<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / 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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
Health Images, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:
<PAGE> 2
HEALTH IMAGES, INC.
8601 DUNWOODY PLACE, BUILDING 200
ATLANTA, GEORGIA 30350
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Health
Images, Inc., a Delaware corporation (the "Company"), will be held May 31, 1996,
at 9:00 a.m., at the Society Hill Sheraton, One Dock Street, Philadelphia,
Pennsylvania 19106, for the following purposes:
1. To elect seven (7) directors for one-year terms of office;
2. To ratify and approve the Company's 1996 Employee Incentive Stock
Option Plan (the "1996 ISOP");
3. To ratify and approve the 1995 Formula Stock Option Plan for
outside directors;
4. To ratify and approve the grant of non-qualified options to
purchase 3,000 shares of the Company's Common Stock to each of the two (2)
non-employee directors of the Company who joined the Board in 1995;
5. To ratify and approve the appointment by the Company's Board of
Directors of Joseph Decosimo and Company as the Company's independent
public accountants for the fiscal year ending December 31, 1996; and
6. To consider and act upon such other business as may properly come
before the meeting or any adjournment thereof.
The Proxy Statement dated April 25, 1996, is attached. Common Stock
stockholders of record on the books of the Company at the close of business on
April 23, 1996, are entitled to notice of and to vote at the meeting.
We hope you will be able to attend the meeting in person, but, if you
cannot be present, it is important that you sign, date and promptly return the
enclosed proxy in the enclosed postage-paid envelope in order that your vote may
be cast at the meeting.
By Order of the Board of Directors
/s/ Robert D. Carl III
---------------------------------
Robert D. Carl, III
Chairman of the Board, President
and Chief Executive Officer
April 25, 1996
Atlanta, Georgia
<PAGE> 3
HEALTH IMAGES, INC.
8601 DUNWOODY PLACE, BUILDING 200
ATLANTA, GEORGIA 30350
---------------------
PROXY STATEMENT
---------------------
This statement is furnished in connection with the solicitation by the
Board of Directors of Health Images, Inc. (the "Company") of proxies to be voted
at the Annual Meeting of Stockholders of the Company to be held May 31, 1996,
and at any and all adjournments of such meeting. The meeting is being held this
year in Philadelphia to accommodate the outside directors who live in the
Northeastern United States, to permit the large number of shareholders in the
Pennsylvania and New York area an opportunity to attend and to avoid the
Atlanta, Georgia area as it prepares to host the Centennial Olympic Games.
PROXY SOLICITATION
Any stockholder who executes and delivers a proxy has the right to revoke
the proxy at any time before it is voted. A proxy may be revoked by (i) filing
an instrument revoking the proxy with the Secretary of the Company, (ii)
executing a proxy bearing a later date, or (iii) attending and voting at the
Annual Meeting. Properly executed proxies, timely returned, will be voted in
accordance with the choices made by the stockholder with respect to the
proposals listed thereon. If a choice is not made with respect to any proposal,
the proxy will be voted "FOR" the election of directors as described under
"PROPOSAL 1 -- ELECTION OF DIRECTORS" below, "FOR" the ratification and approval
of the Company's 1996 ISOP as described under "PROPOSAL 2 -- ADOPTION OF A NEW
EMPLOYEE INCENTIVE STOCK OPTION PLAN" below, "FOR" the ratification and approval
of the 1995 Formula Stock Option Plan for outside directors as described under
"PROPOSAL 3 -- FORMULA STOCK OPTION PLAN" below, "FOR" the ratification and
approval of the grant of non-qualified options to purchase 3,000 shares of the
Company's Common Stock to each of Mr. Strasner and Dr. Greenberg as described
under "PROPOSAL 4 -- GRANT OF NON-QUALIFIED STOCK OPTIONS TO CERTAIN
NON-EMPLOYEE DIRECTORS" below, and "FOR" the ratification of the Board of
Directors' selection of Joseph Decosimo and Company as the Company's independent
public accountants for the 1996 fiscal year as described under "PROPOSAL 5 --
INDEPENDENT PUBLIC ACCOUNTANTS" below. The affirmative vote of a majority of the
shares of Common Stock represented at the meeting and entitled to be voted is
required for Proposals 1, 2, 3, 4, and 5.
Other than the matters set forth herein, management of the Company is not
aware of any matters that may come before the meeting. If any other business
should properly come before the meeting, the persons named in the enclosed proxy
will have the discretionary authority to vote the shares represented by the
effective proxies and intend to vote them in accordance with their best
judgment.
The cost of solicitation of proxies will be borne by the Company. In
addition to the solicitation of proxies by the use of the mails, the directors
and officers of the Company may solicit proxies on behalf of management by
telephone, telegram and personal interview. Such persons will receive no
additional compensation for their solicitation activities and will be reimbursed
only for their actual expenses in connection therewith. The Company will
authorize banks, brokerage houses and other custodians, nominees or fiduciaries
to forward copies of proxy material to the beneficial owners of shares or to
request authority for the execution of the proxies, and will reimburse such
banks, brokerage houses and other custodians, nominees or fiduciaries for their
out-of-pocket expenses incurred in connection therewith. The Notice of the
Meeting, this Proxy Statement and the form of proxy were first mailed to
stockholders on or about April 25, 1996.
VOTING RIGHTS AND PRINCIPAL STOCKHOLDERS
At the close of business on April 23, 1996, the record date for determining
the stockholders entitled to notice of and to vote at the meeting, there were
11,414,757 shares of common stock, $.01 par value, of the Company (the "Common
Stock") outstanding. Each share of Common Stock is entitled to one vote (non-
<PAGE> 4
cumulative) on all matters presented for stockholder vote. The presence in
person or by proxy of the holders of a majority of the outstanding Common Stock
constitutes a quorum for the transaction of business.
Abstentions and broker non-votes are counted for purposes of determining
the presence or absence of a quorum for the transaction of business. Abstentions
are counted separately as neither a vote "FOR" nor a vote "AGAINST" in
tabulations of the votes cast on proposals presented to stockholders. Broker
non-votes are not counted at all for purposes of determining whether a proposal
has been approved.
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of April 1, 1996, by (i) each director of the
Company, (ii) all directors and officers as a group, and (iii) all persons known
to the Company who may be deemed beneficial owners of more than five percent
(5%) of such outstanding shares. Under the rules of the Securities and Exchange
Commission (the "SEC"), a person is deemed to be a "beneficial owner" of a
security if he has, or shares, the power to vote or direct the voting of such
security, or the power to dispose or to direct the disposition of such security.
A person is also deemed to be a beneficial owner of any securities of which that
person has the right to acquire beneficial ownership within 60 days. An asterisk
indicates beneficial ownership of less than one percent (1%).
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENT OF
BENEFICIALLY OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) SHARES(2)
- ----------------------------------------------------------------- --------- -----------
<S> <C> <C>
Robert D. Carl, III.............................................. 1,020,313(3) 8.3%
8601 Dunwoody Place, Bldg. 200
Atlanta, Georgia 30350
Marc I. Raphaelson, M.D.......................................... 23,690(4) *
915 Toll House Avenue
Frederick, Maryland 21701
William E. Whitesell, Ph.D....................................... 44,500(5) *
580 North School Lane
Lancaster, Pennsylvania 17603
Robert L. Taylor................................................. 3,725(6) *
Isolyser, Inc.
4320 International Blvd.
Norcross, Georgia 30093
Anthony T. Prescott.............................................. 29,220(7) *
8601 Dunwoody Pl., Bldg. 200
Atlanta, Georgia 30350
Stuart B. Strasner, Sr........................................... 0 *
2532 Northwest 60th Street
Oklahoma City, Oklahoma 73112
Jack O. Greenberg, M.D.(8)....................................... 15,000 *
Health Images of Philadelphia
5090 Summerdale Avenue
Philadelphia, PA 19124
All Executive Officers and (9) %
Directors of Company as a Group
(12 persons)..................................................... 1,397,142 11.4
Lindner Fund, Inc................................................ 1,071,200 9.4%
7711 Carondelet Avenue
Box 16900
St. Louis, MO 63105
</TABLE>
- ---------------
(1) Unless otherwise specified in the footnotes, the shareholder has sole voting
and dispositive power.
2
<PAGE> 5
(2) The computation of percentage of ownership for officers and directors
includes shares of Common Stock which may be acquired within 60 days of the
April 1, 1996, date of this table by exercise of options and warrants.
(3) Includes 525,900 shares of Common Stock owned individually by Mr. Carl.
Includes options for 240,417 shares of Common Stock which are or will
become exercisable by Mr. Carl within the 60 day period following the April
1, 1996, date of this table and a warrant for 250,000 shares. Includes
1,621 shares held in the Company's 401(K) Plan. Includes 2,375 shares of
Common Stock owned by Mr. Carl's mother for which shares Mr. Carl disclaims
any beneficial ownership. Excludes 4,600 shares of Common Stock owned by
Mr. Carl's spouse.
(4) Includes 11,190 shares of Common Stock owned jointly by Dr. Raphaelson and
his wife. Includes non-qualified options for 12,500 shares which are or
will become exercisable by Dr. Raphaelson within the 60 day period
following the April 1, 1996, date of this table.
(5) Includes 30,000 shares of Common Stock owned by Dr. Whitesell. Includes
2,000 shares of Common Stock held in custody by Dr. Whitesell for two
children for which shares Dr. Whitesell disclaims any beneficial ownership.
Excludes 1,000 shares of Common Stock owned by Dr. Whitesell's spouse.
Includes non-qualified options for 12,500 shares which are or will become
exercisable by Dr. Whitesell within the 60 day period following the April
1, 1996, date of this table.
(6) Includes 975 shares of Common Stock owned individually by Mr. Taylor.
Includes non-qualified options for 2,750 shares which are or will become
exercisable by Mr. Taylor within the 60 day period following the April 1,
1996, date of this table.
(7) Includes 900 shares of Common Stock owned individually by Mr. Prescott.
Includes incentive stock options for 28,320 shares which are or will become
exercisable by Mr. Prescott within the 60 day period following the April 1,
1996, date of this table.
(8) Includes 14,000 shares of Common Stock owned individually by Dr. Greenberg
and 1,000 shares owned by Dr. Greenberg's spouse.
(9) See footnotes 3, 4, 5, 6, 7, and 8. Includes options for 256,990 shares
which are, or will become, exercisable by the non-director officers within
the 60-day period following the April 1, 1996, date of this table.
PROPOSAL 1 -- ELECTION OF DIRECTORS
Seven (7) directors are to be elected to the Company's Board of Directors
at the Annual Meeting for a term of one (1) year and until the election and
qualification of their successors, as provided in the bylaws of the Company. The
proxyholders intend to vote "FOR" the election of the individuals named below,
all of whom are currently directors of the Company, unless authority is
specifically withheld in the proxy. One current director, Anthony Prescott,
Senior Executive Vice President and Chief Operating Officer, was elected on
December 8, 1995, to fill a vacancy on the Board of Directors created by Mr.
W.A. Wilson's July, 1995, resignation.
One current director and nominee, Robert D. Carl, III, Chairman, President
and Chief Executive Officer of the Company, became subject in 1995 to a judgment
and an SEC administrative order finding that he had violated federal securities
laws by failing to file certain reports in connection with securities trades by
his mother in the Company's stock. See "COMPLIANCE WITH SECTION 16(A) OF THE
ACT" below for a complete description. Mr. Carl provides substantial financial
assistance to his parents, in part by advising them in stock transactions. The
SEC believed that because Mr. Carl commingled his own funds with those of his
parents in a stock account, he was the beneficial owner of the account and thus
was required to file Section 16(a) reports, although he had never benefitted
personally from transactions in the account. Mr. Carl consented to the judgment
and the Order in order to avoid the time and expense associated with litigating
whether he was technically the account's beneficial owner. The Board of
Directors does not believe that this matter is material to an evaluation of Mr.
Carl's ability or integrity to serve as a director.
Although management does not contemplate the possibility, in the event any
nominee is not a candidate or is unable to serve as a director at the time of
the election, the proxies will be voted for the nominee designated by the
present Board of Directors to fill such vacancy.
