SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement Confidential, for Use of the Commission
[X]Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
Definitive Additional Materials
Soliciting Material Pursuant
to Section 240.14a-11(c) or
Section 240.14a-12
IMNET SYSTEMS, INC.
-------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
-------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X]No fee required
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
IMNET
8601 DUNWOODY PLACE
SUITE 420
ATLANTA, GEORGIA 30350
_____________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 19, 1996
____________________________
TO THE STOCKHOLDERS OF
IMNET SYSTEMS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of IMNET
SYSTEMS, INC. (the "Company") will be held at the Holiday Inn, 1075 Holcomb
Bridge Road, Roswell, Georgia 30076, on December 19, 1996 at 10:00 a.m., Atlanta
time, for the following purposes:
1. To elect four directors to serve until the next annual meeting of
stockholders and until their successors are elected and have qualified.
2. To consider a proposal to increase the number of shares covered by the
Company's Employee Stock Option and Rights Plan.
3. To consider a proposal to amend Section 8 of the Company's Employee
Stock Option and Rights Plan to reflect amendments to the Securities
and Exchange Commission's "short-swing profit" rules, and granting
authority to the Board to approve certain amendment and termination
transactions.
4. To consider a proposal to approve the Company's Employee Discount Stock
Purchase Plan.
5. To transact such other business as may properly come before the meeting
or any adjournments thereof.
The Proxy Statement dated November 21, 1996, is attached. Only record
holders of the Company's $.01 par value Common Stock at the close of business on
November 20, 1996, will be eligible to vote at the meeting.
If you are not able to attend the meeting, please execute, complete, date
and return the proxy in the enclosed envelope. If you attend the meeting, you
may revoke the proxy and vote in person.
By Order of the Board of Directors:
[SIG CUT]
KENNETH D. RARDIN, Chairman of the
Board and Chief Executive Officer
Date: November 21, 1996
A copy of the Annual Report of IMNET Systems, Inc. for the fiscal year
ended June 30, 1996 containing financial statements is enclosed.
<PAGE>
IMNET
8601 DUNWOODY PLACE
SUITE 420
ATLANTA, GEORGIA 30350
___________________________
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 19, 1996
___________________________
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of IMNET Systems, Inc. ("IMNET," or the "Company") of
proxies for use at the 1996 Annual Meeting of Stockholders to be held on
December 19, 1996, at 10:00 A.M., Atlanta time, at the Holiday Inn, 1075 Holcomb
Bridge Road, Roswell, Georgia 30076.
This Proxy Statement and the accompanying form of proxy are being first
mailed to Stockholders on or about November 21, 1996. The Stockholder giving the
proxy may revoke it at any time before it is exercised at the meeting by: (i)
delivering to the Secretary of the Company a written instrument of revocation
bearing a date later than the date of the proxy; (ii) duly executing and
delivering to the Secretary a subsequent proxy relating to the same shares; or
(iii) attending the meeting and voting in person (attendance at the meeting will
not in and of itself constitute revocation of a proxy). Any proxy which is not
revoked will be voted at the Annual Meeting in accordance with the Stockholder's
instructions. If a Stockholder returns a properly signed and dated proxy card
but does not mark any choices on one or more items, his or her shares will be
voted in accordance with the recommendations of the Board of Directors as to
such items. The proxy card gives authority to the proxies to vote shares in
their discretion on any other matter properly presented at the Annual Meeting.
Proxies will be solicited from the Company's Stockholders by mail. The
Company will pay all expenses in connection with the solicitation, including
postage, printing and handling, and the expenses incurred by brokers,
custodians, nominees and fiduciaries in forwarding proxy material to beneficial
owners. The Company may employ a proxy solicitation firm to solicit proxies in
connection with the Annual Meeting and the Company estimates that the fee
payable for such services will be less than $10,000. It is possible that
directors, officers and regular employees of the Company may make further
solicitation personally or by telephone, telegraph or mail. Directors, officers
and regular employees of the Company will receive no additional compensation for
any such further solicitation.
Only holders (the "Stockholders") of record of the Company's $.01 par
value Common Stock at the close of business on November 20, 1996 (the "Record
Date"), are entitled to notice of, and to vote at, the Annual Meeting. On the
Record Date, the Company had outstanding a total of 9,601,044 shares of $.01 par
value Common Stock (excluding a total of 37,637 shares of treasury stock held by
the Company, which are not entitled to vote). Each such share will be entitled
to one vote (non-cumulative) on each matter to be considered at the Annual
Meeting. A majority of the outstanding shares of Common Stock, present in person
or represented by proxy at the Annual Meeting, will constitute a quorum for the
transaction of business at the Annual Meeting.
Votes cast by proxy or in person at the Annual Meeting will be counted
by the persons appointed by the Company to act as election inspectors for the
meeting. Prior to the meeting, the inspectors will sign an oath to perform their
duties in an impartial manner and to the best of their abilities. The inspectors
will ascertain the number of shares outstanding and the voting power of each of
such shares, determine the shares represented at the
<PAGE>
meeting and the validity of proxies and ballots, count all votes and ballots and
perform certain other duties as required by law.
The affirmative vote of holders of a majority of the outstanding shares
of Common Stock of the Company entitled to vote and present in person or by
proxy at the Annual Meeting is required for approval of each proposal, except
for election of directors. Nominees for election as directors will be elected by
a plurality of the votes cast by the holders of shares entitled to vote in the
election. Accordingly, the four nominees receiving the highest vote totals will
be elected as directors of the Company at the Annual Meeting. It is expected
that shares held by officers and directors of the Company, which in the
aggregate represent approximately 14.9% of the outstanding shares of Common
Stock, will be voted in favor of each proposal. With respect to election of
directors, abstentions, votes "withheld", and broker non-votes will be
disregarded and have no effect on the outcome of the vote. With respect to the
items submitted for approval, abstentions will have the effect of a vote against
the proposal and broker non- votes will be disregarded and will have no effect
on the outcome of the vote. There are no rights of appraisal or similar
dissenter's rights with respect to any matter to be acted upon pursuant to this
Proxy Statement.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company recommends a vote FOR the
election of each of the nominees named below for election as director, FOR the
proposal to increase the number of shares covered by the Company's 1993 Employee
Stock Option and Rights Plan, FOR the proposal to amend Section 8 of the
Employee Stock Option and Rights Plan, and FOR the proposal to approve the
Company's Employee Discount Stock Purchase Plan.
ELECTION OF DIRECTORS
The proxy holders intend to vote FOR election of the nominees named
below (who are currently members of the Board) as directors of the Company,
unless otherwise specified in the proxy. Directors of the Company elected at the
Annual Meeting to be held on December 19, 1996 will hold office until the next
Annual Meeting or until their successors are elected and qualified.
Each of the nominees has consented to serve on the Board of Directors,
if elected. Should any nominee for the office of director become unable to
accept nomination or election, which is not anticipated, it is the intention of
the persons named in the proxy, unless otherwise specifically instructed in the
proxy, to vote for the election of such other person as the Board of Directors
may recommend.
Except for Mr. Gilbert, the individuals listed below as nominees for
the Board of Directors were directors of the Company during fiscal 1996. The
name and age of each nominee, his principal occupation, and the period during
which such person has served as a director is also set forth below:
<TABLE>
<CAPTION>
SERVICE AS
NAME OF NOMINEE AGE DIRECTOR POSITION
- --------------- --- -------- --------
<S> <C> <C> <C>
Kenneth D. Rardin 46 Since 1992 Chairman of the Board and Chief Executive Officer
James A. Gilbert 48 Since 1996 President, Chief Operating Officer and Director
Daniel P. Howell 44(1) Since 1992 Director
James A. Gordon 47(1) Since 1992 Director
- ---------------
</TABLE>
(1) Member of the Audit Committee and the Compensation Advisory Committee.
-2-
<PAGE>
Mr. Rardin has been Chairman of the Board and Chief Executive Officer
of the Company since October 1992, when the Company acquired certain assets of
IMGE, Inc. and certain of its subsidiaries (collectively, "IMGE"). He was also
President of the Company from October 1992 until the appointment of Mr. Gilbert
as President in September 1996. Mr. Rardin has over 25 years of experience in
the computer software field. Beginning in late 1990 until the consummation of
the 1992 IMGE acquisition (the "1992 Acquisition"), he was Chief Executive
Officer of IMGE. From 1989 to 1990, Mr. Rardin was a self-employed consultant in
the computer and data communications industries. From 1986 to 1989, Mr. Rardin
served as President and Chief Executive Officer of GMD, Inc., a provider of
systems which integrated design and manufacturing automation with business
systems. From 1983 to 1986, Mr. Rardin was President and Chief Executive Officer
of FutureSoft Synergies, Inc., a venture capital investment and management
company. From 1977 to 1982, Mr. Rardin was Chief Operating Officer of Software
AG of North America. During such time, Software AG of North America grew from a
small private software company to one of the industry's largest publicly-held
international software companies.
Mr. Gilbert was appointed a Director, President and Chief Operating
Officer in September 1996. Prior to joining IMNET, Mr. Gilbert held several
positions over eight years at HBO & Company ("HBOC"). Since 1995, he was Senior
Vice President and General Counsel, with operational responsibility for several
product groups. From 1988 to 1995 he served as Vice President. Prior to his
eight-year tenure at HBOC, Mr. Gilbert was a partner with the Atlanta law firm
of Hansell and Post.
Mr. Howell has been a director of the Company since the 1992
Acquisition. He is a principal and the Executive Vice President of Mesirow
Private Equity Investments, Inc., and the Vice President of Mesirow Financial
Services, Inc. in Chicago. Mesirow Private Equity Investments, Inc. manages in
excess of $200 million in equity capital. He joined Mesirow in 1986. He has an
M.B.A. from the University of Wisconsin-Madison and a B.A. from Lawrence
University. Mr. Howell serves as a director and a member of the compensation
committee of Microware Systems Corporation.
Mr. Gordon has been a director of the Company since 1992. He is the
principal of Gordon Management, Inc., which he founded in 1992 to serve as the
general partner of Edgewater Private Equity Fund, L.P., a $100 million private
equity and venture capital investment fund. From 1971 through 1992, he served as
the president and owner of Gordon's Wholesale, Inc. ("GWI"). In 1982, Mr. Gordon
engineered a leveraged buy-out of his personal and family interests in GWI and
sold GWI to a European multinational corporation in 1986. Mr. Gordon has been
active in the private equity markets since 1982 and has completed numerous
transactions since that time. He serves on the boards of directors of Advanced
Photonix, a public company; Pride Industries; Microware Systems Corporation;
Pangea, Inc. and DAC Vision, Inc. He also serves as Chairman of the Investment
Committee at Grinnell College and is an Advisory member of the National
Committee for the Performing Arts. Mr. Gordon is a graduate of Northwestern
University.
