<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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 Section 240.14a-11(c) or
Section 240.14a-12
NETMED, 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>
NETMED, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
MAY 15, 1997
AND
PROXY STATEMENT
- --------------------------------------------------------------------------------
IMPORTANT
PLEASE MARK, SIGN AND DATE YOUR PROXY
AND PROMPTLY RETURN IT IN THE ENCLOSED ENVELOPE
<PAGE>
NETMED, INC.
425 Metro Place North
Suite 140
Dublin, Ohio 43017
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 15, 1997
To Our Shareholders:
The Annual Meeting of Shareholders of NetMed, Inc. (the "Company") will
be held at the Wyndham Dublin Hotel, located at 600 Metro Place North,
Dublin, Ohio 43017, on Thursday, May 15, 1997, at 10:00 a.m. local time, for
the following purposes:
(1) To elect Class I Directors of the Company to serve for a two-year
term expiring at the 1999 Annual Meeting of Shareholders.
(2) To amend the Company's 1995 Amended and Restated Stock Option
Plan.
(3) To ratify the selection of Ernst & Young LLP as the Company's
independent auditors for the 1997 fiscal year.
(4) To transact any other business which may properly come before the
meeting or any adjournment thereof.
Holders of record of the Company's common shares at the close of business
on March 31, 1997, will be entitled to vote at the Annual Meeting of
Shareholders.
You will be most welcome at the meeting, and we hope you can attend.
Directors and officers of the Company and representatives of its independent
public accountants will be present to answer your questions and to discuss
the Company's business.
We urge you to execute and return the enclosed proxy as soon as possible
so that your shares may be voted in accordance with your wishes. If you
attend the meeting, you may vote in person and your proxy will not be used.
By Order of the Board of Directors,
David J. Richards
President
--------------------------------------------------------
PLEASE SIGN AND MAIL THE ENCLOSED PROXY
IN THE ACCOMPANYING ENVELOPE
NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES
--------------------------------------------------------
<PAGE>
NETMED, INC.
425 Metro Place North
Suite 140
Dublin, Ohio 43017
_____________________________
PROXY STATEMENT
_____________________________
ANNUAL MEETING OF SHAREHOLDERS
MAY 15, 1997
_____________________________
This Proxy Statement is furnished to the shareholders of NetMed, Inc.
(the "Company") in connection with the solicitation of proxies to be used in
voting at the Annual Meeting of Shareholders to be held on May 15, 1997, at
the Wyndham Dublin Hotel, Dublin, Ohio 43017, and at any adjournment thereof
(the "Annual Meeting"). The enclosed proxy is solicited by the Board of
Directors of the Company. This Proxy Statement and the enclosed proxy will be
first sent or given to the Company's shareholders on approximately April 15,
1997.
The Company will bear the cost of the solicitation of proxies, including
the charges and expenses of brokerage firms and others for forwarding
solicitation material to beneficial owners of shares. Representatives of the
Company may solicit proxies by mail, telegram, telephone, or personal
interview.
The shares represented by the accompanying proxy will be voted as
directed if the proxy is properly signed and received by the Company prior to
the Annual Meeting. If no direction is made to the contrary, the proxy will
be voted FOR each nominee for director named herein; FOR the amendment to the
1995 Amended and Restated Stock Option Plan; FOR the ratification of the
selection of Ernst & Young LLP as the Company's independent auditors for the
fiscal year 1997; and, at the discretion of persons acting under the proxy,
to transact such other business as may properly come before the Annual
Meeting or any adjournment thereof. Any shareholder giving a proxy has the
power to revoke it at any time before it is exercised by filing a written
notice with the Secretary of the Company prior to the Annual Meeting.
Shareholders who attend the Annual Meeting may vote in person and their
proxies will not be used.
Holders of record of the Company's common shares, without par value
("Common Shares") at the close of business on March 31, 1997, will be
entitled to vote at the Annual Meeting. At that time, the Company had
10,947,114 Common Shares outstanding and entitled to vote. Each Common Share
outstanding on the record date entitles the holder to one vote on each matter
submitted at the Annual Meeting.
The presence, in person or by proxy, of holders of a majority of the
outstanding Common Shares of the Company is necessary to constitute a quorum
for the transaction of business at the Annual Meeting. Abstentions and broker
non-votes are counted for purposes of determining the presence or absence of
a quorum. Broker non-votes occur when brokers, who hold their customers'
shares in street name, sign and submit proxies for such shares and vote such
shares on some matters, but not others. Typically, this would occur when
brokers have not received any instructions from their customers, in which
case the brokers, as the holders of record, are permitted to vote on
"routine" matters, which typically includes the election of directors.