3
<PAGE> 6
The name and age of each of the nominees, his principal occupation
(including positions and offices with the Company) and the period during which
he has served as a director are set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY SINCE
- --------------------------------------- --- --------------------------------------- -----
<S> <C> <C> <C>
Robert D. Carl, III.................... 42 Chairman of the Board and Chief 1982
Executive Officer
Marc I. Raphaelson, M.D................ 42 Director 1985
William E. Whitesell, Ph.D............. 58 Director 1985
Robert L. Taylor....................... 56 Director 1993
Stuart B. Strasner, Sr................. 65 Director 1995
Jack O. Greenberg, M.D................. 61 Director 1995
Anthony Prescott....................... 63 Director, Senior Executive Vice 1995
President and Chief Operating Officer
</TABLE>
Robert D. Carl, III, was engaged in the private practice of law in Decatur,
Georgia, and served as President of Carl Investment Associates, Inc., a
registered investment advisor, for three years before joining Cardio Tech, Inc.,
in 1981 as a shareholder, officer, director and corporate counsel. In September
1982, the Company acquired the business of Cardio-Tech, Inc. Mr. Carl has been a
shareholder and director of the Company since its organization in September
1982. In March 1985, he was elected to the positions of President, Chief
Executive Officer and Chairman of the Board of the Company. Effective June 19,
1993, Mr. Carl resigned from the positions of President and CEO. He continued to
serve the Company as Chairman of the Board. Effective September 9, 1994, Mr.
Carl resumed the position of Chief Executive Officer. In July 1995, Mr. Carl
resumed the position of President. The Company has obtained "key man" life
insurance on Robert D. Carl, III, payable to the Company in the amount of $2
million. Mr. Carl serves as a member of the Board of Directors of Enex Resources
Corporation, a Houston, Texas oil and gas company listed on NASDAQ.
Marc I. Raphaelson, M.D., conducted his residency in neurology at Stanford
University Medical Center from 1979 to 1981, and continued and completed his
residency in 1982 at the National Institutes of Health. From 1982 until July
1984, Dr. Raphaelson was a staff neurologist with the Bon Secours Hospital,
Baltimore, Maryland. Since January 1984, he has been a staff neurologist with
Frederick Memorial Hospital. He is also Medical Codirector of Greater Washington
Sleep Disorders Centers, Washington, D.C. which operates accredited sleep
disorders centers and a sleep disorders training program. Dr. Raphaelson is
board certified in neurology with added qualifications in Neurophysiology, in
Sleep Disorders Medicine, and in Electrodiagnostic Medicine. He is a member of
the American Society for Neuroimaging and a member of the Health Policy
Committee for the American Sleep Disorders Association. He was first elected a
Director of the Company in May 1985.
William E. Whitesell, Ph.D., served as Secretary of Banking for the
Commonwealth of Pennsylvania from 1976 through 1979. He is the Mary E. and Henry
P. Stager Professor of Economics at Franklin and Marshall College in Lancaster,
Pennsylvania. He has been a professor in the Department of Economics at Franklin
and Marshall College since 1979, and served as Department Chairman from 1979 to
1981 and from 1985 to 1988. In July 1985, Dr. Whitesell was elected to the Board
of Directors of the Company.
Robert L. Taylor is the President, Chairman, and Chief Executive Officer of
Isolyser Co., Inc. Isolyser Co., Inc., located in Norcross, Georgia, develops
and manufactures products and services for workplace and environmental safety,
specifically for the management of medical waste. He has held these positions
since 1988. Mr. Taylor was President and Chief Executive Officer of Spirotech,
Inc., a small micro-processor based medical instrument manufacturer (1983-1986),
and President and Chief Executive Officer of Unilab Corp. (1986-1988), a
publicly owned manufacturer of state-of-the-art wound care products. Mr. Taylor
received his B.A. degree in Economics from Pfeiffer College in 1961, and his
M.A. in Management from California State University in 1982. He was first
elected to the Board of Directors of the Company in June 1993.
Stuart Strasner is a professor of business law at Oklahoma City University.
From 1984 to 1991, Mr. Strasner was Dean of the law school at Oklahoma City
University and prior thereto was an attorney in
4
<PAGE> 7
private practice in Oklahoma City, Oklahoma. From 1978 to 1981, Mr. Strasner
served as Executive Director of the Oklahoma Bar Association. Mr. Strasner
served for twenty (20) years as an executive in the banking industry. Mr.
Strasner holds an A.B. degree from Panhandle A&M College and a J.D. from the
University of Oklahoma. He is a member of the fellows of the American Bar
Foundation. Mr. Strasner serves on the Board of Directors of Enex Resources
Corporation, a Houston, Texas oil and gas company listed on NASDAQ. He was first
elected to the Board of Directors of the Company in March, 1995.
Jack O. Greenberg, M.D. is the medical director and medical general partner
of the Company's Health Images of Philadelphia imaging center. Dr. Greenberg
holds a B.A. from Washington & Jefferson College and a M.D. from the University
of Pittsburgh. Since 1978, Dr. Greenberg has been Professor of Neurology at the
Medical College of Pennsylvania. Dr. Greenberg retired from his neurology
practice in Philadelphia, Pennsylvania in 1993. Dr. Greenberg was a founder and
past President (1982) of the American Society of Neuroimaging where he serves as
a member of its Executive Committee. He is a member of the Society of Magnetic
Resonance in Imaging (1985). He is Associate Editor of the Journal of
Neuroimaging (1990). He was first elected to the Board of Directors in June
1995.
Anthony Prescott was named Senior Executive Vice President and Chief
Operating Officer of the Company in May 1995. He was elected to the Company's
Board of Directors in December 1995. From 1990 to May 1995, Mr. Prescott served
as Managing Director, Health Images (U.K.) plc. Mr. Prescott was responsible for
establishing and managing the Company's operations in the United Kingdom. Mr.
Prescott was Director of Medical User Services at The Cromwell Hospital, London,
England from 1988 to 1990, Hospital Director of The Lister Hospital, London,
England from 1985 to 1988 and Chief Executive Officer of the Royal Masonic
Hospital in London, England from 1982 to 1985. Mr. Prescott began his career in
hospital management in 1958 while still serving in the Royal Navy and left the
Royal Navy in 1972 after serving as RAF Institute of Aviation Medicine,
Aeromedical Project Officer and Naval Administrator, Naval Medical Unit from
1966 to 1972.
There were eight (8) meetings of the Company's Board of Directors in 1995.
Five (5) of these meetings were in person with the other three (3) meetings
being held via telephone. The Board of Directors took action by unanimous
written consent two (2) times in 1995.
The Board of Directors established an Audit Committee on December 10, 1988.
Messrs. Whitesell, Raphaelson and Strasner serve on the Audit Committee. The
Audit Committee met two (2) times during 1995. The Company also has a
Compensation Committee consisting of William E. Whitesell, Robert L. Taylor, and
Jack O. Greenberg, M.D. The Compensation Committee met three (3) times in 1995.
The Board of Directors has no standing nominating committee.
A vote of a majority of the shares of Common Stock represented at the
meeting will be required to elect the Directors of the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF THE
SEVEN PERSONS NAMED ABOVE.
5
<PAGE> 8
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
--------------------------------------- --- ---------------------------------------
<S> <C> <C>
Robert D. Carl, III.................... 42 Chairman of the Board, President and
Chief Executive Officer
Anthony Prescott....................... 63 Senior Executive Vice President and
Chief Operating Officer
Michael R. Scott....................... 38 Executive Vice President-Engineering
Sandra K. Brum......................... 51 Executive Vice President-Marketing
Robin Eubanks Murray................... 36 Vice President, Secretary and General
Counsel
Ron L. Clark, Jr....................... 30 Treasurer and Controller
Richard J. Kampa....................... 48 Vice President-Operations
</TABLE>
The officers of the Company serve at the pleasure of the Board of
Directors. The officers of the Company also serve in the same positions as
officers of Health Images Pennsylvania, Inc., Health Images Texas, Inc., and
Health Images (U.K.) plc.
Robert D. Carl, III, was engaged in the private practice of law in Decatur,
Georgia, and served as President of Carl Investment Associates, Inc., a
registered investment advisor, for three years before joining Cardio-Tech, Inc.
in 1981 as a shareholder, officer, director and corporate counsel. In September
1982, the Company acquired the business of Cardio-Tech, Inc. Mr. Carl has been a
shareholder, officer and director of the Company since its organization in
September 1982. In March 1985, he was elected to the positions of President,
Chief Executive Officer and Chairman of the Board of the Company. Mr. Carl
resigned from the offices of President and Chief Executive Officer effective
June 19, 1993. Effective September 9, 1994, Mr. Carl resumed the position of
Chief Executive Officer. Mr. Carl resumed the position of President in July
1995. The Company has obtained "key man" life insurance on Robert D. Carl, III,
payable to the Company in the amount of $2 million.
Anthony Prescott was named Senior Executive Vice President and Chief
Operating Officer of the Company in May 1995. He was elected to the Company's
Board of Directors in December 1995. From 1990 to May 1995, Mr. Prescott served
as Managing Director, Health Images U.K. plc. Mr. Prescott was responsible for
establishing and managing the Company's operations in the United Kingdom. Mr.
Prescott was Director of Medical User Services at The Cromwell Hospital, London,
England from 1988 to 1990, Hospital Director of The Lister Hospital, London,
England from 1985 to 1988 and Chief Executive Officer of the Royal Masonic
Hospital in London, England from 1982 to 1985. Mr. Prescott began his career in
hospital management in 1958 while still serving in the Royal Navy and left the
Royal Navy in 1972 after serving as RAF Institute of Aviation Medicine,
Aeromedical Project Officer and Naval Administrator, Naval Medical Unit from
1966 to 1972.
Michael R. Scott was employed from August 1982 to June 1986 by Technicare
Corporation, a wholly-owned subsidiary of Johnson & Johnson, in Solon, Ohio
("Technicare"). Technicare manufactured medical imaging equipment. During that
time, Mr. Scott was involved with Technicare's introduction of its MRI
equipment. Mr. Scott joined Health Images Engineering Services Division in 1986.
Effective June 18, 1993, he became Executive Vice President-Engineering. He had
been a Vice President of the Company since June 1988. His responsibilities
include managing the Company's medical imaging equipment maintenance department,
and third-party services and sales.
Sandra K. Brum worked in the medical field in clinical and academic nursing
for 15 years before joining the Company. She served as a health instructor for
the Henry County (Georgia) School System from July 1983 until July 1986, and as
Department Chairperson for Vocational Education from July 1985 until July 1986.
In August 1986, she became the marketing representative for the Company's
Atlanta Magnetic
6
<PAGE> 9
Imaging-North center. She served as the Clinic Manager for Atlanta Magnetic
Imaging-North from January 1987 to July 1987. Ms. Brum also became the Company's
Director of Center Marketing for all of the Company's imaging centers in January
1987 and served in this position until her election in November 1990 to Vice
President-Marketing. In November, 1994, Ms. Brum was elected Executive Vice
President-Marketing. Ms. Brum's responsibilities include administration of the
marketing and managed care programs for each of the Company's imaging centers.
Robin Eubanks Murray joined the Company as Corporate Counsel in March 1988,
became Senior Staff Counsel in 1989 and was elected Secretary and named as
General Counsel in December 1993. In November, 1994, she was elected a Vice
President of the Company. Prior to joining the Company, she was an associate at
the law firm of Sutherland, Asbill & Brennan, Atlanta, Georgia. Ms. Murray is
responsible for administering the Company's legal affairs, shareholder relations
and human resources.
Ron L. Clark, Jr., joined the Company in June 1988 as a staff accountant.
He was named Accounting Manager in September 1988, became the Controller of the
Engineering Services division in March 1989, and has served as Controller of the
Company since March 1990. He was elected to the office of Treasurer in December
1993. Prior to joining the Company, Mr. Clark was a staff accountant at MATSCO,
Inc., a highway and residential construction company in Atlanta, Georgia. Mr.
Clark is responsible for administering the Company's accounting systems.
