<PAGE> 1
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:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
ADAC Laboratories
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
[ ] Soliciting Material Pursuant to
sec.240.14a-11(c) or
sec.240.14a-12
[ ] Confidential, for Use of the
Commission Only
(as permitted by Rule 14a-6(e)(2))
<PAGE> 2
ADAC LABORATORIES
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MARCH 6, 1997
------------------------
TO THE SHAREHOLDERS OF ADAC LABORATORIES:
The Annual Meeting of Shareholders of ADAC Laboratories, a California
corporation (the "Company"), will be held at the offices of the Company, located
at 540 Alder Drive, Milpitas, California 95035, on Thursday, March 6, 1997, at
1:00 p.m., local time, for the following purposes:
(1) To elect members of the Board of Directors;
(2) To approve an amendment to the Company's 1992 Stock Option Plan to
increase the number of shares authorized thereunder by 712,000 shares;
(3) To approve an amendment to the Company's Employee Stock Purchase Plan
(1994) to increase the number of shares authorized thereunder by 85,000
shares;
(4) To approve an amendment to the Company's Directors' Stock Option Plan
(1987) to increase the number of shares authorized thereunder by 56,665
shares;
(5) To approve the amendment and restatement of the Company's Articles of
Incorporation to delete therefrom the provisions setting forth the
maximum and minimum number of directors that may serve on the Company's
board;
(6) To approve amendments to the Company's Bylaws, including an increase in
the maximum and minimum number of directors that may serve on the
Company's board; and
(7) To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on January 10, 1997
as the record date for the determination of shareholders entitled to vote at the
Annual Meeting. A copy of the Company's Annual Report to Shareholders, including
financial statements for the fiscal year ended September 29, 1996, is being sent
to all shareholders as of the record date concurrently with the mailing of this
Proxy Statement.
Whether or not you expect to attend the Annual Meeting in person, please
date, sign and mail the enclosed Proxy in the envelope provided as promptly as
possible. The Proxy is revocable and will not affect your right to vote in
person in the event you attend the Meeting.
By Order of the Board of Directors
David L. Lowe,
Chairman of the Board
Milpitas, California
February , 1997
<PAGE> 3
ADAC LABORATORIES
540 ALDER DRIVE
MILPITAS, CALIFORNIA 95035
-------------------------------
PROXY STATEMENT
-------------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of ADAC Laboratories, a
California corporation (the "Company"), for use at the Annual Meeting of
Shareholders to be held on March 6, 1997, at 1:00 p.m., local time, or at any
adjournment or postponement thereof, for the purposes set forth herein and in
the accompanying Notice of Annual Meeting of Shareholders. The Annual Meeting
will be held at the offices of the Company, located at 540 Alder Drive,
Milpitas, California 95035. This Proxy Statement and the accompanying proxy card
are being mailed to all shareholders on or about February , 1997.
Whether or not you plan to attend the Annual Meeting in person, please
date, sign and return the enclosed Proxy as promptly as possible, in the postage
prepaid envelope provided, to insure that your shares will be voted at the
Annual Meeting. Any shareholder who returns a proxy in such form has the power
to revoke it at any time prior to its effective use by filing an instrument
revoking it or a duly executed proxy bearing a later date with the Secretary of
the Company or by attending the Annual Meeting and voting in person. Any such
proxy, if not revoked, will be voted at the Annual Meeting in accordance with
the instructions specified therein.
RECORD DATE AND SHARE OWNERSHIP
Shareholders of record at the close of business on January 10, 1997 are
entitled to notice of and to vote at the meeting. At the record date, there were
issued and outstanding 18,068,168 shares of Common Stock, each entitled to one
vote.
The following table sets forth, as of December 2, 1996, the number and
percentage of shares of Common Stock beneficially owned (as defined in Rule
13d-3 adopted under the Securities Exchange Act of 1934) by (a) each nominee for
director, each existing director, all executive officers listed in the
compensation disclosure table and all directors and executive officers of the
Company as a group, and (b) all persons known to the Company to own beneficially
more than five percent (5%) of any class of voting securities of the Company.
All such persons have sole voting and investment power with respect to all
shares shown as beneficially owned by them, except as otherwise stated in the
following footnotes.
<TABLE>
<CAPTION>
BENEFICIAL
(A) DIRECTORS, NOMINEES AND CERTAIN OWNERSHIP PERCENT OF
EXECUTIVE OFFICERS OF COMMON STOCK(1) VOTING SHARES(1)
- ---------------------------------------- ------------------ ----------------
<S> <C> <C>
Stanley D. Czerwinski 82,725(2) *
R. Andrew Eckert 84,753(3) *
Graham O. King 9,000(4) *
David L. Lowe 89,233(5) *
Robert L. Miller 52,499(6) *
F. David Rollo 30,000(7) *
Edmund H. Shea, Jr. 491,190(8) 2.8%
</TABLE>
1
<PAGE> 4
(Continued)
<TABLE>
<CAPTION>
BENEFICIAL
(A) DIRECTORS, NOMINEES AND CERTAIN OWNERSHIP PERCENT OF
EXECUTIVE OFFICERS OF COMMON STOCK(1) VOTING SHARES(1)
- ---------------------------------------- ------------------ ----------------
<S> <C> <C>
Mark L. Lamp 83,300(9) *
P. Andre Simone -- --
Peter C. Vermeeren 18,750(10) *
All Directors and Executive
Officers as a group (11 persons) 941,450(11) 5.3%
</TABLE>
<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP PERCENT OF
(B) OTHER PRINCIPAL SHAREHOLDERS OF COMMON STOCK VOTING SHARES
- ---------------------------------------- ------------------ ----------------
<S> <C> <C>
CREF 1,395,533 7.8%
730 Third Avenue
New York, New York 10017
</TABLE>
- ------------
* Less than one percent (1%).
(1) Based on information furnished by the persons named and 17,853,734 shares
of Common Stock outstanding as of December 2, 1996. All references to
options include options that were exercisable on December 2, 1996 and
within sixty (60) days thereafter.
(2) Includes 17,500 shares issuable upon exercise of options held by Mr.
Czerwinski.
(3) Includes 84,166 shares issuable upon exercise of options held by Mr.
Eckert.
(4) Includes 7,500 shares issuable upon exercise of options held by Mr. King.
(5) Includes 88,833 shares issuable upon exercise of options held by Mr. Lowe.
(6) Includes 32,499 shares issuable upon exercise of options held by Mr.
Miller.
(7) Includes 23,333 shares issuable upon exercise of options held by Dr. Rollo.
(8) Includes 23,333 shares issuable upon exercise of options held by Mr. Shea.
Also includes 85,580 shares held by J. F. Shea, Co., Inc. and 11,506 shares
held by Mrs. Shea, as to which Mr. Shea disclaims beneficial interest.
(9) Includes 82,500 shares issuable upon exercise of options held by Mr. Lamp.
(10) Includes 18,750 shares issuable upon exercise of options held by Mr.
Vermeeren.
(11) Includes options to purchase 378,414 shares of Common Stock held by all
directors and executive officers as a group.
VOTING AND SOLICITATION
The required quorum for the meeting is a majority of the outstanding shares
of Common Stock eligible to be voted on the matters to be considered at the
meeting. In the election of directors, the candidates receiving the highest
number of affirmative votes cast in person or by proxy at the meeting up to the
number of directors to be elected will be elected to office. The affirmative
vote of a majority of the shares represented and voting in person or by proxy at
the meeting (which affirmative votes constitute a majority of the required
quorum) is required for approval of the amendment to the 1992 Stock Option Plan
(Proposal 2), the amendment to the Employee Stock Purchase Plan (1994) (Proposal
3), and the amendment to the Directors' Stock Option Plan (1987) (Proposal 4).
The affirmative vote of a majority of the outstanding shares of Common Stock
eligible to be voted at the meeting is required for approval of the amendment
and restatement of the Company's Articles of Incorporation (Proposal 5) and the
amendments to the Bylaws (Proposal 6).
When your proxy is returned properly signed, the shares represented will be
voted in accordance with your directions. Where specific choices are not
indicated, proxies will be voted for Proposals 1 through 6. If a properly signed
proxy or ballot indicates that a stockholder, broker or other nominee abstains
from voting or that the shares are not to be voted on a particular proposal, the
shares will not be counted as having been voted on that proposal, although such
shares will be counted as being in attendance at the meeting for purposes of
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<PAGE> 5
determining the presence of a quorum. Abstentions will not be reflected in a
final tally of the votes cast for the election of directors (Proposal 1). For
purposes of determining whether the proposed amendment and restatement of the
Articles of Incorporation (Proposal 5) and the proposed amendments to the Bylaws
(Proposal 6) are approved under California law and the Bylaws of the Company,
abstentions and broker non-votes will have the effect of a negative vote because
those proposals require the approval of an absolute majority of the outstanding
shares entitled to vote at the meeting.
Every shareholder voting in the election of directors may cumulate such
shareholder's votes and give one candidate a number of votes equal to the number
of directors to be elected multiplied by the number of shares of Common Stock
which such shareholder is entitled to vote, or may distribute the shareholder's
votes on the same principle among as many candidates as the shareholder chooses,
provided that votes cannot be cast for more than the number of candidates to be
elected. However, no shareholder shall be entitled to cumulate its votes unless
the candidate's name has been placed in nomination prior to the voting and the
shareholder, or any other shareholder, has given notice at the meeting prior to
the voting of such shareholder's intention to cumulate such shareholder's votes.
On all other matters, as explained above, each share of Common Stock has one
vote.
The cost of soliciting proxies will be borne by the Company. The Company
may reimburse brokerage firms and other persons representing beneficial owners
of shares for their expenses in forwarding solicitation material to such
beneficial owners, estimated at $20,000. The Company has retained Skinner & Co.,
a professional proxy solicitor, to assist in the solicitation of proxies and to
arrange for dissemination of proxy materials. The agreement with Skinner & Co.
provides that the fee payable for such services will amount to $3,500; such fee
does not include expenses. Proxies may be solicited by the Company's directors,
officers or other employees, without additional compensation, personally or by
telephone, telegram or facsimile.
(1) ELECTION OF DIRECTORS
GENERAL
Presently the Company's Bylaws authorize seven members to serve on the
Board of Directors. All of the seven persons presently serving as directors,
Messrs. Czerwinski, Eckert, King, Lowe, Miller, Shea and Rollo, are proposed for
election as directors. The proxy holders will be voting for all seven nominees.
In the event that any nominee is unable or declines to serve as a director
at the time of the Annual Meeting, the proxies may be voted for a nominee
designated by the present Board of Directors to fill the vacancy. In the event
that additional persons are nominated for election as directors, the proxy
holders intend to vote all proxies received by them in such a manner in
accordance with cumulative voting as will assure the election of as many of the
nominees listed below as possible, and, in such event, the specific nominees to
be voted for will be determined by the proxy holders. The Company is not aware
of any nominee who will be unable or will decline to serve as a director.
Directors are elected annually by the shareholders, and the term of office of
each person elected as a director will continue until the next Annual Meeting of
Shareholders or until his successor has been elected and qualified.
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<PAGE> 6
NOMINEES
The names of the nominees, and certain information about them, are set
forth below:
<TABLE>
<CAPTION>
DIRECTOR
NOMINEE AND AGE PRINCIPAL OCCUPATION SINCE
--------
<S> <C> <C>
Stanley D. Czerwinski (61) Consultant 1991
R. Andrew Eckert (35) President and General Manager, ADAC 1996
Medical Systems
Graham O. King (56) Chairman of the Board and Chief Executive 1995
Officer of US Servis, Inc.
David L. Lowe (36) Chairman of the Board and Chief Executive 1992
Officer of the Company
Robert L. Miller (44) Attorney at Law and Consultant 1990
F. David Rollo (57) Senior Vice-President of Medical Affairs 1991
and Executive Medical Director of Raytel
Medical Corporation
Edmund H. Shea, Jr. (67) Executive Vice-President and a director of 1987
J.F. Shea Co., Inc.
</TABLE>
Except as set forth below, each of the nominees has been engaged in his
principal occupation set forth above during the past five years. There is no
family relationship between any director or executive officer of the Company.
Mr. Czerwinski was elected a director in November 1991 and served as
Chairman of the Board of the Company from February 1992 until March 1996. Mr.
Czerwinski previously served as the Company's Chief Executive Officer, President
and Chief Operating Officer at various times since January 1991. He originally
joined the Company in May 1986. Mr. Czerwinski is currently serving as a
consultant to the Company. Prior to joining the Company, Mr. Czerwinski served
for seventeen years in various management capacities at TRW, including Director
of Sales and Marketing for the Electronics Components Group, and General Manager
of the Semiconductor Division.
Mr. Eckert was elected a director in April 1996, and has served as
President and General Manager of ADAC Medical Systems since November 1994. From
February 1992 to November 1994, he served as Executive Vice-President and
General Manager of the Company. Mr. Eckert joined the Company in February 1990
and from that date until February 1992 held several other senior management
positions with the Company. Prior to joining the Company, Mr. Eckert worked in
the venture capital and investment banking industries with Summit Partners and
Goldman Sachs, respectively.
Mr. King was appointed a director in June 1995. Mr. King is currently the
Chairman and Chief Executive Officer of US Servis, Inc., a healthcare management
services company. From 1986 to 1993, Mr. King was with Shared Medical Systems, a
company specializing in hospital information systems, most recently serving as
its President from 1988. Previously, Mr. King served as President of Daseke and
Company from 1983 to 1986 and as President and Chief Executive Officer of
Auto-Troll Technology, a computer-aided design software company, from 1979 to
1982. Mr. King also held various management level positions with IBM from 1965
to 1979. Mr. King currently serves as a director of Optika Imaging Systems,
Inc., a leading provider of client/server, integrated imaging systems and
development tools.
Mr. Lowe was elected a director of the Company in August 1992 and Chairman
of the Board in March 1996. He has served as Chief Executive Officer of the
Company since November 1994. From March 1994 until November 1994, Mr. Lowe
served as Co-Chief Executive Officer and from February 1992 until November 1994
as President. He joined the Company in April 1988 and from that time until
February 1992 served in a variety of senior management positions, including
Chief Operating Officer. Prior to joining the Company, Mr. Lowe held management
and consulting positions with several firms or companies providing services to
or engaged in high-technology industries, including Bain & Company and Cygnet
Systems, Inc. Mr. Lowe currently serves as a director of Vivra Incorporated, a
leading provider of specialty healthcare
4
<PAGE> 7
services including kidney dialysis, diabetes management and physician practice
management, and Mecon, Inc., a provider of benchmark data and information
products and consulting services in the health care industry.
Mr. Miller was elected a director in 1990. Mr. Miller serves as counsel to
a number of corporations and served as general counsel to the Company from 1986
to 1996. Mr. Miller is currently serving as a consultant to the Company. Mr.
Miller previously served as general counsel and as a director of Read-Rite
Corporation, a component manufacturer in the disk drive industry, from 1988 to
1993. Mr. Miller has also served as general counsel and as a director of other
companies providing services to or engaged in high-technology industries.
Dr. Rollo was elected a director in 1991 and is currently the Senior
Vice-President of Medical Affairs and Executive Medical Director of Raytel
Medical Corporation, a leading cardiology services company. From April 1995 to
May 1996, Dr. Rollo served as Senior Vice President of Medical Affairs for HCIA.
From October 1992 to April 1995, he served as President and Chief Executive
Officer of MetriCor, Inc., a corporation engaged in medical technology, quality
assurance and health information management consulting services. From 1984 until
October 1992, Dr. Rollo served as Senior Vice President-Medical Affairs for
Humana Inc. Prior to that, he served as Vice President for Humana from 1980
until 1984. He has held various academic and administrative positions with
Vanderbilt University Medical Center since 1977, currently serving as Adjunct
Professor of Radiology.