The election of the director nominees requires the favorable vote of a
plurality of all votes cast by the holders of Common Shares at a meeting at
which a quorum is present. Proxies that are marked "Withhold Authority" and
broker non-votes will not be counted toward such nominee's achievement of a
plurality and thus will have no effect. Each other
<PAGE>
matter to be submitted to the shareholders for approval or ratification at
the Annual Meeting requires the affirmative vote of the holders of a majority
of the Common Shares present and entitled to vote on the matter. For purposes
of determining the number of Common Shares voting on the matter, abstentions
will be counted and will have the effect of a negative vote; broker non-votes
will not be counted and thus will have no effect.
ELECTION OF DIRECTORS
The Company's Regulations provide for a classified board of directors
consisting of two classes, unless there are nine (9) or more directors, in
which case there will be three classes. There are currently seven (7)
directors, therefore there are two classes of directors. Each class of
directors consists, as nearly as practical, of one-half of the total number
of directors. The Board of Directors proposes the re-election of all four
members of Class I at the Annual Meeting. Three incumbent Class II Directors
will continue in office. The nominees for Class I Director, if elected, will
serve for a two-year term expiring at the 1999 Annual Meeting of
Shareholders.
David J. Richards, S. Trevor Ferger, Cecil J. Petitti, and Michael S.
Blue, M.D. are currently Class I Directors and are being nominated by the
Board of Directors for re-election as a Class I Directors.
It is intended that, unless otherwise directed, the shares represented by
the enclosed proxy will be voted FOR the election of Mr. Richards, Mr.
Ferger, Mr. Petitti, and Dr. Blue as Class I Directors. In the event that any
nominee for director should become unavailable, the number of directors of
the Company may be decreased pursuant to the Regulations, or the Board of
Directors may designate a substitute nominee, in which event the Common
Shares represented by the enclosed proxy will be voted for such substitute
nominee.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
ELECTION OF ALL NOMINEES FOR DIRECTOR.
The following table sets forth for the nominee and each continuing director
of the Company, such person's name, age, and his position with the Company:
CLASS I DIRECTORS
(NOMINEES FOR TERMS EXPIRING IN 1999)
NAME AGE POSITION
--------------------- --------- -----------------------------------
David J. Richards 45 President, Secretary, Director
S. Trevor Ferger 42 Director
Cecil J. Petitti 42 Director
Michael S. Blue 41 Director
-2-
<PAGE>
CLASS II DIRECTORS
(TERMS EXPIRING IN 1998)
NAME AGE POSITION
-------------------- ----------- -----------------------------------
John P. Kennedy 42 Vice President, Treasurer,
Asst. Secretary, Director
James F. Zid 63 Director
Robert J. Massey 51 Director
DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS
DAVID J. RICHARDS, a founder of the Company, has served as President and
director of the Company since its inception. From 1981 until commencing
employment with the Company, Mr. Richards was a practicing attorney and, from
1983, a partner, in the law firm of Crabbe, Brown, Jones, Potts & Schmidt in
Columbus, Ohio. from 1985 through 1994, Mr. Richards was engaged in real estate
development as President of Sunset Development, a multi-family housing
developer.
Mr. Richards has an accounting degree from Wright State University, and
earned his Juris Doctor degree from the Ohio State University College of Law in
1977.
JOHN P. KENNEDY is also a founder of the Company and has served as an
officer and director since its inception. Mr. Kennedy is currently Vice
President - Business Development. Until December 31, 1996, Mr. Kennedy was of
counsel with the law firm of Crabbe, Brown, Jones, Potts & Schmidt in Columbus,
Ohio, where he was a partner from 1986 to 1994. Mr. Kennedy has been a
Columbus, Ohio City Councilman since 1988, and was President of Council from
1994 to 1996.
Mr. Kennedy has a Bachelor of Arts in Finance from the University of
Bridgeport, Bridgeport, Connecticut and earned his Juris Doctor from the Ohio
Northern University College of Law in 1978.
S. TREVOR FERGER is President of Ferger & Associates, a master broker
specializing in the sales and marketing of consumer goods to grocery stores. He
also serves as Director of Sales for Acosta Sales Company, a marketer of
consumer products. Mr. Ferger has been active with Ferger & Associates since
1979. Prior to that time he was a sales manager with Procter & Gamble. Mr.
Ferger has a Bachelor of Arts degree from Wake Forest University and a M.B.A.
degree from Xavier University. Mr. Ferger has been a director of the Company
since June, 1994.
CECIL J. PETITTI has been co-owner of Chaney & Petitti Insurance Agency
located in Dublin, Ohio since 1984. Chaney & Petitti specialize in multiple
insurance products, including medical insurance. Prior to merging with the
Chaney Group, Mr. Petitti was associated with the Burke, Kendall & Petitti
Insurance Agency. Mr. Petitti is also President of NetWalk, Inc., a
Columbus-based Internet service provider. Mr. Petitti earned a Bachelor of
Arts degree in Education from The Ohio State University. Mr. Petitti has
been a director of the Company since June, 1994.