Richard ("Dick") J. Kampa joined the Company as a Vice President-Operations
effective April 14, 1995, at the time of the acquisition by the Company of the
fifteen (15) multi-modality imaging centers from MedAlliance, Inc., a
publicly-held Nashville, Tennessee company. Mr. Kampa joined MedAlliance (which
was then operating under the name ImageAmerica, Inc.) in March, 1991, as an area
vice president responsible for the general management of the MedAlliance
ImageAmerica imaging centers, and was promoted to corporate vice president of
MedAlliance in 1992, with responsibility for the general management of all the
imaging centers, including sales and managed care development. From 1986 through
1991, Mr. Kampa served as director of sales and director of national accounts of
Dornier Medical Systems in Marietta, Georgia, a subsidiary of Daimler Benz of
Germany. Prior to Dornier, Mr. Kampa was district sales manager and manager of
national accounts for over six years with Physio-Central, which was then a
Redmond, Washington based division of Eli Lilly Corporation, involved in the
acute cardiac care/defibrillator industry. Mr. Kampa is responsible for
overseeing the operations of the imaging centers.
7
<PAGE> 10
EXECUTIVE COMPENSATION
The following tables and narrative text discuss the compensation paid in
1995 and the two (2) prior fiscal years to the Company's Chairman and Chief
Executive Officer, the Company's four other most highly compensated executive
officers (with annual salary and bonus in excess of $100,000) and two former
executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ------------
---------------------- OPTION ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS(#) COMPENSATION
- ---------------------------------- ---- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Robert D. Carl, III,.............. 1995 $237,500 $112,500(12) 50,000 $ 4,500(1)
Chairman, President and Chief 1994 206,250 0(4)(11) 0 2,320(1)
Executive Officer(2) 1993 230,922 13,203(4)(5) 0 15,000(3)
Anthony Prescott, Sr.............. 1995 $135,557(6) $ 54,375(12) 50,000 $ 6,634(7)
Executive Vice President and
Chief Operating Officer
Robin Eubanks Murray,............. 1995 $115,000 $ 40,500(12) 25,000 $ 4,050(1)
Vice President, General Counsel 1994 91,958 19,000(3) 10,000 1,431(1)
and Secretary
Richard J. Kampa,................. 1995 $ 81,458(8) $ 32,200(8)(10) 50,000 $ 28,273(9)
Vice President-Operations
Michael R. Scott,................. 1995 $110,589 $ 17,250(12) 25,000 $ 0
Executive Vice President- 1994 106,177 21,235(11) 15,000 0
Engineering 1993 102,569 3,086(5) 4,500 0
W. A. Wilson,..................... 1995 $160,000 $ 0 0 $ 4,500(1)
former President and Chief 1994 155,000 0(4)(11) 35,000 2,250(1)
Operating Officer 1993 125,420 3,716(5) 20,000 1,938(1)
Prem Anand,....................... 1995 $125,000 $ 27,000(16) 25,000 $ 0
former Executive Vice President 1994 113,125(15) 25,000(11) 35,000 1,862(1)
of Science and Engineering 1993 137,777(14) 0 20,000 229(1)
Operations(13)
</TABLE>
- ---------------
(1) Represents contributions made by the Company to the Health Images, Inc.,
Profit Sharing and Savings Plan which is qualified under Internal Revenue
Code Section 401(k).
(2) Mr. Carl resumed the positions of Chief Executive Officer of the Company on
September 9, 1994 and President in July 1995.
(3) Pursuant to the terms of Consulting and Non-Competition Agreement dated as
of June 2, 1993 ("Mr. Carl's Agreement"), between the Company and Mr. Carl,
the Company agreed to pay $15,000 to Mr. Carl to reimburse him for legal
expenses incurred in connection with the negotiation of Mr. Carl's
Agreement and Mr. Carl's resignation effective June 19, 1993, from the
offices of President and Chief Executive Officer.
(4) The Company did not pay any bonus to executive officers for the fiscal year
ended December 31, 1993.
(5) This bonus paid in 1993 represented additional amounts paid in 1993 under
the Company's Earnings Target Incentive Plan which are attributable to
earnings of the Company for the fiscal year ended December 31, 1992. These
additional amounts were paid after the Company's auditors completed their
audit of the Company.
(6) Includes compensation in English pounds converted at a rate of L1.55.
(7) Includes $6,634 in moving expenses paid to Mr. Prescott.
(8) Includes only salary and bonus paid since the April 1, 1995 effective date
of the MedAlliance Acquisition.
8
<PAGE> 11
(9) Includes a car allowance of $4,500 and moving expenses of $23,773.
(10) Includes a bonus of $10,062 which was paid in 1996 for performance during
the fourth quarter of 1995. For 1995 compensation, Mr. Kampa as well as
other employees from MedAlliance remained under their previous bonus system
which was tied to center revenue performance, goal achievement and overall
individual performance.
(11) This bonus was paid on February 23, 1995, pursuant to the Company's
Management Incentive Program. Based upon the Company's operating
performance for the fiscal year ended December 31, 1994, without
considering the effect of the acquisition of NDS, the Company achieved an
annual profit objective and an annual revenue objective in 1994 that
resulted in an annual bonus for 1994 equal to 20% of base salary for each
executive officer other than Messrs. Carl and Wilson.
(12) This bonus was awarded by the Company's Board of Directors based upon a
percentage of salary with the percentage varying among officers to reward
individual performance during the 1995 fiscal year and contribution to the
Company's revenue, income and cash flow.
(13) Mr. Anand was promoted to Executive Vice President of Science and
Engineering Operations effective January 1, 1994, from Vice
President-Research and Development. Mr. Anand left the Company as of
December 15, 1995.
(14) Includes $43,277 in moving expenses paid by the Company to Mr. Anand.
(15) Includes $6,558 in moving expenses paid by the Company to Mr. Anand.
(16) Mr. Anand received a performance bonus in May 1995 for obtaining certain
goals involving the STARVIEW System and a bonus in September 1995 when the
HI STAR(TM) received FDA approval.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE OF ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF
------------------------------------------------ STOCK
% OF PRICE APPRECIATION
OPTIONS FOR
TO OPTION TERM(1)
OPTIONS EMPLOYEES EXERCISE OR EXPIRATION -------------------
NAME GRANTED IN FY BASE PRICE DATE 5% 10%
- ----------------------------------- ------- --------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Robert D. Carl, III................ 75,000(2) 20.3% $5.00 6-2-05 $235,500 $597,750
Anthony Prescott................... 50,000(2) 13.5 5.00 6-2-05 157,000 398,500
Robin Eubanks Murray............... 25,000(2) 6.8 5.00 6-2-05 78,500 199,250
Michael R. Scott................... 25,000(2) 6.8 5.00 6-2-05 78,500 199,250
Richard J. Kampa................... 50,000(2) 13.5 5.00 6-2-05 157,000 398,500
</TABLE>
- ---------------
(1) The assumed annual rates of appreciation of five and ten percent would
result in the price of the Company's stock increasing to $8.14 and $12.97,
respectively.
(2) These incentive stock options were granted June 2, 1995, at the market price
on the date of the grant, and vest over a 36-month period. In the event of
a merger, consolidation or change in control of the Company, these options
would immediately vest in full.
9
<PAGE> 12
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END(1) FY-END(2)
SHARES -------------- -----------------
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
- ----------------------------------------- ----------- -------- -------------- -----------------
<S> <C> <C> <C> <C>
Robert D. Carl, III...................... 0 $0 471,667/75,833 $802,125/$140,625
Anthony Prescott......................... 0 0 19,777/46,723 27,415/97,835
Robin Eubanks Murray..................... 0 0 18,222/27,278 18,598/51,653
Michael R. Scott......................... 0 0 90,167/36,833 64,485/53,291
Richard J. Kampa......................... 0 0 8,333/41,667 18,749/93,751
</TABLE>
- ---------------
(1) The exercise prices of these options (includes Mr. Carl's warrant) range
from $4.50 to $13.50.
(2) The year-end market price of the Company's Common Stock was $7.25. The
options of named officers outstanding at December 31, 1995, with an
exercise price in excess of this market price are as follows: a warrant to
purchase 250,000 shares at $4.50/share held by Mr. Carl, 237,500 incentive
options (141,666 of which were exercisable) held by named officers to
purchase stock at $5.00 per share, an incentive option to purchase 10,000
shares at $5.38 per share held by Mr. Carl, an incentive stock option to
purchase 40,000 shares at $6.00 per share held by Mr. Carl, 30,000
incentive options held by named officers to purchase at $6.36 per share and
32,500 incentive options (14,444 of which were exercisable) held by named
Officers to purchase stock at $6.75 per share.
The Company has no Long Term Incentive Plan or Defined Benefit or Actuarial
Plan.
PERFORMANCE GRAPH
As in the two previous years the Company has selected a peer group composed
of publicly-held diagnostic imaging companies rather than simply using the S&P
Health Care Diversified Index as in previous years. The Company believes that
the peer group selected provides a more accurate picture of how the Company's
stock has performed relative to companies operating comparable businesses under
comparable conditions. The peer group is the same as last year except for
MedAlliance, Inc. and Medical Diagnostics, Inc., which ceased trading during
1995.
The companies in the Peer Group (and their stock symbols) are: Alliance
Imaging, Inc. (SCAN), American Health Services Corp. (AHTS), Medical Imaging
Centers of America (MIKA) and NMR of America, Inc. (NMRR). Each company's return
has been weighted by its stock market capitalization at the beginning of each
period in which it was a publicly-held company.
10
<PAGE> 13
COMPARISON OF FIVE (5) YEAR CUMULATIVE TOTAL RETURN(*)
HEALTH IMAGES, INC., S&P 500 INDEX,
S&P HEALTH CARE DIVERSIFIED AND A PEER GROUP
[GRAPH]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD HEALTH S&P HEALTH S&P 500 IN-
(FISCAL YEAR COVERED) IMAGES, INC. PEER GROUP CARE DIV. DEX
<S> <C> <C> <C> <C>
1990 100 100 100 100
1991 113 41 148 130
1992 79 26 126 140
1993 42 7 121 155
1994 51 8 140 157
1995 65 16 208 215
</TABLE>
(*)The graph and table set forth above assume $100 was invested on December 31,
1990, in each of the Company's Common Stock, the S&P Health Care Diversified,
the S&P 500 Index, and the Peer Group (some of the companies in the Peer
Group were not publicly-held at December 31, 1990), and that all dividends
were re-invested. These data were furnished by Research Data Group.
CASH COMPENSATION OF DIRECTORS
For the fiscal year ending December 31, 1995, no employee director of the
Company was paid additional compensation as a member of the Board of Directors.
Commencing with the December 1995 fourth quarter meeting, the Board of Directors
changed its compensation for non-employee members to an annual retainer of
$7,000 plus $800 per meeting of the Board attended and $700 for each committee
meeting attended. In addition, the Board adopted the 1995 Formula Stock Option
Plan described below under "PROPOSAL 3 -- FORMULA STOCK OPTION PLAN." These
changes followed a 1995 study of director compensation at companies of
comparable size in the health care industry by William M. Mercer, Incorporated.
The new rate and forms of compensation replaced the compensation policy
that had been in effect since 1988. Under the previous policy, each non-employee
director of the Company was paid $1,000 on a quarterly basis, plus $1,000 per
Board of Directors meeting attended in person with reimbursement for all
reasonable travel expenses. The Board of Directors left the compensation for
telephone meetings unchanged. The non-employee directors receive no compensation
for the first four meetings attended on the telephone, but receive $250 for each
telephone meeting attended thereafter.
Each of the three members of the Audit Committee was paid $600 per meeting
of the Committee. William E. Whitesell, Stuart Strasner and Marc I. Raphaelson,
M.D. currently serve on the Audit Committee. Each of the four members of the
Compensation Committee was paid $250 for a telephone
11
<PAGE> 14
meeting and $600 for each meeting attended prior to December 1995 and $700 for
the December meeting. Jack O. Greenberg, M.D., William E. Whitesell, and Robert
L. Taylor currently serve on the Compensation Committee.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Mr. Robert D. Carl, III, Chairman, President and Chief Executive Officer
has an employment contract with a two (2) year term ending September 30, 1996.
If Mr. Carl's employment is terminated by the Company without "cause" at
any time during the initial term of two (2) years, or the first one (1) year
renewal term, Mr. Carl shall be entitled to a severance amount equal to the
executive's base salary at the time of termination for a period of 24 months. A
"change of control" of the Company would be treated as a termination without
"cause" and trigger the severance obligation for such executive.
