<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 Section 240.14a-11(c) or Section 240.14a-12
INFORMATION MANAGEMENT ASSOCIATES, 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:
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Notes:
<PAGE>
INFORMATION MANAGEMENT ASSOCIATES, INC.
April 16, 1998
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
the Company which will be held at 10:00 a.m., May 14, 1998 at The Trumbull
Marriott, 180 Hawley Lane, Trumbull, Connecticut.
The formal Notice of the Annual Meeting of Shareholders and Proxy Statement
accompanying this letter provide detailed information concerning matters to be
considered and acted upon at the meeting.
Whether or not you plan to attend the Annual Meeting, please mark, sign,
date and return the enclosed proxy at your earliest convenience. If you later
attend the meeting and wish to vote in person, you may withdraw your proxy and
so vote at that time.
I look forward to seeing you at the Annual Meeting.
Sincerely,
/s/ Gary R. Martino
Gary R. Martino
Chairman of the Board
<PAGE>
INFORMATION MANAGEMENT ASSOCIATES, INC.
ONE CORPORATE DRIVE, SUITE 414
SHELTON, CONNECTICUT 06484
(203) 925-6800
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
MAY 14, 1998
----------------
TO THE SHAREHOLDERS OF INFORMATION MANAGEMENT ASSOCIATES, INC.
Notice is hereby given that the Annual Meeting of Shareholders of
Information Management Associates, Inc. (the "Company") will be held at The
Trumbull Marriott, 180 Hawley Lane, Trumbull, Connecticut, on May 14, 1998 at
10:00 a.m. local time, for the following purposes:
1. To elect three members of the Board of Directors, each to serve a
three-year term;
2. To approve the 1998 Employee and Consultant Stock Option Plan;
3. To ratify the appointment of Arthur Andersen LLP as the Company's
independent auditors; and
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The accompanying Proxy Statement contains further information with respect
to these matters.
The Board of Directors has fixed March 26, 1998 as the record date for
determining the holders of common stock entitled to notice of and to vote at
the meeting. Only shareholders of record at the close of business on March 26,
1998 are entitled to notice of and to vote at the Annual Meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE.
NO POSTAGE IS REQUIRED FOR MAILING IN THE UNITED STATES.
By Order of the Board of Directors
/s/ Michael P. McGroarty
Michael P. McGroarty
Vice President and General Counsel
April 16, 1998
<PAGE>
INFORMATION MANAGEMENT ASSOCIATES, INC.
ONE CORPORATE DRIVE, SUITE 414
SHELTON, CONNECTICUT 06484
(203) 925-6800
----------------
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS, MAY 14, 1998
----------------
The enclosed proxy is solicited by the Board of Directors (the "Board" or
"Board of Directors") of Information Management Associates, Inc., a
Connecticut corporation (the "Company"), One Corporate Drive, Suite 414,
Shelton, Connecticut 06484, to be voted at the Annual Meeting of Shareholders
to be held on May 14, 1998, at 10:00 a.m. local time at The Trumbull Marriott,
180 Hawley Lane, Trumbull, Connecticut, or any adjournments thereof (the
"Annual Meeting"). At the Annual Meeting, the presence in person or by proxy
of the holders of a majority of the total number of shares of outstanding
common stock will be necessary to constitute a quorum.
The Board of Directors does not know of any business to be brought before
the Annual Meeting, other than as indicated in the notice, but it is intended
that, as to any other such business, votes may be cast pursuant to the proxies
in accordance with the judgment of the persons acting thereunder.
Shares of the Company's Common Stock represented by proxies in the form
solicited will be voted in the manner directed by a shareholder. If no
direction is made, the proxy will be voted FOR the election of the nominees
for director named in this Proxy Statement and FOR the other proposals
discussed herein.
Any shareholder who executes and delivers a proxy may revoke it at any time
prior to its use upon (i) receipt by the Assistant Secretary of the Company of
written notice of such revocation; (ii) receipt by the Assistant Secretary of
the Company of a duly executed proxy bearing a later date; or (iii) appearance
by the shareholder at the meeting and his request for the return of his proxy.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the inspectors of election appointed by the Company for the meeting and the
number of shareholders present in person or by proxy will determine whether or
not a quorum is present. If a shareholder abstains from voting as to any
matter, then the shares held by such shareholder shall be deemed present at
the meeting for purposes of determining a quorum and for purposes of
calculating the vote with respect to such matter, but shall not be deemed to
have been voted in favor of such matter. If a broker returns a "non-vote"
proxy, indicating a lack of authority to vote on such matter, then the shares
covered by such non-vote shall be deemed present at the Annual Meeting for
purposes of determining a quorum but shall not be deemed to be represented at
the Annual Meeting for purposes of calculating the vote with respect to such
matter.
Only shareholders of record at the close of business on March 26, 1998 are
entitled to notice of and to vote at the Annual Meeting. As of March 26, 1998
there were 9,413,568 shares of common stock outstanding, each of which is
entitled to one vote. This proxy statement and the attached form of proxy are
first being sent or given to shareholders on or about April 16, 1998.
<PAGE>
OWNERSHIP OF COMMON STOCK BY DIRECTORS,
EXECUTIVE OFFICERS AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 1, 1998 (i) by each person
or entity known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) by each director of the Company,
(iii) by each of the named executive officers and (iv) by all directors and
executive officers of the Company as a group. Unless otherwise indicated
below, to the knowledge of the Company, each person or entity listed below
maintains a mailing address c/o Information Management Associates, Inc., One
Corporate Drive, Suite 414, Shelton, Connecticut 06484, and has sole voting
and investment power over the shares of common stock shown as beneficially
owned, except to the extent authority is shared by spouses under applicable
law.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY OWNED(1)
-------------------------
DIRECTORS, EXECUTIVE OFFICERS AND FIVE PERCENT
SHAREHOLDERS NUMBER PERCENT
- ---------------------------------------------- ------------- -----------
<S> <C> <C>
Wand Group(2)........................................ 2,918,166 31.0%
630 Fifth Avenue, Suite 2435
New York, NY 10111
Albert R. Subbloie, Jr.(3)........................... 643,445 6.4
Gary R. Martino(4)................................... 641,195 6.4
Andrei Poludnewycz(5)................................ 422,952 4.3
David G. Caldeira(6)................................. 54,648 *
Paul G. Frederick(7)................................. 37,781 *
Paul J. Schmidt(8)................................... 149,946 1.6
James S. Aufdemberge(9).............................. 6,000 *
David J. Callard(10)................................. 48,750 *
c/o Wand Partners (S.C.) Inc.
630 Fifth Avenue, Suite 2435
New York, NY 10111
Thomas F. Hill(11)................................... 62,799 *
Donald P. Miller(12)................................. 14,375 *
Directors and Executive Officers as a Group (14 per-
sons)(13)........................................... 2,113,227 18.3
</TABLE>
- -------
* Less than 1%
(1) The number of shares beneficially owned by each shareholder is
determined under rules promulgated by the Securities and Exchange
Commission ("SEC"), and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under SEC rules, beneficial
ownership includes any shares as to which an individual or entity has
sole or shared voting power or investment power and also any shares
which an individual or entity has the right to acquire within 60 days
after March 1, 1998 through the exercise of any stock option, warrant or
other right. The inclusion herein of such shares, however, does not
constitute an admission that the named shareholder is a direct or
indirect beneficial owner of such shares. Unless otherwise indicated,
each person or entity named in the table has sole voting power and
investment power (or shares such power with his or her spouse) with
respect to all shares of capital stock listed as owned by such person or
entity.
(2) Includes (i) 2,222,430 shares held by Wand/IMA Investments, L.P. ("Wand-
I"); (ii) 168,522 shares held by Wand/IMA Investments II L.P. ("Wand-
II"); (iii) 466,076 shares held by Wand/IMA Investments III L.P. ("Wand-
III"); (iv) 34,703 shares held by Wand Partners (S.C.) Inc. ("WPI"); and
(v) 26,435 shares held by Bruce W. Schnitzer. Mr. Schnitzer is the
majority shareholder and a director of WPI and Wand (IMA) Inc. and owns
limited partnership interests in Wand-I and Wand-III. WPI is a general
partner of Wand-I and Wand-II, and Wand (IMA) Inc. is a general partner
of Wand-II and Wand-III. Mr. Schnitzer may be deemed to beneficially own
all shares held by such entities.
(3) Includes 158,006 shares issuable pursuant to stock options which are
exercisable within 60 days.
(4) Includes 158,006 shares issuable pursuant to stock options which are
exercisable within 60 days.
(5) Includes 48,768 shares issuable pursuant to stock options which are
exercisable within 60 days.
(6) Includes 54,450 shares issuable pursuant to stock options which are
exercisable within 60 days.
(7) Includes 37,500 shares issuable pursuant to stock options which are
exercisable within 60 days.
(8) Includes 21,236 shares issuable pursuant to stock options which are
exercisable within 60 days.