INFORMATION ABOUT THE BOARD OF DIRECTORS
AND COMMITTEES OF THE BOARD
MEETINGS OF THE BOARD OF DIRECTORS--During fiscal 1996, there were nine meetings
of the Board of Directors. Each incumbent director who was a director during
fiscal 1996 attended at least 75% of the sum of all meetings of the Board of
Directors and any committees on which that director served.
DIRECTOR COMPENSATION--The Company pays directors who are not full-time
employees of the Company an annual fee of $5,000 for service on the Board of
Directors and a fee of $500 for each Board meeting attended. Directors are
entitled to reimbursement of their traveling costs and other out-of-pocket
expenses incurred in attending Board and Committee meetings. Additionally,
directors who are not members of the Compensation Advisory Committee are
eligible to participate in the Company's Employee Stock Option and Rights Plan
(the "1993 Plan"). Pursuant to the terms of the 1995 Non-Employee Directors
Stock Option Plan, each person who was then a director, other than Mr. Rardin,
received non-qualified options to purchase 3,760 shares of the Company's Common
Stock in July 1995. The per share exercise price for these options was the
initial public offering price ($12.00 per share). Non-
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<PAGE>
employee directors will receive options to acquire 3,760 shares of Common Stock
on the first business day after the Annual Meeting of Stockholders, at the
closing price of the Company's Common Stock on the date prior to the grant of
the option. All options granted under the 1995 Non-Employee Directors Stock
Option Plan become exercisable one year after the date of grant, provided the
director has attended at least 75% of the sum of all meetings of the Board of
Directors and any committees on which that director serves, from the date of
grant to such anniversary date. No option granted pursuant to the Plan may be
exercised later than five years following the date of grant thereof. See
"Benefit Plans - Non-Employee Director Stock Option Plan" below.
AUDIT COMMITTEE--The Company's Audit Committee consists of two non-employee
directors: Mr. Howell and Mr. Gordon. The Audit Committee met three times in
fiscal 1996. The Audit Committee reviews the general scope of the Company's
annual audit and the nature of services to be performed for the Company in
connection therewith, acting as liaison between the Board of Directors and the
independent auditors. The Audit Committee also formulates and reviews various
company policies, including those relating to accounting practices and internal
control systems of the Company. In addition, the Audit Committee is responsible
for recommending, reviewing and monitoring the performance of the Company's
independent auditors.
COMPENSATION ADVISORY COMMITTEE--The Company has a Compensation Advisory
Committee currently consisting of two non-employee directors: Mr. Howell and Mr.
Gordon. The Compensation Advisory Committee met four times in fiscal 1996. The
Compensation Advisory Committee is responsible for reviewing and making
recommendations to the Board regarding the annual compensation for all officers,
including the salary and the compensation package of executive officers. A
portion of the compensation package includes a bonus award. The Compensation
Advisory Committee also administers the Company's benefit plans including the
Company's 1993 Employee Stock Option and Rights Plan.
NOMINATING COMMITTEE--IMNET does not have a standing nominating committee of the
Board of Directors.
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including this proxy statement, in whole or in part, the following
Report and Performance Graph shall not be incorporated by reference into any
such filings.
REPORT OF THE COMPENSATION ADVISORY COMMITTEE ON
EXECUTIVE COMPENSATION
OVERVIEW
The Compensation Advisory Committee of the Board of Directors of IMNET
Systems, Inc. is composed of non-employee directors. The Compensation Advisory
Committee reviews and approves the compensation of the Company's executive
officers at least annually. The Compensation Advisory Committee believes the
actions of top executives of the Company have a profound impact on the Company's
short-term and long-term revenues and profitability. Therefore, the Compensation
Advisory Committee gives significant attention to the design of the Company's
compensation package.
The Company's compensation package consists of three primary parts and
is relatively simple in design. The three primary parts are a base salary,
stock-based incentive compensation, and a cash bonus. No significant perquisites
are provided to executive officers.
BASE SALARY
The Compensation Advisory Committee believes it is important for
executive officers and other employees of the Company to receive acceptable
salaries so that the Company can recruit and retain the talent it needs. In
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<PAGE>
setting salaries, the Compensation Advisory Committee takes into consideration
the individual employee's performance and length of service to the Company. The
Compensation Advisory Committee seeks to set compensation at levels which are
reasonable under the circumstances and generally near the midrange for U.S.
software companies. The base salary for each executive officer is set based on
existing employment agreements, if applicable, which provide for a Consumer
Price Index adjustment. Additional increases, if any, are made on a subjective
basis, bearing in mind an overall impression of that executive's relative
skills, experience and contribution to the Company. For fiscal 1996, salaries
for most executive officers were raised by 2.5%, although two officers received
larger increases. The Compensation Advisory Committee does not attempt to
address the relative weights assigned to the various factors, which are
evaluated on a subjective overall basis by each individual member of the
Compensation Advisory Committee. Salaries of all executive officers are reviewed
annually by the Compensation Advisory Committee. The base salaries for the new
executive officers employed since the beginning of fiscal 1996, Raymond L.
Brown, Chief Financial Officer, James A. Gilbert, President and Chief Operating
Officer, and Thomas D. Underwood, Senior Vice President-Technical Operations,
were established utilizing a procedure agreed upon by the Compensation Advisory
Committee. In accordance with this procedure, the Compensation Advisory
Committee informally consults with Mr. Rardin, the Chairman and Chief Executive
Officer of the Company, and an appropriate range of base salary, bonus, and
stock options is subjectively considered, based upon the range of compensation
received by the other executive officers and the requirements of the particular
positions to be filled. The Chief Executive Officer negotiates with the
candidate for employment, subject to acceptance and ratification by the
Compensation Advisory Committee, and the negotiated base salary is reflected in
the candidate's employment agreement. In the case of Mr. Gilbert and Mr. Brown,
the Compensation Advisory Committee also took into account the candidate's prior
levels of compensation, including outstanding stock options. The Compensation
Advisory Committee is considering whether to adopt a deferred compensation plan
permitting certain company personnel to defer receipt of a portion of their base
salary assuming the plan can be implemented at minimal cost.
STOCK-BASED INCENTIVES
Stock-based incentives have been an important component of compensation
for the Company's executive officers and certain other employees since the
formation of the Company. The Company adopted a formal incentive stock option
plan in 1993. The Compensation Advisory Committee approves grants of stock
options under the 1993 Employee Stock Option and Rights Plan. The Company,
through actions taken by its Board of Directors, has on occasion also made
grants of non-qualified options under an informal stock option program.
Historically, grants made by the Company have generally vested at a
rate of 20% per year and have had a term of ten years. These options also
usually expire upon termination of employment or shortly thereafter, except in
the event of disability or death, in which case the term of the option may
continue for some time thereafter.
The Compensation Advisory Committee believes that the Company's stock
option program has been effective in focusing attention on stockholder value
since the gain to be realized by executive officers (and other key employees)
upon exercise of options will change as the stock price changes. The
Compensation Advisory Committee also believes that the long-term nature of the
options encourages the Company's executive officers to remain with the Company.
Finally, the Compensation Advisory Committee has found it appropriate to grant
options to newly employed executive officers in order to encourage such officers
to accept employment with the Company, and identify promptly with the Company's
goal of increased stockholder value. In fiscal 1996, upon the employment of
Raymond L. Brown as Chief Financial Officer and Thomas D. Underwood as Senior
Vice President- Technical Operations, the Compensation Advisory Committee
granted Messrs. Brown and Underwood incentive stock options for 50,000 and
27,000 shares of Common Stock, respectively. In the fall of 1996, upon the
employment of James A. Gilbert as President and Chief Operating Officer, the
Compensation Advisory Committee granted a non-qualified stock option to acquire
400,000 shares of Common Stock. Of this amount, 250,000 were at the then-current
market price (vesting in one year), and 150,000 were at the higher price at
which option grants had been made to executive officers in fiscal 1996. Grants
made in the fall of 1996, which included those granted to Mr. Gilbert, were
non-qualified options since there were insufficient shares available for grant
under the 1993 Employee Stock Option and Rights Plan. The number of shares to be
granted, the exercise price and other terms
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<PAGE>
were established utilizing the procedure described above at "Base Salary." The
Compensation Advisory Committee subjectively determined the terms of the options
based on its analysis of the number which would provide an adequate incentive to
each new executive officer to accept a position with the Company.
In general, following initial employment, the granting of stock-based
incentives is considered by the Compensation Advisory Committee to be justified
when the Company's revenues and earnings, coupled with the individual
executive's performance, warrant supplemental compensation in addition to the
salary and bonus paid with respect to a given year. Options were granted to
executive officers in fiscal 1996 by the Compensation Advisory Committee based
on a subjective evaluation of the contributions made by each officer, the
recommendations of the Chairman of the Board, and the Committee's perception of
each executive officer's overall compensation. Each of these factors is weighed
subjectively by Committee members in determining whether or not a stock-based
incentive should be granted, and such incentives are not granted routinely.
CASH BONUSES
Cash bonuses are the final component of executive officer compensation.
In determining the amount to be paid as bonuses to executive officers, the
Compensation Advisory Committee considers the performance of the Company in
reaching goals for increased revenues and pre-tax profit as well as the
performance of each executive officer. For fiscal 1996, the Compensation
Advisory Committee, in consultation with Mr. Rardin, set an earnings per share
target (as adjusted to eliminate nonrecurring charges) the attainment of which
would entitle each executive officer to receive a bonus. This target was not
met, although actual earnings per share if the bonuses were paid in full fell
short by only a small margin. After informal deliberation, and consultation with
Mr. Rardin, the Compensation Advisory Committee based its decision that
discretionary bonuses, aggregating somewhat less than would have been due had
the target been met, should be awarded to the Company's executive officers for
fiscal 1996 upon its subjective determination that the Company's fiscal 1996
increases in total revenues and pre-tax profits justified the granting thereof.
The amount of the bonus paid to individual executive officers, which differed in
several instances from the amounts they would have received under the bonus
arrangement, was determined based upon the Committee's subjective analysis of
the performance of each such officer. The aggregate amount was also limited by
the desire of the Compensation Advisory Committee to avoid granting bonuses that
would prevent the Company from reaching a certain earnings per share target.
