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 [ ] Soliciting Material Pursuant to
sec.240.14a-11(c) or sec.240.14a-12
[X] Definitive Proxy Statement [ ] Confidential, for Use of the
Commission Only
[ ] Definitive Additional Materials (as permitted by Rule 14a-6(e)(2))
ADAC Laboratories
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(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):
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[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
ADAC LABORATORIES
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
March 5, 1998
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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 5, 1998, 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 reserve for issuance thereunder an additional 847,000
shares;
(3) To approve an amendment to the Company's Employee Stock
Purchase Plan (1994) to reserve for issuance thereunder an
additional 100,000 shares;
(4) To ratify the adoption by the Company's subsidiary, ADAC
Healthcare Information Systems, Inc., of its 1997 Stock Option
Plan; and
(5) 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
5, 1998 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 28, 1997, 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,
/s/ Karen L. Masterson
Karen L. Masterson
Secretary
Milpitas, California
February 3, 1998
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 Thursday, March 5, 1998, 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 3, 1998.
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 5, 1998
are entitled to notice of and to vote at the meeting. At the record
date, there were issued and outstanding 19,081,756 shares of Common
Stock, each entitled to one vote.
The following table sets forth, as of November 30, 1997, 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 Percent
Ownership of
(a) Directors, Nominees and Certain of Common Voting
Executive Officers Stock(1) Shares (1)
- ---------------------------------------- ----------------- ---------
<S> <C> <C>
Stanley D. Czerwinski 70,825 (2) *
R. Andrew Eckert 123,837 (3) *
Graham O. King 23,840 (4) *
David L. Lowe 135,033 (5) *
F. David Rollo 31,668 (6) *
Edmund H. Shea, Jr. 499,524 (7) 2.6%
Mark L. Lamp 104,814 (8) *
Karen L. Masterson 5,000 (9) *
P. Andre Simone 16,250 (10) *
Peter C. Vermeeren 37,500 (11) *
All Directors and Executive
Officers as a group (11 persons) 1,093,290 (12) 5.7%
</TABLE>
<TABLE>
<CAPTION>
Beneficial Percent
Ownership of
of Common Voting
(b) Other Principal Shareholders Stock(1) Shares
- ---------------------------------------- ----------------- ---------
<S> <C> <C>
CREF 1,395,533 7.3%
730 Third Avenue
New York, New York 10017
</TABLE>
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* Less than one percent (1%).
(1) Based on information furnished by the persons named and
19,024,666 shares of Common Stock outstanding as of December 1,
1997. All references to options include options that were
exercisable on November 30, 1997 and within sixty (60) days
thereafter.
(2) Includes 47,500 shares issuable upon exercise of options held
by Mr. Czerwinski.
(3) Includes 123,250 shares issuable upon exercise of options held
by Mr. Eckert.
(4) Includes 20,000 shares issuable upon exercise of options held
by Mr. King. Also includes 2,600 shares held by the Leola J.
King Pension Fund, of which Mr. King is a trustee.
(5) Includes 135,033 shares issuable upon exercise of options held
by Mr. Lowe.
(6) Includes 11,667 shares issuable upon exercise of options held
by Dr. Rollo.
(7) Includes 24,999 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.
(8) Includes 103,514 shares issuable upon exercise of options held
by Mr. Lamp.
(9) Includes 5,000 shares issuable upon exercise of options held
by Ms. Masterson.
(10) Includes 16,250 shares issuable upon exercise of options held
by Mr. Simone.
(11) Includes 37,500 shares issuable upon exercise of options held
by Mr. Vermeeren.
(12) Includes options to purchase 569,712 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 adoption by ADAC Healthcare Information
Systems, Inc. of its 1997 Stock Option Plan (Proposal 4).
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 4. 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 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).
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 six members to serve on
the Board of Directors. The persons presently serving as directors,
Messrs. Czerwinski, Eckert, King, Lowe, Shea and Rollo, are proposed
for election as directors. The proxy holders will be voting for all
six 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.
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 (62) Consultant 1991
R. Andrew Eckert (36) Chief Executive Officer of the Company 1996
Graham O. King (57) Chairman of the Board and Chief 1995
Executive Officer of US Servis, Inc.
David L. Lowe (37) Chairman of the Board of the Company 1992
F. David Rollo (58) Senior Vice-President of Medical Affairs 1991
and Executive Medical Director of
Raytel Medical Corporation
Edmund H. Shea, Jr. (68) Executive Vice-President and a director 1987
of J.F. Shea Co., Inc.
</TABLE>
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. In August 1997,
Mr. Eckert became the Chief Executive Officer of the Company. From
March 1997 until August 1997, Mr. Eckert served as the President and
Chief Operating Officer of the Company. From November 1994 to March
1997, he served as President and General Manager of ADAC Medical
Systems, and from February 1992 to November 1994, he served as
Executive Vice-President and General Manager of the Company's
nuclear medicine business. 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 elected 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.
Mr. Lowe is currently serving as Chairman of the Board of Directors,
a position he has held since March 1996. Mr. Lowe served as Chief
Executive Officer of the Company from November 1994 until August
1997, as Co-Chief Executive Officer from March 1994 until November
1994, and as President of the Company from February 1992 until
November 1994. 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.
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 healthcare
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 co-founded, 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 Ironstone Group, Inc., a real and personal property tax
appeal company.
Board Meetings, Committees and Directors' Compensation
The Board of Directors of the Company held a total of four regular
meetings and four special meetings during the fiscal year ended
September 28, 1997. 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, the Stock Option Committee and the Governance
Committee each held one meeting, and the Compensation Committee held
two meetings, in fiscal 1997.
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. King, Lowe and Shea, and the Audit Committee
presently consists of Messrs. Czerwinski and Rollo.
During fiscal 1997, each non-employee director received an option
to purchase 3,333 shares of the Company's Common Stock under the
Company's Directors' Stock Option Plan, subject to a specified
vesting schedule. In addition, 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 and Messrs.
Czerwinski and King also received consulting fees of $2,500, $2,000
and $9,500, respectively, for certain services provided to the
Company in fiscal 1997.
