SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 1
(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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<PAGE>
In filing the Annual Report on Form 10-K of IMNET Systems, Inc. (the
"Company"), the Company incorporated certain of the information required by Part
III by reference to the Company's Proxy Statement for the Annual Meeting of
Stockholders. The Company's Proxy Statement for the Annual Meeting of
Stockholders will not be filed within the 120 day period following the end of
the Company's fiscal year ended June 30, 1996. Accordingly, the undersigned
registrant hereby amends Part III of its Annual Report on Form 10-K as set forth
below:
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
DIRECTORS AND EXECUTIVE OFFICERS.
The Company's directors and executive officers and their ages as of
October 23, 1996 are as follows:
<TABLE>
<CAPTION>
NAME Age Position
- ---- --- --------
<S> <C> <C>
Kenneth D. Rardin................... 46 Chairman of the Board and Chief Executive Officer
James A. Gilbert.................... 48 President, Chief Operating Officer and Director
Thomas D. Underwood................. 38 Senior Vice President - Technical Operations
Raymond L. Brown.................... 39 Senior Vice President and Chief Financial Officer
Gary D. Bowers...................... 43 Senior Vice President - Business Development
Paul J. Collins, Jr................. 40 Senior Vice President - Marketing
Kenneth R. Brown.................... 57 Executive Vice President
Daniel P. Howell (1)(2)............. 44 Secretary and Director
James A. Gordon (1)(2).............. 47 Director
</TABLE>
(1) Member of the Audit Committee
(2) Member of the Compensation Advisory Committee
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.
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<PAGE>
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, where he had 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. Underwood became Senior Vice President - Technical Operations in
January 1996. He was Vice President - Technical Operations from July 1995 until
January 1996. Mr. Underwood has over 15 years of experience in operations
management and hardware and software development. From May 1992 through June
1995, Mr. Underwood was Business Unit Manager for the Document Management
Systems division of Perceptics Corporation ("Perceptics"), a subsidiary of
Westinghouse Electric Corporation. From November 1988 through May 1992, Mr.
Underwood served as the Director - Operations and Engineering for Perceptics.
Mr. Raymond L. Brown, a certified public accountant, has been Senior
Vice President and Chief Financial Officer since December 1995. Prior to joining
IMNET, he was employed by Communications Central, Inc., a pay telephone service
provider, as Vice President, Chief Financial Officer and Treasurer from October
1994 to November 1995. From March 1993 to September 1994, Mr. Brown served as
Vice President, Chief Financial Officer, Treasurer and Secretary of AER Energy
Resources, Inc., a battery manufacturing company, where he had responsibility
for all finance, management information systems and human resource activities.
From September 1989 to February 1993, Mr. Brown served as Vice President,
Finance and Chief Operating Officer of Delta Color, Inc., an ink manufacturing
company, where he was responsible for finance and operations. Prior to September
1989, Mr. Brown served as Director, Accounting and Financial Planning for Gould,
Inc. in its imaging and graphics division.
Mr. Bowers has been Senior Vice President - Business Development of the
Company since June 1996. Mr. Bowers has over 21 years of technical and
management experience in the computer software and services field. Mr. Bowers
joined the Company following the 1992 Acquisition in October 1992 as Vice
President Marketing and Business Development. He was employed by IMGE beginning
in 1991 as Vice President of Technical Operations. From 1986 through 1991, Mr.
Bowers was employed at Software AG as Director of Sales Support for its
newly-formed Federal Systems subsidiary and subsequently as Director of the
Geographic Information Systems Group.
Mr. Collins has been Senior Vice President - Marketing of the Company
since April 1995. Mr. Collins has 15 years of experience in information
processing, including ten years in the healthcare industry. Prior to joining
IMNET, he was employed by Lanier Worldwide ("Lanier") for 14 years, most
recently as Marketing Director. From 1991 through 1993 he served as Director of
Product Marketing, and from 1985 through 1991, he served as a District Manager
for Lanier.
Mr. Kenneth R. Brown has been Executive Vice President of the Company
since April 1995. He has more than 32 years of experience in the computer
industry. Mr. Brown is a member of the Board of Advisors and Chairman for the
Center for Healthcare Information Management, an organization representing
approximately 85 HCIS vendors and consultants. From April 1991 through April
1995 he was Chairman of the Board and Chief Executive Officer for CITATION
Computer Systems, Inc., an HCIS company. From 1988 to 1990 he was President of
Silverlake Systems - Sun Data, Inc., a distributor of midrange IBM computer
systems.
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<PAGE>
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.
The IMNET Board of Directors is comprised of four persons, two of whom
are affiliated with investor groups (Messrs. Howell and Gordon), IMNET's Chief
Executive Officer (Mr. Rardin) and President (Mr. Gilbert). Each director other
than Mr. Gilbert was initially elected and reelected pursuant to the terms of a
stockholders' agreement, originally executed at the time of the 1992
Acquisition. That agreement terminated upon the closing of the Company's initial
public offering.
TERMS OF OFFICE.
Each of the Company's directors will hold office until the Company's
Annual Meeting of Stockholders or until his successor is duly elected and
qualified. All executive officers of the Company serve at the discretion of the
Board of Directors.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
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.
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<PAGE>
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 $12 per share,
the initial public offering price. Each year thereafter, non-employee directors
will receive options to acquire 3,760 shares of Common Stock on the first
business day after the Annual Meeting of Stockholders, at the closing price of
the Company's Common Stock on the date prior to the grant of the option. All
options granted under the 1995 Non-Employee Directors Stock Option Plan become
exercisable one year after the date of grant, provided the director has attended
at least 75% of the sum of all meetings of the Board of Directors and any
committees on which that director serves, from the date of grant to such
anniversary date. No option granted pursuant to the Directors Plan may be
exercised later than five years from the date of grant thereof.
EXECUTIVE COMPENSATION.
The following table sets forth the compensation paid or accrued by the
Company to the Company's Chief Executive Officer, the four other most highly
paid executive officers of the Company in 1996 and two former executive officers
(Messrs. Bhatt and Ulatowski) who would have been among the most highly paid
executives but for the fact that they were no longer serving as executive
officers at fiscal year end (the "Named Executive Officers"). The information
presented is for the fiscal years ended June 30, 1996, 1995 and 1994.
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<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
AWARDS
FISCAL YEAR Securities
ENDED ANNUAL Underlying ALL OTHER
NAME AND PRINCIPAL POSITION JUNE 30, COMPENSATION Options(#) COMPENSATION($)
- --------------------------- -------- ---------------------- ---------- ---------------
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 President 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
($3,964) premiums paid by the Company.
(3) Mr. Underwood joined the Company in July 1995.
(4) Mr. Brown and Mr. Collins both joined the Company in April 1995.
(5) Includes sales commissions.
(6) Mr. Ulatowski ceased to be an executive officer of the Company prior to
June 30, 1996.
(7) Mr. Bhatt left the employ of the Company prior to June 30, 1996.
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<PAGE>
OPTION GRANTS TABLE
The following table sets forth certain information regarding options
granted to the Named Executive Officers during the fiscal year ended June 30,
1996. No separate stock appreciation rights ("SARs") were granted during fiscal
1996.
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL 1996
INDIVIDUAL GRANTS
Potential Realizable Value
at Assumed Annual Rates
of Stock Price
Appreciation for
INDIVIDUAL GRANTS Option Term(2)
--------------------------------------------------------------------------- ---------------------------
Number of
Securities % of Total
Underlying Options Granted Exercise
Options to Employees in Price Expiration
NAME Granted(#)(1) Fiscal Year ($/share) Date 5%($) 10%($)
- ---------------------- ---------------- ------------------ ------------ -------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth D. Rardin 193,98 44.8% $21.25 01/09/06 $2,592,404 $6,569,661
Gary D. Bowers 23,64 5.5 21.25 01/09/06 316,019 800,854
Thomas D. Underwood 27,00 6.2 12.00 07/14/05 203,762 516,373
Thomas D. Underwood 23,00 5.3 21.25 01/09/06 307,372 778,942
Paul J. Collins 12,44 2.9 21.25 01/09/06 166,342 421,543
Mark S. Ulatowski 21,20 4.9 21.25 01/09/06 283,317 717,981
</TABLE>
- ---------------------
(1) The options will become exercisable at the rate of 20% per year from the
date of grant and have 10-year terms so long as the optionee's employment
with the Company continues. The exercise price of each option is equal to
the fair market value of the underlying Common Stock on the date of the
grant, as determined by the Compensation Advisory Committee of the Board of
Directors. The exercise price may be paid in cash or, at the option of the
Compensation Advisory Committee, in shares of Common Stock valued at fair
market value on the exercise date.
(2) Future value of current-year grants assuming appreciation in the market
value of the Common Stock of 5% and 10% per year over the 10-year option
period. The actual value realized may be greater than or less than the
potential realizable values set forth in the table.
OPTION EXERCISES AND YEAR-END VALUE TABLE
None of the Named Executive Officers has held or exercised separate
SARs. The following table sets forth certain information regarding options
exercised during the fiscal year ended June 30, 1996 by, and unexercised options
held at fiscal year end by, each of the Named Executive Officers.