Fiscal 1996 executive officer bonuses were paid in fiscal 1997.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Rardin's compensation is set based primarily on a written
employment agreement entered into in 1992, at the time of the 1992 Acquisition.
That agreement was based on his then-existing arrangement with IMGE. The
Compensation Advisory Committee fixed the fiscal 1996 salary of Mr. Rardin at
$324,118 representing a premium of $20,986 over the minimum amount specified in
his written employment agreement. Mr. Rardin was awarded a cash bonus of
$114,356 for his performance in fiscal 1996. This bonus was granted pursuant to
the philosophy of the Compensation Advisory Committee as set forth at "Base
Salary" and "Cash Bonuses" above. The Compensation Advisory Committee deemed it
appropriate to grant an incentive stock option for 193,984 shares of Common
Stock to Mr. Rardin in January 1996, and a non-qualified option for 105,000
shares in September 1996, based on his outstanding performance, which the
Compensation Advisory Committee believes strongly contributed to the Company's
performance in fiscal 1996. The Compensation Advisory Committee believes the
overall compensation of Mr. Rardin, a founder of the Company, reflects the
Committee's subjective opinion that Mr. Rardin has provided superlative
leadership and fulfilled the functions of an executive officer of the Company at
the highest level.
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<PAGE>
CONCLUSION
The Compensation Advisory Committee believes that its mix of a cash
salary and bonuses and a long-term stock incentive compensation program
represents a balance that has motivated and will continue to motivate the
Company's management team to produce the best results possible given overall
economic conditions and the difficulty of predicting the Company's performance
in the short term.
COMPENSATION ADVISORY COMMITTEE:
DANIEL P. HOWELL, CHAIRMAN
JAMES A. GORDON
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1996, Messrs. Howell, Gordon and John I. Jellinek served
as members of the Compensation Advisory Committee. No member of the Committee is
an employee, officer, or former officer of the Company, although Mr. Howell
served as Secretary of the Company without compensation for such services until
November 6, 1996. Mr. Jellinek served on the Compensation Advisory Committee
until his resignation as a director on August 22, 1996.
The Company entered into a distribution partner agreement with SoftNet
Systems, Inc. ("SoftNet") in March 1993. SoftNet is a software and services
company for which Mr. John I. Jellinek served, at that time, as President and
Chief Executive Officer. Mr. John J. McDonough serves as Chairman of the Board
of Directors of SoftNet. Messrs. Jellinek and McDonough are former directors of
the Company. The Company and SoftNet entered into an amendment to the
distribution partner agreement in June 1995 pursuant to which SoftNet agreed to
purchase certain hardware and software from the Company at an aggregate purchase
price of approximately $2.0 million, payable in four equal installments due at
the end of each calendar quarter, the first of which was due January 1, 1996,
and was paid in February 1996. The Company recorded revenues and trade
receivables of $485,000 in fiscal 1995 pursuant to this arrangement. The
remainder was recognized in fiscal 1996.
On June 30, 1996, the Company entered into manufacturing and
distribution rights agreements with SoftNet and an affiliated company which
provided for the grant of exclusive worldwide manufacturing rights and
nonexclusive distribution rights with respect to markets other than healthcare,
as defined, for the IMNET MegaSAR Microfilm Jukebox, the Company's proprietary
microfilm storage device. The terms of the agreements included an obligation by
SoftNet to pay the Company nonrefundable license fees of $1,000,000. These
nonrefundable license fees were recognized as revenue by the Company in the year
ended June 30, 1996. The terms of the agreements also provided for SoftNet to
pay the Company a fixed license fee per unit for all units manufactured, and a
provision for SoftNet to purchase, at carrying value, the Company's remaining
raw materials inventories on an as-needed basis.
Simultaneously with the execution of the manufacturing and distribution
rights agreements and the second amendment to the distribution partner
agreement, the Company converted all amounts due from SoftNet into a secured
note receivable from SoftNet bearing interest at the prime rate plus 2%, due
upon the earlier of (1) the sale of IMNET Common Stock owned by SoftNet, or (2)
June 29, 1997. The note receivable was fully secured at June 30, 1996 by 112,913
shares of IMNET Common Stock owned by SoftNet and held as collateral by the
Company. Subsequently, SoftNet sold its shares of IMNET Common Stock and paid
IMNET $2.5 million against the approximately $2.9 million it owed under the note
receivable.
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PERFORMANCE GRAPH
Set forth below is a line-graph presentation comparing the cumulative
stockholder return on the Company's Common Stock, on an indexed basis, against
cumulative total returns of the Nasdaq Stock Market (U.S. Companies) and the
Nasdaq Health Care Index. The graph assumes that the value of the investment in
the Common Stock and each index was $100 on July 20, 1995. The Performance Graph
shows total return on investment for the period beginning July 20, 1995 (the
date of the Company's initial public offering) through June 30, 1996.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
VALUE OF $100 INVESTED ON JULY 20, 1995 AT:
7/20/95 9/30/95 12/31/95 3/31/96 6/30/96
---------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
IMNET $ 100.00 $ 214.58 $ 200.00 $ 252.08 $ 254.17
NASDAQ HEALTH CARE INDEX 100.00 105.14 121.26 126.43 137.45
NASDAQ MARKET 100.00 103.57 102.74 107.49 115.45
</TABLE>
TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS.
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EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued by the
Company to the Company's Chief Executive Officer, the four other most highly
paid executive officers of the Company in 1996 and two former executive officers
(Messrs. Bhatt and Ulatowski) who would have been among the most highly paid
executives but for the fact that they were no longer serving as executive
officers at fiscal year end (the "Named Executive Officers"). The information
presented is for the fiscal years ended June 30, 1996, 1995 and 1994.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
AWARDS
FISCAL YEAR SECURITIES
ENDED ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION JUNE 30, COMPENSATION OPTIONS(#) COMPENSATION($)
- --------------------------- -------- -------------- ---------- ---------------
SALARY($) BONUS($)
--------- -------
<S> <C> <C> <C> <C> <C>
Kenneth D. Rardin 1996 $324,118 $114,356 193,984 $ 11,763(1)
Chief 1995 281,265 --- 150,400 11,273(2)
Executive Officer..................... 1994 277,216 --- 55,108 11,273(2)
Gary D. Bowers 1996 145,192 57,506 23,647 ---
Senior Vice President - 1995 113,161 12,929 18,800 ---
Business Development.................. 1994 111,371 --- 8,753 ---
Thomas D. Underwood 1996 139,692(3) 55,975 50,000 ---
Senior Vice President - 1995 --- --- --- ---
Technical Operations.................. 1994 --- --- --- ---
Kenneth R. Brown 1996 126,442 63,646 --- ---
Executive Vice 1995 24,038(4) --- 46,353 ---
President............................. 1994 --- --- --- ---
Paul J. Collins, Jr. 1996 123,692 36,900 12,447 ---
Senior Vice President - 1995 23,077(4) 10,000 27,553 ---
Marketing ........................... 1994 --- --- --- ---
Mark S. Ulatowski(6) 1996 114,231(5) 159,750 21,200 ---
Vice President - 1995 273,555(5) 9,000 15,980 ---
Healthcare Services................... 1994 102,118(5) --- 2,820 ---
Nikhil A. Bhatt(7) 1996 193,314 5,000 --- ---
Senior Vice President and 1995 140,595 6,497 --- ---
Chief Technical Officer............... 1994 141,745 --- 8,753 ---
- ------------------
</TABLE>
(1) The amounts shown reflect the dollar value of disability ($9,370) and life
insurance ($2,393) premiums paid by the Company.
(2) Reflects the dollar value of disability ($7,309) and life insurance
($3,964) premiums paid by the Company.
(3) Mr. Underwood joined the Company in July 1995.
(4) Mr. Brown and Mr. Collins both joined the Company in April 1995.
(5) Includes sales commissions.
(6) Mr. Ulatowski ceased to be an executive officer of the Company prior to
June 30, 1996.
(7) Mr. Bhatt left the employ of the Company prior to June 30, 1996.
-9-
<PAGE>
OPTION GRANTS TABLE
The following table sets forth certain information regarding options
granted to the Named Executive Officers during the fiscal year ended June 30,
1996. No separate stock appreciation rights ("SARs") were granted during fiscal
1996.
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL 1996
INDIVIDUAL GRANTS
Potential Realizable Value
at Assumed Annual Rates
of Stock Price
Appreciation for
INDIVIDUAL GRANTS Option Term(2)
--------------------------------------------------------------------------------------------
Number of
Securities % of Total
Underlying Options Granted Exercise
Options to Employees in Price Expiration
Name Granted(#)(1) Fiscal Year ($/share) Date 5%($) 10%($)
- -------------------- ------------- --------------- --------- ------------ -----------------------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth D. Rardin 193,984 44.8% $21.25 01/09/06 $2,592,404 $6,569,661
Gary D. Bowers 23,647 5.5 21.25 01/09/06 316,019 800,854
Thomas D. Underwood 27,000 6.2 12.00 07/14/05 203,762 516,373
Thomas D. Underwood 23,000 5.3 21.25 01/09/06 307,372 778,942
Paul J. Collins 12,447 2.9 21.25 01/09/06 166,342 421,543
Mark S. Ulatowski 21,200 4.9 21.25 01/09/06 283,317 717,981
- ------------------
</TABLE>
(1) The options will become exercisable at the rate of 20% per year from the
date of grant and have 10-year terms so long as the optionee's employment
with the Company continues. The exercise price of each option is equal to
the fair market value of the underlying Common Stock on the date of the
grant, as determined by the Compensation Advisory Committee of the Board
of Directors. The exercise price may be paid in cash or, at the option of
the Compensation Advisory Committee, in shares of Common Stock valued at
fair market value on the exercise date.
(2) Future value of current-year grants assuming appreciation in the market
value of the Common Stock of 5% and 10% per year over the 10-year option
period. The actual value realized may be greater than or less than the
potential realizable values set forth in the table.
Option Exercises and Year-End Value Table
None of the Named Executive Officers has held or exercised separate SARs.
The following table sets forth certain information regarding options exercised
during the fiscal year ended June 30, 1996 by, and unexercised options held at
fiscal year end by, each of the Named Executive Officers.
