SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 2
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission file number 0-26306
IMNET SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 39-1730068
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8601 Dunwoody Place, Suite 420,
Atlanta, Georgia 30350
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (770) 998-2200
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- ------------------- -----------------------------------------
None Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
----------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by nonaffiliates of the
Registrant was approximately $117,786,536 at October 25, 1996 (8,193,846
shares). The number of common shares outstanding at October 25, 1996 was
9,601,044 (exclusive of treasury shares).
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The Registrant is hereby filing Amendment No. 2 to Form 10-K to add the
last digit to the number of securities underlying options granted in the 1996
Option Grants Table. The last digit in each number was inadvertently omitted in
the EDGAR transmission from the Registrant's Amendment No. 1 to Form 10-K filed
on November 8, 1996.
ITEM 11. EXECUTIVE COMPENSATION.
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 (the "Directors Plan"),
each then-current director other than Mr. Rardin received options to purchase
3,760 shares of the Common Stock upon the closing of the initial public offering
in July 1995. The per share exercise price for these options is $12 per share,
the initial public offering price. Each year thereafter, non-employee directors
will receive options to acquire 3,760 shares of Common Stock on the first
business day after the Annual Meeting of Stockholders, at the closing price of
the Company's Common Stock on the date prior to the grant of the option. All
options granted under the 1995 Non-Employee Directors Stock Option Plan become
exercisable one year after the date of grant, provided the director has attended
at least 75% of the sum of all meetings of the Board of Directors and any
committees on which that director serves, from the date of grant to such
anniversary date. No option granted pursuant to the Directors Plan may be
exercised later than five years from the date of grant thereof.
EXECUTIVE COMPENSATION.
The following table sets forth the compensation paid or accrued by the
Company to the Company's Chief Executive Officer, the four other most highly
paid executive officers of the Company in 1996 and two former executive officers
(Messrs. Bhatt and Ulatowski) who would have been among the most highly paid
executives but for the fact that they were no longer serving as executive
officers at fiscal year end (the "Named Executive Officers"). The information
presented is for the fiscal years ended June 30, 1996, 1995 and 1994.
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<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
AWARDS
FISCAL YEAR Securities
ENDED ANNUAL Underlying ALL OTHER
NAME AND PRINCIPAL POSITION JUNE 30, COMPENSATION Options(#) COMPENSATION($)
- --------------------------- -------- ------------ ---------- ---------------
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, Business 1995 113,161 12,929 18,800 ---
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 ---
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</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
($3,964) premiums paid by the Company.
(3) Mr. Underwood joined the Company in July 1995.
(4) Mr. Brown and Mr. Collins both joined the Company in April 1995.
(5) Includes sales commissions.
(6) Mr. Ulatowski ceased to be an executive officer of the Company prior to
June 30, 1996.
(7) Mr. Bhatt left the employ of the Company prior to June 30, 1996.
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OPTION GRANTS TABLE
The following table sets forth certain information regarding options
granted to the Named Executive Officers during the fiscal year ended June 30,
1996. No separate stock appreciation rights ("SARs") were granted during fiscal
1996.
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL 1996
INDIVIDUAL GRANTS
Potential Realizable Value
at Assumed Annual Rates
of Stock Price
Appreciation for
INDIVIDUAL GRANTS Option Term(2)
--------------------------------------------------------------------------- ---------------------------
Number of
Securities % of Total
Underlying Options Granted Exercise
Options to Employees in Price Expiration
NAME Granted(#)(1) Fiscal Year ($/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 $6,569,661
Gary D. Bowers 23,647 5.5 21.25 01/09/06 316,019 800,854
Thomas D. Underwood 27,000 6.2 12.00 07/14/05 203,762 516,373
Thomas D. Underwood 23,000 5.3 21.25 01/09/06 307,372 778,942
Paul J. Collins 12,447 2.9 21.25 01/09/06 166,342 421,543
Mark S. Ulatowski 21,200 4.9 21.25 01/09/06 283,317 717,981
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</TABLE>
(1) The options will become exercisable at the rate of 20% per year from the
date of grant and have 10-year terms so long as the optionee's employment
with the Company continues. The exercise price of each option is equal to
the fair market value of the underlying Common Stock on the date of the
grant, as determined by the Compensation Advisory Committee of the Board of
Directors. The exercise price may be paid in cash or, at the option of the
Compensation Advisory Committee, in shares of Common Stock valued at fair
market value on the exercise date.
(2) Future value of current-year grants assuming appreciation in the market
value of the Common Stock of 5% and 10% per year over the 10-year option
period. The actual value realized may be greater than or less than the
potential realizable values set forth in the table.
OPTION EXERCISES AND YEAR-END VALUE TABLE
None of the Named Executive Officers has held or exercised separate SARs.
The following table sets forth certain information regarding options exercised
during the fiscal year ended June 30, 1996 by, and unexercised options held at
fiscal year end by, each of the Named Executive Officers.
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<TABLE>
<CAPTION>
FISCAL 1996 YEAR-END OPTION VALUES
SHARES NUMBER OF SECURITIES UNDERLYING
ACQUIRED UNEXERCISED OPTIONS AT 1996 VALUE OF UNEXERCISED IN-THE-
ON VALUE FISCAL YEAR END(#) MONEY OPTIONS AT 1996 FISCAL
EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE YEAR END($)(1)
NAME (#) ($) 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
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</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 entitled 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
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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.
Messrs. Bhatt, Bowers, Collins and Underwood have entered into employment
agreements with the Company dated May 22, 1992, May 22, 1992, April 10, 1995 and
July 5,1995, 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 and Mr. Underwood, each subject to annual adjustments
tied to increases in 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; and Mr. Underwood's current annual
salary is $153,250. Each of the employees is eligible to receive incentive
bonuses under bonus plans to be determined by the President 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 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' and Mr. Underwood'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.
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, except that Mr. Howell
served as Secretary of the Company without compensation for such services
through November 1996. Mr. Jellinek served on the Compensation Advisory
Committee until 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 serves as President and Chief Executive
Officer and Mr. John J. McDonough serves as Chairman of the Board of Directors.
Messrs. Jellinek and McDonough are former directors of the
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Company. The Company received $167,142 and no revenues from SoftNet in fiscal
1993 and 1994, respectively, pursuant to this agreement. 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.
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 advance license fees of $1,000,000. These nonrefundable advance
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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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
IMNET SYSTEMS, INC.
November 11, 1996 By: /s/ Raymond L. Brown
--------------------
Raymond L. Brown,
Chief Financial Officer
(Principal Financial and
Accounting Officer)
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