"Cause" is defined as: (i) any willful and material act of dishonesty or
fraud committed by executive after the date hereof which is materially injurious
to the Company; (ii) conviction of, or plea of nolo contendere to, a misdemeanor
or a felony committed by executive after the date hereof involving, in either
case, moral turpitude; (iii) repeated or continuous failure, neglect or refusal
to perform executive's duties hereunder following not less than 60 days prior
written notice of such failure, neglect or refusal.
Mr. Willis A. Wilson, who served as the Company's Chief Executive Officer
from June 19, 1993 until September 9, 1994 and Chief Operating Officer from
September 1994 until May 1995 left his position of President and Chief
Administrative Officer in July 1995. Mr. Wilson had an employment contract with
the Company comparable in its terms to Mr. Carl's contract described above.
Pursuant to its terms, the Company will continue to pay Mr. Wilson his salary
through July 1997.
On April 18, 1996, Mr. Prem K. Anand entered into a Confidential Separation
Agreement and General Release (the "Separation Agreement") with the Company. Mr.
Anand's employment with the Company terminated as of December 15, 1995. The
Company agreed to pay Mr. Anand the sum of $20,833.32, less applicable federal
and state taxes, as consideration for entering into the Separation Agreement.
This sum represented two (2) months salary for Mr. Anand or two (2) weeks for
every year or portion thereof that Mr. Anand was employed with the Company. Mr.
Anand's employee benefits will also continue at Company expense during the two
(2) month period. In addition, if the Company manufactures nine (9) HI STAR(TM)
production units by December 31, 1996, Mr. Anand will receive an additional
$7,500.00, payable by January 10, 1997.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
POLICY AND OBJECTIVES
The Compensation Committee of the Board of Directors is composed of three
(3) independent, non-employee directors, William E. Whitesell, Jack O.
Greenberg, M.D. and Robert L. Taylor, who are not eligible to participate in any
of the compensation plans that it administers (with the exception of the 1995
Formula Stock Option Plan as described below). The Committee has overall
responsibility to review and recommend compensation plans to the Board of
Directors for approval.
The Company's compensation program attempts to balance a recognition that
the achievements of the Company result from the coordinated efforts of all
individuals working toward common objectives with the recognition that
individual achievement must also be rewarded. In 1995, the Company's executive
compensation emphasis shifted to rewarding those individuals who particularly
impacted corporate operations and financial results. The Company is focused on
meeting the expectations of customers and shareholders. The compensation of the
Company's top executives is directly linked to the Company's financial
performance and shareholders' interests and is reviewed and approved annually by
the Compensation Committee of the Board of Directors.
12
<PAGE> 15
In April 1995, the Company acquired fifteen (15) diagnostic imaging centers
from MedAlliance, Inc., almost doubling the Company's revenue base and number of
employees. This acquisition substantially increased the responsibilities of
certain executive officers and other managers of the Company. The Board of
Directors wishes to compensate the Company's employees at a rate which is
competitive. The Compensation Committee of the Board of Directors therefore
hired William M. Mercer Incorporated ("Mercer") in March 1995 to prepare a study
of executive compensation by studying peer companies in the health care industry
of a comparable size to the Company after the MedAlliance acquisition. Mercer
presented its report to the Compensation Committee in June 1995. The Mercer
report's primary emphasis was on salaries, bonuses and long-term incentives such
as stock options. The Mercer report emphasized bonuses as a means of encouraging
and rewarding an individual's excellent performance and discouraged the previous
practice of rewarding all executives with the same percentage bonus if the
Company achieved certain revenue or income targets. The Mercer report emphasized
the need to reward individual achievement instead of treating all executives and
managers as members of a team who "sink or swim together" in the area of bonus
compensation.
Based upon the report and the Compensation Committee's recommendation, the
Board of Directors increased the base salaries of most of the Company's
executive officers in June 1995 with salaries targeted at 70% of the median set
forth in the Mercer report. The Compensation Committee also granted stock
options in June 1995 using the guidelines of the Mercer report.
In December 1995, Mr. Carl, the Chairman, Chief Executive Officer and
President, made bonus recommendations to the Compensation Committee based on his
view of each officer's performance and contribution to the Company during 1995.
The recommendations varied from officer to officer and were a stated percentage
of current salary. The Compensation Committee reviewed Mr. Carl's
recommendations and established, with the approval of the Board of Directors,
the bonuses. The executive bonuses granted in December 1995 varied from no bonus
to a bonus of 45% of current salary.
A feature of the Omnibus Budget Reconciliation Act of 1993 ("OBRA '93")
limits deductibility of certain compensation for the Chief Executive Officer and
the additional four executive officers who are the most highly paid and employed
at year end to $1 million per year, effective for tax years beginning on or
after January 1, 1994, unless such compensation is "performance-based." The
determination of whether compensation is performance-based depends upon a number
of factors, including stockholder approval of the plan under which the
compensation is paid, the exercise price at which options or similar awards are
granted, the disclosure to and approval by the stockholders of applicable
performance standards, the composition of the Compensation Committee, and
certification by the Compensation Committee that performance standards were
satisfied. Although the salary and bonuses of the Company's executive officers
will remain substantially below this $1 million threshold into the foreseeable
future, the presence of non-qualified stock options and warrants make it
theoretically possible that the threshold may be exceeded at some time in the
future. In such an instance, the Company intends to take the necessary steps to
conform its compensation to qualify for deductibility under OBRA '93. In
addition, in structuring compensation programs for the Company's executive
officers, the Compensation Committee intends to give strong consideration to the
deductibility of compensation under OBRA '93.
COMPENSATION PROGRAMS
The Company's executive compensation programs are designed to retain and
reward executives who are capable of leading the Company in achieving its
business objectives in an industry characterized by growth, competitiveness, and
change. Annual compensation for senior management of Health Images consists of
three (3) elements:
1. Base salary is determined by the potential impact the individual
has on the Company, the skills and experiences required by the job, and the
performance and potential of the incumbent in the job;
2. Incentive programs are designed to reward executives for their
impact in generating unusual additional revenue for the Company or for
uniquely controlling the Company's expenses; and
13
<PAGE> 16
3. Long-term incentive compensation is provided in the form of stock
option grants and is designed to link the interests of the executives with
those of the stockholders. Stock option grants provide an incentive that
focuses the executives' attention on managing the Company from the
perspective of an owner with an equity stake in the business. These stock
options are tied to the future performance of the Company's stock and will
provide value to the recipient only when the price of the Company's stock
increases above the option grant price. Long-term incentive compensation is
offered only to those key employees who can make a material impact on the
Company's long-term performance.
A key objective of the Compensation Committee is to assure that the
Company's executives' total compensation is competitive in the industry.
CHIEF EXECUTIVE OFFICER'S COMPENSATION
The Compensation Committee meets annually to evaluate the performance of
the Chief Executive Officer, without the CEO being present, and reports on that
evaluation to the independent Directors of the Board. The Mercer report
indicated a median base salary of $260,000 for a Chairman of the Board and Chief
Executive Officer of a comparably sized company in the health care industry. The
Compensation Committee chose to increase Mr. Carl's base salary in June 1995 to
$250,000. In December 1995, the Compensation Committee granted a bonus to Mr.
Carl equal to 45% of his base salary to reward Mr. Carl for his role in
effecting the MedAlliance acquisition and the increase in the Company's net
revenue, cash flow and income in 1995. The Compensation Committee intends to
review Mr. Carl's salary and any bonus, as it reviews the compensation of other
members of senior management, on an annual basis to reward him for individual
performance and contribution to Company performance using the parameters of the
Mercer report.
Respectfully submitted:
William E. Whitesell, Ph.D., Chairman
Jack O. Greenberg, M.D.
Robert L. Taylor
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Whitesell, Taylor and Dr.
Greenberg.
Dr. Jack O. Greenberg, a Director, also serves as the medical general
partner of Northeastern Magnetic Imaging, Ltd., which owns Health Images of
Philadelphia. As medical general partner, Dr. Greenberg, through his
professional corporation, received $94,402 in management fees during the year
ended December 31, 1995.
Dr. Greenberg also received $358,390 in fees for interpretation services
provided at Health Images of Philadelphia during 1995. Of this amount, Dr.
Greenberg pays another physician approximately 35% for his interpretation
services at Health Images of Philadelphia.
COMPLIANCE WITH SECTION 16(A) OF THE ACT
Based upon a review of Forms 3 and 4 and amendments thereto furnished to
the Company during 1995, and Forms 5 and amendments thereto with respect to 1995
and, where applicable, any written representation that a Form 5 filing was not
required, the Company hereby represents that, except as set forth below, no
director, officer or ten percent (10%) shareholder of the Company failed to file
reports required by Section 16(a) of the Securities Exchange Act of 1934, as
amended, on a timely basis during 1995 or prior fiscal years.
On January 4, 1996, the SEC filed a complaint in the United States District
Court for the District of Columbia against Robert D. Carl, III, who is the
chairman, chief executive officer, and president of the Company. The SEC alleged
that Mr. Carl violated Section 16(a) of the Exchange Act, and Rules 16a-2 and
16a-3 (and former Rule 16a-1) thereunder, by failing to timely file thirty-eight
reports of transactions in his
14
<PAGE> 17
mother's brokerage accounts involving shares of the Common Stock of the Company
stock in which he had a beneficial ownership interest. The SEC requested that
the court impose a $10,000 civil penalty against Mr. Carl pursuant to Section
21(d)(3) of the Exchange Act. Without admitting or denying the allegations in
the complaint, Mr. Carl consented to the entry of a final judgment imposing a
$10,000 penalty. On January 12, 1996, a federal judge entered the final judgment
in this matter. Mr. Carl has filed amended reports on Forms 4 and 5 related to
these transactions in his mother's accounts.
In a related matter, the SEC issued an administrative Order pursuant to
Section 31C of the Exchange Act against Mr. Carl. The Order found that he
violated Section 16(a) and the rules thereunder and required him to cease and
desist from committing or causing any violation or future violation of those
provisions. The Order also noted that Mr. Carl recently disgorged to the Company
approximately $92,400 in short-swing profits resulting from the trading in his
mother's account, plus interest of approximately $52,600. Without admitting or
denying allegations in the Commission's Order, Mr. Carl consented to its entry.
In addition, the Company filed Forms 5 for its executive officers in 1996
to correct past omissions of certain incentive stock options.
PROPOSAL 2 -- APPROVAL OF 1996 EMPLOYEE INCENTIVE STOCK OPTION PLAN
The Company has had in effect an Employee Incentive Stock Option Plan,
approved by the stockholders in 1987 (the "Old Plan"), pursuant to which
incentive stock options have been granted to certain officers and employees of
the Company from time to time. The number of shares of Common Stock of the
Company reserved for issuance under the Old Plan, as amended, have been
substantially depleted over its expected lifetime. As of April 15, 1996, there
were only 56,361 shares available for future grants of incentive stock options
under the Old Plan.
On March 8, 1996, the Board of Directors adopted the Health Images, Inc.
1996 Employee Incentive Stock Option Plan (the "1996 ISOP"), subject to
stockholder approval. The Board of Directors believes that the continued
maintenance of an incentive stock option plan will promote the Company's
objectives of providing incentives to exceptional employees and attracting and
retaining employees who can enhance the Company's business. The Mercer Report
confirms the prevalent use of incentive stock options as a component of
executive compensation. See "Report of the Compensation Committee on Executive
Compensation." The Company nearly doubled in size during 1995 and wishes to
continue its growth plans. The adoption of the 1996 ISOP to replace the Old Plan
will allow the Company to continue to satisfy its objectives of providing
equity-based compensation to officers and employees. The Board of Directors
believes that stock option grants align the interests of the recipients with the
interests of stockholders generally.
The following description of the 1996 ISOP is qualified in its entirety by
reference to the applicable provisions of the 1996 ISOP, which is attached as
Exhibit A.
TERMS OF THE 1996 ISOP
Administration. The Compensation Committee (the "Committee") of the Board
of Directors determines Awards under the 1996 ISOP. Only persons who satisfy the
criteria of "disinterested persons" set forth in Rule 16b-3(c) may be members of
the Committee. The Committee shall have at least three members. The members of
the Committee are indemnified by the Company under the terms of the 1996 ISOP
for actions taken as Committee members provided such actions are not determined
to be negligent or the result of misconduct.