-10-
<PAGE>
<TABLE>
<CAPTION>
FISCAL 1996 YEAR-END OPTION VALUES
SHARES
ACQUIRED NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-
ON VALUE UNEXERCISED OPTIONS AT 1996 MONEY OPTIONS AT 1996 FISCAL
EXERCISE REALIZED FISCAL YEAR END(#) YEAR END($)(1)
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------- --------------- ------------- ----------------------------------- ---------------------------------
<S> <C> <C> <C> <C>
Kenneth D. Rardin 0 $ 0 52,123/347,369 $1,225,021/$5,365,256
Gary D. Bowers 0 0 7,261/43,939 171,112/692,085
Thomas D. Underwood 0 0 5,400/44,600 99,900/612,350
Kenneth R. Brown 9,270 213,674 0/37,083 0/854,763
Paul J. Collins 0 0 5,510/34,490 127,006/623,226
Mark S. Ulatowski 4,324 98,713 0/35,676 0/531,582
Nikhil A. Bhatt 8,753 233,005 0/0 0/0
- -----------------
</TABLE>
(1) Calculated based on the $30.50 estimated fair market value of the
underlying securities as of June 30, 1996.
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Mr. Rardin in May
1992, which was amended in July 1995, and again in May 1996. It extends through
December 31, 1999. The employment agreement, as amended, establishes Mr.
Rardin's base salary at $303,132, subject to adjustment upward in accordance
with the Consumer Price Index (the "CPI"). Under the agreement, the Company also
has agreed to pay the premiums with respect to certain life and disability
insurance for Mr. Rardin. The agreement may be terminated by the Company with or
without cause or upon Mr. Rardin's death or his inability to perform his duties
on a substantially full-time basis on account of disability or incapacity for a
period of six or more months. The agreement also contains a one-year
non-competition provision. The agreement provides that Mr. Rardin is to be
nominated for election as a director of the Company for so long as he is
employed full time by the Company. Mr. Rardin is also entitled to receive
bonuses provided that the Company achieves certain earnings targets, and is
entitled to participate in insurance and other benefit, pension or health plans
provided by the Company to its key executive employees. Mr. Rardin is entitled
to severance through December 31, 1999 upon termination of his employment prior
to January 1, 1999 by reason of: (i) termination by the Company other than for
cause; or (ii) at the election of Mr. Rardin within the six month period
following a Severance Event. A Severance Event includes: (a) the occurrence of
material changes made without the written consent of Mr. Rardin which diminish
the position, title, authority, compensation or scope of authority enjoyed by
Mr. Rardin as of the date the employment agreement was executed; (b) the
occurrence of a transaction involving the Company whereby, following the
consummation thereof, (1) 51% of the Company's outstanding voting shares will
have been acquired by a third party or parties in a transaction or series of
transactions effected with the purpose or effect of accomplishing a change in
control of the Company or (2) the Company will have disposed of to a third party
substantially all of the assets or business or entered into a substantially
similar transaction; or (c) the occurrence of certain bankruptcy or insolvency
events involving the Company (a "Bankruptcy Event"). In the event that Mr.
Rardin's employment with the Company is terminated on or after January 1, 1999
for any of the reasons set forth above, Mr. Rardin is entitled to severance for
a period of 12 months from the date of termination of his employment. The
severance to which Mr. Rardin is entitled includes continued compensation
payments at the base salary rate in effect at the time of the termination of
employment, continued ability to participate in life or death benefit plans,
continued life and disability insurance, and continued ability to participate in
employee fringe benefit and pension plans, each as Mr. Rardin would have been
entitled to receive during the term of his employment. In the event that Mr.
Rardin's employment with the Company terminates by reason of: (A) termination by
the Company other than for cause; (B) disability; (C) death; or (D) the
Severance Events described above, Mr. Rardin is entitled to receive a pro rata
portion of the bonus which he would otherwise have been entitled to receive,
prorated to reflect the actual number of days worked by Mr. Rardin during such
fiscal year.
-11-
<PAGE>
Messrs. Bhatt, Bowers, Collins, Underwood and Gilbert have entered into
employment agreements with the Company dated May 22, 1992, May 22, 1992, April
10, 1995, July 5,1995 and September 10, 1996, respectively. The agreements are
terminable at any time upon three months' written notice by either party;
automatically in the event of the death of the employee; immediately upon
written notice if termination is for cause as defined therein and at any time
upon the mutual agreement of the Company and the employee. The agreements
established original base salary rates for Mr. Bhatt, Mr. Bowers, Mr. Collins,
Mr. Underwood and Mr. Gilbert, each subject to annual adjustments tied to
increases in the Consumer Price Index (the "CPI"). As a result of subsequent
increases in the CPI and merit raises, Mr. Bhatt's annual salary at the time he
left the employ of the Company was $151,354; Mr. Bowers' current annual salary
is $128,125; Mr. Collins' current annual salary is $123,000; Mr. Underwood's
current annual salary is $153,250; and Mr. Gilbert's current annual salary is
$250,000. Mr. Gilbert also received a one-time bonus of $100,000 payable over
twelve months. Each of the employees is eligible to receive incentive bonuses
under bonus plans to be determined by the Chief Executive Officer of the Company
for senior level executives of the Company, with grants of any such bonuses
being made in the sole discretion of the Board of Directors. Each employee is
entitled to receive six months (or in the case of Mr. Gilbert twelve months)
severance pay at the monthly rate of their respective then-current base salaries
upon termination of his employment for any reason other than cause and, with
respect to Mr. Bowers, in the event Mr. Rardin's employment with the Company is
terminated and such employee elects to terminate his employment within 30 days
thereafter, provided such severance terminates upon acceptance by such employee
of full-time employment with a subsequent employer during the six month
severance period. Mr. Collins', Mr. Underwood's and Mr. Gilbert's agreement
contains a one-year non-competition provision, while Mr. Bowers' agreement
contains a six month non-competition provision. Mr. Bhatt left the employ of the
Company prior to June 30, 1996. He accepted full time employment before the
expiration of his severance period.
In April 1995, Mr. Brown entered into a letter agreement with the Company
which established his base salary at $125,000, plus annual CPI adjustments. As a
result of subsequent increases in the CPI, Mr. Brown's current annual salary is
$128,125. Also, pursuant to the agreement, Mr. Brown is eligible to receive
incentive bonuses based upon achieving certain Company goals. The Company
currently has no written employment agreement with Mr. Ulatowski.
BENEFIT PLANS
The following summary description of the Company's existing benefit plans
does not incorporate any changes proposed to the Company's Employee Stock Option
and Rights Plan.
Employee Stock Option and Rights Plan
The Company's Employee Stock Option and Rights Plan (the "1993 Plan")
provides for the grant of options to acquire a maximum of 940,000 shares of
Common Stock. As of November 15, 1996, options for 54,674 shares had been
exercised under the 1993 Plan, and options for 881,491 shares were outstanding.
Unless sooner terminated by the Board, the 1993 Plan terminates on October 27,
2003. The Board of Directors has recommended an increase in the number of shares
covered by the 1993 Plan, as well as an amendment to Section 8 thereof to
eliminate the requirement of obtaining stockholder approval for certain
amendments and termination transactions. See "The IMNET Systems, Inc. Employee
Stock Option and Rights Plan", "Proposal to Increase the Number of Shares
Covered by the IMNET Systems, Inc. Employee Stock Option and Rights Plan, and
"Proposal to Amend Section 8 of IMNET Systems, Inc. Employee Stock Option and
Rights Plan" below.
Employee Discount Stock Purchase Plan
The Board of Directors has recommended that the stockholders approve the
IMNET Systems, Inc. Employee Discount Stock Purchase Plan. See "IMNET Systems,
Inc. Employee Discount Stock Purchase Plan" below.
-12-
<PAGE>
Reservation of Shares for Other Options
The Compensation Advisory Committee is authorized to issue additional
options to acquire up to 200,000 shares of the Company's Common Stock on such
terms as it deems appropriate.
Non-Employee Directors Stock Option Plan
The Non-Employee Directors Stock Option Plan (the "Directors Plan")
permits the granting of options to purchase an aggregate of 94,000 shares of
Common Stock to non-employee directors of the Company. The Directors Plan
provides for automatic grants of non-qualified stock options to non-employee
directors of the Company at an exercise price equal to the then-current fair
market value. An initial grant of options to purchase 3,760 shares, at a price
equal to the initial public offering price, was awarded to each non-employee
director effective upon the closing of the initial public offering. Commencing
with the 1996 Annual Meeting of Stockholders, each non-employee director will
receive an annual grant of options to purchase 3,760 shares on the first
business day after such annual meeting. Options granted under the Directors Plan
are not transferable other than by will or the laws of descent and distribution.
Options vest on the first anniversary of the grant date, but do not vest unless
the director has attended at least 75% of the sum of all meetings of the Board
of Directors and any committees on which that director serves, from the date of
grant to such anniversary date. Options terminate 30 days following cessation of
service as a non-employee director for any reason other than death. Upon the
death of a non-employee director, options which were exercisable on the date of
death are exercisable by his legal representatives or heirs for one year from
the date of death. Under no circumstances may an option be exercised more then
five years following the date of grant. As of the fiscal year end, options for
15,040 shares had been granted, under the Directors Plan. Of these an option to
acquire 3,760 shares was exercised, an option to acquire 3,760 shares vested but
expired unexercised, an option to acquire 3,760 shares expired without vesting
and options to acquire 7,520 shares remain outstanding.
CERTAIN TRANSACTIONS
In connection with obligations undertaken pursuant to the 1992
Acquisition, the Company paid to IMGE $63,281 in fiscal 1996 for its cost in
connection with preparing required filings with the Securities and Exchange
Commission and certain maintenance fees for a specified period of time after the
closing of the Acquisition. The Company's obligations for such filing and
maintenance costs ended in January 1996.
In October 1992 and January 1994, the Company loaned $75,000 and $30,000,
respectively, to Mr. Rardin, the Chairman of the Board and Chief Executive
Officer of the Company. Such loans are evidenced by unsecured promissory notes
which are payable as follows: the $75,000 note accrued no interest for two years
from the date of issuance, and accrued interest thereafter at a rate of 10% per
annum. The $30,000 note bears interest from the date of issuance at a rate of
10% per annum and was initially due by January 31, 1996. The notes were amended
to extend the due date for all payments of principal and interest to September
30, 1997. Pursuant to the terms of such notes, bonuses earned by Mr. Rardin
pursuant to certain provisions of his employment agreement are to be applied
against amounts due under those notes. No bonuses were earned pursuant to these
provisions. The aggregate balance of these loans as of June 30, 1996 and the
largest aggregate amount of indebtedness owed to the Company by Mr. Rardin
during fiscal year 1996 was $105,000.