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<PAGE>
<TABLE>
<CAPTION>
FISCAL 1996 YEAR-END OPTION VALUES
SHARES NUMBER OF SECURITIES UNDERLYING
ACQUIRED UNEXERCISED OPTIONS AT 1996 VALUE OF UNEXERCISED IN-THE-
ON VALUE FISCAL YEAR END(#) MONEY OPTIONS AT 1996 FISCAL
EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE YEAR END($)(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
- ------------------------
</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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<PAGE>
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.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of October 25, 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.
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<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
BENEFICIAL OWNER AS OF 10/25/96
- ---------------- --------------
SHARES PERCENTAGE
------ ----------
<S> <C> <C>
Edgewater Private Equity Fund, L.P.(1)......................... 644,396 6.7%
Mesirow Capital(2)............................................. 644,396 6.7
Kenneth D. Rardin(3)........................................... 147,731 1.5
Gary D. Bowers(4).............................................. 20,849 *
Nikhil A. Bhatt (8)............................................ 8,753 *
Thomas D. Underwood (5)....................................... 5,400 *
Kenneth R. Brown (6)........................................... 11,270 *
Paul J. Collins (7)............................................ 6,010 *
Mark S. Ulatowski (9).......................................... 4,852 *
James A. Gilbert (10).......................................... 1,200 *
James A. Gordon(1)(11)......................................... 648,156 6.7
Daniel P. Howell(2)(11)........................................ 648,156 6.7
All officers and directors as a group (9 persons)(12).......... 1,488,772 15.4
</TABLE>
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* 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 Capital is 350 North Clark Street,
Chicago, Illinois 60610.
(3) Includes 3,760 shares held by Mr. Rardin's daughter. Also includes options
to purchase 52,123 shares which are either currently exercisable or which
become exercisable within 60 days of the date of this Report. Does not
include 452,369 shares subject to outstanding options, which options are
not currently exercisable and will not become exercisable within 60 days of
the date of this Report.
(4) Includes options to purchase 7,261 shares which are either currently
exercisable or which become exercisable within 60 days of the date of this
Report. Does not include 58,939 shares subject to outstanding options,
which options are not currently exercisable and will not become exercisable
within 60 days of the date of this Report.
(5) Consists of options to purchase 5,400 shares which are either currently
exercisable or which become exercisable within 60 days of the date of this
Report. Does not include 84,600 shares subject to outstanding options,
which options are not currently exercisable and will not become exercisable
within 60 days of the date of this Report.
(6) 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 Report.
(7) Includes options to purchase 5,510 shares which are either currently
exercisable or which become exercisable within 60 days of the date of this
Report. Does not include 49,490 shares subject to outstanding options,
which options are not currently exercisable and will not become exercisable
within 60 days of the date of this Report.
(8) Based upon Mr. Bhatt's notice of exercise of options for 8,753 shares
received by the Company on April 30, 1996.
(9) Does not include 35,676 shares subject to outstanding options, which
options are not currently exercisable and will not become exercisable
within 60 days of the date of this Report.
(10) 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 Report.
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(11) Includes options to purchase 3,760 shares which are either currently
exercisable or which become exercisable within 60 days of the date of this
Report.
(12) Includes options to purchase 77,814 shares which are currently exercisable
or which become exercisable within 60 days of the date of this Report. Does
not include 1,157,481 shares subject to outstanding options which options
are not currently exercisable and will not become exercisable within 60
days of the date of this Report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Prior to October 5, 1992, the Company was engaged in raising funds and
negotiating the 1992 Acquisition, which was consummated on that date. IMGE
received 20,000 shares of Series B Preferred Stock and 470,000 shares of Common
Stock as partial consideration for its sale of assets to the Company pursuant to
the 1992 Acquisition. In connection with obligations undertaken pursuant to the
1992 Acquisition, the Company paid to IMGE $96,000 in fiscal 1993, $96,000 in
fiscal 1994 and $72,000 in fiscal 1995, and $63,281 in fiscal 1996. Pursuant to
the 1992 Acquisition, the Company agreed to pay or reimburse IMGE, up to a
maximum annual aggregate amount of $96,000, 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 his employment agreement are to
be applied against amounts due under those notes. 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 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
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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. See Item 8 of the Company's Form
10-K for the fiscal year ended June 30, 1996.
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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 8, 1996 By: /s/ Raymond L. Brown
--------------------
Raymond L. Brown,
Chief Financial Officer
(Principal Financial and Accounting Officer)
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