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 240.14a-11(c) or 240.14a-12
IMNET Systems, Inc.
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(Name of Registrant as Specified In Its Charter)
N/A
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(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.
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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|_| 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:
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[LOGO]
3015 WINDWARD PLAZA
WINDWARD FAIRWAYS II
ALPHARETTA, GEORGIA 30005
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 15, 1998
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 January 15, 1998 at 10:00 a.m., Atlanta
time, for the following purposes:
1. To elect three 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 approve the IMNET Systems, Inc. 1997
Long-Term Incentive Plan (the "1997 Plan") providing for the
issuance of up to 875,000 shares of Common Stock.
3. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The Proxy Statement dated December 15, 1997, is attached. Only record
holders of the Company's $.01 par value Common Stock at the close of business on
December 10, 1997, will be eligible to vote at 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. A copy of the Annual Report of IMNET Systems, Inc. for the fiscal year
ended June 30, 1997 containing financial statements is enclosed.
By Order of the Board of Directors:
/s/ Kenneth D. Rardin
KENNETH D. RARDIN,
Chairman of the Board, President
and Chief Executive Officer
Date: December 15, 1997
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[LOGO]
3015 WINDWARD PLAZA
WINDWARD FAIRWAYS II
ALPHARETTA, GEORGIA 30202
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
JANUARY 15, 1998
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 1997 Annual Meeting of Stockholders to be held on January
15, 1998, 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
mailed to stockholders on or about December 15, 1997. 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 December 10, 1997 (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 9,760,773 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 meeting and the validity of
proxies and ballots, count all votes and ballots and perform certain other
duties as required by law.
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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 three nominees receiving the highest vote totals will be
elected as directors of the Company at the Annual Meeting. 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 the IMNET Systems, Inc. 1997 Long-Term Incentive
Plan (the "1997 Plan"). It is expected that shares held by officers and
directors of the Company and their affiliates, which in the aggregate represent
approximately 14.6% 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 1997 Plan, 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 and FOR
the 1997 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 January 15, 1998 will hold office until the next
Annual Meeting or until their successors are elected and qualified. James A
Gilbert, currently a director of the Company, has declined to stand for
re-election. The Board of Directors voted to reduce the size of the Board to
three directors, effective upon the date of the Annual Meeting.
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.
The name and age of each nominee and the period during which such
person has served as a director is also set forth below:
Name of Nominee Age Service as Director Position
Kenneth D. Rardin 47 Since 1992 Chairman of the Board,
President and Chief
Executive Officer
Daniel P. Howell(1) 45 Since 1992 Director
James A. Gordon(1) 48 Since 1992 Director
- ----------------------------
(1) Member of the Audit Committee and the Compensation Advisory
Committee.
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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 to September 1996, and was re-elected
as President in November 1997. 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, 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. Howell has been a director of the Company since 1992. 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
effected 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 participated in 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 1997, there were six meetings
of the Board of Directors. Each incumbent director who was a director during
fiscal 1997 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 (the "1995 Plan"), non-employee directors will receive stock
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 stock option. Pursuant to the 1995
Plan, Mr. Gordon and Mr. Howell each received stock options to acquire 3,760
shares of Common Stock on December 20, 1996 at a price of $22.50 per share. All
stock options granted under the 1995 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 stock option granted
pursuant to the 1995 Plan may be exercised later than five years following the
date of grant thereof. See "Benefit Plans - Non-Employee Director Stock Option
Plan" below.
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AUDIT COMMITTEE - The Company's Audit Committee consists of two non-employee
directors: Mr. Howell and Mr. Gordon. The Audit Committee met once in fiscal
1997. 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's Compensation Advisory Committee
consists of two non-employee directors: Mr. Howell and Mr. Gordon. The
Compensation Advisory Committee met four times in fiscal 1997. 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 several of the Company's benefit plans including the 1993 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: a
base salary, stock-based incentive compensation, and a cash bonus. The Company
has recently adopted a deferred compensation plan and a split-dollar life
insurance program for executive officers and certain other highly paid
employees. No other 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
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 1997, salaries
for most executive officers were raised by 3.3%. 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.
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The base salaries for the new executive officers employed since the beginning of
fiscal 1997, James L. Hall, Senior Vice-President of Sales, James A. Gilbert,
President and Chief Operating Officer, and Scott A. Remley, Senior
Vice-President and Chief Financial Officer, 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, Mr. Brown, and Mr. Remley, the Compensation Advisory
Committee also took into account the candidate's prior levels of compensation,
including outstanding stock options. The Compensation Advisory Committee has
also endorsed the Company s adoption of a deferred compensation plan permitting
certain company personnel to defer receipt of a portion of their base salary
and/or bonuses.
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 stock option plan in
1993. The Compensation Advisory Committee approves grants of incentive and
non-qualified stock options under the 1993 Plan. The Company, through actions
taken by its Board of Directors or the Compensation Advisory Committee, has on
occasion also made grants of non-qualified stock options under an informal stock
option program. The Compensation Advisory Committee will also administer the
1997 Plan if it is approved by the stockholders.
Historically, stock option grants made by the Company have generally
vested at a rate of 20% per year and have had a term of ten years. These stock
options usually expire upon termination of employment or shortly thereafter,
except in the event of retirement, disability or death, in which case the term
of the stock option may continue for some time thereafter.
The Compensation Advisory Committee believes that the Company's stock
option program has been effective in creating stockholder value since the gain
to be realized by executive officers (and other key employees) upon exercise of
stock options will change as the stock price changes. The Compensation Advisory
Committee also believes that the long-term nature of the stock options
encourages the Company's executive officers to remain with the Company. Finally,
the Compensation Advisory Committee has found it appropriate to grant stock
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 1998, upon the employment of
Scott A. Remley as Senior Vice-President and Chief Financial Officer, the
Compensation Advisory Committee granted Mr. Remley stock options for 100,000
shares of Common Stock at the then current market price. In fiscal 1997, upon
the employment of James L. Hall as Senior Vice-President of Sales, the
Compensation Advisory Committee granted Mr. Hall stock options for 50,000 shares
of Common Stock. Of this amount, 40,000 were at the then-current market price,
and 10,000 were at the higher price at which stock option grants had been made
to other executive officers in fiscal 1996. 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 stock option grants had been made to other executive officers in fiscal
1996. Grants made in the fall of 1996, which included those granted to Mr.
Gilbert and Mr. Hall, were non-qualified stock options granted under an informal
plan since there were insufficient shares available for grant at that time under
the 1993 Plan. The number of stock options to be granted, the exercise price and
other terms were established utilizing the procedure, and considering the
factors, described above at "Base Salary." The Compensation Advisory Committee
subjectively determined the terms of the stock 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.
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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. Stock options were granted
to executive officers in fiscal 1997 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. In
the fall of 1996, the Company made grants of 105,000 shares to Mr. Rardin,
40,000 shares to Mr. Underwood, 25,000 shares to Mr. Brown, and 15,000 shares to
Mr. Bowers, all at an exercise price of $15.75 per share. These grants were
non-qualified stock options granted under an informal plan since there were
insufficient shares at that time available for grant under the 1993 Plan.
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 1997, the Compensation
Advisory Committee, in consultation with Mr. Rardin, set an earnings per share
target (as adjusted to eliminate non-recurring charges) the attainment of which
would entitle each executive officer to receive a bonus. This target was met.
The amount of the bonus paid to individual executive officers was determined
based upon the Committee's subjective analysis of the performance of each such
officer. Fiscal 1997 executive officer bonuses were paid in fiscal 1998, except
to the extent deferred at the election of the individual executive officer. See
"Benefit Plans - Deferred Compensation Plan."
DEFERRED COMPENSATION PLAN
The Company has adopted a non-qualified deferred compensation plan.
This plan, unlike a qualified plan which is subject to, among other things, the
compensation limitations and vesting requirements of the Internal Revenue Code
and additional requirements of the Employee Retirement Income Security Act, is
an arrangement for a select group of management or other highly compensated
employees that is not subject to any specific qualification criteria. The
participants do not recognize income for income tax purposes until amounts are
paid to the participant and the Company is entitled to a deduction at that time.
SPLIT-DOLLAR LIFE INSURANCE
In October 1997, the Company implemented a split dollar life insurance
program for certain executives, including Messrs. Rardin, Underwood, Brown, and
Bowers. This program obligates the Company to obtain a life insurance policy
("Policy") insuring the life of the executive which will provide a minimum
specified dollar amount in death benefits (called the "Minimum Death Benefit").
The Company will pay all the insurance premiums required under the Policies.
Ownership of the Policy is "split" between the Company and the Participants. The
Company has the right of ownership of the net cash value of the Policy and has
the right to receive from any death benefit the greater of (a) total premiums
paid by the Company under the Policy, and (b) net cash surrender value of the
Policy on the date of death of the Participant. The Participant has the right to
designate the death benefit beneficiary for the portion of the death benefit in
excess of the Company's interest described above. This portion of the death
benefit must at all times equal or exceed the Minimum Death Benefit. The Minimum
Death Benefit under the program is $925,000, $90,000, $160,000 and $80,000 and
for Messrs. Rardin, Underwood, Brown and Bowers, respectively.
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COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Rardin's compensation is set based primarily on a written
employment agreement entered into in 1992. That agreement was based on his
then-existing arrangement with IMGE. The Compensation Advisory Committee fixed
the fiscal 1997 salary of Mr. Rardin at $315,363 representing a premium of
$12,231 over the minimum amount specified in his written employment agreement.
