<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<TABLE>
<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
</TABLE>
<TABLE>
<S> <C>
ADAC LABORATORIES
- ------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- ------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
----------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
----------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
----------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------
</TABLE>
<PAGE>
ADAC LABORATORIES
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MARCH 9, 2000
------------------------
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 9, 2000, 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 1999 Long-Term Incentive Plan
to increase the shares reserved for issuance thereunder by an additional
990,000 shares; and
(3) 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 11, 2000
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 October 3, 1999, 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/ R. ANDREW ECKERT]
R. Andrew Eckert
CHAIRMAN OF THE BOARD
Milpitas, California
February 8, 2000
<PAGE>
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 9, 2000, 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 8, 2000.
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 11, 2000 are
entitled to notice of and to vote at the meeting. At the record date, there were
issued and outstanding 20,614,483 shares of Common Stock, each entitled to one
vote.
The following table sets forth, as of November 30, 1999, 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 executive officer 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.
<PAGE>
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 OWNERSHIP PERCENT OF
OF COMMON STOCK(1) VOTING SHARES(1)
-------------------- ----------------
<S> <C> <C>
(a) DIRECTORS, NOMINEES AND CERTAIN EXECUTIVE OFFICERS
- ---------------------------------------------------------
Stanley D. Czerwinski.................................... 41,659(2) *
R. Andrew Eckert......................................... 303,087(3) *
Dennis R. Raney.......................................... 2,000 *
F. David Rollo........................................... 33,335(4) *
Edmund H. Shea, Jr....................................... 506,192(5) 2.4%
Bruce M. Blanco.......................................... 16,875(6) *
Gerhard F. Burbach....................................... 80,000(7) *
Ian R. Farmer............................................ 111,300(8) *
Neil J. Laird............................................ -- *
All directors and executive officers as a group (9
persons)............................................... 1,094,448(9) 5.3%
(b) OTHER PRINCIPAL SHAREHOLDERS
- ---------------------------------------------------------
Neuberger Berman LLC..................................... 1,733,900(10) 8.4%
605 Third Avenue
New York, NY 10158
FMR Corp................................................. 1,657,300(11) 8.0%
82 Devonshire Street
Boston, MA 02109
</TABLE>
- ------------------------
* Less than one percent (1%).
(1) Based on information furnished by the persons named and 20,614,483 shares
of Common Stock outstanding as of January 11, 2000. All references to
options include options that were exercisable on November 30, 1999 and
within sixty (60) days thereafter.
(2) Includes 18,334 shares issuable upon exercise of options held by
Mr. Czerwinski.
(3) Includes 202,500 shares issuable upon exercise of options and 100,000
shares of restricted stock held by Mr. Eckert.
(4) Includes 18,334 shares issuable upon exercise of options held by
Dr. Rollo.
(5) Includes 25,000 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.
(6) Includes 16,875 shares issuable upon exercise of options held by
Mr. Blanco.
(7) Includes 55,000 shares issuable upon exercise of options and 25,000 shares
of restricted stock held by Mr. Burbach.
(8) Includes 85,000 shares issuable upon exercise of options and 25,000 shares
of restricted stock held by Mr. Farmer.
(9) Includes options to purchase 421,043 shares of Common Stock held by all
directors and executive officers as a group.
(10) Neuberger Berman, LLC has sole voting power over 684,600 shares, shared
voting power over 1,043,300 shares, and shared dispositive power over
1,733,900 shares. Neuberger Berman Genesis
2
<PAGE>
Portfolio has shared voting power and shared dispositive power over
1,043,300 shares. Neuberger Berman Management, Inc. has shared voting
power over 1,043,300 and shared dispositive power over 1,733,900 shares.
The remaining balance of 6,000 shares is for individual client accounts
over which Neuberger Berman, LLC has shared dispositive power. Neuberger
Berman, LLC and Neuberger Berman Management, Inc. serve as sub-adviser and
investment manager, respectively, of Neuberger Berman Genesis Portfolio.
(11) Edward C. Johnson III, Chairman of FMR Corp., and FMR Corp., through
Fidelity Management & Research Company ("Fidelity"), a wholly-owned
subsidiary of FMR Corp., each has sole dispositive power over the
1,657,300 shares owned by various Fidelity funds. Fidelity Low-Priced
Stock Fund was the beneficial owner of 1,350,000 such shares. Neither
Mr. Johnson nor FMR Corp. has sole voting power over shares owned by the
Fidelity funds, which power is held by the funds' board of trustees.
Mr. Johnson and FMR Corp., through Fidelity Management Trust Company, a
wholly-owned subsidiary of FMR Corp., each has sole dispositive power and
sole voting power over 154,700 shares.
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 1999 Long-Term
Incentive Plan (Proposal 2).
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 and 2. 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.
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.