MICHAEL S. BLUE, M.D. has been a practicing physician since 1980. Dr. Blue
graduated from Miami University of Ohio in 1976 with a Bachelor of Science in
Zoology and graduated from The Ohio State University with a Doctor of Medicine
in 1979. Dr. Blue has been President of Phoenix Group International, Ltd. and
North American International Trade Group, Inc. since 1994 and 1992,
respectively. He has also been Secretary/Treasurer and member of the Board of
Directors of Columbus Oilfield Exploration, Inc. since 1987. Dr. Blue has been
a director of the Company since December 1996.
-3-
<PAGE>
ROBERT J. MASSEY has served on the Board of Directors of the Company since
January, 1997. He is the past President and Chief Executive Officer of
CompuServe Corporation, an office he retained for one and a half years. Prior
to serving as CompuServe's CEO, Mr. Massey held numerous executive positions
with the firm over a twenty year period in various sales, marketing and general
management areas of responsibility, plus served on the company's Board of
Directors during the period 1991 through 1997. Mr. Massey also was a sales
manager with RIM and Control Data Corporation. He is a graduate of Holy Cross
College, Worchester, Massachusetts and received an MBA in Finance from Syracuse
University. He is currently President of RJM & Associates, a Columbus, Ohio
based consulting firm.
JAMES F. ZID has served on the Board of Directors of the Company since
February, 1997. Mr. Zid retired as the managing partner of the Columbus office
of Ernst & Young LLP in 1993. While at Ernst & Young Mr. Zid worked with
clients in the banking, health care, insurance, and manufacturing industries.
Mr. Zid has served on the Board of Directors of the Greater Columbus Chamber of
Commerce, the Health Coalition of Central Ohio, the Franklin County Academy of
Medicine Foundation, and the Columbus Museum of Art. Mr. Zid currently serves
on the Board of Directors of Neoprobe Corporation and Central Benefits Insurance
Company.
MEETINGS, COMMITTEES, AND COMPENSATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company had a total of four meetings during
the year ended December 31, 1996. During 1996, each of the directors
attended 75% or more of the total number of (i) meetings of the Board, and
(ii) meetings of committees of the Board on which such director served.
Directors who are not employees of the Company received no cash compensation
or expense reimbursement for their services. In 1996 and prior years,
non-employee directors received stock options as compensation for their
services. The exercise price for such options ranges from $3.25 to $11.00
per share. In February 1997, each non-employee director received options to
purchase 2,000 Common Shares, exercisable at $8.40 per share for their
services in 1996. Such options are currently exercisable and will terminate
10 years from the date of grant.
Prior to December 1996, the Board of Directors had no standing committees,
and all corporate decisions were made by the entire Board. On December 12,
1996, the Board appointed an Audit Committee consisting of Messrs. Richards,
Blue and Ferger and a Compensation Committee consisting of Messrs. Richards,
Petitti and Rodney M. Kinsey. Following Mr. Kinsey's resignation from the Board
of Directors in February 1997, the Compensation Committee was reconstituted to
consist of Messrs. Blue, Petitti, and Massey. The Compensation Committee has
the authority and responsibility to determine and administer the Company's
officers compensation policies and to establish the salaries for executive
officers, the formula for bonus awards to executive officers, and the grant of
stock options to executive officers and other key employees under the Company's
1995 Amended and Restated Stock Option Plan.
EXECUTIVE OFFICERS
In addition to David J. Richards and John P. Kennedy, the following person
is an executive officer of the Company:
KENNETH B. LEACHMAN, age 43, was elected as Vice President of Finance in
October 1996. Mr. Leachman has held various financial management positions with
several technology based companies, including Corporate Controller for Goal
Systems International from 1989 to 1991 and as Chief Financial Officer of
Sarcom, Inc. from 1992 to 1994.
Mr. Leachman has a Bachelor of Science degree in accounting from The Ohio
State University in 1975 and earned his CPA certificate from the State of Ohio
in 1977.
Officers are elected annually by the Board of Directors and serve at its
discretion. There are no family relationships among directors and executive
officers of the Company.
-4-
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid during fiscal 1996 to the Company's Chief Executive Officer and each of
the Company's other executive officers whose annual salary and bonus exceeded
$100,000 for each of the Company's last three fiscal years ended December 31,
1996 (collectively, the "Named Executive Officer").
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------- ------------
AWARDS
------------
SECURITIES
UNDERLYING ALL OTHER
SALARY BONUS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($)(1)
- ----------------------------- ------ -------- ---------- ------- ------------
David J. Richards, President 1996 $125,000 $100,000(2) 0 $ 9,338
1995 $125,000 0 0 $12,228
1994 $108,333 0 0 $ 8,900
(1) Includes matching contribution to the Company's 401(k) Plan and car
allowance.