(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 options may be granted for the
purchase of Common Stock, the 1992 Stock Option Plan (the "1992
Plan"). As of November 10, 1997, a total of 4,513,000 shares of
Common Stock were reserved for issuance under the 1992 Plan, but
only 385,265 of these shares remained available for grant.
Accordingly, on November 10, 1997, the Board of Directors approved
an amendment to the 1992 Plan to increase the number of shares
reserved for issuance under the 1992 Plan by 847,000, an amount that
is equal to approximately 4.4% of the outstanding shares of Common
Stock on the record date. The Board of Directors 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. At the Annual Meeting, the
shareholders are being asked to approve this increase.
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 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 later 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 28, 1997, options to purchase a total of 2,990,647
shares of Common Stock were outstanding under the 1992 Plan. At
September 28, 1997, these outstanding options had an aggregate
exercise price of $39,756,702 or an average of $13.29 per share, and
based upon a closing price of $19.25 on September 26, 1997 (the last
trading day of the Company's 1997 fiscal year), the shares
underlying these outstanding options had an aggregate market value
of approximately $57,569,955. During fiscal 1997, the Company
granted the named executive officers the options described below
under "Stock Options Granted in Fiscal 1997," granted all
executive officers as a group options to purchase an aggregate of
360,000 shares of Common Stock under the 1992 Plan at an exercise
price of $16.00 per share, and granted all Company employees,
excluding the foregoing executive officers, options to purchase an
aggregate of 732,900 shares of Common Stock under the 1992 Plan at
an average exercise price of $17.79 per share.
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 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)
General
The Company has maintained an Employee Stock Purchase Plan for the
benefit of its employees since 1980. The Employee Stock Purchase
Plan (1994) (the "Purchase Plan") was approved by the shareholders
in March 1994. At the 1997 Annual Meeting of Shareholders, the
shareholders approved an amendment to the Purchase Plan. As of
November 10, 1997, a total 270,000 shares of Common Stock were
reserved for issuance under the Purchase Plan but only 48,318 of
these shares were available for future purchases. To enable the
Company's employees to continue to benefit under the Purchase Plan,
on November 10, 1997, the Board of Directors approved an amendment
to the Plan to increase the number of authorized shares by 100,000,
an amount that is equal to approximately 0.5% of the outstanding
shares of Common Stock on the record date. At the Annual Meeting,
the shareholders are being requested to approve this increase.
The following description of the Purchase Plan is necessarily
brief and general. A copy of the Purchase Plan, as amended, is
available upon request from the Company.
Description of the Purchase Plan, as amended
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.
If approved by the shareholders, an additional 100,000 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.
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.
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.
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.
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.
Share Purchases
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 1997. In fiscal 1997, employees of the
Company (excluding Mr. Lamp) purchased an aggregate of 92,523 shares
of Common Stock under the Purchase Plan in fiscal 1997 for an
average per share price of $14.75 and an aggregate purchase price of
$1,370,632.
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.
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) RATIFICATION OF ADOPTION OF HCIS 1997 STOCK OPTION PLAN
General
ADAC Healthcare Information Systems, Inc. ("HCIS") is a wholly
owned subsidiary of the Company. The 1997 Stock Option Plan of HCIS
(the "1997 Plan") was adopted by the Board of HCIS and approved by
ADAC Laboratories, the sole shareholder of HCIS, on November 10,
1997. The purposes of the 1997 Plan are to promote the long-term
success of HCIS and to provide additional incentives to its
directors, officers, employees, partners, consultants and advisors.
As described below, the shareholders are being requested to ratify
the adoption of the 1997 Plan to comply with Section 162(m) of the
Code and the regulations promulgated thereunder.
The following description of the 1997 Plan is necessarily brief
and general. A copy of the 1997 Plan is available upon request from
the Company.
Description of the 1997 Plan
The maximum number of shares that may be optioned and sold under
the 1997 Plan is 1,484,968 shares. The 1997 Plan sets a limit of
300,000 shares of HCIS that may be granted to any one optionee
during any calendar year. Options granted under the 1997 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 HCIS or any subsidiary (a "10% Owner")
shall not exceed five years. The 1997 Plan also provides that
nonqualified options have a term to be determined by the Stock
Option Committee (the "Committee"). The Committee has generally set
terms of five years or ten years for all options granted under the
1997 Plan. The Committee also determines when options granted under
the 1997 Plan may be exercisable; options granted are generally
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. In certain circumstances,
however, the Committee has established a more accelerated vesting
schedule for 25% of the option shares. Unless and until the shares
of HCIS are registered under the Securities Act of 1933, as amended,
optionee shall be required to enter into a Stockholders Agreement as
a condition of exercise of the option.
Option exercise prices are determined by the Board of Directors or
the Committee and, in the case of incentive options, may not be less
than 100% of the fair market value of HCIS'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 and any required federal and state
withholding taxes may be paid in cash or by withholding a portion of
the shares that would otherwise be issued under such Option or the
surrender of other shares of Common Stock of HCIS or by delivery of
a full recourse promissory note, at the discretion of the Committee.
Unless provided in the option agreement, options are not
transferable by the optionee, other than by will, the laws of
descent and distribution or pursuant to a divorce decree. The 1997
Plan provides that in the event of a subdivision of the outstanding
shares of HCIS, a declaration of a dividend payable in shares, a
declaration of a dividend payable in a form other than shares in an
amount that has a material effect on the price of shares, a
combination or consolidation of the outstanding shares (by
reclassification or otherwise) into a lesser number of shares, a
recapitalization, a spinoff or a similar occurrence, the Committee
shall make appropriate adjustments in the number of options
available for future grant, the number of shares covered by
outstanding options, and the exercise price. In the event of a
merger of HCIS with or into another corporation, each outstanding
option shall be assumed or an equivalent option shall be substituted
by the successor corporation. If the successor corporation refuses
to assume or substitute for the options, the optionee shall fully
vest in and have the right to exercise the option as to all of the
shares covered thereby.
The Board of Directors may amend the 1997 Plan at any time or may
terminate it 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
under the Plan, that changes the maximum number of shares that are
available for grant to a participant in any fiscal year, or if
otherwise required by applicable laws, regulations or rules.
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 1997 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
The 1997 Plan was adopted in fiscal 1998. Accordingly, no options
were granted under the 1997 Plan in fiscal 1997.