Mr. Shea is a co-founder and has been, since 1968, Executive Vice-President
and a director of J.F. Shea Co., Inc., a diversified construction, land
development and venture investments company. He was elected a director of
Hambrecht & Quist Group in November 1986 and serves as a director of Vanguard
Airlines and Ironstone Group, Inc.
BOARD MEETINGS, COMMITTEES AND DIRECTORS' COMPENSATION
The Board of Directors of the Company held a total of four regular meetings
and five special meetings during the fiscal year ended September 29, 1996. Each
of the directors attended at least 75% of the aggregate number of meetings of
the Board of Directors and meetings of the committees of the Board on which he
served. The Board of Directors presently has an Audit Committee, a Compensation
Committee, a Stock Option Committee and a Governance Committee. The Audit
Committee and the Compensation Committee each held one meeting and the Stock
Option Committee held three meetings during fiscal 1996. The Governance
Committee did not meet during the last fiscal year.
The Stock Option Committee presently consists of Messrs. Rollo and Shea.
The Compensation Committee presently consists of Messrs. Czerwinski, King and
Shea. The Governance Committee presently consists of Messrs. Czerwinski, King
and Lowe. The Audit Committee presently consists of Messrs. Czerwinski, Miller
and Rollo.
During fiscal 1996, non-employee directors received options to purchase
20,000 shares of the Company's Common Stock under the Company's Directors' Stock
Option Plan, subject to specified vesting schedules. In addition, during fiscal
1996, each non-employee director received an annual retainer of $10,000, payable
in quarterly installments, and $2,500 for each Board meeting attended in person
and $500 for each Board meeting attended by telephone. Dr. Rollo also received a
$2,500 consulting fee for certain services provided to the Company in fiscal
1996. See "Certain Transactions".
REPORT OF THE COMPENSATION COMMITTEE ON
ANNUAL COMPENSATION OF EXECUTIVE OFFICERS
Executive Compensation Components. The Compensation Committee of the Board
of Directors is responsible for evaluating and establishing the level of
executive compensation. It is the present philosophy of the Compensation
Committee and the Company that to achieve continual growth and financial
success, the Company must be able to attract and retain qualified executives and
must structure incentive-based compensation which is closely tied to the
Company's financial performance and operations.
5
<PAGE> 8
In fiscal 1996 and in prior years, most executive officers and other
executive-level employees participated in a management incentive program, which
makes overall executive compensation dependent upon both the accomplishment of
individual tasks and objectives, as well as Company-wide performance. Under the
management incentive program, the objectives assigned to individual executives
are intended to further the Company's financial and operating performance,
implement its strategic business plan, develop new products and maintain and
increase market share. The objectives may also include subjective criteria such
as leadership ability, innovation, insuring compliance with Company policies,
enhancing customer satisfaction and furthering the Company's strategy.
Company-wide objectives, which include the accomplishment of targeted levels of
revenues and net earnings, can also be a component of the management incentive
program. In order for an executive to achieve his or her maximum bonus under
such Program, he or she must accomplish most or all of the individual objectives
and the Company must achieve its targeted level of revenue and earnings for a
particular fiscal year.
The Compensation Committee monitors the effectiveness and appropriateness
of all of the Company's executive Compensation programs, approves the base
salaries of the executive officers and, at its discretion, awards bonuses under
the Company's management incentive program and makes recommendations concerning
the grant of stock options under the Company's stock option plans.
Base Salary. In determining the compensation of an executive officer, a
base salary is determined based upon the executive's level of responsibility,
the qualifications and experience required and the need to provide, together
with incentive bonuses and stock options, competitive compensation. Salary
increases are based upon periodic re-evaluations of these factors and the
performance of the executive in meeting individually-assigned objectives.
Bonus Compensation. Under the management incentive program in effect in
fiscal 1996, the Compensation Committee sets objectives for each participant and
establishes the bonuses that may be earned, based upon the achievement of those
individual objectives and the Company's overall financial performance. In order
for any portion of the bonus to be earned, the executive must achieve at least
some of these objectives. Objectives may also be related to the participant's
operating unit. The Compensation Committee may grant bonuses of between 0% and
100% of base salary, based upon the performance of each participant's
individually-assigned objectives for the year, the Company's financial
performance and the executive's level of responsibility.
Stock Options. Stock option grants are intended to supplement an
executive's base salary by providing long-term incentives for the achievement of
the Company's strategic business plan and financial and operational goals and to
align management's interests with those of the Company's shareholders. The size
of any stock option grant is related to the individual's level of responsibility
within the Company. Stock options are also granted to retain and attract key
employees in the very competitive job market of the Silicon Valley in which the
Company is located.
CEO Compensation. Mr. David L. Lowe served as the Company's Chief Executive
Officer during all of fiscal 1996, and also served as Chairman of the Board of
the Company for the second half of fiscal 1996. Mr. Lowe's general compensation
program was established during fiscal 1993 as a result of a compensation study
of peer organizations conducted in that year by an independent compensation
consulting firm which study is updated each year. Mr. Lowe's annual base salary
for fiscal 1996 was $400,000 and he was eligible to receive a bonus of up to 50%
of his base salary based upon quarterly and annual operating results and the
accomplishment of certain goals.
Of the maximum bonus for fiscal 1996 of $200,000, Mr. Lowe could be awarded
an aggregate of $120,000 on the basis of the satisfaction of certain financial
and operating goals, including revenues, earnings per share and bookings
targets, progress in clinical trials and the results of the Company's product
development and engineering efforts. On the basis of the Company's achievement
of all of these goals in fiscal 1996, Mr. Lowe was awarded a bonus of $120,000.
The remaining $80,000 of the total potential bonus could be earned on the
basis of the accomplishment of certain other objective and subjective criteria.
The objective criteria related to expanding the Company's
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addressable markets through acquisitions and internal investment. The subjective
criteria related to the development of Company systems and culture with a view
towards better integrating human resource development plans and programs
throughout the Company's operations and providing the Company with a sustainable
competitive advantage. These criteria include leadership, long-term planning,
product quality, innovation, employee satisfaction and customer satisfaction. On
the basis of the Company's achievements in these areas, Mr. Lowe was awarded a
bonus of $80,000.
In addition, in light of all of the Company's outstanding achievements in
fiscal 1996, including receipt of the Malcolm Baldrige National Quality Award,
the doubling of the value of the Company's Common Stock over the year, the
improved gross margins in the Company's Medical Systems business and the results
of certain other key strategic initiatives, the Board of Directors awarded Mr.
Lowe a one-time, additional bonus of $50,000.
This Report on Executive Compensation has been furnished by the following
members of the Compensation Committee of the Company's Board of Directors:
Stanley D. Czerwinski
Graham O. King
Edmund H. Shea, Jr.
Mr. Czerwinski did not participate in any decisions with respect to his own
compensation while he served as Chairman of the Board of the Company.
The Report on Executive Compensation shall not be deemed to be incorporated
by reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933, as amended (the
"Securities Act"), or under the Exchange Act, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
Compensation Committee Interlocks and Insider Participation. As noted
above, the members of the Company's Compensation Committee are Messrs.
Czerwinski, King and Shea. Mr. Czerwinski served as Chairman of the Board of
Directors of the Company until March 1996.
Executive Compensation. The following table sets forth all compensation
earned by or paid or awarded to the Chief Executive Officer and to the next four
most highly compensated executive officers of the Company for all services
rendered in all capacities for the periods shown.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ---------------------
--------------------------------------------- STOCK LONG- TERM
NAME AND FISCAL OPTION INCENTIVE ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OTHER(1) AWARDS PAYOUTS COMPENSATION
- --------------------------------- ------ -------- -------- -------- ------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
David L. Lowe 1996 $399,984 $250,000 -- 140,000 -- --
Chairman of the Board and 1995 398,542 163,400 -- 196,000(2) -- --
Chief Executive Officer 1994 294,231 148,180 -- 150,000 -- --
R. Andrew Eckert 1996 $199,992 $225,000 -- 90,000 -- --
President and General 1995 199,031 173,957 -- 162,000(2) -- --
Manager, Medical Systems 1994 148,086 102,380 -- 165,000 -- --
Mark L. Lamp 1996 $199,992 $145,000 -- 50,000 -- --
President and General 1995 199,800 144,000 -- 156,000(2) -- --
Manager, Healthcare 1994 177,316 86,700 -- 165,000 -- --
Information Systems
P. Andre Simone(3) 1996 $122,019 $ 67,292 -- 20,000 -- --
Vice President, Chief
Financial Officer and Treasurer
Peter C. Vermeeren(4) 1996 $150,000 $149,700 -- 75,000 -- --
Executive Vice President,
Global Operations
</TABLE>
7
<PAGE> 10
- ---------------
(1) Not included in the compensation table are certain expenses incurred or
reimbursements paid by the Company such as the use of Company-owned or
-leased automobiles, entertainment expenses and other benefits (such as
meals and parking) and other miscellaneous items. The aggregate amount of
such compensation did not exceed the lesser of either $50,000 or 10% of the
total annual salary and bonus reported for each named officer. A small
portion of such expenses may relate to personal expenses or use but are
believed to constitute ordinary and incidental business costs and expenses
which are paid or reimbursed by the Company in order to attract or retain
qualified personnel, facilitate job performance and minimize the
work-related expenses incurred by such persons.
(2) These stock option awards include options granted by the Company's
subsidiary, Community Health Computing Corp. ("CHC"), a provider of health
care information systems. Of the options reported in the table, CHC granted
96,000 options to Mr. Lowe, 72,000 options to Mr. Eckert and 96,000 options
to Mr. Lamp.
(3) Mr. Simone became an executive officer of the Company in June 1996.
(4) Mr. Vermeeren became an executive officer of the Company in January 1996.
Executive Officers of the Company. A description of Mr. Lowe's and Mr.
Eckert's positions with the Company and related information is set forth above
under "(1) ELECTION OF DIRECTORS -- Nominees". Descriptions of the Company's
other current executive officers are set forth below.
Mr. Lamp was named President and General Manager of ADAC Healthcare
Information Systems in August 1994. He previously served as Executive Vice
President of Business Development and prior to that held a variety of other
management and engineering-related positions with the Company.
Ms. Karen L. Masterson, age 36, joined the Company in October 1996 as the
Company's Vice President, General Counsel and Corporate Secretary. From January
1995 to October 1996, Ms. Masterson served as the Director of Intercontinental
Legal Affairs for Sybase, Inc., a relational database software company. From
January 1993 to December 1994, she was a partner, and prior to that, an
associate, in the law firm of Morrison & Foerster in San Francisco, California.
Mr. P. Andre Simone, age 39, was elected Chief Financial Officer of the
Company in June 1996, and has served as Vice-President, Finance of the Company
since October 1995 and Treasurer since May 1994, when he joined the Company.
From February 1993 to March 1994, Mr. Simone served as the Assistant Treasurer
for The Ask Group, Inc., a database and manufacturing accounting software firm.
Prior to that time, he held positions with Emcor Treasury Consultants, Hewlett
Packard and Bain & Company.
Mr. Peter C. Vermeeren, age 56, joined the Company in January 1996 as the
Company's Executive Vice President, Global Operations. From 1966 until he joined
the Company, Mr. Vermeeren held a number of senior management and other
positions with Mallinckrodt Medical, Inc., a global leader in the development
and distribution of nuclear medicine radiopharmaceuticals, medical devices and
imaging contrast media, having most recently served as Senior Vice President,
International. For the past two years, Mr. Vermeeren has also served as Chairman
of the Corporate Committee of the American College of Nuclear Physicians.
The term of office of each of the above-named executive officers is at the
pleasure of the Board of Directors. To the knowledge of the Company, there are
no arrangements or understandings between these officers and any other person
pursuant to which any of these officers was elected as an officer.
8
<PAGE> 11
STOCK OPTIONS GRANTED IN FISCAL 1996
The following table sets forth certain information concerning stock option
grants made by the Company to certain executive officers pursuant to the
Company's stock option plans during fiscal year 1996.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
- ------------------------------------------------------------------------------ VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED PER SHARE FOR OPTION TERM(1)
OPTIONS TO EMPLOYEES EXERCISE EXPIRATION -------------------------
NAME GRANTED IN 1996 PRICE($) DATE 5% 10%
- -------------------- ---------- ------------ --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
David L. Lowe....... 140,000 12.3% $15.875 5-29-06 $1,397,952 $3,542,665
R. Andrew Eckert.... 90,000 7.9 15.875 5-29-06 898,684 2,277,432
Mark L. Lamp........ 50,000 4.4 15.875 5-29-06 499,270 1,265,240
P. Andre Simone..... 20,000 1.8 15.875 5-29-06 199,680 506,096
Peter O.
Vermeeren......... 75,000 6.6 11.875 11-07-05 560,203 1,419,656
</TABLE>
- ---------------
(1) The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and are not an estimate or projection
of future prices or appreciation of the Company's Common Stock or the actual
future value of these options.
Stock options generally vest and become partially exercisable one year from
the date of grant, and vest fully over three years from the date of grant. At
the time of grant, options may be designated as incentive stock options
("ISO's"), a type of option authorized under the 1981 amendments to the Internal
Revenue Code. Options not designated as an ISO are granted as "non-qualified
options." Options generally remain outstanding for five years or ten years from
the date of grant, provided the recipient remains employed throughout that
period. The post-termination exercise period is generally three months.
AGGREGATED STOCK OPTION EXERCISES DURING FISCAL 1996 AND
YEAR-END STOCK OPTION VALUES
The following table sets forth certain information concerning the exercise
of stock options by the Company's executive officers during fiscal 1996, the
"value realized", and the number and value of unexpired stock options at
September 29, 1996 which such executive officers can exercise or in the future
could exercise.
<TABLE>
<CAPTION>
SHARES ACQUIRED VALUE
NAME ON EXERCISE REALIZED(1)
- ------------------------ --------------- ----------- NUMBER OF UNEXERCISED TOTAL VALUE
STOCK OPTIONS HELD OF UNEXERCISED
AT SEPTEMBER 29, 1996 IN-THE-MONEY STOCK
--------------------------- OPTIONS HELD AT
EXERCISABLE UNEXERCISABLE SEPTEMBER 29, 1996(2)
----------- ------------- ---------------------------
EXERCISABLE UNEXERCISABLE
----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David L. Lowe........... -- $ -- 88,833 290,000 $ 1,105,538 $ 2,499,375
R. Andrew Eckert........ 15,000 264,375 84,166 240,000 863,326 2,099,063
Mark L. Lamp............ 15,000 256,375 82,500 177,500 893,437 1,664,063
P. Andre Simone......... 11,250 155,375 -- 43,750 -- 375,625
Peter C. Vermeeren...... -- -- 18,750 56,250 -- 609,375
</TABLE>
- ---------------
(1) The "value realized" is calculated by determining the difference between the
fair market value of ADAC Common Stock on the date of exercise of the
options and the exercise price of such options.
(2) The value of unexercised stock options is calculated by determining the
difference between the closing price of ADAC Common Stock on Friday,
September 27, 1996 of $20.00, being the last trading date of fiscal 1996, as
reported on the Nasdaq Stock Market, and the exercise price of such options.
9
<PAGE> 12
Change-in-Control Agreements. In August 1995, the Company entered into
Executive Severance Agreements with Messrs. Lowe, Eckert and Lamp and, in March
1996, the Company entered into an Executive Severance Agreement with Mr. Simone
and amended Mr. Lamp's agreement. These Agreements provide for a severance
payment and acceleration of the exercisability of the executives' stock options
upon a "change in control" of the Company. A "change of control" is deemed to
occur if (a) any "person" or "group" (as defined in or pursuant to Sections
13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), becomes the "beneficial owner" (as defined in Rule 13d-3 promulgated
under the Exchange Act), directly or indirectly, of securities of the Company
representing 40% or more of the voting power of the common stock outstanding
which votes generally for the election of directors; (b) as a result of market
or corporate transactions or shareholder action, the individuals who constitute
the Board of Directors of the Company at the beginning of any period of 12
consecutive months (but commencing not earlier than July 1, 1995), plus any new
directors whose election or nomination was approved by a vote of at least two-
thirds of the directors still in office who were directors at the beginning of
such period of 12 consecutive months, cease for any reason during such period of
12 consecutive months to constitute at least two-thirds of the members of such
Board; or (c) the Company sells, through merger, assignment or otherwise, in one
or more transactions other than in the ordinary course of business, assets which
provided at least 2/3 of the revenues or pre-tax net income of the Company and
its subsidiaries on a consolidated basis during the most recently-completed
fiscal year.