3
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
GENERAL
Presently the Company's Bylaws authorize five members to serve on the Board
of Directors. The persons presently serving as directors, Messrs. Czerwinski,
Eckert, Raney, Rollo and Shea, are proposed for election as directors. The proxy
holders will be voting for all five 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 (64)........ Consultant 1991
R. Andrew Eckert (38)............. Chief Executive Officer of the Company 1996
Dennis R. Raney (57).............. Senior Vice President and Chief Financial Officer of 1999
Novell, Inc.
F. David Rollo (60)............... Chief Medical Officer of the Company 1991
Edmund H. Shea, Jr. (70).......... Executive Vice President and a director of J.F. Shea 1987
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.
Mr. Eckert was elected a director in April 1996 and Chairman of the Board in
April 1999. He has served as Chief Executive Officer of the Company since
August 1997. 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. Raney was elected a director in March 1999. Mr. Raney is currently the
Senior Vice President and Chief Financial Officer of Novell, Inc., a
publicly-traded software company, which he joined in March 1998. In the
preceding year, Mr. Raney served as Executive Vice President and Chief Financial
Officer of QAD, Inc., a producer of enterprise resource planning software. From
May 1996 to February 1997, he served as Executive Vice President and Chief
Financial Officer of California Microwave, Inc.,
4
<PAGE>
a manufacturer of wireless and satellite communications equipment and systems;
and from December 1995 to May 1996, as Chief Financial Officer of General Magic,
Inc., a developer of mobile computing agents. During the period of October 1993
through December 1995, Mr. Raney was the Senior Vice President and Chief
Financial Officer of the Pharmaceutical Products Group for Bristol Myers Squibb
Company, and prior to that served in a number of capacities at Hewlett-Packard
Company for more than 24 years.
Dr. Rollo was elected a director in 1991. In October 1999 Dr. Rollo joined
the Company and is currently serving as its Chief Medical Officer. From
May 1996 to September 1999, Dr. Rollo was 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
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 nine special meetings during the fiscal year ended October 3, 1999. 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, and a Nominating Committee. The Audit Committee and the Compensation
Committee presently consist of Messrs. Raney and Shea. The Nominating Committee
presently consists of Messrs. Eckert and Shea. The Audit Committee met seven
times, the Compensation Committee met five times and the Nominating Committee
met once in fiscal 1999.
The Audit Committee, among other things, oversees the Company's internal
controls and financial reporting, as well as the Company's compliance with legal
and regulatory matters. The Compensation Committee's responsibilities include
setting the compensation for the Company's executive officers, approving grants
of stock options and other long-term incentives to employees, and administering
the Company's long-term incentive plans. The Nominating Committee is responsible
for nominating directors to serve on the Board and the various committees of the
Board, nominating directors to fill vacancies and nominating a director to serve
as Chairman of the Board. The Nominating Committee will consider nominations
recommended by security holders provided that nominations are submitted in
writing to Mr. Eckert, Chairman of the Nominating Committee, no later than
September 30, 2000.
During fiscal 1999, each non-employee director other than Mr. Raney received
an option to purchase 3,333 shares of the Company's Common Stock under the
Company's Directors' Stock Option Plan, which vests in full on the first
anniversary of the date of grant. In accordance with the terms of the Directors'
Stock Option Plan, Mr. Raney received an option to purchase 20,000 shares of the
Company's Common Stock under that Plan when he joined the Board of Directors.
This option vests ratably over a four-year period. 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.
5
<PAGE>
PROPOSAL NO. 2
AMENDMENT OF COMPANY'S 1999 LONG-TERM INCENTIVE PLAN
TO INCREASE SHARES RESERVED FOR ISSUANCE
The shareholders approved the Company's 1999 Long-Term Incentive Plan in May
1999. The purpose of the Plan is principally to attract and retain the best
available personnel whose present and potential contributions are important to
the continued success of the Company, to afford these individuals the
opportunity to acquire a proprietary interest in the Company, to enable the
Company to enlist and retain in its service the best available talent for the
successful conduct of its business and to align the interest of such persons
with the interests of the Company's shareholders. The Plan currently has
reserved 920,000 shares of stock for issuance thereunder, but only 64,825 of
these shares remain available for grant. On November 9, 1999, the Board of
Directors approved an amendment to the Plan to increase the number of shares
reserved for issuance under the Plan by 990,000. At the Annual Meeting, the
shareholders are being asked to approve this increase.
SUMMARY OF THE 1999 LONG-TERM INCENTIVE PLAN
GENERAL. Options, Stock Purchase Rights ("SPRs"), Stock Appreciation Rights
("SARs") and Long-Term Performance Awards may be granted under the Plan. Options
granted under the Plan may be either "incentive stock options," as defined in
Section 422 of the Code, or nonstatutory stock options.
ADMINISTRATION. The Plan may generally be administered by the Board or the
Committee appointed by the Board (as applicable, the "Administrator").