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 1997
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 HCIS will be allowed a corresponding
tax deduction for compensation expense in an amount equal to the
taxable income recognized by the optionee. If the optionee is an
employee of HCIS, HCIS 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. HCIS 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, HCIS 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." 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 1997 Plan and the shareholder approval requested in
this Proxy Statement are intended solely 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
1997 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 1997 Plan.
Vote Required
Ratification of the adoption of the 1997 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.
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 that is closely tied to the Company's
financial performance and operations.
In fiscal 1997 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 income, 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 net
income 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 and Bonus Compensation. In determining the
compensation of an executive officer, a base salary and the maximum
bonus for which the executive is eligible are determined based upon
the executive's level of responsibility, the qualifications and
experience required, independent compensation analyses of salaries
paid executive officers in similar positions at comparable
companies, and the need to provide, together with incentive bonuses
and stock options, competitive compensation. Base salary and bonus
increases are based upon periodic re-evaluations of these factors
and the performance of the executive in meeting individually-
assigned objectives. Bonus compensation is earned upon the
achievement by the executive of certain individual objectives and
upon the Company's achievement of certain financial goals. In order
for any portion of the bonus to be earned, the executive must
achieve at least some of his or her individual objectives.
Objectives may also be related to the performance of the manager's
business unit. The Compensation Committee may establish bonuses
ranging between 0% and 100% of base salary.
Stock Options. Stock option grants are intended to supplement an
executive's base salary and bonus compensation 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 and the individual's total cash
compensation. 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 the first ten months of fiscal 1997, and
served as Chairman of the Board of the Company for all of fiscal
1997. Mr. R. Andrew Eckert succeeded Mr. Lowe as the Company's Chief
Executive Officer in August 1997 and served in that capacity for the
last two months of fiscal 1997. Mr. Lowe's and Mr. Eckert's general
compensation programs for fiscal 1997 were determined based on a
compensation study of peer organizations conducted in that year by
an independent compensation consulting firm. Mr. Lowe's and
Mr. Eckert's annual base salaries for fiscal 1997 were $500,000 and
$325,000 respectively. Mr. Lowe and Mr. Eckert were eligible to
receive bonuses of up to 50% and 85% of their base salaries,
respectively, based upon the Company's and their achievement of
certain goals.
Of Mr. Lowe's maximum bonus for fiscal 1997 of $250,000, Mr. Lowe
could be awarded an aggregate of $125,000 on the basis of the
Company's achievement of its financial plan, including revenues,
earnings per share and bookings targets, and $125,000 on the basis
of the Company's and his development and implementation of certain
strategic plans for future fiscal periods. These plans included the
development of the Company's service business and the attainment of
certain goals in the Company's two primary business units, Medical
Systems and HCIS, including specified sales goals for particular
products, the timely development of certain key products and the
establishment of longer-term strategic plans for certain of the
Company's businesses. Based on the level of achievement of these
objectives, Mr. Lowe was awarded bonuses aggregating $185,000, or
74% of the total bonus that could be earned by Mr. Lowe for fiscal
1997.
Of Mr. Eckert's maximum bonus for fiscal 1997 of $275,000,
Mr. Eckert could be awarded an aggregate of $96,250 based on the
Company's achievement of its financial plan and $178,750 based on
the Company's and Mr. Eckert's achievement of specified operating
goals. These goals related to the achievement of specified
operating objectives by one of the Company's business units, ADAC
Radiology Services, and of certain strategic objectives in the
Company's Medical Systems business. These goals included specific
sales, product development and other objectives. Based on the
degree of achievement of these goals, Mr. Eckert was awarded bonuses
aggregating $155,437, or 57% of the total bonus that could be earned
by Mr. Eckert for fiscal 1997.
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.
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 an
officer of the Company in various capacities from January 1991 to
March 1996.
Executive Compensation. The following table sets forth all
compensation earned by or paid or awarded to Messrs. Lowe and
Eckert, who both served as the Chief Executive Officer of the
Company during fiscal 1997, 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 Long All
--------------------------------------- Stock Term Other
Fiscal Option Incentive Compen-
Name and Current Position Year Salary Bonus Other(1) Awards Payouts sation
- --------------------------- --------- --------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
David L. Lowe (2) 1997 $500,458 $185,000 -- 100,000 -- --
Chairman of the Board 1996 399,984 250,000 -- 140,000 -- --
1995 398,542 163,400 -- 196,000 -- --
R. Andrew Eckert (3) 1997 $325,000 $155,437 -- 100,000 -- --
Chief Executive Officer 1996 199,992 225,000 -- 90,000 -- --
1995 199,031 173,957 -- 162,000 -- --
Mark L. Lamp (4) 1997 $200,030 $93,920 -- 50,000 -- --
Executive Vice President, 1996 199,992 145,000 -- 50,000 -- --
Business Development 1995 199,800 144,000 -- 156,000 -- --
Karen L. Masterson (5) 1997 $167,073 $65,100 -- 20,000 -- --
Vice President, General
Counsel and Corporate
Secretary
P. Andre Simone (6) 1997 $167,686 $83,828 -- 20,000 -- --
Vice President, Chief 1996 122,019 67,292 -- 20,000 -- --
Financial Officer and
Treasurer
Peter C. Vermeeren (7) 1997 $108,782 $111,360 -- 20,000 -- --
Executive Vice President, 1996 150,000 149,700 -- 75,000 -- --
Global Operations
</TABLE>
- ----------------
(1) Not included in the compensation table are certain perquisites
and other benefits which do not, in the aggregate, exceed the
lesser of either $50,000 or 10% of the total annual salary and
bonus reported for each named executive officer.
(2) Mr. Lowe's 1995 award includes options to purchase 96,000
shares of the common stock of the Company's subsidiary, ADAC
Healthcare Information Systems, Inc. ("HCIS"). See "Certain
Transactions."
(3) Mr. Eckert's 1995 award includes options to purchase 72,000
shares of HCIS common stock. See "Certain Transactions."
(4) Mr. Lamp's 1995 award includes options to purchase 96,000
shares of HCIS common stock. See "Certain Transactions."
(5) Ms. Masterson became an executive officer of the Company in
October 1996.
(6) Mr. Simone became an executive officer of the Company in June
1996.
(7) 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. Mark L. Lamp, age 38, was named Executive Vice President,
Business Development, for the Company in October 1997. Mr. Lamp
previously served as President and General Manager of ADAC
Healthcare Information Systems from August 1994 to October 1997 and
prior to that served as Executive Vice President of Business
Development for, and held a variety of other management and
engineering-related positions with, the Company.
Ms. Karen L. Masterson, age 37, 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. Robert L. Miller, age 45, joined the Company as President of
ADAC Radiology Services, Inc. in May 1997. From 1990 to 1997,
Mr. Miller served as a director of the Company, and from 1993 to
September 1996, served as the outside general counsel for the
Company, as well as various other corporations in the high
technology industry. From 1992 to 1996, Mr. Miller also served as
Chairman of the Board and Chief Executive Officer of Ironstone
Group, Inc., a real and personal property tax appeal company.
Mr. Miller previously served as general counsel and a director of
Read-Rite Corporation, a component manufacturer in the disk drive
industry.
Mr. P. Andre Simone, age 40, 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 57, 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.
STOCK OPTIONS GRANTED IN FISCAL 1997
The following table sets forth certain information concerning
stock option grants made by the Company to certain executive
officers pursuant to the Company's 1992 Stock Option Plan during
fiscal 1997. No other option grants were made to the named
executive officers during fiscal 1997.
<TABLE>
<CAPTION>
% of Potential Realizable
Total Value at Assumed
Number of Options Annual Rates of Stock
Securities Granted Per Price Appreciation for
Underlying to Share Expir- Option Term(1)
Options Employees Exercise ation -----------------------
Name Granted in 1997 Price($) Date 5% ($) 10% ($)
- --------------------- ----------- --------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
David L. Lowe ....... 100,000 9.0% $16.00 4-23-07 $1,006,200 $2,550,000
R. Andrew Eckert .... 100,000 9.0% 16.00 4-23-07 1,006,200 2,550,000
Mark L. Lamp ........ 50,000 4.5% 16.00 4-23-07 503,100 1,275,000
Karen L. Masterson .. 20,000 1.8% 16.00 4-23-07 201,240 510,000
P. Andre Simone ..... 20,000 1.8% 16.00 4-23-07 201,240 510,000
Peter C. Vermeeren .. 20,000 1.8% 16.00 4-23-07 201,240 510,000
</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.
The foregoing stock options vest in increments of 25%, 25% and 50%
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 1997 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 1997, the "value realized", and the number and value of
unexpired stock options at September 28, 1997 which such executive
officers can exercise or in the future could exercise.
<TABLE>
<CAPTION>
Total Value
of Unexercised
Number of Unexercised In-the-Money Stock
Shares Stock Options Held Options Held at
Acquired at September 28, 1997 September 28, 1997 (2)
on Value -------------------------- ---------------------------
Name Exercise Realized (1) Exercisable Unexercisable Exercisable Unexercisable
- --------------------- --------- ------------ ------------ ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
David L. Lowe ....... 88,800 $1,237,669 135,033 225,000 $1,365,344 $1,241,875
R. Andrew Eckert .... 88,416 1,038,701 123,250 212,500 1,145,344 1,059,063
Mark L. Lamp ........ 88,986 1,087,071 103,514 177,500 1,011,287 626,563
Karen L. Masterson .. -- -- 5,000 35,000 16,875 115,625
P. Andre Simone ..... -- -- 16,250 47,500 151,563 256,250
Peter C. Vermeeren .. -- -- 37,500 57,500 276,875 341,563
</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 26, 1997, the last trading day
of fiscal 1997, as reported on the Nasdaq Stock Market, of
$19.25, and the exercise price of such options.
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.
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, 1992 through September 28, 1997. 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.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
- ------------------------------------------ --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
ADAC Laboratories $100.00 $109.30 $80.99 $122.00 $209.19 $206.57
NASDAQ Composite Index 100.00 132.23 132.41 180.80 213.11 291.46
S&P Medical Products and Supply Index 100.00 75.39 93.46 149.33 175.32 238.61
</TABLE>
CERTAIN TRANSACTIONS
In May 1997, in connection with the merger of CHC, the immediate
parent of HCIS, with and into HCIS as part of the overall
recapitalization of HCIS, CHC repurchased from the holders thereof
all outstanding options to purchase CHC common stock for a purchase
price equal to the fair market value of the CHC common stock
underlying the options, as determined by an independent appraiser,
less the aggregate exercise price for such options. In these
transactions, CHC repurchased 96,000 shares of CHC common stock for
a purchase price of $73,920, from each of Mr. Lowe and Mr. Lamp and
72,000 shares of CHC common stock for a purchase price of $55,440
from Mr. Eckert.
Mr. Robert L. Miller, a former director and the former outside
general counsel of the Company, received approximately $54,000
during fiscal 1997 as payment for a variety of legal services
rendered to the Company in his capacity as outside general counsel
to the Company.
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 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.
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 28,
1997, 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.
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 1997
fiscal year, all filing requirements applicable to its officers and
directors were complied with.
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 November 5, 1998 in order to
be considered for inclusion in the Company's 1999 proxy materials
related to the 1999 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 28, 1997, 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 Heidi Magner, Investor Relations.
By Order of the Board
of Directors,
/s/ David L. Lowe,
David L. Lowe,
Chairman of the Board
Dated: February 3, 1998
<PAGE>
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 Karen L. Masterson, 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 5, 1998, 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:
(1) ELECTION OF DIRECTORS: FOR ALL NOMINEES LISTED [ ] WITHHOLD AUTHORITY [ ]
(except as listed below) to vote for all
nominees listed
(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, 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 847,000: (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 100,000 shares:
(mark one; the Board recommends a "FOR" vote). FOR [ ]
AGAINST [ ] ABSTAIN [ ]
(4) Ratification of the adoption by the Compamny's subsidiary, ADAC
Healthcare Information Systems, Inc., of its 1997 Stock Option Plan:
(mark one; the Board recommends a "FOR" vote). FOR [ ]
AGAINST [ ] ABSTAIN [ ]
- --------------------------------------------------------------------------------
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>
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:_________ , 1998
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>
Exhibit 10.16
1997 STOCK OPTION PLAN
ADAC HEALTHCARE INFORMATION SYSTEMS, INC.
(Effective November 10, 1997)
ARTICLE 1.
INTRODUCTION
The Plan was originally adopted by the Board and approved by the
Company's sole stockholder, ADAC Laboratories, a California
corporation, on November 10, 1997. The purpose of the Plan is to
promote the long-term success of the Company and the creation of
incremental stockholder value by (a) encouraging directors, officers,
employees, partners, consultants and advisors to focus on critical
long-range objectives, (b) attracting and retaining such persons with
exceptional qualifications and (c) linking such persons directly to
stockholder interests through increased stock ownership. Options
granted under the Plan shall be designated at the time of grant as
either non-qualified stock options or incentive stock options, as
defined in Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"). The Plan shall be governed by, and construed in
accordance with the laws of the State of California.
ARTICLE 2.
ADMINISTRATION
2.1 The Committee. The Plan shall be administered by a
Committee (the "Committee") that shall consist of two or more persons
who are "non-employee directors," as defined in Rule 16b-3 promulgated
under the Exchange Act, and "outside directors," as defined in Section
162(m) of the Code.
2.2 Powers of the Committee. Subject to the other provisions
of the Plan and the approval of any relevant authorities, the Committee
shall have the authority, in its discretion:
(a) to determine the Fair Market Value;
(b) to select the Participants to whom Options may from
time to time be granted hereunder;
(c) to determine the number of Common Shares to be
covered by each Option granted hereunder;
(d) to approve forms of agreement for use under the Plan;
(e) to determine the terms and conditions of any Option
granted hereunder. Such terms and conditions include, but are not
limited to, the exercise price, the time or times when Options may be
exercised (which may be based on performance criteria), any vesting
acceleration or waiver of forfeiture restrictions, and any restriction
or limitation regarding any Option or the Common Shares relating
thereto, based in each case on such factors as the Committee, in its
sole discretion, shall determine;
(f) to determine whether and under what circumstances an
Option may be settled in cash instead of Common Shares;
(g) to reduce the exercise price of any Option to the
then current Fair Market Value if the Fair Market Value of the Common
Shares covered by such Option has declined since the date the Option
was granted, or to initiate an option exchange program;
(h) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-
plans established for the purpose of qualifying for preferred tax
treatment under foreign tax laws;
(i) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Common
Shares to be issued upon exercise of an Option that number of Common
Shares having a Fair Market Value equal to the amount required to be
withheld. The Fair Market Value of the Common Shares to be withheld
shall be determined on the date that the amount of tax to be withheld
is to be determined. All elections by Optionees to have Common Shares
withheld for this purpose shall be made in such form and under such
conditions as the Committee may deem necessary or advisable; and
(j) to construe and interpret the terms of the Plan and
Options granted pursuant to the Plan.
2.3 Effect of Committee's Decision. All decisions,
determinations and interpretations of the Committee shall be final and
binding on all Optionees.
ARTICLE 3.
SHARES RESERVED UNDER THE PLAN
Subject to the provisions of Article 7 of the Plan, the maximum
aggregate number of Common Shares which may be subject to option and
sold under the Plan is 1,484,968 Common Shares. The Common Shares may
be authorized but unissued, or reacquired Common Shares. The maximum
number of Common Shares that may be available for grant to any
Participant in any financial year of the Company shall not exceed
300,000 Common Shares.
If an Option expires or becomes unexercisable without have been
exercised in full, or is surrendered pursuant to an option exchange
program, the unpurchased Common Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the
Plan has terminated). However, Common Shares that have actually been
issued under the Plan upon exercise of an Option, shall not be returned
to the Plan and shall not become available for future distribution
under the Plan, except that if Common Shares subject to vesting
restrictions are repurchased by the Company at their original purchase
price, such Common Shares shall become available for future grant under
the Plan.
ARTICLE 4.
ELIGIBILITY
The following persons shall be eligible for designation as
Participants by the Committee: (i) directors, officers, employees,
consultants and advisors of the Company, (ii) directors, officers,
employees, consultants and advisors of a parent of the Company, (iii)
directors, officer, employees, consultants and advisors of any
Subsidiary corporation, partnership or limited liability company (A)
which is controlled by the Company or (B) 50% or more or the voting
power of which is held by the Company (a "Controlled Entity") or (iv)
any individual, corporation, partnership or limited liability company
which is an equity owner of a Controlled Entity.
ARTICLE 5.
OPTIONS
5.1 Stock Option Agreement. Each grant of an Option under the
Plan shall be evidenced by a Stock Option Agreement between Optionee
and the Company. Such Option shall be subject to all applicable terms
and conditions of the Plan and may be subject to any other terms and
conditions which are not inconsistent with the Plan and which the
Committee deems appropriate for inclusion in a Stock Option Agreement.
The provisions of the various Stock Option Agreements entered into
under the Plan need not be identical.
5.2. Options Nontransferable. Unless the Stock Option Agreement
provides otherwise, no Option or interest therein may be transferred,
assigned or pledged by Optionee other than by will, the laws of descent
and distribution or operation of law. Unless the Stock Option
Agreement provides otherwise, an Option held by an individual may be
exercised during the lifetime of Optionee only by him or her.
5.3 Number of Shares. Each Stock Option Agreement shall
specify the number of Common Shares subject to the Option which number
may be adjusted in accordance with Article 7.
5.4 Exercise Price. Each Stock Option Agreement shall specify
the Exercise Price. The Exercise Price of Incentive Stock Options
shall not be less than the Fair Market Value of a Common Share on the
date of grant. Subject to the preceding sentence, the Exercise Price
under any Option shall be determined by the Committee.
5.5 Exercisability and Term. Each Stock Option Agreement shall
specify the date when all or any installment of the Option is to become
exercisable. The Stock Option Agreement shall also specify the term of
the Option provided that the term of an Option that is an Incentive
Stock Option shall in no event exceed ten (10) years from the date of
grant. A Stock Option Agreement may provide for accelerated
exercisability in the event of Optionee's death, disability or
retirement and may provide for expiration prior to the end of its term
in the event of the termination of Optionee's employment or service.
5.6 Modification, Extension and Renewal of Options. Within the
limitations of the Plan, the Committee may modify, extend or renew
outstanding Options or may accept the cancellation of outstanding
Options (to the extent not previously exercised) in return for the
grant of new Options at the same or a different price. The foregoing
notwithstanding, no modification of an Option shall, without the
consent of Optionee, impair his or her rights or obligations under such
Option.
5.7 Restrictions on Transfer of Common Shares. Any Common
Shares issued upon exercise of an option shall be subject to such
special forfeiture conditions, rights of repurchase, rights of first
refusal and other transfer restrictions as are set forth in the
Stockholders Agreement or as otherwise determined by the Committee.
Any additional restrictions shall be set forth in the applicable Stock
Option Agreement.
5.8 Limitations on Incentive Stock Options. Incentive Stock
Options may be granted only to Participants who are employees of the
Company or one of its subsidiaries (within the meaning of Section
424(f) of the Code) at the date of grant. The aggregate Fair Market
Value (determined as of the time the option is granted) of the Common
Shares with respect to which Incentive Stock Options are exercisable
for the first time by a Participant during any calendar year (under all
option plans of the Company) shall not exceed $100,000. Incentive
Stock Options may not be granted to any Participant who, at time of
grant, owns stock possessing (after the application of the attribution
rules of Section 424(d) of the Code) more than 10% of the total
combined voting power of all classes of stock of the Company, unless
the option price is fixed at not less than 110% of the Fair Market
Value of the Common Shares on the date of grant and the exercise of
such option is prohibited by its term after the expiration of five
years from the date of grant of such option.
ARTICLE 6.
PAYMENT FOR OPTION SHARES AND WITHHOLDING TAXES
Upon exercise of an Option, the Exercise Price of such Option,
together with the full amount of all federal and state withholding or
other employment taxes resulting from such exercise, shall be required
to be delivered to the Company. Subject to the sole discretion of the
Committee, all or any part of the aggregate Exercise Price and
withholding tax obligation may be satisfied by Optionee delivering
Common Shares, by having the Company withhold a portion of the Common
Shares that otherwise would be issued to Optionee under such Options or
by Optionee delivering a full recourse promissory note. Common Shares
so delivered or withheld shall be valued at their Fair Market Value on
the exercise date of the Option. The payment of the exercise price and
withholding taxes by delivering or withholding Common Shares to the
Company shall be subject to the discretion of the Committee and to such
restrictions as the Committee may impose, including any restrictions
required by rules of the Securities and Exchange Commission and
restrictions necessary to avoid a charge to earnings for financial
accounting purposes. The terms of the promissory note delivered in
payment of all or any portion of the aggregate Exercise Price and
withholding taxes and any required collateral to secure the obligations
under such promissory note and the applicable rate of interest thereon
shall be determined in the sole discretion of the Committee.
ARTICLE 7.
PROTECTION AGAINST DILUTION
7.1 General. In the event of a subdivision of the outstanding
Common Shares, a declaration of a dividend payable in Common Shares, a
declaration of a dividend payable in a form other than Common Shares in
amount that has a material effect on the price of Common Shares, a
combination or consolidation of the outstanding Common Shares (by
reclassification or otherwise) into a lesser number of Common Shares, a
recapitalization, a spinoff or a similar occurrence, the Committee
shall make appropriate adjustments in (a) the number of Options
available for future grant under Article 3 and (b) the number of Common
Shares covered by each outstanding Option, including a commensurate
adjustment in the Exercise Price, if necessary, under each outstanding
Option.
7.2 Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Committee shall notify
each Optionee as soon as practicable prior to the effective date of
such proposed transaction. The Committee in its discretion may provide
for an Optionee to have the right to exercise his or Option until
fifteen (15) days prior to such transaction as to all of the Common
Shares covered thereby, including Common Shares as to which the Option
would not otherwise be exercisable. In addition, the Committee may
provide that any Company repurchase option applicable to any Common
Shares purchased upon exercise of an Option shall lapse as to all such
Common Shares, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated. To the extent it has
not been previously exercised, an Option will terminate immediately
prior to the consummation of such proposed action.
7.3 Merger or Asset Sale. In the event of a merger of the
Company with or into another corporation, or the sale of substantially
all of the assets of the Company, each outstanding Option shall be
assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In
the event that the successor corporation refused to assume or
substitute for the Option, the Optionee shall fully vest in and have
the right to exercise the Option as to all of the Common Shares covered
thereby, including Common Shares as to which it would not otherwise be
exercisable. If an Option is exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Committee
shall notify the Optionee in writing or electronically that the Option
shall be fully vested and exercisable for a period of fifteen (15) days
from the date of such notice, and the Option shall be considered
assumed if, following the merger or sale of assets, the option confers
the right to purchase or receive, for each Common Share subject to the
Option immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property)
received in the merger or sale of assets by holders of common stock of
the Company for each Common Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the
type of consideration chosen by the holders of a majority of the
outstanding common stock of the Company); provided, however, that if
such consideration received in the merger or sale of assets was not
solely common stock of the successor corporation or its Parent, the
Committee may, with the consent of the successor corporation, provide
the consideration to be received upon the exercise of the Option, for
each Common Share subject to the Option, to be solely common stock of
the successor corporation or its Parent equal in fair market value to
the par share consideration received by holders of common stock of the
Company in the merger or sale of assets.
7.4 Reservation of Rights. Except as provided in this Article
7, a Participant shall have no rights by reason of any subdivision or
consolidation of shares of stock of any class, the payment of any stock
dividend or any other increase or decrease in the number of shares of
stock of any class. Any issue by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class,
shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number or Exercise Price of Common Shares subject
to an Option. The grant of an Option under the Plan shall not affect
in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or
business structure, to merge or consolidate or dissolve, liquidate,
sell or transfer all or any part of its business or assets.
ARTICLE 8.
LIMITATION OF RIGHTS
8.1 Employment Rights. Neither the Plan nor any Option granted
under the Plan shall be deemed to give any individual a right to remain
employed by the Company or a Subsidiary. The Company and its
Subsidiaries reserve the right to terminate the employment of any
employee at any time, and for any reason, subject only to a written
employment agreement (if any).
8.2 Stockholders' Rights. A Participant shall have no dividend
rights, voting rights or other rights as a stockholder with respect to
any Common Shares covered by his or her Option prior to the issuance of
such Common Shares. No adjustment shall be made for cash dividends or
other rights for which the record date is prior to the date when such
certificate is issued, except as expressly provided in Article 7.
8.3 Government Regulations. Any other provision of the Plan
notwithstanding, the obligations of the Company with respect to Common
Shares to be issued pursuant to the Plan shall be subject to all
applicable laws, rules and regulations and such approvals by any
governmental agencies as may be required. The Company reserves the
right to restrict, in whole or in part, the delivery of Common Shares
pursuant to any Option until such time as any legal requirements or
regulations have been met relating to the issuance of such Common
Shares or to their registration, qualification or exemption from
registration or qualification under the Securities Act or any
applicable state securities laws. With respect to any issuance of
Common Shares, the Company shall have no obligation to either (a)
register the issuance of the Common Shares under the Securities Act or
(b) issue Common Shares to persons who are not "Accredited Investors"
in reliance upon the exemption provided under Regulation D as
promulgated under the Securities Act.
8.4 Stockholders Agreement. Any other provision of the Plan
notwithstanding, unless and until the Common Shares are registered
under the Exchange Act, the obligations of the Company to issue Common
Shares upon the exercise of Options is subject to the condition that
Optionee become a party to and subject to all transfer restrictions and
other provisions of the Stockholders Agreement.
ARTICLE 9.
FUTURE OF THE PLAN
9.1 Term of the Plan. This Plan is effective on November 10,
1997 and shall remain in effect until November 9, 2002 unless
terminated earlier under Section 9.2.
9.2 Amendment or Termination. The Board may, at any time and
for any reason, amend or terminate the Plan. However, any amendment of
the Plan shall be subject to the approval of the Company's
stockholders, if the effect of the amendment is to increase the Common
Shares reserved for issuance under the Plan or to change the maximum
number of Common Shares that are available for grant to a Participant
in any fiscal year, or if otherwise required by applicable laws,
regulations or rules.
9.3 Effect of Amendment or Termination. No Options shall be
granted under the Plan after the termination thereof. The termination
of the Plan, or any amendment thereof, shall not affect any Option
previously granted under the Plan.
ARTICLE 10.
DEFINTIONS
10.1 "Board" means the Company's Board of Directors, as
constituted from time to time.
10.2 "Change in Control" means:
(a) the sale, lease, exchange or other transfer or
disposition by the Company of all or substantially all of the assets of
the Company and its subsidiaries; or
(b) when any person or group of persons other than ADAC
Laboratories or an affiliate of ADAC Laboratories is or becomes the
beneficial owner (as defined in Rule 13d-3 of the Exchange Act),
directly or indirectly, of voting securities of the Company having
greater combined voting power than the combined voting power of the
voting securities of the Company beneficially owned, directly or
indirectly, by ADAC Laboratories and any affiliate of ADAC
Laboratories.
10.3 "Committee" has the meaning set forth in Section 2.1.
10.4 "Common Share" means one share of the Company's Common
Stock, $.00l par value.
10.5 "Company" means ADAC Healthcare Information Systems, Inc.
a Texas corporation.
10.6 "Exchange Act" means the Securities and Exchange Act of
1934, as amended.
10.7 "Exercise Price" means the amount for which one Common
Share may be purchased upon exercise of an Option, as specified by the
Committee in the applicable Stock Option Agreement.
10.8 "Fair Market Value" means the market price of a Common
Share, determined by the Committee as follows:
(a) if the Common Share was traded on a stock exchange on
the date in question, then the Fair Market Value shall be equal to the
closing price reported by the applicable composite-transactions report
for such date;
(b) if the Common Share was traded over-the-counter on
the date in question but was classified as a national market issue,
then the Fair Market Value shall be equal to the last-transaction price
quoted by the Nasdaq National Market system for such date; and
(c) if the Common Share was traded over-the-counter on
the date in question but was not classified as a national market issue,
then the Fair Market Value shall be equal to the mean between the last
reported representative bid and asked prices quoted by the Nasdaq
National Market system for such date; and
(d) if none of the foregoing provisions is applicable,
then the Fair Market Value shall be determined by the Committee in good
faith on such basis as it deems appropriate.
10.9 "Option" means an Option granted under the Plan and
entitling the holder to purchase one Common Share.
10.10 "Optionee" means an individual or his or her
representative or transferee that holds an Option.
10.11 "Participant" means a person who has received an Option.
10.12 "Plan" means this 1997 Stock Option Plan, as it may be
amended from time to time.
10.13 "Securities Act" means the Securities Act of 1933, as
amended.
10.14 "Stock Option Agreement" means the agreement between the
Company and an Optionee which contains the terms, conditions and
restrictions pertaining to his or her Option.
10.15 "Stockholders Agreement" means that certain Stockholders
Agreement, dated as of November 10, 1997, between the Company and its
shareholders.
10.16 "Subsidiary" means any corporation, if the Company and/or
one or more other Subsidiaries own fifty percent (50%) or more of the
total combined voting power of all classes of outstanding stock of such
corporation. A corporation that attains the status of a Subsidiary on
a date after the adoption of the Plan shall be considered a Subsidiary
commencing as of such date.
ARTICLE 11.
EXECUTION
To record the adoption of the Plan by the Board, the Company has
caused its duly authorized officer to execute the Plan in its name and
on its behalf as of November 10, 1997.
ADAC Healthcare Information Systems, Inc.
By:___________________________________
Exhibit 10.16
INCENTIVE STOCK OPTION AGREEMENT
THIS OPTION AGREEMENT (the "Agreement") is made as of ,
1997, between ADAC HEALTHCARE INFORMATION SYSTEMS, INC., a Texas corporation
(the "Company"), and _____________ ("Optionee").
WHEREAS, pursuant to that certain 1997 Stock Option Plan, a copy of
which is attached hereto as Exhibit A (the "Plan"), the Committee of the
Board of Directors of the Company (the "Committee") has determined that
Optionee is to be granted, on the terms and conditions set forth herein,
an incentive stock option to purchase shares of the Company's common
stock, $.001 par value (the "Common Shares").