Awards. The 1996 ISOP permits the Committee to make awards of incentive
stock options to officers and employees of the Company or its subsidiaries for
the purchase of shares of Common Stock, as well as non-qualified options to the
extent that an incentive stock option award exceeds certain statutory
limitations. The Company has reserved 600,000 shares of Common Stock for
issuance pursuant to awards that may be made under the 1996 ISOP, subject to
adjustment as provided therein.
15
<PAGE> 18
The Committee decides the number of shares as to which an option is
granted, the recipient of an option and the terms and conditions of any option
award, subject to the provisions of the 1996 ISOP.
Term. The 1996 ISOP will expire ten years following its adoption by the
Board of Directors unless the Board of Directors effects an earlier termination.
Granting of Options to Purchase Stock. Options may be granted pursuant to
the 1996 ISOP only to officers and employees of the Company or any subsidiary.
The number of shares of Common Stock as to which an option will be granted
will be determined by the Committee in its sole discretion, as long as the total
number of the shares available for grants under the 1996 ISOP does not exceed
600,000. Further, to the extent required under Section 162(m) of the Internal
Revenue Code and the regulations thereunder for compensation to be treated as
qualified, performance-based compensation, the maximum number of shares of
Common Stock with respect to which options may be granted during any single
fiscal year of the Company to any "covered employee," within the meaning of
Section 162(m) of the Internal Revenue Code, cannot exceed 100,000.
Each option granted under the 1996 ISOP will be evidenced by an option
agreement in such form and containing such terms, conditions and restrictions as
the Committee may determine is appropriate and which will specify at a minimum
the number of shares of Common Stock subject to the grant, the option price and
the option term. In addition, in the event the aggregate fair market value, as
determined as of the option grant date, of Common Stock subject to such options
(under all plans of the Company and subsidiaries) that first become exercisable
during any calendar year exceeds $100,000, then such options in excess of this
limitation will not be incentive stock options and, to the extent such options
were granted pursuant to the 1996 ISOP, they will be treated as non-qualified
stock options.
Options are not transferable or assignable except by will or by the laws of
descent or distribution and are exercisable during the recipient's lifetime only
by the recipient.
Option Price. The exercise price per share of Common Stock purchased under
any option will be set forth in the applicable option agreement and will in no
event be less than the fair market value of a share of Common Stock. With
respect to an option granted to the holder of over 10% of the Common Stock of
the Company, the exercise price will in no event be less than 110% of the fair
market value of a share of Common Stock on the date the option is granted.
The 1996 ISOP provides for the following alternatives for payment of an
option's exercise price: cash, surrender of previously owned shares or a
combination of the foregoing.
Option Term. The term of an option will be specified in the applicable
option agreement and will expire no later than ten years from the date of grant;
provided, however, that, with respect to an option grant to the holder of over
10% of the Common Stock of the Company, the term of the option will expire no
later than five years from the date of grant. In addition, the option agreement
will provide that, in the event of a termination of employment, the then
unexpired portion of the option will terminate no later than 30 days after the
date of termination of employment, except that in the case of a recipient whose
termination of employment is due to death or disability, a period of up to one
year may be substituted for the 30-day period.
Termination and Amendment of the 1996 ISOP. The Board of Directors at any
time may amend or terminate the 1996 ISOP without stockholder approval;
provided, however, that no amendment made without stockholder approval shall
change the number of shares reserved for issuance under the 1996 ISOP, change
the persons eligible to receive options, decrease the option exercise price,
remove the administration of the 1996 ISOP from the Committee or render any
member of the Committee eligible to receive an option grant.
Changes in Capitalization. The 1996 ISOP provides for an adjustment in the
number and types of shares of Common Stock reserved under the Plan and subject
to awards issued pursuant to the 1996 ISOP in the event of any increase or
decrease in the number of issued shares of Common Stock resulting from a
subdivision or combination of shares or the payment of a stock dividend in
shares of Common Stock or any other increase or decrease in the number of shares
of Common Stock outstanding effected without receipt of consideration by the
Company.
16
<PAGE> 19
In the event of certain corporate reorganizations, the vesting of
outstanding options may be accelerated and/or new options may be substituted for
outstanding options.
The Committee shall have the sole discretion to determine the manner and
extent, if any, of any adjustment, provided such action is consistent with the
express terms of the 1996 ISOP.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion outlines generally the federal income tax
consequences of participation in the 1996 ISOP. Individual circumstances may
vary these results. The federal income tax laws and regulations are frequently
amended, and each participant should rely on his or her own tax counsel for
advice regarding federal income tax treatment under the 1996 ISOP. If the
recipient is subject to Section 16(b) of the Exchange Act, special rules may
apply to determine the federal income tax consequences of certain option
exercises.
Incentive Stock Options. The recipient of an incentive stock option is not
subject to any federal income tax upon the grant of such an option pursuant to
the 1996 ISOP, nor does the grant of an incentive stock option result in an
income tax deduction for the Company. Further, a recipient will not recognize
income for federal income tax purposes and the Company normally will not be
entitled to any federal income tax deduction as a result of the exercise of an
incentive stock option and the related transfer of shares of Common Stock to the
recipient. However, the excess of the fair market value of the shares
transferred upon the exercise of the incentive stock option over the exercise
price for such shares generally will constitute an item of alternative minimum
tax adjustment to the recipient for the year in which the option is exercised.
Thus, certain recipients may increase their federal income tax liability as a
result of the exercise of an incentive stock option under the alternative
minimum tax rules of the Internal Revenue Code.
If the shares of Common Stock transferred pursuant to the exercise of an
incentive stock option are disposed of within two years from the date the option
is granted or within one year from the date the option is exercised, the
recipient generally will recognize ordinary income equal to the lesser of (1)
the gain recognized (i.e., the excess of the amount realized on the disposition
over the exercise price) or (2) the excess of the fair market value of the
shares transferred upon exercise over the exercise price for such shares. The
balance, if any, of the recipient's gain over the amount treated as ordinary
income on disposition generally will be treated as long- or short-term capital
gain depending upon whether the holding period applicable to long-term capital
assets is satisfied. The Company normally would be entitled to a federal income
tax deduction equal to any ordinary income recognized by the recipient, provided
the Company satisfies applicable federal income tax withholding requirements.
If the shares of Common Stock transferred upon the exercise of an incentive
stock option are disposed of after the holding periods have been satisfied, such
disposition will result in a long-term capital gain or loss treatment with
respect to the difference between the amount realized on the disposition and the
exercise price. The Company will not be entitled to a federal income tax
deduction as a result of a disposition of such shares after these holding
periods have been satisfied.
Non-Qualified Options. A recipient will not recognize income upon the
grant of a non-qualified option or at any time prior to the exercise of the
option or a portion thereof. At the time the recipient exercises a non-qualified
option or portion thereof, he or she will recognize compensation taxable as
ordinary income in an amount equal to the excess of the fair market value of the
Common Stock on the date the option is exercised over the price paid for the
Common Stock, and the Company will then be entitled to a corresponding
deduction.
Depending upon the period shares of Common Stock are held after exercise,
the sale or other taxable disposition of shares acquired through the exercise of
a non-qualified option generally will result in a short- or long-term capital
gain or loss equal to the difference between the amount realized on such
disposition and the fair market value of such shares when the non-qualified
option was exercised.
Special rules apply to a participant who exercises a non-qualified option
by paying the exercise price in whole or in part by a transfer of shares of
Common Stock to the Company.
17
<PAGE> 20
STOCKHOLDER APPROVAL
The Board of Directors seeks stockholder approval primarily because such
approval is required under the Internal Revenue Code as a condition of incentive
stock option treatment and also because certain eligible participants in the
Stock Plan are subject to Section 16 of the Securities Exchange Act of 1934. If
the 1996 ISOP is not approved by the stockholders, awards made to these persons
may be deemed "purchases" of Common Stock for the purposes of the short-swing
profit recovery provision of Section 16.
Approval of the 1996 ISOP requires the affirmative vote of the holders of
at least a majority of the outstanding shares of Common Stock of the Company
present, or represented and entitled to vote, at the Annual Meeting of
Stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE 1996
EMPLOYEE INCENTIVE STOCK OPTION PLAN.
PROPOSAL 3 -- FORMULA STOCK OPTION PLAN
TERMS OF THE 1995 FORMULA STOCK OPTION PLAN
The 1995 Formula Stock Option Plan (the "Option Plan"), a copy of which is
attached hereto as Exhibit B, was adopted by the Board of Directors on September
15, 1995. The Option Plan was intended to promote the Company's interests by
paying some of the remuneration for director's services in the form of company
stock. The grant of such formula stock options is intended to align the
directors' interests with the long-term interests of the shareholders. The
Option Plan authorizes the issuance of non-qualified options to non-employee
directors of the Company for up to an aggregate of 100,000 shares The Option
Plan is being submitted for approval by stockholders of the Company so that
options granted under it will be exempt from the operation of Section 16(b) of
the Exchange Act pursuant to Rule 16b-3(c). The following description of the
Option Plan is qualified in its entirety by reference to the applicable
provisions of the plan document.
The Option Plan is administered by the Compensation Committee, consisting
of certain non-employee directors of the Company. It is intended that the grants
of options pursuant to the Option Plan (a "Formula Option") and the
participation of directors in the Option Plan will constitute "participation in
a formula plan which does not disqualify a director from being disinterested"
under Rule 16b-3 for purposes of serving as a member of a committee that
administers other Company plans.
Subject to shareholder approval and ratification at the May 31, 1996 Annual
Meeting, each non-employee director of the Company was granted a non-qualified
stock option ("Option") to purchase two thousand (2,000) shares as of September
19, 1995. The number of shares subject to any outstanding option will be
adjusted for certain changes in the Company's capital structure. Beginning in
1996 and in each year thereafter, formula options to purchase 2,000 shares each
will be granted to each non-employee director of the Company then on the Board
of Directors two (2) business days following the filing of the second quarter
10-Q in August, until the Plan is terminated.
The exercise price of each Share granted pursuant to a Formula Option shall
be the Fair Market Value of a Share on the business day on which the Option is
granted. On April 19, 1996, the closing sale price per share of Common Stock was
$8.50.
If shareholder approval is obtained at the 1996 Annual Meeting, the
effective date of the Option Plan shall be September 19, 1995 (the "Effective
Date"). The Board of Directors established the Effective Date to be the second
business day following the announcement of a dividend increase approved by the
Board of Directors in its September 15, 1995 meeting. The Option Plan shall
terminate 10 years after the Effective Date.
To the extent required under Rule 16b-3, the provisions of the Option Plan
and the Agreement relating to eligibility and to the amount, price and timing of
a Formula Option may not be amended by the Board of Directors more than once
every six months, other than to conform it with changes in the Internal Revenue
Code, the Employee Retirement Income Security Act of 1974, or any rules under
either of the foregoing.
18
<PAGE> 21
The non-qualified Formula Options are not transferable by the optionee.
Each option will vest ratably on a monthly basis during the three (3)-year
period commencing with the grant date. In the event the optionee's service with
the Company is terminated prior to the full vesting of the option, the
non-vested portion of the option will immediately expire. Any vested, but
unexercised option shall automatically terminate and expire ten (10) years from
the date of the grant.
The Option Plan provides that the non-vested, unexpired portion of any
Formula Option granted thereunder will vest in full at the time of any merger or
consolidation to which the Company is a party or at the time of any change in
control of the Company.
Any Common Stock obtained from the exercise of a Formula Option is not
registered. Such stock may only be sold pursuant to an exemption from
registration under applicable federal and state securities laws.
The grants of the Formula Options were expressly contingent upon the
approval of the stockholders of the Company at the Annual Meeting of
Stockholders in order to meet requirements of the New York Stock Exchange and
the Securities and Exchange Commission. The New York Stock Exchange requires
that the Company obtain shareholder approval of the issuance of securities in
connection with option plans for directors, officers or key employees.
In addition, regulations promulgated by the SEC under the Exchange Act
require that in order to be exempt from the option of Section 16(b) of the
Exchange Act, options must be issued pursuant to a written plan meeting certain
specified criteria and approved by the stockholders of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE 1995
FORMULA STOCK OPTION PLAN AND THE GRANT OF NON-QUALIFIED STOCK OPTIONS TO THE
NON-EMPLOYEE DIRECTORS OF THE COMPANY THEREUNDER.
FEDERAL INCOME TAXATION OF FORMULA STOCK OPTIONS AND NON-QUALIFIED STOCK
OPTIONS.
The Formula Options are non-qualified stock options, i.e., they do not
qualify as incentive stock options for tax purposes. The Company understands
that, under existing federal income tax law, (i) no income will be recognized to
the optionee at the time of grant; (ii) upon exercise of an option, the optionee
must treat as ordinary income the difference between the exercise price and the
fair market value of the stock purchased on the date of exercise, and the
Company will be entitled to a deduction equal to such amount; and (iii) assuming
the shares received upon exercise of such option constitute capital assets in
the optionee's hands, any gain or loss upon the disposition of shares (measured
by reference to the fair market value of the shares on the date of exercise)
will be treated as capital gain or loss, which will be long-term if the shares
have been held longer than one year.
The Non-Qualified Stock Options described immediately below have the same
tax effect for the Company and the Optionee as the Formula Options described
above.
PROPOSAL 4 -- GRANT OF NON-QUALIFIED STOCK OPTIONS
TO CERTAIN NON-EMPLOYEE DIRECTORS UPON JOINING THE BOARD
The Company has a long-standing policy of granting non-employee directors
an option to purchase 3,000 shares at the then current market value upon joining
the Board of Directors. Mr. Stuart Strasner was elected to the Board in March
1995 and Dr. Jack O. Greenberg in June 1995. At the June 1995 Board of Directors
meeting the Company granted Dr. Greenberg and Mr. Strasner each a ten-year
non-qualified option to purchase 3,000 shares of the Company's Common Stock at
$5.00 per share. Each of these options vests at the rate of 1/36 per month over
the three-year period commencing on June 2, 1995. The grant of these non-
qualified stock options to non-employee directors of the Company upon joining
the Board is intended to enable the Company to attract and retain qualified
persons to serve as directors. Such grants are thought to provide such directors
with incentives and rewards to encourage them to continue service and align the
director's interests more closely with the shareholders' interests.
19
<PAGE> 22
The grants of the non-qualified stock options to Dr. Greenberg and Mr.
Strasner were expressly contingent upon approval thereof by the stockholders of
the Company at the annual meeting of stockholders. Such approval is necessary to
meet requirements of the New York Stock Exchange and to qualify such options as
exempt from the operation of Section 16(b) of the Exchange Act and as "one-time
formula grants" under former Rule 16b-3, which remains applicable to the
Company's employee benefit plans, that do not disqualify a director from being
"disinterested" for purposes of serving as a member of a committee that
administers other Company plans.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE GRANT OF
NON-QUALIFIED STOCK OPTIONS TO CERTAIN OF THE NON-EMPLOYEE DIRECTORS OF THE
COMPANY
PROPOSAL 5 -- INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Joseph Decosimo and Company as the
Company's independent public accountants for fiscal 1996. Joseph Decosimo and
Company has served as the Company's auditors since 1982. Representatives of
Joseph Decosimo and Company are expected to be present at the Annual Meeting and
will have an opportunity to make a statement if they desire to do so, and will
be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
APPOINTMENT OF JOSEPH DECOSIMO AND COMPANY AS INDEPENDENT PUBLIC ACCOUNTANTS FOR
1996.
STOCKHOLDER PROPOSALS
Appropriate proposals of stockholders intended to be presented at the
Company's next annual meeting of stockholders (which the Company currently
intends to hold in June of 1997) must be received by the Company by December 31,
1996, for inclusion in its proxy statement and form of proxy relating to that
meeting. If the date of the next annual meeting is changed by more than 30
calendar days from such anticipated time frame, the Company shall, in a timely
manner, inform its stockholders of the change and the date by which proposals of
stockholders must be received.
MISCELLANEOUS
Management does not know of any other matters to come before the meeting.
If any other matters properly come before the meeting, however, it is the
intention of the persons designated as Proxies to vote in accordance with his
best judgment on such matters.
ANNUAL REPORT
The Company's 1995 Annual Report to Stockholders is enclosed. The Annual
Report is not a part of the proxy soliciting material.
20
<PAGE> 23
EXHIBIT A
HEALTH IMAGES, INC.
1996 EMPLOYEE INCENTIVE STOCK OPTION PLAN
1. Purpose. This Employee Incentive Stock Option Plan (the "Plan") is
intended as an incentive and to encourage stock ownership by certain officers
and other key employees of Health Images, Inc., a Delaware corporation (the
"Corporation"), or of its subsidiary corporations as that term is defined in
Section 424(f) of the Internal Revenue Code of 1986, as amended (the
"Subsidiary" or "Subsidiaries"), so that they may acquire or increase their
proprietary interest in the Corporation, and properly to reward them for
meritorious or profit producing services to the Corporation or the Subsidiaries.
It is further intended that options issued pursuant to this Plan shall
constitute incentive stock options within the meaning of Sec. 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
2. Administration. The Plan shall be administered by a committee appointed
by the Board of Directors of the Corporation (the "Committee"). The
Corporation's Compensation Committee shall administer the Plan. The Committee
shall consist of not less than three members. The Board of Directors may from
time to time remove members from or add members to the Committee. Vacancies on
the Committee, howsoever caused, shall be filled by the Board of Directors. The
Committee shall select one of its members as Chairman and shall hold meetings at
such times and places as it may determine. The action of a majority of the
Committee at a meeting at which a quorum is present, or acts reduced to or
approved in writing by a majority of the members of the Committee, shall be the
valid acts of the Committee. Each Director while a member of the Committee shall
meet the definition of "disinterested person" contained in Rule 16b-3 of the
Securities and Exchange Commission. The Committee shall from time to time at its
discretion designate the key employees who shall be granted options and the
number of shares to be optioned to each.
The interpretation and construction by the Committee of any provisions of
the Plan or of any option granted under it shall be final. No member of the
Board of Directors or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any option granted
under it.
3. Eligibility. The persons who shall be eligible to receive options shall
be such employees (including officers, whether or not they are Directors) of the
Corporation or its Subsidiaries as the Committee shall select from time to time
("Optionee" or "Optionees"). An Optionee may hold more than one option, but only
on the terms and subject to the restrictions hereafter set forth.
4. Stock. The stock subject to the options shall be shares of the
Corporation's authorized and unissued or reacquired $.01 par value voting common
stock (the term "Shares" as used herein shall refer to shares which are
specifically subject to an option granted under the Plan). The aggregate number
of shares which may be issued under options pursuant to the Plan shall not
exceed 600,000 shares. The maximum number of Shares with respect to which
options may be granted during any fiscal year of the Corporation to any eligible
optionee who is a "covered employee" within the meaning of Section 162(m) of the
Code shall not exceed 100,000 shares. The limitations established by each of the
preceding sentences shall be subject to adjustment as provided in Section 6(i)
of the Plan.
In the event that any outstanding option under the Plan for any reason
expires or is terminated, the Shares allocable to the unexercised portion of
such option may again be subjected to an option under the Plan.
5. Annual Limitation. The fair market value (determined as of the date of
grant of the option) of the Shares with respect to which options first become
exercisable by an Optionee during any calendar year (under the Plan and any
other plans granting incentive stock options which are established by the
Corporation or its Subsidiaries) shall not exceed $100,000.
A-1
<PAGE> 24
6. Terms and Conditions of Option. Options granted pursuant to the Plan
shall be authorized by the Committee and shall be evidenced by agreements in
such form as the Committee shall from time to time approve, which agreement
shall contain specifically or be subject to the following terms and conditions:
(a) Number of Shares. Each option shall state the number of Shares to
which it pertains.
(b) Option Price. Each option shall state the option price, which
shall be not less than 100% of the fair market value of the Shares subject
to the option on the date of grant. Fair market value shall be determined
under the principles of Treasury Regulations sec. 20.2031-2 or such other
regulations or authorities as the Committee shall deem appropriate at the
time. Subject to the foregoing, the Committee, in fixing the option price,
shall have full authority and discretion and be fully protected in doing
so.
(c) Medium and Time of Payment. The option price shall be payable on
the exercise of the option and may be paid (i) in United States Dollars in
cash or by check; (ii) by transferring a number of shares, valued as
provided in Paragraph 6(b) above, as of the date of transfer; having a
value equal to the option price; or (iii) by part payment in cash or by
check as provided in (i) above and by payment of the balance by
transferring shares to the Corporation as provided in (ii) above;
(d) Conditions of Exercise of Options.
(1) No option granted pursuant to this Plan shall be exercised in
whole or in part more than ten years after it is granted, and such
option shall be subject to such further terms and conditions as to the
time of its exercise as the Committee may prescribe.
(2) In order to exercise an option granted hereunder, in whole or
in part, each of the following conditions must be fulfilled at the time
of exercise:
(i) The Optionee must be in the employ of the Corporation or one
of its Subsidiaries or exercise the Option within the 30 day period
following termination of employment. However, any Optionee who is
totally and permanently disabled at the time of exercise of an option
and who has ceased to work for the Corporation or one of its
Subsidiaries as a result of such disability shall not be required to
satisfy this condition if he has been employed by the Corporation or
one of its Subsidiaries within one year prior to the date of exercise
of such option. Permanent and total disability for purposes of this
Paragraph 6(d)(2)(i) shall mean that such Optionee, at the time he
ceased his employment by the Corporation, was unable to engage in any
substantial gainful activity by reason of a medically determinable
physical or mental impairment which could be expected to result in
death or which at such time could be expected to last for a
continuous period of not less than twelve (12) months. Such optionee
shall furnish proof of such disability in form and substance
satisfactory to the Committee.
Neither the transfer of an employee from employment by one of
the Corporation's Subsidiaries to another Subsidiary, the transfer of
an employee from the employment by one of the Subsidiaries to the
Corporation or by the Corporation to one of its Subsidiaries shall be
deemed the termination of the employment of the employee by the
Corporation or any of its Subsidiaries.
(ii) The Optionee shall have met any additional specific
conditions imposed by the Committee at the time of the granting of
the option. Such specific conditions may be in the form of
achievement goals for the individual Optionee based upon
predetermined minimum increases over a specific period or periods
time, in sales, gross profits, pre-tax or after tax earnings,
productivity, or other goals or standards for the Corporation or the
Subsidiary for which the Optionee works. The imposition of such
achievement goals and conditions shall be in the sole discretion of
the Committee; and such goals and conditions may differ between
individual employees of the Corporation and/or of its Subsidiaries;
and between classes of employees of the Corporation and/or any
Subsidiary; and between the employees of the Corporation, as a class,
and the employees of the Subsidiaries as a class.
A-2
<PAGE> 25
(iii) Any Optionee of the Corporation or any Subsidiary shall be
entitled to accumulate and carry over any unexercised portion of an
option to any subsequent period, provided that at the time of
exercise of such portion of the option, the Optionee shall meet all
conditions herein required of the Optionee at the time of the
exercise.
(e) Termination of Employment Except by Death. Subject to Paragraph
6(d)(2)(i), in the event that an Optionee shall cease to be employed by the
Corporation or any of its Subsidiaries for any reason other than his death
and shall be no longer in the employ of any of them, such Optionee shall
have thirty (30) days from the date of termination of employment to
exercise the unexercised portion of the option after which such portion of
the option shall become null and void. Whether authorized leave of absence
or absence for military or governmental service shall constitute
termination of employment, for the purposes of the Plan, shall be
determined by the Committee, whose determination shall be final and
conclusive.
(f) Death of Optionee and Transfer of Option. If the Optionee shall
die while in the employ of the Corporation or a Subsidiary and shall not
have fully exercised the option, the option may be exercised, subject to
the condition that no option shall be exercisable after the expiration of
ten years from the date it is granted, to the extent that the Optionee's
right to exercise such option had accrued pursuant to this Section 6 of the
Plan at the time of his death and had not previously been exercised, at any
time within twelve months after the Optionee's death, by the executors or
administrators of the Optionee or by any person or persons who shall have
acquired the option directly from the optionee by bequest or inheritance.
No option shall be transferable by the Optionee otherwise than by will
or under the laws of descent and distribution.
(g) Recapitalization. Subject to any required action by the
shareholders, the number of Shares covered by each outstanding option, and
the price per Share thereof in each such option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of the
Corporation resulting from a subdivision or consolidation of shares or the
payment of a stock dividend or stock split (but only on the shares) or any
other increase or decrease in the number of such shares affected without
receipt of consideration by the Corporation.