(2) Consists of a $50,000 cash bonus for 1995, which was paid in 1996 and
$50,000 represented by the forgiveness of indebtedness to the Company,
which was approved by the Board of Directors in 1995 and conditioned on
completion of the merger described below under "Certain Relationships and
Related Party Transactions" (the "Merger").
The Company has no employment agreement with Mr. Richards, and no changes
in the amount or nature of Mr. Richards' salary or benefits were made during
1996.
REPORT ON 1996 EXECUTIVE COMPENSATION
The Company's compensation policies have been designed to attract, retain
and motivate the executive talent required to achieve the Company's business
objectives and to increase shareholder value. Prior to December 12, 1996,
the executive compensation policies and decisions were made by the entire
Board of Directors. On December 12, 1996, the Board of Directors appointed a
Compensation Committee (the "Committee"), which currently consists of Messrs.
Blue, Petitti and Massey. The Committee plans to annually review the
competitiveness of the Company's executive compensation programs.
During 1996, the Board made no changes to Mr. Richards' base salary and
benefits from what had been paid in 1995. The Board in 1996 approved a $50,000
cash bonus to Mr. Richards based upon his individual performance during the year
ended 1995, including his efforts toward increasing the Company's revenues,
working towards a settlement of outstanding issues involving the Company's
license with NSI, and initiation of the process that lead to the successful
completion of the Merger. In addition, in 1995 the Board had approved an
additional bonus (in the form of forgiveness of a $50,000 advance by the
Company) in the event of a successful completion of a merger with other
-5-
<PAGE>
licensees of the PAPNET-Registered Trademark- Testing System, which bonus was
deemed to have been earned in 1996 upon completion of the Merger. Mr. Richards
did not participate in any Board deliberations concerning his compensation.
The Company's compensation for executive officers consists of a base
salary, a benefits package, cash bonus and long-term incentives, which have
historically been in the form of stock options. The annual cash bonus and stock
options are variable, may fluctuate significantly from year to year, and are
directly tied to Company and individual performance. The Company believes that
making stock options a significant portion of the total compensation package
serves to align the economic interests of the executive with those of the
Company and its shareholders.
The foregoing Report on 1996 Executive Compensation is submitted by those
members of the Board of Directors who were directors during 1996: David M.
Richards, Chairman, S. Trevor Ferger, Cecil J. Petitti, Michael S. Blue, M.D.,
and John P. Kennedy.
OWNERSHIP OF COMMON SHARES BY MANAGEMENT AND PRINCIPAL SHAREHOLDERS
SECURITY OWNERSHIP BY MANAGEMENT
The following table sets forth information regarding beneficial ownership
of the Company's Common Shares by each director, the Company's executive officer
named in the Summary Compensation Table, and the directors and executive
officers of the Company as a group as of March 31, 1997:
SHARES BENEFICIALLY OWNED (1)
-----------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT
- ----------------------------------------------- ------------- --------------
David J. Richards(2) 1,120,052 10.0
John P. Kennedy(3) 662,244 6.0
S. Trevor Ferger(4) 293,825 2.7
Cecil J. Petitti(5) 165,976 1.5
Michael S. Blue 286,717 2.6
Robert J. Massey 48,922 *
James F. Zid 3,800 *
Rodney M. Kinsey(6) 617,085 5.6
All directors and executive officers as a group
(8 persons) 3,186,087 28.3
______________________
* Represents beneficial ownership of less than 1% of the Company's
outstanding Common Shares.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission which generally attribute beneficial
ownership of securities to persons who possess sole or shared voting power
and/or investment power or as to which the person has the right to acquire
the beneficial ownership within 60 days of March 31, 1997. Unless
otherwise indicated, voting power and investment power are exercised solely
by the person named above or shared with members of his household.
-6-
<PAGE>
(2) Includes 287,020 shares which may be purchased under stock options
exercisable within 60 days of March 31, 1997.
(3) Includes 26,000 shares which may be purchased under stock option
exercisable within 60 days of March 31, 1997.
(4) Includes 10,000 shares which may be purchased under stock options
exercisable within 60 days of March 31, 1997.
(5) Includes 10,000 shares which may be purchased under stock options
exercisable within 60 days of March 31, 1997.
(6) Includes 494,385 held of record by Mr. Kinsey, 80,331 shares held by Mr.
Kinsey's wife, and 35,702 shares held by his children. Mr. Kinsey resigned
from the board of directors effective February 26, 1997. Pursuant to the
Company's Regulations, Mr. Zid was appointed by the board of directors to
replace Mr. Kinsey as a Class II Director. Also includes 6,667 shares
which may be purchased under stock options exercisable within 60 days of
March 31, 1997.