Mr. Rardin was awarded a cash bonus of $792,854 for his performance in fiscal
1997. 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 Mr. Rardin a
non-qualified stock option for 105,000 shares in September 1996, based on his
performance, which the Compensation Advisory Committee believes strongly
contributed to the Company's performance in fiscal 1997. 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 strong leadership and fulfilled the functions of an executive officer
of the Company at the highest level.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) of the Internal Revenue Code ("Section 162(m)") limits
the tax deduction for individual compensation paid the CEO and the four other
most highly paid executives ("Covered Executives") to $1.0 million annually,
subject to certain exceptions. Except with regard to Mr. Rardin, executive
compensation in fiscal 1997 did not exceed $1.0 million. The Committee has
approved the Executive Deferred Compensation Plan described above. Participation
in that Plan is limited to certain executives (including the current "Covered
Executives") and is voluntary. It allows an individual to elect to defer a
portion of base salary and cash bonus awards. Accordingly, any amounts which
would otherwise result in non-tax deductible compensation may be deferred under
the Plan. As a result of the implementation of the Executive Deferred
Compensation Plan and the elections made thereunder by the Covered Executives,
no tax deduction will be lost as a result of Section 162(m) on compensation paid
to executives in fiscal 1997. In addition, the Committee considered the impact
of Section 162(m) in structuring Mr. Gilbert's compensation package.
The Compensation Advisory Committee has undertaken a continuing review
of the Company's compensation plans with regard to the deduction limitation
under Section 162(m) and the final regulations interpreting Section 162(m) which
have recently been adopted by the Internal Revenue Service and the Department of
the Treasury. Based on its initial review, the Compensation Advisory Committee
has determined that certain stock options granted under the 1993 Plan, as
previously approved by stockholders, may not meet the requirements for
deductibility under the Internal Revenue Code (the "Code"). In order to permit
the future deductibility of stock-based awards for certain executive officers of
the Company, the Committee and the Board of Directors have approved the new 1997
Plan. If the new plan is approved by stockholders, future stock-based awards
under the 1997 Plan can qualify as performance based and not be subject to the
tax deductibility limitation of Section 162(m). Certain stock options previously
granted under the 1993 Plan, and other stock options granted outside the 1993
Plan, may not qualify as performance based, and the Company could potentially
lose tax deductions with respect to the exercise of such stock options,
depending on the timing of the executives' exercise of those stock options. The
Committee anticipates that the Covered Executives will cooperate with the
Company with respect to the timing of the exercise of the stock options, as well
as deferrals under the Executive Deferred Compensation Plan, in an attempt to
avoid the loss of tax deductions for the Company, although the Company has not
entered into any formal arrangements with the Covered Executives with respect to
such cooperation. The Compensation Advisory Committee continues to monitor the
Company's other compensation plans and other issues relating to the Section
162(m) compensation deduction limitation.
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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 1997, Messrs. Howell and Gordon 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. John I. Jellinek also served on the Compensation Advisory Committee
until his resignation as a director on August 22, 1996.
The Company entered into a distribution 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, which according to SoftNet's SEC filings then acted as its
compensation committee. Messrs. Jellinek and McDonough were directors of the
Company until August 22, 1996 and August 20, 1996, respectively. The Company and
SoftNet entered into an amendment to the distribution 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 remaining $1,515,000 was recognized in fiscal
1996.
On June 30, 1996, the Company entered into manufacturing and
distribution rights agreements with SoftNet and a SoftNet-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 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. On
September 24, 1996, the Company received a $2.5 million cash payment on the $2.9
million note receivable from SoftNet and released the collateral the Company
held under the note, and SoftNet sold its shares of IMNET Common Stock. The
largest aggregate amount of indebtedness due to IMNET under SoftNet s note
during fiscal 1997 was $2.9 million.
In July, 1997, the Company and SoftNet amended the distributor
agreement referred to above. The Company agreed to a credit related to disputed
amounts of $177,000 and accepted property valued at $71,000 in partial
8
<PAGE>
satisfaction of the remaining amount due, and SoftNet executed a new unsecured
note receivable for the remaining balance of $161,000, which bears interest at
the rate of 6.07% per annum, which has been included in prepaid expenses and
other current assets in the accompanying 1997 consolidated balance sheet. No
payments of principal or interest due pursuant to the new note have been made to
IMNET as of the date of this Proxy Statement. In addition, SoftNet agreed to
manufacture the MegaSAR based on an order from the Company for which a certain
portion of the payment for each MegaSAR delivered to IMNET will be applied
against the balance of the note due IMNET.
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 1, 1996 through
June 30, 1997 and includes July 20, 1995 (the date of the Company's initial
public offering) as a reference point.
[GRAPH OMITTED]
VALUE OF $100 INVESTED ON JULY 20, 1995 AT:
7/20/95 6/30/96 6/30/97
-------- ------- -------
IMNET $100.00 $254.17 $258.83
NASDAQ HEALTH CARE INDEX 100.00 138.51 127.21
NASDAQ MARKET 100.00 115.45 139.08
Total return assumes reinvestment of dividends.
9
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued by the
Company to the Company's Chief Executive Officer and the four other most highly
paid executive officers of the Company in 1997 (the "Named Executive Officers").
The information presented is for the fiscal years ended June 30, 1997, 1996 and
1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Fiscal Year Long Term All Other
Ended Annual Compensation Awards Compensation($)
Name and Principal Position June 30, Compensation Securities
Underlying Options(#)
Salary($) Bonus($)
<S> <C> <C> <C> <C> <C>
Kenneth D. Rardin 1997 315,363 792,854(7) 105,000 12,508(1)
Chairman and Chief 1996 324,118 248,955 193,984 11,763(2)
Executive Officer 1995 281,265 --- 150,400 11,273(3)
James L. Gilbert 1997 184,225(4) 148,258(7) 400,000 ---
President and Chief 1996 ---- --- --- ---
Operating Officer(4) 1995 ---- --- --- ---
Thomas D. Underwood 1997 155,545 51,519(7) 40,000 ---
Senior Vice President - 1996 139,692(5) 55,975 50,000 ---
Technical Operations 199 --- --- --- ---
Raymond L. Brown 1997 145,649 48,498(7) 25,000 ---
Senior Vice President - 1996 77,538(6) 40,113 50,000 ---
Chief Financial Officer 1995 --- --- --- ---
Gary D. Bowers 1997 134,510 45,864(7) 15,000 ---
Senior Vice President - 1996 145,192 38,438 23,647 ---
Business Development(8) 1995 113,161 31,997 18,800 ---
</TABLE>
- --------------------------------
(1) The amounts shown reflect the dollar value of disability ($7,309) and life
insurance ($5,199) premiums paid
by the Company.
(2) The amounts shown reflect the dollar value of disability ($9,370) and life
insurance ($2,393) premiums paid by the Company.
(3) Reflects the dollar value of disability ($7,309) and life insurance
($3,964) premiums paid by the Company.
(4) Mr. Gilbert joined the Company in September 1996 and subsequently resigned
as President and Chief Operating Officer in November 1997.
(5) Mr. Underwood joined the Company in July 1995. He was appointed Senior Vice
President - Client Services in November 1997.
(6) Mr. Brown joined the Company in November 1995. He was appointed Senior Vice
President - Business Development in November 1997.
(7) Includes $500,916, $79,027, $17,809, $37,380, and $17,702, respectively,
deferred by Messrs. Rardin, Gilbert, Underwood, Brown and Bowers under the
Company's Deferred Compensation Plan. See "Deferred Compensation Plan."
(8) Mr. Bowers was appointed Senior Vice President - Product Technology in
November 1997.
10
<PAGE>
Option Grants Table
The following table sets forth certain information regarding stock options
granted to the Named Executive Officers during the fiscal year ended June 30,
1997. No separate stock appreciation rights ("SARs") were granted during fiscal
1997.
OPTION GRANTS IN FISCAL 1997
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
Potential Realizable
Value of Assumed
Number of % of Total Annual Rates of Stock
Securities Options Price Appreciation for
Underlying Granted to Exercise Option Term(2)
Options Employees in Price Expiration
Name Granted(#)(1) Fiscal Year ($/share) Date 5%($) 10%($)
- ---- ------------- -------------- --------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Kenneth D. Rardin 105,000 14.1% $15.75 09/09/06 1,040,034 2,635,652
James A. Gilbert 250,000(3) 34.5% 15.75 09/09/06 2,476,273 6,275,361
150,000(4) 20.7% 21.25 09/09/06 660,764 2,940,217
Thomas D. Underwood 40,000 5.5% 15.75 09/09/06 396,204 1,004,058
Raymond L. Brown 25,000 3.4% 15.75 09/09/06 247,627 627,536
Gary D. Bowers 15,000 2% 15.75 09/09/06 148,576 376,522
</TABLE>
- -----------------------
(1) Except as noted in footnotes 3 and 4 below, the stock 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 stock 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 discretion 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 stock
option period. The actual value realized may be greater than or less than
the potential realizable values set forth in the table.
(3) Exercisable in full as of the first anniversary of the date of grant.
(4) Exercisable at the rate of 25% per year commencing on the second
anniversary of the date of the grant. This stock option will expire without
vesting due to Mr. Gilbert s resignation as President and Chief Operating
Officer in November 1997.
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 stock options
exercised during the fiscal year ended June 30, 1997 by, and unexercised stock
options held at fiscal year end by, each of the Named Executive Officers.
11
<PAGE>
FISCAL 1997 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Shares Number of Securities
Acquired Underlying Unexercised Value of Unexercised
on Value Options at 1997 Fiscal Year In-the-Money Options at 1997
Exercise Realized End(#) Fiscal Year End($)(1)
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
-------------------------- ------------- ----------- ------------------------------ ------------------------------
<S> <C> <C> <C> <C>
Kenneth D. Rardin 0 0 120,743/383,749 2,350,724/6,070,818
James A. Gilbert 0 0 0/400,000 0/5,299,000
Thomas D. Underwood 0 0 10,000/80,000 148,050/1,204,600
Raymond L. Brown 0 0 10,000/65,000 98,100/775,150
Gary D. Bowers 0 0 17,502/48,698 353,582/767,936
</TABLE>
- -----------------
(1) Calculated based on the $31.06 estimated fair market value of the
underlying securities as of June 30, 1997.
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Mr. Rardin in May
1992, which was amended in July 1995, May 1996, and November 1997. It extends
through December 31, 2000. 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, 2000 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, 2000
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.