Subject to any required action by the shareholders, if the Corporation
shall be the surviving corporation in any merger, consolidation or change
in capital structure other than a change in control, each outstanding
option shall pertain to and apply to the securities to which a holder of
the number of shares subject to the option would have been entitled. A
dissolution or liquidation of the Corporation shall cause each outstanding
option to terminate.
In the event of a change in the shares of the Corporation as presently
constituted, which is limited to a change of all of its authorized shares
without par value into the same number of shares with a different stated
value or with par value, the shares resulting from any such change shall be
deemed to be the shares within the meaning of the Plan.
To the extent that the foregoing adjustments relate to stock or
securities of the Corporation, such adjustments shall be made by the
Committee, whose determination in that respect shall be final, binding and
conclusive, provided that each option granted pursuant to this Plan shall
not be adjusted in a manner that causes the option to fail to continue to
qualify as an incentive stock option within the meaning of Sec. 422A of the
Code.
Subject to any required action by the shareholders, if the Corporation
is a party to any merger, consolidation or reorganization where it shall
not be the surviving corporation or in the event of change in control of
the Corporation (as contemplated by any other agreement then in effect to
which the Corporation is a party or which otherwise concerns the affairs of
the Corporation), each outstanding option shall vest in full at the time of
such merger, consolidation, reorganization or change in control. Each
option shall then pertain to and apply to the securities of the
Corporation, or in a case where the Corporation is not the surviving
corporation, in the successor corporation to the Corporation to which a
holder of the number of shares subject to the option would have been
entitled.
A-3
<PAGE> 26
Except as hereinbefore provided in this Section 6 as interpreted by
the Committee in its sole discretion, the Optionee shall have no rights by
reason of any subdivision or consolidation of shares of stock of any class
or the payment of any stock dividend or any other increase or decrease in
the number of shares of stock of any class or by reason of any dissolution,
liquidation, merger, or consolidation or spinoff of assets or stock of
another corporation, and any issue by the Corporation of shares of stock or
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 price of shares subject to the option.
The grant of any option pursuant to the Plan shall not affect in any
way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge or to consolidate or to dissolve, liquidate or sell,
or transfer all or any part of its business or assets; provided, however,
that if any such adjustment shall result in a fractional share for any
Optionee under any option hereunder, such fraction shall be completely
disregarded and the Optionee shall only be entitled to the whole number of
shares resulting from such adjustment.
(h) Rights as a Shareholder. An Optionee or a transferee of an option
shall have no rights as a shareholder with respect to any shares covered by
his option until the date of the issuance of a stock certificate to him for
such shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the
date such stock certificate is issued, except as otherwise provided in this
Section 6.
(i) Investment Purpose. The Corporation shall not be obligated to
sell or issue any shares pursuant to any option unless the shares with
respect to which the option is being exercised are at that time effectively
registered or exempt from registration under the Securities Act of 1933, as
amended.
Notwithstanding anything in the Plan to the contrary, each option
under the Plan shall be granted on the condition that the purchases of
shares thereunder shall be for investment purposes, and not with a view to
resale or distribution except that in the event the shares subject to such
option are registered under the Securities Act of 1933, as amended, and
applicable state securities laws or in the event a resale of such shares
without such registration would otherwise be permissible, such condition
shall be inoperative if in the opinion of counsel for the Corporation such
condition is not required under the Securities Act of 1933 or any other
applicable law, regulation, or rule of any governmental agency.
(j) Other Provisions. Options authorized under the Plan shall contain
such other provisions, including, without limitation, restrictions upon the
exercise of the option, as the Committee or the Board of Directors of the
Corporation shall deem advisable subject to any limitation on the
discretion of the Board of Directors required by Rule 16b-3. Any such
option agreement shall contain such limitations and restrictions upon the
exercise of the option as shall be necessary in order that such option will
be an Incentive Stock Option as defined in Sec. 422 of the Code or to
conform to any change in the law and shall not contain any provisions,
restrictions or limitations which shall prevent such option from being an
Incentive Stock Option as aforesaid.
7. Term of Plan. Options may be granted pursuant to the Plan from time to
time within a period of ten years from the date the Plan is adopted or the date
the Plan is approved by the shareholders, whichever is earlier.
8. Indemnification of Committee. In addition to such other rights of
indemnification as they may have as Directors or as members of the Committee,
the members of the Committee shall be indemnified by the Corporation against the
reasonable expenses, including attorneys' fees actually and necessarily incurred
in connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with the
Plan or any option granted thereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by the independent
legal counsel selected by the Corporation) or paid by them in satisfaction of a
judgment in any such action, a suit or proceeding, except in relation to matters
as to which it shall be adjudged in such action, suit or proceeding that such
Committee member is liable for negligence or misconduct in the performance of
his duties; provided that within sixty (60) days after
A-4
<PAGE> 27
institution of any such action, suit or proceeding a Committee member shall in
writing offer the Corporation the opportunity, at its own expense, to handle and
defend the same.
9. Amendment to the Plan. The Board of Directors of the Corporation may,
insofar as permitted by law, from time to time, with respect to any shares at
the time not subject to options, suspend or discontinue the Plan or revise or
amend it in any respect whatsoever except that, without approval of the
shareholders, no such revision or amendment shall change the number of shares
subject to the Plan, change the designation of the class of employees eligible
to receive options, decrease the price at which options may be granted, remove
the administration of the Plan from the Committee, or render any member of the
Committee eligible to receive an option under the Plan while serving thereon.
Furthermore, the Plan may not, without the approval of the shareholders, be
amended in any manner that will cause options issued under it to fail to meet
the requirements of Incentive Stock Options as defined in Sec. 422 of the Code.
10. Application of Funds. The proceeds received by the Corporation from
the sale of Shares pursuant to options will be used for general corporate
purposes.
11. No Obligation to Exercise Option. The granting of an option shall
impose no obligation upon the Optionee to exercise such option.
12. Approval of Shareholders. The Plan shall not take effect until
approved by the holders of a majority of the outstanding shares which approval
must occur within the period beginning twelve months before and ending twelve
months after the date the Plan is adopted by the Board of Directors.
13. Limitations on Grant of Option. No option may be granted under this
Plan to any person who owns, directly or indirectly under the rules of Section
424(d) of the Code, or who, by reason of the exercise of such option will own
more than ten (10%) percent of the total combined voting power of all classes of
stock of the Corporation, its parent or subsidiary, as provided in Section
422(b)(6) of the Code, unless such option (i) has an exercise price that equals
at least 110% of the fair market value of the stock on the date the option is
granted, and (ii) shall not be exercisable more than five years from the date
the option is granted.
A-5
<PAGE> 28
EXHIBIT B
HEALTH IMAGES, INC.
1995 FORMULA STOCK OPTION PLAN
THIS FORMULA STOCK OPTION PLAN is made as the 15th day of September, 1995,
by Health Images, Inc., a corporation organized and doing business under the
laws of the State of Delaware (the "Company").
1. Purpose.
The Company adopts the Health Images, Inc., 1995 Formula Stock Option Plan
(the "Plan") to secure and retain the services of outside directors of the
Company, the Parent and any Subsidiary by giving them an opportunity to invest
in the future success of the Company. The terms "Parent" or "Subsidiary" shall
mean any corporation which qualifies as a parent or subsidiary of the Company
pursuant to Internal Revenue Code Section 424(e) or (f), as amended.
2. Administration.
The Plan shall be administered by the Board of Directors of the Company
(the "Board of Directors") or the Compensation Committee of the Board of
Directors (the "Committee"). It is intended that the grants of options pursuant
to the Plan and the participation of directors hereunder shall constitute
"participation in a formula plan which does not disqualify a direct from being
disinterested" under Rule 16b-3 for purposes of serving as a member of a
committee that administers other Company plans.
If the Committee consists of fewer than all of the members of the Board of
Directors, each member of the Committee shall serve at the discretion of the
Board of Directors, which may fill any vacancy, however caused, in the
Committee. The Committee shall select one of its members as a chairman and shall
hold meetings at the times and in the places as it may deem advisable. All
actions the Committee takes shall be made by majority decision. Any action
evidenced by a written instrument signed by all of the members of the Committee
shall be as fully effective as if the Committee had taken the action by majority
vote at a meeting duly called and held.
The Committee shall have complete and conclusive authority to (i) interpret
this Plan, (ii) prescribe, amend and rescind rules and regulations relating to
it, (iii) determine the terms of each stock option agreement with optionees who
are granted Options pursuant to Section 5, consistent with the terms of the Plan
and the form of stock option agreement attached hereto as Exhibit A (the
"Agreement"), and (iv) make all other determinations necessary or advisable for
the administration of this Plan. The Committee's determinations on these matters
shall be conclusive.
In addition to any other rights of indemnification that they may have as
directors of the Company or as members of the Committee, the directors of the
Company and members of the Committee shall be indemnified by the Company against
the reasonable expenses, including attorneys' fees, actually and necessarily
incurred in connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of action taken or failure to act under or in connection with this
Plan or any Option granted thereunder, and against all amounts paid by them in
settlement thereof or paid by them in satisfaction of a judgment in any action,
suit or proceeding, except in relation to matters as to which it shall be
adjudged in the action, suit or proceeding that the Committee member is liable
for gross negligence or misconduct in the performance of his duties; provided
that within 60 days after institution of any action, suit or proceeding, a
Committee member shall in writing offer the Company the opportunity, at its own
expense, to handle and defend the same.
B-1
<PAGE> 29
3. Eligibility.
Directors of the Company, the Parent or a Subsidiary who are not employees
on the date an Option is to be granted pursuant to Plan Section 5 shall be
granted Options hereunder (the "Eligible Optionees").
4. Stock Subject to Plan.
The Company has authorized and reserved for issuance upon the exercise of
options pursuant to this Plan an aggregate of one hundred thousand (100,000)
shares of $0.01 par value common stock of the Company (the "Shares"). If any
option is cancelled, expires or terminates without the respective optionee
exercising it in full, the Committee may grant Options with respect to those
unpurchased Shares to that same optionee or another Eligible Optionee.
The Committee shall adjust the total number of Shares and any Shares
subject to outstanding Options, both as to the number of Shares and the option
price, for any increase or decrease in the number of outstanding Shares
resulting from a stock split or a payment of a stock dividend on the Shares, a
subdivision or combination of the Shares, a reclassification of the Shares, a
merger or consolidation of the Shares or any other like changes in the Shares or
in their value. The Committee shall not issue fractional shares as a result of
any of these changes, and shall eliminate from the outstanding Options any
fractional shares that result from a change. The Committee shall not adjust
outstanding Options for cash dividends or the issuance to optionees of rights to
subscribe for additional stock or securities of the Company.
The foregoing adjustments and the manner of application for the foregoing
provisions shall be determined by the Committee in its sole discretion.
The grant of an Option by the Committee shall not affect in any way the
right or power of the Company to make adjustments, reclassifications,
reorganizations or changes in its capital or business structure, or to merge,
consolidate dissolve, liquidate, sell or transfer all or any part of its
business or assets.
Subject to any required action by the shareholders, if the Company is a
party to any merger or consolidation or there is a change in control of the
Company, each outstanding option shall vest in full at the time of such merger
or consolidation. Each option shall then pertain to and apply to the securities
which a holder of the number of shares subject to the option would have been
entitled.
5. Formula and Terms of Option Grants.
Each Eligible Optionee shall be granted a non-qualified stock option
("Option") to purchase Two Thousand (2,000) Shares, as of the Effective Date
(defined in Section 6) and each year thereafter two (2) business days following
the filing of the second quarter 10-Q in August, until the Plan is terminated.
In the event the remaining number of Shares reserved for issuance under the Plan
is insufficient to grant options for the appropriate number of Shares to all
Eligible Optionees as of any grant date, then no options shall be granted as of
that grant date.
The exercise price of each Share granted pursuant to an Option shall be the
Fair Market Value of a Share on the business day on which the Option is granted.
