<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:
[ ] Preliminary Proxy Statement
[X] 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 11, 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 11, 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 of the Company. 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
4
<PAGE> 7
healthcare 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,
a heathcare information company that develops and markets clinical and financial
decision support systems. 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 was elected a director in 1987. He is a co-founder and since 1968
has served as the 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 also 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 accomplishment 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 operating 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 Company's 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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<PAGE> 9
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 foregoing 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, or the Securities Exchange Act of 1934, as amended, 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 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, the last trading day of fiscal 1996, as reported on the
Nasdaq Stock Market, of $20.00, 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 and 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 in the 1992
Plan, and instead participate in the Directors' Option Plan (1987).
The 1992 Plan sets a limit of 300,000 shares that 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 (a "10% Owner") 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.
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 is a 10% Owner. 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 at least six (6) months by the optionee or (ii) withholding
of a sufficient
12
<PAGE> 15
number 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 (the "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 (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
its exercise, 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, 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 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 in 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 consists of an interim three-month purchase period.
At the end of each three-month interim purchase period, shares are 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 or her 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, except employees
who are customarily employed for less than 20 hours per week or for less than 5
months in any calendar year. 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 or her 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 participate 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.
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<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
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 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 granted annually 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 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 under the Directors' Plan 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 Stock Market 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 Amendment to 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 and the regulations promulgated
thereunder.
VOTE REQUIRED
Approval of the amendment to the Directors' Plan requires the affirmative
vote of the holders of a majority of the 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 impair 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, as amended, 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 14, 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,
/s/ DAVID L. LOWE
David L. Lowe,
Chairman of the Board
Dated: February 11, 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.