(9) Includes 6,000 shares issuable pursuant to stock options which are
exercisable within 60 days. Mr. Aufdemberge resigned his position as an
executive officer of the Company on December 2, 1997.
(10) Includes 16,875 shares issuable pursuant to stock options which are
exercisable within 60 days. Mr. Callard is a minority shareholder and a
director of WPI and Wand (IMA) Inc. WPI is a general partner of Wand-I
and Wand-II, and Wand (IMA) Inc. is a general partner of Wand-II and
Wand-III. Mr. Callard owns limited partnership interests in Wand-I and
Wand-III. Mr. Callard disclaims beneficial ownership of any shares of
Common Stock except for those held by him directly.
(11) Includes 16,875 shares issuable pursuant to stock options which are
exercisable within 60 days.
(12) Includes 14,375 shares issuable pursuant to stock options which are
exercisable within 60 days.
(13) Includes options to purchase an aggregate of 563,216 shares held by
directors and executive officers which are exercisable within 60 days.
2
<PAGE>
PROPOSAL 1. ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE ELECTION AS
DIRECTORS OF THE NOMINEES LISTED BELOW.
NUMBER OF AND NOMINEES FOR DIRECTORS
The Company's Board of Directors is divided into three classes, with terms
expiring at the annual meeting of shareholders in successive years, commencing
with the 1998 Annual Meeting. All of the current directors were elected
pursuant to action of the Company's shareholders on April 2, 1997. Commencing
at this Annual Meeting, all directors standing for election will be elected
for three-year terms, with one class of directors being elected at each annual
meeting of shareholders. At the Annual Meeting, three directors of the Company
are to be elected for a term expiring at the Annual Meeting in 2001, or until
their respective successors are elected and qualified.
The Company's Board of Directors has nominated the following three
individuals to serve as directors: Paul J. Schmidt, Donald P. Miller and
Thomas F. Hill, all of whom are currently members of the Board.
The persons named in the accompanying proxy will vote FOR the election of
the nominees described herein, unless authority to vote is withheld. The Board
of Directors has been informed that each of the nominees is willing to serve
as a director; however, if any nominee should decline or become unable to
serve as a director for any reason, the proxy may be voted for such other
person as the proxies shall, in their discretion, determine.
The following table sets forth certain information as of March 1, 1998,
concerning the nominees for election as directors of the Company and as to the
other directors whose terms of office will continue after the Annual Meeting.
There are no family relationships between any directors and executive
officers.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- ---- --- ---------------------
<S> <C> <C>
NOMINEES FOR ELECTION AS
DIRECTORS
WHOSE TERMS EXPIRE IN 1998
(CLASS I)
Paul J. Schmidt........... 38 Vice President--Application Development
Donald P. Miller(1)....... 66 Director
Thomas F. Hill(2)......... 52 Director
DIRECTORS WHOSE TERMS
EXPIRE IN 1999 (CLASS II)
Andrei Poludnewycz........ 37 Executive Vice President--Technology and
Albert R. Subbloie, Jr. .. 37 President and Chief Executive Officer
DIRECTORS WHOSE TERMS
EXPIRE IN 2000 (CLASS
III)
David J. Callard(1, 2).... 59 Director
Gary R. Martino........... 37 Chairman of the Board, Chief Financial Officer,
</TABLE>
- --------
(1) Member of Audit Committee
(2) Member of Compensation Committee
Class I Directors:
Mr. Schmidt has served as an officer and Director of the Company since its
incorporation in 1990. From 1990 to 1994, he served as Vice President--Client
Services. From 1995 to 1997, he served as Vice President--Applied Technologies
and since 1997 he has served as Vice President--Application Development. From
1985 to 1990, Mr. Schmidt was employed as a Vice President at the Company's
predecessor, Information Management Associates (the "Partnership") and
specialized in client services. From 1982 to 1985, Mr. Schmidt worked for
Andersen Consulting and specialized in financial, distribution and
manufacturing consulting.
Mr. Hill has served as a Director of the Company since March 1991. He has
served as a director of WPI from 1990 until March 1997 and his present
principal occupation is as President of Thomas F. Hill, Inc., a
3
<PAGE>
management consulting company. Since 1994, he has also served as a director of
Nestor, Inc., a company which develops neural network pattern recognition
technology.
Mr. Miller has served as a Director of the Company since March 1991. From
1970 to 1986 Mr. Miller was President and Chief Executive Officer of Posi-Seal
International, Inc., a manufacturer of industrial valves. He is presently
retired. Mr. Miller has served as a director of the following companies since
the dates indicated: Raytech Corp., a manufacturing holding company, since
1986; Saab Financial Receivable Corp., an automotive finance company and
wholly-owned subsidiary of Saab-Scania Corp., since 1991; and Smart Games
Interactive, Inc., a manufacturer of interactive consumer electronic systems,
since 1993.
Class II Directors:
Mr. Subbloie has been the President, Chief Executive Officer and a Director
of the Company since its incorporation in 1990. Prior to incorporation of the
Company, Mr. Subbloie was a founding partner of the Partnership with Messrs.
Martino and Poludnewycz, which engaged in the business of consulting and
development of computer software. From 1982 to 1984, Mr. Subbloie was employed
with the consulting division of Arthur Andersen & Co., a professional
accounting firm ("Arthur Andersen"), and specialized in distribution and
manufacturing consulting.
Mr. Poludnewycz has been an officer and a Director of the Company since its
incorporation in 1990. Mr. Poludnewycz has served as Secretary of the Company
since its incorporation in 1990. From 1992 to 1994, he served as Executive
Vice President--Products Division and subsequently has served as Executive
Vice President--Technology. Prior to incorporation of the Company, Mr.
Poludnewycz was a founding partner of the Partnership with Messrs. Subbloie
and Martino. From 1982 to 1984, Mr. Poludnewycz was employed with the
consulting division of Arthur Andersen and specialized in developing computer
applications for the mid-range hardware platforms of IBM.
Class III Directors:
Mr. Martino has been a Director and officer of the Company since its
incorporation in 1990. In his capacity as a director, he has served as the
Chairman of the Board of Directors since the Company's incorporation in 1990.
In his capacity as an officer, he has served as Treasurer, Chief Financial
Officer and Assistant Secretary. Prior to incorporation of the Company, Mr.
Martino was also a founder of the Partnership with Messrs. Subbloie and
Poludnewycz. From 1982 to 1984, Mr. Martino was employed with the consulting
division of Arthur Andersen and specialized in financial application
consulting.
Mr. Callard has served as a Director of the Company since March 1992. He has
served as President of Wand Partners (S.C.) Inc. (formerly Wand Partners Inc.)
("WPI") since 1991. WPI and its affiliates are principally engaged in the
business of direct private equity investments. Prior to joining WPI, Mr.
Callard was a Managing Director in mergers and acquisitions with the
investment banking firm of Alex. Brown & Sons Incorporated. Mr. Callard has
also served as a director since 1974 of Waverly, Inc., a medical publisher,
and as a director since 1992 of Chartwell Re Corp., a property and casualty
reinsurer.
4
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 1997 the Board of Directors met
seven times and acted by unanimous written consent on three occasions. During
1997, each director with the exception of Messrs. Hill and Poludnewycz
attended at least 75% of the aggregate of the total number of meetings of the
Board of Directors and the total number of meetings held by all committees on
which he served.
To assist in the discharge of its responsibilities, the Board of Directors
of the Company has established two standing committees, an Audit Committee and
a Compensation Committee. The Board of Directors has no standing nominating
committee.
The Audit Committee, in conjunction with the entire Board of Directors, is
responsible for recommending the auditors for the Company and consults with
and reviews the results and scope of the audit and other services provided by
the Company's independent public accountants. The Audit Committee consists of
David J. Callard and Donald P. Miller. The Audit Committee met once during
1997.
The Compensation Committee makes recommendations to the Board of Directors
concerning salaries and incentive compensation for executive officers and
employees of and consultants to the Company. The Compensation Committee
consists of David J. Callard and Thomas F. Hill. The Compensation Committee
met once during 1997.
5
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION SUMMARY
The following tables set forth information with respect to the Chief
Executive Officer ("CEO"), Albert R. Subbloie, Jr., each of the four most
highly compensated executive officers and a former executive officer who would
have been listed as one of the four most highly compensated executive officers
had he remained an executive officer of the Company on December 31, 1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION(1)
----------------------- ----------------------------------
SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS/SARS(2) COMPENSATION
- --------------------------- ---- --------- -------- --------------------- ------------
<S> <C> <C> <C> <C> <C>
Albert R. Subbloie,
Jr. ................... 1997 225,000 18,750 39,375 2,975(3)
President and Chief
Executive Officer 1996 225,000 18,750 123,750 25,104(4)
Gary R. Martino......... 1997 225,000 18,750 39,375 1,850(3)
Chairman of the Board, 1996 225,000 18,750 123,750 22,399(4)
Chief Financial
Officer, Treasurer and
Assistant Secretary
Paul G. Frederick....... 1997 179,375 56,379 5,000 1,931(3)
Senior Vice President--
Client Services 1996 179,375 19,047 -- 899(4)
David G. Caldeira....... 1997 157,420 30,833 -- 1,444(3)
Vice President--Products
Division 1996 129,583 10,000 -- 876(4)
Paul J. Schmidt......... 1997 129,583 51,938 12,798 956(3)
Vice President--
Application Development 1996 118,750 40,963 22,500 596(4)
James F.
