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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Filed
by the registrant
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Filed
by a party other than the registrant
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the appropriate box:
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Preliminary
Proxy Statement
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Confidential,
For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to Section 240.14a-12
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iCAD,
Inc.
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(Name
of Registrant as Specified in Its Charter)
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(Name
of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
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Payment
of Filing Fee (Check the appropriate
box):
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No
fee required
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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Aggregate
number of securities to which transaction applies:
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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maximum aggregate value of transaction:
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Fee
paid previously with preliminary materials.
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box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its
filing.
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previously paid:
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Schedule or Registration Statement No.:
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iCAD,
Inc.
98
Spit Brook Road, Suite 100
Nashua,
New Hampshire 03062
May 4,
2009
Dear
Fellow Stockholders:
You are
cordially invited to attend iCAD, Inc’s Annual Meeting of Stockholders which
will be held on Tuesday, June 23, 2009, at 11:00 A.M. (local time), at the
Marriott Courtyard New York Manhattan/Midtown East, Empire Room, 866 Third
Avenue (between 52
nd
and
53
rd
Street), New York NY 10022
.
The
Notice of Annual Meeting and Proxy Statement, which follow, describe the
business to be conducted at the meeting.
Your vote
is very important. Whether or not you plan to attend the meeting in
person, we will appreciate a prompt submission of your vote. We hope
to see you at the meeting.
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Cordially,
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Kenneth
Ferry
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President
and Chief Executive
Officer
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iCAD,
Inc.
98
Spit Brook Road, Suite 100
Nashua,
New Hampshire 03062
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON JUNE 23, 2009
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 Tuesday, June 23, 2009, at 11:00 A.M.
(local time), at the Marriott Courtyard New York Manhattan/Midtown East, Empire
Room, 866 Third Avenue (between 52
nd
and
53
rd
Street), New York NY 10022, for the following purposes:
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1.
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To
elect seven directors for a one-year term and until their respective
successors have been duly elected and
qualified;
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2.
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To
consider and vote upon the proposal to amend the iCAD, Inc. 2007 Stock
Incentive Plan to increase the number of shares of Common Stock authorized
for issuance by 3,000,000 shares from 2,250,000 to 5,250,000 shares;
and
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3.
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To
transact such other business as may properly come before the meeting or
any adjournment or adjournments
thereof.
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Only
stockholders of record at the close of business on May 1, 2009 are entitled to
notice of and to vote at the Annual Meeting or any adjournments
thereof.
Your
Board of Directors believes that the election of the nominees specified in the
accompanying proxy statement as directors at the Annual Meeting is in the best
interests of the Company and its stockholders and, accordingly, unanimously
recommends a vote
“FOR
”
such nominees. Further, the Board believes that the proposed amendment to the
Company’s 2007 Stock Incentive Plan is in the best interests of the Company and
its stockholders and, accordingly, unanimously recommends a vote
“FOR”
such
proposal.
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By
Order of the Board of Directors,
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Darlene
M. Deptula-Hicks
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Executive
Vice President of Finance and Chief
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May
4, 2009
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Financial
Officer, Treasurer and
Secretary
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PLEASE
NOTE THAT ATTENDANCE AT THE ANNUAL 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 23, 2009
This
proxy statement is furnished in connection with the solicitation of proxies by
the Board of Directors of iCAD, Inc. (the "Company", “iCAD”, “we”, “us”, or
“our”) for use at the Annual Meeting of Stockholders (the "Annual Meeting") to
be held on June 23, 2009, including any adjournment or adjournments thereof, for
the purposes set forth in the accompanying Notice of Meeting.
At the
Annual Meeting, the stockholders of the Company will vote on proposals
(1) to elect seven individuals to serve as directors, (2) to approve
an amendment to the Company’s 2007 Stock Incentive Plan to increase the number
of shares of its common stock, par value $.01 per share (the “Common Stock”)
authorized for issuance under the plan by 3,000,000 shares (from 2,250,000 to
5,250,000 shares), and (3) any other matters properly brought before the Annual
Meeting or any adjournment or adjournments thereof.
Notice of
Electronic Availability of Proxy Statement and Annual Report.
As permitted by rules
adopted by the United States Securities and Exchange Commission (the “SEC”), we
are making this proxy statement and our annual report to stockholders for the
fiscal year ended December 31, 2008 available to our stockholders electronically
via the Internet instead of mailing a printed copy of these materials to each
such stockholder. On or about May 11, 2009, we will mail to our
stockholders a notice containing instructions on how to access this proxy
statement and our annual report to stockholders and vote online (the “Notice”).
If you receive a Notice by mail, you will not receive a printed copy of the
proxy materials in the mail. The Notice instructs you on how to access and
review all of the important information contained in the proxy statement and
annual report to stockholders. The Notice also instructs you on how you may
submit your proxy over the Internet. If you receive a Notice by mail and would
like to receive a printed copy of our proxy materials, you should follow the
instructions for requesting such materials included in the Notice.