ELIGIBILITY; LIMITATIONS. Nonstatutory stock options and rights may be
granted under the Plan to employees, directors and consultants of the Company
and any parent or subsidiary of the Company. Incentive stock options may be
granted only to employees. The Administrator, in its discretion, selects the
employees, directors and consultants to whom options and rights may be granted,
the time or times at which such options and rights shall be granted, and the
number of shares subject to each such grant.
Section 162(m) of the Code places limits on the deductibility for federal
income tax purposes of compensation paid to certain executive officers of the
Company. In order to preserve the Company's ability to deduct the compensation
income associated with options and SARs granted to such persons, the Plan
provides that no employee, director or consultant may be granted, in any fiscal
year of the Company, options and SARs to purchase more than 300,000 shares of
Common Stock. Notwithstanding this limit, however, in connection with such
individual's initial employment with the Company, he or she may be granted
options or rights to purchase up to an additional 300,000 shares of Common
Stock.
TERMS AND CONDITIONS OF OPTIONS. Each option is evidenced by a stock option
agreement between the Company and the optionee, and is subject to the following
additional terms and conditions:
(a) EXERCISE PRICE. The Administrator determines the exercise price of
options at the time the options are granted; provided, however, that the
exercise price of an option may not be less than 100% of the fair market
value of the Common Stock on the date such option is granted; provided,
further, that the exercise price of an incentive stock option granted to a
10% shareholder may not be less than 110% of the fair market value of the
Common Stock on the date such option is granted. For purposes of the Plan,
the fair market value of the Common Stock is generally determined with
reference to the closing sale price for the Common Stock (or the closing bid
if no sales were reported) on the last market trading day prior to the date
the option is granted.
(b) EXERCISE OF OPTION; FORM OF CONSIDERATION. The Administrator
determines when options become exercisable, and may in its discretion,
accelerate the vesting of any outstanding option. Stock options granted
under the Plan generally vest and become exercisable over three years. The
means of payment for shares issued upon exercise of an option is specified
in each option agreement. The Plan
6
<PAGE>
permits payment to be made by cash, check, promissory note, other shares of
Common Stock of the Company (with some restrictions), cashless exercise, a
reduction in the amount of any Company liability to the optionee, any other
form of consideration permitted by applicable law, or any combination
thereof.
(c) TERM OF OPTION. The term of an option shall be specified in the
option agreement; provided, however, that the term of an incentive stock
option may be no more than ten (10) years from the date of grant; provided
further that in the case of an incentive stock option granted to a 10%
shareholder, the term of the option may be no more than five (5) years from
the date of grant. No option may be exercised after the expiration of its
term.
(d) TERMINATION OF EMPLOYMENT. If an optionee's employment or
consulting relationship terminates for any reason (other than death or
disability), the Optionee may exercise his or her option within such period
as is determined by the Administrator at the time of grant to the extent the
option is exercisable at the time of optionee's termination. In the absence
of a determination by the Administrator, the Option shall remain exercisable
for three (3) months following the Optionee's termination. To the extent the
option is exercisable at the time of such termination, or to the extent the
optionee does not exercise his or her option, the shares subject thereto
shall revert to the Plan.
(e) DEATH OR DISABILITY. If an optionee's employment or consulting
relationship terminates as a result of death or disability, the Optionee may
exercise his or her option within such period as is determined by the
Administrator at the time of grant as to all of the shares subject thereto,
including shares as to which the option would not otherwise be exercisable.
In the absence of a determination by the Administrator, the Option shall
remain exercisable for twelve (12) months following the Optionee's
termination. To the extent that the optionee (or the optionee's estate or
the person who acquires the right to exercise the option by bequest or
inheritance) does not exercise the option before the expiration of such
period, the shares subject thereto shall revert to the Plan.
(f) OPTIONS TO OUTSIDE DIRECTORS. Except as set forth below, options
granted to outside directors shall be governed by the generally applicable
terms of the Plan. Each outside director shall be automatically granted an
option (a "First Option") for 20,000 shares on the date on which such person
first becomes an outside director (whether through election by the
shareholders of the Company or appointment by the Board to fill a vacancy).
Each outside director shall receive an additional grant (a "Subsequent
Option") for 3,333 shares on March 15th of each year (or the next business
day if a weekend or holiday), except that each fourth year, the outside
director's Subsequent Option shall cover 20,000 shares. The term of each
First Option and each Subsequent Option shall be five (5) years.
(g) NONTRANSFERABILITY OF OPTIONS. Options granted under the Plan are
generally not transferable other than by will or the laws of descent and
distribution, and may be exercised during the optionee's lifetime only by
the optionee.
(h) OTHER PROVISIONS. The stock option agreement may contain other
terms, provisions and conditions not inconsistent with the Plan as may be
determined by the Administrator.