SECURITY OWNERSHIP BY PRINCIPAL SHAREHOLDERS
The following table sets forth information as of March 31, 1997 relating to
the beneficial ownership of Common Shares by each person known by the Company to
own beneficially more than 5% of the outstanding Common Shares.
SHARES BENEFICIALLY OWNED (1)
-----------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT
- ----------------------------------------------- ------------- --------------
David J. Richards(2) 1,120,052 10.0
John P. Kennedy(3) 662,244 6.0
Rodney M. Kinsey(4) 617,085 5.6
Carl Genberg(5) 695,000 6.3
______________________
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission which generally attribute beneficial
ownership of securities to persons who possess sole or shared voting power
and/or investment power or as to which the person has the right to acquire
the beneficial ownership within 60 days of March 31, 1997. Unless
otherwise indicated, voting power and investment power are exercised solely
by the person named above or shared with members of his household.
(2) Includes 287,020 shares which may be purchased under stock options
exercisable within 60 days of March 31, 1997. Mr. Richards' address is 425
Metro Place North, Suite 140, Dublin, Ohio 43017.
(3) Includes 26,000 shares which may be purchased under stock options
exercisable within 60 days of March 31, 1997. Mr. Kennedy's address is
425 Metro Place North, Suite 140, Dublin, Ohio 43017.
(4) Includes 494,385 held of record by Mr. Kinsey, 80,331 shares held by Mr.
Kinsey's wife, and 35,702 shares held by his children. Mr. Kinsey resigned
from the board of directors effective February 26, 1997. Pursuant to the
Company's Regulations, Mr. Zid was appointed by the board of directors to
replace Mr. Kinsey as a Class II Director. Mr. Kinsey's address is 8651
Gairloch Ct., Dublin, Ohio 43017. Also includes 6,667 shares which may be
purchased under stock options exercisable within 60 days of March 31, 1997.
(5) Mr. Genberg's address is 101 Convention Center Drive, Suite 1001, Las
Vegas, Nevada 89109.
-7-
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
There were no options granted to the Named Executive Officer during the
fiscal year ended 1996.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
The following table provides certain information regarding the number and
value of stock options held by the Company's Named Executive Officer at
December 31, 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT FISCAL
AT FISCAL YEAR-END (#) YEAR-END ($)(1)
------------------------------ ------------------------------
SHARES
ACQUIRED
ON VALUE
EXERCISE REALIZED
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David J. Richards -- -- 287,020 -- $2,028,395 --
</TABLE>
(1) Represents the total gain which would be realized if all in-the-money
options held at year end were exercised, determined by multiplying the
number of shares underlying the options by the difference between the per
share option exercise price and the per share fair market value at year end
($8.125 on December 31, 1996). An option is in-the-money if the fair
market value of the underlying shares exceeds the exercise price of the
option.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-8-
<PAGE>
THE FOLLOWING PERFORMANCE GRAPH SHALL NOT BE DEEMED INCORPORATED BY
REFERENCE BY ANY GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY
STATEMENT INTO ANY OF THE COMPANY'S FILINGS UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, EXCEPT TO THE
EXTENT THAT THE COMPANY SPECIFICALLY INCORPORATES THIS INFORMATION BY
REFERENCE, AND SHALL NOT OTHERWISE BE DEEMED FILED UNDER SUCH ACTS.
PERFORMANCE GRAPH
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, THE AMEX MARKET VALUE INDEX
AND THE S&P HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) INDEX
The following Performance Graph compares the performance of the Company
with that of the AMEX Market Value Index and the S&P Health Care (Medical
Products & Supplies) Index. The comparison of the cumulative total return to
shareholders for each of the periods assumes that $100 was invested on May 12,
1994 in the Company's Common Shares, and in the AMEX Market Value Index, and
the S&P Health Care (Medical Products & Supplies) Index and that all dividends
were reinvested.
RESEARCH Total Return - Data Summary
NMD
Cumulative Total Return
--------------------------------
5/12/94 12/94 12/95 12/96
NETMED INC OHIO NMD 100 93 357 227
AMEX MARKET VALUE IXAX 100 99 125 133
S & P HLTH CARE (MED PRODS & SUPPLS) IMDP 100 125 211 243
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The Company recently completed a merger (the "Merger") with five companies
who had acquired the rights to market the PAPNET-Registered Trademark- System in
the states of Missouri, Georgia, and North Carolina (collectively the
"Predecessor Companies"). The Company was the surviving corporation in the
Merger. The Merger was completed on December 16, 1996. Upon completion of the
Merger, and simultaneously with the filing of the Certificate of Merger, the
Company changed its name from Papnet of Ohio, Inc. to NetMed, Inc.