If your shares are held in the name of a
bank, broker or other holder of record, you will receive i
nstructions from the holder of record.
You must follow the instructions of the holder of record in order for your
shares to be voted. Internet voting also will be offered to stockholders owning
shares through certain banks and brokers. If your shares are
n
ot registered in your own name and you
plan to vote your shares in person at the Annual Meeting, you should contact
your broker or agent to obtain a legal proxy or broker
’
s proxy card and bring it to the Annual
Meeting in order to vote.
Important
Notice Regarding Internet Availability of Proxy Materials for the Annual
Meeting: This Proxy Statement and the Company’s Annual Report to
Stockholders are available for review on the Internet at
http://www.cstproxy.com/icadmed/2009. Instructions on how to access and review
the materials on the Internet can also be found on the Notice, or as applicable,
on the accompanying proxy card.
Proxies
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 Annual
Meeting and voting in person.
The
address and telephone number of the principal executive office of the Company
is:
98 Spit
Brook Road,
Suite
100
Nashua,
NH 03062
Telephone
No.:
(603)
882-5200
If
your shares are held in street name through a broker, bank, or other nominee,
you need to contact the record holder of your shares regarding how to revoke
your proxy.
OUTSTANDING
STOCK AND VOTING RIGHTS
Only
holders of the Company’s Common Stock at the close of business on May 1, 2009,
(the “Record Date”) are entitled to receive notice of and to vote at the Annual
Meeting. As of the Record Date, the Company had 45,358,375 shares of
Common Stock outstanding. Each share of Common Stock is entitled to
one vote on all matters. There are no cumulative voting
rights.
VOTING
PROCEDURES
The directors will be elected by the
affirmative vote of the holders of a plurality of the shares of Common Stock
that are present in person or represented by proxy at the Annual Meeting,
provided a quorum is present. Therefore, the nominees receiving the
greatest number of votes cast at the meeting will be elected as directors of the
Company. 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 outstanding as of the Record Date are present in person or
represented by proxy at the Annual Meeting. All other matters at the
Annual Meeting will be decided by the affirmative vote of the holders of a
majority of the votes represented by the shares of Common Stock cast with
respect thereto, provided a quorum is present.
Votes
will be counted and certified by one or more Inspectors of Election who are
expected to be an employee of either Continental Stock Transfer & Trust
Company, the transfer agent for the Common Stock or a representative of the
Company’s legal counsel. 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. Abstentions and broker non-votes will have no effect on the election of
directors. For purposes of determining approval of any other
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. If a proxy is executed but no instructions as to how to
vote are given the persons named as proxies in the accompanying proxy card
intend to vote the shares represented in favor of the proposed nominees for
director listed below and in favor of the proposal to amend the Company’s 2007
Stock Incentive Plan described below.
PROPOSAL
I
ELECTION
OF DIRECTORS
The
Company’s Certificate of Incorporation provides for the annual election of all
of its directors. Currently, at each Annual Meeting of Stockholders,
directors are elected for a one year term. Each director will be elected to
serve during his or her 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 directors of the Company, of the seven 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.
All
nominees have been recommended by the Company’s Nominating and Corporate
Governance Committee.
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.
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Principal Occupation
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Director
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Name
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Age
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or Employment
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Since
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Dr.
Lawrence
Howard
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56
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General Partner of Hudson
Ventures, LP
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2006
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Kenneth
Ferry
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55
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President and Chief Executive
Officer of iCAD, Inc.
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2006
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Rachel Brem,
MD
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50
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Professor and Vice Chairman in the
Department of Radiology at The George Washington University Medical Center
and Associate Director of the George Washington Cancer
Institute
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2004
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Anthony
Ecock
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47
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Senior Operating Executive of
Welsh, Carson, Anderson & Stowe
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2008
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Steven
Rappaport
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60
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Partner of RZ Capital,
LLC
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2006
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Maha Sallam,
PhD
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42
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Vice President of the CT Program
of iCAD, Inc.
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2002
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Elliot Sussman,
MD
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57
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President and Chief Executive
Officer of Lehigh Valley Health Network
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2002
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Dr. Lawrence Howard
was
appointed Chairman of the Board in 2007 and has been a director of the Company
since November 2006. Dr. Howard has been, since March 1997, a general partner of
Hudson Ventures, L.P. (formerly known as Hudson Partners, L.P.), a limited
partnership that is the general partner of Hudson Venture Partners, L.P.
(“HVP”), a limited partnership that is qualified as a small business investment
company. Since March 1997, Dr. Howard has also been a managing
member of Hudson Management Associates LLC, a limited liability company that
provides management services to HVP. Since November 2000, Dr. Howard has
been a General Partner of Hudson Venture Partners II, and a limited partner
of Hudson Venture II, L.P. He was a founder and has been since November
1987, and continues to be, a director of Presstek, Inc. (“Presstek”), a public
company which has developed proprietary imaging and consumables technologies for
the printing and graphic arts industries, and served in various officer
positions at Presstek from October 1987 to June 1993, lastly as its Chief
Executive Officer.
Kenneth Ferry
has served as
the Company’s President and Chief Executive Officer since May
2006. He has over 25 years of experience in the healthcare technology
field, with more than 10 years experience in senior management positions. Prior
to joining the Company, from October 2003 to May 2006, Mr. Ferry was Senior Vice
President and General Manager for the Global Patient Monitoring business for
Philips Medical Systems, the market leader in the medical diagnostic imaging and
patient monitoring systems industry. In this role he was responsible for
Research & Development, Marketing, Business Development, Supply Chain and
Manufacturing, Quality and Regulatory, Finance and Human
Resources. From September 2001 to October 2003, Mr. Ferry served as
Senior Vice President for Philips Medical Systems Division. From 1983
to 2001, Mr. Ferry served in a number of management positions with Hewlett
Packard Company, a global provider of products, technologies, software solutions
and services to individual consumers and businesses and Agilent Technologies,
Inc., a provider of core bio-analytical and electronic measurement solutions to
the communications, electronics, life sciences and chemical analysis
industries.
Dr. Rachel Brem
is currently
the Professor and Vice Chairman in the Department of Radiology at The George
Washington University Medical Center and Associate Director of the George
Washington Cancer Institute. Dr. Brem has been at the George
Washington University since 2000. From 1991 to 1999 Dr. Brem was at
the John Hopkins Medical Institution where she introduced image guided minimally
invasive surgery and previously was the Director of Breast
Imaging. Dr. Brem is a nationally and internationally recognized
expert in new technologies for the improved diagnosis of breast cancer and has
published over 80 manuscripts.
Anthony Ecock
has led the
Resources Group at the private equity investment firm, Welsh, Carson, Anderson
& Stowe ("WCAS"), since 2007. Mr. Ecock has over 10 years of
experience in the healthcare technology field. At WCAS, Mr. Ecock leads a team
that is responsible for helping portfolio companies identify and implement
growth, earnings and cash flow improvement opportunities. Before joining WCAS,
he served as Vice President and General Manager of General Electric Healthcare’s
Enterprise Sales organization, from 2003 to 2007. From 1999 to 2003
he served as General Manager of Hewlett Packard’s Patient Monitoring Division,
which was subsequently spun off as part of Agilent Technologies and was then
sold to Koninklijke Philips Electronics, N.V., where Mr. Ecock was named a
Senior Vice President. Prior to that, Mr. Ecock worked at the
consulting firm of Bain & Company for 12 years where he was a Partner,
Practice Leader for Information Technology and Global Program Director for
Consultant Training.
Steven Rappaport
has been a
partner of RZ Capital, LLC since July 2002, a private investment firm that also
provides administrative services for a limited number of clients. From March
1995 to July 2002, Mr. Rappaport was Director, President and Principal of
Loanet, Inc., an online real-time accounting service used by brokers and
institutions to support domestic and international securities borrowing and
lending activities. Loanet, Inc. was acquired by SunGard Data Systems in May
2001. From March 1992 to December 1994, Mr. Rappaport was Executive Vice
President of Metallurg, Inc. (“Metallurg”), a producer and seller of high
quality specialty metals and alloys, and President of Metallurg’s subsidiary,
Shieldalloy Corporation. He served as Director of Metallurg from 1985 to 1998.
From March 1987 to March 1992, Mr. Rappaport was Director, Executive Vice
President and Secretary of Telerate, Inc. (“Telerate”), an electronic
distributor of financial information. Telerate was acquired by Dow Jones over a
number of years commencing in 1985 and culminating in January 1990, when it
became a wholly-owned subsidiary. Mr. Rappaport practiced corporate and tax
law at the New York law firm of Hartman & Craven from August 1974 to
March 1987. He became a partner in the firm in 1979. Mr. Rappaport is
currently serving as an independent director of Presstek and a number of open
and closed end American Stock Exchange funds of which Credit Suisse serves as
the investment adviser.
Maha Sallam, PhD
has been a
Vice President of the Company since July 2002. From 1997 until the
Company’s acquisition of Intelligent Systems Software, Inc. (“ISSI”) in July
2002, Dr. Sallam served as Director and as President then Executive Vice
President of Regulatory Affairs and Clinical Testing at ISSI, and was one
of ISSI’s founders. Dr. Sallam served iCAD as Vice President of Regulatory
Affairs until 2003. Subsequently, she was responsible for the Company’s Advocacy
and Research Grants program. In 2005, Dr. Sallam took responsibility for new
product initiatives in the Computed Tomography (CT) area and continues to serve
as the Company’s Vice President for the CT Program. Dr. Sallam holds a Ph.D. in
Computer Engineering from the University of South Florida.
Dr. Elliot Sussman
is
currently President and Chief Executive Officer of Lehigh Valley 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.