12
<PAGE>
Messrs. Gilbert, Underwood, Brown, and Bowers entered into employment
agreements with the Company dated September 10, 1996, July 5, 1995, November 17,
1995, and May 22, 1992, 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. Gilbert, Mr. Underwood, Mr. Brown, and Mr. Bowers, 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. Gilbert's
annual salary is currently $250,000, Mr. Underwood's current annual salary is
$158,307, Mr. Brown's current annual salary is $148,235, and Mr. Bower's current
annual salary is $139,455. 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 (other than Mr. Gilbert) 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. Gilbert's, Mr. Underwood's, and Mr. Brown's
agreement contains a one-year non-competition provision, while Mr. Bowers'
agreement contains a six month non-competition provision. Each of the Named
Executive Officers elected to defer a portion of his fiscal 1997 bonus under the
Company's Deferred Compensation Plan. See "Deferred Compensation Plan." In
November 1997, Mr. Gilbert resigned as Chief Operating Officer and President. He
will remain employed by the Company until June 1998.
BENEFIT PLANS
Employee Stock Option and Rights Plan
The 1993 Plan, as amended pursuant to Stockholder approval on December
19, 1996, provides for the grant of stock options to acquire a maximum of
1,590,000 shares of Common Stock. As of June 30, 1997, stock options for 94,362
shares had been exercised under the 1993 Plan, and stock options for 818,915
shares were outstanding. The number of shares covered by the 1993 Plan was
increased from 944,000 to 1,590,000 pursuant to approval of the Stockholders in
December 1996. Unless sooner terminated by the Board, the 1993 Plan terminates
on October 27, 2003. These stock options also usually expire upon termination of
employment or shortly thereafter, except in the event of retirement, disability
or death, in which case the term of the stock option may continue for some time
thereafter. In the event of a "Non-Acquiring Transaction" as defined in 1993
Plan (certain transactions constituting a change in control), limitations on
exercisability of stock options owned by executive officers shall be waived, and
the limitations on exercisability of stock options owned by others may be waived
(in the discretion of the Compensation Advisory Committee).
Employee Discount Stock Purchase Plan
In December 1996, the Stockholders approved the adoption of the IMNET
Systems, Inc. Employee Discount Stock Purchase Plan for employees of the Company
and its subsidiaries (the "Stock Purchase Plan"). The Stock Purchase Plan was
established pursuant to the provisions of Section 423 of the Code. The purpose
of the Stock Purchase Plan is to provide a method whereby all eligible employees
of the Company may acquire a proprietary interest in the Company through the
purchase of the Company s common stock. Under the Stock Purchase Plan, payroll
deductions are used to purchase the Company s common stock.
An aggregate of 300,000 shares of common stock of the Company were
reserved for issuance under the Stock purchase Plan, and as of June 30, 1997, an
aggregate of 12,215 shares of common stock were purchased and issued under that
Plan (including approximately 1,740 shares purchased by executive officers). All
employees (including officers) of the Company or its majority-owned subsidiaries
whose customary employment is at least 20 hours per week and five months per
year are eligible to participate in the Stock Purchase Plan. As of July 1, 1997,
approximately 257 employees were eligible to participate in the Stock Purchase
Plan. An employee electing to participate in the Stock Purchase Plan must
13
<PAGE>
authorize a whole percentage (not less than 1% nor more than 25%) of the
employee s compensation to be deducted by the Company from the employee s pay
during each pay period. Each six month period from January 1 to June 30 and July
1 to December 31 is a "Plan Period" during which payroll deductions will be
accumulated to purchase Common Stock at the end of such a Plan Period. The price
for common stock purchased under the Stock Purchase Plan is equal to the lesser
of 85% of the closing sale price on Nasdaq of the Common Stock on either the (i)
first trading day or (ii) the last trading day of the applicable Plan Period;
provided that the price will be the closing sale price on the last trading day
of the Plan Period if the Board does not specify a maximum number of shares per
employee for the Plan Period.
A participant may voluntarily withdraw from the Stock Purchase Plan at
any time and may, at the participant s option (i) receive on withdrawal the cash
balance, without interest, then held in the participant s account or (ii) allow
the cash balance to remain in the Plan and be used to purchase Common Stock at
the end of the Plan Period. Upon termination of employment for any reason,
including resignation, discharge, disability or retirement, or upon the death of
a participant, the balance of the participant's account, without interest, will
be paid to the participant or his or her designated beneficiary. However, in the
event of the participant's death, disability or retirement, the participant or
the participant's beneficiary may elect to exercise the participant's option to
purchase such number of full shares which such participant's accumulated payroll
deductions will purchase at the applicable purchase price.
Reservation of Shares for Other Options
In September 1996, the Company's Board of Directors approved the grants
of options to acquire 610,000 shares of Common Stock as part of an Informal
Stock Option Plan (the "Informal Plan"). The Compensation Advisory Committee was
authorized to grant further stock options under the Informal Plan to acquire up
to 200,000 shares of the Company's Common Stock on such terms as it deems
appropriate, and has issued stock options to purchase 40,000 of such shares. As
of October 30, 1997, stock options for 200 shares had been exercised under the
Informal Plan, stock options for 39,800 shares were outstanding, and 160,000
shares remained available for issuance under the Informal Plan. Stock options
issued under the Informal Plan incorporate by reference the terms of the 1993
Plan.
Non-Employee Directors Stock Option Plan
The Non-Employee Directors Stock Option Plan (the "1995 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 1995 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 stock 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 receives an
annual grant of stock options to purchase 3,760 shares on the first business day
after such annual meeting. Stock options granted under the 1995 Plan are not
transferable other than by will or the laws of descent and distribution. Stock
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. Stock 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, stock 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 a stock option be
exercised more then five years following the date of grant. As of the fiscal
year end, stock options for 22,560 shares had been granted, under the 1995 Plan.
Of these, stock options to acquire 3,760 shares were exercised, stock options to
acquire 7,520 shares expired without vesting and stock options to acquire 7,520
shares remain outstanding.
Deferred Compensation Plan.
In 1997, the Company adopted a non-qualified deferred compensation plan
whereby certain executive officers, including Messrs. Rardin, Gilbert,
Underwood, Brown, and Bowers, can elect to defer a portion of the cash
compensation he would otherwise be entitled to receive. This plan, unlike a
qualified plan which is subject to, among other things, the compensation
limitations and vesting requirements of the Internal Revenue Code and additional
14
<PAGE>
requirements of the Employee Retirement Income Security Act, is an arrangement
for a select group of management or other highly compensated employees that is
not subject to any specific qualification criteria. The participants do not
recognize income for income tax purposes until amounts are paid to the
participant. Likewise, the Company is not entitled to an income tax deduction
until such amounts are paid to participants. For fiscal 1997, the amount of
compensation deferred under the Deferred Compensation Plan was $500,916,
$79,027, $17,809, $37,380 and $17,702 for Messrs. Rardin, Gilbert, Underwood,
Brown and Bowers, respectively.
Executive Split-Dollar Life Insurance Program
In October 1997, the Company implemented a split dollar life insurance
program for certain executives, including Messrs. Rardin, Underwood, Brown, and
Bowers. This program obligates the Company to obtain a life insurance policy
("Policy") insuring the life of the executive which will provide a minimum
specified dollar amount in death benefits (called the "Minimum Death Benefit").
The Company will pay all the insurance premiums required under the Policies.
Ownership of the Policy is "split" between the Company and the Participants. The
Company has the right of ownership of the net cash value of the Policy and has
the right to receive from any death benefit the greater of (a) total premiums
paid by the Company under the Policy, and (b) net cash surrender value of the
Policy on the date of death of the Participant. The Participant has the right to
designate the death benefit beneficiary for the portion of the death benefit in
excess of the Company's interest described above. This portion of the death
benefit must at all times equal or exceed the Minimum Death Benefit. The Minimum
Death Benefit under the program is $925,000, $90,000, $160,000 and $80,000 for
Messrs. Rardin, Underwood, Brown and Bowers, respectively.
CERTAIN TRANSACTIONS
In October 1992 and January 1994, the Company loaned $75,000 and
$30,000, respectively, to Mr. Rardin, the Chairman of the Board, President and
Chief Executive Officer of the Company. Such loans were evidenced by unsecured
promissory notes which were 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 bore 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 were to be applied against amounts due under those notes.
No bonuses were earned pursuant to these provisions prior to fiscal 1997. The
aggregate balance of these loans as of June 30, 1997 and the largest aggregate
amount of indebtedness owed to the Company by Mr. Rardin during fiscal year 1997
was $139,150, including accrued interest. On June 30, 1997, the amount of
$139,150, representing the largest amount due from the dates of the loans
through such date, was paid out of the bonuses earned by Mr. Rardin in the
fiscal year ended June 30, 1997.
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. HBOC is the Company s largest
Healthcare Information Systems distribution partner. During fiscal 1997, HBOC
accounted for 31% of the Company s revenues ($31.5 million). As part of the
agreements with HBOC, 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 in March 1996 through March 1997. Payments of $1.2 million were made
to HBOC by the Company in fiscal 1996, and the remaining $1.8 million was paid
in fiscal 1997. In fiscal 1997, 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 estimated cash flows from the maintenance revenues
expected from the First Perspective customers. The Company has classified the
remaining $1.7 million in estimated conversion costs, net of conversion costs of
$1.3 million incurred through June 30, 1997, in accrued expenses in its June 30,
1997 consolidated balance sheet. At June 30, 1997, the Company had $12.1 million
of trade accounts receivable from HBOC.
15
<PAGE>
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 1997, all Section 16(a) filing requirements applicable to
its executive officers, directors and greater than 10% beneficial owners were
complied with, except that the grants of 3,760 stock options to Messrs. Howell
and Gordon were inadvertently not reported on their respective Form 5 filings
for the year ending June 30, 1997. Amended Forms 5 were filed.
PROPOSAL TO APPROVE THE IMNET SYSTEMS, INC.
1997 LONG-TERM INCENTIVE PLAN
On December 10, 1997, the Board of Directors, subject to the approval
of stockholders, adopted the 1997 Long-Term Incentive Plan (the "1997 Plan").
The 1997 Plan shall be effective as of the date of such approval of stockholders
("Effective Date").
Options and other stock awards may be granted under the 1997 Plan to
employees of the Company and certain subsidiaries and affiliated businesses
("Related Companies"), and directors, consultants and other persons providing
key services to the Company. The Company estimates that, as of the date of this
Proxy Statement, approximately 300 employees (including officers), the two
non-officer directors and no more than ten consultants and advisors of the
Company are eligible to participate in the 1997 Plan. The following discussion
summarizes the 1997 Plan.
Shares Reserved for the Plan
The Company's 1997 Plan provides for the grant of options ("Options"),
stock appreciation rights ("SARs") and other stock awards ("Stock Awards")
(collectively "Awards") to acquire shares of common stock up to a maximum ("Plan
Maximum") of 875,000 shares of common stock. In addition, the following
provisions are imposed under the 1997 Plan: (i) a maximum of 800,000 shares
issued under Options intended to be ISOs, (ii) a maximum of 300,000 shares
issued under Options and SARs to any one individual during any consecutive
twelve month period, (iii) a maximum number of shares under other Awards of
500,000 shares, (iv) a maximum payment under other Awards of $2,000,000 to any
one individual for any Performance Goals established for any performance period
(including the Fair Market Value of stock subject to Awards denominated in
shares). These maximums are subject to adjustment in the event of stock
dividends, stock splits, combination of shares, recapitalization,
reorganization, merger, consolidation, split-up, spin-off, exchange of shares or
other changes in the outstanding Common Stock ("Corporate Transactions"). Any
such adjustment will be made by the Committee (as defined below). The Plan
Maximum shall not be reduced for shares subject to plans assumed by the Company
in an acquisition of an interest in another company. Shares subject to Awards
that are forfeited or canceled shall again be available for new Awards under the
1997 Plan. Shares issued under the 1997 Plan may consist, in whole or in part,
of authorized and unissued shares or treasury shares.
The 1997 Plan permits the grant of incentive stock options ("ISOs"),
non-qualified stock options ("NSOs"), SARs and other Stock Awards. The
Compensation Advisory Committee will determine the terms and conditions of
options granted under the 1997 Plan, including the exercise price ("Exercise
Price"), which may not be less than the fair market value, all subject to
certain limitations provided under the 1997 Plan.
16
<PAGE>
Awards may be settled through cash payments, the delivery of shares of
Stock, the granting of replacement Awards, or a combination thereof as the
Committee shall determine. Any Award settlement, including payment deferrals,
may be subject to such rules and procedures as it may establish, which may
include provisions for the payment or crediting of interest, or dividend
equivalents, including converting such credits into deferred Stock equivalents.
Purpose of Plan
The Company desires to (i) to attract and retain persons eligible to
participate in the 1997 Plan ("Participants"); (ii) motivate Participants, by
means of appropriate incentives, to achieve long-range goals; (iii) provide
incentive compensation opportunities that are competitive with those of other
similar companies; and (iv) further identify Participants' interests with those
of the Company's other stockholders through compensation that is based on the
Company's common stock; and thereby promote the long-term financial interest of
the Company and the Related Companies, including the growth in value of the
Company's equity and enhancement of long-term stockholder return. A portion of
the options issued pursuant to the 1997 Plan may constitute ISOs within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any succeeding provisions. The 1997 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.
Administration of the Plan
The 1997 Plan will be administered by the Compensation Advisory
Committee (the "Committee") appointed by the Board of Directors of the Company.
Subject to the terms of the 1997 Plan, in administering the 1997 Plan and the
Awards granted under the 1997 Plan, the Committee will have the authority to (1)
to determine the directors, officers and employees of the Company and its
subsidiaries and the consultants and advisors to whom Awards may be granted and
the types of Awards; (2) determine the time or times at which Awards may be
granted; (3) determine the option price for shares subject to each Option and
establish the terms, conditions, performance criteria restrictions and other
provisions of each Award; (4) determine the extent to which Awards will be
structured to conform to Section 162(m) of the Code; (5) establish terms and
conditions of Awards to conform to requirements of jurisdictions outside the
United States; (6) determine whether restrictions are to be imposed on shares
subject to Options and the nature of such restrictions; and (7) interpret the
1997 Plan and prescribe and rescind rules and regulations, if any, relating to
and consistent with the 1997 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 1997 Annual Meeting of the Stockholders; they are candidates for
reelection. Under the 1997 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.
Amendment of the Plan
The 1997 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 the number of shares that may be issued
under the 1997 Plan (except by certain adjustments provided for under the 1997
Plan); or (b) amending the 1997 Plan provisions regarding the limitations on the
Exercise Price. In addition, no amendment or termination may, in the absence of
written consent to the change by the affected Participant (or, if the
Participant is not then living, the affected beneficiary), adversely affect the
rights of any Participant or beneficiary under any Award granted under the 1997
Plan prior to the date such amendment is adopted by the Board. Options may not
be granted under the 1997 Plan after the date of termination of the 1997 Plan,
but Options granted prior to that date shall continue to be exercisable
according to their terms.
17
<PAGE>
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 1997 Plan.
Furthermore, certain consultants and advisors to the Company may also be
eligible to participate in the 1997 Plan.
Nothing contained in the 1997 Plan or in any 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
No Awards have been granted under the Plan. No determination has been
made by the Board or the Committee regarding the number of Awards to be granted
to any executive officer, executive officers as a group, non-executive directors
or non-executive employees.
Option Exercise Price and Vesting
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 the greater of
the fair market value or par value per share of the Common Stock on the Pricing
Date (as defined below). 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 Pricing 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 Pricing Date. The "fair
market value" shall be the mean between the highest and lowest reported sale
prices on the Nasdaq National Market on the Pricing Date, or, if no quotes are
available on the Pricing Date, or the last business day for which the price or
quotes are available prior to the Pricing Date. The "Pricing Date" is the date
on which the Option or SAR is granted, except that the Committee may provide
that: (i) the Pricing Date is the date on which the recipient is hired or
promoted (or similar event), if the grant of the Option or SAR occurs not more
than 90 days after the date of such hiring, promotion or other event; and (ii)
if an Option or SAR is granted in tandem with, or in substitution for, an
outstanding Award, the Pricing Date is the date of grant of such outstanding
Award. The Committee determines the vesting provisions for each Option.
Adjustments to Exercise Price and Number of Shares; Change of Control
In the event of a Corporate Transaction, the Committee may adjust
Awards to preserve the benefits or potential benefits of the Awards. Action by
the Committee may include adjustment of: (i) the number and kind of shares which
may be delivered under the Plan; (ii) the number and kind of shares subject to
outstanding Awards; and (iii) the Exercise Price of outstanding Options and
SARs; as well as any other adjustments that the Committee determines to be
equitable.
In general, if the Company is merged into or consolidated with another
corporation under circumstances in which the Company is not the surviving
corporation, or if the Company is liquidated, or sells or otherwise disposes of
substantially all of its assets to another corporation (any such merger,
consolidation, etc., being hereinafter referred to as a "Change of Control
Transaction") while unexercised Options are outstanding under the 1997 Plan,
after the effective date of a Change of Control Transaction 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
18
<PAGE>
those shares subject to the Option shall be entitled to receive in such Change
of Control Transaction based upon the agreed upon conversion ratio or per share
distribution. However, any limitations on exercisability of Options owned by
executive officers or the Company shall be waived, and Options of non-executive
officers may be waived (in the discretion of the Committee), so that all such
Options, from and after a date prior to the effective date of such Change of
Control Transaction shall be exercisable in full. 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 (by
written notice) of an Option during a 15-day period preceding the effective date
of such Change of Control Transaction. Any outstanding Options not exercised
within such 15-day period may be canceled by the Committee as of the effective
date of any such Change of Control Transaction, as specified in the 15-day
notice. To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the Committee,
whose determination in that respect shall be final, binding and conclusive.
Duration and Termination of 1997 Plan and Options
The 1997 Plan shall be unlimited in duration and, in the event of 1997
Plan termination, shall remain in effect as long as any Awards under it are
outstanding; provided, however, that, to the extent required by the Code, no
ISOs may be granted under the 1997 Plan on a date that is more than ten years
from the date the 1997 Plan is adopted or, if earlier, the date the 1997 Plan is
approved by stockholders.
Each Option expires on the Expiration Date specified by the Committee.
The "Expiration Date" with respect to an Option means the date established as
the Expiration Date by the Committee at the time of the grant; provided,
however, that the Expiration Date with respect to any Option shall not be later
than the earliest to occur of: (a)the ten-year anniversary of the date on which
the Option is granted; (b) if the Participant's date of termination occurs by
reason of death or disability, the one-year anniversary of such date of
termination; (c) if the Participant's date of termination occurs by reason of
retirement or early retirement, the three-year anniversary of such date of
termination; (d) if the participant's date of termination occurs for Cause (as
defined in the 1997 Plan), the date of termination; or (e) if the Participant's
date of termination occurs for reasons other than Cause, retirement, early
retirement, death or disability, the 30-day anniversary of such date of
termination. Notwithstanding the foregoing, if the Participant dies while the
Option is otherwise exercisable, the Expiration Date may be later than the dates
set forth above, provided that it is not later than the first anniversary of the
date of death. 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.
Means of Exercise of Options
An Option or an SAR shall be exercisable in accordance with such terms
and conditions and during such periods as may be established by the Committee.
The payment of the Exercise Price of an Option granted under the 1997
Plan shall be subject to the following:
(a) The full Exercise Price for shares of Stock purchased upon the exercise of
any Option shall be paid at the time of such exercise (except that, in the
case of an exercise arrangement approved by the Committee and described
below, payment may be made as soon as practicable after the exercise).
(b) The Exercise Price shall be payable in cash or by tendering shares of
Common Stock (by either actual delivery of shares or by attestation, with
such shares valued at Fair Market Value as of the day of exercise), or in
any combination thereof, as determined by the Committee.
(c) The Committee may permit a Participant to elect to pay the Exercise Price
upon the exercise of an Option by authorizing a third party to sell shares
of Stock (or a sufficient portion of the shares) acquired upon exercise of
the Option and remit to the Company a sufficient portion of the sale
proceeds to pay the entire Exercise Price and any tax withholding resulting
from such exercise.
Non-transferability of Options
Except as provided by the Committee, no Option is transferable except
by will or by the laws of descent and distribution. Shares subject to Options
granted under the 1997 Plan that have lapsed or terminated may again be subject
to Options granted under the 1997 Plan.
19
<PAGE>
Restrictions on Stock Awards
Each Stock Award shall be subject to such conditions, restrictions and
contingencies as the Committee shall determine. These may include continuous
service and/or the achievement of Performance Measures (as defined in the 1997
Plan). The Performance Measures that may be used by the Committee for such
Awards shall be measured by revenues, income, or such other criteria as the
Committee may specify. If the right to become vested in a Stock Award granted
under the 1997 Plan is conditioned on the completion of a specified period of
service with the Company and its subsidiaries, without achievement of
Performance Measures or other objectives being required as a condition of
vesting, then the required period of service for vesting shall be not less than
three years (subject to acceleration of vesting, to the extent permitted by the
Committee, in the event of the Participant's death, disability, change in
control or involuntary termination).
Tax Treatment
The following discussion addresses certain anticipated federal income
tax consequences to recipients of awards made under the 1997 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.
A company, such as the Company, for which an individual is performing
services will generally be allowed to deduct amounts that are includable in the
income of such person as compensation income at the time such amounts are so
includable, provided that such amounts qualify as reasonable compensation for
the services rendered. This general rule will apply to the deductibility of a
Participant's compensation income resulting from participation in the 1997 Plan.
The timing and amount of deductions available to the Company as a result of the
1997 Plan will, therefore, depend upon the timing and amount of compensation
income recognized by a Participant as a result of participation in the 1997
Plan. The following discusses the timing and amount of compensation income which
will be recognized by Participants and the accompanying deduction which will be
available to the Company.
Incentive Stock Options ("ISOs"). A Participant to whom an incentive
stock option ("ISO") which qualifies under Section 422 of the Code is granted
generally will not recognize compensation income (and the Company will not be
entitled to a deduction) upon the grant or the exercise of the Option. To obtain
nonrecognition treatment on exercise of an ISO, however, the Participant must be
an employee of the Company or a subsidiary continuously from the date of grant
of the option until three months prior to the exercise of the Option. (If
termination of employment is due to disability of the Participant, ISO treatment
will be available if the option is exercised within one year of termination). If
an Option originally designated as an ISO is exercised after those periods, the
option will be treated as a nonqualified stock option ("NSO") for income tax
purposes and compensation income will be recognized by the Participant (and a
deduction will be available to the Company) in accordance with the rules
discussed below concerning NSOs.
The Code provides that ISO treatment will not be available to the
extent that the fair market value of shares subject to ISOs (determined as of
the date of grant of the ISOs) which become exercisable for the first time
during any year exceed $100,000. If the $100,000 limitation is exceeded, the
Options in excess of the limitation are treated as NSOs when exercised.
While a Participant may not recognize compensation income upon exercise
of an ISO, the excess of the fair market value of the shares of Stock received
over the exercise price for the option can affect the optionee's alternative
minimum tax liability under applicable provisions of the Code. The increase, if
any, in an optionee's alternative minimum tax liability resulting from exercise
of an ISO will not, however, create a deductible compensation expense for the
Company.
When a Participant sells shares of Stock received upon exercise of an
ISO more than one year after the exercise of the Option and more than two years
after the grant of the Option, the Participant will normally not recognize any
compensation income, but will instead recognize capital gain or loss from the
20
<PAGE>
sale in an amount equal to the difference between the sales price for the Shares
of Stock and the option exercise price. If, however, a Participant sells the
Shares of Stock within one year after exercising the ISO or within two years
after the grant of the ISO, the Participant will recognize compensation income
(and the Company will be entitled to a deduction) in an amount equal to the
lesser of (i) the excess, if any, of the fair market value of the Shares of
Stock on the date of exercise of the Option over the option exercise price, and
(ii) the excess, if any, of the sale price for the shares over the option
exercise price. Any other gain or loss on such sales (in addition to the
compensation income mentioned previously) will normally be capital gain or loss.
Nonqualified Stock Options ("NSOs"). A Participant to whom a NSO is
granted will not normally recognize income at the time of grant of the Option.
When a Participant exercises a NSO, the Participant will generally recognize
compensation income (and the Company will be entitled to a deduction) in an
amount equal to the excess, if any, of the fair market value of the Shares of
Stock when acquired over the option exercise price. The amount of gain or loss
recognized by a Participant from a subsequent sale of Shares of Stock acquired
from the exercise of a NSO will be equal to the difference between the sales
price for the Shares of Stock and the sum of the exercise price of the Option
plus the amount of compensation income recognized by the Participant upon
exercise of the Option.
SARs. The recipient of an SAR generally will not recognize any
compensation income upon grant of the SAR. At the time of exercise of an SAR,
however, the recipient should recognize compensation income in an amount equal
to the amount of cash, or the fair market value of the shares, received.
Restricted Stock Awards. If stock received pursuant to a stock award
made through the 1997 Plan is subject to a restriction on continued ownership
which is dependent upon the recipient continuing to perform services for the
Company or its affiliated companies (a "risk of forfeiture"), the Participant
should not recognize compensation income upon receipt of the Shares of Stock
unless he/she makes a so-called "83(b) election" as discussed below. Instead,
the Participant will recognize compensation income (and the Company will be
entitled to a deduction) when the shares of Stock are no longer subject to a
risk of forfeiture, in an amount equal to the fair market value of the stock at
that time. Absent a Participant making an 83(b) election, dividends paid with
respect to Shares of Stock which are subject to a risk of forfeiture will be
treated as compensation income for the Participant (and a compensation deduction
will be available to the Company for the dividend) until the Shares of Stock are
no longer subject to a risk of forfeiture.
Different tax rules will apply to a Participant who receives Shares of
Stock subject to a risk of forfeiture if the Participant files an election
pursuant to Section 83(b) of the Code (an "83(b) election"). If, within 30 days
of receipt of the Shares of Stock, a Participant files an 83(b) election with
the Internal Revenue Service and the Company, then, notwithstanding that the
Shares of Stock are subject to a risk of forfeiture, the Participant will
recognize compensation income upon receipt of the Shares of Stock (and the
Company will be entitled to a deduction) in an amount equal to the fair market
value of the stock at the time of the award. If the 83(b) election is made, any
dividends paid with respect to the Shares of Stock will not result in
compensation income for the Participant (and will not entitle the Company to a
deduction). Rather, the dividends paid will be treated as any other dividends
paid with respect to Company Stock, as noncompensatory ordinary income.
Tax Withholding
Whenever the Company proposes, or is required, to distribute shares
under the 1997 Plan, the Company may require the recipient to satisfy any
Federal, state and local tax withholding requirements prior to the delivery of
any certificate for such shares or, in the discretion of the Committee, the
Company may withhold from the shares to be delivered shares sufficient to
satisfy all or a portion of such tax withholding requirements.
Unfunded Status of the 1997 Plan
The 1997 Plan is intended to constitute an "unfunded" plan for
incentive and deferred compensation. With respect to any payments not yet made
to a Participant or optionee by the Company, nothing contained in the 1997 Plan
shall give any such Participant or optionee any rights that are greater than
those of a general creditor of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
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<PAGE>
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 December 15, 1997 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 December 15, 1997
<S> <C> <C>
Shares Percentage
Edgewater Private Equity Fund, L.P. (1) 644,396 6.6
Mesirow Capital (2) 644,396 6.6
Kenneth D. Rardin (3) 329,150 3.3
James A. Gilbert (4) 258,842 2.6
Gary D. Bowers (5) 44,508 *
Thomas D. Underwood (6) 28,000 *
Raymond L. Brown (7) 25,649 *
James A. Gordon (1)(8) 651,916 6.7
Daniel P. Howell (2)(8) 651,916 6.7
All officers and directors as a group (10 persons) (1)(2)(9) 2,018,299 19.5
Mellon Bank Corporation(10) 661,000 6.8
Waddell & Reed, Inc.(11) 567,000 5.8
</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.
(3) Includes 3,760 shares held by Mr. Rardin's daughter. Also includes stock
options to purchase 221,642 shares which are either currently exercisable
or which become exercisable within 60 days of the date of this Report. Does
not include 282,850 shares subject to outstanding stock options, which
stock options are not currently exercisable and will not become exercisable
within 60 days of the date of this Report.
(4) Includes stock options to purchase 250,000 shares which are currently
exercisable.
(5) Includes stock options to purchase 30,741 shares which are either currently
exercisable or which become exercisable within 60 days of the date of this
Report. Does not include 35,549 shares subject to outstanding stock
options, which stock options are not currently exercisable and will not
become exercisable within 60 days of the date of this Report.
22
<PAGE>
(6) Includes stock options to purchase 28,000 shares which are either currently
exercisable or which become exercisable within 60 days of the date of this
Report. Does not include 62,000 shares subject to outstanding stock
options, which stock options are not currently exercisable and will not
become exercisable within 60 days of the date of this Report.
(7) Includes stock options to purchase 25,000 shares which are either currently
exercisable or which become exercisable within 60 days of the date of this
Report. Does not include 50,000 shares subject to outstanding stock
options, which stock options are not currently exercisable and will not
become exercisable within 60 days of the date of this Report.
(8) Includes stock options to purchase 7,520 shares which are either currently
exercisable or which become exercisable within 60 days of the date of this
Report.
(9) Includes stock options to purchase 595,923 shares which are currently
exercisable or which become exercisable within 60 days of the date of this
Report. Does not include 606,309 shares subject to outstanding stock
options which stock options are not currently exercisable and will not
become exercisable within 60 days of the date of this Report.
(10) Based upon information contained in a Schedule 13G filed with the
Securities and Exchange Commission, and is as of February 4, 1997. The
address of Mellon Bank is c/o Mellon Bank Corporation, One Mellon Bank
Center, Pittsburgh, Pennsylvania 15258. Includes shares held by the
following subsidiaries: Mellon Bank, N.A. (645,000 shares) and the Dreyfuss
Corporation (610,000 shares).
(11) Based upon information contained in a Schedule 13G filed with the
Securities and Exchange Commission, and is as of January 31, 1997. The
address of Waddell & Reed, Inc. is Post Office Box 29217, 6300 Lamar
Avenue, Overland, Kansas 66202-4200. Includes shares held be the following
additional group members: Liberty National Life insurance Company, Waddell
& Reed Financial Services, Inc., Torchmark Corporation, and United
Investors Management Company. The nature of the group members affiliations
and shareholdings was not disclosed in the Schedule 13G.
INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of KPMG Peat Marwick LLP has been the independent
certified public accountants of the Company since 1992. 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 LLP will be present at the Annual Meeting of Stockholders to
answer questions and make a statement if the representative desires to do so.
STOCKHOLDER PROPOSALS
Appropriate proposals of stockholders intended to be presented at the
Company's 1998 Annual Meeting of Stockholders must be received by the Company by
August 18, 1998 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 1997 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, 1997. REQUEST FOR A COPY OF SUCH ANNUAL REPORT ON FORM 10-K SHOULD BE
ADDRESSED TO MR. SCOTT A. REMLEY, SECRETARY, IMNET SYSTEMS, INC., 3015 WINDWARD
PLAZA, WINDWARD FAIRWAYS II, ALPHARETTA, GEORGIA 30005.
23
<PAGE>
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
/s/ Kenneth D. Rardin
KENNETH D. RARDIN, Chairman of the Board,
President and Chief Executive Officer
Dated: December 15, 1997
<PAGE>
APPENDIX "1"
IMNET SYSTEMS, INC.
1997 LONG-TERM INCENTIVE PLAN
SECTION 1
GENERAL
1.1. Purpose. The IMNET Systems, Inc. 1997 Long-Term Incentive Plan
(the "Plan") has been established by IMNET Systems, Inc. (the "Company") (i) to
attract and retain persons eligible to participate in the Plan; (ii) motivate
Participants, by means of appropriate incentives, to achieve long-range goals;
(iii) provide incentive compensation opportunities that are competitive with
those of other similar companies; and (iv) further identify Participants'
interests with those of the Company's other stockholder through compensation
that is based on the Company's common stock; and thereby promote the long-term
financial interest of the Company and the Related Companies, including the
growth in value of the Company's equity and enhancement of long-term stockholder
return.
1.2. Participation. Subject to the terms and conditions of the Plan,
the Committee shall determine and designate, from time to time, from among the
Eligible Employees, those persons who will be granted one or more Awards under
the Plan, and thereby become "Participants" in the Plan. In the discretion of
the Committee, a Participant may be granted any Award permitted under the
provisions of the Plan, and more than one Award may be granted to a Participant.
Awards may be granted as alternatives to or replacement of awards outstanding
under the Plan, or any other plan or arrangement of the Company or a Related
Company (including a plan or arrangement of a business or entity, all or a
portion of which is acquired by the Company or a Related Company).
SECTION 2
OPTIONS AND SARS
2.1. Definitions of Options and SARS.
(a) The grant of an "Option" entitles the Participant to purchase
shares of Stock at an Exercise Price established by the
Committee. Options granted under this Section 2 may be either
Incentive Stock Options or Non-Qualified Stock Options, as
determined in the discretion of the Committee. An "Incentive
Stock Option" is an Option that is intended to satisfy the
requirements applicable to an "incentive stock option"
described in section 422(b) of the Code. A "Non- Qualified
Option" is an Option that is not intended to be an "incentive
stock option" as that term is described in section 422(b) of
the Code.
487241.3
<PAGE>
(b) To the extent that the aggregate fair market value of Stock
with respect to which Incentive Stock Options are exercisable
for the first time by the Participant during any calendar year
(under all plans of the Company and all Related Companies)
exceeds $100,000, such options shall be treated as
Non-Qualified Stock Options, to the extent required by section
422 of the Code.
(c) A stock appreciation right (an "SAR") entitles the Participant
to receive, in cash or Stock (as determined in accordance with
subsection 2.5), value equal to all or a portion of the excess
of: (a) the Fair Market Value of a specified number of shares
of Stock at the time of exercise; over (b) an Exercise Price
established by the Committee.
2.2. Exercise Price. The "Exercise Price" of each Option and SAR
granted under this Section 2 shall be established by the Committee or shall be
determined by a method established by the Committee at the time the Option or
SAR is granted; except that the Exercise Price shall not be less than the
greater of 100% of the Fair Market Value or the par value of a share of Stock as
of the Pricing Date. However, if the Participant owns more than 10% of the total
combined voting power of all classes of capital stock of the Company or any of
its subsidiary or parent corporations, the Exercise Price of an Incentive Stock
Option granted to such Participant shall not be less than 110% of the Fair
Market Value at a share of stock as of the Pricing Date. For purposes of the
preceding sentence, the "Pricing Date" shall be the date on which the Option or
SAR is granted, except that the Committee may provide that: (i) the Pricing Date
is the date on which the recipient is hired or promoted (or similar event), if
the grant of the Option or SAR occurs not more than 90 days after the date of
such hiring, promotion or other event; and (ii) if an Option or SAR is granted
in tandem with, or in substitution for, an outstanding Award, the Pricing Date
is the date of grant of such outstanding Award.
2.3. Exercise. An Option and an SAR shall be exercisable in
accordance with such terms and conditions and during such periods as may be
established by the Committee.
2.4. Payment of Option Exercise Price. The payment of the Exercise
Price of an Option granted under this Section 2 shall be subject to the
following:
(a) Subject to the following provisions of this subsection 2.4,
the full Exercise Price for shares of Stock purchased upon the
exercise of any Option shall be paid at the time of such
exercise (except that, in the case of an exercise arrangement
approved by the Committee and described in paragraph 2.4(c),
payment may be made as soon as practicable after the
exercise).
(b) The Exercise Price shall be payable in cash or by tendering
shares of Stock (by either actual delivery of shares or by
attestation, with such shares valued at Fair Market Value as
of the day of exercise), or in any combination thereof, as
determined by the Committee.
487241.3
2
<PAGE>
(c) The Committee may permit a Participant to elect to pay the
Exercise Price upon the exercise of an Option by authorizing a
third party to sell shares of Stock (or a sufficient portion
of the shares) acquired upon exercise of the Option and remit
to the Company a sufficient portion of the sale proceeds to
pay the entire Exercise Price and any tax withholding
resulting from such exercise.
2.5. Expiration Date. The "Expiration Date" with respect to an
Option means the date established as the Expiration Date by the Committee at the
time of the grant; provided, however, that the Expiration Date with respect to
any Option shall not be later than the earliest to occur of:
(a) the ten-year anniversary of the date on which the Option is
granted;
(b) if the Participant's Date of Termination occurs by reason of
death or Disability, the one-year anniversary of such Date of
Termination;
(c) if the Participant's Date of Termination occurs by reason of
Retirement or Early Retirement, the three-year anniversary of
such Date of Termination;
(d) if the Participant's Date of Termination occurs for Cause, the
Date of Termination; or
(e) if the Participant's Date of Termination occurs for reasons
other than Cause, Retirement, Early Retirement, death or
Disability, the 30-day anniversary of such Date of
Termination.
Notwithstanding the foregoing provisions of this subsection 2.5, if the
Participant dies while the Option is otherwise exercisable, the Expiration Date
may be later than the dates set forth above, as determined by the Committee,
provided that it is not later than the first anniversary of the date of death.
2.6. Settlement of Award. Distribution following exercise of an Option
or SAR, and shares of Stock distributed pursuant to such exercise, shall be
subject to such conditions, restrictions and contingencies as the Committee may
establish. Settlement of SARs may be made in shares of Stock (valued at their
Fair Market Value at the time of exercise), in cash, or in a combination
thereof, as determined in the discretion of the Committee. The Committee, in its
discretion, may impose such conditions, restrictions and contingencies and may
waive any such conditions, restrictions and contingencies, at or after grant, or
otherwise accelerate the vesting of any option or SAR, at anytime, in its
discretion with respect to shares of Stock acquired pursuant to the exercise of
an Option or an SAR as the Committee determines to be desirable.
487241.3
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<PAGE>
SECTION 3
OTHER STOCK AWARDS
3.1. Definition. A Stock Award is a grant of shares of Stock or of
a right to receive shares of Stock (or their cash equivalent or a combination of
both) in the future.
3.2. Restrictions on Stock Awards. Each Stock Award shall be subject to
such conditions, restrictions and contingencies as the Committee shall
determine. These may include continuous service and/or the achievement of
Performance Measures. The Performance Measures that may be used by the Committee
for such Awards shall be measured by revenues, income, or such other criteria as
the Committee may specify. The Committee may designate a single goal criterion
or multiple goal criteria for performance measurement purposes, with the
measurement based on absolute Company or business unit performance and/or on
performance as compared with that of other publicly-traded companies. If the
right to become vested in a Stock Award granted under this Section 3 is
conditioned on the completion of a specified period of service with the Company
and the Related Companies, without achievement of Performance Measures or other
objectives being required as a condition of vesting, then the required period of
service for vesting shall be not less than three years (subject to acceleration
of vesting, to the extent permitted by the Committee, in the event of the
Participant's death, disability, change in control or involuntary termination).
SECTION 4
OPERATION AND ADMINISTRATION
4.1. Effective Date. Subject to the approval of the stockholders of the
Company at the Company's next annual meeting of its stockholders, the Plan shall
be effective as of the date such approval is obtained (the "Effective Date").
The Plan shall be unlimited in duration and, in the event of Plan termination,
shall remain in effect as long as any Awards under it are outstanding; provided,
however, that, to the extent required by the Code, no Incentive Stock Options
may be granted under the Plan on a date that is more than ten years from the
date the Plan is adopted or, if earlier, the date the Plan is approved by
stockholders.
4.2. Shares Subject to Plan.
(a) (i) Subject to the following provisions of this
subsection 4.2, the maximum number of shares of Stock
that may be delivered to Participants and their
beneficiaries under the Plan shall be equal to
875,000 shares of Stock;
(ii) Any shares of Stock granted under the Plan that are
forfeited because of the failure to meet an Award
contingency or condition shall again be available for
delivery pursuant to new Awards granted under the
Plan. To the extent any shares of Stock covered by an
Award are not delivered to a Participant or
beneficiary because the Award is forfeited or
cancelled,
487241.3
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<PAGE>
or the shares of Stock are not delivered because the
Award is settled in cash, such shares shall not be
deemed to have been delivered for purposes of
determining the maximum number of shares of Stock
available for delivery under the Plan.
(iii) If the Exercise Price of any stock option granted
under the Plan or any Prior Plan is satisfied by
tendering shares of Stock to the Company (by either
actual delivery or by attestation), only the number
of shares of Stock issued net of the shares of Stock
tendered shall be deemed delivered for purposes of
determining the maximum number of shares of Stock
available for delivery under the Plan.
(iv) Shares of Stock delivered under the Plan in
settlement, assumption or substitution of outstanding
awards (or obligations to grant future awards) under
the plans or arrangements of another entity shall not
reduce the maximum number of shares of Stock
available for delivery under the Plan, to the extent
that such settlement, assumption or substitution as a
result of the Company or a Related Company acquiring
another entity (or an interest in another entity).
(b) Subject to paragraph 4.2(c), the following additional maximums
are imposed under the Plan.
(i) The maximum number of shares of Stock that may be
issued by Options intended to be Incentive Stock
Options shall be 800,000 shares.
(ii) The maximum number of shares of Stock that may be
issued in conjunction with Awards granted pursuant to
Section 3 (relating to Stock Awards) shall be 500,000
shares.
(iii) The maximum number of shares that may be covered by
Awards granted to any one individual pursuant to
Section 2 (relating to Options and SARs) shall be
300,000 shares during any consecutive 12 month
period.
(iv) The maximum payment that can be made for awards
granted to any one individual pursuant to Section 3
(relating to Stock Awards) shall be $2,000,000 for
any single or combined performance goals established
for any annual performance period. If an Award
granted under Section 3 is, at the time of grant,
denominated in shares, the value of the shares of
Stock for determining this maximum individual payment
amount will be the Fair Market Value of a share of
Stock on the first day of the applicable performance
period.
487241.3
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<PAGE>
(c) In the event of a corporate transaction involving the Company
(including, without limitation, any stock dividend, stock
split, extraordinary cash dividend, recapitalization,
reorganization, merger, consolidation, split-up, spin-off,
combination or exchange of shares), and subject to Section
4.15 hereof, the Committee shall adjust Awards to preserve the
benefits or potential benefits of the Awards. Action by the
Committee may include adjustment of: (i) the number and kind
of shares which may be delivered under the Plan; (ii) the
number and kind of shares subject to outstanding Awards; and
(iii) the Exercise Price of outstanding Options and SARs; as
well as any other adjustments that the Committee determines to
be equitable.
4.3. Limit on Distribution. Distribution of shares of Stock or
other amounts under the Plan shall be subject to the following:
(a) Notwithstanding any other provision of the Plan, the Company
shall have no liability to deliver any shares of Stock under
the Plan or make any other distribution of benefits under the
Plan unless such delivery or distribution would comply with
all applicable laws (including, without limitation, the
requirements of the Securities Act of 1933), and the
applicable requirements of any securities exchange or similar
entity.
(b) To the extent that the Plan provides for issuance of stock
certificates to reflect the issuance of shares of Stock, the
issuance may be effected on a non-certificated basis, to the
extent not prohibited by applicable law or the applicable
rules of any stock exchange.
4.4. Tax Withholding. Whenever the Company proposes, or is required, to
distribute Stock under the Plan, the Company may require the recipient to remit
to the Company an amount sufficient to satisfy any Federal, state and local tax
withholding requirements prior to the delivery of any certificate for such
shares or, in the discretion of the Committee, the Company may withhold from the
shares to be delivered shares sufficient to satisfy all or a portion of such tax
withholding requirements. Whenever under the Plan payments are to be made in
cash, such payments may be net of an amount sufficient to satisfy any Federal,
state and local tax withholding requirements.
4.5. Payment in Shares. Subject to the overall limitation on the number
of shares of Stock that may be delivered under the Plan, the Committee may use
available shares of Stock as the form of payment for compensation, grants or
rights earned or due under any other compensation plans or arrangements of the
Company or a Related Company, including the plans and arrangements of the
Company or a Related Company acquiring another entity (or an interest in another
entity).
4.6. Dividends and Dividend Equivalents. An Award may provide the
Participant with the right to receive dividends or dividend equivalent payments
with respect to Stock which may
487241.3
6
<PAGE>
be either paid currently or credited to an account for the Participant, and may
be settled in cash or Stock as determined by the Committee. Any such
settlements, and any such crediting of dividends or dividend equivalents or
reinvestment in shares of Stock, may be subject to such conditions, restrictions
and contingencies as the Committee shall establish, including the reinvestment
of such credited amounts in Stock equivalents.
4.7. Payments. Awards may be settled through cash payments, the
delivery of shares of Stock, the granting of replacement Awards, or combination
thereof as the Committee shall determine. Any Award settlement, including
payment deferrals, may be subject to such rules and procedures as it may
establish, which may include provisions for the payment or crediting of
interest, or dividend equivalents, including converting such credits into
deferred Stock equivalents.
4.8. Transferability. Except as otherwise provided by the
Committee, Awards under the Plan are not transferable except as designated by
the Participant by will or by the laws of descent and distribution.
4.9. Form and Time of Elections. Unless otherwise specified herein,
each election required or permitted to be made by any Participant or other
person entitled to benefits under the Plan, and any permitted modification, or
revocation thereof, shall be in writing filed with the Committee at such times,
in such form, and subject to such restrictions and limitations, not inconsistent
with the terms of the Plan, as the Committee shall require.
4.10. Agreement With Company. At the time of an Award to a Participant
under the Plan, the Committee may require a Participant to enter into an
agreement with the Company (the "Agreement") in a form specified by the
Committee, agreeing to the terms and conditions of the Plan and to such
additional terms and conditions, not inconsistent with the Plan, as the
Committee may, in its sole discretion, prescribe.
4.11. Limitation of Implied Rights.
(a) Neither a Participant nor any other person shall, by reason of
the Plan, acquire any right in or title to any assets, funds
or property of the Company or any Related Company whatsoever,
including, without limitation, any specific funds, assets, or
other property which the Company or any Related Company, in
their sole discretion, may set aside in anticipation of a
liability under the Plan. A Participant shall have only a
contractual right to the stock or amounts, if any, payable
under the Plan, unsecured by any assets of the Company or any
Related Company. Nothing contained in the Plan shall
constitute a guarantee that the assets of such companies shall
be sufficient to pay any benefits to any person.
(b) The Plan does not constitute a contract of employment, and
selection as a Participant will not give any employee the
right to be retained in the employ of the Company or any
Related Company, nor any right or claim to any benefit
487241.3
7
<PAGE>
under the Plan, unless such right or claim has specifically
accrued under the terms of the Plan. Except as otherwise
provided in the Plan, no Award under the Plan shall confer
upon the holder thereof any right as a stockholder of the
Company prior to the date on which the individual fulfills all
conditions for receipt of such rights.
4.12. Evidence. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting on
it considers pertinent and reliable, and signed, made or presented by the proper
party or parties.
4.13. Action by Company or Related Company. Any action required or
permitted to be taken by the Company or any Related Company shall be by
resolution of its board of directors, or by action of one or more members of the
board (including a committee of the board) who are duly authorized to act for
the board, or (except to the extent prohibited by applicable law or applicable
rules of any stock exchange) by a duly authorized officer of the Company.
4.14. Gender and Number. Where the context admits, words in any
gender shall include any other gender, words in the singular shall include the
plural and the plural shall include the singular.
4.15. Change of Control. In general, if the Company is merged into
or consolidated with another corporation under circumstances in which the
Company is not the surviving corporation, or if the Company is liquidated, or
sells or otherwise disposes of substantially all of its assets to another
corporation (any such merger, consolidation, etc., being hereinafter referred to
as a "Change of Control Transaction") while unexercised Options are outstanding
under the Plan, after the effective date of a Change of Control Transaction 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
Change of Control Transaction based upon the agreed upon conversion ratio or per
share distribution. However, any limitations on exercisability of Options owned
by executive officers or the Company shall be waived, and Options of
non-executive officers may be waived (in the discretion of the Committee), so
that all such Options, from and after a date prior to the effective date of such
Change of Control Transaction shall be exercisable in full. 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 (by written notice) of an Option during a 15-day period preceding
the effective date of such Change of Control Transaction. Any outstanding
Options not exercised within such 15-day period may be cancelled by the
Committee as of the effective date of any such Change of Control Transaction, as
specified in the 15-day notice. To the extent that the foregoing adjustments
relate to stock or securities of the Company, such adjustments shall be made by
the Committee, whose determination in that respect shall be final, binding and
conclusive.
487241.3
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<PAGE>
4.16. Liability for Cash Payment. Each Related Company shall be liable
for payment of cash due under the Plan with respect to any Participant to the
extent that such benefits are attributable to the services rendered for that
Related Company by the Participant. Any disputes relating to liability of a
Related Company for cash payments shall be resolved by the Committee.