The Company entered into a loan agreement, dated March 14, 1996 with
Cytology West, Inc. ("CWI") and Papnet Utah, Inc. ("PUI"). CWI is licensed to
sell the PAPNET-Registered Trademark- Testing System and the PAPNET-Registered
Trademark- service in Arizona, Nevada and San Diego County California. PUI is
licensed to sell PAPNET-Registered Trademark- Testing System and the
PAPNET-Registered Trademark- service in Utah. Carl Genberg, President of CWI,
owns 695,000 shares of the Company's common stock. CWI and PUI were originally
to have been a parties to a merger with the Company and the Predecessor
Companies, but that transaction was abandoned by the parties. CWI and PUI
abandoned the transaction in order to pursue other technologies that the Company
and the Predecessor Companies were not ready to pursue without assurances of the
ability to obtain the financing necessary to commercialize them. The loan
agreement provided for advances to CWI of up to $585,000 to cover certain
operating expenses, expenses associated with the abandoned merger, and the
acquisition of new technology. No specific amount was established for advances
to PUI. The advances bear interest at the rate of 7% per annum. No further
advances will be made under the loan agreement and as of December 31, 1996, the
balance due was $130,143. CWI has agreed to transfer 16,331 shares of NetMed
common stock to the Company in exchange for the cancellation of the outstanding
balance.
AMENDMENT TO THE COMPANY'S 1995 STOCK OPTION PLAN
The proposed amendment to the 1995 Amended and Restated Stock Option Plan
(the "Plan") would increase the number of shares of the Company's common stock
subject to the Plan from 300,000 shares to 750,000 shares. Approval of this
amendment requires the affirmative vote of the holders of a majority of the
shares of the Company's common stock represented at the Annual Meeting. THE
BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR APPROVAL OF THE
AMENDMENT TO THE PLAN.
The Company's Board of Directors believes that providing selected persons
with an opportunity to invest in the Company will give them additional incentive
to increase their efforts on behalf of the Company and will enable the Company
to attract and retain the best available associates, officers, directors,
consultants and advisors. The description in this Proxy Statement of the Plan
is included solely as a summary, does not purport to be complete and is
qualified in its entirety by the Plan. The Company's Board of Directors has
approved an amendment to the Plan to increase the number of shares of the
Company's Common Stock reserved for issuance upon the exercise of options
granted under the Plan from 300,000 shares to 750,000 shares.
1995 STOCK OPTION PLAN
The Plan was adopted by the Board of Directors on September 8, 1995, and
approved by the shareholders on September 28, 1995. The Plan was amended and
restated by the Board of Directors, under authority granted in the Plan, to make
changes to facilitate compliance with Section 16 of the Securities Act of 1934.
Options granted under the Plan may either meet the requirements of Section 422
("Incentive Options") of the Internal Revenue Code of 1986, as amended (the
"Code") or not meet such requirements ("Nonqualified Options"). Key employees,
officers, and directors of, and consultants and advisors who render services to,
the Company are eligible to receive options under the Stock Option Plan.
The Plan may be administered by the Board of Directors or a Stock Option
and Compensation Committee (the "Committee") consisting of directors who are not
employees of the Company. The Board or Committee determines the number of
shares subject to option, the duration of the option, the per share exercise
price, the rate and manner of exercise, and whether the option is intended to be
a Nonqualified Option or an Incentive Option. An incentive Option
-10-
<PAGE>
may not have an exercise price less than fair market value of the Company's
common stock on the date of grant or an exercise period that exceeds ten
years from the date of grant and is subject to certain other limitations
which allow the option holder to qualify for favorable tax treatment. None
of these restrictions applies to the grant of Nonqualified Options, which may
have an exercise price less than the fair market value of the underlying
common stock on the date of grant and may be exercisable for an indeterminate
period of time. The Board or Committee also has the discretion under the
Plan to make cash grants to option holders that are intended to offset a
portion of the taxes payable upon exercise of Nonqualified Options or on
certain dispositions of shares acquired under Incentive Options.
To date, the criteria applied by the Board of Directors in determining
the eligibility, amount, exercise price, and the vesting of stock options
awarded under the Plan have been determined on a case-by-case basis. While no
specific formula has been adopted., the Board of Directors has considered
performance, overall contribution to the Company, the number of vested and
unvested stock options already held and other similar factors in awarding stock
options.
The exercise price of the option may be paid in cash or, with the consent
of the Board or Committee, (i) with previously acquired shares of common stock
valued at their fair market value on the date they are tendered, (ii) delivery
of a full recourse promissory note, the terms and conditions of which will be
determined by the Board, or (iii) by delivery of written instructions to forward
the notice of exercise to a broker or dealer and to deliver to a specified
account a certificate for the shares purchased upon exercise of the option and a
copy of irrevocable instructions to the broker or dealer to deliver the purchase
price of the shares to the Company.