DIRECTOR
INDEPENDENCE
The Board
has determined that Drs. Brem and Sussman and Messrs. Rappaport and Ecock, meet
the director independence requirements under the applicable Marketplace Rule of
The NASDAQ Stock Market LLC (“NASDAQ”). In reaching this conclusion
the Board reviewed the definition of independence under the applicable NASDAQ
Marketplace Rule and the answers to annual questionnaires completed by each of
the independent directors and also considered the investments in convertible
notes of the Company made by certain of the independent directors during
2006.
BOARD
OF DIRECTORS MEETINGS AND BOARD COMMITTEES
During
the fiscal year ended December 31, 2008, the Board of Directors held six
meetings. In addition, the Board took action by unanimous written
consent in lieu of meetings. During 2008, each of the Company’s directors,
attended at least seventy-five percent of the aggregate of: (1) the total number
of meetings of the Board of Directors; and (2) the total number of meetings of
all Board committees on which they served.
The
Company’s current policy strongly encourages that all of its Directors attend
all Board and Committee meetings and the Company’s Annual Meeting of
Stockholders, absent extenuating circumstances that would prevent their
attendance. Five of the seven directors attended last year's Annual Meeting of
Stockholders.
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 NASDAQ Marketplace Rules. In addition, the Board has
determined that each member of the Audit Committee meets the independence
requirements of applicable SEC rules. The Audit Committee and the Compensation
Committee operate under written charters adopted by the Board of Directors. A
copy of the Audit Committee charter is attached as Exhibit A to this Proxy
Statement. A copy of the Compensation Committee charter is attached as Exhibit B
to this Proxy Statement. The Nominating and Corporate Governance Committee
adopted a charter, a copy of which was filed as Exhibit B to our Definitive
Proxy Statement on Schedule 14A filed with the SEC on May 16, 2008. None
of the charters referred to above is available on our website.
The Audit
Committee, among other things, selects the firm to be appointed as the
independent registered public accounting firm to audit our 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 six meetings during 2008. The
Audit Committee currently consists of, Mr. Rappaport, Chairperson, and Mr. Ecock
and Dr. Sussman. The Board of Directors has determined that Mr.
Rappaport qualifies as the Audit Committee’s “financial expert” under applicable
SEC rules and determined that each member met the criteria of "independent
director" under applicable NASDAQ and SEC rules
The
Nominating and Corporate Governance Committee is responsible for, among other
things, developing and recommending to the Board corporate governance policies
for iCAD, establishing procedures for the director nomination process and
recommending nominees for election to the Board. The Nominating and
Corporate Governance Committee held one meeting during 2008. The
Nominating and Corporate Governance Committee currently consists of, Mr. Ecock,
Chairperson, and Dr. Brem each of whom was determined by the Board to have met
the criteria of an "independent director" under applicable NASDAQ
rules.
The
Compensation Committee of the Board of Directors is responsible for, among other
things, assisting the Board in overseeing our executive compensation strategy
and reviewing and approving the compensation of our executive officers and
administering our various stock option and incentive plans. Under our
2007 Stock Incentive Plan certain of the administrative functions may be
delegated to our Chief Executive Officer or Chief Financial
Officer. The Compensation Committee held four meetings during
2008. The Compensation Committee currently consists of, Dr. Sussman,
Chairperson, and Dr. Brem. The Board of Directors determined that
each met the criteria of an "independent director" under applicable NASDAQ
rules.
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange
Act of 1934 (“Exchange Act”) requires certain of our officers and our directors,
and persons who own more than 10 percent of a registered class of our 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 us with copies of all Section 16(a) forms they
file.
Based solely on our review of copies of
such forms received by us, we believe that during the year ended December 31,
2008, all filing requirements applicable to all of our officers, directors, and
greater than 10% beneficial stockholders were timely complied with,
except for Dr. Sussman who filed a late Form 4 with respect to purchases
of Common Stock made on November 21, 2008 and a late Form 4 for Maha Sallam with
respect to grants of stock options and restricted stock on January 24,
2008.
CODE
OF BUSINESS CONDUCT AND ETHICS
iCAD has
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.
98 Spit
Brook Road, Suite 100
Nashua,
NH 03062
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, 98 Spit Brook Road, Suite 100, Nashua,
NH 03062. 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
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., 98 Spit Brook, Suite 100, Nashua, NH 03062.
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, and
complies with the procedures set forth below under “Deadline and Procedures for
Submitting Board Nominations”. 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 applicable NASDAQ Rules, or, alternatively, a statement that
the recommended candidate would not be so barred. Candidates recommended by
stockholders that comply with these procedures will receive the same
consideration that candidates recommended by the Committee receive. 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
iCAD. 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 our
industry, (iv) relevant experience and knowledge of corporate governance
practices, and (v) expertise in an area relevant to iCAD. Such persons
should not have commitments that would conflict with the time commitments of a
Director of iCAD. Such persons shall have other characteristics
considered appropriate for membership on the Board of Directors, as determined
by the Nominating and Corporate Governance Committee.
DEADLINE
AND PROCEDURES FOR SUBMITTING BOARD NOMINATIONS
Our
Amended and Restated By-laws, requires a stockholder wishing to nominate a
candidate for election to our Board of Directors at a meeting of our
stockholders to give written notice, containing the required information
specified above, that must be delivered personally to or mailed to and received
by our Corporate Secretary at our principal executive offices (currently located
at 98 Spit Brook Road, Suite 100, Nashua, NH 03062), not less than 50 days nor
more than 75 days prior to the meeting; provided, however, that, in the event
that we give less than 65 days notice or prior public disclosure of the date of
the meeting to our stockholders, notice by the stockholder to be timely must be
received by our Corporate Secretary not later than the close of business on the
tenth day following the earlier of (i) the day on which such notice of the date
of the meeting was mailed or (ii) such public disclosure was made. Any such
notice must set forth: (i) the name and record address of the stockholder who
intends to make the nomination and of the person or persons to be nominated;
(ii) the class or series and number of shares of our stock which are held of
record, owned beneficially and represented by proxy by such stockholder as of
the record date for the meeting (if such date shall then have been made publicly
available) and of the date of such notice; (iii) a representation that the
stockholder intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice; (iv) a description of all
arrangements or understandings between such stockholder and each nominee and any
other person or persons (naming such person or persons) under which the
nomination or nominations are to be made by such stockholder; (v) the name, age,
business address and residence address of the nominee and such other information
regarding each nominee proposed by such stockholder as would be required to be
included in a proxy statement filed by us pursuant to the proxy rules of the
SEC, had each nominee been nominated, or intended to be nominated by our Board
of Directors; and (vi) the written consent of each nominee to serve as our
director, if so elected.
COMPENSATION
OF DIRECTORS
Compensation
of Directors is determined by the Board in conjunction with recommendations made
by the Compensation Committee. The following is the 2008 compensation paid to
those members of the Board who are not employed by us or any of our subsidiaries
and were not employed by us or any of our subsidiaries at any time during 2008,
our “Non-Employee Directors”.
2008
Non-Employee Director Compensation:
Cash
Compensation
a)
Amounts.
For
2008, each Non-Employee Director received an annual retainer of $18,000 except
for the Chairperson of the Board who received an annual retainer of
$35,000. In addition to the $18,000 retainer, the Chairperson of the
Audit Committee received an annual fee of $7,500 and the Chairperson of the
Compensation Committee received an annual fee of $3,000. Our designated
“financial expert” also received an additional annual fee of $5,000 unless the
financial expert is also the Chairperson of the Audit Committee and received the
$7,500 fee for acting as such Chairperson.
Additionally,
for each Board or Board Committee meeting attended in person, each Non-Employee
Director received $1,000. For each Board meeting attended
telephonically, each Non-Employee Director received $1,000. For each Board
Committee meeting attended telephonically, each Non-Employee Director received
$500.
b)
Payment
Dates
. The Non-Employee Director annual board retainer,
Committee Chair retainer and the designated financial expert retainer was paid
quarterly, in arrears on the 20th day of April, July, October and January of
each year (or if such date was not a business day on the next following business
day). The $1,000 and/or $500 fees for attendance at Board or Board
Committee meetings was also paid in arrears on the 20th day of April, July,
October and January of each year (or if such date was not a business day on the
next following business day) for meetings attended in the immediately preceding
quarter (each a “payment date”).
c)
Election to receive options
in lieu of cash fees
.
In lieu
of receiving the cash payments set forth above, each Non-Employee Director was
entitled to choose to receive five-year non-qualified stock options to purchase
that number of shares of our Common Stock that has a Black Sholes value (as
determined by us using the same methodology we use to calculate options for
purposes of our audited financial statements) on a given payment date equal to
the value of the cash fees the director would otherwise be entitled to. An
election, once made, was irrevocable and covered all of the cash fees for the
ensuing year. Any option issued under this election vested
immediately upon the date of issuance and had an exercise price equal to the
fair market value of the common stock on the applicable payment date
and were not subject to forfeiture as a
result of the director ceasing to act as a director of
iCAD.
In 2008, we had four non-employee directors elect to
receive options in lieu of cash fees.
Equity
Compensation
a.)
Initial Awards of Options
for New Directors.
Any
person who is elected or appointed as an Non-Employee Director and who has not
served as our director in the prior calendar year automatically receives, on the
date of election or appointment to the Board, an award of five-year immediately
exercisable non-qualified stock options to purchase 25,000 shares of Common
Stock at an exercise price equal to the fair market value of Common Stock on the
date of grant
and
that
will not be subject to forfeiture as a
result of the director ceasing to act as our director
.
b.)
Quarterly Option
Awards.
On each
payment date in 2008, each Non-Employee Director was granted five-year
immediately exercisable non-qualified options to purchase shares of our Common
Stock. The options were payable in arrears for Board or Board Committee services
rendered by the Non-Employee Director in the three month period immediately
preceding the date of the award or “Service Period”. The exercise price of these
options are equal to the fair market value of the Common Stock on the applicable
quarterly payment date and are not subject to forfeiture as a result of the
director ceasing to act as our director. A total of 3,750 options
were granted to each director who served for the entire Service Period. Any
Non-Employee Director who served for only a portion of the Service Period
received proportionately fewer options.
The
following table provides information on director compensation paid by us during
2008. An executive officer who serves on our Board does not receive
additional compensation for serving on the Board.
DIRECTOR
COMPENSATION
|
|
|
|
|
|
|
|
|
|
|
|
Name
(3)
|
|
Fees earned
or
paid in
cash
(1)
($)
|
|
|
Option
Awards
(2)
($)
|
|
|
Total
($)
|
|
Dr.
Lawrence Howard
|
|
|
41,000
|
|
|
|
13,292
|
|
|
|
54,292
|
|
Dr.
Rachel Brem
|
|
|
-
|
|
|
|
38,292
|
|
|
|
38,292
|
|
Anthony
Ecock
|
|
|
16,121
|
|
|
|
9,581
|
|
|
|
25,702
|
|
James
Harlan
(4)
|
|
|
-
|
|
|
|
20,543
|
|
|
|
20,543
|
|
Steven
Rappaport
|
|
|
-
|
|
|
|
47,791
|
|
|
|
47,791
|
|
Dr. Elliot Sussman
|
|
|
-
|
|
|
|
42,791
|
|
|
|
42,791
|
|
|
(1)
|
These
amounts do not include fees that were earned but paid in options pursuant
to the election by certain directors to receive options in lieu of cash
fees.
|
|
(2)
|
The
amounts included in the “Option Awards” column represent the compensation
cost recognized by us in 2008 related to stock option awards to directors,
computed in accordance with SFAS No. 123R. For a discussion of
valuation assumptions, see Note 5 to our consolidated financial statements
contained in our Annual Report on Form 10-K for the year ended December
31, 2008 (“2008 Form 10-K”). All options granted to directors
in 2008 vested immediately. The amounts included options that
were issued in lieu of cash fees pursuant to an election made by certain
of the directors.
|
|
(3)
|
As
of December 31, 2008, the aggregate number of unexercised stock
options held by each person who was a Non-Employee director was as
follows: Dr. Howard - 51,250; Dr. Brem – 138,195; Mr. Ecock – 32,500;
Mr. Rappaport - 76,861; Dr. Sussman -
103,536.
|
|
(4)
|
Mr.
James Harlan’s term as one of our directors expired at our Annual Meeting
of Stockholders held on June 17,
2008.
|
2009
Non-Employee Director Compensation:
On
November 16, 2008, our Compensation Committee and Board of Directors agreed to
continue to compensate our Non-Employee Directors in 2009 at the same rate as
the 2008 compensation discussed above and will review it
periodically.
EXECUTIVE
OFFICERS
All
officers serve at the direction of our Board of Directors. The Board
elects our officers on an annual basis.
In
addition to Mr. Kenneth Ferry, our President and Chief Executive Officer, our
other executive officers are Ms. Darlene Deptula-Hicks, our Executive Vice
President of Finance and Chief Financial Officer, Mr. Jeffrey Barnes, our Senior
Vice President of Sales, Ms. Stacey Stevens, our Senior Vice President of
Marketing and Strategy and Mr. Jonathan Go, our Senior Vice President of
Research and Development.
Darlene Deptula-Hicks,
51,
has served as
the Company’s Executive Vice President of Finance and Chief Financial Officer
and Treasurer since September 2006. She has more than 25 years
experience in financial management within the medical device and high technology
industries. Prior to joining the Company, from January 2002 to
February 2006, Ms. Deptula-Hicks served as Executive Vice President and Chief
Financial Officer and Treasurer of ONI Medical Systems, Inc., a venture
capital-backed designer and manufacturer of high-field diagnostic imaging
systems. From 1998 to 2001, Ms. Deptula-Hicks was Executive Vice President and
Chief Financial Officer and Treasurer of Implant Sciences Corporation, an early
stage medical device company that had its initial public offering (“IPO”) in
June of 1999. Ms. Deptula-Hicks led the pre-IPO and post-IPO activities for the
company. Ms. Deptula-Hicks has also held various senior financial and
accounting positions at Abiomed, Incorporated; GCA Corporation; Edwards High
Vacuum International and Puritan Bennett Corporation. Ms. Deptula-Hicks also
currently serves on the Board of Directors and as Chair of the Audit Committee
of USfalcon, Inc., a private information technology and professional services
company serving military, federal and commercial customers worldwide. Ms.
Deptula-Hicks previously served on the Board of Directors and as Chair of the
Audit Committees of IMCOR Pharmaceutical Company, a public biotech company and
Technest Holdings, Inc. a public defense and homeland security
company. Ms. Deptula-Hicks received her Bachelor of Science degree in
Accounting from New Hampshire College and her MBA degree from Rivier
College.