"Fair Market Value" shall be determined in good faith by the Committee provided
that:
(a) if the Shares are actively traded on any national securities
exchange or the Nasdaq National Market, fair market value shall be the
closing sales price per share of the Shares on such day;
(b) if the Shares are otherwise traded over the counter, fair market
value shall be the arithmetic mean of the bid and asked prices for the
Shares, as reported by Nasdaq or any other recognized reporting services,
on such day;
(c) if the Shares are not traded, fair market value shall be
determined by the Committee which shall, in making such determination,
consider, where applicable, among other facts: the existence and extent of
a private market for the Shares and a public market for the Company's
securities of the same class, if any; the price at which the Shares were
acquired, if applicable, by the Company; the estimated
B-2
<PAGE> 30
period of time, if any, during which the Shares will be freely marketable;
the estimated amount of floating supply of Shares available; changes in the
financial condition and prospects of the Company; the existence of merger
proposals or tender offers affecting the Company; and any other factors
affecting fair market value; provided, however, that fair market value
shall be determined without regard to any restriction other than a
restriction which, will never lapse.
Each Option granted pursuant to this Plan shall be authorized by the
Committee, shall be evidenced by an Agreement and shall be subject to such
additional terms as set forth in the Agreement.
6. Terms of Plan.
The Company shall submit this Plan to its shareholders for approval within
12 months of the adoption of this Plan by the Board of Directors. Unless
shareholder approval is obtained within said twelve-month period, both this Plan
and all outstanding Options shall be rendered immediately void and of no effect.
If shareholder approval is obtained at the 1996 Annual Meeting, the effective
date of this Plan shall be September 19, 1995 (the "Effective Date"). The
Effective Date was established by the Board of Directors to be the second
business day following the announcement of the dividend increase approved by
the Board of Directors in its September 15, 1995 meeting. This Plan shall
terminate 10 years after the Effective Date.
7. Assignability.
No Option or any of the rights and privileges thereof accruing to an
optionee shall be transferred, assigned, pledged or hypothecated in any way
whether by operation of law or otherwise other than as (1) the will of the
optionee, or (2) the applicable laws of descent and distribution permit, and no
Option, right or privilege shall be subject to execution, attachment or similar
process.
8. No Right to Continued Service.
No provision in this Plan or any Option shall confer upon any right to
continue performing services for or to interfere in any way with the right of
shareholders for the Company to remove such optionee as a director at any time
for any reason.
9. Amendment and Termination.
To the extent required under Rule 16b-3, the provisions of the Plan and the
Agreement relating to eligibility and to the amount, price and timing of an
Option may not be amended by the Board of Directors more than once every six
months, other than to conform it with changes in the Internal Revenue Code, the
Employee Retirement Income Security Act of 1974, or any rules under either of
the foregoing. Except as otherwise provided in this Section, the Board of
Directors at any time may amend or terminate the Plan without shareholder
approval; provided, however, that the Board of Directors may condition any
amendment on the approval of the shareholders of the Company if such approval is
necessary or advisable with respect to tax, securities (which require such
approval for a material increase of the number of Shares subject to Options and
for material modifications to the eligibility requirements of this Plan, among
other amendments, or other applicable laws to which the Company, this Plan,
optionees or Eligible Optionees are subject. No Amendment or termination of this
Plan shall adversely affect the rights of an optionee with regard to his Options
without his consent.
10. Choice of Law.
The laws of the State of Delaware will govern this Plan.
11. General Restriction.
Notwithstanding anything contained herein or in any of the Agreements to
the contrary, no purported exercise of any Option granted pursuant to the Plan
shall be effective without the written approval of the Company, which may be
withheld to the extent that the exercise, either individually or in the
aggregate
B-3
<PAGE> 31
together with the exercise of the previously exercised stock options and/or
offers and sales pursuant to any prior or contemplated offering of securities,
would, in the sole and absolute judgment of the Company, require the filing of a
registration statement with the United States Securities and Exchange Commission
or with the securities commission of any state. The Company shall avail itself
of any exemptions from registration contained in the applicable federal and
state securities laws which are reasonably available to the Company on terms
which, in its sole and absolute discretion, it deems reasonable and not unduly
burdensome or costly. Each optionee shall, prior to the exercise of an Option,
deliver to the Company such information, representations and warranties as the
Company may reasonably request in order for the Company to be able to satisfy
itself that the Shares to be acquired pursuant to the exercise of an Option is
being acquired in accordance with the terms of an applicable exemption from the
securities registration requirements of applicable federal and state securities
laws.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed in the
form and as of the date set forth above.
<TABLE>
<S> <C>
ATTEST: HEALTH IMAGES, INC.
By:
- ------------------------------------------ ------------------------------------------
Secretary Title:
------------------------------------------
[CORPORATE SEAL]
</TABLE>
B-4
<PAGE> 32
OPTION AGREEMENT
THIS OPTION AGREEMENT ("Agreement") made as of the day of ,
199 , between HEALTH IMAGES, INC., a Delaware corporation (the "Company"),
and , a Director of the Company (the "Optionee").
WITNESSETH:
WHEREAS, the Company maintains the 1995 Formula Stock Option Plan (the
"Plan");
WHEREAS, the Plan provides for the automatic grant to eligible directors of
an option annually to purchase 2,000 shares of the Common Stock, $0.01 par
value, of the Company;
WHEREAS, the Optionee is eligible annually for an option grant pursuant to
the terms of the Plan and effective as of the date specified in the Plan (the
"Grant Date");
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties agree as follows:
1.
a. The Company hereby grants and Optionee hereby accepts an option
("Option") to purchase 2,000 shares of Common Stock (the "Shares") of the
Company at a purchase price per share of $ , payable in cash upon
exercise of the Option, such Option being exercisable for a period of ten
years from the Grant Date (or for a shorter period determined pursuant to
Section 3(a)), provided, however, that such Option shall vest pursuant to
Section 1(b) before Optionee has the right to exercise such Option.
b. The Option to purchase Shares shall vest at a rate of 55.55 Shares
per calendar month over a 36-month period, commencing as of the Grant Date.
In the event of a merger, acquisition, reorganization or change in control
of the Company, the Option shall immediately vest.
2.
Optionee hereby covenants, represents and warrants to the Company as
follows and acknowledges that each such covenant, representation and warranty is
material to and relied upon by the Company in connection with its grant of
Option and issuance of Shares to Optionee:
a. Optionee is acquiring the Option and shares solely for his or her
own account for investment purposes and not with a view to resale or
distribution of all or any part thereof.
b. Optionee acknowledges that the Option granted hereby and underlying
Shares are to be granted or issued and sold to him or her without
registration and in reliance upon certain exemptions under the Federal
Securities Act of 1933, as amended, and in reliance upon certain exemptions
from registration requirements under applicable securities acts.
c. Optionee will make no pledge, transfer or assignment of any of the
Option or Shares unless in compliance with the Securities Act of 1933, as
amended, and any other applicable securities laws. Optionee consents and
agrees that a legend to such effect may be affixed to the certificate or
certificates representing the Shares issued to him or her.
d. Optionee is aware that no federal or state agency has made any
recommendation or endorsement of the Option or Shares or any finding or
determination as to the fairness of the investment in such Option or
Shares.
e. Optionee has full legal power and authority to execute and deliver,
and to perform his or her obligations under this Agreement and such
execution, delivery and performance will not violate any agreement,
contract, law, rule, decree or other legal restriction by which the
undersigned is bound.
<PAGE> 33
f. Optionee is a non-employee director of the Company and in such
capacity is fully knowledgeable about the Company and its business and has
fully investigated and reviewed the Company and its business prior to
execution of this Agreement.
g. Optionee has been advised by his or her own independent personal
tax advisors of the tax consequences of the grant and exercise of Option
hereunder.
3.
In the event Optionee ceases to be a director of the Company prior to the
full vesting of the Option ( , 19 ), the non-vested
portion of the Option will immediately expire. Any unexercised but vested Option
shall automatically terminate and expire ten (10) years from the date of this
Option.
4.
a. The Option granted hereunder is not transferable by Optionee, and
during Optionee's lifetime shall be exercisable only by Optionee. The
Option shall confer no rights on the holder thereof to act as a stockholder
with respect to any of the Shares until payment of the purchase price and
delivery of share certificate(s) have been made.
b. The Company reserves the right to request additional documentation
from Optionee in connection with the issuance of Shares in compliance with
the applicable securities laws.
c. A legend shall be placed on the back of the certificate evidencing
Shares issued pursuant hereto to the effect that such shares are subject to
this Agreement and may not be sold, transferred, pledged or assigned except
in accordance with the terms of this Agreement.
5.
In the event of any reorganization, recapitalization, reclassification,
stock dividend, stock split or similar event affecting the Company's Common
Stock, the Company shall make an appropriate adjustment in number of Shares for
which the Option has been granted in accordance with the terms hereof.
6.
This Agreement constitutes the sole agreement setting forth the terms of
the Option, supersedes any other agreement, certificate or understanding
relating to the grant of such Option and no separate certificate evidencing such
Option shall be issued.
7.
This option grant is being made pursuant to that certain Non-Qualified
Stock Option Plan attached hereto as Exhibit A and is contingent upon the
approval of that plan and this grant by the Company's Shareholders at the 1996
Annual Meeting.
<PAGE> 34
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
OPTIONEE:
--------------------------------------
--------------------------------------
HEALTH IMAGES, INC.
By:
----------------------------------
Name:
-----------------------------
Title:
-----------------------------
<PAGE> 35
APPENDIX A
HEALTH IMAGES, INC., PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF HEALTH IMAGES, INC.,
FOR THE ANNUAL MEETING OF STOCKHOLDERS
May 31, 1996
The undersigned stockholder hereby constitutes and appoints each of ROBERT
D. CARL, III, and ROBIN EUBANKS MURRAY, with full power of substitution, to act
as proxy for and to vote all shares of Common Stock which the undersigned is
entitled to vote at the Annual Meeting of Stockholders to be held on May 31,
1996, at 9:00 a.m., at the Society Hill Sheraton, One Dock Street, Philadelphia,
Pennsylvania 19106, or any adjournment(s) thereof, on all matters coming before
said meeting.
THE PROXIES SHALL VOTE AS SPECIFIED BELOW, OR IF A CHOICE IS NOT SPECIFIED
FOR ANY OF THE FOLLOWING PROPOSALS, THE PROXIES SHALL VOTE "FOR" THE ELECTION OF
THE BOARD OF DIRECTORS' NOMINEES FOR DIRECTORS, "FOR" THE APPROVAL OF A NEW
INCENTIVE STOCK OPTION PLAN, "FOR" THE APPROVAL OF THE 1995 FORMULA STOCK OPTION
PLAN, "FOR" THE GRANT OF NON-QUALIFIED OPTIONS TO MR. STRASNER AND DR. GREENBERG
AND "FOR" THE RATIFICATION OF JOSEPH DECOSIMO AND COMPANY AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1996.
The undersigned instructs said proxies to vote:
1. Election of Directors -- Robert D. Carl, III; William E. Whitesell, Ph.D.;
Marc I. Raphaelson, M.D.; Robert Taylor; Stuart B. Strasner; Jack O.
Greenberg, M.D. and Anthony T. Prescott.
<TABLE>
<S> <C> <C>
/ / FOR all nominees / / AGAINST all nominees / /FOR all nominees, except a vote is cast
against the following nominees:
------------------------------------------------
2. Approval of New ISOP 5. Appointment of Independent Public Accountants:
/ / FOR / / AGAINST / / ABSTAIN / / FOR approval / / AGAINST approval / / ABSTAIN
Amendment Amendment
3. Approval of 1995 Non-Employee Director Formula 6. The undersigned further gives the proxies authority to
Stock Option Plan vote according to his or her best judgment with respect to any other matters
/ / FOR approval / / AGAINST approval / / ABSTAIN which properly come before the meeting.
4. Approve Grant of Non-Qualified Options to Two New
Directors
/ / FOR approval / / AGAINST approval / / ABSTAIN
</TABLE>
The undersigned acknowledges the receipt of Notice of the aforesaid Annual
Meeting and Proxy Statement, each dated April 25, 1996.
Signature:
----------------------------------
Date:
----------------------------------
(Signature should conform to name
and title stenciled hereon.
Executors, administrators,
trustees, guardians and attorneys
should add their titles upon
signing.)
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
POSTAGE PAID ENVELOPE.
Please enter your Social Security Number or Federal Employer Identification
Number here:
---------------------------