Any option granted under the Plan will terminate automatically (i) 30 days
after an employee's termination of employment with the Company (other than by
reason of death or disability or for cause), and (ii) one year after the
employee's death or termination of employment by reason of disability, unless
the option expires earlier by its terms. Options not exercisable as of the date
of a change in control of the Company will become exercisable immediately as of
such date. Options granted under the Plan are not transferable except by will
or the laws of descent and distribution.
The Board may amend or modify the Plan at any time provided that (a) no
amendment may be made to the Plan which would cause the Incentive Options
granted thereunder to fail to qualify as incentive stock options under the
Code; and (b) any amendment which requires the approval of the shareholders
of the Company under the Code or Section 16 of the Securities Exchange Act of
1934, as amended, or the regulations promulgated thereunder, will be subject
to such approval in accordance with the applicable law or regulations. No
amendment, modification or termination of the Plan may in any manner
adversely affect any option previously granted under the Plan without the
consent of the option holder or a permitted transferee of such option holder.
As of March 31, 1997, the following current directors and executive
officers named in the Company's Proxy Statement had been granted options under
the Plan:
NUMBER OF OPTIONS AVERAGE EXERCISE PRICE
NAME GRANTED PER SHARE
---- ----------------- ----------------------
Kenneth B. Leachman 50,000 $5.95
Robert J. Massey 25,000 $6.16
John P. Kennedy 102,000 $7.04
S. Trevor Ferger 22,000 $7.62
Cecil J. Petitti 22,000 $7.62
Michael S. Blue 20,000 $7.54
-11-
<PAGE>
Since adoption of the Plan: (i) all current executive officers, as a group,
have been granted options under the Plan covering 152,000 shares of the
Company's Common Shares which represents approximately 51% of the total number
of options granted pursuant to the Plan; (ii) all directors, excluding executive
officers, have been granted options under the Plan covering 89,000 shares of the
Company's Common Shares which represents approximately 30% of the total number
of options granted pursuant to the Plan; and (iii) all current employees,
excluding executive officers, as a group, have been granted options under the
Plan covering 46,000 shares of the Company's common stock which represents
approximately 16% of the total number of options granted pursuant to the Plan.
The grant of an Incentive Option or a Nonqualified Option has no immediate
tax consequence to the option holder or to the Company. The exercise of an
Incentive Option will generally have no immediate tax consequence to the option
holder (except to the extent it is an adjustment in computing alternative
minimum taxable income) or to the Company; however, the exercise of a
Nonqualified Option will cause the option holder to recognize ordinary income,
and permit the Company to take a deduction if applicable withholding
requirements are satisfied, and in an amount equal to the excess of the fair
market value on the date of the exercise of the shares of common stock acquired
pursuant to the exercise of the Nonqualified Option ("Nonqualified Shares") over
the exercise price.
Upon the sale of shares acquired pursuant to the exercise of an Incentive
Option ("Incentive Shares") after the required holding period, no deduction
will be allowable to the Company and the option holder will generally realize
long-term capital gain or loss in an amount equal to the difference between
amount realized upon the sale and the exercise price of the Incentive Shares.
If, however, an option holder disposes of the Incentive Shares prior the
expiration of the required holding period (a "disqualifying disposition"),
the option holder will recognize ordinary income, and the Company will be
entitled to a deduction, provided that applicable withholding requirements
are satisfied, equal to the excess of the fair market value of the Incentive
Shares on the date of exercise (or the proceeds of the disposition, if less)
over the exercise price. If the amount realized upon the disqualifying
disposition exceeds the fair market value of the Incentive Shares on the date
of exercise, such excess is taxable to the option holder as capital gain
income. Upon the sale of Nonqualified Shares, the option holder will
generally realize long or short term capital gain or loss (depending upon the
holding period of the shares) in an amount equal to the difference between
the option holder's tax basis in the Nonqualified Shares and the amount
realized on the sale.
The option holder's tax basis in the Incentive Shares and Nonqualified
Shares will be the exercise price plus the amount of any ordinary income
recognized by the option holder. The option holder's holding period will
commence on the date that the Incentive Shares or Nonqualified Shares are
transferred to him or her.
The affirmative vote of a majority of the votes entitled to be cast by the
holders of the Company's common stock present in person or represented by proxy
at the Annual Meeting is required to adopt the Amended 1995 Stock Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL
OF THE AMENDMENT TO THE 1995 STOCK OPTION PLAN. UNLESS A CONTRARY CHOICE IS
SPECIFIED, PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED FOR
APPROVAL OF THE PLAN.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Ernst & Young LLP, independent public
accountants, as auditors for the Company for fiscal 1997. Ernst & Young LLP
has served as the independent public accountants for the Company since 1996.