Aufdemberge(5)......... 1997 156,019 41,276 19,293 1,335(3)
Senior Vice President--
Sales and Marketing 1996 152,500 74,645 -- 995(4)
</TABLE>
- -------
(1) The Company did not make any restricted stock awards or long-term
incentive plan payments in the fiscal year ended December 31, 1997.
(2) The Company did not grant any stock appreciation rights ("SARs") in the
fiscal year ended December 31, 1997.
(3) For 1997, amount includes in the case of Mr. Subbloie, $1,850 for Company
paid term life insurance premiums and $1,125 in matching contributions
made by the Company under the 401(k) plan; in the case of Mr. Martino,
$1,850 for Company paid term life insurance premiums; in the case of Mr.
Frederick, $191 for Company paid term life insurance premiums, $1,345 in
matching contributions made by the Company under the 401(k) plan, and a
$395 contribution made by the Company under the employee stock purchase
plan; in the case of Mr. Caldeira, $191 for Company paid term life
insurance premiums, $975 in matching contributions made by the Company
under the 401(k) plan, and a $278 contribution made by the Company under
the employee stock purchase plan; in the case of Mr. Schmidt, $956 in
matching contributions under the 401(k) plan; and in the case of Mr.
Aufdemberge, $191 for Company paid term life insurance premiums, and
$1,144 in matching contributions made by the Company under the 401(k)
plan.
(4) For 1996, amount includes in the case of Mr. Subbloie, $3,524 for Company
paid term life insurance premiums and the benefit derived from the
interest-free loan made by the Company in the amount of $21,580; in the
case of Mr. Martino, $2,464 for Company paid term life insurance premiums
and the benefit derived from the interest-free loan made by the Company in
the amount of $19,935; in the case of Mr. Frederick, $232 for Company paid
term life insurance premiums and $667 in matching contributions made by
the Company under the 401(k) plan; in the case of Mr. Caldeira, $232 for
Company paid term life insurance premiums and $644 in matching
contributions made by the Company under the 401(k) plan; in the case of
Mr. Schmidt, $596 in matching contributions made by the Company under the
401(k) plan; and in the case of Mr. Aufdemberge, $232 for Company paid
term life insurance premiums, and $763 in matching contributions made by
the Company under the 401(k) plan. As to Messrs. Subbloie and Martino, the
benefit derived from the interest free loans was calculated by taking the
December 31, 1996 prime rate of 8.25% and applying it to the January 1,
1996 through December 31, 1996 month-end balances.
(5) Mr. Aufdemberge resigned his position as an executive officer of the
Company on December 2, 1997 and received compensation through December 31,
1997.
6
<PAGE>
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The following table sets forth grants of stock options to the Named
Executive Officers during the fiscal year ended December 31, 1997. No SARs
were granted during the fiscal year ended December 31, 1997.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL VALUE AT ASSUMED
GRANTS (1) ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(2)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION --------------------- ---
NAME GRANTED(#) FISCAL YEAR(3) ($/SH) DATE 5%($) 10%($)
---- ------------ -------------- ----------- ---------- ---------- ---------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Albert R. Subbloie,
Jr..................... 39,375 9.61% $ 7.11 1/9/07(4) 176,064 446,166
Gary R. Martino......... 39,375 9.61% $ 7.11 1/9/07(4) 176,064 446,166
Paul G. Frederick....... 5,000 1.22% $11.75 9/19/97(5) 36,948 93,630
David G. Caldeira....... -- -- -- -- -- --
Paul J. Schmidt......... 12,798 3.12% $ 7.11 1/9/07(4) 57,226 145,017
James F. Aufdemberge.... 19,293 4.71% $ 7.11 1/9/07(4) 86,268 218,613
</TABLE>
- --------
(1) All options were granted at fair market value on the date of the grant as
determined by the Board of Directors of the Company.
(2) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compound rates of appreciation (5% and 10%) on
the market value of the Common Stock on the date of option grant over the
term of the options. These numbers are calculated based on rules
promulgated by the SEC and do not reflect the Company's estimate of future
stock price growth. Actual gains, if any, on stock option exercises and
Common Stock holdings are dependent on the timing of such exercise and the
future performance of the Common Stock. There can be no assurance that the
rates of appreciation assumed in this table can be achieved or that the
amounts reflected will be received by the individuals.
(3) Based on options to purchase an aggregate of 409,626 shares of Common
Stock granted to all employees of the Company in fiscal 1997.
(4) The dates of exercisability for the options, with the exception of 8,043
granted to Mr. Aufdemberge and 1,548 granted to Mr. Schmidt which vested
immediately, are as follows: (i) 25% on January 9, 1998; (ii) 25% on
January 9, 1999; (iii) 25% on January 9, 2000; and (iv) 25% on January 9,
2001.
(5) The dates of exercisability for the options are as follows: (i) 25% on
September 19, 1998; (ii) 25% on September 19, 1999; (iii) 25% on September
19, 2000; and (iv) 25% on September 19, 2001.
7
<PAGE>
OPTION/SAR EXERCISES AND HOLDINGS
The following table sets forth certain information concerning the number and
value of unexercised options held by each of the Named Executive Officers as
of December 31, 1997. No stock options were exercised by any of the Named
Executive Officers during fiscal year 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
IN-THE-
SHARES NUMBER OF UNEXERCISED MONEY OPTIONS AT
ACQUIRED ON OPTIONS AT FISCAL FISCAL YEAR END
EXERCISE VALUE REALIZED YEAR END EXERCISABLE/ $ (1) EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
- ---- ----------- -------------- --------------------- --------------------
<S> <C> <C> <C> <C>
Albert R. Subbloie,
Jr..................... -- -- 158,006/80,156 575,239/136,497
Gary R. Martino......... -- -- 158,006/80,156 575,239/136,497
Paul G. Frederick....... -- -- 30,000/61,250 158,213/79,106
David G. Caldeira....... -- -- 54,450/ 0 308,336/ 0
Paul J. Schmidt......... -- -- 21,236/25,312 81,081/42,313
James F. Aufdemberge.... -- -- 71,324/6,000 358,353/32,250
</TABLE>
- --------
(1) Calculated on the basis of the difference between the closing price of the
underlying securities on December 31, 1997 and the exercise price of the
option.
DIRECTORS' COMPENSATION
During 1997, the Company paid each member of the Board of Directors who is
not employed by the Company for attending Board meetings. Mr. Miller received
$2,500 for attendance at each meeting of the Board, unless he attended via
telephone. Mr. Hill received a fixed fee of $10,000 per year. Mr. Callard
received no fee for his services until the Company completed its initial
public offering. Prior to the public offering, Wand Partners LP, of which Mr.
Callard is a limited partner, was entitled to an annual monitoring fee of
which $10,000 was paid in 1997. Since the public offering, Mr. Callard has
received $2,500 for attendance of each meeting of the Board, unless he
attended via telephone. For the fiscal year ended December 31, 1997, non-
employee directors received the following compensation: (i) Mr. Hill--
($10,000); (ii) Mr. Miller--($12,500); and Mr. Callard--($5,000).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company was comprised of Messrs. Callard
and Hill for the fiscal year ended December 31, 1997. Mr. Callard is the
President and a Director of WPI and Wand (IMA) Inc. Mr. Hill is a former
director of WPI. Various affiliates of WPI and Wand (IMA) Inc. have engaged in
certain financing and consulting transactions with the Company during fiscal
year 1997. Messrs. Subbloie and Martino also engaged in certain transactions
with the Company during fiscal year 1997. See "Certain Transactions."
8
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
In 1997, the Compensation Committee was composed of Messrs. Callard and
Hill. Each of these individuals is a non-employee member of the Company's
Board of Directors. The Compensation Committee is responsible for setting and
administering policies governing compensation of executive officers.
COMPENSATION POLICIES GENERALLY
The goals of the Company's executive officer compensation policies are to
attract, retain and reward executive officers who contribute to the Company's
success, to align executive officer compensation with the Company's
performance and to motivate executive officers to achieve the Company's
business objectives. The Company uses salaries, executive officer bonuses and
stock options to achieve these goals. The Compensation Committee reviews
compensation surveys and other data to enable the Compensation Committee to
compare the Company's compensation package with that of comparably-sized high
technology companies.