Notwithstanding the foregoing, the following events do not constitute a
change in control: any acquisition of beneficial ownership pursuant to (a) a
reclassification, however effected, of the Company's authorized common stock, or
(b) a corporate reorganization involving the Company or any of its subsidiaries
which does not result in a material change in the ultimate ownership by the
shareholders of the Company (through their ownership of the Company or its
successor resulting from the reorganization) of the assets of the Company and
its subsidiaries, but only if such reclassification or reorganization has been
approved by the Company's Board of Directors.
If a change in control of the Company occurs, each executive will be
entitled to a severance payment equal to 2.99 times the total cash compensation
received by each such executive, including base salary, bonuses and other
incentive compensation (excluding the value of any options), during the period
of the 12 months prior to such change in control. Such severance payment will
not be immediately paid if not later than ten days prior to the change in
control, the executive is offered employment by the Company or its successor
corporation on similar terms to those then applicable to the executive as an
officer of the Company and, in such event, the severance payment would be paid
to the executive twelve months following the change of control, but only if (i)
the executive accepts such comparable employment with the Company and (ii) the
executive is not, during such twelve-month period, terminated for cause. Such a
change in control of the Company will also cause all stock options held by the
executive to become immediately exercisable. In the event that the executive (i)
purchases the shares subject to the accelerated stock options, (ii) sells the
shares so purchased and (iii) is offered comparable employment by the Company or
its successor, the executive must deposit in escrow with the Company an amount
equal to 50% of the difference between his sales proceeds received from the sold
shares and his option exercise price. These escrowed funds will be released to
the executive from the escrow account if the executive has accepted the
comparable employment offer and is not terminated for cause for twelve months
after the change in control. If the executive does not accept such comparable
employment from the Company or its successor or is terminated for cause during
such twelve-month period, then the escrowed funds are released to the Company.
In addition, Mr. Lamp's amended Executive Severance Agreement provides that if
there is a change of control of Community Health Computing Corp. ("CHC") (as
defined in Mr. Lamp's CHC Stock Option Agreement) or if CHC is spun off by the
Company to its shareholders and, as a result, Mr. Lamp is no longer employed by
the Company or one of its subsidiaries, then, for twelve months thereafter, the
Company will retain Mr. Lamp as a part-time employee or consultant at a salary
of $1,000 per month without fringe benefits, and all of his Company stock
options will continue to vest during such period.
10
<PAGE> 13
PERFORMANCE GRAPH
The following graph sets forth the Company's total cumulative shareholder
return as compared to the NASDAQ Composite Index and the Standard and Poor's
Medical Products and Supply Index for the period September 28, 1991 through
September 29, 1996. Total shareholder return assumes $100 invested at the
beginning of the period in the Company's Common Stock, the stocks represented in
the NASDAQ Composite Index and the stocks represented in the Standard and Poor's
Medical Products and Supply Index, in each case on a "total return" basis
assuming reinvestment of dividends.
FIVE-YEAR CUMULATIVE TOTAL RETURN COMPARISON
<TABLE>
<CAPTION>
S&P MEDICAL
MEASUREMENT PERIOD ADAC LABORATO- NASDAQ COMPOSITE PRODUCTS AND SUP-
(FISCAL YEAR COVERED) RIES INDEX PLY IND EX
<S> <C> <C> <C>
1991 100.00 100.00 100.00
1992 269.78 110.05 95.87
1993 294.88 145.52 72.28
1994 218.49 145.72 89.60
1995 329.12 198.97 143.16
1996 564.34 234.53 168.08
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------
1991 1992 1993 1994 1995 1996
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
ADAC Laboratories $100.00 $269.78 $294.88 $218.49 $329.12 $564.34
NASDAQ Composite Index 100.00 110.05 145.52 145.72 198.97 234.53
S&P Medical Products and Supply Index 100.00 95.87 72.28 89.60 143.16 168.08
</TABLE>
CERTAIN TRANSACTIONS
Mr. Robert L. Miller, a director and general counsel of the Company,
received approximately $331,205 during fiscal 1996 as payment for a variety of
legal services rendered to the Company in his capacity as outside general
counsel to the Company and $21,000 for attending Board of Directors' meetings as
a director of the Company. Mr. Miller, who is not characterized as a
non-employee director, also received an option to purchase 25,000 shares of
Common Stock of the Company in part as a result of his agreement to a revised
fee arrangement with the Company for his services as outside general counsel.
In November 1994, Mr. Stanley Czerwinski and the Company entered into a
10-year agreement under which he is now being paid a consulting fee of $3,000
per 8 hour day for services rendered. For the first 36 months of such agreement,
the Company has agreed to pay Mr. Czerwinski an additional $20,833 per month in
consideration of, among other things, not competing with the Company during the
term of the agreement and not selling any of his shares of common stock to the
extent that doing so would disqualify the Company from obtaining "pooling of
interests" treatment for financial reporting purposes with regard to any
acquisition transaction for which negotiations commenced on or before March 31,
1995, and which is completed on or before June 30, 1995.
11
<PAGE> 14
(2) APPROVAL OF AMENDMENT TO 1992 STOCK OPTION PLAN
GENERAL
The Company currently has one stock option plan for employees and
consultants pursuant to which new options may be granted for the purchase of
Common Stock, the 1992 Stock Option Plan (the "1992 Plan"). At the 1996 Annual
Meeting of Shareholders, the shareholders approved an amendment to the 1992 Plan
increasing the number of shares authorized for issuance under the Plan to
3,801,000. During fiscal 1996, the Board of Directors granted options to
purchase an aggregate of 959,000 shares under the 1992 Plan, and as of October
31, 1996, only 628,000 shares remained available for grant. Accordingly, on
October 31, 1996, the Board of Directors approved an amendment to the 1992 Plan
to increase the number of authorized option shares by 712,000. As amended, the
1992 Plan would have a total of 4,513,000 shares of Common Stock authorized for
issuance, of which 1,340,000 shares would be available for future grant. The
Board of Directors has approved and adopted this amendment because it believes
it is very important to the long-term success of the Company for it to be able
to continue to retain and attract key management and executives and that the
continued ability to grant options is essential to retain these executives,
especially in light of the current very competitive job market in the Silicon
Valley.
The following description of the 1992 Plan is necessarily brief and
general. A copy of the 1992 Plan, as amended, is available upon request from the
Company.
DESCRIPTION OF THE 1992 PLAN, AS AMENDED
The purposes of the 1992 Plan are to attract and retain the best available
personnel for positions of substantial responsibility and to provide additional
incentives to key employees, officers, consultants or other persons whose
efforts are deemed worthy of encouragement to promote the growth and success of
the Company's business. Non-employee directors may not participate under the
1992 Plan, and instead participate under the Directors' Option Plan (1987).
The 1992 Plan sets a limit of 300,000 shares which may be granted to any
one optionee during any calendar year. Options granted under the 1992 Plan may
be incentive stock options, which are intended to meet the requirements of
Section 422 of the Internal Revenue Code ("incentive options"), or nonqualified
options, which are not intended to meet such requirements ("nonqualified
options"). Incentive options must have terms of ten years or less from the date
of grant; however, the term of any such option granted to a person who owns
shares possessing more than 10% of the total combined voting power or value of
all classes of stock of the Company or any subsidiary shall not exceed five
years. The 1992 Plan also provides that nonqualified options have a term not to
exceed ten years. The Stock Option Committee has generally set terms of five
years or ten years for all options granted under the 1992 Plan. The Stock Option
Committee also determines when options granted under the 1992 Plan may be
exercisable; options granted have historically been exercisable to the extent of
25%, 25% and 50% of the number of option shares subject to an option grant 12,
24 and 36 months, respectively, after the date of grant.
The option exercise prices are determined by the Board of Directors or the
Stock Option Committee and may not be less than 100% of the fair market value of
the Company's Common Stock on the date of grant, or 110% of such fair market
value if the optionee holds more than 10% of the Company's Common Stock. The
option price may be paid by cash, check, promissory note or surrender of other
shares of Common Stock of the Company that have been held for at least six
months, or a combination thereof, at the discretion of the Committee or as set
forth in the applicable stock option agreement. The 1992 Plan also provides that
whenever an optionee exercises an option by surrendering already-owned shares to
pay all or a portion of the exercise price, if the option agreement so provides
or if then approved by the Committee, the optionee may receive a new option for
the purchase of a number of shares equal to the amount tendered for payment,
with an exercise price equal to the then fair market value of a share of Common
Stock.
The 1992 Plan permits an optionee, if set forth in his or her option
agreement, to have any required Federal and state withholding taxes satisfied by
either (i) delivering outstanding shares of Common Stock of the Company
previously owned for six (6) months by the Optionee or (ii) withholding of a
sufficient number
12
<PAGE> 15
of exercised option shares to satisfy such withholding obligations, based upon
fair market value of such shares on the date of exercise.
The 1992 Plan provides that any optionee who is terminated as an employee
or who ceases to serve as a consultant, may, within 90 days (or such other
period as may be determined by the Committee) after such termination or
cessation, exercise the option but only to the extent the optionee was entitled
to do so at the date of his or her termination or cessation of services. Special
exercise rules are applicable to optionees who become totally and permanently
disabled or who die during, or within 90 days after termination of, their period
of employment with the Company. No option may be exercised after the expiration
of its term. Options are not transferable by the optionee, other than by will,
the laws of descent and distribution or pursuant to a divorce decree.
The 1992 Plan provides that in the event any change, such as a stock split,
reverse stock split or stock dividend, is made in the Company's capitalization
which results in an increase or decrease in the number of outstanding shares of
Common Stock without receipt of consideration by the Company, appropriate
adjustment shall be made in the option price and the number of shares subject to
the option. In the event of a proposed dissolution or liquidation of the
Company, or the merger of the Company with or into another corporation, each
outstanding option shall be assumed or an equivalent option shall be substituted
by the successor corporation, unless the Board of Directors determines, in its
discretion, to accelerate the exercisability of outstanding options. In
addition, upon a "change in control", except as limited by any specific
employment or severance agreement, all options will accelerate and be
immediately exercisable. The definition of "change in control" is the same as
that contained in the Executive Severance Agreements discussed earlier in this
Proxy Statement.
The maximum number of shares that may be optioned and sold under the 1992
Plan may be automatically adjusted by the Board if it determines in connection
with an acquisition of another business that it is necessary to grant new or
replacement options to employees of such acquired business.
The Board of Directors may amend the 1992 Plan at any time or may terminate
it without approval of the shareholders; provided, however, that shareholder
approval is required for any amendment that materially increases the number of
shares for which options may be granted under the Plan, materially increases the
benefits accruing to participants under the Plan, or materially modifies the
eligibility requirements of the Plan. However, no action by the Board of
Directors or shareholders may alter or impair any option previously granted
without the consent of the optionee.
ADMINISTRATION
The 1992 Plan is administered by a committee of the Board consisting of not
less than two (2) persons who are "outside directors" as defined in Section
162(m) of the Internal Revenue Code.
OUTSTANDING OPTIONS
At September 29, 1996, there were outstanding options to purchase 2,830,724
shares of Common Stock. Of these options, 148,747 were granted under the 1985
Option Plan (no further options may be granted under such Plan), 159,997 were
granted under the Directors' Stock Option Plan (1987), and 2,496,998 were
granted under the 1992 Stock Option Plan. On September 29, 1996, these
outstanding options had an aggregate exercise price of $31,284,102 or an average
of $11.05 per share, and based upon a closing price of $20.00 on September 27,
1996 (being the last trading day of the Company's 1996 fiscal year), the shares
underlying these outstanding options had an aggregate market value of
approximately $56,614,480.
SUMMARY OF FEDERAL TAX CONSEQUENCES
Nonqualified Stock Options. There will be no Federal income tax
consequences to an optionee at the time an option under the 1992 Plan is
granted. Upon exercise of a nonqualified option, the optionee will recognize
taxable ordinary income in an amount equal to the fair market value of the stock
on the date of exercise less the exercise price paid, and the Company will be
allowed a corresponding tax deduction for
13
<PAGE> 16
compensation expense in an amount equal to the taxable income recognized by the
optionee. If the optionee is an employee of the Company, the Company is required
to withhold Federal income taxes with respect to such ordinary income amount.
Upon the subsequent sale of shares acquired upon the exercise of a nonqualified
option, the optionee generally will recognize a capital gain or loss in an
amount equal to the difference between the proceeds received upon sale and the
fair market value of such shares on the prior date of exercise.
Incentive Stock Options. There will be no Federal income tax consequences
to an optionee at the time of the initial grant of the option or at the time of
an exercise of an incentive option, although the exercise may be an item of tax
preference and may subject the optionee to the alternative minimum tax. The
Company will not be entitled to a tax deduction for compensation expense at the
time of the exercise of an incentive option. If an optionee holds stock acquired
through exercise of an incentive option for (a) more than two years from the
date on which the option is granted and (b) more than one year from the date on
which the shares are transferred to the optionee upon exercise of the option,
then income recognized at the time of the subsequent sale of the stock will be
treated as a capital gain or loss. Generally, if the optionee disposes of the
stock before the expiration of either of these holding periods (a "Disqualifying
Disposition"), at that time the optionee will realize taxable ordinary income
equal to the lesser of (i) the excess of the stock's fair market value on the
date of exercise over the exercise price or (ii) the optionee's actual gain, if
any, resulting from the purchase and sale. To the extent the optionee recognizes
income by reason of a Disqualifying Disposition, the Company will be entitled to
a corresponding tax deduction for compensation in the tax year in which the
disposition occurs.
Under Section 162(m) of the Code, enacted in August 1993, the Company may
be precluded from claiming a federal income tax deduction for total remuneration
in excess of $1,000,000 paid to the CEO or the other four executive officers
named in the "Summary Compensation Table" in any one year beginning in 1995.
Total remuneration would include amounts received upon the exercise of stock
options granted after February 17, 1993. An exception does exist, however, for
"performance-based compensation," including amounts received upon the exercise
of stock options pursuant to a plan approved by shareholders that meets certain
requirements. The terms of the 1992 Plan and the shareholder approval requested
in this Proxy Statement are intended to comply with Section 162(m) of the Code
and the regulations promulgated thereunder.
The foregoing discussion is merely a summary of the more significant
effects of current Federal income taxation upon optionees and the Company with
respect to shares issued under the 1992 Plan and it does not purport to be a
complete analysis of the tax laws dealing with this subject. Reference should be
made to the applicable provisions of the Internal Revenue Code and the
Regulations promulgated thereunder. In addition, this summary does not discuss
the provisions of the income tax laws of any state or foreign country in which
an employee may reside. Each employee should consult his or her own tax advisor
concerning the Federal (and state and local) income tax consequences of
participation in the 1992 Plan.
VOTE REQUIRED
Approval of the amendment to the 1992 Plan requires the affirmative vote of
the holders of a majority of the voting shares represented and voting in person
or by proxy at the Annual Meeting (which affirmative votes also constitute at
least a majority of the required quorum). THE BOARD OF DIRECTORS RECOMMENDS A
VOTE "FOR" THIS PROPOSAL.