The Board of Directors believes that the reappointment of Ernst & Young LLP for
fiscal 1997, is appropriate because of the firm's reputation, qualifications,
and experience. Representatives of Ernst & Young LLP will be present at the
meeting and will have an opportunity to make a statement if they desire to do
so. Such representatives will be available to respond to appropriate questions.
-12-
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors, and persons who are beneficial owners of more than ten
percent of the Company's Common Stock ("reporting persons") to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Reporting persons are required by Securities and Exchange Commission regulations
to furnish the Company with copies of all Section 16(a) forms filed by them.
Based on its review of the copies of Section 16(a) forms received by it and
written representations from reporting persons, the Company believes that all
filing requirements applicable to its reporting persons were complied with
during 1996.
A COPY OF THE COMPANY'S FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31,
1996, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, IS AVAILABLE WITHOUT
CHARGE TO SHAREHOLDERS UPON REQUEST TO: KENNETH B. LEACHMAN, VICE PRESIDENT OF
FINANCE, NETMED, INC., 425 METRO PLACE NORTH, SUITE 140, DUBLIN, OHIO 43017.
PROPOSALS BY SHAREHOLDERS FOR 1998 ANNUAL MEETING
If any shareholder of the Company wishes to submit a proposal to be
included in next year's Proxy Statement and acted upon at the annual meeting of
the Company to be held in 1998, the proposal must be received by the Secretary
of the Company at the principal executive offices of the Company, 425 Metro
Place North, Suite 140, Dublin, Ohio 43017, prior to the close of business on
December 31, 1997. Any proposal submitted after that date may be omitted by the
Company from the Proxy Statement and form of proxy relating to that meeting.
OTHER MATTERS
As of the date of this Proxy Statement, management knows of no other
business that will come before the meeting. Should any other matter requiring a
vote of the shareholders arise, the proxy in the enclosed form confers upon the
persons designated to vote the shares discretionary authority to vote with
respect to such matter in accordance with their best judgment.
The Company's 1996 Annual Report to Shareholders, including financial
statements, was furnished to shareholders prior to or concurrently with the
mailing of this Proxy Statement.
By Order of the Board of Directors,
David J. Richards
President
-13-
<PAGE>
NETMED, INC.
425 METRO PLACE NORTH, STE. 140
DUBLIN, OHIO 43017
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
MAY 15, 1997
The undersigned hereby appoints DAVID J. RICHARDS and KENNETH B. LEACHMAN,
or either of them, my attorneys and proxies, with full power of substitution, in
the name, place and stead of the undersigned, to vote at the Annual Meeting of
Shareholders of NetMed, Inc. to be held on May 15, 1997, and at any adjournment
thereof, with all of the powers I would have if personally present, for the
following purposes:
1. THE ELECTION OF CLASS I DIRECTORS.
/ / FOR all nominees listed below (except as marked to the contrary).
/ / WITHHOLD AUTHORITY to vote for all nominees listed below
(INSTRUCTIONS: Do not check "WITHHOLD AUTHORITY" to vote for only
certain individual nominees. To withhold authority to vote for any
individual nominee, strike a line through the nominee's name below and
check "FOR").
David J. Richards - S. Trevor Ferger - Cecil J. Petitti -
Michael S. Blue, M.D.
2. APPROVAL OF THE AMENDMENT TO THE 1995 AMENDED AND RESTATED STOCK OPTION
PLAN TO INCREASE THE NUMBER OF SHARES AVAILABLE UNDER THE PLAN FROM 300,000
SHARES TO 750,000 SHARES.
/ / FOR / / AGAINST / / ABSTAIN
3. RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS AUDITORS FOR THE
CURRENT FISCAL YEAR.
/ / FOR / / AGAINST / / ABSTAIN
4. TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING AND
ANY ADJOURNMENT THEREOF.
THIS PROXY, WHEN EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2 AND 3.
(CONTINUED AND TO BE SIGNED ON OTHER SIDE.)
<PAGE>
(CONTINUED FROM OTHER SIDE.)
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Shareholders dated April 15, 1997, the Proxy Statement furnished therewith,
and the Annual Report to Shareholders of the Company for the fiscal year ended
December 31, 1996. Any proxy heretofore given to vote said shares is hereby
revoked.
DATED: , 1997
________________________________________
(SIGNATURE)
________________________________________
(SIGNATURE)
SIGNATURE(S) MUST AGREE WITH THE NAME(S)
PRINTED ON THIS PROXY. IF SHARES ARE
REGISTERED IN TWO NAMES, BOTH
SHAREHOLDERS SHOULD SIGN THIS PROXY.
IF SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE GIVE YOUR FULL TITLE AS SUCH.
PLEASE DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE