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreement herein contained, the parties agree as follows:
1. Option. The Company hereby grants to Optionee an option (the
"Option") to purchase _____________________ (______) shares of Common
Shares (the "Option Shares") at an exercise price of __________ ($0.___)
per share. This Option is intended to be treated as an "incentive stock
option" within the meaning of Section 422 of the Internal Revenue Code
of 1986, or a successor thereto. Notwithstanding the foregoing, in the
event this Option fails to qualify as an "incentive stock option" under
the Code for any reason, in whole or in part, this Option shall not be
invalid but shall instead be treated as a "non-qualified stock option"
under the Code to the extent it does not qualify for incentive stock
option treatment.
2. Term of Option. The term of this Option shall commence on
the date hereof and terminate on _________________, unless earlier
terminated under the terms of the Plan or this Agreement. Upon the
termination of this Option, the right to purchase Option Shares hereunder
shall cease.
3. Time of Exercise. This Option may be exercised (in the
manner provided in Section 4 hereof) in whole or in part, and from time
to time after the date hereof, subject to the terms and conditions of the
Plan and the following additional limitations:
(a) Optionee shall have the right to exercise this Option
as to [_______ percent (____%) of the Option Shares on the _____________,
________ percent (___%) on the __________________ and __________ percent
(___%) on the _________________of the Option grant date].
(b) This Option may not be exercised after and shall
terminate upon the earliest to occur of any of the following:
(i) thirty (30) days after the termination of
Optionee's employment with the Company or any other affiliate of the
Company for any reason other than retirement, permanent disability or
death (and then only to the extent Optionee could have exercised this
Option on the date of termination); or
(ii) one hundred eighty (180) days after the
termination of Optionee's employment with the Company or one of its
subsidiaries as a result of retirement or permanent disability (and then
only to the extent Optionee could have exercised this Option on the date
of termination); or
(iii) one hundred eighty (180) days after Optionee's
death, if death occurs while Optionee is employed by the Company or one
of its subsidiaries (and then only to the extent Optionee could have
exercised this Option on the date of his or her death); or
(iv) Optionee's termination for cause. Cause shall
include gross and willful failure, after written warning, to discharge
the normal duties required of Optionee, theft or misappropriation of
Company property, commission of a crime such that the Company's
reputation with its customers is materially damaged, and breach of the
ADAC Nondisclosure and Inventions Agreement or other similar agreement
executed by Optionee.
(c) This Option may be exercised as to any or all of the
Option Shares that may be acquired by Optionee on the date of such
exercise subject to the following limitations: (i) this Option must be
exercised for no less than the greater of 2,500 Shares of Common Stock or
twenty percent (20%) of the Option Shares; provided, that if the number
of the Option Shares that may be acquired by Optionee is less than the
foregoing amount then this Option must be exercised as to all the Option
Shares that may be acquired by Optionee and (ii) this Option must be
exercised as to all of the Option Shares that may be acquired by Optionee
unless after such exercise Optionee would have the right to acquire no
less than 2,500 Shares of Common Stock or twenty percent (20%) of the
Option Shares.
4. Method of Exercise. This Option may be exercised only by the
giving of written notice thereof to the Company which notice shall be
accompanied by: (a) a certified or cashier's check in an aggregate
amount of the exercise price and the withholding taxes required to be
delivered to the Company upon exercise of this Option, or following any
initial public offering by the Company, the consideration required under
any cashless exercise program established by the Company; (b) an executed
counterpart signature page to the Stockholders Agreement (the
"Stockholders Agreement") in the form attached hereto as Exhibit B; and
(c) such other documents or representations as the Company may reasonably
request in order to comply with securities, tax or other laws then
applicable to the exercise of this Option.
5. Nontransferability of Option. This Option may not be
transferred, sold, assigned, pledged or hypothecated other than by will,
the laws of descent and distribution or by operation of law, and is
exercisable during the life of the Optionee only by the Optionee.
6. Stock Option Plan. This Option is granted under and is
subject to the terms and conditions of the Plan.
7. Mandatory Exercise. Upon ADAC Laboratories, a California
corporation ("Parent"), giving written notice to Optionee under
Section 2.4 of the Stockholders Agreement, Optionee hereby agrees to
exercise this Option (on a net payment basis in the manner hereinafter
described) as to that number of the Option Shares equal to (i) the number
of the Option Shares that Optionee may exercise on the date such notice
is given to Optionee, multiplied by (ii) the percentage of shares of
Common Stock held by Parent that are intended to be sold by Parent in the
proposed transaction. Optionee shall promptly execute and deliver a
counterpart signature page to the Stockholders Agreement in the form
attached hereto as Exhibit B and such other documents or representations
the Company may reasonably request in order to comply with securities,
tax or other laws then applicable to the exercise of this Option and
shall be bound by the provisions of the Stockholders Agreement. In
connection with a transaction contemplated under Section 2.4 of the
Stockholders Agreement, Optionee shall not deliver the exercise price and
withholding taxes and the Company shall cause Optionee to be paid the
consideration per Option Share less the aggregate exercise price and
withholding taxes. If the transaction price under Section 2.4 of the
Stockholders Agreement is less than the exercise price under this Option,
the Optionee may elect not to exercise this Option and this Option shall
terminate effective upon the closing of the transaction covered by
Section 2.4 of the Stockholders Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
signed and to be dated as of the date set forth on the first page hereof.
OPTIONEE: ____________________________________
ADAC HEALTHCARE
INFORMATION SYSTEMS, INC.: ADAC HEALTHCARE INFORMATION
SYSTEMS, INC.
a Texas corporation
By:_________________________________
Its:________________________________
EXHIBIT A
1997 STOCK OPTION PLAN
EXHIBIT B
STOCKHOLDERS AGREEMENT
Counterpart Signature Page
The undersigned hereby agrees to become a party to that certain
Stockholders Agreement, dated as of _______________, 1997 (the
"Agreement"), by and among ADAC Healthcare Information Systems, Inc., a
Texas corporation, and its stockholders and agrees to be bound by the
terms and conditions of the Agreement. The undersigned shall be an
"Employee Holder" for all purposes under the Agreement.
Dated as of ____________________, 1997.
EMPLOYEE HOLDER:
