UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Schedule 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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|_| Preliminary Proxy Statement
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|_| Soliciting Material Pursuant to Section 240.14a-12
iCAD, Inc.
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(Name of Registrant as Specified in Its Charter)
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iCAD, Inc.
4 Townsend West, Suite 17
Nashua, New Hampshire 03063
May 23, 2005
Dear Fellow Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders
which will be held on Wednesday, June 22, 2005, at 9:00 A.M. (local time), at
the offices of Blank Rome LLP, 24 Floor, Boardroom, 405 Lexington Avenue, New
York, NY 10174.
The Notice of Annual Meeting and Proxy Statement, which follow,
describe the business to be conducted at the meeting.
Whether or not you plan to attend the meeting in person, it is
important that your shares be represented and voted. After reading the enclosed
Notice of Annual Meeting and Proxy Statement, please complete, sign, date and
return your proxy card in the envelope provided. If the address on the
accompanying material is incorrect, please advise our Transfer Agent,
Continental Stock Transfer & Trust Company, in writing, at 17 Battery Place, New
York, New York 10004.
Your vote is very important, and we will appreciate a prompt return of
your signed proxy card. We hope to see you at the meeting.
Cordially,
Robert Howard
Chairman of the Board
iCAD, Inc.
4 Townsend West, Suite 17
Nashua, New Hampshire 03063
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 22, 2005
To the Stockholders of iCAD, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of iCAD,
Inc. (the "Company") will be held on Wednesday, June 22 2005, at 9:00 A.M.
(local time), at the offices of Blank Rome LLP, 24 Floor, Boardroom, 405
Lexington Avenue, New York, NY 10174 for the following purposes:
1. To elect three Class III directors to hold office until the Annual
Meeting of Stockholders to be held in 2008 and until their respective
successors have been duly elected and qualified;
2. To consider and vote upon the proposal to approve the adoption of the
Company's 2005 Stock Incentive Plan; and
3. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on May 16, 2005
are entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof.
By Order of the Board of Directors,
W. Scott Parr
President and Chief Executive Officer
May 23, 2005
IF YOU DO NOT EXPECT TO BE PRESENT AT THE MEETING:
PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE
PROVIDED FOR THAT PURPOSE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO EXERCISE, AND IF YOU ARE
PRESENT AT THE MEETING YOU MAY, IF YOU WISH, REVOKE YOUR PROXY AT THAT TIME AND
EXERCISE THE RIGHT TO VOTE YOUR SHARES PERSONALLY.
PLEASE NOTE THAT ATTENDANCE AT THE MEETING WILL BE LIMITED TO STOCKHOLDERS OF
iCAD, INC. AS OF THE RECORD DATE (OR THEIR AUTHORIZED REPRESENTATIVES) HOLDING
EVIDENCE OF OWNERSHIP. IF YOUR SHARES ARE HELD BY A BANK OR BROKER, PLEASE BRING
TO THE MEETING YOUR BANK OR BROKER STATEMENT EVIDENCING YOUR BENEFICIAL
OWNERSHIP OF iCAD, INC. STOCK TO GAIN ADMISSION TO THE MEETING.
iCAD, Inc.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 22, 2005
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of iCAD, Inc. (the "Company" or "iCAD") for
use at the Annual Meeting of Stockholders (the "Annual Meeting") to be held on
June 22, 2005, including any adjournment or adjournments thereof, for the
purposes set forth in the accompanying Notice of Meeting.
Management intends to mail this proxy statement and the accompanying
form of proxy to stockholders on or about May 24, 2005.
Proxies in the accompanying form, duly executed and returned to the
management of the Company and not revoked, will be voted at the Annual Meeting.
Any proxy given pursuant to such solicitation may be revoked by the stockholder
at any time prior to the voting of the proxy by a subsequently dated proxy, by
written notification to the Secretary of the Company, or by personally
withdrawing the proxy at the meeting and voting in person.
The address and telephone number of the principal executive offices of
the Company are:
4 Townsend West, Suite 17
Nashua, New Hampshire 03063
Telephone No.: (603) 882-5200
OUTSTANDING STOCK AND VOTING RIGHTS
Only holders of the Company's common stock, par value $.01 per share,
(the "Common Stock") and holders of the Company's Series A Preferred Stock at
the close of business on May 16, 2005, (the "Record Date") are entitled to
receive notice of and to vote at the Annual Meeting. As of the Record Date, the
Company had 36,601,813 shares of Common Stock outstanding. Each share of Common
Stock is entitled to one vote on all matters. In addition, holders of the
Company's Series A Preferred Stock vote together with holders of the Common
Stock as a single class on all actions to be voted on by the stockholders. Each
share of Series A Preferred Stock entitles the holder to 100 votes per share.
Based upon 5,150 shares of Series A Preferred Stock outstanding on the Record
Date, the holders of the Series A Preferred Stock are entitled to an aggregate
of 515,000 votes. There are no cumulative voting rights.
1
VOTING PROCEDURES
The directors will be elected by the affirmative vote of the holders of
a plurality of the shares of Common Stock and Series A Preferred Stock voting
together as one class that are present in person or represented by proxy at the
Annual Meeting, provided a quorum is present. Therefore, the three nominees
receiving the greatest number of votes cast at the meeting will be elected as
directors of the Company. All other matters at the Annual Meeting, including
approval of the proposal to approve the adoption of the Company's 2005 Stock
Incentive Plan, will be decided by the affirmative vote of the holders of a
majority of the votes represented by the shares of Common Stock and Series A
Preferred Stock cast with respect thereto, provided a quorum is present. A
quorum is present if, as of the Record Date, at least a majority of the
aggregate votes represented by holders of the shares of Common Stock and Series
A Preferred Stock outstanding as of the Record Date are present in person or
represented by proxy at the Annual Meeting.
Votes will be counted and certified by one or more Inspectors of
Election who are expected to be employees of Continental Stock Transfer & Trust
Company, the transfer agent for the Common Stock. In accordance with Delaware
law, abstentions and "broker non-votes" (i.e., proxies from brokers or nominees
indicating that such persons have not received instructions from the beneficial
owner or other person entitled to vote shares as to a matter with respect to
which the brokers or nominees do not have discretionary power to vote) will be
treated as present for purposes of determining the presence of a quorum. For
purposes of determining approval of a matter presented at the meeting,
abstentions will be deemed present and entitled to vote and will, therefore,
have the same legal effect as a vote "against" a matter presented at the
meeting. Broker non-votes will be deemed not entitled to vote on the subject
matter as to which the non-vote is indicated and will, therefore, have no legal
effect on the vote on that particular matter.
Proxies will be voted in accordance with the instructions thereon.
Unless otherwise stated, all shares represented by a proxy will be voted as
instructed. Proxies may be revoked as noted above.
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides that the Company's
Board of Directors is divided into three classes (Class I, Class II and Class
III). At each Annual Meeting of Stockholders, directors constituting one class
are elected for a three-year term. At this year's Annual Meeting, three (3)
Class III directors will be elected to hold office for a term expiring at the
Annual Meeting of Stockholders to be held in 2008. Each director will be elected
to serve during his elected term until a successor is elected and qualified or
until the director's earlier resignation or removal.
At the Annual Meeting, proxies granted by stockholders will be voted
individually for the election, as Class III directors of the Company, of the
persons listed below, unless a proxy specifies that it is not to be voted in
favor of a nominee for director. In the event any of the nominees listed below
is unable to serve, it is intended that the proxy will be voted for such other
nominees as are designated by the Board of Directors. Each of the persons named
below, who are presently members of the Company's Board of Directors, has
indicated to the Board of Directors of the Company that he or she will be
available to serve.
2
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION OF THE
NOMINEES SPECIFIED BELOW.
The following table sets forth the name, age and principal occupation
of the nominees for election at this Annual Meeting and the length of continuous
service as a director of the Company.
CLASS III DIRECTORS
(to be elected)
(New Term to Expire in 2008)
Principal Occupation
Name of Nominee Age or Employment Director Since
--------------- --- ------------- --------------
Robert Howard 82 Chairman of the Board of Directors of the 1984
Company
W. Scott Parr 54 President and Chief Executive Officer of the 1998
Company
Rachel Brem 46 Director of Breast Imaging and Intervention, 2004
Professor of Radiology and the Vice-Chairman
in the Department of Radiology at The George
Washington University Medical Center
Robert Howard, the founder and Chairman of the Board of Directors of
the Company, was the inventor of the first impact dot matrix printer. Mr. Howard
was Chief Executive Officer of the Company from its establishment in 1984 until
December of 1993. He was the founder, and from 1969 to April 1980 he served as
President and Chairman of the Board, of Centronics Data Computer Corp.
("Centronics"), a manufacturer of a variety of computer printers. He resigned
from Centronics' board of directors in 1983. From April 1980 until 1983, Mr.
Howard was principally engaged in the management of his investments. Commencing
in mid-1982, Mr. Howard, doing business as R.H. Research, developed the ink jet
technology upon which the Company was initially based. Mr. Howard contributed
this technology, without compensation, to the Company. Mr. Howard was Chairman
of the Board of Presstek, Inc. ("Presstek"), a public company which has
developed proprietary imaging and consumables technologies for the printing and
graphic arts industries from June 1988 to September 1998 and served as Chairman
Emeritus of the Board of Presstek from September 1998 to December 2000. Mr.
Howard is Chairman of the Board of Ionatron, Inc. ("Ionatron") a public company
involved in the development and marketing of directed energy weapon technology
products.
3
W. Scott Parr joined the Company in January 1998 as President and Chief
Executive Officer. He was appointed to the Company's Board of Directors in
February 1998. Prior to joining iCAD, Mr. Parr served as Divisional Director and
a member of the Board of Directors of SABi International Ventures, Inc. where he
was responsible for restructuring and upgrading certain U.S. companies owned by
foreign and venture investors. From 1995 to 1997 Mr. Parr was Chief Executive
Officer, General Counsel and Director of Allied Logic Corporation, a start-up
venture specializing in proprietary molding and manufacturing technologies. From
1990 to 1995 Mr. Parr was General Counsel and a Director of LaserMaster
Technologies, Inc.
Dr. Rachel Brem is currently the Director of Breast Imaging and
Intervention, Professor of Radiology and the Vice-Chairman in the Department of
Radiology at The George Washington University Medical Center, positions she has
held since 2000. From 1991 to 1999 Dr. Brem was the Director of Breast Imaging
at the John Hopkins Medical Center. Dr. Brem's research includes Minimally
Invasive Breast Biopsy, New Technologies for the Earlier Diagnosis of breast
cancer including Computer Aided Detection, as well as Nuclear Medicine Imaging
of the Breast and Electrical Impedance Imaging of the Breast.
The following tables set forth similar information with respect to
incumbent directors in Class I and Class II of the Board of Directors who are
not nominees for election at this Annual Meeting:
CLASS I DIRECTORS
(Term Expires in 2006)
Principal Occupation
Name of Nominee Age or Employment Director Since
--------------- --- ------------- --------------
George Farley 66 Financial Consultant 2004
Herschel Sklaroff 69 Medical Consultant at The Mount Sinai Hospital 2004
George Farley, a Certified Public Accountant, is currently a financial
consultant, a position he has held since August 1999. From November 1997 to
August 1999 Mr. Farley served as Chief Financial Officer and Director for Talk
America, Inc (formerly Talk.com, Inc.). He previously held the position as
National Director, Managing Partner of BDO Seidman, LLP, where he specialized in
Capital Formation and Mergers and Acquisitions. In addition to his service as
director at Talk America, he has held directorships at Preserver Insurance
Group, Acorn Holding Corp., and is currently a director of Ionatron.
4
Dr. Herschel Sklaroff has been in private practice since 1966 and is
currently involved in the establishment of the new Diagnostic and Preventive
Medical Center at The Mount Sinai Hospital where he will serve as Associate
Director. Dr. Sklaroff served his internship, medical residency and residency in
Cardiology at The Mount Sinai Hospital of New York City where he was Chief
Resident. Dr. Sklaroff served, from 1980 to 1990 as Chief of Medical
Consultation Services, and from 1978 to 1990 as Chief of General Medicine, both
at The Mount Sinai Hospital.
CLASS II DIRECTORS
(New Term to Expire in 2007)
Principal Occupation
Name of Nominee Age or Employment Director Since
--------------- --- ------------- --------------
James Harlan 53 Executive Vice President and CFO of HNG 2000
Storage Company
Maha Sallam 38 Vice President of the Company 2002
Elliot Sussman 53 President and CEO of Lehigh Valley Hospital 2002
and Health Network
James Harlan, PhD, was the founder and has been the Executive Vice
President and Chief Financial Officer of HNG Storage Company, a natural gas
storage, development and operations company since 1998. From 1991 to 1997 Mr.
Harlan served as General Manager and Chief Financial Officer of Pacific
Resources Group where he was responsible for the planning and financial
development of various manufacturing and distribution businesses in Asia. He
also served as operations research and planning analyst for the White House
Office of Energy Policy and Planning from 1977 to 1978, the Department of Energy
from 1978 to 1981, and U.S. Synthetic Fuels Corporation from 1981 to 1984. Mr.
Harlan is a director of Ionatron.
Maha Sallam has been a Vice President for the Company since June 2002.
From 1997 until the Company's acquisition of Intelligent Systems Software, Inc.
("ISSI") in June 2002, Dr. Sallam served as Director and Vice President of
Regulatory Affairs and Clinical Testing and Secretary of ISSI. She was one of
ISSI's founders and has over fourteen years of industry and research experience
in image analysis including a doctoral dissertation, conference presentations
and several publications on the automated analysis of digital mammograms.
Dr. Elliot Sussman is currently President and Chief Executive Officer
of Lehigh Valley Hospital and Health Network, a position he has held since 1993.
Dr. Sussman is the Leonard Parker Pool Professor of Health Systems Management,
Professor of Medicine, and Professor of Health Evaluation Sciences at
Pennsylvania State University's College of Medicine. Dr. Sussman served as a
Fellow in General Medicine and a Robert Wood Johnson Clinical Scholar at the
University of Pennsylvania, and trained as a resident at the Hospital of the
University of Pennsylvania. Dr. Sussman is a director and the Chairperson of the
compensation committee of the Board of Directors of Universal Health Realty
Income Trust, a public company involved in real estate investment trust
primarily engaged in investing in healthcare and human service-related
facilities. Dr. Sussman is also a director of the Board of Directors of VIASYS
Healthcare, Inc., a healthcare technology company.
5
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
During the fiscal year ended December 31, 2004 ("2004"), the Board of
Directors held two meetings. In addition, the Board took action by unanimous
written consent in lieu of meetings. During 2004, each member of the Board
participated in all Board and applicable committee meetings held during the
period for which he or she was a director. The Company's current policy strongly
encourages that all of its Directors attend the Company's Annual Meeting of
Stockholders, absent extenuating circumstances that would prevent their
attendance. At last years Annual Meeting of Stockholders, Messrs. Howard, Parr,
Harlan, Farley, Sussman, Rogers, Sklaroff and Ms. Maha Sallam were the Directors
in attendance.
BOARD COMMITTEES
The Board of Directors maintains an Audit Committee, a Nominating and
Corporate Governance Committee and a Compensation Committee. The Audit
Committee, the Nominating and Corporate Governance Committee and the
Compensation Committee are comprised solely of persons who meet the definition
of an "Independent Director" under the NASD Marketplace Rules applicable to
Nasdaq listed companies. In addition, each member of the Audit Committee meets
the independence requirements of applicable Securities and Exchange Commission
("SEC") rules. The Audit Committee adopted a charter in 2004, of which a copy
was filed as Exhibit A to the Company's Definitive Proxy Statement on Schedule
14A filed with the SEC on May 28, 2004. The Nominating and Corporate Governance
Committee has adopted a charter which is not available on the Company's website.
A copy of this charter is attached as Exhibit A to this Proxy Statement.
The Audit Committee, among other things, selects the firm to be
appointed as the independent registered public accounting firm to audit the
Company's financial statements and reviews and discusses the scope and results
of each audit with the independent registered public accounting firm and with
management. The Audit Committee held five meetings during the fiscal year ended
December 31, 2004. The current members of the Audit Committee are: James Harlan,
Chairperson; George Farley and Elliot Sussman. The Board of Directors has
determined that Mr. Farley qualifies as the Audit Committee's "financial expert"
under applicable SEC rules.
The Nominating and Corporate Governance Committee is responsible for,
among other things, developing and recommending to the Board corporate
governance policies for the Company, establishing procedures for the director
nomination process and recommending nominees for election to the Board. The
Nominating and Corporate Governance Committee did not hold any meetings during
the fiscal year ended December 31, 2004. The current members of the Nominating
and Corporate Governance Committee are: George Farley, Chairperson; Rachel Brem;
and Herschel Sklaroff.
6
The Compensation Committee of the Board of Directors is responsible
for, among other things, assisting the Board in overseeing the Company's
executive compensation strategy and reviewing and approving the compensation of
the Company's executive officers. The Compensation Committee held two meetings
during the fiscal year ended December 31, 2004. The current members of the
Compensation Committee are: Elliot Sussman, Chairperson; Rachel Brem; and James
Harlan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors is responsible
for, among other things, assisting the Board in overseeing the Company's
executive compensation strategy and reviewing and approving the compensation of
the Company's executive officers. During 2004 none of the executive officers of
the Company served on the Board of Directors or Compensation Committee of any
other entity.
COMPLIANCE WITH SECTION 16(a) OF SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10 percent of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the SEC. Officers, directors, and greater than 10 percent
stockholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on the Company's review of copies of such forms received
by the Company, the Company believes that during the year ended December 31,
2004, all filing requirements applicable to all officers, directors, and greater
than 10% beneficial stockholders were timely complied with except that Form 3's
for Messrs. Farley and Sklaroff and Ms. Brem were filed late; a Form 4 by Mr.
Skalroff to report five sales of an aggregate of 6,081 shares of the Company's
common stock was filed several days late; a Form 4 for Mr. Rogers with respect
to 14 transactions relating to sales of an aggregate of 20,000 shares of the
Company's common stock was filed one day late and late Form 4's were filed with
respect to grants of employee stock options to Mr. Corbett and Rogers, former
officers and director of the Company, in February 2004 .
DIRECTOR INDEPENDENCE
The Board has determined that Messrs. Harlan and Farley and Drs. Brem,
Sklaroff and Sussman, meet the director independence requirements of the NASD
Marketplace Rules applicable to Nasdaq listed companies.
7
CODE OF BUSINESS CONDUCT AND ETHICS
The Company developed and adopted a comprehensive Code of Business
Conduct and Ethics to cover all employees. Copies of the Code of Business
Conduct and Ethics can be obtained, without charge, upon written request,
addressed to:
iCAD, Inc.
4 Townsend West
Nashua, NH 03063
Attention: Corporate Secretary
COMMUNICATIONS WITH THE BOARD
The Board of Directors, through its Nominating and Corporate Governance
Committee, has established a process for stockholders to send communications to
the Board of Directors. Stockholders may communicate with the Board of Directors
individually or as a group by writing to: The Board of Directors of iCAD, Inc.
c/o Corporate Secretary, 4 Townsend West, Suite 17, Nashua, NH 03063.
Stockholders should identify their communication as being from an iCAD
stockholder. The Corporate Secretary may require reasonable evidence that the
communication or other submission is made by an iCAD stockholder before
transmitting the communication to the Board of Directors.
CONSIDERATION OF DIRECTOR NOMINEES
Stockholders of the Company wishing to recommend director candidates to
the Nominating and Corporate Governance Committee must submit their
recommendations in writing to the Nominating and Corporate Governance Committee,
c/o Corporate Secretary, iCAD, Inc., 4 Townsend West, Suite 17, Nashua, NH
03063.
The Nominating and Corporate Governance Committee will consider
nominees recommended by iCAD stockholders provided that the recommendation
contains sufficient information for the Nominating and Corporate Governance
Committee to assess the suitability of the candidate, including the candidate's
qualifications. Candidates recommended by stockholders that comply with these
procedures will receive the same consideration that candidates recommended by
the Committee receive. The recommendations must also state the name of the
stockholder who is submitting the recommendation. In addition, it must include
information regarding the recommended candidate relevant to a determination of
whether the recommended candidate would be barred from being considered
independent under NASD Marketplace Rule 4200, or, alternatively, a statement
that the recommended candidate would not be so barred. A nomination which does
not comply with the above requirements will not be considered.
The qualities and skills sought in prospective members of the Board are
determined by the Nominating and Corporate Governance Committee. The Nominating
and Corporate Governance Committee generally requires that director candidates
be qualified individuals who, if added to the Board, would provide the mix of
director characteristics, experience, perspectives and skills appropriate for
the Company. Criteria for selection of candidates will include, but not be
limited to: (i) business and financial acumen, as determined by the Committee in
its discretion, (ii) qualities reflecting a proven record of accomplishment and
ability to work with others, (iii) knowledge of the Company's industry, (iv)
relevant experience and knowledge of corporate governance practices, and (v)
expertise in an area relevant to the Company. Such persons should not have
commitments that would conflict with the time commitments of a Director of the
Company. Such persons shall have other characteristics considered appropriate
for membership on the Board of Directors, as determined by the Nominating and
Corporate Governance Committee.
8
DEADLINE AND PROCEDURES FOR SUBMITTING BOARD NOMINATIONS
A stockholder wishing to nominate a candidate for election to the Board
at the Annual Meeting of Stockholders to be held in 2006 is required to give
written notice containing the required information specified above addressed to
the Nominating and Corporate Governance Committee, c/o Secretary of the Company,
iCAD, Inc., 4 Townsend West, Suite 17, Nashua, NH 03061 of his or her intention
to make such a nomination. The notice of nomination and other required
information must be received by the Company's Secretary no later than February
28, 2006.
With respect to the deadlines discussed above, if the date of the
Annual Meeting of Stockholders to be held in 2006 is advanced by more than
thirty days or delayed (other than as a result of adjournment) by more than
thirty days from the anniversary of the Annual Meeting held in 2005, a
stockholder must submit any such proposal to the Company no later than the close
of business on the sixtieth day prior to the date of the 2006 Annual Meeting.
COMPENSATION OF DIRECTORS
The Company does not pay cash compensation to members of its Board of
Directors for their services as board members. The Company does reimburse
members of the board for out-of-pocket expenses incurred for attendance at Board
and Board Committee meetings and for other out-of-pocket expenses incurred in
their capacity as director of the Company.
EXECUTIVE OFFICERS
The executive officers of the Company are Mr. Parr and Mr. John
DeBiase, the Company's Vice President of Sales and Marketing, Mr. Samuel Ronci,
the Company's Vice President of Operations, Mr. Thomas Shoup, the Company's
Chief of Staff and Ms. Annette Heroux, the Company's Vice President of Finance
and Chief Financial Officer.
9
John DeBiase, 45, the Company's Vice President of Sales & Marketing
joined the Company in December 2003 with the acquisition of Qualia Computing,
Inc., where he had served as Sales Manager since the beginning of December 2003.
From 2000 until December 2003, Mr. DeBiase was President of Imaging Financial
Solutions, a sales and distribution consulting company. From 1995 to 2000 Mr.
DeBiase served as General Manager and Sales Vice-President of Physician Sales
and Services' Diagnostic Imaging division, a national distributor of medical
supplies.
Annette Heroux, 48, joined the Company in October 1987 as Accounting
Manager and was named Controller in October 1998 and Vice President of Finance,
Chief Financial Officer in July 1999. Prior to joining the Company, from 1980 to
1987, Ms. Heroux served as Finance and Administration Manager of Laurier, Inc.,
a semiconductor equipment manufacturer, where she was responsible for the
financial reporting and administrative functions. From 1978 to 1980 Ms. Heroux
was Accounting Manager for Hoodkroft Nursing Center, a skilled nursing facility,
where she was responsible for patient insurance and financial records.
Samuel Ronci, 60, the Company's Vice President of Operations joined the
Company in December 2004. From 2000 to December 2004, Mr. Ronci was Vice
President of Development for Elicon Multimedia, a web based company that
promotes corporate presentations, to include web presentations, trade shows and
product promotions. From 1987 to 2000 Mr. Ronci was President of Ronci Medical
which later became Ronci Surgical, a Division of Minnesota Scientific Inc. Ronci
Medical designed patient positioning equipment for various Arthroscopic surgical
procedures.
Thomas Shoup, 53, has been the Chief of Staff for the Company since
December 2003. Mr. Shoup joined the Company with the acquisition of Qualia
Computing, Inc., where he had served as Chief Operating Officer since December
2000. From 1996 to 2000 Mr. Shoup was President and COO of CAD CAM Inc., where
he grew the company and negotiated the sale of this privately held business to a
Canadian public enterprise. From 1985 to 1996 Mr. Shoup served as Base Civil
Engineer for the US Air Force's largest continental installation,
Wright-Patterson AFB, responsible over 20 million square feet of scientific,
engineering and logistical facilities and a workforce in excess of 1,000
personnel.
EXECUTIVE COMPENSATION
The following table provides information on the compensation provided
by the Company during fiscal years 2004, 2003 and 2002 to the persons serving as
the Company's Chief Executive Officer during fiscal 2004 and the Company's most
highly compensated executive officers serving at the end of the 2004 fiscal year
("the Named Persons"). Included in this list are only those executive officers
whose total annual salary and bonus exceeded $100,000 during the 2004 fiscal
year.
10
SUMMARY COMPENSATION TABLE
Securities
Underlying
Name and Principal Position Year Salary($) Option(#)
--------------------------- ---- --------- ----------
W. Scott Parr
President, Chief Executive Officer, Director............. 2004 214,108 -0-
2003 191,600 -0-
2002 173,762 125,000
Maha Sallam
Vice President, Director................................. 2004 125,000 -0-
2003 132,489 -0-
Annette Heroux
Vice President of Finance, Chief Financial Officer....... 2004 129,269 -0-
2003 111,814 -0-
2002 96,949 65,183
Steven Rogers (1)
Chief Scientific Officer................................. 2004 268,108 110,092
James Corbett (1)
Chief Commercial Officer................................. 2004 242,144 110,092
Peter Farrell (1)
EVP Sales and Marketing.................................. 2004 233,745 80,000
Thomas Shoup
Chief of Staff........................................... 2004 221,823 80,000
(1) Messrs. Rogers, Corbett and Farrell joined the Company with the acquisition
of Qualia Computing, Inc. in December 2003 and served as Executive Officers of
iCAD until their resignations in the first quarter of 2005.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding stock
options granted by the Company to the Named Persons in 2004.
Individual Grants Potential
Realizable Value at
Number of Percent of Assumed Annual
Securities Total Options Rates of Stock
underlying Granted to Exercise of Price Appreciation
Options Employees Base Price Expiration for Option Term (2)
Name Granted(1) in Fiscal Year ($/Sh) Date 5%($) 10%($)
---- ---------- -------------- ----------- ---------- ----- ------
Steven Rogers 110,092 8% 5.28 02/23/2014 365,567 926,420
James Corbett 110,092 8% 5.28 02/23/2014 365,567 926,420
Peter Farrell 80,000 6% 5.28 02/23/2014 265,645 673,200
Thomas Shoup 80,000 6% 5.28 02/23/2014 265,645 673,200
(1) All of the foregoing options vest in installments at various times between
February 23, 2005 and February 23, 2008 and provide for early termination under
certain circumstances.