(3) APPROVAL OF AMENDMENT TO EMPLOYEE STOCK PURCHASE PLAN (1994)
BACKGROUND INFORMATION
The Company has maintained an Employee Stock Purchase Plan since 1980 for
the benefit of its employees. The most recent Employee Stock Purchase Plan (the
"Purchase Plan") was approved by the shareholders during March 1994. Upon
receipt of shareholder approval at the 1996 Annual Meeting of Shareholders, the
Purchase Plan was amended to authorize the purchase of up to 185,000 shares of
Common Stock under the Plan. During fiscal 1996, the Company's employees
purchased 64,248 shares of Common Stock pursuant to the Purchase Plan, leaving
only 38,836 shares available for future purchases. To enable the
14
<PAGE> 17
Company's employees to continue to benefit under the Purchase Plan, on October
31, 1996, the Board of Directors approved an amendment to the Plan to increase
the number of authorized shares by 85,000. The shareholders are being requested
to approve this increase of an additional 85,000 shares under the Purchase Plan.
None of the directors or executive officers of the Company other than Mark L.
Lamp currently participates in the Purchase Plan. Mr. Lamp purchased an
aggregate of 400 shares of Common Stock under the Purchase Plan in fiscal 1996.
SHARES SUBJECT TO THE PURCHASE PLAN
If approved by the shareholders, an additional 85,000 shares of Common
Stock of the Company will be available for issuance under the Purchase Plan. In
the event of a stock split, stock dividend or other subdivision, combination or
classification of the Company's Common Stock, appropriate adjustments will be
made with respect to the maximum number of shares subject to, and the purchase
price of shares under, the Purchase Plan.
OPERATION OF THE PURCHASE PLAN
The Purchase Plan provides eligible employees with the opportunity to
purchase shares of Common Stock pursuant to a payroll deduction program. The
Purchase Plan provides for offering periods of up to 27 months (the "Offering
Periods") during which contributions may be made to purchase shares of Common
Stock. Each Offering Period shall consist of interim three-month purchase
periods. At the end of each three-month interim purchase period, shares would be
purchased automatically at 85% of the market price at the beginning of the
27-month Offering Period or 85% of the market price on the last day of each
interim three-month purchase period, whichever price is lower.
An employee may have up to 10% of his total compensation (including
commissions, but excluding bonuses, overtime, etc.) withheld and applied to the
purchase of shares under the Purchase Plan. However, during any one year no
employee is entitled to purchase Common Stock under the Purchase Plan having a
value of more than $25,000 or more than 100 shares of Common Stock during any
interim three-month purchase period.
ELIGIBILITY AND ENROLLMENT
All employees of the Company may participate in the Plan. However,
employees who are customarily employed for less than 20 hours per week or for
less than 5 months in any calendar year are not eligible to participate.
Further, any employee who owns, or holds options to acquire, or who, as a result
of participation in the Purchase Plan, would own or hold options to purchase
five percent (5%) or more of the Company's securities is not eligible to
participate in the Purchase Plan.
Under the Purchase Plan an employee may enroll in the Purchase Plan at the
beginning of any of the three-month interim purchase periods within an Offering
Period. An employee who joins the Purchase Plan after the beginning of the
Offering Period will have a purchase price equal to 85% of the market price on
the effective date of his joining the Purchase Plan or on the last day of each
interim three-month purchase period, whichever price is lower.
WITHDRAWAL; TERMINATION; RE-ENROLLMENT
A participant may withdraw from the Purchase Plan at any time. Termination
of a participant's employment for any reason, including retirement or death, or
the employee's failure to remain an eligible employee, also terminates
participation in the Purchase Plan. In the event of termination, all payroll
deductions previously credited to the participant's account are returned,
without interest. The Purchase Plan allows for re-enrollment after waiting for
one complete interim three-month purchase period, except that officers and
directors would be required to wait at least six (6) months before re-enrolling.
15
<PAGE> 18
ADMINISTRATION
The Purchase Plan is administered by the Board of Directors of the Company;
the Board may also adopt and appoint a Committee thereof to administer the
Purchase Plan. The Board or any Committee so appointed has the power to make,
amend and repeal rules and regulations for the interpretation and administration
of the Purchase Plan, all of which are final and binding upon each participant
having an interest therein.
DURATION AND MODIFICATION
The Purchase Plan will remain in full force until December 31, 2003 unless
terminated earlier by action of the Company's Board of Directors or until all of
the shares reserved for issuance thereunder have been issued. The Purchase Plan
may be terminated or amended from time to time by the Board of Directors,
provided that a participant's existing rights cannot be adversely affected
thereby, nor may any amendment be made without the approval of shareholders of
the Company if such amendment would increase the aggregate number of shares of
Common Stock to be issued under the Plan, materially modify the requirements for
eligibility to participants in the Plan, increase the maximum number of shares
which a participant may purchase during any Offering Period, extend the term of
the Plan, alter the purchase price formula so as to reduce the price per share
to be purchased under the Plan, materially increase the benefits accruing to
participants under the Plan or cause the Plan to fail to meet the requirements
of an "employee stock purchase plan" under Section 423 of the Internal Revenue
Code.
FEDERAL INCOME TAX CONSEQUENCES
The Purchase Plan and the right of employees to make purchases thereunder
are intended to qualify under the provisions of Sections 421 and 423 of the
Internal Revenue Code. Under these provisions, no income will be taxable to an
employee at the time shares are purchased under the Purchase Plan. As summarized
below, an employee may be taxed upon disposition or sale of the shares acquired
under the Purchase Plan:
1. If the shares are sold at least two years after the date of
granting of the option and more than one year after the transfer of the
shares to the employee: In this event, the lesser of (a) the excess of the
fair market value of the shares at the time granted over the purchase price
of the shares or (b) the excess of the fair market value of the shares at
the time such shares are disposed of over the purchase price of the shares
will be treated as ordinary income. Any further gain upon such sale will be
treated as a capital gain. If the shares are sold and the sale price is
less than the purchase price, there is no ordinary income and the employee
has a capital loss equal to the difference.
2. If the shares are sold prior to the expiration of two years after
the granting of the option and less than one year after the transfer of the
shares to the employee: In this event (a "Disqualifying Disposition"), the
excess of the fair market value of the shares at the date the shares are
exercised over the purchase price will be treated as ordinary income to the
employee. This excess will constitute ordinary income in the year of sale
or other disposition. Any further gain upon such sale will be treated as a
capital gain. If the shares are sold for less than their fair market value
on the date of purchase the same amount of ordinary income is attributed to
the employee and a capital loss will be recognized equal to the difference
between the sale price and the fair market value of the shares on such
purchase date. To the extent the employee recognizes ordinary income by
reason of a Disqualifying Disposition, the Company will be entitled to a
corresponding tax deduction for compensation in the tax year in which the
disposition occurs, provided the Company has satisfied its withholding
obligations under the Code.
In the event an employee dies while owning stock acquired under the
Purchase Plan, compensation must be reported in his/her final income return. The
amount of compensation to be reported will be the lesser of (a) the excess of
the fair market value of the shares at the time these shares were granted over
the purchase price of the shares or (b) the excess of the fair market value of
the shares at the time of the employee's death over the purchase price of the
shares.
16
<PAGE> 19
The foregoing discussion is merely a summary of the more significant
effects of the Federal income tax on an employee and the Company with respect to
the shares purchased under the Purchase Plan and does not purport to be a
complete analysis of the tax laws dealing with this subject. Reference should be
made to the applicable provisions of the Internal Revenue Code and the Income
Tax Regulations promulgated thereunder. In addition, this summary does not
discuss the provisions of the income tax laws of any state or foreign country in
which an employee may reside. Each employee should consult his or her own tax
advisor concerning the Federal (and any state and local) income tax consequences
of participation in the Purchase Plan.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares represented
and voting in person or by proxy at the meeting (which affirmative votes
constitute at least a majority of the required quorum) is required for the
approval of the amendment to the Purchase Plan. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
(4) APPROVAL OF AMENDMENT TO DIRECTORS' STOCK OPTION PLAN (1987)
BACKGROUND INFORMATION
The Company has previously determined that it is advisable and in the best
interests of the Company and its shareholders to obtain independent directors
with outstanding ability and experience and to provide incentives to such
independent directors for the encouragement of the highest level of performance
by providing such persons with a proprietary interest in the Company.
Accordingly, the Board of Directors and the shareholders previously adopted the
Directors' Stock Option Plan (1987) (the "Directors' Plan"). Under the
Directors' Plan, stock options are granted annually to each non-employee
director of the Company. An aggregate of 100,000 shares of Common Stock were
originally reserved under the Directors' Plan. Upon receipt of shareholder
approval at the 1996 Annual Meeting of Shareholders, the Directors' Plan was
amended to increase the aggregate number of shares authorized for issuance under
the Directors' Plan to 231,666. During fiscal 1996, an aggregate of 80,000
shares were optioned to non-employee directors, leaving as of October 31, 1996
only 1,668 shares available for future grants. The Board of Directors desires to
continue to be able to attract outstanding independent directors and to provide
incentives to such directors, including any additional directors that may be
recruited to the Board in the future if Proposals 5 and 6 below are approved,
and has approved an amendment to the Directors' Plan to increase the number of
available shares by 56,665.
DESCRIPTION OF THE DIRECTORS' PLAN
The purpose of the Directors' Plan is to encourage and provide incentives
for the highest level of performance by the Company's non-employee directors.
Only directors who are not also employees of the Company or any of its
subsidiaries are eligible to participate in the Directors' Plan.
As amended, an aggregate of 288,331 shares of Common Stock are authorized
under the Directors' Plan, of which 159,997 option shares have been previously
granted. The Directors' Plan provides for 20,000 option shares to be granted to
each new non-employee director upon being elected to the Board and for 3,333
option shares to be annually granted on March 15 of each year thereafter, except
that on each fifth anniversary of the year the director first commenced serving
as a director, he or she would receive on March 15 an additional grant of 20,000
shares. This schedule would repeat itself every five years (in all cases
subject, of course, to the director remaining in office). The Board of Directors
or a committee consisting of such Board members or other persons as may be
appointed by the Board administers the Directors' Plan.
Each option granted has a term of five years from the date of grant. The
option exercise price must be equal to 100% of the "fair market value"
(generally, the closing price of the Company's Common Stock as traded in the
NASDAQ National Market System or other principal market) on the date of grant of
the option. The option price may be paid in cash or by surrendering to the
Company outstanding Common Stock of the Company having been owned by the
optionee for at least six (6) months, valued at fair market value. Each 20,000
share option grant would be exercisable 25% per year from the date of grant.
Each 3,333 share option grant would be fully exercisable after 12 months from
the date of grant. However, options under the
17
<PAGE> 20
Directors' Plan may be exercised in full immediately in the event of the death
of the optionee. Upon a liquidation or dissolution of the Company, a
reorganization or merger pursuant to which the Company does not survive, or a
sale of substantially all of the Company's assets, each option will become
immediately exercisable without regard to the original vesting schedule. In
addition, the options would become immediately exercisable upon a "change in
control" of the Company. The definition of "change of control" is the same as
that contained in the Executive Severance Agreements and the 1992 Plan.
If the holder of an option resigns or is removed as a director for reasons
other than as set forth above, he may exercise the option within three (3)
months after such resignation or removal but only to the extent it was
exercisable on such date and only if the termination did not result from a
violation of the director's normal duties. In the event of death while, or
within three (3) months after, serving as a director, the option may be
completely exercised by the person to whom the director's rights under the
option pass by will or by the laws of descent and distribution. Options are not
transferable by the optionee, other than by will or the laws of descent and
distribution or, as amended, pursuant to a qualified domestic relations order.
The Directors' Plan provides that the total number of option shares covered
by such Plan, the number of shares covered by each option and the exercise price
per share shall be proportionately adjusted in the event of a stock split, stock
dividend or similar capital adjustment effected without receipt of consideration
by the Company.
The Board of Directors may amend the Directors' Plan no more than once
every six (6) months. The Board may amend or terminate the Directors' Plan
without approval of the shareholders; provided, however, that shareholder
approval is required for any amendment that increases the number of shares for
which options may be granted, changes the designation of the class of persons
eligible to participate in the Directors' Plan or changes in any material
respect the limitations or provisions of the options subject to the Directors'
Plan. However, no action by the Board of Directors or shareholders may alter or
impair any option previously granted without the consent of the optionee.
Options granted to directors under the Directors' Plan will be treated as
nonqualified stock options under the Internal Revenue Code. A brief description
of certain Federal income tax effects resulting from the grant and exercise of
nonqualified stock options, and the sale of the option shares, both to the
optionee and the Company, is set forth under "Approval of 1992 Stock Option
Plan -- Summary of Federal Tax Consequences" above. Such summary does not
purport to be complete, and reference is made to the applicable provisions of
the Internal Revenue Code.
VOTE REQUIRED
Approval of the amendment to the Directors' Plan requires the affirmative
vote of the holders of a majority of the voting shares represented and voting in
person or by proxy at the Annual Meeting (which affirmative votes must
constitute at least a majority of the required quorum). THE BOARD OF DIRECTORS
RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
(5) APPROVAL OF AMENDMENT AND RESTATEMENT OF
ARTICLES OF INCORPORATION
The Board of Directors believes that it is in the best interests of both
the Company and its shareholders to amend and restate the Company's Articles of
Incorporation to delete therefrom provisions relating to the maximum and minimum
number of directors that may comprise the Board (the "Amendment to the
Articles"), in order that the Company may consolidate such provisions in the
Company's Bylaws. The text of the proposed Amended and Restated Articles of
Incorporation is set forth substantially in the form of Exhibit A to this Proxy
Statement, and has been previously adopted by the Board of Directors, subject to
approval by shareholders holding a majority of the outstanding shares of the
Company's Common Stock.
At present, both the Company's Articles of Incorporation and the Company's
Bylaws contain provisions establishing a maximum and minimum number of directors
that may serve on the Company's variable Board of Directors. The Board of
Directors has determined that it is in the best interest of the shareholders and
the
18
<PAGE> 21
Company to simplify the Company's Articles of Incorporation by deleting the
provisions contained therein in order that the Company may consolidate such
provisions in the Company's Bylaws, which the Company is seeking approval to
amend pursuant to Proposal 6 below. Because the shareholder approval required to
change the maximum and minimum number of directors comprising a variable board
is the same whether the maximum and minimum are set forth in the Articles or the
Bylaws, the Company believes that the deletion of this provision from the
Articles will not affect the shareholders' ability to vote on any changes in the
size of the Company's variable board and will enable the Company, upon receipt
of the appropriate shareholder approval, to make any such changes more
efficiently as only one instrument would require amendment.
VOTE REQUIRED
Approval of the Amendment to the Articles requires the affirmative vote of
the holders of a majority of the outstanding shares of Common Stock. THE BOARD
OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL. If the Amendment to the
Articles is not approved but the amendments to the Bylaws described below in
Proposal 6 are approved by the shareholders, the shareholders' approval of the
Bylaw amendments will be deemed to constitute approval by the shareholders to
amend the Articles of Incorporation to the extent necessary to conform the
provisions of the Articles regarding the size of the Company's variable board to
the corresponding amended Bylaw provision set forth in Exhibit B to this Proxy
Statement.
(6) APPROVAL OF AMENDMENTS TO BYLAWS
The Board of Directors believes it is in the best interests of the Company
and the shareholders to adopt amendments to the Bylaws of the Company to
increase the number of directors that may serve on the Company's variable board.
The Board of Directors believes it is advisable to increase the number of
directors that may serve on the Company's variable board in order to give the
Company the flexibility in the future to add directors with experience that may
be critical to the Company's ability to achieve its long-term strategic goals.
Accordingly, the Board of Directors has approved amendments to the Bylaws,
subject to approval by shareholders holding a majority of the outstanding shares
of Common Stock of the Company, that (i) provide that the Board of Directors
will consist of not less than six nor more than eleven directors, with the exact
number to be fixed by approval of the Board of Directors or the shareholders,
and with the number initially fixed in the Bylaws at seven, and (ii) define the
authority of the Board of Directors to fix the exact number of the directors
within the foregoing range in accordance with California law. The proposed text
of the amendments to the Bylaws is set forth substantially in the form of
Exhibit B to this Proxy Statement.