On August 22, 1995, the Company loaned Mr. Underwood, the Vice President -
Technical Operations of the Company, $150,000, secured by his home in Knoxville,
Tennessee, in order to assist him in financing the purchase of a home in
Atlanta. This amount, plus interest at the rate of 8.75%, was due to be repaid
upon the closing of the sale of his home in Knoxville. On September 29, 1995,
Mr. Underwood repaid the Company $151,422, including accrued interest,
representing the largest amount due from the date of the loan through such date.
In September 1996, James A. Gilbert became President and Chief Operating
Officer and a director of the Company. Prior to September 1996, Mr. Gilbert was
an executive officer of HBOC. In March 1996, the Company
-13-
<PAGE>
signed agreements with HBOC, forming a business alliance whereby HBOC will
distribute the Company's products on a private label basis and HBOC has agreed
to certain noncompete provisions with respect to the Company's products. As part
of these agreements, the Company also assumed certain customer support and
conversion obligations with respect to HBOC customers currently using HBOC's
First Perspective product line. The Company has accrued $3.0 million to reflect
its estimate of the cost of converting the First Perspective customers to the
Company's products. The HBOC alliance provides for a seven year term and five
equal payments to HBOC totaling $3.0 million, beginning upon execution of the
agreements through March 1997. Payments of $600,000 were made to HBOC by the
Company in March and June 1996. The Company recorded a non-recurring charge of
$4.6 million to the Company's consolidated statement of operations and
capitalized the remaining $1.4 million as an intangible asset related to the
Company's valuation of the margin on the maintenance and support revenues
expected from the First Perspective customers. The Company has classified the
remaining obligation to HBOC of $1.8 million in cash and the $2.8 million in
estimated conversion costs, net of conversion costs incurred through June 30,
1996, in accrued expenses in its June 30, 1996 consolidated balance sheet.
Mr. Gilbert's employment agreement, effective as of September 10, 1996,
provides that he is entitled to borrow up to $350,000 from the Company to cover
income taxes incurred in connection with the exercise of options to acquire
Common Stock of HBOC. Funds advanced shall accrue interest at the Prime Rate and
are due upon the earlier of (1) the date on which the closing price of HBOC
Common Stock on the NASDAQ Stock Market's National Market equals or exceeds
$100.00 per share; or (2) one year from the date of advance. Mr. Gilbert has
informed the Company that he does not currently intend to borrow funds from the
Company. Further, Mr. Gilbert's employment agreement provides that if he is
required to pay an excise tax resulting from the acceleration of his
non-qualified stock option to acquire 400,000 shares of Common Stock, then the
Company will reimburse Mr. Gilbert an amount equal to such excise tax, in cash
or Company Common Stock, but not to exceed an amount equal to the value of
50,000 shares of the Company's outstanding Common Stock as of a specified date.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors and persons who beneficially own more
than 10% of the Company's stock to file initial reports of ownership and reports
of changes in ownership with the Securities and Exchange Commission and the
National Association of Securities Dealers, Inc. Executive officers, directors
and greater than 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 its review of copies of forms received by it pursuant to
Section 16(a) of the Securities Exchange Act of 1934, as amended, or written
representations from certain reporting persons, the Company believes that with
respect to fiscal year 1996, all Section 16(a) filing requirements applicable to
its executive officers, directors and greater than 10% beneficial owners were
complied with, except that (i) Mr. Collins filed a report on Form 5 with respect
to an option grant and one other late transaction; (ii) Mr. Mark Ulatowski, the
Company's former Vice President - Healthcare Sales, filed a report on Form 5
disclosing one late transaction; (iii) Mr. Kenneth Brown filed a report on Form
5 disclosing one late transaction; and (iv) Mr. Bhatt (former Senior Vice
President and Chief Technical Officer of the Company) failed to file a Form 5
with respect to an exercise of an option and any other transactions in his
shares.
THE IMNET SYSTEMS, INC.
EMPLOYEE STOCK OPTION AND RIGHTS PLAN
On October 27, 1993, the Company, with the approval of its stockholders,
adopted the Employee Stock Option and Rights Plan (the "1993 Plan"). As of
November 15, 1996, options for 881,4491 shares were outstanding (after
adjustment for forfeitures) and 54,674 had been exercised under the 1993 Plan.
Unless sooner terminated by the Board, the 1993 Plan terminates on October 27,
2003.
-14-
<PAGE>
Options may be granted under the 1993 Plan to those employees, officers or
directors of, and consultants and advisors to, the Company, who, in the opinion
of the Compensation Advisory Committee (the "Committee"), are in a position to
contribute materially to the Company's continued growth and development and to
its long-term financial success. The Company estimates that, as of the date of
this Proxy Statement, approximately 214 employees (including officers), the two
non-officer directors and no more than 10 consultants and advisors of the
Company are eligible to participate in the 1993 Plan. The following discussion
contains a summary of the 1993 Plan.
Shares Reserved for the Plan
The Company's 1993 Plan provides for the grant of options to acquire a
maximum of 940,000 shares of Common Stock, subject to adjustment in the event of
stock dividends, stock splits, combination of shares, recapitalizations, or
other changes in the outstanding Common Stock. Any such adjustment will be made
by the Board. Shares issued under the 1993 Plan may consist, in whole or in
part, of authorized and unissued shares, treasury shares or shares purchased on
the open market. In September 1996, the Board of Directors of the Company
adopted and recommended to the Stockholders an amendment to the 1993 Plan for an
increase of 650,000 in the number of shares of Common Stock available under the
1993 Plan. See "Proposal to increase the number of shares covered by the
Company's Employee Stock Option and Rights Plan" below.
The 1993 Plan permits the grant of incentive stock options ("ISOs"),
non-qualified stock options ("NSOs"), SARs and other stock-based awards at the
discretion of the Compensation Advisory Committee of the Board of Directors,
which consists solely of non-employee directors, as such term is defined in Rule
16b-3, promulgated pursuant to the Securities Exchange Act of 1934, as amended.
The Committee determines the terms and conditions of options granted under the
1993 Plan, including the exercise price.
Purpose of Plan
The Company desires to attract and retain persons of skill and experience
and to encourage their highest levels of performance on behalf of the Company
and its subsidiaries. The 1993 Plan accordingly affords eligible persons the
opportunity to acquire stock rights in the Company. A portion of the options
issued pursuant to the 1993 Plan shall constitute ISOs within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
any succeeding provisions. The 1993 Plan is not qualified under Section 401(a)
of the Code and is not subject to the provisions of the Employee Retirement
Income Security Act of 1974.
Duration of Plan
Stock options may be granted pursuant to the 1993 Plan from time to time
prior to the earliest of (1) October 27, 2003; (2) the date on which all Shares
have been issued under the 1993 Plan; or (3) such date as the Board of Directors
shall determine in its sole discretion.
Administration of the Plan
The 1993 Plan is administered by the Committee consisting of two or more
directors of the Company appointed by the Board, each of whom is a "non-employee
director" as defined in Rule 16b-3 under the Securities Exchange Act of 1934, as
amended ("Exchange Act"). Rule 16b-3 provides that certain transactions between
an issuer of equity securities and its officers or directors are exempt from
Section 16(b) of the Exchange Act if the transaction satisfies certain
conditions. Subject to the terms of the 1993 Plan, in administering the 1993
Plan and the stock options granted under the 1993 Plan, the Committee shall have
the authority to (1) determine the employees of the Company and its subsidiaries
to whom ISOs may be granted, and to determine the directors, officers and
employees of the Company and its subsidiaries and the consultants and advisors,
to whom NSOs may be granted; (2) determine time or times at which options may be
granted; (3) determine the option price for shares subject to each option; (4)
determine whether each option granted shall be an ISO or a NSO; (5) determine
the time or times when each option
-15-
<PAGE>
shall become exercisable and the duration of the exercise period; (6) determine
whether restrictions are to be imposed on shares subject to options and the
nature of such restrictions; and (7) interpret the 1993 Plan and prescribe and
rescind rules and regulations, if any, relating to and consistent with the 1993
Plan.
The current Committee members are Mr. Daniel P. Howell, Chairman, and Mr.
James A. Gordon. The terms of Mr. Howell and Mr. Gordon as directors expire at
the 1996 Annual Meeting of the Stockholders, unless they are reelected as
contemplated. Under the 1993 Plan, acts by a majority of the Committee, or acts
reduced to or approved in writing by a majority of the members of the Committee,
shall be the valid acts of the Committee.
No members of the Board of Directors or the Committee shall be liable for
any action or determination made in good faith with respect to the 1993 Plan or
any stock. No member of the Board or the Committee shall be liable for any act
or omission of any other member of the Board or the Committee or for any act or
omission on his own part, including but not limited to the exercise of any power
in discretion given to him under the 1993 Plan, except those resulting from his
own gross negligence or willful misconduct. In addition to such other rights of
indemnification as he may have as a member of the Board or Committee, each
member of the Board and the Committee shall be entitled to indemnification by
the Company with respect to administration of the 1993 Plan and the granting of
stock options under it.
Amendment of the Plan
The 1993 Plan may be terminated or amended by the Board of Directors at
any time, except that the following actions may not be taken without stockholder
approval: (a) materially increasing number of shares that may be issued under
the 1993 Plan (except by certain adjustments under the 1993 Plan); (b)
materially modifying the requirements as to eligibility for participation in the
1993 Plan; (c) materially increasing the benefits accruing to participants under
the 1993 Plan; (d) modifying the exercise price at which shares may be offered
(except by adjustment pursuant to the 1993 Plan); and (e) modifying the October
27, 2003, expiration date of the 1993 Plan. Stock options may not be granted
under the 1993 Plan after the date of termination of the 1993 Plan, but options
granted prior to that date shall continue to be exercisable according to their
terms.
In September 1996, in response to amendments to Securities and Exchange
Commission Rule 16b-3 ("Rule 16b- 3") the Board of Directors of the Company
adopted, subject to Stockholder ratification, an amendment to the 1993 Plan
which would eliminate the provisions described in items (a)-(c) of the preceding
paragraph from the 1993 Plan. See "Proposal to Amend Section 8 of the Company's
1993 Employee Stock Option and Rights Plan" below.
Eligibility for Participation
Each person who is serving as an officer, director, or employee of the
Company or any of its subsidiaries is eligible to participate in the 1993 Plan.
Furthermore, certain consultants and advisors to the Company may also be
eligible to participate in the 1993 Plan.