11
(2) The potential realizable value columns of the table illustrate values that
might be realized upon exercise of the options immediately prior to their
expiration, assuming the Company's Common Stock appreciates at the compounded
rates specified over the term of the options. These numbers do not take into
account provisions of options providing for termination of the option following
termination of employment or non transferability of the options and do not make
any provision for taxes associated with exercise. Because actual gains will
depend upon, among other things, future performance of the Common Stock, there
can be no assurance that the amounts reflected in this table will be achieved.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information regarding the exercise of
stock options during the Company's last completed fiscal year by each of the
Named Persons and the fiscal year-end value of unexercised options.
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the Money
Options at Options at
Shares FY-End (#) FY-End($) (1)
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized Unexercisable Unexercisable
---- ------------ -------- ------------- -------------
W. Scott Parr 0 0 531,518 / -0- 1,644,783 / -0-
Maha Y. Sallam 0 0 156,250 / -0- 304,438 / -0-
Annette L. Heroux 0 0 107,373 / 6,727 294,321 / 19,643
Steven Rogers 0 0 - 0- / 110,092 -0- / -0-
James Corbett 0 0 - 0- / 110,092 -0- / -0-
Peter Farrell 0 0 - 0- / 80,000 -0- / -0-
Thomas Shoup 0 0 - 0- / 80,000 -0- / -0-
------------------------
(1) Based upon the closing price of the Common Stock on December 31, 2004, of
$4.47 per share.
The Company does not have any employment agreements with its executive officers.
SEPARATION AGREEMENTS WITH FORMER OFFICER
On February 16, 2005, the Company entered into a separation agreement
and release with Dr. Steven K. Rogers (the "Agreement") in connection with Dr.
Rogers' resignation as Chief Scientific Officer and Director of the Company. Dr.
Rogers was formerly President and Chief Executive Officer of Qualia Computing,
Inc., a company acquired by the Company in December, 2003. Pursuant to the
Agreement, the Company and Dr. Rogers entered into a consulting agreement (the
"Consulting Agreement"), which provided for Dr. Rogers to provide consulting
services to the Company at the rate of $11,875 per month. By agreement of the
parties, the Consulting Agreement will be terminated effective June 1, 2005. In
the agreement, Dr. Rogers reaffirmed his previous agreements not to compete with
the Company, not to solicit employees of the Company, and not to disclose
confidential information of the Company.
12
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible
for, among other things, assisting the Board in overseeing the Company's
executive compensation strategy and reviewing and approving the compensation of
the Company's executive officers. The Company's compensation policy is to base
compensation generally on performance, the Company's resources, achievement of
financial and operational objectives and comparative compensation data from
other companies deemed to be applicable peer groups or benchmarks for the
Company's compensation program.
Stock Options. Stock option awards are intended to attract, retain and
motivate personnel by affording them an opportunity to receive additional
compensation based upon the performance of the Company's Common Stock. The size
and grant of actual awards is determined by the Board on an individual basis,
taking into account the individual's role in the Company and standard principals
of reward, retention and recognition to which option grants are geared. The
Board's determination as to the size of actual awards to individual executives
is subjective, after taking into account the relative responsibilities and
contributions of the individual employee.
By the Compensation Committee:
Elliot Sussman; James Harlan; and Rachel Brem.
13
STOCK PERFORMANCE GRAPH
The following chart sets forth a line graph comparing the performance
of the Company's Common Stock, over the past five years. This graph assumes the
investment of $100 on December 31, 1999, in the Company's Common Stock, and
compares the performance with the Nasdaq Composite Index, the Nasdaq Computer
Manufacturer Index and the Nasdaq Medical Devices and Supplies, Manufacturers
and Distributors Index. Measurement points are at December 31 for each
respective year. Those companies which compete with the Company in its principal
market are either small subsidiaries or divisions of large United States
corporations or are foreign companies which are either not quoted on a stock
exchange or for which data is difficult to obtain. For this reason the Company
in prior years has used the more generic index of Nasdaq Computer Manufacturer
stocks for a peer group comparison. Due to the recent change in the Company's
business to a medical devices company the Company believes that the Nasdaq
Medical Devices Index is more representative of its peer group than the Nasdaq
Computer Manufacturer Index. The Company pays no dividends on its Common Stock.
The Nasdaq Composite Index, the Nasdaq Computer Manufacturer Index and the
Nasdaq Medical Devices Index reflect a cumulative total return based upon the
reinvestment of dividends of the stocks included in those indices. The
historical information set forth below is not necessarily indicative of future
performance.
Comparative 5-year Cumulative Total Return Among iCAD, Nasdaq Composite Index,
the Nasdaq Computer Manufacturer Index and the Nasdaq Medical Devices and
Supplies, Manufacturers and Distribution Index
[ LINE GRAPH OMITTED ]
12/31/1999 12/31/2000 12/31/2001 12/31/2002 12/31/2003 12/31/2004
iCAD, Inc. $ 100.00 $ 46.37 $ 21.09 $ 36.51 $ 76.80 $ 65.02
NASDAQ Index $ 100.00 $ 237.86 $ 188.67 $ 130.44 $ 195.03 $ 212.24
NASDAQ Computer $ 100.00 $ 426.14 $ 293.58 $ 194.54 $ 270.60 $ 353.83
Manufacturer Index
NASDAQ Medical Devices $ 100.00 $ 103.16 $ 113.38 $ 91.71 $ 135.68 $ 158.96
and Supplies
Manufacturers and
Distributors Index
14
VOTING SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the Common
Stock, Series A and Series B Convertible Preferred Stock of the Company owned on
the Record Date by (i) each person who is known to the Company to own
beneficially more than 5% of the outstanding shares of the Company's Common
Stock (ii) each executive officer named in the Summary Compensation Table, (iii)
each director of the Company, and (iv) all current executive officers and
directors as a group. The table also provides information regarding beneficial
owners of more than 5% of the outstanding shares of the Company's Series A and
Series B Convertible Preferred Stock. Unless otherwise indicated below, the
address of each beneficial owner is c/o iCAD, Inc. 4 Townsend West, Suit 17,
Nashua, New Hampshire 03063.
Number of Shares
Name and Address of Title Beneficially Percentage
Beneficial Owner of Class Owned (1) (2) of Class
---------------- -------- ------------- --------
Robert Howard Common 4,986,720 (3) 13.6%
145 East 57th Street
New York, New York 10022
Maha Sallam Common 2,043,570 (4) 5.6%
Donald Chapman Common 1,874,697 (5) 5.0%
8650 South Ocean Drive Preferred Series A 4,600 89.3%
Jenson Beach, FL 34957 Preferred Series B 680 55.6%
Steven Rogers Common 27,523 (6) 0.1%
W. Scott Parr Common 806,812 (7) 2.2%
Preferred Series A 550 10.7%
Preferred Series B 50 4.1%
Edgar Ball Preferred Series B 200 16.3%
PO Box 560726
Rockledge, FL 32956
Dr. Herschel Sklaroff Common 54,500 (8) *
1185 Park Avenue Preferred Series B 79 6.5%
New York, NY 10128
John Westerfield Preferred Series B 100 8.2%
4522 SW Bimini Circle N.
Palm City, FL 34990
Dr. Rachel Brem Common 15,000 (9) *
George Farley Common 15,000 (10) *
James Harlan Common 156,000 (11) *
Dr. Elliot Sussman Common 33,000 (12) *
James Corbett Common 27,523 (13) *
Peter Farrell Common 20,000 (14) *
Annette Heroux Common 154,100 (15) *
Thomas Shoup Common 20,000 (16) *
All current executive officers and Common 8,433,952 (3),(4), & (7) 22.1%
directors as a group (12 persons) through (12) &
(15) through (16)
Preferred Series A 550 10.7%
Preferred Series B 129 10.5%
------------------------------------
* Less than one percent
15
1) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the Record Date, upon the
exercise of options, warrants or rights; through the conversion of a
security; pursuant to the power to revoke a trust, discretionary account or
similar arrangement; or pursuant to the automatic termination of a trust,
discretionary account or similar arrangement. Each beneficial owner's
percentage ownership is determined by assuming that the options or other
rights to acquire beneficial ownership as described above, that are held by
such person (but not those held by any other person) and which are
exercisable within 60 days from the Record Date, have been exercised.
2) Unless otherwise noted, the Company believes that the persons referred to
in the table have sole voting and investment power with respect to all
shares reflected as beneficially owned by them.
3) Includes options to purchase 10,000 shares of the Company's Common Stock at
$1.72 per share and 30,000 shares at $2.76 per share, 54,557 shares of the
Company's Common Stock pursuant to Convertible notes issued to Mr. Howard
pursuant to the Loan Agreement with the Company and 20,000 shares
beneficially owned by Mr. Howard's wife.
4) Includes options to purchase 56,250 shares of the Company's Common Stock at
$0.80 per share, 100,000 shares at $3.49 per share and also includes
183,625 shares beneficially owned by Dr. Sallam's husband.
5) Includes 28,000 shares owned by Mr. Chapman's wife, 460,000 shares of
Common Stock issuable upon conversion of 4,600 shares of Series A
Convertible Preferred Stock and 340,000 shares of Common Stock issuable
upon conversion of 680 shares of Series B Convertible Preferred Stock owned
by Mr. Chapman.
6) Includes options to purchase 27,523 shares of the Company's Common Stock at
$5.28 per share.
7) Includes 11,000 shares owned by Mr. Parr's wife. Also includes options to
purchase 275,268 shares of the Company's Common Stock at $1.13 per share,
125,000 shares at $0.81 per share, 2,250 shares at $1.00 per share, 4,000
shares at $0.95 per share, 25,000 shares at $1.75 per share, 100,000 shares
at $2.69 per share and 150,000 shares at $3.92 per share, 55,000 shares of
Common Stock issuable upon conversion of 550 shares of Series A Convertible
Preferred Stock and 25,000 shares of Common Stock issuable upon conversion
of 50 shares of Series B Convertible Preferred Stock owned by Mr. Parr.
8) Includes options to purchase 15,000 shares of the Company's Common Stock at
$3.35 per share. Also, includes 39,500 shares of Common Stock issuable upon
conversion of 79 shares of Series B Convertible Preferred Stock.
9) Includes options to purchase 15,000 shares of the Company's Common Stock at
$3.35 per share.
10) Includes options to purchase 15,000 shares of the Company's Common Stock at
$3.35 per share.
16
11) Includes options to purchase 25,000 shares of the Company's Common Stock at
$1.75 per share and 50,000 shares at $1.55 per share.
12) Includes options to purchase 15,000 shares of the Company's Common Stock at
$1.55 per share.
13) Includes options to purchase 27,523 shares of the Company's Common Stock at
$5.28 per share.
14) Includes options to purchase 20,000 shares of the Company's Common Stock at
$5.28 per share.
15) Includes options to purchase 6,600 shares of the Company's Common Stock at
$0.81 per share, 3,000 shares at $0.95 per share, 23,317 shares at $1.13
per share, 20,183 shares at $1.55 per share, 1,000 shares at $1.72 per
share, 35,000 shares at $1.75 per share, 25,000 shares at $2.69 per share
and 35,000 shares at $3.92 per share.
16) Includes options to purchase 20,000 shares of the Company's Common Stock at
$5.28 per share.
Equity Compensation Plan
The following table provides certain information with respect to all of the
Company's equity compensation plans in effect as of December 31, 2004.
Number of securities to Number of securities
be issued upon exercise remaining available for
of outstanding Weighted-average issuance under equity
options, warrants exercise price of compensation plans (excluding
and rights outstanding options, securities reflected in
Column (a) warrants and rights column (a))
---------------------------------------------------------------------------------
Plan Category:
--------------------------------------------------------------------------------------------------------------------
Equity compensation plans
approved by security holders: 3,914,511 $3.04 1,036,612
--------------------------------------------------------------------------------------------------------------------
Equity compensation plans not 1,010,311 $5.54 -0-
approved by security holders
(1):
--------------------------------------------------------------------------------------------------------------------
Total 4,924,822 $3.55 1,036,612
--------------------------------------------------------------------------------------------------------------------
(1) Represents the aggregate number of shares of Common Stock issuable upon
exercise of individual arrangements with option and warrant holders. These
options and warrants are five years in duration, expire at various dates
between February 28, 2005 and November 24, 2008, contain anti-dilution
provisions providing for adjustments of the exercise price under certain
circumstances and have termination provisions similar to options granted
under stockholder approved plans. A description of the Company's Stock
Option Plans can be found in Note 8 of Notes to the Consolidated Financial
Statements in the Company's Annual Report on Form 10-K for the year ended
December 31, 2004.
17
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has a Revolving Loan and Security Agreement (the "Loan Agreement")
with Mr. Robert Howard, Chairman of the Board of Directors of the Company, under
which Mr. Howard has agreed to advance funds, or to provide guarantees of
advances made by third parties in an amount up to $5,000,000. The Loan Agreement
expires January 4, 2006, subject to extension by the parties. Outstanding
advances are collateralized by substantially all of the assets of the Company
and bear interest at prime interest rate plus 2% with a minimum of 8%, (8% at
December 31, 2004). Mr. Howard is entitled to convert outstanding advances made
by him under the Loan Agreement into shares of the Company's common stock at any
time based on the outstanding closing market price of the Company's common stock
at the lesser of the market price at the time each advance is made or at the
time of conversion.
In December 2004 the Company repaid Mr. Howard $3,330,000 pursuant to the Loan
Agreement, and during the first quarter of 2005 the Company paid accrued
interest of approximately $617,000 owed to Mr. Howard pursuant to the Loan
Agreement. As of December 31, 2004, $300,000 was owed by the Company to Mr.
Howard and the Company had $4,700,000 available for future borrowings under the
Loan Agreement.
On February 16, 2005, the Company entered into a separation agreement and
release with Dr. Steven K. Rogers in connection with Dr. Rogers' resignation as
Chief Scientific Officer and Director of the Company. Dr. Rogers was formerly
President and Chief Executive Officer of Qualia Computing, Inc., a company
acquired by the Company in December, 2003. Pursuant to the Agreement, the
Company and Dr. Rogers entered into a consulting agreement which provided for
Dr. Rogers to provide consulting services to the Company. By agreement of the
parties, the consulting agreement will be terminated effective June 1, 2005.
AUDIT COMMITTEE REPORT
In early 2004, the Audit Committee met with management and
representatives of BDO Seidman, LLP to review preparations for the audit and the
procedures and timing of the audit of the Company's financial statements. During
the fourth quarter of 2004 the Audit Committee met with representatives of BDO
Seidman, LLP to review and discuss plans for the audit of the Company's
financial statements for the year ended December 31, 2004 and to discuss the
accounting treatment of certain financial items. Following completion of the
audit of the Company's financial statements, the Audit Committee met with
representatives of BDO Seidman, LLP to review the audit findings. The Audit
Committee also conducted discussions with the Company's independent auditors,
BDO Seidman, LLP, regarding the matters required by the Statement on Auditing
Standards No. 61. As required by Independence Standards Board Standard No. 1,
"Independence Discussion with Audit Committees," the Audit Committee has
discussed with and received the required written disclosures and confirming
letter from BDO Seidman, LLP regarding its independence and has discussed with
BDO Seidman, LLP its independence. Based upon the review and discussions
referred to above, the Audit Committee recommended to the Board of Directors
that the audited financial statements be included in the Company's Annual Report
on Form 10-K for the year ended December 31, 2004.
18
The Audit Committee -
James Harlan (Chairperson), Elliot Sussman, George Farley
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
BDO Seidman, LLP has audited and reported upon the financial statements
of the Company for the fiscal year ended December 31, 2004. It is currently
anticipated that BDO Seidman, LLP will be selected by the Audit Committee of the
Board of Directors to examine and report upon the financial statements of the
Company for the fiscal year ending December 31, 2005. A representative of BDO
Seidman, LLP may be present at the Annual Meeting with the opportunity to make a
statement if he or she desires to do so and may be available to respond to
appropriate questions.
The total fees paid by the Company to BDO Seidman, LLP for the last two fiscal
years are as follows:
Audit Fees. The aggregate fees billed by BDO Seidman, LLP for professional
services rendered for the audit of the Company's annual financial statements for
the years ended December 31, 2004 and 2003, the review of the interim financial
statements included in the Company's Forms 10-Q and consents issued in
connection with the Company's filings on Forms S-3 and S-8 for 2004 and 2003
totaled $155,297 and $71,550, respectively.
Audit-Related Fees. The aggregate fees billed by BDO Seidman, LLP for assurance
and related services that are reasonably related to the performance of the audit
or review of the Company's financial statements, for the years ended December
31, 2004 and 2003, and are not disclosed in the paragraph captions "Audit Fees"
above, were $24,000 and $46,323, respectively.
No tax fees or other fees were paid to BDO Seidman, LLP for the years ended
December 31, 2004 and 2003.
The Audit Committee has established its pre-approval policies and procedures,
pursuant to which the Audit Committee approved the foregoing audit services
provided by BDO Seidman, LLP in 2004. Consistent with the Audit Committee's
responsibility for engaging the Company's independent auditors, all audit and
permitted non-audit services require pre-approval by the Audit Committee. The
full Audit Committee pre-approves proposed services and fee estimates for these
services. The Audit Committee chairperson or their designee has been designated
by the Audit Committee to pre-approve any services arising during the year that
were not pre-approved by the Audit Committee. Services pre-approved by the Audit
Committee chairperson are communicated to the full Audit Committee at its next
regular meeting and the Audit Committee reviews services and fees for the fiscal
year at each such meeting. Pursuant to these procedures, the Audit Committee
pre-approved the foregoing audit services provided by BDO Seidman, LLP.
19
PROPOSAL I
APPROVAL OF THE COMPANY'S 2005 STOCK INCENTIVE PLAN
At the Annual Meeting, the Company's stockholders will be asked to
approve the adoption of the Company's 2005 Stock Incentive Pan (the "2005
Plan").
In May 2005, the Board of Directors adopted, subject to stockholder
approval, the 2005 Plan (the "2005 Plan"). The Board believes that, to enable
the Company to continue to attract and retain personnel of the highest caliber,
provide incentive for officers, directors, employees and other key persons and
to promote the well-being of the Company, it is in the best interest of the
Company and its stockholders to provide to officers, directors, employees,
consultants and other independent contractors who perform services for the
Company, through the granting of stock options, restricted stock, deferred stock
or other stock-based awards, the opportunity to participate in the value and/or
appreciation in value of the Company's Common Stock. The Board has found that
the grant of options under its existing stock option and stock incentive plans
has proven to be a valuable tool in attracting, retaining and motivating key
employees and consultants. Accordingly, the Board believes that the 2005 Plan,
which provides the Board greater flexibility with respect to certain terms under
which awards that may be granted, as well as different types of awards, (a) will
provide the Company with significant means to attract and retain talented
personnel, (b) will result in saving cash, which otherwise would be required to
maintain current employees and adequately attract and reward personnel and
others who perform services for the Company, and (c) consequently, will prove
beneficial to the Company's ability to be competitive. The Company believes that
there is not a sufficient amount of options and stock awards available for
future grant under the Company's existing stock option and stock incentive
plans. The last sale price of the Common Stock on May 16, 2005 was $3.75.
To date, no options or other awards have been granted under the 2005
Plan. If the 2005 Plan is approved by the stockholders, options or other stock
based awards may be granted under the 2005 Plan, the timing, amounts and
specific terms of which have not been determined at this time.
The following summary of the 2005 Plan does not purport to be complete,
and is subject to and qualified in its entirety by reference to the full text of
the 2005 Plan, set forth as Exhibit B to this Proxy Statement.
Summary of the 2005 Plan
The 2005 Plan provides for the grant of any or all of the following
types of awards (collectively, "Awards"): (a) stock options, (b) restricted
stock, (c) deferred stock and (d) other stock-based awards. Awards may be
granted singly, in combination, or in tandem, as determined by the Board of
Directors or the Committee (as defined below). Subject to anti-dilution
adjustments as provided in the 2005 Plan, (i) a total of 600,000 shares of
Common Stock have been reserved for distribution pursuant to the 2005 Plan, and
(ii) the maximum number of shares of Common Stock that may be issued to any
individual participant under the 2005 Plan may not exceed 250,000 shares during
the term of the 2005 Plan.
20
The 2005 Plan may be administered by the Board of Directors (the
"Board") or a Committee (the "Committee") consisting of two or more members of
the Board of Directors appointed by the Board. The Board or the Committee will
determine, among other things, the persons to whom Awards will be granted, the
type of Awards to be granted, the number of shares subject to each Award and the
share price. The Board or the Committee will also determine the term of each
Award, the restrictions or limitations thereon, and the manner in which each
such Award may be exercised or, if applicable, the extent and circumstances
under which Common Stock and other amounts payable with respect to an Award will
be deferred. The 2005 Plan will become effective upon its approval and adoption
at the Annual Meeting (the "Effective Date") and no Award shall be granted
pursuant to the 2005 Plan on or after the tenth anniversary of the Effective
Date.
Stock Options. The 2005 Plan provides for the grant of "incentive stock options"
("Incentive Stock Options"), as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), and for options not qualifying as
Incentive Stock Options ("Non-Qualified Stock Options"). The Board or the
Committee, as the case may be, shall determine those persons to whom stock
options may be granted.
Incentive Stock Options granted pursuant to the 2005 Plan are
nontransferable by the optionee during his lifetime. Options granted pursuant to
the 2005 Plan will expire if not exercised within 10 years of the grant (five
years in the case of Incentive Stock Options granted to an eligible employee
owning stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or a parent or subsidiary of the Company
immediately before the grant ("10% Stockholder")), and under certain
circumstances set forth in the 2005 Plan, may be exercised within three (3)
months following termination of employment (one year in the event of death,
retirement or disability of the optionee), unless the term of the option,
pursuant to the stock option agreement, expires earlier or unless the Board or
Committee determines to shorten or extend the exercise periods. Options may be
granted to optionees in such amounts and at such prices as may be determined,
from time to time, by the Board or the Committee. The exercise price of an
Incentive Stock Option will not be less than the fair market value of the shares
underlying the option on the date the option is granted, provided, however, that
the exercise price of an Incentive Stock Option granted to a 10% Stockholder may
not be less than 110% of such fair market value. The exercise price of a
Non-Qualified Stock Option may be less than such fair market value on the date
of grant.
Under the 2005 Plan, the Company may not, in the aggregate, grant
Incentive Stock Options that are first exercisable by any optionee during any
calendar year (under all such plans of the optionee's employer corporation and
its "parent" and "subsidiary" corporations, as those terms are defined in
Section 424 of the Code) to the extent that the aggregate fair market value of
the underlying stock (determined at the time the option is granted) exceeds
$100,000.
The 2005 Plan contains anti-dilution provisions authorizing appropriate
adjustments in certain circumstances. Shares of Common Stock subject to Awards
which expire without being exercised or which are cancelled as a result of the
cessation of employment are available for further grants. No shares of Common
Stock of the Company may be issued upon the exercise of any option granted under
the 2005 Plan until the full option price has been paid by the optionee. The
Board of Directors or the Committee may grant individual options under the 2005
Plan with more stringent provisions than those specified in the 2005 Plan.
21
Options become exercisable in such amounts, at such intervals and upon
such terms and conditions as the Board of Directors or the Committee provides.
Stock options granted under the 2005 Plan are exercisable until the earlier of
(i) a date set by the Board of Directors or Committee at the time of grant or
(ii) the close of business on the day before the tenth anniversary of the stock
option's date of grant (the day before the fifth anniversary in the case of an
Incentive Stock Option granted to a 10% Stockholder). The 2005 Plan will remain
in effect until all stock options are exercised or terminated. Notwithstanding
the foregoing, no options may be granted on or after the tenth anniversary of
the Effective Date.
Restricted and Deferred Stock Awards. Under the 2005 Plan, the Board or the
Committee may grant shares of restricted Common Stock either alone or in tandem
with other Awards. Restricted and Deferred Stock awards give the recipient the
right to receive a specified number of shares of Common Stock, subject to such
terms, conditions and restrictions as the Board or the Committee deems
appropriate. Restrictions may include limitations on the right to transfer the
stock until the expiration of a specified period of time and forfeiture of the
stock upon the occurrence of certain events such as the termination of
employment prior to expiration of a specified period of time. In addition, a
participant in the 2005 Plan who has received a Deferred Stock Award may
request, under certain conditions, the Board or the Committee to defer the
receipt of an Award (or an installment of an Award) for an additional specified
period or until the occurrence of a specified event.
Other Stock Based Awards. Other Stock-Based Awards, which may include
performance shares and shares valued by reference to the performance of the
Company or any parent or subsidiary of the Company, may be granted either alone
or in tandem with other Awards.
Certain Federal Income Tax Consequences of the 2005 Plan
The following is a brief summary of the Federal income tax aspects of
Awards made under the 2005 Plan. This summary is not intended to be exhaustive,
and does not describe state or local tax consequences. The information is based
upon federal income tax rules as they existed prior to the adoption of the
American Jobs Creation Act of 2004 (the "Jobs Act"). The Jobs Act made
significant changes to the federal income tax rules applicable to nonqualified
deferred compensation arrangements, including many of the types of Awards that
may be granted under the 2005 Plan. The new federal income tax rules are
generally effective for all amounts deferred after December 31, 2004. The IRS
has so far issued only limited guidance on the interpretation of the Jobs Act
although the IRS has stated that it anticipates issuing additional guidance in
the future.
22
Because the tax consequences to any recipient of an Award under the
2005 Plan may depend on his or her particular situation, as well as the
uncertain application of the Jobs Act, each person receiving an Award under the
2005 Plan should consult his or her tax advisor as to the federal, state, local
and other tax consequences of the grant or exercise of an option under the 2005
Plan or with respect to any other Award granted under the 2005 Plan.
Incentive Stock Options. The optionee will recognize no taxable income
upon the grant or exercise of an Incentive Stock Option. Upon a disposition of
the shares of Common Stock received upon exercise of an Incentive Stock Option
after the later of two years from the date of grant and one year after the
transfer of the shares to the optionee, (a) the optionee will recognize the
difference, if any, between the amount realized and the exercise price as
long-term capital gain or long-term capital loss (as the case may be) if the
shares are capital assets in his or her hands; and (b) the Company will not
qualify for any deduction in connection with the grant or exercise of the
options. The excess, if any, of the fair market value of the shares on the date
of exercise of an Incentive Stock Option over the exercise price will be treated
as an item of adjustment to the optionee for his or her taxable year in which
the exercise occurs and may result in an alternative minimum tax liability for
the optionee. In the case of a disposition of shares in the same taxable year as
the exercise where the amount realized on the disposition is less than the fair
market value of the shares on the date of exercise, there will be no adjustment
since the amount treated as an item of adjustment, for alternative minimum tax
purposes, is limited to the excess of the amount realized on such disposition
over the exercise price which is the same amount included in regular taxable
income.
If Common Stock acquired upon the exercise of an Incentive Stock Option
is disposed of prior to the expiration of the holding periods described above,
(a) the optionee will recognize ordinary compensation income in the taxable year
of disposition in an amount equal to the excess, if any, of the lesser of the
fair market value of the shares on the date of exercise or the amount realized
on the disposition of the shares, over the exercise price paid for such shares;
and (b) the Company will qualify for a deduction equal to any such amount
recognized, subject to the requirements that the compensation be reasonable and
not limited under Section 162(m) of the Code. The optionee will recognize the
excess, if any, of the amount realized over the fair market value of the shares
on the date of exercise, if the shares are capital assets in his or her hands,
as short-term or long-term capital gain, depending on the length of time that
the optionee held the shares, and the Company will not qualify for a deduction
with respect to such excess.
Subject to certain exceptions for disability or death, if an Incentive
Stock Option is exercised more than three months following the termination of
the optionee's employment, the option will generally be taxed as a Non-Qualified
Stock Option. See "Non-Qualified Stock Options."
Non-Qualified Stock Options. With respect to Non-Qualified Stock
Options, (a) upon grant of the option, the optionee will recognize no income;
(b) upon exercise of the option (if the shares are not subject to a substantial
risk of forfeiture), the optionee will recognize ordinary compensation income in
an amount equal to the excess, if any, of the fair market value of the shares on
the date of exercise over the exercise price, and the Company will qualify for a
deduction in the same amount, subject to the requirements that the compensation
be reasonable and not limited under Section 162(m) of the Code; (c) the Company
will be required to comply with applicable Federal income tax withholding
requirements with respect to the amount of ordinary compensation income
recognized by the optionee; and (d) on a sale of the shares, the optionee will
recognize gain or loss equal to the difference, if any, between the amount
realized and the sum of the exercise price and the ordinary compensation income
recognized. Such gain or loss will be treated as short-term or long-term capital
gain or loss if the shares are capital assets in the optionee's hands depending
upon the length of time that the optionee held the shares. If the optionee's
shares acquired upon exercise are subject to a substantial risk of forfeiture,
the optionee will have an election to treat the exercise as a taxable event or
defer the Federal income tax consequences according to the rules described below
in "Stock Awards."
23
Stock Awards. Unless a participant otherwise elects to be taxed upon
receipt of shares of restricted or deferred stock under the 2005 Plan, the
participant must include in his or her taxable income the difference between the
fair market value of the shares and the amount paid, if any, for the shares, as
of the first date the participant's interest in the shares is no longer subject
to a substantial risk of forfeiture or such shares become transferable. A
participant's rights in stock awarded under the 2005 Plan are subject to a
substantial risk of forfeiture if the rights to full enjoyment of the shares are
conditioned, directly or indirectly, upon the future performance of substantial
services by the participant. Where shares of stock received under the 2005 Plan
are subject to a substantial risk of forfeiture, the participant can elect to
report the difference between the fair market value of the shares on the date of
receipt and the amount paid, if any, for the stock as ordinary income in the
year of receipt. To be effective, the election must be filed with the Internal
Revenue Service within 30 days after the date the shares are transferred to the
participant. The Company is entitled to a Federal income tax deduction equal in
amount to the amount includable as compensation in the gross income of the
participant, subject to the requirements that the compensation be reasonable and
not limited under Section 162(m) of the Code. The amount of taxable gain arising
from a participant's sale of shares of restricted stock acquired pursuant to the
2005 Plan is equal to the excess of the amount realized on such sale over the
sum of the amount paid, if any, for the stock and the compensation element
included by the participant in taxable income.
Other Tax Matters. If unmatured installments of Awards are accelerated
as a result of a Change of Control (as defined in the 2005 Plan), any amounts
received from the exercise by a participant of a stock option, the lapse of
restrictions on restricted stock or the deemed satisfaction of conditions of
performance-based Awards may be included in determining whether or not a
participant has received an "excess parachute payment" under Section 280G of the
Code, which could result in (a) the imposition of a 20% Federal excise tax (in
addition to Federal income tax) payable by the participant on certain payments
of Common Stock or cash resulting from such exercise or deemed satisfaction of
conditions of performance Awards from such exercise or deemed satisfaction of
conditions of performance awards or, in the case of restricted stock, on all or
a portion of the fair market value of the shares on the date the restrictions
lapse and (b) the loss by the Company of a compensation deduction.
Recommendation
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE 2005 STOCK
INCENTIVE PLAN.
24
STOCKHOLDER PROPOSALS FOR 2006 ANNUAL MEETING
Stockholders who wish to present proposals appropriate for
consideration at the Company's Annual Meeting of Stockholders to be held in the
year 2006 must submit the proposal in proper form to the Company at its address
set forth on the first page of this proxy statement and in accordance with
applicable regulations of the SEC not later than January 23, 2006 in order for
the proposition to be considered for inclusion in the Company's proxy statement
and form of proxy relating to such annual meeting. Any such proposals, as well
as any questions related thereto, should be directed to the Secretary of the
Company.
If a stockholder submits a proposal after the January 23, 2006 deadline
but still wishes to present the proposal at the Company's Annual Meeting of
Stockholders (but not in the Company's proxy statement) for the fiscal year
ending December 31, 2005, the proposal, which must be presented in a manner
consistent with the Company's By-Laws and applicable law, must be submitted to
the Secretary of the Company in proper form at the address set forth above no
later than April 7, 2006. The Company did not receive notice of any proposed
matter to be submitted by stockholders for a vote at this Annual Meeting and,
therefore, in accordance with Exchange Act Rule 14a-4(c) any proxies held by
persons designated as proxies by the Company's Board of Directors and received
in respect of this Annual Meeting will be voted in the discretion of the
Company's management on such other matter which may properly come before the
Annual Meeting. Moreover, if the Company does not receive notice by April 7,
2006 of a proposed matter to be submitted by a stockholder for stockholders vote
at the Annual Meeting of Stockholders for the fiscal year ending December 31,
2005 to be held in 2006, then, in accordance with Exchange Act Rule 14a-4(c) any
proxies held by persons designated as proxies by the Company's Board of
Directors in respect of such Annual Meeting may be voted at the discretion of
such persons on such matter if it shall properly come before such Annual
Meeting.
OTHER INFORMATION
Proxies for the Annual Meeting will be solicited by mail and through
brokerage institutions and all expenses involved, including printing and
postage, will be paid by the Company.
A COPY OF THE COMPANY'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2004 IS BEING FURNISHED HEREWITH TO EACH STOCKHOLDER OF RECORD AS
OF THE CLOSE OF BUSINESS ON MAY 16, 2005. ADDITIONAL COPIES OF SUCH ANNUAL
REPORT WILL BE PROVIDED FOR A NOMINAL CHARGE UPON WRITTEN REQUEST TO:
25
ICAD , INC.
4 TOWNSEND WEST, SUITE 17
NASHUA, NEW HAMPSHIRE 03063
ATTENTION: ANNETTE HEROUX
The Board of Directors is aware of no other matters, except for those
incident to the conduct of the Annual Meeting, that are to be presented to
stockholders for formal action at the Annual Meeting. If, however, any other
matters properly come before the Annual Meeting or any adjournments thereof, it
is the intention of the persons named in the proxy to vote the proxy in
accordance with their judgment.
By order of the Board of Directors,
Robert Howard,
Chairman of the Board,
May 23, 2005
26
EXHIBIT A
iCAD, INC.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE CHARTER
This Nominating and Corporate Governance Committee Charter
(the "Charter") has been adopted by the Board of Directors (the "Board") of
iCAD, Inc. (the "Company").
I. Purpose
The Nominating and Corporate Governance Committee (the "Committee") of
the Board is responsible for developing and recommending to the Board a
set of corporate governance policies for the Company, establishing
criteria for selecting new directors, and identifying, screening and
recruiting new directors. The Committee will also select nominees for
directors and recommend directors for committee membership to the
Board.
II. Composition
The Committee shall be comprised of three or more members, all of whom
must qualify as independent directors ("Independent Directors") under
the listing standards of the Nasdaq Stock Market, Inc. ("NASDAQ").
Notwithstanding this independence requirement, if the Committee is
comprised of at least three members, one director, who is not
independent as defined in Rule 4200 of the NASDAQ Marketplace Rules,
and is not a current officer or employee or a Family Member (as defined
in Rule 4200 of the NASDAQ Marketplace Rules) of such person, may be
appointed to the Committee if the Board, under exceptional and limited
circumstances, determines that such individual's membership on the
committee is required by the best interests of the Company and its
stockholders, and the Board discloses, in the next annual meeting proxy
statement subsequent to such determination, the nature of the
relationship and the reasons for the determination. A member appointed
under this exception may not serve longer than two years.
The Committee members shall be appointed by the Board. The Board shall
appoint one member of the Committee as chairperson. If the Board fails
to elect a chairperson, the Committee members shall elect a chairperson
from their members. The chairperson shall be responsible for leadership
of the Committee, including overseeing the agenda, presiding over the
meetings and reporting to the Board. If the Committee chairperson is
not present at a meeting, the remaining members of the Committee may
designate an acting chairperson.
The members shall serve for a term of one year or until their
successors shall be appointed and qualified. No member of the Committee
shall be removed except by majority vote of the full Board. The Board
shall have the authority to fill vacancies or add additional members to
the Committee.
1
A member shall promptly notify the Committee and the Board if the
member is no longer an Independent Director and such member shall be
removed from the Committee unless the Board determines that an
exception to the Independent Director requirement is available under
the NASDAQ rules with respect to such member's continued membership on
the Committee.
III. Meetings and Procedures
Consistent with the Company's Certificate of Incorporation, Bylaws and
applicable state law, the following shall apply:
o The Committee shall fix its own rules of procedure, which
shall be consistent with the Bylaws of the Company and this
Charter.
o The Committee shall meet at least annually and more frequently
as circumstances require.
o The chairperson of the Committee or a majority of the members
of the Committee may call special meetings of the Committee.
o The chairperson, in consultation with other members of the
Committee, shall set the length of each meeting and the agenda
of items to be addressed at each meeting and shall circulate
the agenda to each member of the Committee in advance of each
meeting.
o A majority of the members of the Committee shall constitute a
quorum.
o The Committee may request that any directors, officers or
employees of the Company, or other persons whose advice and
counsel are sought by the Committee, attend any meeting of the
Committee and/or provide such pertinent information as the
Committee requests, except that no director of the Company
shall participate in discussions or attend any portion of a
meeting of the Committee at which that director's nomination
or committee selection is being discussed.
o Following each of its meetings, the Committee shall deliver a
report on the meeting to the Board, including a description of
all actions taken by the Committee at the meeting.
o The Committee shall keep written minutes of its meetings,
which minutes shall be maintained by the Company with the
books and records of the Company. The chairperson may
designate an officer or employee of the Company to serve as
secretary to the Committee.
IV. Responsibilities and Duties of the Nominating Committee
The Nominating Committee has the following duties and responsibilities:
2
Selection of Director Nominees and Committee Membership
o Determine what types of backgrounds are needed to help
strengthen and balance the Board and establish the process for
identifying and evaluating nominees for director, including but
not limited to establishing criteria for selecting new
directors.
o Determine the minimum qualifications that must be met by
nominating committee recommended candidates.
o Conduct background and qualifications checks of persons it
wishes to recommend to the Board as candidates or to fill
vacancies.
o Conduct director evaluations prior to renomination of directors
for election.
o Select the slate of nominees of directors to be proposed for
election by the stockholders and recommend to the Board
individuals to be considered by the Board to fill vacancies.
Approvals should follow a review by the Committee of the
performance and contribution of fellow directors as well as the
qualifications of proposed new directors.
o Recommend to the Board those directors to be selected for
membership on the various Board committees. Recommendations
should consider the qualifications for membership on each
committee, whether the candidate will be able to devote the
requisite time to the Committee, the extent to which there
should be a policy of periodic rotation of directors among the
committees, and any limitations on the number of consecutive
years a director should serve on any one Board committee.
o Determine director and committee member/chair compensation for
those directors who are not also salaried officers of the
Company.
o Establish policies regarding the consideration of director
candidates recommended by security holders.
o Establish procedures to be followed by security holders in
submitting recommendations for director candidates.
o Develop and Implement Policies Regarding Corporate Governance
Matters.
o Recommend to the Board policies to enhance the Board's
effectiveness, including with respect to the distribution of
information to Board members, the size and composition of the
Board, and the frequency and structure of Board meetings.
o Develop and review periodically, and at least annually, the
corporate governance policies of the Company to ensure that
they are appropriate for the Company and that policies of the
Company comply with applicable laws, regulations and listing
standards, and recommend any desirable changes to the Board.
3
o Create, maintain and recommend to the Board for adoption a Code
of Conduct for directors, officers and employees.
o Appoint an Ethics Officer to establish and maintain compliance
with the Company's Code of Conduct [and obtain an annual report
of the Ethics Officer].
o Consider any other corporate governance issues that arise from
time to time, and recommend appropriate actions to the Board.
o Assist management in the review of director and officer
liability insurance requirements and the alternative methods
available for satisfying them.
Evaluation of the Board and Management
o Oversee performance evaluations for the Board as a whole, the
directors and management.
o Maintain an orientation program for new directors and
continuing education programs for directors.
Succession Planning and Other Matters
o Make recommendations to the Board with respect to potential
successors for key management positions.
o Obtain advice and assistance from internal or external legal or
other advisors as required for the performance of its duties.
o Review and evaluate the Committee's performance annually with
respect to its evaluation of its performance.
o Review and reassess the adequacy of this Charter on an annual
basis and recommend to the Board any appropriate changes.
o Perform such other duties and responsibilities as may be
assigned to the Committee, from time to time, by the Board.
V. Investigations and Studies; Outside Advisors
The Committee may conduct or authorize investigations into or studies
of matters within the scope of the Committee's duties and
responsibilities, and may retain, at the Company's expense, such
experts and other professionals as it deems necessary. The Committee
shall have the sole authority to retain or terminate any search firm to
be used to identify director candidates, including sole authority to
approve the search firm's fees and other retention terms, such fees to
be borne by the Company.
4
EXHIBIT B
iCAD, INC.
2005 Stock Incentive Plan
Section 1. Purposes; Definitions.
The purpose of the iCAD, Inc. 2005 Stock Incentive Plan is to enable
iCAD, Inc. to offer to those of its employees and to the employees of its
Subsidiaries and other persons who are expected to contribute to the success of
the Company, long term performance-based stock and/or other equity interests in
the Company, thereby enhancing their ability to attract, retain and reward such
key employees or other persons, and to increase the mutuality of interests
between those employees or other persons and the shareholders of iCAD, Inc.
For purposes of the Plan, the following terms shall be defined as set
forth below:
(a) "Board" means the Board of Directors of iCAD, Inc.
(b) "Cause" shall have the meaning ascribed thereto in Section
5(b)(ix) below.
(c) "Change of Control" shall have the meaning ascribed thereto in
Section 9 below.
(d) "Code" means the Internal Revenue Code of 1986, as amended from
time to time and any successor thereto.
(e) "Committee" means any committee of the Board, which the Board
may designate.
(f) "Company" means iCAD, Inc., a corporation organized under the
laws of the State of Delaware.
(g) "Deferred Stock" means Stock to be received, under an award
made pursuant to Section 7 below, at the end of a specified
deferral period.
(h) "Disability" means disability as determined under procedures
established by the Board or the Committee for purposes of the
Plan.
(i) "Early Retirement" means retirement, with the approval of the
Board or the Committee, for purposes of one or more award(s)
hereunder, from active employment with the Company or any
Parent or Subsidiary prior to age 65.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, as in effect from time to time.
(k) "Fair Market Value", unless otherwise required by any
applicable provision of the Code or any regulations issued
thereunder, means, as of any given date: (i) if the principal
market for the Stock is a national securities exchange or the
National Association of Securities Dealers Automated Quotations
System ("NASDAQ) or the Over The Counter Bulletin Board, the
closing sale price of the Stock on such day as reported by such
exchange or market system or quotation medium, or on a
1
(l) consolidated tape reflecting transactions on such exchange or
market system or quotation medium, or (ii) if the principal
market for the Stock is not a national securities exchange and
the Stock is not quoted on NASDAQ or the Over The Counter
Bulletin Board, the mean between the closing bid sale price for
the Stock on such day as reported by NASDAQ or the National
Quotation Bureau, Inc.; provided that if clauses (i) and (ii)
of this paragraph are both inapplicable, or if no trades have
been made or no quotes are available for such day, the Fair
Market Value of the Stock shall be determined by the Board of
Directors or the Committee, as the case may be, which
determination shall be conclusive as to the Fair Market Value
of the Stock.
(m) "Incentive Stock Option" means any Stock Option which is
intended to be and is designated as an "incentive stock option"
within the meaning of Section 422 of the Code, or any successor
thereto.
(n) "Non-Qualified Stock Option" means any Stock Option that is not
an Incentive Stock Option.
(o) "Normal Retirement" means retirement from active employment
with the Company or any Subsidiary on or after age 65.
(p) "Other Stock-Based Award" means an award under Section 8 below
that is valued in whole or in part by reference to, or is
otherwise based upon, Stock.
(q) "Parent" means any present or future parent of the Company, as
such term is defined in Section 424(e) of the Code, or any
successor thereto.
(r) "Plan" means this iCAD Inc. 2005 Stock Incentive Plan, as
hereinafter amended from time to time.
(s) "Restricted Stock" means Stock, received under an award made
pursuant to Section 6 below, that is subject to restrictions
imposed pursuant to said Section 6.
(t) "Retirement" means Normal Retirement or Early Retirement.
(u) "Rule 16b-3" means Rule 16b-3 of the General Rules and
Regulations under the Exchange Act, as in effect from time to
time, and any successor thereto.
(v) "Securities Act" means the Securities Act of 1933, as amended,
as in effect from time to time.
(w) "Stock" means the Common Stock of the Company, $.01 par value
per share.
(x) "Stock Option" or "Option" means any option to purchase shares
of Stock which is granted pursuant to the Plan.
(y) "Subsidiary" means any present or future (A) subsidiary
corporation of the Company, as such term is defined in Section
424(f) of the Code, or any successor thereto, or (B)
unincorporated business entity in which the Company owns,
directly or indirectly, 50% or more of the voting rights,
capital or profits.
2
Section 2. Administration.
The Plan shall be administered by the Board, or at its discretion, the
Committee, the membership of which shall consist solely of two or more members
of the Board, each of whom shall serve at the pleasure of the Board and shall be
a "Non-Employee Director," as defined in Rule 16b-3 and shall be at all times
constituted so as not to adversely affect the compliance of the Plan with the
requirements of Rule 16b-3 or with the requirements of any other applicable law,
rule or regulation.
The Board or the Committee, as the case may be, shall have the
authority to grant, pursuant to the terms of the Plan, to officers and other
employees or other persons eligible under Section 4 below: (i) Stock Options,
(ii) Restricted Stock, (iii) Deferred Stock, and/or (iv) Other Stock-Based
Awards.
For purposes of illustration and not of limitation, the Board or the
Committee, as the case may be, shall have the authority (subject to the express
provisions of the Plan):
(i) to select the officers, other employees of the Company or
any Parent or Subsidiary and other persons to whom Stock
Options, Restricted Stock, Deferred Stock and/or Other
Stock-Based Awards may be from time to time granted
hereunder;
(ii) to determine the Incentive Stock Options, Non-Qualified
Stock Options, Restricted Stock, Deferred Stock and/or
Other Stock-Based Awards, or any combination thereof, if
any, to be granted hereunder to one or more eligible
persons;
(iii) to determine the number of shares of Stock to be covered
by each award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted
hereunder (including, but not limited to, share price,
any restrictions or limitations, and any vesting
acceleration, exercisability and/or forfeiture
provisions);
(v) to determine the terms and conditions under which awards
granted hereunder are to operate on a tandem basis and/or
in conjunction with or apart from other awards made by
the Company or any Parent or Subsidiary outside of the
Plan;
(vi) to determine the extent and circumstances under which
Stock and other amounts payable with respect to an award
hereunder shall be deferred; and
(vii) to substitute (A) new Stock Options for previously
granted Stock Options, including previously granted Stock
Options having higher option exercise prices and/or
containing other less favorable terms, and (B) new awards
of any other type for previously granted awards of the
same type, including previously granted awards which
contain less favorable terms.
3
Subject to Section 10 hereof, The Board or the Committee, as the case
may be, shall have the authority to (i) adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, (ii) interpret the terms and provisions of
the Plan and any award issued under the Plan (and to determine the form and
substance of all agreements relating thereto), and (iii) to otherwise supervise
the administration of the Plan.
Subject to the express provisions of the Plan, all decisions made by
the Board or the Committee, as the case may be, pursuant to the provisions of
the Plan shall be made in the Board or the Committee's sole and absolute
discretion and shall be final and binding upon all persons, including the
Company, its Parent and Subsidiaries and the Plan participants.
Section 3. Stock Subject to Plan.
The total number of shares of Stock reserved and available for
distribution under the Plan shall be 600,000 shares. Such shares may consist, in
whole or in part, of authorized and unissued shares or treasury shares.
If any shares of Stock that have been optioned cease to be subject to a
Stock Option for any reason, or if any shares of Stock that are subject to any
Restricted Stock award, Deferred Stock award or Other Stock-Based award are
forfeited or any such award otherwise terminates without the issuance of such
shares, such shares shall again be available for distribution under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, extraordinary distribution with
respect to the Stock or other change in corporate structure affecting the Stock,
such substitution or adjustments shall be made in the (A) aggregate number of
shares of Stock reserved for issuance under the Plan, (B) number, kind and
exercise price of shares of Stock subject to outstanding Options granted under
the Plan, and (C) number, kind, purchase price and/or appreciation base of
shares of Stock subject to other outstanding awards granted under the Plan, as
may be determined to be appropriate by the Board or the Committee, as the case
may be, in order to prevent dilution or enlargement of rights; provided,
however, that the number of shares of Stock subject to any award shall always be
a whole number. Such adjusted exercise price shall also be used to determine the
amount which is payable to the optionee upon the exercise by the Board or the
Committee, as the case may be, of the alternative settlement right which is set
forth in Section 5(b)(xi) below.
Subject to the provisions of the immediately preceding paragraph, the
maximum numbers of shares subject to Options, Restricted Stock awards, Deferred
Stock awards, and other Stock-Based awards to each of the Company's chief
executive office and the four other highest compensated executive officers who
are employed by the Company on the last day of any taxable year of the Company,
shall be 250,000 shares during the term of the Plan.
Section 4. Eligibility.
Officers and other employees of the Company or any Parent or Subsidiary
(but excluding any person whose eligibility would adversely affect the
compliance of the Plan with the requirements of Rule 16b-3) who are at the time
of the grant of an award under the Plan employed by the Company or any Parent or
Subsidiary and who are responsible for or contribute
4
to the management, growth and/or profitability of the business of the Company or
any Parent or Subsidiary, are eligible to be granted Options and awards under
the Plan. In addition, Non-Qualified Stock Options and other awards may be
granted under the Plan to any person, including, but not limited to, directors,
independent agents, consultants and attorneys who the Board or the Committee, as
the case may be, believes has contributed or will contribute to the success of
the Company. Eligibility under the Plan shall be determined by the Board or the
Committee, as the case may be.
The Board or the Committee, as the case may be, may, in its sole
discretion, include additional conditions and restrictions in the agreement
entered into in connection with such awards under the Plan. The grant of an
Option or other award under the Plan, and any determination made in connection
therewith, shall be made on a case by case basis and can differ among optionees
and grantees. The grant of an Option or other award under the Plan is a
privilege and not a right and the determination of the Board or the Committee,
as the case may be, can be applied on a non-uniform (discretionary) basis.
Section 5. Stock Options.
(a) Grant and Exercise. Stock Options granted under the Plan may be
of two types: (i) Incentive Stock Options and (ii)
Non-Qualified Stock Options. Any Stock Option granted under the
Plan shall contain such terms as the Board or the Committee, as
the case may be, may from time to time approve. The Board or
the Committee, as the case may be, shall have the authority to
grant to any optionee Incentive Stock Options, Non-Qualified
Stock Options, or both types of Stock Options, and they may be
granted alone or in addition to other awards granted under the
Plan. To the extent that any Stock Option is not designated as
an Incentive Stock Option or does not qualify as an Incentive
Stock Option, it shall constitute a Non-Qualified Stock Option.
The grant of an Option shall be deemed to have occurred on the
date on which the Board or the Committee, as the case may be,
by resolution, designates an individual as a grantee thereof,
and determines the number of shares of Stock subject to, and
the terms and conditions of, said Option.
Anything in the Plan to the contrary notwithstanding, no term
of the Plan relating to Incentive Stock Options or any
agreement providing for Incentive Stock Options shall be
interpreted, amended or altered, nor shall any discretion or
authority granted under the Plan be exercised, so as to
disqualify the Plan under Section 422 of the Code, or, without
the consent of the optionee(s) affected, to disqualify any
Incentive Stock Option under said Section 422.
(b) Terms and Conditions. Stock Options granted under the Plan
shall be subject to the following terms and conditions:
(i) Option Price. The option price per share of Stock
purchasable under a Stock Option shall be determined by
the Board or the Committee, as the case may be, at the
time of grant but as to Incentive Stock Options and
Non-Qualified Stock Options shall be not less than 100%
(110% in the case of an Incentive Stock Option granted to
an optionee ("10% Shareholder") who, at the time of
grant, owns Stock possessing more than 10% of the total
combined voting power of all classes of stock of the
Company or its Parent, if any, or its Subsidiaries) of
the Fair Market Value of the Stock at the time of grant.
5
(ii) Option Term. The term of each Stock Option shall be fixed
by the Board or the Committee, as the case may be, but no
Incentive Stock Option shall be exercisable more than ten
years (five years, in the case of an Incentive Stock
Option granted to a 10% Shareholder) after the date on
which the Option is granted.
(iii) Exercisability. Stock Options shall be exercisable at
such time or times and subject to such terms and
conditions as shall be determined by the Board or the
Committee, as the case may be. If the Board or the
Committee, as the case may be, provides, in its
discretion, that any Stock Option is exercisable only in
installments, the Board or the Committee, as the case may
be, may waive such installment exercise provisions at any
time at or after the time of grant in whole or in part,
based upon such factors as the Board or the Committee, as
the case may be, shall determine.
(iv) Method of Exercise. Subject to whatever installment,
exercise and waiting period provisions are applicable in
a particular case, Stock Options may be exercised in
whole or in part at any time during the option period by
giving written notice of exercise to the Company
specifying the number of shares of Stock to be purchased.
Such notice shall be accompanied by payment in full of
the purchase price, which shall be in cash or, if
provided in the Stock Option agreement referred to in
Section 5(b)(xii) below or otherwise provided by the
Board, or Committee, as the case may be, either at or
after the date of grant of the Stock Option , in whole
shares of Stock which are already owned by the holder of
the Option or partly in cash and partly in such Stock.
Cash payments shall be made by wire transfer, certified
or bank check or personal check, in each case payable to
the order of the Company; provided, however, that the
Company shall not be required to deliver certificates for
shares of Stock with respect to which an Option is
exercised until the Company has confirmed the receipt of
good and available funds in payment of the purchase price
thereof. If permitted, payments in the form of Stock
(which shall be valued at the Fair Market Value of a
share of Stock on the date of exercise) shall be made by
delivery of stock certificates in negotiable form which
are effective to transfer good and valid title thereto to
the Company, free of any liens or encumbrances. In
addition to the foregoing, payment of the exercise price
may be made by delivery to the Company by the optionee of
an executed exercise form, together with irrevocable
instructions to a broker-dealer to sell or margin a
sufficient portion of the shares covered by the option
and deliver the sale or margin loan proceeds directly to
the Company. Except as otherwise expressly provided in
the Plan or in the Stock Option agreement referred to in
Section 5(b)(xii) below or otherwise provided by the
Board or Committee, as the case may be, either at or
after the date of grant of the Option, no Option which is
granted to a person who is at the time of grant an
employee of the Company or of a Subsidiary or Parent of
the Company may be exercised at any time unless the
holder thereof is then an employee of the Company or of a
Parent or a Subsidiary. The holder of an Option shall
have none of the rights of a shareholder with respect to
the shares subject to the Option until the optionee has
given written notice of exercise, has paid in full for
those shares of Stock and, if requested by the Board or
Committee, as the case may be, has given the
representation described in Section 12(a) below.
6
(v) Transferability; Exercisability. No Stock Option shall be
transferable by the optionee other than by will or by the
laws of descent and distribution, except as may be
otherwise provided with respect to a Non-Qualified Option
pursuant to the specific provisions of the Stock Option
agreement pursuant to which it was issued as referred to
in Section 5(b)(xii) below (which agreement may be
amended, from time to time). Except as otherwise
provided in the Stock Option agreement relating to a
Non-Qualified Stock Option, all Stock Options shall be
exercisable, during the optionee's lifetime, only by the
optionee or his or her guardian or legal representative.
(vi) Termination by Reason of Death. Subject to Section
5(b)(x) below, if an optionee's employment by the Company
or any Parent or Parent or Subsidiary terminates by
reason of death, any Stock Option held by such optionee
may thereafter be exercised, to the extent then
exercisable or on such accelerated basis as the Board or
Committee, as the case may be, may determine at or after
the time of grant, for a period of one year (or such
other period as the Board or the Committee, as the case
may be, may specify at or after the time of grant) from
the date of death or until the expiration of the stated
term of such Stock Option, whichever period is the
shorter.
(vii) Termination by Reason of Disability. Subject to Section
5(b)(x) below, if an optionee's employment by the Company
or any Parent or Subsidiary terminates by reason of
Disability, any Stock Option held by such optionee may
thereafter be exercised by the optionee, to the extent it
was exercisable at the time of termination or on such
accelerated basis as the Board or the Committee, as the
case may be, may determine at or after the time of grant,
for a period of one year (or such other period as the
Board or the Committee, as the case may be, may specify
at or after the time of grant) from the date of such
termination of employment or until the expiration of the
stated term of such Stock Option, whichever period is the
shorter; provided, however, that if the optionee dies
within such one year period (or such other period as the
Board or the Committee, as the case may be, shall specify
at or after the time of grant), any unexercised Stock
Option held by such optionee shall thereafter be
exercisable to the extent to which it was exercisable at
the time of death for a period of one year from the date
of death or until the expiration of the stated term of
such Stock Option, whichever period is the shorter.
7
(viii) Termination by Reason of Retirement. Subject to Section
5(b)(x) below, if an optionee's employment by the Company
or any Parent or Subsidiary terminates by reason of
Normal Retirement, any Stock Option held by such optionee
may thereafter be exercised by the optionee, to the
extent it was exercisable at the time of termination or
on such accelerated basis as the Board or the Committee,
as the case may be, may determine at or after the time of
grant, for a period of one year (or such other period as
the Board or the Committee, as the case may be, may
specify at or after the time of grant) from the date of
such termination of employment or the expiration of the
stated term of such Stock Option, whichever period is the
shorter; provided, however, that if the optionee dies
within such one year period (or such other period as the
Board or the Committee, as the case may be, shall specify
at or after the date of grant), any unexercised Stock
Option held by such optionee shall thereafter be
exercisable to the extent to which it was exercisable at
the time of death for a period of one year from the date
of death or until the expiration of the stated term of
such Stock Option, whichever period is the shorter. If an
optionee's employment with the Company or any Parent or
Subsidiary terminates by reason of Early Retirement, the
Stock Option shall thereupon terminate; provided,
however, that if the Board or the Committee, as the case
may be, so approves at the time of Early Retirement, any
Stock Option held by the optionee may thereafter be
exercised by the optionee as provided above in connection
with termination of employment by reason of Normal
Retirement.
(ix) Other Termination. Subject to the provisions of Section
12(g) below and unless otherwise determined by the Board
or Committee, as the case may be, at or after the time of
grant, if an optionee's employment by the Company or any
Parent or Subsidiary terminates for any reason other than
death, Disability or Retirement, the Stock Option shall
thereupon automatically terminate, except that if the
optionee is involuntarily terminated by the Company or
any Parent or a Subsidiary without Cause (as hereinafter
defined), such Stock Option may be exercised for a period
of three months (or such other period as the Board or the
Committee, as the case may be, shall specify at or after
the time of grant) from the date of such termination or
until the expiration of the stated term of such Stock
Option, whichever period is shorter. For purposes of the
Plan, "Cause" shall mean (1) the conviction of the
optionee of a felony under Federal law or the law of the
state in which such action occurred, (2) dishonesty by
the optionee in the course of fulfilling his or her
employment duties, or (3) the failure on the part of the
optionee to perform his or her employment duties in any
material respect. In addition, with respect to an option
granted to an employee of the Company, a Parent or a
Subsidiary, for purposes of the Plan, "Cause" shall also
include any definition of "Cause" contained in any
employment agreement between the optionee and the
Company, Parent or Subsidiary, as the case may be.
(x) Additional Incentive Stock Option Limitation. In the case
of an Incentive Stock Option, the aggregate Fair Market
Value of Stock (determined at the time of grant of the
Option) with respect to which Incentive Stock Options are
exercisable for the first time by an optionee during any
calendar year (under all such plans of optionee's
employer corporation and its Parent and Subsidiaries)
shall not exceed $100,000.
8
(xi) Alternative Settlement of Option. If provided for, upon
the receipt of written notice of exercise or otherwise
provided for by the Board or Committee, as the case may
be, either at or after the time of grant of the Stock
Option, the Board or the Committee, as the case may be,
may elect to settle all or part of any Stock Option by
paying to the optionee an amount, in cash or Stock
(valued at Fair Market Value on the date of exercise),
equal to the product of the excess of the Fair Market
Value of one share of Stock, on the date of exercise over
the Option exercise price, multiplied by the number of
shares of Stock with respect to which the optionee
proposes to exercise the Option. Any such settlements
which relate to Options which are held by optionees who
are subject to Section 16(b) of the Exchange Act shall
comply with any "window period" provisions of Rule 16b-3,
to the extent applicable, and with such other conditions
as the Board or Committee, as the case may be, may
impose.
(xii) Stock Option Agreement. Each grant of a Stock Option
shall be confirmed by, and shall be subject to the terms
of, an agreement executed by the Company and the
participant.
Section 6. Restricted Stock.
(a) Grant and Exercise. Shares of Restricted Stock may be issued
either alone or in addition to or in tandem with other awards
granted under the Plan. The Board or the Committee, as the case
may be, shall determine the eligible persons to whom, and the
time or times at which, grants of Restricted Stock will be
made, the number of shares to be awarded, the price (if any) to
be paid by the recipient, the time or times within which such
awards may be subject to forfeiture (the "Restriction Period"),
the vesting schedule and rights to acceleration thereof, and
all other terms and conditions of the awards. The Board or the
Committee, as the case may be, may condition the grant of
Restricted Stock upon the attainment of such factors as the
Board or the Committee, as the case may be, may determine.
(b) Terms and Conditions. Each Restricted Stock award shall be
subject to the following terms and conditions:
(i) Restricted Stock, when issued, will be represented by a
stock certificate or certificates registered in the name
of the holder to whom such Restricted Stock shall have
been awarded. During the Restriction Period,
certificates representing the Restricted Stock and any
securities constituting Retained Distributions (as
defined below) shall bear a restrictive legend to the
effect that ownership of the Restricted Stock (and such
Retained Distributions), and the enjoyment of all rights
related thereto, are subject to the restrictions, terms
and conditions provided in the Plan and the Restricted
Stock agreement referred to in Section 6(b)(iv) below.
Such certificates shall be deposited bythe holder with
the Company, together with stock powers or other
instruments of assignment, endorsed in blank, which will
permit transfer to the Company of all or any portion of
the Restricted Stock and any securities constituting
Retained Distributions that shall be forfeited or that
shall not become vested in accordance with the Plan and
the applicable Restricted Stock agreement.
9
(ii) Restricted Stock shall constitute issued and outstanding
shares of Common Stock for all corporate purposes, and
the issuance thereof shall be made for at least the
minimum consideration (if any) necessary to permit the
shares of Restricted Stock to be deemed to be fully paid
and nonassessable. The holder will have the right to
vote such Restricted Stock, to receive and retain all
regular cash dividends and other cash equivalent
distributions as the Board may in its sole discretion
designate, pay or distribute on such Restricted Stock
and to exercise all other rights, powers and privileges
of a holder of Stock with respect to such Restricted
Stock, with the exceptions that (A) the holder will not
be entitled to delivery of the stock certificate or
certificates representing such Restricted Stock until
the Restriction Period shall have expired and unless all
other vesting requirements with respect thereto shall
have been fulfilled; (B) the Company will retain custody
of the stock certificate or certificates representing
the Restricted Stock during the Restriction Period; (C)
other than regular cash dividends and other cash
equivalent distributions as the Board may in its sole
discretion designate, pay or distribute, the Company
will retain custody of all distributions ("Retained
Distributions") made or declared with respect to the
Restricted Stock (and such Retained Distributions will
be subject to the same restrictions, terms and
conditions as are applicable to the Restricted Stock)
until such time, if ever, as the Restricted Stock with
respect to which such Retained Distributions shall have
been made, paid or declared shall have become vested and
with respect to which the Restriction Period shall have
expired; (D) the holder may not sell, assign, transfer,
pledge, exchange, encumber or dispose of the Restricted
Stock or any Retained Distributions during the
Restriction Period; and (E) a breach of any of the
restrictions, terms or conditions contained in the Plan
or the Restricted Stock agreement referred to in Section
6(b)(iv) below, or otherwise established by the Board or
Committee, as the case may be, with respect to any
Restricted Stock or Retained Distributions will cause a
forfeiture of such Restricted Stock and any Retained
Distributions with respect thereto.
(iii) Upon the expiration of the Restriction Period with
respect to each award of Restricted Stock and the
satisfaction of any other applicable restrictions, terms
and conditions (A) all or part of such Restricted Stock
shall become vested in accordance with the terms of the
Restricted Stock agreement referred to in Section
6(b)(iv) below, and (B) any Retained Distributions with
respect to such Restricted Stock shall become vested to
the extent that the Restricted Stock related thereto
shall have become vested. Any such Restricted Stock and
Retained Distributions that do not vest shall be
forfeitedto the Company and the holder shall not
thereafter have any rights with respect to such
Restricted Stock and Retained Distributions that shall
have been so forfeited.
(iv) Each Restricted Stock award shall be confirmed by, and
shall be subject to the terms of, an agreement executed
by the Company and the participant.
10
Section 7. Deferred Stock.
(a) Grant and Exercise. Deferred Stock may be awarded either alone
or in addition to or in tandem with other awards granted under
the Plan. The Board or the Committee, as the case may be, shall
determine the eligible persons to whom and the time or times at
which Deferred Stock shall be awarded, the number of shares of
Deferred Stock to be awarded to any person, the duration of the
period (the "Deferral Period") during which, and the conditions
under which, receipt of the Deferred Stock will be deferred,
and all the other terms and conditions of the awards. The Board
or the Committee, as the case may be, may condition the grant
of the Deferred Stock upon the attainment of such factors or
criteria as the Board or the Committee, as the case may be,
shall determine.
(b) Terms and Conditions. Each Deferred Stock award shall be
subject to the following terms and conditions:
(i) Subject to the provisions of the Plan and Deferred Stock
agreement referred to in Section 7(b)(vii) below,
Deferred Stock awards may not be sold, assigned,
transferred, pledged or otherwise encumbered during the
Deferral Period. At the expiration of the Deferral
Period (or the Additional Deferral Period referred to in
Section 7(b)(vi) below, where applicable), share
certificates shall be delivered to the participant, or
his legal representative, in a number equal to the
shares of Stock covered by the Deferred Stock award.
(ii) As determined by the Board or the Committee, as the case
may be, at the time of award, amounts equal to any
dividends declared during the Deferral Period (or the
Additional Deferral Period referred to in Section
7(b)(vi) below, where applicable) with respect to the
number of shares covered by a Deferred Stock award may
be paid to the participant currently or deferred and
deemed to be reinvested in additional Deferred Stock.
(iii) Subject to the provisions of the Deferred Stock
agreement referred to in Section 7(b)(vii) below and
this Section 7 and Section 12(g) below, upon termination
of a participant's employment with the Company or any
Parent or Subsidiary for any reason during the Deferral
Period (or the Additional Deferral Period referred to in
Section 7(b)(vi) below, where applicable) for a given
award, the Deferred Stock in question will vest or be
forfeited in accordance with the terms and conditions
established by the Board or the Committee, as the case
may be, at the time of grant.
(iv) The Board or the Committee, as the case may be, may,
after grant, accelerate the vesting of all or any part
of any Deferred Stock award and/or waive the deferral
limitations for all or any part of a Deferred Stock
award.
11
(v) In the event of hardship or other special circumstances
of a participant whose employment with the Company or
any Parent or Subsidiary is involuntarily terminated
(other than for Cause), the Board or the Committee, as
the case may be, may waive in whole or in part any or
all of the remaining deferral limitations imposed
hereunder or pursuant to the Deferred Stock agreement
referred to in Section 7(b)(vii) below with respect to
any or all of the participant's Deferred Stock.
(vi) A participant may request to, and the Board or the
Committee, as the case may be, may at any time, defer
the receipt of an award (or an installment of an award)
for an additional specified period or until a specified
period or until a specified event (the "Additional
Deferral Period"). Subject to any exceptions adopted by
the Board or the Committee, as the case may be, such
request must be made at least one year prior to
expiration of the Deferral Period for such Deferred
Stock award (or such installment).
(vii) Each Deferred Stock award shall be confirmed by, and
shall be subject to the terms of, an agreement executed
by the Company and the participant.
Section 8. Other Stock-Based Awards.
(a) Grant and Exercise. Other Stock-Based Awards, which may include
performance shares and shares valued by reference to the
performance of the Company or any Parent or Subsidiary, may be
granted either alone or in addition to or in tandem with Stock
Options, Restricted Stock or Deferred Stock. The Board or the
Committee, as the case may be, shall determine the eligible
persons to whom, and the time or times at which, such awards
shall be made, the number of shares of Stock to be awarded
pursuant to such awards, and all other terms and conditions of
the awards. The Board or the Committee, as the case may be, may
also provide for the grant of Stock under such awards upon the
completion of a specified performance period.
(b) Terms and Conditions. Each Other Stock-Based Award shall be
subject to the following terms and conditions:
(i) Shares of Stock subject to an Other Stock-Based Award
may not be sold, assigned, transferred, pledged or
otherwise encumbered prior to the date on which the
shares are issued, or, if later, the date on which any
applicable restriction or period of deferral lapses.
(ii) The recipient of an Other Stock-Based Award shall be
entitled to receive, currently or on a deferred basis,
dividends or dividend equivalents with respect to the
number of shares covered by the award, as determined by
the Board or the Committee, as the case may be, at the
time of the award. The Board or the Committee, as the
case may be, may provide that such amounts (if any)
shall be deemed to have been reinvested in additional
Stock.
(iii) Any Other Stock-Based Award and any Stock covered by any
Other Stock-Based Award shall vest or be forfeited to
the extent so provided in the award agreement referred
to in Section 8(b)(v) below, as determined by the Board
or the Committee, as the case may be.
12
(iv) In the event of the participant's Retirement, Disability
or death, or in cases of special circumstances, the
Board or the Committee, as the case may be, may waive in
whole or in part any or all of the limitations imposed
hereunder (if any) with respect to any or all of an
Other Stock-Based Award.
(v) Each Other Stock-Based Award shall be confirmed by, and
shall be subject to the terms of, an agreement executed
by the Company and by the participant.
Section 9. Change of Control Provisions.
(a) A "Change of Control" shall be deemed to have occurred on the
tenth day after:
(i) any individual, corporation or other entity or group (as
defined in Section 13(d)(3) of the Exchange Act),
becomes, directly or indirectly, the beneficial owner
(as defined in the General Rules and Regulations of the
Securities and Exchange Commission with respect to
Sections 13(d) and 13(g) of the Exchange Act) of more
than 50% of the then outstanding shares of the Company's
capital stock entitled to vote generally in the election
of directors of the Company; or
(ii) the commencement of, or the first public announcement of
the intention of any individual, firm, corporation or
other entity or of any group (as defined in Section
13(d)(3) of the Exchange Act) to commence, a tender or
exchange offer subject to Section 14(d)(1) of the
Exchange Act for any class of the Company's capital
stock; or
(iii) the shareholders of the Company approve (A) a definitive
agreement for the merger or other business combination
of the Company with or into another corporation pursuant
to which the shareholders of the Company do not own,
immediately after the transaction, more than 50% of the
voting power of the corporation that survives, or (B) a
definitive agreement for the sale, exchange or other
disposition of all or substantially all of the assets of
the Company, or (C) any plan or proposal for the
liquidation or dissolution of the Company; provided,
however, that a "Change of Control" shall not be deemed
to have taken place if beneficial ownership is acquired
(A) directly from the Company, other than an acquisition
by virtue of the exercise or conversion of another
security unless the security so converted or exercised
was itself acquired directly from the Company, or (B)
by, or a tender or exchange offer is commenced or
announced by, the Company, any profit-sharing, employee
ownership or other employee benefit plan of the Company;
or any trustee of or fiduciary with respect to any such
plan when acting in such capacity.
(b) In the event of a "Change of Control" as defined in Section
9(a) above, awards granted under the Plan will be subject to
the following provisions, unless the provisions of this Section
9 are suspended or terminated by an affirmative vote of a
majority of the Board prior to the occurrence of such a "Change
of Control":
13
(i) all outstanding Stock Options which have been
outstanding for at least one year shall become
exercisable in full, whether or not otherwise
exercisable at such time, and any such Stock Option
shall remain exercisable in full thereafter until it
expires pursuant to its terms; and
(ii) all restrictions and deferral limitations contained in
Restricted Stock awards, Deferred Stock awards and Other
Stock-Based Awards granted under the Plan shall lapse.
Section 10. Amendments and Termination.
The Board may at any time, and from time to time, amend any of the
provisions of the Plan, and may at any time suspend or terminate the Plan;
provided, however, that no such amendment shall be effective unless and until it
has been duly approved by the holders of the outstanding shares of Stock if the
failure to obtain such approval would adversely affect the compliance of the
Plan with the requirements of Rule 16b-3 or any other applicable law, rule or
regulation. The Board or the Committee, as the case may be, may amend the terms
of any Stock Option or other award theretofore granted under the Plan; provided,
however, that subject to Section 3 above, no such amendment may be made by the
Board or the Committee, as the case may be, which in any material respect
impairs the rights of the optionee or participant without the optionee's or
participant's consent, except for such amendments which are made to cause the
Plan to qualify for the exemption provided by Rule 16b-3. Moreover, no Stock
Option previously granted under the Plan may be amended to reduce the exercise
price of the Stock Option.
Section 11. Unfunded Status of Plan.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those of a
creditor of the Company.
Section 12. General Provisions.
(a) The Board or the Committee, as the case may be, may require
each person acquiring shares of Stock pursuant to an Option or
other award under the Plan to represent to and agree with the
Company in writing, among other things, that the optionee or
participant is acquiring the shares for investment without a
view to distribution thereof.
All certificates for shares of Stock delivered under the Plan
shall be subject to such stop transfer orders and other
restrictions as the Board or the Committee, as the case may be,
may deem to be advisable under the rules, regulations, and
other requirements of the Securities and Exchange Commission,
any stock exchange or association upon which the Stock is then
listed or traded, any applicable Federal or state securities
law, and any applicable corporate law, and the Board or the
Committee, as the case may be, may cause a legend or legends to
be put on any such certificates to make appropriate reference
to such restrictions.
14
(b) Nothing contained in the Plan shall prevent the Board from
adopting such other or additional incentive arrangements as it
may deem desirable, including, but not limited to, the granting
of stock options and the awarding of stock and cash otherwise
than under the Plan; and such arrangements may be either
generally applicable or applicable only in specific cases.
(c) Nothing contained in the Plan or in any award hereunder shall
be deemed to confer upon any employee of the Company or any
Parent or Subsidiary any right to continued employment with the
Company or any Parent or Subsidiary, nor shall it interfere in
any way with the right of the Company or any Parent or
Subsidiary to terminate the employment of any of its employees
at any time.
(d) No later than the date as of which an amount first becomes
includable in the gross income of the participant for Federal
income tax purposes with respect to any Option or other award
under the Plan, the participant shall pay to the Company, or
make arrangements satisfactory to the Board or the Committee,
as the case may be, regarding the payment of, any Federal,
state and local taxes of any kind required by law to be
withheld or paid with respect to such amount. If permitted by
the Board or the Committee, as the case may be, tax withholding
or payment obligations may be settled with Stock, including
Stock that is part of the award that gives rise to the
withholding requirement. The obligations of the Company under
the Plan shall be conditional upon such payment or
arrangements, and the Company or the participant's employer (if
not the Company) shall, to the extent permitted by law, have
the right to deduct any such taxes from any payment of any kind
otherwise due to the participant from the Company or any Parent
or Subsidiary.
(e) The Plan and all awards made and actions taken thereunder shall
be governed by and construed in accordance with the laws of the
State of Delaware (without regard to choice of law provisions).
(f) Any Stock Option granted or other award made under the Plan
shall not be deemed compensation for purposes of computing
benefits under any retirement plan of the Company or any Parent
or Subsidiary and shall not affect any benefits under any other
benefit plan now or subsequently in effect under which the
availability or amount of benefits is related to the level of
compensation (unless required by specific reference in any such
other plan to awards under the Plan).
(g) A leave of absence, unless otherwise determined by the Board or
Committee prior to the commencement thereof, shall not be
considered a termination of employment. Any Stock Option
granted or awards made under the Plan shall not be affected by
any change of employment, so long as the holder continues to be
an employee of the Company or any Parent or Subsidiary.
(h) Except as otherwise expressly provided in the Plan or in any
Stock Option agreement, Restricted Stock agreement, Deferred
Stock agreement or any Other Stock-Based Award agreement, no
right or benefit under the Plan may be alienated, sold,
assigned, hypothecated, pledged, exchanged, transferred,
encumbranced or charged, and any attempt to alienate, sell,
assign, hypothecate, pledge, exchange, transfer, encumber or
charge the same shall be void. No right or benefit hereunder
shall in any manner be subject to the debts, contracts or
liabilities of the person entitled to such benefit.
15
(i) The obligations of the Company with respect to all Stock
Options and awards under the Plan shall be subject to (A) all
applicable laws, rules and regulations, and such approvals by
any governmental agencies as may be required, including,
without limitation, the effectiveness of a registration
statement under the Securities Act, and (B) the rules and
regulations of any securities exchange or association on which
the Stock may be listed or traded.
(j) If any of the terms or provisions of the Plan conflicts with
the requirements of Rule 16b-3 as in effect from time to time,
or with the requirements of any other applicable law, rule or
regulation, and with respect to Incentive Stock Options,
Section 422 of the Code, then such terms or provisions shall be
deemed inoperative to the extent they so conflict with the
requirements of said Rule 16b-3, and with respect to Incentive
Stock Options, Section 422 of the Code. With respect to
Incentive Stock Options, if the Plan does not contain any
provision required to be included herein under Section 422 of
the Code, such provision shall be deemed to be incorporated
herein with the same force and effect as if such provision had
been set out at length herein.
(k) The Board or the Committee, as the case may be, may terminate
any Stock Option or other award made under the Plan if a
written agreement relating thereto is not executed and returned
to the Company within 30 days after such agreement has been
delivered to the optionee or participant for his or her
execution.
(l) The grant of awards pursuant to the Plan shall not in any way
effect the right or power of the Company to make
reclassifications, reorganizations or other changes of or to
its capital or business structure or to merge, consolidate,
liquidate, sell or otherwise dispose of all or any part of its
business or assets.
Section 13. Effective Date of Plan.
The Plan shall be effective as of the date of the approval and adoption
thereof at a meeting of the stockholders of the Company.
Section 14. Term of Plan.
No Stock Option, Restricted Stock Award, Deferred Stock award or Other
Stock-Based Award shall be granted pursuant to the Plan after the tenth
anniversary of the effective date of the Plan, but awards granted on or prior to
such tenth anniversary may extend beyond that date.
16
| FOLD AND DETACH HERE AND READ THE REVERSE SIDE |
v v
--------------------------------------------------------------------------------
iCAD, Inc.
4 Townsend West, Suite 17
Nashua, New Hampshire 03063
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 22, 2005.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints W. SCOTT PARR and ANNETTE HEROUX, and each
of them, Proxies, with full power of substitution in each of them, in the name,
place and stead of the undersigned, to vote at the Annual Meeting of
Stockholders of iCAD, Inc. (the "Company") on Wednesday, June 22, 2005, at 9:00
AM or at any adjournment or adjournments thereof, according to the number of
votes that the undersigned would be entitled to vote if personally present, upon
the following matters:
(Continued and to be signed on reverse side)
| FOLD AND DETACH HERE AND READ THE REVERSE SIDE |
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The Board of Directors recommend a vote FOR Items 1 and 2. Please mark
your votes |X|
like this
1. ELECTION OF CLASS III DIRECTORS:
FOR all nominees listed below
(except as marked to the contrary below). |_|
WITHHOLD AUTHORITY
to vote for all nominees listed below. |_|
Robert Howard, W. Scott Parr, and Rachel Brem
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space below
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2. Adoption of the Company's 2005 FOR AGAINST ABSTAIN
Stock Incentive Plan. |_| |_| |_|
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN ABOVE. IF NO
INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR THOSE NOMINEES AND THE
PROPOSALS LISTED ABOVE.
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partner-ship name by authorized person
COMPANY ID:
PROXY NUMBER:
ACCOUNT NUMBER:
Signature ____________________ Signature ____________________ Date _____________
Please mark, sign, date and return this proxy card promptly using the enclosed
envelope.