VOTE REQUIRED
Approval of the amendments to the Bylaws requires the affirmative vote of
the holders of a majority of the outstanding shares of Common Stock. THE BOARD
OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Coopers & Lybrand, L.L.P. has examined the financial statements
of the Company for the fiscal year ended September 29, 1996, and has been
selected to perform such service for the current fiscal year. A representative
of Coopers & Lybrand, L.L.P. is expected to be present at the Annual Meeting
with the opportunity to make a statement if he or she desires to do so and is
expected to be available to respond to appropriate questions. The Company has
been advised that neither that firm, nor any of its partners or associates, has
any direct or indirect financial interest in or any connection with the Company
other than as accountants and auditors.
19
<PAGE> 22
OTHER MATTERS
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Securities and Exchange Commission's rules under Section 16 of the
Securities Exchange Act of 1934 require the Company's officers and directors,
and persons who own more than ten percent (10%) of a registered class of the
Company's equity securities, to file reports showing their initial stock
ownership and subsequent changes in such ownership with the SEC by specific
dates.
Based solely on its review of the copies of such forms received by it or
written representations from the Company's appropriate officers and directors,
the Company believes that, during the 1996 fiscal year, all filing requirements
applicable to its officers and directors were complied with, except for the
following: One report on Form 4 concerning the exercise of options to purchase
8,750 shares of Common Stock and the sale of such shares by Mr. Simone on
September 4, 1996 was not filed but such transactions were reported in a Form 5
filed for the fiscal year ended September 29, 1996. Two Form 5s concerning Mr.
Lamp's purchase of 100 shares of Common Stock under the Purchase Plan on each of
the four quarterly purchase dates in fiscal 1995 and 1996 were not filed but
were subsequently disclosed in an amended Form 4.
SHAREHOLDER PROPOSALS
Individual shareholders of the Company may be entitled to submit proposals
which they believe should be voted upon by the shareholders. The Securities and
Exchange Commission has adopted regulations which govern the inclusion of such
proposals in annual proxy materials. All such proposals must be submitted to the
Secretary of the Company no later than October 10, 1997 in order to be
considered for inclusion in the Company's 1998 proxy materials related to the
1998 Annual Meeting of Shareholders.
OTHER BUSINESS
Management does not know of any business to be presented other than the
matters set forth above, but if other matters properly come before the meeting,
it is the intention of the persons named in the Proxy to vote in accordance with
their best judgment on such matters.
AVAILABILITY OF FORM 10-K
THE COMPANY WILL FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM
10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 29, 1996, AS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION, TO ANY SHAREHOLDER DESIRING A COPY. Shareholders may
write to ADAC Laboratories, 540 Alder Drive, Milpitas, California 95035,
attention of Robert Starr, Vice President of Administration.
By Order of the Board of Directors,
David L. Lowe,
Chairman of the Board
Dated: February , 1997
20
<PAGE> 23
EXHIBIT A
FORM OF
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
ADAC LABORATORIES
A California Corporation
ARTICLE I
The name of this corporation is:
ADAC LABORATORIES
ARTICLE II
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
This Corporation is authorized to issue two classes of stock, without par
value, to be designated "Preferred Stock" and "Common Stock," respectively. The
total number of shares of which this Corporation is authorized to issue is
55,000,000 shares, of which 50,000,000 shares shall be Common Stock and
5,000,000 shares shall be Preferred Stock.
ARTICLE IV
The Corporation hereby elects to be governed by all the provisions of the
General Corporation Law of the State of California in effect as of January 1,
1977, which are not otherwise applicable to it pursuant to Chapter 23 of said
law.
ARTICLE V
The liability of the directors of the Corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
ARTICLE VI
The Corporation is authorized to provide indemnification of Agents (as
defined in Section 317 of the Corporations Code) for breach of duty to the
Corporation and its shareholders through By-law provisions, agreements with the
Agents, vote of shareholders or disinterested directors or otherwise in excess
of the indemnification otherwise permitted by Section 317 of the Corporations
Code), subject to the limits on such excess indemnification set forth in Section
204 of the Corporations Code or as to circumstances in which indemnity is
expressly prohibited by Section 317.
A-1
<PAGE> 24
EXHIBIT B
The following provisions of the Company's Bylaws are amended and restated
in their entirety to read as follows:
"Section 3.02. Number and Qualification of Directors. The number of
directors of the corporation shall be not less than six (6) nor more than
eleven (11). The exact number of directors shall be seven (7) until
changed, within the limits specified above, by a bylaw amending this
Section 3.02 duly adopted by the board of directors or approved by the
shareholders; provided, however, that any amendment reducing the fixed
number or the minimum number of directors to a number less than five (5)
cannot be adopted if the votes cast against its adoption at a meeting of
the shareholders, or the shares not consenting in the case of action by
written consent, are equal to more than sixteen and two-thirds percent
(16 2/3%) of the outstanding shares entitled to vote thereon. No amendment
may change the stated maximum number of authorized directors to a number
greater than two (2) times the stated minimum number of directors minus one
(1)."
"Section 9.02. Amendment of Bylaws by Directors. Subject to the right
of the shareholders to adopt, amend or repeal bylaws, bylaws may be
adopted, amended or repealed by a majority vote of the directors present at
any meeting of the board at which a quorum is present; provided, however,
that the board of directors may not adopt a bylaw or amendment thereof
specifying or changing a fixed number of directors or the maximum or
minimum number of directors or changing from a fixed to a variable board or
vice versa."
B-1
<PAGE> 25
PROXY ADAC LABORATORIES
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
The undersigned shareholder of ADAC Laboratories, a California corporation,
acting under the California General Corporation Law, hereby constitutes and
appoints David L. Lowe and Robert L. Miller, and each of them, the attorneys and
proxies of the undersigned, each with the power of substitution, to attend and
act for the undersigned at the Annual Meeting of Shareholders of said
corporation to be held on March 6, 1997, at 1:00 p.m., local time, at the
offices of the Company, located at 540 Alder Drive, Milpitas, California 95035,
and at any adjournments thereof, and in connection therewith to vote and
represent all of the shares of Stock of said corporation which the undersigned
would be entitled to vote, as follows:
<TABLE>
<S> <C> <C>
(1) ELECTION OF DIRECTORS: FOR ALL NOMINEES LISTED [ ] WITHHOLD AUTHORITY [ ]
(except as listed below) to vote for all nominees listed
</TABLE>
(mark one: the Board of Directors recommends a "FOR" vote for the election
of the following nominees to the Board of Directors:
Stanley D. Czerwinski, R. Andrew Eckert, Graham O. King, David L.
Lowe, Robert L. Miller, F. David Rollo and Edmund H. Shea,
Jr.).
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THE NAME(S) OF SUCH NOMINEE(S) BELOW.)
- --------------------------------------------------------------------------------
(2) Approval of an Amendment to the 1992 Stock Option Plan, to increase the
number of authorized shares by 712,000: (mark one; the Board recommends a
"FOR" vote). FOR [ ] AGAINST [ ] ABSTAIN [ ]
(3) Approval of an Amendment to the Employee Stock Purchase Plan (1994) to
increase the number of shares authorized thereunder by 85,000 shares:
(mark one; the Board recommends a "FOR" vote). FOR [ ] AGAINST [
] ABSTAIN [ ]
(4) Approval of an Amendment to the Directors' Stock Option Plan (1987), to
increase the number of authorized shares by 56,665: (mark one; the Board
recommends a "FOR" vote). FOR [ ] AGAINST [ ] ABSTAIN [ ]
(5) Approval of the Amendment and Restatement of Articles of Incorporation to
delete provisions pertaining to the variable board: (mark one; the Board
recommends a "FOR" vote).(If Proposal 5 is not approved but Proposal 6 is
approved, the approval of Proposal 6 will be deemed to constitute the
requisite shareholder approval to amend the Articles to the extent
necessary to give effect to the approval of Proposal 6.) FOR [
] AGAINST [ ] ABSTAIN [ ]
(6) Approval of Amendments to the Bylaws, including to provide for a variable
board of directors consisting of not less than six and not more than 11
directors (mark one; the Board recommends a "FOR" vote.)
- --------------------------------------------------------------------------------
Said attorneys and proxies, and each of them, shall have all the powers which
the undersigned would have if acting in person. The undersigned hereby revokes
any other proxy to vote at such meeting and hereby ratifies and confirms all
that said attorneys and proxies, and each of them, may lawfully do by virtue
hereof. Said proxies, without hereby limiting their general authority, are
specifically authorized to vote in accordance with their best judgment with
respect to all matters incident to the conduct of the meeting; all matters
presented at the meeting but which are not known to the Board of Directors at
the time of the solicitation of this proxy; and, with respect to the election of
any person as a Director, if a bona fide nominee for the office is named in the
Proxy Statement and such nominee is unable to serve or will not serve, to vote
for any other person.
<PAGE> 26
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF ADAC LABORATORIES
Each of the above-named proxies present at said meeting, either in person or
by substitute, shall have and exercise all the powers of said proxies hereunder.
This proxy will be voted in accordance with the choices specified by the
undersigned on the other side of this proxy. IF NO INSTRUCTIONS TO THE CONTRARY
ARE INDICATED HEREON, THIS PROXY WILL BE TREATED AS A GRANT OF AUTHORITY TO VOTE
FOR THE ELECTION OF THE NOMINEES FOR THE BOARD OF DIRECTORS NAMED ON THE OTHER
SIDE HEREOF AND AS A GRANT OF AUTHORITY TO VOTE FOR THE OTHER PROPOSALS STATED
ON THE OTHER SIDE HEREOF AND ON ANY OTHER MATTERS TO BE VOTED UPON.
The undersigned acknowledges receipt of a copy of the Notice of Annual
Meeting and Proxy Statement relating to the meeting.
[CAPTION]
<TABLE>
<S> <C>
Signature
<S> <C>
</TABLE>
Date: , 1997
IMPORTANT: In signing
this proxy, please sign
your name or names on
the signature lines in
the same manner as it
appears on your stock
certificate. When
signing as an attorney,
executor,
administrator, trustee
or guardian, please
give your full title as
such. EACH JOINT TENANT
SHOULD SIGN.
PLEASE SIGN, DATE AND RETURN PROXY PROMPTLY IN THE POSTAGE PREPAID ENVELOPE
PROVIDED.
<PAGE> 1
Exhibit 99.1
AMENDED AND RESTATED
DIRECTORS' STOCK OPTION PLAN (1987)
OF
ADAC LABORATORIES
1. PURPOSE.
The purpose of this Directors' Stock Option Plan (1987) (the
"Plan") is to assist the Company in attracting, motivating and retaining
qualified non-employee directors by providing a means whereby such persons will
be given an opportunity to acquire a proprietary interest in the Company's
future growth by purchasing shares of Company Common Stock.
2. DEFINITIONS.
When used in this Plan, unless the context otherwise requires:
(a) "Board of Directors" shall mean the Board of
Directors of the Company as constituted at any time.
(b) "Committee" shall mean the Committee as
hereinafter described in Section 3 hereof.
(c) "Company" shall mean ADAC Laboratories, a
California corporation.
(d) "Directors' Options" shall mean options to
purchase shares of Company Common Stock which may be granted each fiscal year
by the Company to each person serving as a director of the Company who is not
also an employee of the Company or any of its Subsidiary corporations.
(e) "Fair Market Value" shall mean the closing
price of the Company's Common Stock, as traded on the NASDAQ National Market
System (or, if such shares are then listed on any national securities exchange,
the closing price on such exchange) on the date as of which such value is being
determined. If the Common Stock is not traded on the NASDAQ National Market
System or any national securities exchange, Fair Market Value shall be
determined by the Board on the basis of the best available market value
information.
(f) "Options" shall mean the Directors' Options
issued pursuant to the Plan.
(g) "Plan" shall mean the Directors' Stock Option
Plan (1987) of the Company authorized and adopted by the Board of Directors at
its meeting held on July 28, 1987 and as amended from time to time.
<PAGE> 2
Amended and Restated
Directors' Stock Option Plan (1987)
of ADAC Laboratories
(h) "Share" shall mean a share of Common Stock of
the Company.
(i) "Subsidiary" shall mean any corporation in
which the Company owns, directly or indirectly, stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of stock.
3. ADMINISTRATION.
The Plan shall be administered by the Board of Directors or by
a Committee which shall consist of such members of the Board of Directors of
the Company or such other persons as may be appointed by the Board of
Directors. The Board and, if any, the Committee, shall have full power and
authority to construe, interpret and administer the Plan and to make
determinations which shall be final, conclusive and binding upon all persons,
including but not limited to the Company, the shareholders and any person
having an interest in any Options. If a member of the Committee, for any
reason, shall cease to serve, the vacancy may be filled by the Board of
Directors. Any member of the Committee may be removed at any time, with or
without cause, by the Board of Directors.
4. ELIGIBILITY.
Options may be granted only to non-employee directors of the
Company; employees of the Company or any of its Subsidiary corporations are not
eligible to receive Options under the Plan.
5. SHARES SUBJECT TO THE PLAN.
Subject to the provisions of Section 12 (relating to
adjustments upon changes in shares), the Shares which may be sold pursuant to
Directors' Options granted under the Plan shall not exceed in the aggregate
231,666 shares of the Company's authorized Common Stock, without par value. If
any Option under the Plan shall for any reason terminate or expire without
having been exercised in full, the Shares not purchased under such Option shall
again be available under the Plan.
6. ANNUAL OPTION GRANTS.
The number of shares to be optioned to each
non-employee director shall be fixed at 3,333 Option Shares during each fiscal
year of the Company and such grant shall automatically occur on March 15th of
each year except during each fifth year the
2
<PAGE> 3
Amended and Restated
Directors' Stock Option Plan (1987)
of ADAC Laboratories
director shall receive a grant of 20,000 shares (in lieu of the 3,333 share
annual grant), provided, however, that on the date a person first becomes a
director such person shall receive an option grant of 20,000 shares. Each
option shall be for a term of five (5) years from the date of grant and each
annual 3,333 share grant shall vest and become fully exercisable upon the first
anniversary of the date of grant and each 20,000 share grant shall vest and
become exercisable 25% per year. An option agreement, signed by an officer of
the Company, shall be issued to each person to whom an option is granted.
7. PRICE.
The purchase price per Share for the Shares to be purchased
pursuant to the exercise of any Option shall be fixed by the Board of Directors
or the Committee at the time of grant of the Option, but shall always equal
100% of the Fair Market Value of the Shares on the date such Option is granted.
8. DURATION OF OPTIONS.
All Directors' Options issued under the Plan shall have a
duration of five (5) years from the date of grant, regardless of any
termination of the Plan prior to the exercise of such Options.
9. NON-TRANSFERABILITY OF OPTIONS.
(a) Options shall not be transferrable by the
holder thereof otherwise than (i) by will, (ii) pursuant to the laws of descent
and distribution or (iii) if then permitted by Rule 16b-3, promulgated under
the Securities Exchange Act of 1934, as amended, pursuant to a qualified
domestic relations order as defined by the Internal Revenue Code of 1986, as
amended, or by Title I of the Employee Retirement Income Security Act (ERISA),
or the rules thereunder; provided, however, that an Option holder may designate
a beneficiary who, upon Option holder's death, may exercise the Option to the
extent permitted in Section 10 of the Plan.
(b) Subject to early acceleration as provided
herein, at least six months must elapse from the date of the grant of the
Directors' Options to the date of disposition of the Directors' Option (other
than upon exercise or conversion) or the shares subject to such Directors'
Option.