STOCK PURCHASE RIGHTS. The Company may sell shares to eligible service
providers pursuant to SPRs. Unless the Administrator determines otherwise, the
restricted stock purchase agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
employment with the Company for any reason (including death or disability). The
purchase price for shares repurchased pursuant to the repurchase option shall be
the original price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to the Company. The repurchase option shall lapse
at a rate determined by the Administrator; provided, however, that the vesting
period shall not be less than four (4) years, unless the Administrator
determines, in its sole discretion, to provide for vesting
7
<PAGE>
of no less than one (1) year. No more than 25% of the shares available for
issuance on the first day of any fiscal year may be issued pursuant to SPRs in
such fiscal year.
LONG-TERM PERFORMANCE AWARDS. Long-Term Performance Awards are cash or
stock bonus awards that may be granted either alone or in addition to other
awards granted under the Plan. Such awards may be granted for no cash
consideration. The Administrator shall determine the nature, length and starting
date of any performance period (the "Performance Period") for each Long-Term
Performance Award, and shall determine the performance or employment factors, if
any, to be used in the determination of Long-Term Performance Awards and the
extent to which such Long-Term Performance Awards are valued or have been
earned. Long-Term Performance Awards shall be confirmed by, and be subject to
the terms of, a Long-Term Performance Award agreement. The terms of such awards
need not be the same with respect to each participant.
The Administrator may adjust the performance factors applicable to the
Long-Term Performance Awards to take into account changes in legal, accounting
and tax rules and to make such adjustments as the Administrator deems necessary
or appropriate to reflect the inclusion or exclusion of the impact of
extraordinary or unusual items, events or circumstances in order to avoid
windfalls or hardships.
STOCK APPRECIATION RIGHTS. The Plan also permits the granting of SARs. SARs
may be granted alone or in addition to other awards under the Plan. An SAR
entitles the optionee, by exercising the SAR, to receive from the Company an
amount equal to the excess of the fair market value of the Common Stock covered
by the exercised portion of the SAR, as of the date of such exercise, over the
fair market value of the Common Stock covered by the exercised portion of the
SAR as of the date of grant. Notwithstanding the foregoing, the Administrator of
the Plan may place limits on the aggregate amount that may be paid upon exercise
of an SAR. An SAR shall be exercisable, in whole or in part, at such time as the
Administrator shall specify in the optionee's SAR agreement.
The Company's obligation arising upon the exercise of an SAR may be paid in
Common Stock or in cash, or any combination thereof, as the Administrator may
determine. Shares issued upon the exercise of an SAR shall be valued at their
fair market value as of the date of exercise.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event that the stock of
the Company changes by reason of any stock split, reverse stock split, stock
dividend, combination, reclassification or other similar change in the capital
structure of the Company effected without the receipt of consideration,
appropriate adjustments shall be made in the number and class of shares of stock
subject to the Plan, the number and class of shares of stock subject to any
option or right outstanding under the Plan, and the exercise price of any such
outstanding option or right.
In the event of a liquidation or dissolution, any unexercised options or
rights will terminate. The Administrator may, in its discretion declare that any
option or right shall terminate as of a date fixed by the Administrator and
provide that the vesting and exercisability of each option and right shall
accelerate in full.
In connection with any merger, consolidation, acquisition of assets or like
occurrence involving the Company, each outstanding option or right shall be
assumed or an equivalent option or right substituted by the successor
corporation. If the successor corporation refuses to assume the options and
rights or to substitute substantially equivalent options and rights, the vesting
and exercisability of each option and right shall accelerate in full.
Notwithstanding the foregoing, in the event of a "Change in Control" as defined
in the Plan, all options and rights outstanding on the date such Change in
Control is determined to have occurred that are not yet fully exercisable and
vested on such date become fully exercisable and vested.
AMENDMENT AND TERMINATION OF THE PLAN. The Board may amend, alter, suspend
or terminate the Plan or any part thereof, at any time and for any reason.
However, the Company shall obtain shareholder approval for any amendment to the
Plan to the extent necessary to comply with Section 162(m) and
8
<PAGE>
Section 422 of the Code, or any similar rule or statute. No such action by the
Board or shareholders may alter or impair any option or right previously granted
under the Plan without the written consent of the optionee. Unless terminated
earlier, the Plan shall terminate five years from the date of its adoption by
the Board.
FEDERAL INCOME TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS. An optionee who is granted an incentive stock
option does not recognize taxable income at the time the option is granted or
upon its exercise, although the exercise may subject the optionee to the
alternative minimum tax. Upon a disposition of the shares more than two years
after grant of the option and one year after exercise of the option, any gain or
loss is treated as long-term capital gain or loss. If these holding periods are
not satisfied, the optionee recognizes ordinary income at the time of
disposition equal to the difference between the exercise price and the lower of
(i) the fair market value of the shares at the date of the option exercise or
(ii) the sale price of the shares. Any gain or loss recognized on such a
premature disposition of the shares in excess of the amount treated as ordinary
income is treated as long-term or short-term capital gain or loss, depending on
the holding period. A different rule for measuring ordinary income upon such a
premature disposition may apply if the optionee is also an officer, director, or
10% shareholder of the Company. The Company is generally entitled to a deduction
in the same amount as the ordinary income recognized by the optionee.