4.17. Governing Law. This Plan and all awards made and actions taken
thereunder shall be governed by and construed in accordance with (i) the laws of
the State of Georgia, excluding its conflict of law provisions and its General
Business Corporation Code, (ii) the applicable corporation law, which shall be
the General Business Corporation Law of Delaware.
SECTION 5
COMMITTEE
5.1. Administration. The authority to control and manage the
operation and administration of the Plan shall be vested in a committee (the
"Committee") in accordance with this Section 5.
5.2. Selection of Committee. The Committee shall be selected by the
Board, and shall consist of two or more members of the Board.
5.3. Powers of Committee. The authority to manage and control the
operation and administration of the Plan shall be vested in the Committee,
subject to the following:
(a) Subject to the provisions of the Plan, the Committee will have
the authority and discretion to select from among the Eligible
Employees those persons who shall receive Awards, to determine
the time or times of receipt, to determine the types of Awards
and the number of shares covered by the Awards, to establish
the terms, conditions, performance criteria, restrictions, and
other provisions of such Awards, and (subject to Section 4.15
and the restrictions imposed by Section 6) to cancel or
suspend Awards or accelerate any provisions, including vesting
provisions, thereof, in making such Award determinations, the
Committee may take into account the nature of services
rendered by the individual, the individual's present and
potential contribution to the Company's success and such other
factors as the Committee deems relevant.
(b) Subject to the provisions of the Plan, the Committee will have
the authority and discretion to determine the extent to which
Awards under the Plan will be structured to conform to the
requirements applicable to performance-based compensation as
described in Code section 162(m), and to take such action,
establish such procedures, and impose such restrictions at or
after the time such Awards are granted as the Committee
determines to be necessary or appropriate to conform to such
requirements.
487241.3
9
<PAGE>
(c) The Committee will have the authority and discretion to
establish terms and conditions of awards as the Committee
determines to be necessary or appropriate to conform to
applicable requirements or practices of jurisdictions outside
of the United States.
(d) The Committee will have the authority and discretion to
interpret the Plan, to establish, amend, and rescind any rules
and regulations relating to the Plan, to determine the terms
and provisions of any agreements made pursuant to the Plan,
and to make all other determinations that may be necessary or
advisable for the administration of the Plan.
(e) Any interpretation of the Plan by the Committee and any
decision made by it under the Plan is final and binding.
(f) Except as otherwise expressly provided in the Plan, where the
Committee is authorized to make a determination with respect
to any Award, such determination shall be made at the time the
Award is made, except that the Committee may reserve the
authority to have such determination made by the Committee in
the future (but only if such reservation is made at the time
the Award is granted and is expressly stated in the Agreement
reflecting the Award).
(g) In controlling and managing the operation and administration
of the Plan, the Committee shall act by a majority of its then
members, by meeting or by writing filed without a meeting. The
Committee shall maintain and keep adequate records concerning
the Plan and concerning its proceedings and acts in such form
and detail as the Committee may decide.
5.4. Delegation by Committee. Except to the extent prohibited by
applicable law or the applicable rules of a stock exchange, the Committee may
allocate all or any portion of its responsibilities and powers to any one or
more of its members and may delegate all or any part of its responsibilities and
powers to any person or persons selected by it. Any such allocation or
delegation may be revoked by the Committee at any time.
5.5. Information to be Furnished to Committee. The Company and Related
Companies shall furnish the Committee with such data and information as may be
required for it to discharge its duties. The records of the Company and Related
Companies as to an employee's or Participant's employment (or other provision of
services), termination of employment (or cessation of the provision of
services), leave of absence, reemployment and compensation shall be conclusive
on all persons unless determined to be incorrect. Participants and other persons
entitled to benefits under the Plan must furnish the Committee such evidence,
data or information as the Committee considers desirable to carry out the terms
of the Plan.
487241.3
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<PAGE>
SECTION 6
AMENDMENT AND TERMINATION
6.1. Board of Directors. The Board may, at any time, amend or terminate
the Plan, provided that, subject to subsection 4.2(c) (relating to certain
adjustments to shares), no amendment or termination may, in the absence of
written consent to the change by the affected Participant (or, if the
Participant is not then living, the affected beneficiary), adversely affect the
rights of any Participant or beneficiary under any Award granted under the Plan
prior to the date such amendment is adopted by the Board. Furthermore, the Board
may not amend the provisions of Section 2.2 hereof to reduce the minimum
Exercise Price or change the persons eligible to receive Incentive Stock
Options, nor may the Board increase the number of shares reserved under the
Plan, or change the maximums set forth in Subsection 4.2(b), unless it obtains
stockholder approval. Subject to the foregoing, the Board shall have broad
authority to amend the Plan to take into account changes in applicable
securities and tax laws and accounting rules, as well as other developments.
6.2. Committee. The Committee may amend the terms of any Award theretofore
granted, prospectively or retroactively, but, subject to subsection 4.2
(relating to certain adjustments to shares) no amendment or termination may, in
the absence of written consent to the change by the affected Participant (or, if
the Participant is not then living, the affected beneficiary), adversely affect
the rights of any Participant or beneficiary granted under the Plan prior to the
date such amendment is adopted by the Committee under any Award. The Committee
may also substitute new Options for previously granted Options (on a one for one
or other basis), including previously granted Options having higher option
exercise prices.
SECTION 7
DEFINED TERMS
7.1. For purposes of the Plan, the terms listed below shall be
defined as follows:
(a) Award. The term "Award" shall mean any award or benefit
granted to any Participant under the Plan, including, without
limitation, the grant of Options, SARs, and Stock Awards.
(b) Board. The term "Board" shall mean the Board of Directors of
the Company.
(c) Cause. The term "Cause" means a felony conviction of a
Participant or the failure of a Participant to contest
prosecution for a felony, or a Participant's willful
misconduct or dishonesty, or other unauthorized activity
which, in the good faith opinion of the Committee, is directly
and materially harmful to the business or reputation of the
Company or a Related Company.
487241.3
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<PAGE>
(d) Code. The term "Code" means the Internal Revenue Code of 1986,
as amended. A reference to any provision of the Code shall
include reference to any successor provision of the Code.
(e) Early Retirement. The term "Early Retirement" shall mean
retirement, with the express written consent of the Company,
approved by the Committee, of a Participant from active
employment with the Company and any Related Company.
(f) Eligible Individual. The term "Eligible Individual" shall mean
any employee of the Company or a Related Company, and any
director, consultant or other person providing key services to
the Company or a Related Company.
(g) Fair Market Value. For purposes of determining the "Fair
Market Value" of a share of Stock, the following rules shall
apply:
(i) If the Stock is at the time listed or admitted to
trading on any stock exchange (including the Nasdaq
National Stock Market), then the "Fair Market Value"
shall be the mean between the lowest and highest
reported sale prices of the Stock on the date in
question on the principal exchange on which the Stock
is then listed or admitted to trading. If no reported
sale of Stock takes place on the date in question on
the principal exchange, then the reported closing
asked price of the Stock on such date on the
principal exchange shall be determinative of "Fair
Market Value."
(ii) If the Stock is not at the time listed or admitted to
trading on a stock exchange, the "Fair Market Value"
shall be the mean between the lowest reported bid
price and highest reported asked price of the Stock
on the date in question in the over-the-counter
market, as such prices are reported in a publication
of general circulation selected by the Committee and
regularly reporting the market price of Stock in such
market.
(iii) If the Stock is not listed or admitted to trading on
any stock exchange or traded in the over-the-counter
market, the "Fair Market Value" shall be as
determined in good faith by the Committee.
(h) Related Company. The term "Related Company" means any company
(i) during any period in which it is a "parent company" (as
that term is defined in Code section 424(e)) with respect to
the Company, or a "subsidiary corporation" (as that term is
defined in Code section 424(f)) with respect to the Company,
or (ii) any company or other business venture in which the
Company has a significant business interest, as determined in
the discretion of the Committee.
(i) Retirement. The term "Retirement" shall mean retirement from
active employment with the Company and any Related Company on
or after age 65.
487241.3
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<PAGE>
(j) Stock. The term "Stock" shall mean shares of common stock of
the Company.
SECTION 8
UNFUNDED STATUS OF THE PLAN
8.1. The Plan is intended to constitute an "unfunded" plan for
incentive and deferred compensation. With respect to any payments not yet made
to a Participant or optionee by the Company, nothing contained herein shall give
any such Participant or optionee any rights that are greater than those of a
general creditor of the Company. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Stock or payments in lieu of or with respect
to awards hereunder; provided, however, that, unless the Committee otherwise
determines with the consent of the affected Participant, the existence of such
trusts or other arrangements is consistent with the "unfunded" status of the
Plan.
487241.3
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APPENDIX "2"
IMNET SYSTEMS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR USE AT THE ANNUAL MEETING ON JANUARY 15, 1998
The undersigned Stockholder hereby appoints KENNETH D. RARDIN, SCOTT A.
REMLEY 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
January 15, 1998, and any adjournments thereof.
The undersigned acknowledges receipt of Notice of the Annual Meeting
and Proxy Statement, each dated December 15, 1997, 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:
<TABLE>
<S> <C>
FOR election of the individuals set forth below as REFRAIN FROM VOTING FOR election of
directors (except as marked to the contrary) the individuals set forth as directors
</TABLE>
NOMINEES: Kenneth D. Rardin, Daniel P. Howell and James A. Gordon
(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)
________________________________________________________________________________
2. Resolution of the Stockholders approving the Company's 1997 Long-Term
Incentive Plan.
FOR AGAINST ABSTAIN
3. 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:____________________, 1997/8
_________________________________
(Signature)
_________________________________
(Signature)
(Stockholders should sign exactly as the 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 THE BOX SO THAT DATA PROCESSING
EQUIPMENT WILL RECORD YOUR VOTES"
