve any matter presented at the meeting. Shares represented by all valid
proxies will be voted in accordance with the instructions contained in the
proxies. In the absence of instructions, shares represented by valid proxies
will be voted for the election of the Board of Director's nominees and with
respect to any other matters, in the discretion of the proxy holders as
indicated on the proxy. Abstentions and broker non-votes will be counted
toward determining whether a quorum is present, but will have no effect on
the election of directors or approval of other matters.
ELECTION OF DIRECTORS
The directors of InnoServ are elected annually and serve until the next
annual meeting of shareholders or until their successors are elected and
qualified. Shareholders are entitled to a cumulative voting right in the
election of directors. Under cumulative voting, each shareholder is entitled
to a number of votes equal to the number of directors to be elected
multiplied by the number of shares the shareholder is entitled to vote. Such
votes may be cast for one nominee or distributed among two or more nominees.
The eight nominees for director receiving the highest number of votes at the
meeting will be elected.
No shareholder shall be entitled to cumulate votes for a nominee unless
such nominee's name has been placed in nomination prior to the voting and the
shareholder has given notice at the Annual Meeting prior to the voting of the
intention to cumulate votes. If any shareholder gives such notice, all
shareholders may cumulate votes. By delivering an executed proxy, a
shareholder gives the persons named in the accompanying proxy discretionary
authority to cumulate votes in the election of directors.
4
<PAGE>
The nominees for election as directors are set forth below. InnoServ
has no reason to believe that any nominee for election will not be able to
serve his prescribed term. Should any nominee become unavailable to serve,
the proxies solicited hereby may be voted for election of such other person
as shall be designated by the Board of Directors.
Director of
InnoServ
Name Age Position Since
- -------------------------------- --- ------------------------- -----------
Dudley A. Rauch (1)(2) 56 Director, Chairman of the 1981
Board of Directors
Samuel Salen, M.D. (2) 56 Director, Vice Chairman 1981
of the Board of Directors
and Secretary
Michael G. Puls 47 President and Chief 1995
Executive Officer;
Director
Thomas E. Carroll (3) 53 Director 1996
Bernard J. Korman (2) 65 Director 1994
Michael M. Sachs (1)(2) 56 Director 1981
Michael F. Sandler (1)(2)(3)(4) 51 Vice President and Chief 1994
Financial Officer;
Director
David A. Wegmann (2) 50 Director 1983
- --------------------
NOTES:
(1) Member of the Audit Committee of the Board of Directors.
(2) Member of the Compensation and Stock Option Committee of the Board of
Directors.
(3) Pursuant to the Agreement of Merger and Plan of Organization dated August
3, 1994 ("Agreement of Merger"), MEDIQ has the right, subject to
qualification by InnoServ, to designate two individuals to be nominated for
election to the Board of Directors of InnoServ. Messrs. Carroll and
Sandler are the individuals so designated by MEDIQ. MEDIQ's right to
designate two nominees exists until the shares of Common Stock received by
MEDIQ pursuant to the Agreement of Merger are distributed by MEDIQ to its
stockholders. A Registration Statement on Form S-3 has been filed, but
not declared effective, with the Securities and Exchange Commission in
order to provide MEDIQ the opportunity to distribute such shares. In the
Agreement of Merger, MEDIQ agreed to distribute the shares within 60 days
after the Common Stock is registered.
5
<PAGE>
(4) Appointed to the office of Vice President and Chief Financial Officer
effective May 1, 1997.
Further information with respect to the nominees and directors is set forth
below:
Mr. Rauch has been a private investor since 1992. Previously, Mr. Rauch
served as President and Chief Executive Officer of InnoServ from 1981 and was
elected Chairman and appointed Chief Executive Officer in 1986. He resigned as
Chief Executive Officer in 1992.
Dr. Salen is a radiologist and the President of MSB Radiology Medical
Group, Inc., a private physician's group practice. Dr. Salen served as
interim President and Chief Executive Officer of InnoServ from March 1995 to
December 1995.
Mr. Puls became President and Chief Executive Officer of InnoServ in
December 1995. Before joining InnoServ, Mr. Puls was a Group Director of
Venture Projects for Senmed Medical Ventures, a manager of commercialization
processes for advanced medical technologies, from January 1995 to December
1995. Mr. Puls was the President and Chief Executive Officer of EnviroSurgical,
Inc., an early-stage medical device company, from January 1993 to December
1994 and an independent consultant to medical device and service companies
from July 1991 to December 1992. He also served as the Vice President of
Business Development for EZEM Corporation, a provider of radiology products,
from January 1989 to June 1991.
Mr. Carroll has been the President, Chief Executive Officer and a director
of MEDIQ Incorporated ("MEDIQ"), a healthcare services company, since 1995.
Formerly he was the President and Chief Operating Officer of MEDIQ/PRN Life
Support Services, Inc. ("MEDIQ/PRN") from 1994 to 1995 and Executive Vice
President and Chief Operating Officer of MEDIQ/PRN from 1990 to 1994.
Mr. Korman has been Chairman of Graduate Health System, a not-for-profit
health system since 1995 and NutraMax Products, Inc., a consumer healthcare
products company since 1986. He also serves as director of The New America
High Income Fund, a financial services company; Pep Boys, Inc., an automotive
supplies company; Today's Man, Inc., a retail men's clothing sales company;
Omega Healthcare Investors, Inc., a healthcare REIT; Kapson Senior Quarter
Corporation, a provider of assisted living services; and Kranzo Realty Trust,
a shopping center REIT. Mr. Korman formerly was the President, CEO and
director of MEDIQ Incorporated, a healthcare services company, from 1980 to
1995.
Mr. Sachs, since 1990, has been the Chairman and Chief Executive Officer
of Westrec Properties, Inc., which operates marinas and related businesses.
From 1982 to 1990, Mr. Sachs was Executive Vice President, Director and General
Counsel of Public Storage, Inc., a rental storage facilities company. He also
serves on the Board of Directors of New Century Financial Corporation.
Mr. Sandler, a certified public accountant, has been Senior Vice
President, Finance and Chief Financial Officer since November 1988, Treasurer
since 1991, and director since March 1994, of MEDIQ. Mr. Sandler became Vice
President and Chief Financial Officer of InnoServ on May 1, 1997 while
continuing his employment with Mediq. He has served as
6
<PAGE>
Vice President, Treasurer and a director of MEDIQ/PRN since May 1992, and
also served as Chief Financial Officer of MEDIQ/PRN from January 1989 to
September 1992.
Mr. Wegmann has been a private investor since 1988. Mr. Wegmann serves
on the Board of Directors of Plantronics, Inc., a manufacturer of telephone
headset equipment.
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
During the fiscal year ended April 30, 1997, the Board of Directors of
InnoServ had an Audit Committee and a Compensation and Stock Option Committee.
The Audit Committee's functions include (i) reviewing and approving the
scope and general extent of the annual audit, the audit procedures utilized
and the basis for determining the compensation to be paid to the independent
auditors, (ii) recommending to the Board of Directors the engagement of the
independent auditors for the ensuing year, (iii) reviewing and reporting to
the Board of Directors concerning the results of the annual audit conducted
by the independent auditors, (iv) reviewing and reporting to the Board of
Directors concerning InnoServ's policies and procedures relating to accounting
and financial controls, (v) inquiring of appropriate personnel of InnoServ
and of the independent auditors as to deviations from or failures to fulfill
the corporation's responsibilities relating to accounting policies, internal
controls and financial reporting practices. The Committee held two meetings
during the 1997 fiscal year.
The Compensation and Stock Option Committee reviews salaries, bonuses
and other aspects of executive compensation and administers InnoServ's
Incentive Stock Option Plan. The Committee held two meetings during the 1997
fiscal year.
InnoServ does not have a Nominating Committee.
The Board of Directors of InnoServ held thirteen meetings during the
1997 fiscal year. Mr. Korman participated in ten of the meetings. All other
incumbent directors participated in all such meetings and all meetings held
by all committees of the Board of Directors on which the director served.
COMPENSATION OF DIRECTORS
Directors who are not compensated directly as officers receive $3,500
per quarter and $1,000 for each Board of Directors or Committee meeting
attended in person. Also, under the 1992 Stock Incentive Plan, on the first
business day following InnoServ's annual meeting of shareholders, each
nonemployee director is automatically granted options to purchase shares of
Common Stock equal to the lesser of (a) 3,000 shares of Common Stock and (b)
the number of shares of Common Stock that have an aggregate fair market value
of $20,000 on the date of grant. Directors who are compensated directly as
officers receive no additional compensation.
For his services as Vice President and Chief Financial Officer of
InnoServ, Mr. Sandler is not directly compensated by InnoServ. InnoServ has
agreed to reimburse MEDIQ, Mr. Sandler's employer and the beneficial owner of
44% of InnoServ's common stock, for
7
<PAGE>
time Mr. Sandler spends at InnoServ at an hourly rate based on MEDIQ's cost
plus travel and other related expenses. For services provided by Mr. Sandler
from April 1, 1997 through June 30, 1997, InnoServ reimbursed MEDIQ $21,534.
EXECUTIVE OFFICERS
The following table sets forth certain information regarding the
executive officers of InnoServ as of August 1, 1997.
Served as an
Officer
Name Age Position Since
- ---------------------- ---- --------------------------------- -------------
Michael G. Puls 47 President and Chief December 1995
Executive Officer, Director
Michael F. Sandler 51 Vice President and Chief May 1997
Financial Officer, Director
Each officer serves until a successor has been chosen or until the
officer's earlier resignation or removal. There is no family relationship
among any of the above executive officers or the directors of InnoServ. A
summary of the employment history of Messrs. Puls and Sandler appears above
under the heading "Election of Directors".
Mr. Sandler became Vice President and Chief Financial Officer of
InnoServ in May 1997.
8
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the annual and long-term compensation
paid or accrued by InnoServ for services in all capacities for each of the
periods ended April 30, 1996 and April 30, 1997 for InnoServ's Chief
Executive Officer and other executive officers ("Named Executive Officers")
at the end of fiscal 1997. The Named Executive Officers each joined InnoServ
during fiscal 1996 and, accordingly, no information is presented for fiscal
year 1995.
<TABLE>
Long-term
Annual Compensation Compen-
----------------------------- Other sation
Annual Awards/
Name and Principal Compen- Options All Other
Position Year Salary Bonus sation (Shares) Compensation
- ----------------------- ---- --------- ---------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Michael G. Puls (1) 1997 $203,333 $22,000 * 0 (2) $10,519 (6)
President, Chief 1996 $ 68,974 $ 0 * 150,000 (2) $90,481 (3)
Executive Officer
and Director
Thomas E. Hoefert (4) 1997 $152,500 $15,000 $23,247(5) 0 $1,000 (7)
Vice President and 1996 $ 43,846 $ 0 * 25,000 *
Chief Financial Officer
</TABLE>
- -----------
NOTES:
* Perquisites and other personal benefit amounts are not required to be
reported in Other Annual Compensation if not exceeding $50,000 or ten
percent of the executive's annual salary and bonus.
(1) Mr. Puls has served as President and Chief Executive Officer of InnoServ
since December 27, 1995.
(2) The options granted to Mr. Puls in fiscal 1996 were rescinded and
immediately reissued during fiscal 1997 pursuant to a free standing option
agreement, the terms of which are the same in all substantive respects as
the options granted in fiscal 1996, including exercise price, vesting and
term and are therefore not shown as granted during fiscal 1997.
(3) Represents payments for relocation assistance in conjunction with the
commencement of Mr. Puls' employment with InnoServ.
(4) Mr. Hoefert acted as Vice President and Chief Financial Officer of
InnoServ from January 17, 1996 to April 30, 1997.
(5) Represents payment for accrued vacation in conjunction with Mr. Hoefert's
separation from the employment of InnoServ.
9
<PAGE>
(6) Includes $9,519 for relocation assistance in conjunction with the
commencement of Mr. Puls' employment with InnoServ and $1,000 in employer-
matched 401(k) contributions.
(7) Represents employer-matched 401(k) contributions.
STOCK OPTION GRANTS
No stock options, warrants or rights to purchase securities were granted
to the Named Executive Officers during fiscal 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information concerning the fiscal
year-end value of unexercised options held by each Named Executive Officer.
No options were exercised by the Named Executive Officers in fiscal 1997.
Number of Unexercised Value of Unexercised Options
Options at Year-End at Year-End (1)
-------------------------- ---------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- --------------------- ----------- ------------- ----------- --------------
Michael G. Puls 50,000 100,000 $0 $0
Thomas E. Hoefert 8,333 (2) 16,667 (2) $0 $0
NOTES:
(1) Calculated using the closing price of the Common Stock on April 30, 1997
of $1.938 per share.
(2) Pursuant to the terms of the respective stock option agreement, options
granted to Mr. Hoefert expired unexercised July 29, 1997, 90 days after
Mr. Hoefert's resignation.
EMPLOYMENT AGREEMENTS
InnoServ has a letter agreement with Mr. Puls which provides that if his
employment is terminated by InnoServ for any reason other than cause (as
defined in the agreement), then InnoServ must pay a severance payment by the
continuation of his then current monthly salary and continued participation
in InnoServ's medical and insurance plans for twelve months. The agreement
also contain a two year covenant not to compete following termination of
employment.
The agreement with Mr. Puls also provides that, in the event of
termination of his employment with InnoServ without cause within six months
following a "change of control" of InnoServ (as defined in the agreement), he
will receive a severance payment as provided for above and a one-time payment
equivalent to his prior year's bonus. The agreement also provides for
immediate vesting of all his stock options upon such change of control.
Mr. Puls has an agreement with InnoServ that provides for a one-time
bonus (as defined in the agreement) of $200,000 in the event of a Sale of the
Company (as defined in the
10
<PAGE>
agreement), provided that he is a full time employee (subject
to requirements defined in the agreement) in good standing on the closing of
such a Sale of the Company.
Mr. Hoefert, had a similar agreement with InnoServ, providing for a
one-time bonus ranging from $150,000 to $250,000 depending on the sale
price (as defined in the agreement). Mr. Hoefert resigned with InnoServ
effective April 30, 1997 making him ineligible for the one-time bonus in the
event of a subsequent Sale of the Company.
Effective March 13, 1995, Mr. Alan Margulis resigned from his position
as President and Chief Executive Officer of InnoServ and entered into a
separation agreement with InnoServ which provides that InnoServ will pay to
Mr. Margulis a severance compensation of approximately $72,000 on each of
January 5, 1996, January 5, 1997 and January 5, 1998. The Separation
Agreement also terminated other certain agreements between Mr. Margulis and
InnoServ.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
InnoServ applies a consistent philosophy to compensation for all
employees, including executive officers. This philosophy is based on the
premise that the achievements of InnoServ result from the coordinated efforts
of all individuals working toward common objectives. InnoServ strives to
achieve those objectives through teamwork that is focused on meeting the
expectations of customers and shareholders.
COMPENSATION PHILOSOPHY
The goals of the compensation program are to align compensation with
business objectives and performance, and to enable InnoServ to attract,
retain and reward executive officers who contribute to the long-term success
of InnoServ. InnoServ's compensation program for executive officers is based
on the same principles applicable to compensation decisions for all employees
of InnoServ:
* InnoServ compensates competitively.
* InnoServ is committed to providing a pay program that helps attract and
retain the best people in the industry.
* InnoServ pays for relative sustained performance.
* Executive officers are rewarded based upon corporate performance, business
unit performance and individual performance. Individual performance is
evaluated by reviewing organizational and management development progress
against set objectives and the degree to which teamwork and company values
are fostered.
* InnoServ strives for fairness in the administration of compensation.
In light of InnoServ's compensation levels, the provisions of the
Revenue Reconciliation Act of 1993 which, under some circumstances, do not
allow publicly held corporations to take a tax deduction for remuneration of
its executive officers over $1 million per year have no effect on InnoServ's
compensation philosophy.
11
<PAGE>
COMPENSATION METHODS
InnoServ utilizes a compensation program that consists of cash and
equity based compensation.
InnoServ sets base salary for employees by reviewing the aggregate of
base salary for competitive positions in the market. InnoServ does not have
a defined annual bonus plan, but makes an annual review of each senior
management employee's performance based on InnoServ's compensation philosophy
as well as InnoServ's performance to determine any amount to be awarded to
such employee as a bonus.
InnoServ also has an incentive stock option program, the purpose of
which is to provide additional incentives to employees to work to maximize
shareholder value. The incentive stock option program also utilizes vesting
periods to encourage key employees to continue in the employ of InnoServ.
Senior management employees of InnoServ are evaluated annually based upon
individual performance and the performance of InnoServ to determine if the
awarding of incentive stock options is appropriate.
CHIEF EXECUTIVE OFFICER COMPENSATION
At the time Mr. Puls was hired, the Committee established Mr. Puls'
annual base salary at $200,000 based on Mr. Puls' past experience, input
received from the executive recruiting firm retained to conduct the search
for a new chief executive officer as to comparable compensation in the
market, and the Committee's expectations with respect to Mr. Puls' future
contributions to the furtherance of InnoServ's goals and objectives in a
turnaround situation, and other factors including the pay level of InnoServ's
former chief executive officers. During fiscal 1997 Mr. Puls received a
bonus of $22,000 and an increase in salary to $210,000 per year, primarily in
recognition of reductions in operating costs and increased cash flow. The
Compensation and Stock Option Committee will continue to evaluate Mr. Puls'
performance during fiscal 1998 to determine if further adjustments in the
form of salary increases or bonuses or additional issues of stock options are
warranted.
CONCLUSION
The Committee believes this executive compensation program serves the
interests of shareholders and InnoServ effectively. The compensation
vehicles are appropriately balanced to provide increased motivation for
executives to contribute to InnoServ's overall future success, thereby
enhancing the value of InnoServ for the shareholders.
COMPENSATION AND STOCK OPTION COMMITTEE
Dudley A. Rauch, Chairman
Samuel Salen, M.D.
Bernard J. Korman
Michael F. Sandler
Michael M. Sachs
David A. Wegmann
12
<PAGE>
PERFORMANCE GRAPH
The Securities and Exchange Commission requires InnoServ to include in this
Proxy Statement a linegraph presentation comparing cumulative, five-year
shareholder returns with an overall stock market index (Standard & Poors 500
Index) and either a nationally recognized industry standard or an index of
peer companies selected by InnoServ. InnoServ believes the various published
indices available for the healthcare industry are not representative of the
market in which InnoServ operates and it is not practical to construct a peer
issuer index as InnoServ's competitors are the service organizations of
medical equipment manufacturers and third party maintenance service
companies, only one of which is known to have publicly traded stock.
Therefore, the Board of Directors has approved the use of the Standard &
Poors Industrial Index which contains both medical equipment manufacturers
and healthcare providers as its peer group index. The table below compares
the total return during the five years ended April 30, 1997 of the Common
Stock of InnoServ to the Standard & Poors 500 Index and the Standard & Poors
Industrial Index, assuming an initial investment of $100 in each of the above
at their closing prices on April 30, 1992 and assuming the reinvestment of
all dividends, if any. The performance shown is not necessarily indicative
of future performance.
INDEXED RETURNS
Base Years Ending
Period
Company / Index Apr92 Apr93 Apr94 Apr95 Apr96 Apr97
- ------------------------------------------------------------------------
INNOSERV TECHNOLOGIES I 100 207.93 195.08 132.65 142.48 76.13
S&P 500 INDEX 100 109.24 115.05 135.14 175.97 220.20
S&P INDUSTRIALS INDEX 100 105.15 112.01 133.89 173.11 213.91
13
<PAGE>
OTHER MATTERS
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are no interlocks between InnoServ and other entities involving
InnoServ's executive officers and directors and those of other entities. No
member of the Compensation and Stock Option Committee is an officer or former
officer of InnoServ, except for Mr. Rauch who was the President and Chief
Executive Officer of InnoServ from 1981 to 1992 and Dr. Salen who was the
interim President and Chief Executive Officer of InnoServ from March 13, 1995
to December 26, 1995 and Mr. Sandler, who has served since May 1997 as
InnoServ's Vice President and Chief Financial Officer.
INDEPENDENT AUDITORS
Ernst & Young LLP served as InnoServ's independent auditors for the year
ended April 30, 1997. A representative of that firm is expected to be at the
Annual Meeting of Shareholders and will have an opportunity to make a
statement, if desired. The representative will also be available to respond
to appropriate questions from shareholders.
SHAREHOLDERS PROPOSALS
Any proposal of a shareholder intended to be presented at InnoServ's
1998 Annual Meeting of Shareholders must be received by InnoServ for
inclusion in the Proxy Statement and form of Proxy for that meeting no later
than April 25, 1998.
COMPLIANCE WITH SECTION 16 OF THE SECURITIES AND EXCHANGE ACT OF 1934
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 and the
rules promulgated thereunder, officers and directors of InnoServ and persons
who beneficially own more than 10 percent of a registered class of InnoServ's
equity securities are required to file with the Securities and Exchange
Commission and furnish to InnoServ reports of ownership and changes in
ownership of all classes of InnoServ's equity securities. Based solely on
its review of the copies of such reports received by it during or with
respect to the year ended April 30, 1997, InnoServ believes that all reports
required to be filed during or with respect to the 1997 fiscal year, or prior
fiscal years, by any person who was an officer, director or beneficial owner
of more than 10 percent of a registered class of its equity securities at any
time during the 1997 fiscal year were filed timely.
14
<PAGE>
MISCELLANEOUS
As of the date of this Proxy Statement, there are no other matters to be
brought before the Annual Meeting. Should any other matters come before the
Annual Meeting, action may be taken thereon pursuant to the proxies in the
form enclosed, which confer discretionary authority on the persons named
therein or their substitutes with respect to such matters.
By Order of the Board of Directors
Samuel Salen, M.D.
VICE CHAIRMAN AND SECRETARY
Arlington, Texas
August 22, 1997
15
<PAGE>
PROXY
INNOSERV TECHNOLOGIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF INNOSERV
TECHNOLOGIES, INC. FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
SEPTEMBER 15, 1997.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders and Proxy Statement (the "Proxy Statement"), each
dated August 22, 1997 and the Annual Report to Shareholders, and revoking all
prior proxies, hereby constitutes and appoints Michael G. Puls and Michael F.
Sandler and each of them, with full power of substitution, attorneys-in-fact
and proxies of the undersigned to represent the undersigned and to vote all
the shares of Common Stock, $.01 par value, of InnoServ Technologies, Inc.
which the undersigned would be entitled to vote if personally present at the
Annual Meeting of Shareholders in the El Dorado Meeting Room of the Arlington
Hilton Hotel, located at 2401 East Lamar Boulevard, Arlington, Texas 76006,
on September 15, 1997 at 9:00 a.m., Central Daylight Time, or at any
adjournment(s) thereof, in the following manner:
WHEN THIS PROXY IS PROPERLY EXECUTED AND RETURNED, THE SHARES IT
REPRESENTS WILL BE VOTED AS DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER.
IF NO DIRECTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR ITEM 1 AND IN
ACCORDANCE WITH THE BEST JUDGMENT OF THE PROXY HOLDERS WITH RESPECT TO ANY
OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING.
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE SO THAT IT MAY BE COUNTED AT THE ANNUAL MEETING ON SEPTEMBER 15, 1997.
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR PROPOSAL 1 .
<TABLE>
<S> <C> <C>
1. Election of Directors.
Nominees: Thomas E. Carroll, Bernard J. Korman, Michael G. Puls, Dudley A. Rauch, Michael M. Sachs,
Samuel Salen, M.D., Michael F. Sandler and David A. Wegmann.
/ / FOR all nominees listed above / / WITHHOLD AUTHORITY
(except as marked to the contrary below). to vote for all nominees listed above.
(INSTRUCTION: To withhold authority to vote for any individual, write that nominee's name on the space provided
below.) IF YOU DO NOT WITHHOLD AUTHORITY TO VOTE FOR THE ELECTION OF ANY NOMINEE, YOUR PROXIES WILL VOTE FOR ALL
NOMINEES LISTED ABOVE.
--------------------------------------------------------------------------------------------------------------------
2. IN ACCORDANCE WITH THEIR BEST JUDGMENT, the proxies are authorized to vote with respect to any matter
which may properly come up before the Annual Meeting.
For Against Abstain
- ---------------------------------------
Signature(s)
Dated: _________________________, 1997
Please date and sign exactly as your name or names appear herein. If there is
more than one owner of the shares represented, all owners should sign.
Executors, administrators, trustees, guardians, attorneys and corporate
officers should indicate their fiduciary capacity or full title in signing.
</TABLE>