Salary. Messrs. Subbloie and Martino annually review the base salaries of
executive officers other than their own and recommend to the Compensation
Committee base salaries based upon a number of criteria, including individual
performance, scope of responsibilities and the base salary levels paid by
comparably-sized high technology companies in the Company's geographic area.
The Compensation Committee approved and implemented those recommendations for
fiscal 1997 using those criteria. The base salary of Mr. Martino for 1997 was
set by the Compensation Committee based on similar criteria.
Bonuses. The Compensation Committee believes that cash performance-based
compensation incentives build shareholder value and align the interests of
executive officers with those of the shareholders. For fiscal 1997, each of
the Company's executive officers developed goals and objectives for the year
in consultation with Messrs. Subbloie and Martino. Messrs. Subbloie and
Martino recommended, and the Compensation Committee reviewed and approved, a
cash bonus compensation structure for 1997 for each such executive officer
based on the individual's overall performance, attainment of certain financial
or other goals, and the Company's performance. Cash bonuses for Messrs.
Subbloie and Martino were set by the Compensation Committee based upon similar
criteria.
Stock Options. The Committee is responsible for recommending option grants
to the full Board of Directors for approval. The Board approved all grants of
stock options recommended by the Committee in 1997. The Company strongly
believes that equity ownership by executive officers provides incentives to
build shareholder value and align the interests of executive officers with
those of the shareholders. The size of an initial option grant to an executive
officer has generally been determined with reference to comparably-sized high
technology companies for similar positions, the responsibilities and
anticipated future contributions of the executive officer, as well as
recruitment considerations. In this regard, during 1997, options were granted
to Mr. Kian Saneii, the Company's Vice President--Worldwide Marketing, and to
Mr. Eric Montgomery, the Company's Vice President--Sales, upon each such
executive officer commencing employment with the Company. Executive officers
may receive subsequent option grants based on level of position and individual
contribution.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Compensation Committee annually reviews the performance and compensation
of Mr. Subbloie. Mr. Subbloie has served as the Company's President and Chief
Executive Officer since June 1990. The compensation of Mr. Subbloie is based
upon the same criteria outlined above for the other executive officers of the
Company. While the Chief Executive Officer makes recommendations about the
compensation levels, goals and performance of the executive officers other
than Mr. Martino, he does not participate in discussions regarding his
compensation or performance. Mr. Subbloie's salary and bonus remained
unchanged in 1997 from 1996 in light of the fact that Mr. Subbloie had
received an award of 123,750 stock options in 1996 and an additional award of
39,375 stock options in 1997.
9
<PAGE>
The Compensation Committee has considered the potential impact of Section
162(m) of the Internal Revenue Code of 1986, as amended, and the regulations
thereunder (the "Section"). The Section disallows a tax deduction for any
publicly-held corporation for individual compensation exceeding $1 million in
any taxable year for any of the Named Executive Officers, unless such
compensation is performance-based. Since the cash compensation of each of the
Name Executive Officers is below the $1 million threshold and the Compensation
Committee believes that any options granted under the 1996 Employee and
Consultant Option Plan are exempt from the Section, the Compensation Committee
believes that the Section will not reduce the tax deduction available to the
Company for fiscal 1997. The Company's policy is to qualify, to the extent
reasonable, its executive officers' compensation for deductibility under
applicable tax laws. However, the Compensation Committee believes that its
primary responsibility is to provide a compensation program that will attract,
retain and reward the executive talent necessary to the Company's success.
Consequently, the Compensation Committee recognizes that the loss of a tax
deduction could be necessary in some circumstances.
Other elements of executive compensation include participation in a Company-
wide life insurance program, including a short-term and long-term disability
insurance program. Executives are also eligible for Company-wide medical
benefits, participation in a 401(k) plan under which the Company provides
limited matching contributions and participation in the Company's Employee
Stock Purchase Plan under which participants are granted rights to purchase
shares of the Company's Common Stock at a discount.
David J. Callard
Thomas F. Hill
10
<PAGE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS
In July 1997, the Company completed the public offering of 3,900,000 of its
common stock, of which 2,800,000 shares were issued and sold by the Company
and 1,100,000 were sold by selling shareholders. All shares issued by the
Company and sold by the selling shareholders were sold at $13.00 per share
before underwriting discounts and commissions. In the offering Wand I sold
456,971 shares, Wand II sold 34,665 shares, Wand III sold 95,870 shares, WPI
sold 7,056 shares, Bruce W. Schnitzer sold 5,438 shares, Albert R. Subbloie,
Jr. sold 66,000 shares, Gary R. Martino sold 66,000 shares, Andrei Poludnewycz
sold 43,602 shares, Paul J. Schmidt sold 15,000 shares, Thomas F. Hill sold
6,000 shares and Donald P. Miller sold 2,500 shares.
In 1997, the Company was indebted to Wand I in the principal amount of
$250,000 (the "Wand Note"). The Wand Note earned interest at a rate of 12% per
annum. The Company used the proceeds from the sale of the Wand Note for
working capital purposes. The Company repaid the Wand Note in full upon
completion of the public offering in August 1997. Also in 1997, the Company
paid Wand Partners LP $10,000 pursuant to a monitoring agreement. The
monitoring agreement terminated upon the completion of the offering. Mr.
Callard is the President and a director of WPI and Wand (IMA) Inc. and Mr.
Hill is a former director of WPI. WPI is a general partner of Wand I.
Messrs. Subbloie, Martino and Poludnewycz in 1997 were indebted to the
Company in the aggregate amount of $295,700, $281,100 and $143,100,
respectively, (collectively, the "Indebtedness") which were the greatest
principal amounts outstanding at any time during 1997 for such officers. The
Indebtedness earned interest during 1997 at a rate of 8.25% per annum. The
Indebtedness represented advances made by the Company which were used by
Messrs. Subbloie, Martino and Poludnewycz for personal expenses unrelated to
the business of the Company. Messrs. Subbloie, Martino and Poludnewycz repaid
the outstanding principal amount and interest on the Indebtedness upon
completion of the Company's public offering in August 1997.
11
<PAGE>
PROPOSAL 2. APPROVAL OF 1998 EMPLOYEE AND CONSULTANT STOCK OPTION PLAN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE 1998 EMPLOYEE
AND CONSULTANT STOCK OPTION PLAN
At its meeting on March 24, 1998, the Board of Directors adopted the 1998
Employee and Consultant Stock Option Plan (the "Plan"), which will become
effective upon approval by the Company's shareholders.
The complete text of the Plan is set forth as Exhibit "A" hereto. The
following is a summary of the material features of the Plan and is qualified
in its entirety by reference to Exhibit "A."
PURPOSE OF THE PLAN
The purpose of the Plan is to provide an incentive to the employees and
consultants of the Company and its affiliates to contribute materially to the
long-term success of the Company and its affiliates, to increase their
interest in the welfare of the Company and its affiliates and to aid in
attracting and retaining employees and consultants of outstanding ability.
EFFECTIVE DATE AND DURATION
The Plan will become effective May 14, 1998, subject to approval by the
Company's shareholders and will remain in effect, subject to the right of the
Board of Directors to terminate the Plan at any time, until all shares subject
to the Plan have been purchased or acquired.
AMENDMENTS
The Board may, at any time, alter, amend, suspend, discontinue or terminate
the Plan; provided, however, that no such action may adversely affect the
right of optionholders under stock options previously granted to them.
ADMINISTRATION OF THE PLAN
The Plan will be administered by the Board which shall have the authority to
delegate any of its administrative responsibilities to one or more committees
established thereby under the Plan.
SHARES SUBJECT TO THE PLAN
The Plan authorizes the grant of up to 800,000 shares of the Company's
common stock. Shares underlying awards that lapse or are forfeited or awards
that are not paid in shares may be reused for subsequent awards. Only the
number of shares issued net of shares tendered for exercise shall be deemed
issued under the Plan. Shares may be authorized but unissued shares of common
stock, treasury shares or shares purchased on the open market. The market
value of Company common stock as of December 31, 1997 was $9.375 per share.
If any corporate transaction occurs that causes a change in the
capitalization of the Company, the Board will make such adjustments to the
outstanding awards and the shares of stock that may be delivered under the
Plan as it deems appropriate and equitable to prevent dilution or enlargement
of rights.
ELIGIBILITY AND PARTICIPATION
Individuals eligible to participate in the Plan include all officers and
employees of and consultants to the Company and its affiliates, as determined
by the Board, including employees and consultants who are members of the
Board, but excluding directors who are not employees of or consultants to the
Company or one or more of its affiliates. It is anticipated that all employees
and consultants of the Company will be eligible to participate under the Plan.
12
<PAGE>
CHANGE OF CONTROL
Upon a change, as defined in the Plan, any and all Nonqualified Stock
Options (as defined herein) and Incentive Stock Options (as defined herein)
granted under the Plan shall become fully vested and immediately exercisable.