NONSTATUTORY STOCK OPTIONS. An optionee does not recognize any taxable
income at the time he or she is granted a nonstatutory stock option. Upon
exercise, the optionee recognizes taxable income generally measured by the
excess of the then fair market value of the shares over the exercise price. Any
taxable income recognized in connection with an option exercise by an employee
of the Company is subject to tax withholding by the Company. The Company is
generally entitled to a deduction in the same amount as the ordinary income
recognized by the optionee. Upon a disposition of such shares by the optionee,
any difference between the sale price and the optionee's exercise price, to the
extent not recognized as taxable income as provided above, is treated as
long-term or short-term capital gain or loss, depending on the holding period.
STOCK PURCHASE RIGHTS. Stock purchase rights will generally be taxed in the
same manner as nonstatutory stock options. However, restricted stock is
generally purchased upon the exercise of a stock purchase right. At the time of
purchase, restricted stock is subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code. As a result, the purchaser will
not recognize ordinary income at the time of purchase. Instead, the purchaser
will recognize ordinary income on the date when the stock ceases to be subject
to a substantial risk of forfeiture. The stock will generally cease to be
subject to a substantial risk of forfeiture when it is no longer subject to the
Company's right to repurchase the stock upon the purchaser's termination of
employment with the Company. At such times, the purchaser will recognize
ordinary income measured as the difference between the purchase price and the
fair market value of the stock on the date the stock is no longer subject to a
substantial risk of forfeiture.
The purchaser may accelerate to the date of purchase his or her recognition
of ordinary income, if any, and the beginning of any capital gain holding period
by timely filing an election pursuant to Section 83(b) of the Code. In such
event, the ordinary income recognized, if any, is measured as the difference
between the purchase price and the fair market value of the stock on the date of
purchase, and the capital gain holding period commences on such date. The
ordinary income that is recognized by a purchaser who is an employee will be
subject to tax withholding by the Company. Different rules may apply if the
purchaser is also an officer, director, or 10% shareholder of the Company.
STOCK APPRECIATION RIGHTS. No income shall be recognized by a recipient in
connection with the grant of an SAR. When the SAR is exercised, the recipient
will generally be required to include as taxable ordinary income in the year of
exercise an amount equal to the amount of cash received and the fair market
value of any Common Stock received upon the exercise. In the case of a recipient
who is also an
9
<PAGE>
employee, any income recognized upon the exercise of an SAR will constitute
wages for which withholding may be required. The Company will generally be
entitled to a tax deduction in the same amount as the ordinary income recognized
by the recipient. If the optionee receives Common Stock upon the exercise of an
SAR, any gain or loss on the sale of such stock will be treated in the same
manner as discussed above under "Nonstatutory Stock Options."
The foregoing is only a summary of the effect of federal income taxation
upon optionees, holders of rights, and the Company with respect to the grant and
exercise of options and rights under the Plan. It does not purport to be
complete, and does not discuss the tax consequences of the employee or
consultant's death or the provisions of the income tax laws of any municipality,
state or foreign country in which the employee or consultant may reside.
OUTSTANDING LONG-TERM INCENTIVE AWARDS
As of October 3, 1999, options to purchase a total of 855,175 shares of
Common Stock were outstanding under the Plan. As of such date, these options had
an aggregate exercise price of $6,126,229, or an average of $7.16 per share,
and, based upon the closing price of $9.50 on October 1, 1999 (the last trading
day of the Company's 1999 fiscal year), the shares underlying these outstanding
options had an aggregate market value of approximately $8,124,162. During fiscal
1999, the Company granted the named executive officers the options described
below under "Stock Options Granted in Fiscal 1999" under the Plan, granted all
executive officers as a group options to purchase an aggregate of 225,000 shares
of Common Stock under the Plan with an exercise price of $7.25 per share,
granted all current directors who are not executive officers as a group options
to purchase an aggregate of 30,000 shares with an exercise price of $7.25, and
granted all Company employees, excluding the foregoing executive officers,
options to purchase an aggregate of 600,175 shares of Common Stock under the
Plan at an average exercise price of $7.13 per share.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares represented
and voting in person or by proxy at the Annual Meeting will be required to
approve the amendment to the 1999 Long-Term Incentive Plan. THE BOARD OF
DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THIS PROPOSAL.