3
<PAGE> 4
Amended and Restated
Directors' Stock Option Plan (1987)
of ADAC Laboratories
10. EXERCISE OF OPTIONS.
(a) Except in the event of death, in which case
they may be exercised in full immediately, and except as provided in Section 12
below, Directors' Options may be exercised only in installments as follows:
(i) each annual 3,333 share grant shall vest and become fully exercisable upon
the first anniversary of the date of grant and (ii) each 20,000 share grant
shall vest and become fully exercisable 25% per year.
(b) An Option shall be exercised by the delivery
of a duly signed notice in writing to such effect, together with the full
purchase price. Payment of the purchase price shall be made in cash or
outstanding Common Stock of the Company already owned by the optionee (valued
at Fair Market Value). Option Agreements under the Plan may contain a
provision to the effect that all Federal and state taxes required to be
withheld or collected from an Optionee upon exercise of an Option may be
satisfied by the withholding of a sufficient number of exercised Option shares
which, valued at Fair Market Value on the date of exercise, would be equal to
the total withholding obligation of Optionee.
(c) The Company will, as soon as practicable
after the exercise of an Option, deliver to the person entitled thereto a
certificate or certificates for the Shares purchased pursuant to the exercise
of the Option.
11. TERMINATION.
If a holder of a Directors' Option shall resign or be removed
as a director, the Option of such holder shall terminate, except that, subject
to the limitation stated in the last sentence of this Section 11, (i) if his
director's status with the Company is terminated for any reason other than his
death, he may at any time within three months after such termination exercise
his Option but only to the extent that it was exercisable by him on the date of
termination and only if his status was not terminated because of a violation of
his normal duties; and (ii) if he dies while serving as a director of the
Company, or within three months after termination of such status, his Option
may be exercised by the person or persons to whom his rights under the Option
shall pass by will or by the laws of descent and distribution, without regard
to the vesting provisions included in the Option. In no event may an Option be
exercised to any extent by anyone after the expiration of its term.
4
<PAGE> 5
Amended and Restated
Directors' Stock Option Plan (1987)
of ADAC Laboratories
12. CHANGES IN CAPITALIZATION: SPLITS, LIQUIDATIONS,
MERGERS AND REORGANIZATIONS.
(a) The aggregate number of shares of Common
Stock for which Options may be granted to eligible persons under the Plan, the
number of shares of Common Stock covered by each outstanding Option and the
price per share thereof in each such Option may be proportionately adjusted by
the Board of Directors or the Committee for any increase or decrease in the
number of issued shares of Common Stock of the Company resulting from a stock
split, a reverse stock split, a subdivision or consolidation of shares or other
similar capital adjustment, the payment of a stock dividend or any other
increase or decrease in such shares effected without receipt of consideration
by the Company. Any such determination by the Board of Directors of the
Company shall be conclusive.
(b)(i) Except and to the extent provided otherwise
in, or limited by, employment, severance or similar written agreements between
the Company and an Optionee, ten (10) days prior to a "Change in Control" (as
defined below), all stock options which are then not exercisable shall
immediately vest and become exercisable, regardless of the original vesting
schedule. A "Change in Control" of the Company shall be deemed to have
occurred if (a) any "person" or "group" (as defined in or pursuant to Sections
13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), becomes the "beneficial owner" (as defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of securities of
the Company representing 40% or more of the voting power of the common stock
outstanding which votes generally for the election of directors; (b) as a
result of market or corporate transactions or shareholder action, the
individuals who constitute the Board of Directors of the Company at the
beginning of any period of 12 consecutive months (but commencing not earlier
than July 1, 1995), plus any new directors whose election or nomination was
approved by a vote of at least two-thirds of the directors still in office who
were directors at the beginning of such period of 12 consecutive months, cease
for any reason during such period of 12 consecutive months to constitute at
least two-thirds of the members of such Board; or (c) the Company sells,
through merger, assignment or otherwise, in one or more transactions other than
in the ordinary course of business, assets which provided at least 2/3 of the
revenues or pre-tax net income of the Company and its subsidiaries on a
consolidated basis during the most recently-completed fiscal year.
5
<PAGE> 6
Amended and Restated
Directors' Stock Option Plan (1987)
of ADAC Laboratories
(ii) Notwithstanding paragraph (i) above, the
following events shall not constitute a Change in Control: any
acquisition of beneficial ownership pursuant to (a) a
reclassification, however effected, of the Company's authorized common
stock, or (b) a corporate reorganization involving the Company or any
of its subsidiaries which does not result in a material change in the
ultimate ownership by the shareholders of the Company (through their
ownership of the Company or its successor resulting from the
reorganization) of the assets of the Company and its subsidiaries, but
only if such reclassification or reorganization has been approved by
the Company's Board of Directors.
13. ISSUANCE OF SHARES AND COMPLIANCE WITH SECURITIES
ACT.
The Company may postpone the issuance and delivery of Shares
upon any exercise of an Option until (a) the admission of such Shares to
listing on any stock exchange on which Shares of the Company of the same class
are then listed and (b) the completion of such registration or other
qualification of such Shares under any state or Federal law, rule or regulation
as the Company shall determine to be necessary or advisable. Any person
exercising an Option shall make such representations and furnish such
information as may, in the opinion of counsel for the Company, be appropriate
to permit the Company to issue the Shares in compliance with the provisions of
the Securities Act of 1933, as amended.
14. AMENDMENT AND TERMINATION OF THE PLAN.
(a) Except as hereinafter provided, the Board of
Directors or the Committee may at any time withdraw or from time to time amend
the Plan and the terms and conditions of any Options not theretofore issued,
and the Board of Directors or the Committee, with the consent of the affected
holder of an Option, may at any time amend the terms and conditions of such
Options as have been theretofore granted. Notwithstanding the foregoing, any
amendment to the Plan by the Board of Directors or Committee which would (i)
increase the number of Shares issuable under Options, (ii) change the class of
persons to whom Options may be granted or (iii) change in any material respect
the limitations or provisions pertaining to Options, shall be subject to the
approval of the holders of a majority of the shares of the Company present at
any meeting of shareholders and entitled to vote thereat either prior to or
within one year after such amendment.
6
<PAGE> 7
Amended and Restated
Directors' Stock Option Plan (1987)
of ADAC Laboratories
(b) The determination of the Board of Directors
or the Committee as to any questions which may arise with respect to the
interpretation of the provisions of the Plan and Options granted hereunder
shall be final and conclusive.
(c) The Board of Directors or the Committee may
authorize and establish such rules, regulations and revisions thereof, not
inconsistent with the provisions of the Plan, as it may deem advisable to make
the Plan and Options effective or provide for their administration, and may
take such other action with regard to the Plan and Options as it shall deem
desirable to effectuate their purpose.
(d) The Plan shall remain in effect until such
time as it is terminated by the Board of Directors of the Company. No such
termination shall affect Options granted prior thereto.
(e) Notwithstanding anything in the Plan to the
contrary, the terms and conditions of this Plan shall not be amended more than
once every six months other than to comport with changes in the Internal
Revenue Code, the Employee Retirement Income Securities Act, or the rules
thereunder.
15. EFFECTIVE DATE OF THE PLAN.
The Plan was adopted on July 28, 1987, and is subject to
approval of the holders of a majority of the shares of the Company present at
any meeting of shareholders and entitled to vote thereat. Options may not be
granted under the Plan prior to such shareholder approval.
Adopted by the Board of
Directors on July 28, 1987
7
<PAGE> 1
Exhibit 99.2
ADAC LABORATORIES
1992 STOCK OPTION PLAN,
AMENDED AND RESTATED
1. PURPOSES OF PLAN. The purposes of this 1992 Stock Option Plan
of ADAC Laboratories (the "Plan") are to attract and retain the best available
personnel for positions of substantial responsibility, and to provide
additional incentives to key employees, officers, consultants and other persons
whose efforts are deemed worthy of encouragement in order to promote the growth
and success of the Company's business.
2. DEFINITIONS. As used herein, the following definitions shall
apply:
(a) "BOARD" shall mean the Board of Directors of the
Company.
(b) "CODE" shall mean the Internal Revenue Code of 1986,
as amended.
(c) "COMMON STOCK" shall mean the Common Stock of the
Company.
(d) "COMPANY" shall mean ADAC Laboratories, a California
corporation.
(e) "COMMITTEE" shall mean the Committee appointed by the
Board of Directors in accordance with Section 4(a) below, if one has been
appointed.
(f) "CONSULTANT" shall mean any person who is engaged by
the Company or any Parent or Subsidiary of the Company to render consulting
services.
(g) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT"
shall mean the absence of any interruption or termination of services as an
Employee or Consultant. Continuous Status as an Employee or Consultant shall
not be considered interrupted in the case of sick leave, military leave, or any
other leave of absence approved by the Board, provided that either such leave
is for a period of not more than ninety (90) days or reemployment upon the
expiration of such leave is guaranteed by contract or statute.
(h) "EMPLOYEE" shall mean any person, including an
officer or director, employed by the Company or any Parent or Subsidiary of the
Company. The payment of a director's fee by the Company shall not be
sufficient to constitute "employment" by the Company.
(i) "OFFICER" shall mean any person, including a
director, employed by the Company or any Parent or Subsidiary of the Company
who has been elected an officer of the Company by the Board
<PAGE> 2
ADAC Laboratories
1992 Stock Option Plan,
Amended and Restated
of Directors and who is required to file periodic reports under Section 16(a)
of the Securities Exchange Act of 1934.
(j) "OPTION" or "OPTIONS" shall mean one or more stock
options issued pursuant to the Plan. Options may be either "Incentive
Options," which are defined as Options intended to meet the requirements of
Section 422A of the Code and any regulations promulgated thereunder, or
"Nonqualified Options," which are defined as Options not intended to meet such
requirements.
(k) "OPTIONED STOCK" shall mean the Common Stock subject
to an Option.
(l) "OPTIONEE" shall mean a person who receives an
Option.
(m) "PARENT" shall mean a "parent corporation", whether
now or hereafter existing, as defined in Section 425(e) of the Code.
(n) "PLAN" shall mean this 1992 Stock Option Plan.
(o) "SHARE" shall mean a share of Common Stock, as may be
adjusted in accordance with Section 11 below.
(p) "SUBSIDIARY" shall mean a "subsidiary corporation",
whether now or hereafter existing, as defined in Section 425(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of
Section 11 and Section 4(b)(x) below, the maximum aggregate number of shares
that may be optioned and sold under the Plan is 3,801,000 shares of Common
Stock. If an Option should expire or become unexercisable for any reason
without having been exercised in full, then the unpurchased shares that were
subject to the Option shall, unless the Plan has been terminated, become
available for future grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) APPOINTMENT OF COMMITTEE.
(i) Before any Option under the Plan is granted
to an Officer or Director of the Company, the Board shall
appoint a Committee, comprised of not less than two (2)
members of the Board, each of whom shall be a "disinterested
person", as that term is defined from time to time
2
<PAGE> 3
ADAC Laboratories
1992 Stock Option Plan,
Amended and Restated
in Rule 16b-3 promulgated under the Securities Exchange Act of
1934, as amended, and, in addition, as may be further defined
under Section 162(m) of the Internal Revenue Code of 1986.
The Committee may be an existing committee of the Board or a
new committee organized for the purpose of administering the
Plan. Options granted to any person who is both an employee
and a Director may be granted only by the Committee.
(ii) An Option to an Officer may be granted by the
Board if each member thereof is then a "disinterested person"
(as hereinabove defined). Otherwise, an Option to an Officer
may be granted only by the Committee.
(iii) A Option to a person who is neither an Officer
nor a Director may be granted by either the Board or the
Committee.
(iv) Subject to the foregoing, the Board may, from
time to time, increase the size of the Committee and appoint
additional members thereof, remove members (with or without
cause) and appoint new members in substitution therefor, fill
vacancies however caused or remove all members of the
Committee. All actions of the Board or the Committee, if
taken in accordance with the Company's Bylaws, shall be valid
notwithstanding the fact that one or more of the members
thereof do not constitute "disinterested persons", as
hereinabove defined.
(b) POWERS OF THE BOARD. Subject to the provisions of
the Plan, the Board and the Committee shall have the authority, in its
discretion:
(i) to determine, upon review of relevant
information, the fair market value of the Common Stock;
(ii) to determine the persons to whom Options
shall be granted, the time or times at which Options shall be
granted, the number of Shares to be represented by each Option
and the exercise price per Share;
(iii) to interpret the Plan;
(iv) to prescribe, adopt, amend, and rescind rules
and regulations relating to the Plan;
3
<PAGE> 4
ADAC Laboratories
1992 Stock Option Plan,
Amended and Restated
(v) to determine whether an Option granted shall
be an Incentive Option or a Nonqualified Option and to
determine the terms and provisions of each Option granted
(which need not be identical) and, with the consent of the
holder thereof, to modify or amend each Option;
(vi) to determine the exercise date(s) and the
number of shares exercisable at each such date, and to
accelerate or defer (with the consent of the Optionee) the
exercise date of any Option;
(vii) to authorize any person to execute on behalf of
the Company any instrument required to effectuate the grant of
an Option previously approved by the Board or the Committee;
(viii) to make such adjustments to Options granted
under the Plan to enable them to comply with the laws of
foreign jurisdictions and/or to make them consistent with
options customarily utilized by companies in foreign
jurisdictions;
(ix) to make all other determinations deemed
necessary or advisable for the administration of the Plan.
(x) Notwithstanding the number of shares set
forth in Section 3, the maximum aggregate number of shares
subject to the Plan may be automatically increased by the
Board, at its discretion and without shareholder approval, if
the Board determines in connection with an acquisition of
another business (whether by merger, consolidation or purchase
of assets or otherwise) that it is necessary to grant a
substantial number of new options to employees of, or persons
holding options in, such acquired business to replace existing
options, to grant new options to incentivize the employees or
replace other equity rights previously granted to such persons
by the acquired business. The amount of the additional number
of shares to become subject to the Plan shall not exceed the
number of new options granted in connection with such
acquisition.
(c) EFFECT OF DECISIONS. All decisions, determinations,
and interpretations of the Board or the Committee shall be final and binding on
all Optionees and any other holders of any Options granted under the Plan.
4
<PAGE> 5
ADAC Laboratories
1992 Stock Option Plan,
Amended and Restated
5. ELIGIBILITY; MAXIMUM ANNUAL LIMITATION. Options may be
granted only to Employees, Officers, Consultants or other persons whose efforts
are deemed by the Board or the Committee to be worthy of encouragement in
order to promote the growth and success of the Company. A person who has been
granted an Option may, if he/she is otherwise eligible, be granted an
additional Option or Options. Options under the Plan may not be granted to any
non-employee director. The aggregate number of shares of Common Stock with
respect to which Options may be granted to any one Optionee shall not exceed
300,000 shares in any calendar year, subject to adjustment in accordance with
Section 11.
Neither the Plan nor any Option granted hereunder shall confer
upon any Optionee any right with respect to continuation of employment with the
Company, nor shall it interfere in any way with his/her right or the Company's
right to terminate his/her employment at any time, with or without cause.
6. TERM OF PLAN. The Plan shall continue in effect for a term of
ten (10) years unless sooner terminated under Section 13 below. Options may be
granted hereunder immediately.
7. TERM OF OPTION. The term of any Incentive Option granted
under the Plan shall be for a period of not to exceed ten (10) years from the
date on which it is granted, as determined by the Board of Directors or the
Committee; provided, however, that any Incentive Option granted to any person
who owns shares possessing more than ten percent (10%) of the total combined
voting power or value of all classes of stock of the Company or of a Subsidiary
of the Company shall have a term of not to exceed five (5) years. The term of
a Nonqualified Option shall be for a period of not to exceed ten (10) years
from the date on which it is granted, as determined by the Board of Directors
or the Committee.
8. EXERCISE PRICE AND CONSIDERATION.
(a) EXERCISE PRICE. The per share exercise price for the
Shares to be issued pursuant to the exercise of an Incentive Option shall not
be less than one hundred percent (100%) of the fair market value of the
Company's Common Stock on the date of grant as determined by the Board or the
Committee; provided, however, that any Incentive Option granted to any person
who owns shares possessing more than ten percent (10%) of the total combined
voting power or value of all classes of stock of the Company or of a Subsidiary
thereof shall have a per share exercise price of one hundred ten percent (110%)
of the fair market value of the Company's Common Stock on the date of grant as
determined by the
5
<PAGE> 6
ADAC Laboratories
1992 Stock Option Plan,
Amended and Restated
Board or the Committee. The per share exercise price for Shares to be issued
pursuant to the exercise of a Nonqualified Option shall not be less than one
hundred percent (100%) of the fair market value of the Company's Common Stock
on the date of grant as determined by the Board or the Committee.
(b) FAIR MARKET VALUE. The fair market value shall be
determined by the Board or the Committee in its discretion; provided, however,
that if there is a public market for the Common Stock, the fair market value
per Share shall be, in the event the Common Stock is listed on the NASDAQ
National Market System or on a stock exchange, the closing price on such
National Market System or exchange on the date of grant of the Option, as
reported in the "Wall Street Journal", and, if not so listed, fair market value
shall be the mean of the bid and asked prices of the Common Stock on the date
of the grant, as reported in the "Wall Street Journal" (or, if not so reported,
as otherwise reported by the National Association of Securities Dealers
Automated Quotation (NASDAQ) System).
(c) CONSIDERATION. The consideration to be paid for the
Shares to be issued upon exercise of an Option, including the method of
payment, shall be determined by the Board or the Committee and may consist
entirely of cash, check, promissory note or shares of Company Common Stock
(which must have been held for at least six (6) months) having a fair market
value on the date of surrender equal to the aggregate exercise price of the
Shares as to which the Option shall be exercised, or any combination of such
methods of payment, or other consideration and method of payment for the
issuance of Shares to the extent permitted under Section 408 and 409 of the
California General Corporation Law. In making its determination as to the type
of consideration to accept, the Board or the Committee shall consider whether
such consideration may be reasonably expected to benefit the Company.
(d) RE-LOAD OPTION. Whenever an Optionee exercises an
Option by surrendering already-owned shares to pay all or a portion of the
exercise price, if the Option Agreement so provides or if permitted by the
Board or the Committee, at its discretion, at the time of such exercise, the
Optionee shall receive a new Option for the purchase of a number of Shares
equal to the number of Shares so surrendered, and such new Option shall have an
exercise price of not less than the fair market value of a Share of Common
Stock on the date of such surrender and shall vest and become exercisable as
may be determined by the Board or the Committee.
6
<PAGE> 7
ADAC Laboratories
1992 Stock Option Plan,
Amended and Restated
(e) WITHHOLDING TO PAY TAXES. Option Agreements under
the Plan may contain a provision to the effect that all Federal and state taxes
required to be withheld or collected from an Optionee upon exercise of an
Option may be satisfied by either (i) delivering outstanding shares of Common
Stock of the Company previously owned for six (6) months by the Optionee or
(ii) the withholding of a sufficient number of exercised Option shares which,
valued at fair market value on the date of exercise, would be equal to the
total withholding obligation of the Optionee; provided, however, that no person
who is an "officer" of the Company, as such term is defined in Rule 3b-2 under
the Securities Exchange Act of 1934, may elect to satisfy the withholding of
Federal and state taxes upon the exercise of an Option by the withholding of
Optioned Stock unless such election is made either (i) at least six months
prior to the date that the exercise of the Option becomes a taxable event or
(ii) during any of the periods beginning on the third business day following
the date on which the Company releases publicly the operating results of a
fiscal quarter or fiscal year and ending on the twelfth (12th) business day
following such date. Such election shall be deemed made upon receipt of notice
thereof by an officer of the Company, by mail, personal delivery or by
facsimile message, and shall be operative for all Option exercises which occur
following the election, until terminated by a notice revoking such withholding
election (such termination shall become effective six (6) months after the date
of such new notice).
9. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER.
(i) Any Option granted hereunder shall be
exercisable at such times and under such conditions as determined by the Board
or the Committee, including performance criteria with respect to the Company
and/or the Optionee, and as otherwise permissible under the terms of the Plan.
(ii) An Option may not be exercised for a fraction
of a Share.
(iii) An Option shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance
with the terms of the Option by the person entitled to exercise the Option and
full payment for the Shares with respect to which the Option is exercised has
been received by the Company; provided, however, that the Board or the
Committee may prescribe and adopt rules and procedures allowing an Optionee to
exercise an Option and sell the Optioned Stock simultaneously (or on the same
7
<PAGE> 8
ADAC Laboratories
1992 Stock Option Plan,
Amended and Restated
business day) under circumstances which provide reasonable certainty that the
Company will receive the Option exercise price by the settlement date of the
sale of the Optioned Stock. Until the issuance (as evidenced by an appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company) of the stock certificate evidencing such Shares, no right to vote or
receive dividends or any other rights as a shareholder shall exist with respect
to the Optioned Stock, notwithstanding the exercise of the Option. No
adjustment shall be made for a dividend or other right for which the record
date is prior to the date the stock certificate is issued, except as provided
in Section 11 below.
(iv) Exercise of an Option in any manner shall
result in a decrease in the number of Shares which thereafter may be available,
both for purposes of the Plan and for exercise under the Option, by the number
of Shares as to which the Option is exercised.
(b) TERMINATION OF CONTINUOUS STATUS AS AN EMPLOYEE OR
CONSULTANT.
(i) Except as set forth in Section 9(b)(ii)
below, if an Employee or Consultant ceases his/her Continuous Status as an
Employee or Consultant (as the case may be), he/she may, but only within ninety
(90) days (or, with respect to Nonqualified Options, such longer period of time
as may be determined by the Board or the Committee), after the date he/she
ceases to have such Continuous Status, exercise his/her Option to the extent
that he/she was entitled to exercise it at the date of such termination.
(ii) Notwithstanding the provisions of Section
9(b)(i) above, if the holder of an Option (A) is terminated due to Optionee's
willful refusal to perform the normal and/or reasonable duties and
responsibilities delegated to Optionee as an Employee of the Company, (B) is
terminated due to Optionee's expropriation of Company property (including trade
secrets or other proprietary rights), or (C) leaves the employment of the
Company in order to directly (or indirectly, as an employee or agent of another
business or business entity) compete with the Company, the Board or the
Committee shall have the authority, by notice to the holder of an Option, to
immediately terminate such Option, effective on the date of termination, and
such Option shall no longer be exercisable to any extent whatsoever.
(c) RETIREMENT. Notwithstanding the provisions of
Section 9(a) above, if an Optionee ceases Continuous Status as an
8
<PAGE> 9
ADAC Laboratories
1992 Stock Option Plan,
Amended and Restated
Employee or Consultant as a result of retiring as an active Employee or
Consultant of the Company at age 62 or older, such ninety-day period shall be
extended to one (1) year. To the extent that Optionee was not entitled to
exercise the Option at the date of such termination, or if Optionee does not
exercise such Option within the time specified herein, the Option shall
terminate.
(d) DISABILITY. Notwithstanding the provisions of
Section 9(a) above, in the event an Employee or Consultant is unable to
continue his/her employment or consulting relationship (as the case may be)
with the Company as a result of his/her total and permanent disability (as
defined in Section 105(d)(4) of the Code), he/she may, but only within a period
of up to twenty-four (24) months (or such shorter or longer period of time as
is determined by the Board or the Committee or as set forth in the Option
Agreement) from the date of termination, exercise the Option to the extent
Optionee was entitled to exercise it at the date of such termination. To the
extent that Optionee was not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option within the time
specified herein, the Option shall terminate.
(e) DEATH OF OPTIONEE. In the event of the death of an
Optionee which occurs during the time in which an Option may be exercised, such
Option may be exercised at any time within two (2) years following the date of
death or such shorter period as may be set forth in the Option Agreement, by
the Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent of the right to
exercise that would have accrued had the Optionee continued living and remained
in Continuous Status as an Employee or Consultant for two (2) years after the
date of death.
(f) DESIGNATION OF BENEFICIARY. Notwithstanding anything
in the Plan to the contrary, any Option Agreement issued under the Plan may
provide for the designation of a beneficiary of the Optionee (which may be an
individual or a trust) who may exercise the Option after the Optionee's death
and enjoy the economic benefits thereof, subject to the consent of Optionee's
spouse if required by law.
10. NON-TRANSFERABILITY OF OPTIONS.
Options shall not be transferable by the holder thereof
otherwise than (i) by will, (ii) pursuant to the laws of descent and
distribution or (iii) pursuant to a dissolution of marriage, whether pursuant
to a qualified domestic relationship order,
9
<PAGE> 10
ADAC Laboratories
1992 Stock Option Plan,
Amended and Restated
stipulation between the optionholder and spouse or otherwise; provided,
however, that an Optionee may designate a beneficiary who, upon Optionee's
death, may exercise the Option to the extent permitted in Section 9 of the
Plan.
11. ADJUSTMENTS.
(a) STOCK SPLITS, DIVIDENDS AND OTHER COMBINATIONS.
Subject to any required action by the shareholders of the Company, the number
of shares of Common Stock covered by each outstanding Option, and the number of
shares of Common Stock which have been authorized for issuance under the Plan
but as to which no Options have yet been granted or which have been returned to
the Plan upon cancellation or expiration of an Option, as well as the price per
share of Common Stock covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall
be made by the Board or the Committee, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein,
no issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Option.
(b) DISSOLUTION OR LIQUIDATION. In the event of the
proposed dissolution or liquidation of the Company, each Option shall terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board or the Committee. The Board or the Committee may, in the
exercise of its sole discretion in such instances, declare that any Option
shall terminate as of a date fixed by the Board or the Committee and give each
Optionee the right to exercise his/her Option as to all or any part of the
Optioned Stock, including Shares as to which the Option would not otherwise be
exercisable.
(c) SALE OF ASSETS OR MERGER. In the event of a proposed
sale of all or substantially all of the assets of the Company, or the merger of
the Company with or into another corporation, the Option shall be assumed or an
equivalent option
10
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ADAC Laboratories
1992 Stock Option Plan,
Amended and Restated
(containing the same vesting schedule and equivalent exercise price) shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless the Board or the Committee determines, in the
exercise of its sole discretion and in lieu of such assumption or substitution,
that the Optionee shall have the right to exercise the Option as to all of the
Optioned Stock, including Shares as to which the Option would not otherwise be
exercisable. If the Board or the Committee makes an Option fully exercisable
in lieu of assumption or substitution in the event of a merger or sale of
assets, then the Board shall notify the Optionee that the Option shall be fully
exercisable for a period of thirty (30) days from the date of such notice, and
the Option shall terminate upon the expiration of such period.
(d) CHANGE IN CONTROL.
(i) Except and to the extent provided otherwise
in, or limited by, employment, severance or similar written agreements between
the Company and an Optionee, ten (10) days prior to a "Change in Control" (as
defined below), all stock options which are then not exercisable shall
immediately vest and become exercisable, regardless of the original vesting
schedule. A "Change in Control" of the Company shall be deemed to have
occurred if (a) any "person" or "group" (as defined in or pursuant to Sections
13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), becomes the "beneficial owner" (as defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of securities of
the Company representing 40% or more of the voting power of the common stock
outstanding which votes generally for the election of directors; (b) as a
result of market or corporate transactions or shareholder action, the
individuals who constitute the Board of Directors of the Company at the
beginning of any period of 12 consecutive months (but commencing not earlier
than July 1, 1995), plus any new directors whose election or nomination was
approved by a vote of at least two-thirds of the directors still in office who
were directors at the beginning of such period of 12 consecutive months, cease
for any reason during such period of 12 consecutive months to constitute at
least two-thirds of the members of such Board; or (c) the Company sells,
through merger, assignment or otherwise, in one or more transactions other than
in the ordinary course of business, assets which provided at least 2/3 of the
revenues or pre-tax net income of the Company and its subsidiaries on a
consolidated basis during the most recently-completed fiscal year.
(ii) Notwithstanding paragraph (i) above, the
following events shall not constitute a Change in Control: any
11
<PAGE> 12
ADAC Laboratories
1992 Stock Option Plan,
Amended and Restated
acquisition of beneficial ownership pursuant to (a) a reclassification, however
effected, of the Company's authorized common stock, or (b) a corporate
reorganization involving the Company or any of its subsidiaries which does not
result in a material change in the ultimate ownership by the shareholders of
the Company (through their ownership of the Company or its successor resulting
from the reorganization) of the assets of the Company and its subsidiaries, but
only if such reclassification or reorganization has been approved by the
Company's Board of Directors.
12. SPECIAL PROVISIONS RELATING TO INCENTIVE OPTIONS. The Company
shall not grant Incentive Options under the Plan to any Optionee to the extent
that the aggregate fair market value of the Common Stock covered by such
Incentive Options which are exercisable for the first time during any calendar
year, when combined with the aggregate fair market value of all stock covered
by incentive stock options granted to such Optionee after December 31, 1986 by
the Company, its Parent or a Subsidiary thereof which are exercisable for the
first time during the same calendar year, exceeds $100,000. Incentive Options
shall be granted only to persons who, on the date of grant, are Employees of
the Company or a Parent or a Subsidiary of the Company. Notwithstanding the
above, to the extent the fair market value of Shares subject to Incentive Stock
Options first exercisable in a calendar year is greater than $100,000, the
excess Options shall be treated as Non-qualified Options.
13. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board or the
Committee may at any time suspend, amend or terminate the Plan with or without
shareholder approval; provided, however, that if the Plan has been previously
approved by the shareholders, no amendment or modification may be adopted
without shareholder approval if the amendment would (i) materially increase the
benefits accruing to participants under the Plan; (ii) materially increase the
number of Shares which may be issued under the Plan or (iii) materially modify
the requirements as to the eligibility for participation in the Plan.
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such
amendment or termination of the Plan shall not affect Options already granted
and such Options shall remain in full force and effect as if the Plan had not
been amended or terminated, unless mutually agreed otherwise between the
Optionee and the Board or the Committee, which agreement must be in writing and
signed by the Optionee and the Company.
12
<PAGE> 13
ADAC Laboratories
1992 Stock Option Plan,
Amended and Restated
14. CONDITIONS UPON ISSUANCE OF SHARES.
(a) COMPLIANCE WITH SECURITIES LAWS. Shares shall not be
issued pursuant to the exercise of an Option unless the exercise of such Option
and the issuance and delivery of such Shares pursuant thereto complies with all
relevant provisions of law, including, without limitation, the Securities Act
of 1933, the Securities Exchange Act of 1934, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the Shares may then be listed. The exercise of such Option and the issuance
and delivery of such Shares pursuant thereto shall be further subject to the
approval of counsel for the Company with respect to such compliance.
(b) INVESTMENT REPRESENTATION. As a condition to the
exercise of an Option, the Company may require the person exercising such
Option to represent and warrant at the time of any such exercise that the
Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
relevant provisions of law.
15. RESERVATION OF SHARES. The Company, during the term of the
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan. The inability of
the Company to obtain authority from any regulatory body having jurisdiction,
which authority is deemed by the Company's counsel to be necessary to the
lawful issuance and sale of any Shares hereunder, shall relieve the Company of
any liability in respect of the failure to issue or sell such Shares as to
which such requisite authority shall not have been obtained.
16. OPTION AGREEMENTS. Options shall be evidenced by written
Option Agreements in such form as the Board or the Committee shall approve.
17. SHAREHOLDER APPROVAL. The Plan shall become effective when
approved by the Board or any committee thereof having authority to do so and
the shareholders of the Company.