Jeffrey Barnes,
47, has
served as the Company’s Senior Vice President of Sales since May
2006. For the 17 years prior to joining the Company Mr. Barnes served
in a variety of sales and marketing management positions with Philips Medical
Systems, Agilent Technologies, Inc. and Hewlett Packard Healthcare Solutions
Group (which was acquired in 2001 by Philips Medical Systems). From
November 2002 to May 2006 he was Vice President Sales and National Sales Manager
for Cardiac Resuscitation Solutions at Philips Medical Systems, where he worked
closely with iCAD’s Chief Executive Officer, Kenneth Ferry. Mr.
Barnes was responsible for sales and service operations at Philips’
market-leading defibrillation field organization. From May 2000 to
November 2002, Mr. Barnes served as Vice President of Marketing, Americas, for
the Cardiac and Monitoring Systems unit of Hewlett-Packard/Agilent and Philips
Medical Systems. He was responsible for all marketing activities and
certain direct sales activities for the North and South American field
operation. Mr. Barnes earned a Bachelor of Arts degree in Economics
from St. Lawrence University and an MBA degree from New York University’s
Leonard N. Stern School of Business.
Stacey Stevens,
41, has
served as the Company’s Senior Vice President of Marketing and Strategy since
June 2006. During the past 16 years, Ms. Stevens has served in a variety of
sales, business development, and marketing management positions with Philips
Medical Systems, Agilent Technologies, Inc. and Hewlett Packard's Healthcare
Solutions Group (which was acquired in 2001 by Philips Medical Systems). From
February 2005 until joining the Company she was Vice President, Marketing
Planning at Philips Medical Systems, where she was responsible for the
leadership of all global marketing planning functions for Philips' Healthcare
Business. From 2003 to January 2005, she was Vice President of Marketing for the
Cardiac and Monitoring Systems Business Unit of Philips where she was
responsible for all marketing and certain direct sales activities for the
America's Field Operation. Prior to that, Ms. Stevens held several key marketing
management positions in the Ultrasound Business Unit of Hewlett-Packard/Agilent
and Philips Medical Systems. Ms. Stevens earned a Bachelor of Arts Degree in
Political Science from the University of New Hampshire, and an MBA from Boston
University’s Graduate School of Management.
Jonathan Go,
46, has served
as the Company’s Senior Vice President of Research and Development since October
2006. Mr. Go brings more than twenty years of software development
experience in the medical industry to his position with the
Company. From February 1998 to May 2006, Mr. Go served as Vice
President of Engineering at Merge eMed Inc., a provider of Radiology Information
System and Picture Archiving and Communication Systems solutions for imaging
centers, specialty practices and hospitals. At Merge eMed, Mr. Go was
responsible for software development, product management, testing, system
integration and technical support for all of eMed's products. From July 1986 to
January 1998, Mr. Go held various development roles at Cedara Software Corp. in
Toronto culminating as Director of Engineering. Cedara Software is focused on
the development of custom engineered software applications and development tools
for medical imaging manufacturers. At Cedara Mr. Go built the workstation
program, developing multiple specialty workstations that have been adopted by a
large number of partners. Mr. Go earned a Bachelor of Science in Electrical
Engineering from the University of Michigan and a Masters of Science in
Electrical Engineering and Biomedical Engineering from the University of
Michigan.
EXECUTIVE
COMPENSATION
The
following discussion covers the compensation arrangements of our current
principal executive officer, our current principal financial officer and our
current three other executive officers (the “Named Executive Officers”) and
includes a general discussion and analysis of our compensation program for our
executive officers as well as a series of tables containing specific
compensation information for our Named Executive Officers. This discussion
contains forward looking statements that are based upon our current executive
compensation program, policies and methodologies. We may make changes in this
program and these policies and methodologies in the future, and if made, we
could have materially different compensation arrangements in the
future
Compensation
Discussion and Analysis
This
Compensation Discussion and Analysis is intended to provide information about
our compensation objectives, policies and practices for our Named Executive
Officers. The Compensation Committee of our Board of Directors oversees and
approves all compensation decisions relating to our Named Executive
Officers.
We
compete in a competitive market for personnel, both for executive and for
non-executive employees. The healthcare industry in general is highly
competitive and characterized by continual change and improvement in technology.
Desirable candidates for employment may also have opportunities from other
attractive healthcare or high technology employers. Our long term
success depends on our ability to continue to develop and market innovative
Computer-Aided Detection systems and advance image analysis and workflow
products worldwide that address important medical needs. Our ability to compete
effectively depends to a large extent on our success in identifying, recruiting,
developing and retaining key management personnel. A key element of our
compensation strategy is the design and implementation of an executive
compensation program that provides competitive and differentiated levels of pay
based on corporate and individual performance and reinforces the alignment of
interests of the members of our executive management team with those of our
stockholders.
While our
compensation program includes short-term elements, such as annual base salary,
and generally annual incentive cash bonuses, a significant aspect of our
compensation program includes longer term elements such as equity-based
incentive awards through grants of stock options or other stock-based awards,
primarily restricted and unrestricted stock grants. We believe that our
compensation program provides an overall level of compensation that is
competitive to that offered in our industry and with executives in other public
companies of similar size within the healthcare industry.