GRANTS UNDER THE PLAN
The Plan permits the grant of Nonqualified Stock Options (each, an "NQSO")
to employees, officers and consultants, and Incentive Stock Options (each, an
"ISO") to employees and officers only.
AWARD INFORMATION
It is not possible at this time to determine awards that will be made
pursuant to the Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief description of the federal tax consequences related
to options to be awarded under the Plan.
1. Consequences to the Optionholder
Grant. There are no federal income tax consequences to the optionholder
solely by reason of the grant of ISOs or NQSOs under the Plan.
Exercise. The exercise of an ISO is not a taxable event for regular federal
income tax purposes if certain requirements are satisfied, including the
restriction providing that the optionholder generally must exercise the option
no later than three months following the termination of employment. However,
such exercise may give rise to alternative minimum tax liability (see
"Alternative Minimum Tax" below).
Upon the exercise of a NQSO, the optionholder will generally recognize
ordinary income in an amount equal to the excess of the fair market value of
the shares of Company common stock at the time of exercise over the amount
paid as the exercise price. The ordinary income recognized in connection with
the exercise by an optionholder of a NQSO will be subject to both wage and
employment tax withholding.
The optionholder's tax basis in the shares acquired pursuant to the exercise
of an option will be the amount paid upon exercise plus, in the case of a
NQSO, the amount of ordinary income recognized by the optionholder upon
exercise, if any.
Qualifying Disposition. If an optionholder disposes of shares of Company
common stock acquired upon exercise of an ISO in a taxable transaction, and
such disposition occurs more than two years from the date on which the option
was granted and more than one year after the date on which the shares were
transferred to the optionholder pursuant to the exercise of the ISO, the
optionholder will recognize long-term capital gain or loss equal to the
difference between the amount realized upon such disposition and the
optionholder's adjusted basis in such shares (generally the option exercise
price).
Disqualifying Disposition. If the optionholder disposes of shares of the
Company common stock acquired upon the exercise of an ISO (other than in
certain tax-free transactions) within two years from the date on which the ISO
was granted or within one year after the transfer of shares to the
optionholder pursuant to the exercise of the ISO, then at the time of
disposition the optionholder will generally recognize ordinary income equal to
the lesser of (i) the excess of such share's fair market value on the date of
exercise over the exercise price paid by the optionholder or (ii) the
optionholder's actual gain (i.e., the excess, if any, of the amount realized
on the disposition over the exercise price paid by the optionholder). If the
total amount realized on a taxable disposition (including return of capital
and capital gain) exceeds the fair market value on the date of exercise, then
the optionholder will recognize a capital gain in the amount of such excess.
If the optionholder incurs a loss on the disposition (i.e., if the total
amount realized is less than the exercise price paid by the optionholder),
then the loss will be a capital loss.
13
<PAGE>
Other Disposition. If an optionholder disposes of shares of Company common
stock acquired upon exercise of a NQSO in a taxable transaction, the
optionholder will recognize capital gain or loss in an amount equal to the
difference between the optionholder's basis (as discussed above) in the shares
sold and the total amount realized upon disposition. Any such capital gain or
loss (and any capital gain or loss recognized on a disqualifying disposition
of shares of Company common stock acquired upon exercise of ISOs as discussed
above) will be short-term or long-term depending on whether the shares of
Company common stock were held for more than one year from the date such
shares were transferred to the optionholder (lower tax rates will apply if the
shares were held for more than 18 months).
Alternative Minimum Tax. Alternative minimum tax ("AMT") is payable if and
to the extent it exceeds the taxpayer's regular tax liability, and any AMT
paid may generally be credited against future regular tax liability (but not
future AMT liability). AMT applies to alternative minimum taxable income;
generally regular taxable income as adjusted for tax preferences and other
items are treated differently under the AMT.
For AMT purposes, the spread upon exercise of an ISO (but not a NQSO) will
be included in alternative minimum taxable income, and the taxpayer will
receive a tax basis equal to the fair market value of the shares at such time
for subsequent AMT purposes. However, if the optionholder disposes of the ISO
shares in the year of exercise, the AMT income cannot exceed the gain
recognized for regular tax purposes, provided that the disposition meets
certain third-party requirements for limiting the gain on a disqualifying
disposition. If there is a disqualifying disposition in a year other than the
year of exercise, the income on the disqualifying disposition is not
considered alternative minimum taxable income.
2. Consequences to the Company
There are no federal income tax consequences to the Company by reason of the
grant of ISOs or NQSOs or the exercise of ISOs (other than disqualifying
dispositions).
At the time the optionholder recognizes ordinary income from the exercise of
a NQSO, the Company will be entitled to a federal income tax deduction in the
amount of the ordinary income so recognized (as described above), subject to
any applicable limitations, such as any limitations imposed by Code Section
162(m). To the extent the optionholder recognizes ordinary income by reason of
a disqualifying disposition of the stock acquired upon exercise of ISOs, the
Company will be entitled to a corresponding deduction in the year in which the
disposition occurs.
The Company will be required to report to the Internal Revenue Service any
ordinary income recognized by any optionholder by reason of the exercise of a
NQSO. The Company will be required to withhold income and employment taxes
(and pay the employer's share of employment taxes) with respect to ordinary
income recognized by the optionholder upon the exercise of NQSOs.
3. Other Tax Consequences
The foregoing discussion is not a complete description of the federal income
tax aspects of ISOs and NQSOs under the Plan. In addition, administrative and
judicial interpretations of the application of the federal income tax laws are
subject to change. Furthermore, the foregoing discussion does not address
state or local tax consequences.
14
<PAGE>
PROPOSAL 3. RATIFICATION OF INDEPENDENT ACCOUNTANTS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
SELECTION OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR
THE FISCAL YEAR 1998.
Arthur Andersen LLP was the Company's independent accounting firm for the
fiscal year ended December 31, 1997. The Board of Directors has selected
Arthur Andersen LLP as independent accountants for the year ending December
31, 1998. A representative of Arthur Andersen LLP is expected to be present at
the 1998 Annual Meeting to respond to appropriate questions and to make a
statement if he or she so desires.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires executive
officers and directors, and persons who beneficially own more than ten percent
(10%) of the Company's Common Stock to file initial reports of ownership and
reports of changes in ownership with the SEC and the New York Stock Exchange.
Executive officers, directors and greater than ten percent (10%) beneficial
owners are required by SEC regulations to furnish the Company with copies of
all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company and written representations from the executive officers and directors,
the Company believes that all Section 16(a) filing requirements applicable to
its executive officers and directors were complied with during its fiscal year
1997 except for Mr. Eric Montgomery and Mr. James Anderson. On December 12,
1997, Mr. Eric Montgomery, an officer of the Company, filed a Form 3 to report
his holdings in the Company. The Form 3 did not report 2000 shares of the
Company's Common Stock which Mr. Montgomery had acquired. On January 15, 1998,
as soon as this deficiency was discovered, Mr. Montgomery filed an amended
Form 3 with the SEC.
On July 30, 1997, Mr. James Anderson filed a Form 3 to report his holdings
in the Company. The Form 3 did not report his ownership of stock options to
acquire 12,500 shares of the Company's common stock. On April 14, 1998, as
soon as the deficiency was discovered, Mr. Anderson filed an amended Form 3
with the SEC.
15
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Company's
Common Stock, based on the market price of the Common Stock and assuming
reinvestment of dividends, with the cumulative total return of companies in the
Nasdaq Stock Market Index and the Dow Jones Software Index for the period
beginning July 30, 1997 (the date the Company's Common Stock began trading on
the Nasdaq National Market) and ending December 31, 1997.
The indices are included for comparative purposes only. They do not
necessarily reflect management's opinion that such indices are appropriate
measures of the relative performance of the Company's Common Stock, and they
are not intended to forecast or be indicative of future performance of the
Common Stock.
LINE GRAPH
<TABLE>
<CAPTION>
PERIOD ENDING
----------------------------------------------------------
7/30/97 7/31/97 8/31/97 9/30/97 10/31/97 11/30/97 12/31/97
------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Information Management
Associates, Inc. ...... 100 96 90 91 91 77 69
Nasdaq Stock Market In-
dex.................... 100 100 100 106 101 101 100
Dow Jones Software In-
dex.................... 100 100 96 95 95 100 93
</TABLE>
16
<PAGE>
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of no
matters which will be presented for consideration at the Annual Meeting other
than the proposals set forth in this Proxy Statement. If any other matters
properly come before the Annual Meeting, it is intended that the persons named
in the proxy will act in respect thereof in accordance with their best
judgment.
SHAREHOLDER PROPOSALS
Any shareholder who intends to present a proposal at the 1999 Annual Meeting
of shareholders is advised that, in order for such proposal to be considered
for inclusion in the Board of Directors' proxy material for such meeting, the
proposal must be received by the Company no later than December 12, 1998 and
must meet certain eligibility requirements of the SEC. Such proposals may be
mailed to Information Management Associates, Inc., the attention of the
Assistant Secretary, One Corporate Drive, Suite 414, Shelton, Connecticut
06484.