Adopted and Approved
Effective July 8, 1992
13
<PAGE> 1
Exhibit 99.3
ADAC LABORATORIES
AMENDED AND RESTATED
EMPLOYEE STOCK PURCHASE PLAN (1994)
1. ESTABLISHMENT OF THE PLAN; PURPOSE. This Employee Stock
Purchase Plan (1994) (the "Plan") is established to provide Eligible Employees
with an opportunity through regular payroll deductions to purchase Common Stock
of ADAC Laboratories (the "Company") so that they may increase their
proprietary interest in the Company. The Plan is intended to qualify as an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code.
2. DEFINITIONS. As used herein, the following definitions shall
apply:
(a) "Board of Directors" means the Committee, if one has
been appointed, or the Board of Directors of the Company if no Committee has
been appointed.
(b) "Code" means the Internal Revenue Code, as amended
from time to time.
(c) "Committee" means the committee appointed by the
Board of Directors to administer the Plan in accordance with Section 3 below,
if one is appointed.
(d) "Company" means ADAC Laboratories and such present or
future Subsidiaries, as defined in Section 424 of the Code, of the Company as
the Board of Directors shall from time to time designate.
(e) "Compensation" means the annual base rate of pay of a
Participant, determined in accordance with nondiscriminatory rules adopted by
the Board of Directors, including commissions, but excluding bonuses, income
with respect to stock options or other stock purchases, moving expense
reimbursements, shift differentials or any pay for work outside the regular
work schedule.
(f) "Eligible Employee" means any regular employee of the
Company who is customarily employed for at least 20 hours per week and more
than five (5) months in any calendar year.
(g) "Fair Market Value" of a share of Stock means the
NASDAQ closing price on the applicable date. In the event the Stock is not
traded on the date as of which the Fair Market Value is to be determined, Fair
Market Value shall be determined as of the next preceding date on which the
Stock is traded.
(h) "Interim Offering Period" means each period (of up to
three months in duration) during and within an Offering Period, all as
established by the Board of Directors.
<PAGE> 2
ADAC Laboratoires
Amended and Restated
Employee Stock Purchase Plan (1994)
(i) "Option" means the right of a Participant to purchase
Stock during the applicable Offering Period.
(j) "Offering Date" means the first day of each Offering
Period.
(k) "Offering Period" means, in the absence of a specific
determination to the contrary by the Board of Directors or the Committee, a
27-month period during which contributions may be made toward the purchase of
Stock under the Plan. The Board of Directors or the Committee shall establish
from time to time Option Periods which shall be up to twenty-seven (27) months.
The first Offering Period under the Plan shall commence March 1, 1994.
(l) "Participant" means an Eligible Employee who elects
to participate in the Plan.
(m) "Plan Account" means the account established for each
Participant pursuant to the Plan. No interest shall accrue for the Participant
in the Plan Account.
(n) "Purchase Price" means the price at which
Participants may purchase Stock as determined pursuant to the Plan.
(o) "Stock" means the Common Stock of the Company.
(p) "Subsidiary" means a corporation a majority of whose
voting shares are owned by the Company.
3. ADMINISTRATION. The Plan shall be administered by the Board
of Directors and/or by a duly appointed Committee consisting of two or more
persons, at least two of which shall be members of the Board of Directors, and
having such powers as shall be specified by the Board. The Board of Directors
may from time to time remove members from, or add members to, the Committee.
Vacancies on the Committee, howsoever caused, shall be filled by the Board of
Directors. The Committee shall select one of its members as Chairman, and shall
hold meetings at such times and places as it may determine. The interpretation
and construction by the Board of Directors or the Committee of any provision of
the Plan or of any right to purchase Stock shall be conclusive and binding on
all persons.
4. NUMBER OF SHARES TO BE OFFERED. The maximum aggregate number
of shares which shall be offered under the Plan shall be 185,000 shares of
Stock, subject to adjustment as provided in Section 8 hereof. In the event
that any Option granted under the Plan expires or is terminated for any reason,
such shares allocable to the unexercised portion of such Option shall again be
subject to an Option under the Plan.
2
<PAGE> 3
ADAC Laboratoires
Amended and Restated
Employee Stock Purchase Plan (1994)
5. ELIGIBILITY AND PARTICIPATION.
(a) INITIAL PARTICIPATION. An Eligible Employee shall
become a Participant on the Offering Date after satisfying the eligibility
requirements by delivering to the Company's payroll office an enrollment form
authorizing payroll deductions not less than ten (10) business days prior to
such Offering Date. An Eligible Employee who did not enroll in the Plan prior
to the Offering Date, or a person who becomes an Eligible Employee after an
Offering Date, may enroll in the Plan for the remainder of the Offering Period
as of the beginning of the next Interim Offering Period by completing and
filing an enrollment form prior to the commencement date of such Interim
Offering Period.
(b) CONTINUED PARTICIPATION. A Participant shall
automatically participate in each successive Offering Period (including Interim
Offering Periods) until such time as such Participant withdraws from the Plan
as set forth below. A Participant is not required to file any additional
enrollment forms for subsequent Offering Periods in order to continue
participation in the Plan.
(c) PAYROLL DEDUCTION RATE. The Participant shall
designate on the enrollment form the percentage of Compensation which he or she
elects to have withheld for the purchase of Stock, which may be any whole
percentage from 1% to 10% of the Participant's Compensation. A Participant may
reduce (but not increase) the rate of payroll withholding during an Offering
Period by filing an amended enrollment form with the Committee at any time
prior to the last day of any Interim Offering Period (for which such change is
to be effective), but not more than three (3) changes may be made in any
Offering Period (or such other number of changes as may be approved by the
Board or the Committee). A Participant may increase or decrease the rate of
payroll deduction for any subsequent Offering Period by filing with the Company
a new authorization for payroll deductions not less than ten (10) days prior to
the Offering Date for such subsequent Offering Period.
By enrolling in the Plan, a Participant shall be deemed to
have elected to purchase the maximum number of whole shares of Stock which can
be purchased with the amount of the Participant's Compensation which is
withheld during the Offering Period; provided, however, that with respect to
any Interim Offering Period no Participant may purchase more than 100 shares of
Stock or shares of Stock in excess of the amount permitted under Section 9.
(d) OFFERING PERIOD. Any Options granted pursuant to the
Plan shall be subject to the Company obtaining all necessary governmental
approvals and/or qualifications of the sale and/or issuance of Options and/or
Stock.
3
<PAGE> 4
ADAC Laboratoires
Amended and Restated
Employee Stock Purchase Plan (1994)
(e) PURCHASE PRICE. The Purchase Price for each share of
Stock to be purchased under the Plan shall be eighty-five percent (85%) of the
Fair Market Value of such share on either (i) the Offering Date (or the date of
entry for new or re-enrolling employees) or (ii) the last day of each Interim
Offering Period, whichever is less.
(f) CONTRIBUTIONS. The Purchase Price of the Stock shall
be accumulated by payroll deductions throughout the Offering Period, which
shall be applied automatically to purchase Stock at the end of each Interim
Offering Period. In the absence of a contrary determination prior to the
commencement of an Offering Period, each Interim Offering Period shall have the
durations described in Section 2(h) of the Plan. At the end of each Interim
Offering Period, accrued payroll deductions will be automatically applied to
the purchase of Stock at the Purchase Price as hereinabove defined. Payroll
deductions shall commence on the first payday following the Offering Date (or,
in the case of a new or re-enrolling employee, on the first payday following
the commencement of the applicable Interim Offering Period) and shall continue
to the end of the Offering Period unless sooner altered or terminated as
provided in the Plan.
(g) EFFECT OF LEAVE OF ABSENCE. During a leave of
absence approved by the Company, a Participant may, for such period as the
Committee shall deem reasonable, continue contributions to the Plan by making
cash payments to the Company on his normal paydays in an amount equal to the
difference between the amount of his regular payroll deductions taken while
such employee was participating under the Plan and the amount of his payroll
deductions taken while on such leave of absence. Failure to pay any
installment within ten (10) days after the payday on which it is due shall be
treated as a withdrawal from the Plan.
(h) PURCHASE OF STOCK. The Company will maintain a Plan
Account on its books in the name of each Participant. On each payday the
amount deducted from the Participant's Compensation will be credited to the
Participant's Plan Account. No interest shall accrue on any such payroll
deductions. As of the last day of each Interim Offering Period the amount then
in the Participant's Plan Account will be divided by the Purchase Price and the
amount in the Participant's Plan Account shall be used to purchase the number
of whole shares of Stock which result. Share certificates representing the
number of shares of Stock so purchased shall be issued and delivered to the
Participant as soon as reasonably practicable after the close of each Interim
Offering Period. Any amount remaining in the Participant's Plan Account at the
end of an Offering Period after deducting the amount of the Purchase Price for
the number of whole shares issued to the Participant shall remain in the
Participant's Plan Account, without any accrual of
4
<PAGE> 5
ADAC Laboratoires
Amended and Restated
Employee Stock Purchase Plan (1994)
interest, and shall be applied against the purchases to be made during the next
Interim Offering Period.
(i) WITHDRAWAL. A Participant may elect to withdraw from
participation in the Plan at any time up to the last day of an Interim Offering
Period by filing the prescribed form with the Committee. At the time of
withdrawal, the amount credited to the Participant's Plan Account will be
refunded in cash, without interest. Upon withdrawal from the Plan, the
accumulated payroll deductions shall be returned to the withdrawn Participant
and the withdrawn Participant's interest in the Plan shall terminate. In the
event a Participant voluntarily elects to withdraw from the Plan, such
Participant may not resume participation in the Plan until after the expiration
of one complete Interim Offering Period; provided, however, notwithstanding the
duration of any Interim Offering Period, any officer or director of the Company
participating under the Plan may not resume participation in the Plan for at
least six (6) months after his or her withdrawal. Re-enrollment in the Plan
shall be made in the same manner as set forth above for initial participation
in the Plan.
(j) PRO RATA ALLOCATION. In the event that the aggregate
number of shares which all Participants elect to purchase during an Interim
Offering Period shall exceed the number of shares remaining available for
issuance under the Plan, the number of shares to which each Participant shall
become entitled shall be determined by multiplying the number of shares
available for issuance by a fraction, the numerator of which is the sum of the
number of shares the Participant has elected to purchase and the denominator of
which is the sum of the number of shares which all Participants have elected to
purchase.
6. EFFECT OF TERMINATION OF EMPLOYMENT. Termination of a
Participant's employment for any reason, including retirement or death, or the
failure of a Participant to remain an Eligible Employee shall be treated as a
withdrawal under the Plan. In the event of the Participant's death, the refund
of the Participant's Plan Account shall be paid, without interest, to the
representative of the Participant's estate. A transfer by a Participant from
the Company to a Subsidiary, from one Subsidiary to another, or from a
Subsidiary to the Company shall not be treated as a termination of employment.
7. RIGHTS NOT TRANSFERABLE.
The rights or interests of any Participant in the Plan, in any
Option granted under the Plan, or in any Stock or moneys to which he or she may
be entitled under the Plan, shall not be transferable by voluntary or
involuntary assignment or by operation of law, or by any other manner otherwise
than by will or the applicable laws of descent and distribution. If the
Participant
5
<PAGE> 6
ADAC Laboratoires
Amended and Restated
Employee Stock Purchase Plan (1994)
shall in any manner attempt to transfer, assign or otherwise encumber his or
her rights or interests under the Plan, other than by will, such act shall be
treated as a withdrawal from the Plan.
8. RECAPITALIZATION, ETC.
Subject to any required action by the shareholders of the
Company, the number of shares of Stock covered by each Option under the Plan
which has not yet been exercised and the number of shares of Stock which have
been authorized for issuance under the Plan but have not yet been placed under
an Option (collectively the "Reserves"), as well as the price per share of
Stock covered by each Option under the Plan which has not yet been exercised,
shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of Stock, or any other increase or
decrease in the number of shares of Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issue by the Company of
the shares of Stock of any class shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of shares of Stock
subject to an Option.
In the event of the proposed dissolution or liquidation of the
Company, the Offering Period will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the Board.
In the event of a proposed sale of all or substantially all of the assets of
the Company, or the merger of the Company with or into another corporation,
each Option under the Plan shall be assumed or an equivalent option shall be
substituted by such successor corporation, unless the Board determines, in the
exercise of its sole discretion and in lieu of such assumption or substitution,
that the Participant shall have the right to exercise the Option as to all of
the optioned Stock, including shares as to which the Option would not otherwise
be exercisable. If the Board makes an Option fully exercisable in lieu of
assumption or substitution in the event of a merger or sale of assets, the
Board shall notify the Participant that the Option shall be fully exercisable
for a period of thirty (30) days from the date of such notice, and the Option
will terminate upon the expiration of such period.
The Board may also, if it so determines in the exercise of its
sole discretion, make provision for adjusting the Reserves, as well as the
price per share of Stock covered by each outstanding Option, in the event that
the Company effects one or more reorgani-
6
<PAGE> 7
ADAC Laboratoires
Amended and Restated
Employee Stock Purchase Plan (1994)
zations, recapitalization, rights offerings or other increases or reductions of
shares of its outstanding Stock, and in the event of the Company being
consolidated with or merged into any other corporation.
9. LIMITATION ON STOCK OWNERSHIP.
Notwithstanding any provision herein to the contrary, no
Participant shall be granted a right to purchase Stock pursuant to Section 5 if
such Participant, immediately after electing to purchase such Stock, would own
Stock possessing five percent (5%) or more of the total combined voting power
or value of all classes of stock of the Company or any parent or Subsidiary of
the Company, or (ii) if under the terms of the Plan the rights of the employee
to purchase Stock under this and all other qualified employee stock purchase
plans of the Company or its Subsidiaries would accrue at a rate that exceeds
$25,000 of fair market value of such Stock (determined at the time such right
is granted) for each calendar year for which such right is outstanding at any
time. For purposes of this Section 9, ownership of Stock shall be determined by
the attribution rules of Section 424(d) of the Code and Participants shall be
considered to own any Stock which they have a right or option to purchase under
this or any other plan.
10. RIGHTS AS AN EMPLOYEE.
Nothing in the Plan shall be construed to give any Participant
the right to remain in the employ of the Company or a Subsidiary or to affect
the right of the Company and its Subsidiaries or the Participant to terminate
such employment at any time with or without cause.
11. RIGHTS AS A SHAREHOLDER.
A Participant shall have no rights as a shareholder with
respect to any shares of Stock he or she may have a right to purchase under the
Plan until the date of issuance of a stock certificate to such Participant for
shares issued pursuant to the Plan.
12. AMENDMENT OR TERMINATION OF THE PLAN.
The Board of Directors shall have the right to amend, modify
or terminate the Plan at any time without notice, provided that no
Participant's existing rights are adversely affected thereby, and provided
further that no amendment to the Plan shall be effective until such amendment
is approved by a vote of the holders of at least a majority of the outstanding
shares of Common Stock of the Company within twelve months before or after the
date upon which such action is taken by the Board of Directors, if such
amendment would:
7
<PAGE> 8
ADAC Laboratoires
Amended and Restated
Employee Stock Purchase Plan (1994)
(a) Increase the aggregate number of shares of Stock to
be issued under the Plan (except as provided in Section 8 hereof);
(b) Materially modify the requirements for eligibility to
participate in the Plan;
(c) Increase the maximum number of shares of Stock which
a Participant may purchase in any Offering Period;
(d) Extend the term of the Plan;
(e) Alter the Purchase Price formula so as to reduce the
price for shares of Stock to be purchased under the Plan;
(f) Otherwise materially increase the benefits accruing
to Participants under the Plan; or
(g) Cause the Plan to fail to meet the requirements of an
"employee stock purchase plan" under Section 423 of the Code.
The Plan shall terminate on December 31, 2003, unless it has
been earlier terminated pursuant to this Section 12, but the Plan shall remain
in full force and effect until the end of the Offering Period then in effect.
Adopted by the Board of Directors on November 3, 1993 and approved by the
Shareholders on March 2, 1994; amended by the Board of Directors on June 11,
1995; and amended by the Board of Directors on November 2, 1995 and approved by
the Shareholders on March 6, 1996.
8