Nothing contained in the 1993 Plan or in any stock options agreement may
confer upon any person any right to continue as director, officer or employee of
the Company or its subsidiaries or as a consultant or advisor, or limit in any
way any right of stockholders or of the Board, as applicable, to remove such
person.
New Plan Benefits
During fiscal 1996, the number of shares granted to executive officers as
a group, non-executive directors and non-executive employees were 301,278, 0,
and 105,906, respectively. All options have an exercise price of $21.25 per
share, except for 27,000 options granted to an executive officer which have an
exercise price of $12.00 per share. See "Option Grants Table" above for
discussion regarding number of securities underlying options granted to the
"Named Executive Officers".
-16-
<PAGE>
Grant of Stock Options
The Board may grant stock options to eligible persons in such amounts and
on such terms not inconsistent with the 1993 Plan as it may deem appropriate up
to the number of shares remaining subject to the 1993 Plan. The date upon which
a stock option is approved by the Committee shall be the "Grant Date."
The Company and each eligible person shall execute an agreement providing
for the grant of stock options in accordance with the pertinent provisions of
the 1993 Plan. No consideration shall be paid in connection with any such grant
unless the sale of shares is made simultaneously with the grant.
Option Exercise Price
The exercise price per share for the shares subject to NSOs shall be at
whatever price is approved by the Committee, but not less than 90% of the fair
market value per share of the Common Stock on the Grant Date. The exercise price
per share for the shares subject to ISOs shall be not less than the fair market
value per share of Common Stock on the Grant Date, except that in the case of an
ISO to be granted to an employee owning more than 10% of the total combined
voting power of all classes of stock of the Company, the exercise price per
share shall be not less than 110% of the fair market value per share of Common
Stock on the Grant Date. The "fair market value" shall be the last reported sale
price on the Nasdaq National Market on the last business day for which the price
or quotes are available prior to the Grant Date.
Vesting of Options
Unless otherwise provided by the Committee, options granted under the 1993
Plan generally vest at the rate of 20% per annum over a five-year period so that
all options are vested after five years. Options held by executive officers vest
100% in the event of a change of control. In such event, the Committee may also
accelerate the vesting of other outstanding options under the 1993 Plan.
Adjustments to Exercise Price and Number of Shares
If the shares of Common Stock are subdivided or combined, or a stock
dividend is declared and paid, the number of shares of Common Stock deliverable
upon the exercise of the options shall be increased or decreased
proportionately, and the purchase price per share shall be adjusted to reflect
such subdivision, combination or stock dividend. If the Company is to be
consolidated with or acquired by another entity in a merger, sale of
substantially all of the Company's assets or otherwise ("Acquisition"), while
unexercised options are outstanding under the 1993 Plan, after the effective
date of the Acquisition each holder of an outstanding option shall be entitled,
upon exercise of such option, to receive such stock, or other securities as the
holders of the same class of stock as those shares subject to the option shall
be entitled to receive in such Acquisition based upon the agreed upon conversion
ratio or per share distribution. In September 1996, the Board of Directors
amended the 1993 Plan such that any limitations on exercisability of options
owned by executive officers of the Company shall be waived, and options of
non-executive officers may be waived (in the discretion to the Committee), so
that all such options, from and after a date prior to the effective date of such
Acquisition shall be exercisable in full. Prior to this amendment, the Board of
Directors was required to waive limitations regarding both executive officers
and non-executive officers in change of control transactions. Furthermore, the
right to exercise shall, in the case of executive officers, and may (in the
discretion of the Committee), in the case of other option holders, be given to
each holder of an option during a 15-day period preceding the effective date of
such Acquisition. Any outstanding options not exercised within such 15-day
period may be cancelled by the Committee as of the effective date of any such
Acquisition.
In the event of recapitalization or reorganization of the Company (other
than pursuant to an Acquisition) an optionee upon exercising the option shall be
entitled to receive the shares issuable in connection with such recapitalization
or reorganization. Notwithstanding the foregoing, in the event the Committee
determines that such adjustments would constitute a statutory "modification" of
the ISOs, the Committee may refrain from making such
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<PAGE>
adjustments. In the event of the proposed dissolution or liquidation of the
Company, each option shall terminate on the date immediately prior to
consummation of such proposed action.
Duration and Termination of Options
Each option expires on the date specified by the Committee, but not more
than (i) ten years from the Grant Date in the case of NSOs, (ii) ten years from
the Grant Date in the case of ISOs generally, and (iii) five years from the
Grant Date in the case of ISOs granted to an employee owning more than 10% of
the total combined voting power of all classes of stock of the Company. If
approved by the Committee, after request by the grantee, ISOs may be converted
into NSOs and the term of such option may be extended.
Subject to greater restrictions or limitations as may be imposed by the
Committee upon the granting of an ISO, ISOs shall terminate on the earlier of
the specified expiration date or three months from the date of termination of
employment. In the event employment terminates by reason of death or total
disability (as defined in the 1993 Plan), subject to any greater restrictions or
limitations as may be imposed by the Committee upon the granting of any ISO, the
terminated employee or estate or representative of the deceased employee may
acquire the shares underlying the ISO at any time prior to the earlier of the
specified expiration or within one year or three years for death or disability,
respectively.
All options must be exercised prior to expiration and all options not
vested at the time of expiration may not be exercised.
Means of Exercise of Options
Options are exercised by giving written notice to the Company at its
principal office address, accompanied by full payment of the purchase price
therefor either (a) in United States dollars in cash or by check, or (b) if
permitted in the grant agreement, the delivery of shares of Common Stock having
a fair market value equal as of the date of the exercise to the cash exercise
price of the option, or (c) if permitted in the grant agreement, by delivery of
the grantee's personal recourse note on terms as the Committee may accept, or
(d) if permitted in the grant agreement, by any combination of (a) (b) or (c)
above.
Non-transferability of Options
No option is transferable except by will or by the laws of descent and
distribution, and all options are exercisable, during the lifetime of the
optionee, only by the optionee or the optionee's guardian or legal
representative. Shares subject to options granted under the 1993 Plan that have
lapsed or terminated may again be subject to options granted under such 1993
Plan.
Tax Treatment
The following discussion addresses certain anticipated federal income tax
consequences to recipients of awards made under the 1993 Plan. It is based on
the Code and interpretations thereof as in effect on the date of this Proxy
Statement. This summary is not intended to be exhaustive and, among other
things, does not describe state, local or foreign tax consequences.
Non-qualified options granted pursuant to the 1993 Plan to Plan
participants not employed by the Company cannot qualify as Incentive Stock
Options pursuant to Section 422 of the Code. Under current interpretations of
the Code, the grant of a NSO to an optionee will not result in the recognition
of any taxable income to the optionee, because a NSO does not have a readily
ascertainable fair market value on the date it is granted.
Upon exercise of the NSO, the optionee will generally recognize ordinary
compensation income equal to the excess, if any, of the fair market value of the
shares received pursuant to exercise of the NSOs over the exercise
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<PAGE>
price. However, taxation will be deferred (i) if the NSO options are subject to
restrictions imposed by the Committee which could result in a substantial risk
of their forfeiture or (ii) if the optionee is subject to the "short-swing
profit" forfeiture provisions of Section 16(b) of the Exchange Act, unless the
optionee makes an election pursuant to Section 83(b) of the Code (an "83(b)
Election"), within 30 days of receipt of the NSO options to be taxed on the date
of receipt of the NSO options. If no 83(b) Election is made, the optionee will
recognize ordinary compensation income at the time the NSO options are no longer
subject to such restrictions or the optionee is no longer subject to Section
16(b) liability as a result of the transfer of the NSO, in an amount equal to
the excess of the value of the option shares at such time over the amount paid
for them. The optionee's tax basis for the NSO will be equal to the exercise
price paid by the optionee plus the amount includable in the optionee's gross
income as compensation, and the optionee's holding period for the NSO will
commence on the date on which the NSO are acquired.
An optionee to whom an ISO which qualifies under Section 422 of the Code
is granted generally will not recognize income at the time of grant of the ISO
or its exercise. However, the excess of the fair market value of the shares
subject to the ISO over the exercise price of the ISO at the time of its
exercise is an adjustment to taxable income in determining an optionee's
alternative minimum taxable income and ultimately his alternative minimum tax
("AMT"). As a result, this adjustment could cause the optionee to be subject to
AMT or increase his AMT liability.
If an optionee who has exercised an ISO does not sell the shares until (i)
more than one year after exercise and (ii) more than two years after the date of
grant, such optionee will normally recognize long term capital gain or loss
equal to the difference, if any, between the selling price of the shares and the
exercise price. If the optionee sells the shares before the time periods expire
(a "disqualifying disposition") he or she will recognize ordinary compensation
income equal to the lesser of (i) the difference, if any, between the fair
market value of the shares on the date of exercise and the exercise price of the
ISO, and (ii) the difference, if any, between the selling price for the shares
and the exercise price of the ISO. Each optionee who receives an ISO must notify
the Company in writing immediately after the optionee makes a disqualifying
disposition of any options. Any other gain or loss on such sale will normally be
capital gain or loss. The tax basis of the options to the optionee, for purposes
of computing such other gain or loss, should be equal to the exercise price paid
(plus, in the case of an early disposition, the amount includable in the
optionee's gross income as compensation, if any).
PROPOSAL TO INCREASE THE NUMBER OF SHARES
COVERED BY THE IMNET SYSTEMS, INC.
EMPLOYEE STOCK OPTION AND RIGHTS PLAN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
On September 9, 1996, the Board of Directors of the Company approved,
adopted and recommended to the Stockholders an amendment to the 1993 Plan for an
increase of 650,000 in the number of shares of Common Stock available under the
1993 Plan. The 1993 Plan constitutes a key element of the Company's incentive
program and is utilized to attract, retain and motivate key employees of the
Company and to align key employee and stockholder interests.
As a result of the prior grant of stock options under the 1993 Plan, the
number of shares currently available for grant of additional stock options is
less than 10,000. The Board of Directors has determined that this amount is
insufficient to continue to maintain the Company's needs under its incentive
program. As a result, the Board has adopted and proposes that the stockholders
approve an amendment to the 1993 Plan which will increase the total number of
shares authorized for issuance pursuant to the 1993 Plan by 650,000 shares,
thereby increasing the aggregate number of shares which would be available for
exercises of options to 1,590,000. No decision has been reached regarding the
benefits to be granted to any particular individual or groups of individuals.