SOLICITATION OF PROXIES AND COST THEREOF
The solicitation of the proxies is made by the Company. The cost of
solicitation of the proxies will be borne by the Company. In addition to
solicitation of the proxies by use of the mails, directors, officers and other
employees of the Company, without extra remuneration, may solicit proxies
personally or by telephone, telegraph, or other means of communication. The
Company will reimburse brokerage firms, nominees, custodians and fiduciaries
for their out-of-pocket expenses for forwarding proxy materials to beneficial
owners and seeking instruction with respect thereto.
SHAREHOLDERS MAY OBTAIN A COPY OF THE COMPANY'S FORM 10-K AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION WITHOUT CHARGE (EXCEPT FOR EXHIBITS), BY
WRITING TO ASSISTANT SECRETARY, INFORMATION MANAGEMENT ASSOCIATES, INC., ONE
CORPORATE DRIVE, SUITE 414, SHELTON, CONNECTICUT 06484.
By Order of the Board of Directors
/s/ Michael P. McGroarty
Michael P. McGroarty
Vice President and General Counsel
April 16, 1998
17
<PAGE>
APPENDIX A
INFORMATION MANAGEMENT ASSOCIATES, INC.
1998 EMPLOYEE AND CONSULTANT STOCK OPTION PLAN
I. ESTABLISHMENT OF PLAN; DEFINITIONS
1. Purpose. The purpose of the Information Management Associates, Inc. 1998
Employee and Consultant Stock Option Plan is to provide an incentive to
Employees and Consultants of Information Management Associates, Inc. (the
"Corporation") and its Affiliates who are in a position to contribute
materially to the long-term success of the Corporation and/or its Affiliates,
to increase their interest in the welfare of the Corporation and its
Affiliates, and to aid in attracting and retaining Employees and Consultants
of outstanding ability.
2. Definitions. Unless the context clearly indicates otherwise, the
following terms shall have the meanings set forth below:
a. "Affiliate" shall mean any parent or subsidiary of the Corporation
which meets the requirements of Section 425 of the Code.
b. "Board" shall mean the Board of Directors of the Corporation.
c. "Cause" shall mean repeated failure to properly perform assigned
duties, gross negligence, insubordination, commission of a felony, or any
act injurious to the Corporation involving dishonesty or breach of any duty
of confidentiality or loyalty.
d. "Change of Control" shall mean a change of control of the Corporation
of a nature that would be required to be reported in response to Item 6(e)
of Schedule 14A of Regulation 14A under the Securities Exchange Act of 1934
(the "Exchange Act"), whether or not the Corporation is subject to the
Exchange Act at such time; provided, however, that without limiting the
generality of the foregoing, a "Change of Control" will in any event be
deemed to occur if and when (i) there shall be consummated (x) any
consolidation, reorganization or merger of the Corporation in which the
Corporation is not the continuing or surviving corporation or pursuant to
which shares of the Stock would be converted into cash, securities or other
property, other than a merger of the Company in which holders of the Stock
immediately prior to the merger have the same proportionate ownership of
common stock of the surviving corporation immediately after the merger, or
(y) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all, or substantially all, of the assets
of the Corporation, or (ii) the shareholders of the Corporation shall
approve any plan or proposal for liquidation or dissolution of the
Corporation, or (iii) any person (as such term is used in Sections 13(d)
and 14(d)(2) of the Exchange Act, including any "group" (as defined in
Section 13(d)(3) of the Exchange Act) (other than the Grantee or any group
controlled by the Grantee)) shall become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of thirty percent (30%) or
more of the outstanding Stock (other than pursuant to a plan or arrangement
entered into by such person and the Corporation) and such person discloses
its intent to effect a change of the control or ownership of the Company in
any filing with the Securities and Exchange Commission ("SEC") or (iv)
within any twenty-four (24) month period beginning on or after May 14,
1998, the persons who were directors of the Corporation immediately before
the beginning of such period (the "Incumbent Directors") shall cease (for
any reason other than death, disability or retirement) to constitute at
least a majority of the Board or the board of directors of any successor to
the Corporation, provided that, any director who was not a director as of
May 14, 1998 shall be deemed to be an Incumbent Director if such director
was elected to the Board by, or on the recommendation of or with the
approval of, at least two-thirds of the directors who then qualified as
Incumbent Directors either actually or by prior operation of this
definition unless such election, recommendation or approval was the result
of any actual or threatened election contest of the type contemplated by
Regulation 14a-11 promulgated under the Exchange Act or any successor
provision.
e. "Code" shall mean the Internal Revenue Code of 1986, as it may be
amended from time to time.
18
<PAGE>
f. "Consultant" shall mean any consultant of the Corporation or any of
its Affiliates.
g. "Corporation" shall mean Information Management Associates, Inc., a
Connecticut corporation.
h. "Disability" shall mean a medically determinable physical or mental
condition which causes an Employee to be unable to engage in any
substantial gainful activity and which can be expected to result in death
or to be of long, continued and indefinite duration.
i. "Employee" shall mean any employee, including officers, of the
Corporation or any of its Affiliates, as determined under the Code and the
Treasury Regulations thereunder.
j. "Fair Market Value" shall mean on any date, (i) if the Stock is not
listed on a national securities exchange or quoted on the National
Association of Securities Dealers Automated Quotation System ("Nasdaq"),
the fair market value of the Stock on that date as determined by the Board,
or (ii) if the Stock is listed on a national securities exchange or is
quoted on Nasdaq, the closing price reported on the composite tape for
issues listed on such exchange at the close of business on the day next
preceding such date, or the closing price or the average of the closing
dealer "bid" and "asked" prices of the Stock at the close of business on
the day next preceding the date of grant as quoted by Nasdaq, or if no
trades shall have been reported for such date, on the next preceding date
on which there were trades reported; provided that if no quotations shall
have been made within the 10 business days preceding such date, the Fair
Market Value shall be determined by the Board as provided in clause (i)
above.
k. "Grantee" shall mean an Employee or Consultant granted a Stock Option
under this Plan.
l. "Incentive Stock Option" shall mean an option granted pursuant to the
Incentive Stock Option provisions as set forth in Part II of this Plan.
m. "Non-Qualified Stock Option" shall mean an option granted pursuant to
the Non-Qualified Stock Option provisions as set forth in Part III of this
Plan.
n. "Option Period" shall mean the term of the Stock Option as fixed by
the Board.
o. "Plan" shall mean the Information Management Associates, Inc. 1998
Employee and Consultant Stock Option Plan as set forth herein and as
amended from time to time.
p. "Stock" shall mean authorized but unissued shares of the Common Stock
of the Corporation, no par value, or reacquired shares of the Corporation's
Common Stock.
q. "Stock Option" shall mean an option, which shall include Non-Qualified
Stock Options and Incentive Stock Options, granted pursuant to the Plan to
purchase shares of Stock.
r. "Stock Option Agreement" shall mean the written instrument evidencing
the grant of one or more Stock Options under the Plan and which contains
the terms and conditions applicable to such grant.
s. "Ten Percent Shareholder" shall mean an Employee or Consultant who at
the time a Stock Option is granted owns stock possessing more than ten
percent (10%) of the total combined voting power of all stock of the
Corporation or of its Affiliates.
3. Shares of Stock Subject to the Plan. There are hereby reserved for
issuance under the Plan 800,000 shares of Stock. Subject to the provisions of
Paragraph 1 of Part IV, the Stock which may be issued pursuant to Stock
Options authorized to be granted under the Plan and the Stock which is subject
to outstanding but unexercised Stock Options under the Plan shall not exceed
800,000 shares of Stock in the aggregate. If a Stock Option shall expire and
terminate for any reason, in whole or in part, without being exercised, the
number of shares of Stock as to which such expired or terminated Stock Option
shall not have been exercised may again become available for the grant of
Stock Options.
There shall be no terms and conditions in a Stock Option which provide that
the exercise of an Incentive Stock Option reduces the number of shares of
Stock for which an outstanding Non-Qualified Stock Option may be exercised;
and there shall be no terms and conditions in a Stock Option which provide
that the exercise of a Non-Qualified Stock Option reduces the number of shares
of Stock for which an outstanding Incentive Stock Option may be exercised.
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4. Administration of the Plan. The Plan shall be administered by the Board.
Subject to the express provisions of the Plan, the Board shall have authority
to grant Stock Options under the Plan, to interpret the Plan, to prescribe,
amend, and rescind rules and regulations relating to it, to determine the
terms and provisions of Stock Option Agreements, and to make all other
determinations necessary or advisable for the administration of the Plan. Any
controversy or claim arising out of or related to the Plan shall be determined
unilaterally by and at the sole discretion of the Board. Any determination,
decision or action of the Board in connection with the construction,
interpretation, administration, implementation or maintenance of the Plan
shall be final, conclusive and binding upon all Grantees and all person(s)
claiming under or through any Grantees. In addition, the Board shall have the
authority to delegate any of its duties and responsibilities under the Plan to
such committee(s) as it shall determine including any such delegation
necessary for the Plan's compliance with the requirements of Rule 16b-3
promulgated by the SEC, as amended ("Rule 16b-3") and Section 162(m) of the
Code.
5. Amendment or Termination. The Board may, at any time, alter, amend,
suspend, discontinue, or terminate the Plan; provided, however, that such
action shall not adversely affect the right of Grantees to Stock Options
previously granted.
6. Effective Date and Duration of the Plan. The Plan shall become effective
on May 14, 1998, subject to the approval by the shareholders of the
Corporation. The Plan shall terminate ten years from the date it becomes
effective, and no Stock Option may be granted under the Plan thereafter, but
such termination shall not affect any Stock Option theretofore granted.
II. INCENTIVE STOCK OPTION PROVISIONS
1. Granting of Incentive Stock Options.
a. Only Employees of the Corporation or its Affiliates shall be eligible
to receive Incentive Stock Options under the Plan.
b. When granting an Incentive Stock Option, the Board shall determine the
purchase price of the Stock subject thereto, provided, that the purchase
price of each share of Stock subject to an Incentive Stock Option shall not
be less than 100% of the Fair Market Value of a share of the Stock on the
date the Incentive Stock Option is granted; and provided, further, that the
purchase price of each share of Stock subject to an Incentive Stock Option
granted to a Ten Percent Shareholder shall not be less than 110% of the
Fair Market Value of a share of the Stock on the date the Incentive Stock
Option is granted.
c. No Incentive Stock Option shall be exercisable more than ten years
from the date the Incentive Stock Option was granted; provided, however,
that an Incentive Stock Option granted to a Ten Percent Shareholder shall
not be exercisable more than five years from the date the Incentive Stock
Option was granted.
d. The Board shall determine and designate from time to time those
Employees who are to be granted Incentive Stock Options and specify the
number of shares subject to each Incentive Stock Option.
e. Notwithstanding any other provisions hereof, the aggregate Fair Market
Value (determined at the time the option is granted) of the Stock with
respect to which Incentive Stock Options are exercisable for the first time
by the Employee during any calendar year (under all such plans of the
Corporation and its Affiliates) shall not exceed $100,000.
f. The Board, in its sole discretion, shall determine whether any
particular Incentive Stock Option shall become exercisable in one or more
installments, specify the installment dates, and, within the limitations
herein provided, determine the total period during which the Incentive
Stock Option is exercisable. Further, the Board may make such other
provisions as may appear generally acceptable or desirable to the Board or
necessary to qualify its grants under the provisions of Section 422 of the
Code.
g. The Board may grant at any time new Incentive Stock Options to an
Employee who has previously received Incentive Stock Options or other
options whether such prior Incentive Stock Options or other options are
still outstanding, have previously been exercised in whole or in part, or
are canceled in connection with the issuance of new Incentive Stock
Options. The purchase price of the new Incentive Stock Options may be
established by the Board without regard to the existing Incentive Stock
Options or other options.
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h. During any calendar year, no Employee may be granted Incentive Stock
Options with respect to more than 200,000 shares of Stock.
2. Exercise of Incentive Stock Options. The purchase price of Stock subject
to an Incentive Stock Option shall be payable on exercise of the option in
cash or by check, bank draft or postal or express money order. The Board, in
its discretion, may permit a Grantee to make partial or full payment of the
purchase price by the surrender of Stock owned by the Grantee prior to the
date of exercise. Shares of Stock surrendered in payment of the purchase price
as provided above shall be valued at the Fair Market Value thereof on the date
of exercise. Surrender of such stock shall be evidenced by delivery of the
certificate(s) representing such shares in such manner, and endorsed in such
form, or accompanied by stock powers endorsed in such form, as the Board may
determine.
In the absence of any other action by the Board, all Incentive Stock Options
shall become exercisable in equal installments over a period of four years
calculated from the date of grant.
3. Termination of Employment. Except as provided otherwise in the applicable
Stock Option Agreement (in which case the provisions of the Stock Option
Agreement shall control over the provisions of this paragraph 3):
a. If a Grantee's employment is terminated, including termination by
reason of retirement at or after age 65, or by reason of Disability (other
than for Cause or voluntary termination prior to retirement at or after age
65 or death) only those Incentive Stock Options held by the Grantee which
were immediately exercisable at the date of the termination of Grantee's
employment shall be exercisable by the Grantee following the termination of
Grantee's employment. Such Incentive Stock Options must be exercised within
three months after such termination of employment (but in no event after
expiration of the Option Period) or they shall be forfeited.
b. If a Grantee's employment is terminated for Cause or if the Grantee
shall have voluntarily terminated employment other than by retirement at or
after age 65, all then outstanding Incentive Stock Options held by the
Grantee shall expire immediately and such Incentive Stock Options shall not
be exercisable after the date of the termination of Grantee's employment.
c. If a Grantee's employment is terminated by death, only those Incentive
Stock Options held by the Grantee which were immediately exercisable at the
date of the Grantee's death shall be exercisable by the representative of
the Grantee's estate or beneficiaries thereof to whom the Incentive Stock
Options have been transferred. Such Incentive Stock Options must be
exercised by the earlier of (i) three months from the date of the Grantee's
death or (ii) the expiration of the Option Period, or they shall be
forfeited.
d. The Board may grant a leave of absence to any Grantee and, for
purposes hereunder, such Grantee shall be deemed to be continued to be
employed with the Corporation or its Affiliates during such leave of
absence.
III. NON-QUALIFIED STOCK OPTION PROVISIONS
1. Granting of Non-Qualified Stock Options.
a. Employees and Consultants of the Corporation or its Affiliates shall
be eligible to receive Non-Qualified Stock Options under the Plan.
b. The Board shall determine and designate from time to time those
Employees and Consultants who are to be granted Non-Qualified Stock Options
and specify the number of shares subject to each Non-Qualified Stock
Option.
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c. The Board may grant at any time new Non-Qualified Stock Options to an
Employee or Consultant who has previously received Non-Qualified Stock
Options or other options, whether such prior Non-Qualified Stock Options or
other options are still outstanding, have previously been exercised in
whole or in part, or are canceled in connection with the issuance of new
Non-Qualified Stock Options.
d. When granting a Non-Qualified Stock Option, the Board shall determine
the purchase price of the Stock subject thereto.
e. The Board, in its sole discretion, shall determine whether any
particular Non-Qualified Stock Option shall become exercisable in one or
more installments, specify the installment dates and, within the
limitations herein provided, determine the total period during which the
Non-Qualified Stock Option is exercisable. Further, the Board may make such
other provisions as may appear generally acceptable or desirable to the
Board.
f. No Non-Qualified Stock Option shall be exercisable more than ten years
from the date such option is granted.
g. During any calendar year, no Employee may be granted Non-Qualified
Stock Options with respect to more than 200,000 shares of Stock.
2. Exercise of Non-Qualified Stock Options. The purchase price of Stock
subject to a Non-Qualified Stock Option shall be payable on exercise of the
option in cash or by check, bank draft or postal or express money order. The
Board, in its discretion, may permit a Grantee to make partial or full payment
of the purchase price by the surrender of Stock owned by the Grantee prior to
the date of exercise. Shares of Stock surrendered in payment of the purchase
price as provided above shall be valued at the Fair Market Value thereof on
the date of exercise, surrender of such to be evidenced by delivery of the
certificates(s) representing such shares in such manner, and endorsed in such
form, or accompanied by stock powers endorsed in such form, as the Board may
determine.
In the absence of any other action by the Board, all Non-Qualified Stock
Options shall become exercisable in equal installments over a period of four
years calculated from the date of grant.
3. Termination of Employment. Except as provided otherwise in the applicable
Stock Option Agreement (in which case the provisions of the Stock Option
Agreement shall control over the provisions of this paragraph 3):
a. If a Grantee's employment is terminated, including termination by
reason of retirement at or after age 65 or by reason of Disability (other
than for Cause or voluntary termination prior to retirement at or after age
65 or death), only those Non-Qualified Stock Options held by the Grantee
which were immediately exercisable at the date of the termination of
Grantee's employment shall be exercisable by the Grantee following the
termination of Grantee's employment. Such Non-Qualified Stock Options must
be exercised within three months after such termination of employment (but
in no event after expiration of the Option Period) or they shall be
forfeited.
b. If a Grantee's employment is terminated for Cause or if the Grantee
shall have voluntarily terminated employment other than by retirement at or
after age 65, all then outstanding Non-Qualified Stock Options held by the
Grantee shall expire immediately and such Non-Qualified Stock Options shall
not be exercisable after the date of the termination of Grantee's
employment.
c. If a Grantee's employment is terminated by death, only those Non-
Qualified Stock Options held by the Grantee which were immediately
exercisable at the date of death shall be exercisable by the representative
of the Grantee's estate or beneficiaries thereof to whom the Non-Qualified
Stock Options have been transferred. Such Non-Qualified Stock Options must
be exercised by the earlier of (i) three months from the date of the
Grantee's death or (ii) the expiration of the Option Period, or they shall
be forfeited.
d. The Board may grant a leave of absence to any Grantee and, for
purposes hereunder, such Grantee shall be deemed to continue to be employed
for purposes of continuing such Grantee's employment with the Corporation
or its Affiliates during such leave of absence.