10
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE ON
ANNUAL COMPENSATION OF EXECUTIVE OFFICERS
The Compensation Committee of the Board of Directors (the "Committee")
determines the level of compensation for the Company's chief executive officer
and its other executive officers. The Committee determines the base salary and
bonus compensation, and also makes recommendations for the grants of incentive
compensation under the Company's incentive plans.
The goals of the Company's compensation program are to structure
incentive-based compensation that is closely tied to the Company's performance
and long-term objectives, and to attract, retain and reward qualified executives
who contribute to the Company's success.
The primary components of the Company's compensation package are base
salary, bonuses and incentive compensation.
BASE SALARY. Base salaries of executive officers are determined based upon
their level of responsibility, qualifications, level of experience, and
individual performance. The Company uses outside consultants to review salary
ranges for each executive officer against independent compensation analyses of
salaries paid to executive officers in similar positions at comparable
companies. Base salary levels are also designed to be competitive with the
marketplace.
BONUS COMPENSATION. The Company's bonus plan provides for cash bonuses
based on the accomplishment of individual performance goals, company-wide profit
targets and strategic objectives. The objectives are designed to further the
Company's financial and operating performance, implement its strategic business
plan, develop new products and maintain and increase market share. Generally,
the goals are set at the beginning of the fiscal year based on the Company's
long-term and short-term objectives, and accomplishment of these goals is
assessed quarterly and annually. Bonuses range from 0% to 100% of base salary.
To be awarded the maximum bonus, the officer must accomplish most or all of the
individual objectives and the Company must achieve its financial objectives for
the fiscal year.
LONG-TERM INCENTIVE COMPENSATION. The Committee uses grants of stock
options and restricted stock to supplement executive officers' base salary and
bonus compensation. These grants provide long-term incentives for the
achievement of the Company's strategic objectives and financial and operating
goals, and align the executives' interests with those of the Company's
shareholders. The Committee also makes these grants in order to retain and
attract high-quality employees in the competitive job market of the Silicon
Valley. The incentive program utilizes a vesting schedule to encourage executive
officers to maintain a long-term perspective. The sizes of grants are based on
the officers' level of responsibility, satisfaction of individual performance
objectives, and the Company's performance.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. Mr. R. Andrew Eckert has been
the Company's Chief Executive Officer since 1997. Mr. Eckert's overall
compensation in fiscal 1999 was based on the Company's performance,
Mr. Eckert's achievement of specified goals, and upon a compensation study of
peer organizations conducted by an independent compensation consulting firm.
Mr. Eckert's base salary for fiscal 1999 was $500,000. He was also eligible to
receive a bonus of up to $300,000. Of this amount, up to $120,000 was payable
quarterly based on the Company's financial results, and up to $180,000 was
payable at year-end based on Mr. Eckert's achievement of specified operating and
strategic goals, including management development and pursuit of growth
opportunities in certain business segments. Based on his level of achievement of
these goals, the Company awarded Mr. Eckert a bonus of $131,250. In addition,
the Company awarded Mr. Eckert a discretionary bonus of $50,000 for his
achievement of certain additional objectives, including maintaining the
Company's business momentum and improving the Company's infrastructure and
internal controls. Mr. Eckert also received long-term incentive compensation
consisting of 100,000 shares of restricted stock, and stock options for a total
of 100,000 shares of Common Stock of the Company and 75,000 shares of common
stock of ADAC Healthcare Information
11
<PAGE>
Systems, Inc. in accordance with the Committee's philosophy set forth above
under "Long-Term Incentive Compensation."
This report on executive compensation has been furnished by the following
members of the Compensation Committee of the Company's Board of Directors:
Dennis R. Raney
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. Raney and
Shea.
EXECUTIVE COMPENSATION. The following table sets forth all compensation
earned by or paid or awarded to Mr. Eckert, the Chief Executive Officer of the
Company, and to the next four most highly compensated executive officers of the
Company for all services rendered in all capacities for the periods shown.
12
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION --------------------------------------
----------------------------------------- RESTRICTED ADAC STOCK HCIS STOCK
FISCAL BASE STOCK OPTION OPTION
NAME AND CURRENT POSITION YEAR SALARY BONUS OTHER(1) AWARDS AWARDS AWARDS(2)
- ------------------------- -------- -------- -------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
R. Andrew Eckert........... 1999 $500,000 $181,250 -- $220,000 100,000 75,000
Chief Executive 1998 450,000 240,000 -- -- 170,000 107,931
Officer 1997 325,000 155,000 -- -- 100,000 --
Bruce M. Blanco(3)......... 1999 $157,503 $ 83,946 -- -- 50,000 --
Vice President, Finance 1998 145,976 45,125 -- -- 27,500 --
Gerhard F. Burbach(3)...... 1999 $225,000 $175,950 -- $181,250 90,000 --
President, ADAC Medical 1998 154,000 138,000 -- -- 75,000 --
Systems
Ian R. Farmer(3)........... 1999 $190,000 $156,085 -- $181,250 50,000 15,000
Senior Vice President, 1998 175,000 109,000 -- -- 55,000 --
Business Development
Neil J. Laird(4)........... 1999 -- -- -- -- 50,000 --
Senior Vice President,
Chief Financial Officer
<CAPTION>
LONG-TERM COMPENSATION
--------------------------
LONG-TERM
INCENTIVE ALL OTHER
NAME AND CURRENT POSITION PAYOUTS COMPENSATION
- ------------------------- ---------- -------------
<S> <C> <C>
R. Andrew Eckert........... -- --
Chief Executive -- --
Officer -- --
Bruce M. Blanco(3).........
Vice President, Finance -- --
Gerhard F. Burbach(3)...... -- --
President, ADAC Medical -- --
Systems
Ian R. Farmer(3)........... -- --
Senior Vice President, -- --
Business Development
Neil J. Laird(4)........... -- --
Senior Vice President,
Chief Financial Officer
</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) Represents options granted by the Company's subsidiary, ADAC Healthcare
Information Systems, Inc. ("HCIS"), under the 1997 HCIS Stock Option Plan.
(3) Messrs. Blanco, Burbach and Farmer became executive officers of the Company
in fiscal 1998.
(4) Mr. Laird became an executive officer of the Company at the end of fiscal
1999. Mr. Laird's base salary and bonus compensation for fiscal 1999 are not
disclosed because they did not exceed $100,000 for that period.
EXECUTIVE OFFICERS OF THE COMPANY. A description of Mr. Eckert's position
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. Gerhard F. Burbach, age 37, currently serves as President of the Medical
Systems division of the Company. From September 1996, when he joined the
Company, until September 1998, Mr. Burbach served as Senior Vice President and
General Manager of the Radiation Therapy Products division of the Company. Prior
to joining the Company, from 1990 to 1996, Mr. Burbach was a Senior Engagement
Manager for McKinsey & Company, a management consulting firm.
Mr. Ian R. Farmer, age 50, currently serves as Senior Vice President of
Business Development for the Company. From 1995 to 1998, he served as Senior
Vice President and General Manager of Nuclear Medicine. From 1993, when he
joined the Company, until 1995, he served as Vice President of Marketing.
Mr. Neil J. Laird, age 47, has served as the Company's Senior Vice President
and Chief Financial Officer since September 1999, when he joined the Company.
From March 1999 until September 1999, Mr. Laird served as Vice President and
Chief Operating Officer of Coherent Medical Group, and from 1998 until
March 1999 he served as Vice President of Finance of Coherent Medical Group.
From 1980 to 1997, he held various finance positions with Measurex Corporation
and was Vice President and Corporate Controller from 1994 to 1997.
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.
13
<PAGE>
STOCK OPTIONS GRANTED IN FISCAL 1999
The following table sets forth certain information concerning stock option
grants made to certain executive officers during fiscal 1999. No other option
grants were made to the named executive officers during fiscal 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
--------------------
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
NUMBER OF % OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO PER SHARE OPTION TERM(2)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ---------------------------
NAME GRANTED 1999 PRICE ($) DATE 5% 10%
- ---- ---------- ------------ --------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
R. Andrew Eckert............. 100,000 5.3 $ 7.25 07-07-09 $455,949 $1,155,463
75,000(3) 12.9(4) 7.13 09-10-09 336,301 852,254
Bruce M. Blanco.............. 20,000(5) 1.1 $21.75 01-19-09 $273,569 $ 693,278
10,000(5) .5 13.50 03-15-09 84,901 215,155
20,000(5) 1.1 7.25 07-07-09 91,189 231,093
Gerhard F. Burbach........... 15,000(5) .8 $13.50 03-15-09 $127,351 $ 322,732
75,000 4.0 7.25 07-07-09 341,961 866,597
Ian R. Farmer................ 50,000 2.6 $ 7.25 07-07-09 $227,974 $ 577,732
15,000(3) 2.6(4) 7.13 09-10-09 67,260 170,451
Neil J. Laird................ 50,000(5) 2.6 $ 6.31 09-10-09 $198,416 $ 502,826
</TABLE>
- ------------------------
(1) All option grants, except those described in footnotes (3) and (5) below,
were made by the Company under the Company's 1999 Long-Term Incentive Plan.
(2) 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.
(3) Represents grants by the Company's subsidiary, HCIS, under the 1997 HCIS
Stock Option Plan.
(4) Represents percentage of total options granted under the 1997 HCIS Stock
Option Plan.
(5) Represents grants made by the Company under the Company's 1992 Stock Option
Plan.
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. Options not designated as incentive stock
options 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.
14
<PAGE>
AGGREGATED STOCK OPTION EXERCISES DURING FISCAL 1999 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 1999, the
"value realized", and the number and value of unexpired stock options at
October 3, 1999 which such executive officers can exercise or in the future
could exercise.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED TOTAL VALUE OF UNEXERCISED
STOCK OPTIONS HELD AT IN-THE-MONEY STOCK OPTIONS
OCTOBER 3, 1999 HELD AT OCTOBER 3, 1999(2)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
R. Andrew Eckert....... -- -- 202,500 280,379 $ -- $249,298
Bruce M. Blanco........ -- -- 16,875 60,625 -- 45,000
Gerhard F. Burbach..... -- -- 55,000 150,000 -- 168,750
Ian R. Farmer.......... -- -- 85,000 105,000 37,500 112,500
Neil J. Laird.......... -- -- -- 50,000 -- 159,350
</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,
October 1, 1999, the last trading day of fiscal 1999, as reported on the
Nasdaq Stock Market, of $9.50, and the exercise price of such options.
CHANGE-IN-CONTROL AGREEMENTS. The Company has entered into Executive
Severance Agreements with Messrs. Eckert, Burbach, Farmer and Laird. 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 in 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,
(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 or (c) a spin-off by the Company of
all or any portion of the ownership of any subsidiary whereby the Company's
shareholders become shareholders of the subsidiary.
If a change in control of the Company occurs, each executive will be
entitled to a severance payment equal to 2.99 times the average annual
compensation received by each such executive, including base
15
<PAGE>
salary, bonuses and other incentive compensation and stock option gains during
the sixty-month period ending immediately preceding the calendar year in which
the change in control occurs. 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 in 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.
16
<PAGE>
PERFORMANCE GRAPH
The following graph sets forth the Company's total cumulative shareholder
return as compared to the NASDAQ Stock Market (U.S.) Index and the Standard and
Poor's Health Care (Medical Products and Supplies) Index for the period
September 30, 1994 through September 30, 1999. Total shareholder return assumes
$100 invested at the beginning of the period in the Company's Common Stock, the
stocks represented in the NASDAQ Stock Market (U.S.) Index and the stocks
represented in the Standard and Poor's Health Care (Medical Products and
Supplies) Index, in each case on a "total return" basis assuming reinvestment of
dividends.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
9/94 9/95 9/96 9/97 9/98 9/99
<S> <C> <C> <C> <C> <C> <C>
DOLLARS
ADAC LABORATORIES 100.00 150.63 259.91 241.34 309.95 126.72
NASDAQ STOCK MARKET (U.S.) 100.00 138.07 163.85 224.97 228.78 371.62
S & P HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) 100.00 161.54 194.19 240.16 289.74 324.00
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN AS OF SEPTEMBER 30
---------------------------------------------------------------
1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
ADAC Laboratories.................................... $100 $151 $260 $241 $310 $127
Nasdaq Stock Market (U.S.)........................... 100 138 164 225 229 372
S & P Health Care (Medical Products & Supplies)...... 100 162 194 240 290 324
</TABLE>
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The firm of PricewaterhouseCoopers LLP has examined the financial statements
of the Company for the fiscal year ended October 3, 1999, and has been selected
to perform such service for the current fiscal year. A representative of
PricewaterhouseCoopers LLP 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.
17
<PAGE>
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 1999 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 December 26, 2000 in order to be
considered for inclusion in the Company's proxy materials related to the 2001
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 October 3, 1999, 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:
Investor Relations.
By Order of the Board of Directors,
[/S/ R. ANDREW ECKERT]
R. Andrew Eckert,
CHAIRMAN OF THE BOARD
Dated: February 8, 2000
18
<PAGE>
ADAC LABORATORIES
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of ADAC Laboratories, a California
corporation, acting under the California General Corporation Law, hereby
constitutes and appoints R. Andrew Eckert and Neil J. Laird, 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 Thursday, March 9, 2000, 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:
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.
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<PAGE>
Please mark your votes as indicated in this example /X/
1. Election of Directors:
FOR all nominees listed (EXCEPT AS LISTED BELOW) / /
WITHHOLD authority 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, DENNIS R.
RANEY, F. DAVID ROLLO AND EDMUND H. SHEA, JR.) / /
2. Approval of an amendment to the Company's 1999 Long-Term Incentive Plan to
reserve for issuance thereunder an additional 990,000 shares: (mark one; the
Board recommends a "FOR" vote).
FOR AGAINST ABSTAIN
/ / / / / /
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
the name(s) of such nominee(s) below.)
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EACH OF THE ABOVE-NAMED PROXIES PRESENT AT SAID MEETING, EITHER IN PERSON OR
BY SUBSTITUTE, SHALL HAVE AND EXERCISE ALL THE POWERS 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 PROPOSAL
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.
PLEASE SIGN, DATE, AND RETURN PROXY PROMPTLY IN THE POSTAGE PREPAID ENCLOSED
ENVELOPE.
Signature(s) Dated , 2000
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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.
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