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<PAGE>
The Board believes that the increase in the number of shares available for
issuance under the 1993 Plan will strengthen the Company's ability to attract,
retain and motivate key employees of the Company. Proxies received by the Board
of Directors of the Company will be voted for such amendment unless stockholders
specify a contrary choice in their proxies. The affirmative vote by the holders
of a majority of the outstanding shares of Common Stock present in person or by
proxy at the meeting is required to approve the amendment to the 1993 Plan. For
a description of the 1993 Plan, see "The IMNET Systems, Inc. Employee Stock
Option and Rights Plan" above.
PROPOSAL TO AMEND SECTION 8 OF IMNET SYSTEMS, INC.
EMPLOYEE STOCK OPTION AND RIGHTS PLAN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
On September 9, 1996, the Board of Directors of the Company adopted,
subject to Stockholder ratification, an amendment to Section 8 of the 1993
Employee Stock Option and Rights Plan.
The amendment to the 1993 Plan amends Section 8 which is captioned
"Amendments and Termination". The amendment to the captioned section eliminates
provisions previously included in the 1993 Plan due to the requirements of Rule
16b-3. Rule 16b-3 provides that certain transactions between the issuer of
equity securities and its officers or directors are exempt from Section 16(b) of
the Exchange Act if the transaction satisfies conditions set forth in Rule
16b-3. The amended provisions required obtaining stockholder approval for
transactions which would (i) materially increase the benefits accruing to
participants under the 1993 Plan; (ii) materially increase the number of
securities which may be issued under the 1993 Plan; and (iii) materially modify
the requirements as to eligibility for participation in the 1993 Plan. Pursuant
to amendments to Rule 16b-3, compliance with the above provisions is no longer
required and the Board feels such provisions should be eliminated to provide the
greatest possible flexibility to the Board, and avoid future expense of
soliciting proxies to make such amendments to the 1993 Plan. Furthermore, the
Board of Directors has traditionally been given the right to authorize the
issuance of shares, and of options and grants to acquire such shares.
Proxies received by the Board of Directors of the Company will be voted
for such amendment unless stockholders specify a contrary choice in their
proxies. The affirmative vote by the holders of a majority of the outstanding
shares of Common Stock present in person or by proxy at the meeting is required
to approve the amendment to Section 8 of the 1993 Employee Stock Option and
Rights Plan. For a description of the 1993 Plan, see "The IMNET Systems, Inc.
Employee Stock Option and Rights Plan" above.
PROPOSAL TO APPROVE THE IMNET SYSTEMS, INC.
EMPLOYEE DISCOUNT STOCK PURCHASE PLAN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
In September 1996, the Board adopted, subject to stockholder approval, the
IMNET Systems, Inc. Employee Discount Stock Purchase Plan (the "1996 Plan"). If
approved by stockholders, the 1996 Plan will provide eligible employees (defined
below) with an opportunity to purchase the Company's Common Stock through
payroll deductions. The 1996 Plan is intended to assist eligible employees in
acquiring a stock ownership interest in the Company pursuant to a plan that is
intended to qualify as an "employee stock purchase plan" under section 423 of
the Internal Revenue Code of 1986, as amended (the "Code"), to help eligible
employees provide for their future security and to encourage them to remain in
the employment of the Company and participating subsidiaries. The following
discussion contains a summary of certain material features of the 1996 Plan.
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<PAGE>
Shares Reserved for the Plan
The aggregate number of shares of Common Stock which may be purchased
under the 1996 Plan shall not exceed 300,000, subject to adjustment in the event
of stock dividends, stock splits, combination of shares, recapitalizations, or
other changes in the outstanding Common Stock. Shares issued under the 1996 Plan
may consist, in whole or in part, of authorized and unissued shares, treasury
shares or shares purchased on the open market.
Eligible Participants
All employees of the Company, or of any other corporation, the majority of
the voting stock of which is owned by the Company (a "Subsidiary"), whose
customary employment is at least 20 hours per week and five months per year will
be eligible to participate in the 1996 Plan. Approximately 208 employees would
have been eligible to participate as of October 31, 1996.
Certain Material Features of the Plan
The 1996 Plan provides for two purchase periods ("Plan Periods") of six
months each beginning on January 1 and July 1 of each year. Each purchase shall
be effected no later than three months after the last day of said Plan Period.
On this applicable date, and provided a maximum number of shares that can be
purchased by any eligible employee during the Plan Period is set prior to
commencement of the Plan Period, each eligible employee shall be entitled to
purchase shares of Common Stock at a purchase price equal to the lower of (i)
85% of the closing sale price of a share of Common Stock on the Nasdaq National
Market on the first trading day of a Plan Period, or (ii) 85% of the closing
sale price of a share of Common Stock on the Nasdaq National Market on the last
trading day of such Plan Period. If the Board of Directors does not specify a
maximum number of shares per eligible employee for a Plan Period, the purchase
price during the Plan Period will be equal to the amount referenced in (ii) of
the preceding sentence. The Board of Directors may change the number of Plan
Periods to as few as one in each year, or as many as four.
Payment for shares of Common Stock purchased under the 1996 Plan will be
made by authorized payroll deductions from an eligible employee's "Base Pay."
"Base Pay" means an eligible employee's total regular straight- time and
overtime earnings received from the Company or a Subsidiary during a Plan
Period, excluding payments for incentive compensation, bonuses and other special
payments. Eligible employees who elect to participate in the 1996 Plan will
designate a stated whole percentage equaling at least 1%, but no more than 25%,
of Base Pay, to be deposited into a separate account. On the date of exercise,
the entire periodic deposit account of each participant in the 1996 Plan is used
to purchase whole shares of Common Stock. No fractional shares will be
purchased, and the amount remaining in the employee's account after such
application will be held for the purchase of Common Stock in the next purchase
period. Participants will be entitled to receive, as soon as practicable after
the end of a purchase period, a stock certificate for the number of purchased
shares.
No participant in the 1996 Plan is permitted to purchase Common Stock
under the 1996 Plan at a rate that exceeds $25,000 in fair market value of
Common Stock for each calendar year, and a participant may not purchase more
than a maximum number of shares of Common Stock that may be specified by the
Board ("Participant Maximum") for any particular Plan Period. If a participant
purchases the Participant Maximum, the amount not applied to the purchase of
Common Stock for that Plan Period will be refunded after the close of the Plan
Period. If the number of shares for which purchase rights are exercised exceeds
the number of shares available in any Plan Period under the 1996 Plan, the
shares available for sale will be allocated pro rata among the participants in
such Plan Period in proportion to the relative amounts in their accounts. All
funds received by the Company from the sale of Common Stock under the 1996 Plan
may be used for any corporate purpose.
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<PAGE>
New Plan Benefits
It is not possible to determine how many eligible employees will
participate in the 1996 Plan in the future. Therefore, it is not possible to
determine the dollar value or number of shares of Common Stock that will be
distributed under the 1996 Plan.
Tax Treatment
The following discussion addresses certain anticipated federal income tax
consequences to recipients of awards made under the 1996 Plan. It is based on
the Code and interpretations thereof as in effect on the date of this Proxy
Statement. This summary is not intended to be exhaustive and, among other
things, does not describe state, local or foreign tax consequences.
The 1996 Plan is intended to qualify as an employee stock purchase plan
within the meaning of Section 423 of the Code. Under the Code, an employee who
elects to participate in an offering under the 1996 Plan will not realize income
at the time the offering commences or when the shares purchased under the 1996
Plan are transferred to him or her. If an employee disposes of such shares after
two years from the date the offering of such shares is deemed to have been made
for federal income tax purposes (the "Grant Date") or after one year from the
date of the transfer of such shares to him or her or if the employee holds such
shares until his or her death, the employee will be required to include in
income, as compensation for the year in which such disposition or death occurs,
an amount equal to the excess of (i) the lesser of (x) the fair market value of
such shares at the time of disposition or death or (y) the fair market value of
such shares as of the Grant Date, over (ii) the purchase price. The employee's
basis in the shares disposed of will be increased by an amount equal to the
amount so includable in his or her income as compensation, and any gain or loss
computed with reference to such adjusted basis which is recognized at the time
of the disposition will be a capital gain or loss, either short-term or
long-term, depending on the holding period for such shares. In such event, the
Company (or the subsidiary by which the employee is employed) will not be
entitled to any deduction from income.
If any employee disposes of the shares purchased under the 1996 Plan
within such two-year or one-year period, the employee will be required to
include in income, as compensation for the year in which such disposition
occurs, an amount equal to the excess of (i) the lesser of (x) the fair market
value of such shares on the date of purchase, or (y) the net sales proceeds for
the shares, over (ii) the purchase price. The employee's basis in such shares
disposed of will be increased by an amount equal to the amount includable in his
or her income as compensation, and any gain or loss computed with reference to
such adjusted basis which is recognized at the time of disposition will be a
capital gain or loss, either short-term or long-term, depending on the holding
period for such shares. In the event of a disposition within such two-year or
one-year period, the Company (or the subsidiary by which the employee is
employed) will be entitled to a deduction from income equal to the amount the
employee is required to include in income as a result of such disposition.
Plan Administration and Termination
The 1996 Plan is administered by the Company's Board of Directors. The
Board of Directors may adopt rules and procedures not inconsistent with the
provisions of the 1996 Plan for its administration. The Board's interpretation
and construction of the 1996 Plan is final and conclusive.
The Board of Directors may at any time, or from time to time, alter or
amend the 1996 Plan in any respect, except that, without approval of the
stockholders of the Company, no amendment may materially increase the benefits
or the number of shares reserved for purchase under the 1996 Plan or adversely
affect the rights of any participant with respect to amounts previously credited
to his stock purchase plan amount.
The Board of Directors shall have the right to terminate the 1996 Plan or
any offering thereunder at any time for any reason. Unless terminated earlier,
the 1996 Plan shall terminate at the time purchase rights have been
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<PAGE>
exercised with respect to all shares of Common Stock reserved for grant under
the 1996 Plan. Upon expiration or termination of the 1996 Plan, any amount not
applied toward the purchase of Common Stock will be refunded.
Although employee directors may have an interest in the 1996 Plan, the
Board of Directors believes that the 1996 Plan is fair and in the best interest
of the Company and the stockholders. Proxies received by the Board of Directors
of the Company will be voted for approval of the Company's Employee Discount
Stock Purchase Plan, unless stockholders specify a contrary choice in their
proxies. The affirmative vote by the holders of a majority of the outstanding
shares of Common Stock present in person or by proxy at the meeting is required
to approve the Company's Employee Discount Stock Purchase Plan.
OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND CERTAIN EXECUTIVE OFFICERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of November 19, 1996 by:
(i) each person (or group of affiliated persons) known by the Company to be the
beneficial owner of more than 5% of the outstanding Common Stock; (ii) the Named
Executive Officers who beneficially own shares of the Company's Common Stock;
(iii) each director of the Company; and (iv) all of the Company's executive
officers and directors as a group. Except as otherwise indicated in the
footnotes to this table, the Company believes that the persons named in this
table have sole voting and investment power with respect to all the shares of
Common Stock indicated.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
BENEFICIAL OWNER AS OF 11/19/96
- ---------------- --------------
SHARES PERCENTAGE
------ ----------
<S> <C> <C> <C>
Edgewater Private Equity Fund, L.P.(1)................... 644,396 6.7%
Mesirow Capital(2)....................................... 644,396 6.7
Kenneth D. Rardin(3) .................................... 198,428 2.0
Raymond L. Brown(4)...................................... 10,000 *
Gary D. Bowers(5)........................................ 25,578 *
Nikhil A. Bhatt (9)...................................... 8,753 *
Thomas D. Underwood (6).................................. 10,000 *
Kenneth R. Brown (7)..................................... 11,270 *
Paul J. Collins (8)...................................... 14,010 *
Mark S. Ulatowski (10)................................... 12,852 *
James A. Gilbert (11).................................... 8,195 *
James A. Gordon(1)(12)................................... 648,156 6.7
Daniel P. Howell(2)(12).................................. 648,156 6.7
All officers and directors as a group (9 persons)(13).... 1,573,793 16.1
</TABLE>
- -----------------
* Represents beneficial ownership of less than 1%.
(1) The shares beneficially owned include 644,396 shares held by Edgewater
Private Equity Fund, L.P. ("Edgewater"). Gordon Management, Inc. serves
as general partner of Edgewater. Mr. Gordon is the President and a
principal of Gordon Management, Inc. Mr. Gordon may therefore be deemed
to be the beneficial owner of the shares held by Edgewater. The address
of Edgewater Private Equity Fund, L.P., is 666 Grand Avenue, Suite 200,
Des Moines, Iowa 50309.
(2) The shares beneficially owned include 520,287 shares held by Mesirow V
and 124,109 shares held by Mesirow VI. Mr. Howell is a principal and the
Executive Vice President of Mesirow Private Equity Investments, Inc.,
the General Partner of Mesirow V and Mesirow VI. Mr. Howell may
therefore be deemed to be the beneficial owner of the shares held by
Mesirow V and Mesirow VI. The address of Mesirow Private Equity
Investments is 350 North Clark Street, Chicago, Illinois 60610.
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<PAGE>
(3) Includes 3,760 shares held by Mr. Rardin's daughter. Also includes
options to purchase 90,920 shares which are either currently exercisable
or which become exercisable within 60 days of the date of this Proxy
Statement. Does not include 413,572 shares subject to outstanding
options, which options are not currently exercisable and will not become
exercisable within 60 days of the date of this Proxy Statement.
(4) Consists of options to purchase 10,000 shares which are either currently
exercisable or which become exercisable within 60 days of the date of
this Proxy Statement. Does not include 65,000 shares subject to
outstanding options, which options are not currently exercisable and
will not become exercisable within 60 days of the date of this Proxy
Statement.
(5) Includes options to purchase 11,990 shares which are either currently
exercisable or which become exercisable within 60 days of the date of
this Proxy Statement. Does not include 54,210 shares subject to
outstanding options, which options are not currently exercisable and
will not become exercisable within 60 days of the date of this Proxy
Statement.
(6) Consists of options to purchase 10,000 shares which are either currently
exercisable or which become exercisable within 60 days of the date of
this Proxy Statement. Does not include 80,000 shares subject to
outstanding options, which options are not currently exercisable and
will not become exercisable within 60 days of the date of this Proxy
Statement.
(7) Does not include 37,083 shares subject to outstanding options, which
options are not currently exercisable and will not become exercisable
within 60 days of the date of this Proxy Statement.
(8) Includes options to purchase 13,510 shares which are either currently
exercisable or which become exercisable within 60 days of the date of
this Proxy Statement. Does not include 41,490 shares subject to
outstanding options, which options are not currently exercisable and
will not become exercisable within 60 days of the date of this Proxy
Statement.
(9) Based upon Mr. Bhatt's notice of exercise of options for 8,753 shares
received by the Company on April 30, 1996.
(10) Includes options to purchase 8,000 shares which are either currently
exercisable or which become exercisable within 60 days of the date of
this Proxy Statement. Does not include 27,676 shares subject to
outstanding options, which options are not currently exercisable and
will not become exercisable within 60 days of the date of this Proxy
Statement.
(11) Does not include 400,000 shares subject to outstanding options, which
options are not currently exercisable and will not become exercisable
within 60 days of the date of this Proxy Statement.
(12) Includes options to purchase 3,760 shares which are either currently
exercisable or which become exercisable within 60 days of the date of
this Proxy Statement.
(13) Includes options to purchase 143,940 shares which are currently
exercisable or which become exercisable within 60 days of the date of
this Proxy Statement. Does not include 1,141,355 shares subject to
outstanding options which options are not currently exercisable and will
not become exercisable within 60 days of the date of this Proxy
Statement.
INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of KPMG Peat Marwick has been the independent
certified public accountants of the Company since the 1992 Acquisition. Approval
or selection of the independent certified public accountants of the Company is
not submitted for a vote at the Annual Meeting of Stockholders. The Board of
Directors of the Company has historically selected the independent certified
public accountants of the Company, with the advice of the Audit Committee, and
the Board believes that it would be to the detriment of the Company and its
Stockholders for there to be any impediment (such as selection or ratification
by the Stockholders) to its exercising its judgment to remove the Company's
independent certified public accountants if, in its opinion, such removal is in
the best interest of the Company and its stockholders.
It is anticipated that a representative from the accounting firm of KPMG
Peat Marwick will be present at the Annual Meeting of Stockholders to answer
questions and make a statement if the representative desires to do so.
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<PAGE>
STOCKHOLDER PROPOSALS
Appropriate proposals of stockholders intended to be presented at the
Company's 1997 Annual Meeting of Stockholders must be received by the Company by
July 24, 1997 for inclusion in its Proxy Statement and form of proxy relating to
that meeting. If the date of the next Annual Meeting is advanced or delayed by
more than 30 calendar days from the date of the annual meeting to which this
Proxy Statement relates, the Company shall, in a timely manner, inform its
stockholders of the change, and the date by which proposals of stockholders must
be received.
UPON THE WRITTEN REQUEST OF ANY RECORD OR BENEFICIAL OWNER OF COMMON STOCK
OF THE COMPANY WHOSE PROXY WAS SOLICITED IN CONNECTION WITH THE 1996 ANNUAL
MEETING OF STOCKHOLDERS, THE COMPANY WILL FURNISH SUCH OWNER, WITHOUT CHARGE, A
COPY OF ITS ANNUAL REPORT ON FORM 10-K, AS AMENDED, FOR ITS FISCAL YEAR ENDED
JUNE 30, 1996. REQUEST FOR A COPY OF SUCH ANNUAL REPORT ON FORM 10-K SHOULD BE
ADDRESSED TO MR. RAYMOND L. BROWN, SECRETARY, IMNET SYSTEMS, INC., 3601 DUNWOODY
PLACE, SUITE 420, ATLANTA, GEORGIA 30350.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY, STOCKHOLDERS WHO DO NOT
EXPECT TO ATTEND THE MEETING IN PERSON ARE URGED TO SIGN, COMPLETE, DATE AND
RETURN THE PROXY CARD IN THE ENCLOSED ENVELOPE, TO WHICH NO POSTAGE NEED BE
AFFIXED.
By Order of the Board of Directors
[Sig Cut]
KENNETH D. RARDIN, Chairman of the
Board and Chief Executive Officer
Dated: November 21, 1996
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APPENDIX
PROXY CARD
IMNET SYSTEMS INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR USE AT THE ANNUAL MEETING ON DECEMBER 19, 1996
The undersigned Stockholder hereby appoints KENNETH D. RARDIN, JAMES A.
GILBERT and RAYMOND L. BROWN, or any of them, with full power of substitution,
to act as proxy for, and to vote the stock of, the undersigned at the Annual
Meeting of Stockholders of IMNET SYSTEMS INC. (the "Company") to be held on
December 19, 1996, and any adjournments thereof.
The undersigned acknowledges receipt of Notice of the Annual Meeting and
Proxy Statement, each dated November 21, 1996, and grants authority to said
proxies, or their substitutes, and ratifies and confirms all that said proxies
may lawfully do in the undersigned's name, place and stead. The undersigned
instructs said proxies to vote as indicated on the reverse hereof.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
1. ELECTION OF DIRECTORS:
__ FOR election of the individuals set __ REFRAIN FROM VOTING FOR
forth below as directors (except as election of the individuals
marked to the contrary) set forth as directors
NOMINEES: Kenneth D. Rardin, Daniel P. Howell,
James A. Gordon and James A. Gilbert
(INSTRUCTION: To withhold authority to vote for any individual nominee(s), write
that person's name on the space provided below.)
(CONTINUED ON THE REVERSE SIDE)
<PAGE>
2. Resolution of the Stockholders ratifying and approving an increase in the
number of shares covered by the Company's Employee Stock Option and Rights Plan.
____ FOR ____ AGAINST ____ ABSTAIN
3. Resolution of the Stockholders approving the amendment to Section 8 of the
Company's Employee Stock Option and Rights Plan.
____ FOR ____ AGAINST ____ ABSTAIN
4. Resolution of the Stockholders approving the Company's Employee Discount
Stock Purchase Plan.
____ FOR ____ AGAINST ____ ABSTAIN
5. Upon such other matters as may properly come before the meeting.
THE PROXIES SHALL VOTE AS SPECIFIED ABOVE, OR IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR EACH OF THE LISTED PROPOSALS.
Date:_________________________, 1996
____________________________________
(Signature)
____________________________________
(Signature)
(Stockholders should sign exactly as
name appears on stock. Where there
is more than one owner each should
sign. Executors, Administrators,
Trustees and others signing in a
representative capacity should so
indicate.)
Please enter your Social Security
Number or Federal Employer
Identification Number here:
"PLEASE MARK INSIDE BOX SO THAT DATA
PROCESSING EQUIPMENT WILL RECORD YOUR VOTES"
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