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4. Termination of Consultancy. Except as provided otherwise in the
applicable Stock Option Agreement (in which case the provisions of the Stock
Option Agreement shall control over the provisions of this paragraph 4):
a. If a Grantee's consulting engagement is terminated (other than for
Cause or voluntary termination or death), only those Non-Qualified Stock
Options held by the Grantee which were immediately exercisable at the date
of termination of the Grantee's consulting engagement shall be exercisable
by the Grantee following the termination of the Grantee's consulting
engagement. Such Non-Qualified Stock Options must be exercised within three
months after such termination of the Grantee's consulting engagement (but
in no event after expiration of the Option Period) or they shall be
forfeited.
b. If a Grantee's consulting engagement is terminated for Cause or if the
Grantee shall have voluntarily terminated his or her consulting engagement,
all then outstanding Non-Qualified Stock Options held by the Grantee shall
expire immediately and such Non-Qualified Stock Options shall not be
exercisable after the date of termination of the Grantee's consulting
engagement.
c. If a Grantee's consulting engagement is terminated by death, only
those Non-Qualified Stock Options immediately exercisable at the date of
the Grantee's death shall be exercisable by the representative of the
Grantee's estate or beneficiaries thereof to whom the Non-Qualified Stock
Options have been transferred. Such Non- Qualified Stock Options must be
exercised by the earlier of (i) three months from the date of the Grantee's
death or (ii) the expiration of the Option Period, or they shall be
forfeited.
IV. GENERAL PROVISIONS
1. Recapitalization Adjustments.
a. In the event of any change in capitalization affecting the Stock,
including, without limitation, a stock dividend or other distribution,
stock split, reverse stock split, recapitalization, consolidation,
subdivision, split-up, spin-off, split-off, combination or exchange of
shares or other form of reorganization or recapitalization, or any other
change affecting the Stock, the Board shall authorize and make such
proportionate adjustments, if any, as the Board deems appropriate to
reflect such change, including, without limitation, with respect to the
aggregate number of shares of Stock for which Stock Options in respect
thereof may be granted under the Plan, the number of shares of Stock
covered by each outstanding Stock Option, and the purchase price per share
of Stock in respect of outstanding Stock Options.
b. Any provision hereof to the contrary notwithstanding, in the event the
Corporation is a party to a merger or other reorganization, outstanding
Stock Options shall be subject to the agreement of merger or
reorganization. Such agreement may provide, without limitation, for the
assumption of outstanding Stock Options by the surviving corporation or its
parent, for their continuation by the Corporation (if the Corporation is a
surviving corporation) for accelerated vesting and accelerated expiration
or for settlement in cash.
2. Change of Control. Notwithstanding anything to the contrary contained in
the Plan or in any Stock Option Agreement, upon the occurrence of a Change of
Control, all then outstanding Stock Options shall automatically become fully
and immediately vested and exercisable.
3. General.
a. Each Stock Option shall be evidenced by a Stock Option Agreement.
b. The granting of a Stock Option in any year shall not give the Grantee
any right to similar grants in future years or any right to be retained as
an Employee or Consultant of the Corporation, and all Employees and
Consultants shall remain subject to discharge or removal to the same extent
as if the Plan were not in effect.
c. No Employee or Consultant, and no beneficiary or other person claiming
under or through him, shall have any right, title or interest by reason of
any Stock Option to any particular assets of the Corporation, or any shares
of Stock allocated or reserved for the purposes of the Plan or subject to
any Stock Option except as set forth herein. The Corporation shall not be
required to establish any fund or make any other segregation of assets to
assure the exercise of any Stock Option.
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d. No Stock Option or right under the Plan shall or may be sold,
exchanged, assigned, pledged, encumbered, or otherwise hypothecated or
disposed of except by will or the laws of descent and distribution, and a
Stock Option shall be exercisable during the Grantee's lifetime only by the
Grantee or his conservator.
e. Notwithstanding any other provision of the Plan or agreements made
pursuant thereto, the Corporation's obligation to issue or deliver any
certificate or certificates for shares of Stock under a Stock Option, and
the transferability of Stock acquired by exercise of a Stock Option, shall
be subject to all of the following conditions:
(1) Any registration or other qualification of such shares under any state
or federal law or regulation, or the maintaining in effect of any such
registration or other qualification which the Board shall, in its absolute
discretion upon the advice of counsel, deem necessary or advisable;
(2) The obtaining of any other consent, approval, or permit from any state
or federal governmental agency which the Board shall, in its absolute
discretion upon the advice of counsel, determine to be necessary or advisable;
and
(3) Each stock certificate issued pursuant to a Stock Option shall bear such
legends which the Corporation shall determine, in its absolute discretion, are
necessary or advisable, or which in the opinion of counsel to the Corporation
are required under applicable federal or state securities laws.
f. All payments to Grantees or to their legal representatives shall be
subject to any applicable tax, community property, or other statutes or
regulations of the United States or of any state having jurisdiction
thereof. The Grantee may be required to pay to the Corporation the amount
of any withholding taxes which the Board, in its sole discretion, deems
necessary to be withheld in order to comply with any applicable statutes or
regulations with respect to a Stock Option or its exercise. In the event
that such payment is not made when due, the Corporation shall have the
right to deduct, to the extent permitted by law, from any payment or
settlement of any kind otherwise due to such person all or part of the
amount required to be withheld. If the Board, in its sole discretion,
permits shares of Stock to be used to satisfy any such tax withholding,
such Stock shall be valued based upon the Fair Market Value of such Stock
as of the date the tax withholding is required to be made, such date to be
determined by the Board. The Corporation shall not be required to issue
Stock until such obligations are satisfied.
g. In the case of a grant of a Stock Option to any Employee or Consultant
of an Affiliate of the Corporation, the Corporation may, if the Board so
directs, issue or transfer the shares, if any, covered by the Stock Option
to the Affiliate, for such lawful consideration as the Board may specify,
upon the condition or understanding that the Affiliate will transfer the
shares to the Employee or Consultant in accordance with the terms of the
Stock Option specified by the Board pursuant to the provisions of the Plan.
h. A Grantee entitled to Stock as a result of the exercise of an Option
shall not be deemed for any purpose to be, or have rights as, a shareholder
of the Corporation by virtue of such exercise, except to the extent a stock
certificate is issued therefor and then only from the date such certificate
is issued. No adjustments shall be made for dividends or distributions or
other rights for which the record date is prior to the date such stock
certificate is issued, except as otherwise provided herein. The Corporation
shall issue any stock certificates required to be issued in connection with
the exercise of a Stock Option with reasonable promptness after such
exercise.
i. The grant or exercise of Stock Options granted under the Plan shall be
subject to, and shall in all respects comply with, applicable Connecticut
corporate law relating to such grant or exercise.
j. Should the participation of any Employee or Consultant in the Plan be
subject to Section 16 of the Securities Exchange Act of 1934 or any
successor statute ("Section 16"), it is the express intent of the
Corporation that, notwithstanding anything to the contrary contained in the
Plan, the Plan and Stock Options granted under the Plan shall satisfy and
be interpreted in a manner to achieve the result that the applicable
requirements of Rule 16b-3 shall be satisfied with respect to such
Employees and Consultants, with the result that such Employees and
Consultants shall be entitled to the benefits of Rule 16b-3 or other
applicable
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exemptive rules under Section 16. If any provision of the Plan or of any
Stock Option would otherwise frustrate or conflict with the intent of the
Corporation expressed in the immediately preceding sentence, to the extent
possible, such provision shall be interpreted and deemed amended so as to
avoid such conflict, and, to the extent of any remaining irreconcilable
conflict with such intent, the provision shall, solely with respect to
Employees and Consultants subject to Section 16, be deemed void.
k. It is the express intent of the Corporation that, notwithstanding
anything to the contrary contained in the Plan, the Plan and Stock Options
granted under the Plan shall satisfy and be interpreted in a manner to
achieve the result that Stock Options granted under the Plan shall
constitute "performance-based" compensation within the meaning of Section
162(m) of the Code. If any provision of the Plan or of any Stock Option
would otherwise frustrate or conflict with the intent of the Corporation
expressed in the immediately preceding sentence, to the extent possible,
such provision shall be interpreted and deemed amended so as to avoid such
conflict, and, to the extent of any remaining irreconcilable conflict with
such intent, the provision shall, solely with respect to Employees subject
to Section 162(m) of the Code, be deemed void.
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