The
Compensation Committee intends to continue its strategy of compensating
executives through programs that are linked to our achievement of our business
goals and objectives, which may include among others, certain financial goals,
such as revenue and pre-tax profitability, and individual executives are further
rewarded for exceeding those goals and for personal performance. The
Compensation Committee believes that the total compensation of executive
officers should reflect their leadership abilities, initiative, the scope of
their responsibilities and our success and the past and expected future
contribution of each executive to that success. The Compensation Committee seeks
to foster a performance-oriented environment by tying certain compensation
components to the achievement of performance targets that are important to us
and to our efforts to increase stockholder value. We believe that our
compensation program contributes to our employees’ and Named Executive Officers’
incentive to execute on our goals.
Objectives
of our Executive Compensation Program
The Compensation Committee strives to
ensure that our executive compensation programs will enable us to attract and
retain superior executive talent and motivate our executives to execute our
business strategy and to assist us in achieving our short-term and long-term
growth and earnings goals and increase stockholder value. The primary objectives
of our executive compensation program are to:
|
·
|
attract,
retain and fairly compensate highly talented and experienced executives in
the healthcare industry for us to achieve and expand our business goals
and objectives;
|
|
·
|
ensure
executive compensation is aligned with specific performance
objectives;
|
|
·
|
ensure
that our executive compensation plans are designed to encourage our
executive officers to achieve and exceed established performance
targets;
|
|
·
|
promote
the achievement of strategic and financial performance measures by tying
cash and equity incentives to the achievement of measurable corporate and
individual performance goals, both short term and long term;
and
|
|
·
|
align
executive officers’ incentives with the creation of stockholder
value.
|
In May
2008 the Compensation Committee retained the consulting firm Pearl Meyer and
Partners (“Pearl Meyer”) as its independent compensation consultant to review
our compensation programs for 2008 and to advise them on compensation matters
and trends in our industry relating to our executive officers and other
employees.
The
Compensation Committee and the Board of Directors evaluate the performance of
our President/Chief Executive Officer and rely on input from our President/Chief
Executive Officer as it relates to other executive officers. Our goal is to
compensate at levels we believe are competitive with executives in other
companies of similar size and growth patterns within the healthcare and high
technology industries. The Compensation Committee, along with the
data provided from their compensation consultant and input from our
President/Chief Executive Officer, makes decisions regarding the forms and
amounts of compensation for our executive officers.
Compensation
Program Benchmarking
The study performed by Pearl Meyer in
May 2008 included an executive compensation competitive assessment and long term
incentive strategy review for use by the Compensation Committee in its 2008
executive compensation decisions. They assessed the competitiveness
of our executive compensation program utilizing a peer group of the following
twenty-two companies: Abiomed, Inc., AFP Imaging Corporation, Amicas, Inc.,
Aspect Medical Systems, Inc., ATS Medical, Inc., Bio Imaging Technologies, Inc.,
BioSphere Medical, Inc., Bovie Medical Corporation, Clarient, Inc., Emageon,
Inc., Endocare, Inc., IRIDEX Corporation, LeMaitre Vascular, Inc., Merge
Healthcare, Inc., Micrus Endovascular Corporation, Natus Medical, Inc.,
NeuroMetrix, Inc., NMT Medical, Inc., NxStage Medical, Inc., Stereotaxis, Inc.,
Vital Images, Inc. and VNUS Medical Technologies, supplemented by published
surveys.
In
February 2009 the Compensation Committee of the Board of Directors again engaged
Pearl Meyer to review the proposed 2008 bonus payments for our Named Executive
Officers. As part of the review Pearl Meyer outlined the current
economic environment and how it is relating to companies in general with respect
to compensation practices and outcomes. To gain perspective on
proposed bonus payments for 2008, Pearl Meyer provided to the Compensation
Committee general industry research regarding 2008 bonus payments to other
executive officers in the medical device industry, the absolute performance of
iCAD against its stated goals and the relative performance of iCAD against the
peer group companies utilized for compensation comparisons.
Pearl
Meyer advised the Compensation Committee that it had conducted a Trends and
Issues report entitled “Executive Pay in the New Economy”, where they polled
more than 300 board members, executives and human resource professionals across
industries on how the recent market turmoil has effected pay decisions for
executives. In summary, approximately 55% of the respondents expect
to pay their 2008 incentive payouts for executives at “formula” (ie: they do not
expect to make adjustments to formula payouts) and approximately 36% said they
may exercise discretion to pay a bonus that is “below formula” (ie: less than
what executives would have earned based on achievement of the plan’s stated
objectives). Pearl Meyer advised the Compensation Committee that in
addition to looking at overall industry trends, it is as important to review how
the Company performed from an absolute standpoint (ie: based on its internal
targets and performance measurements) as well as from a relative performance
basis (ie: against its peer group).
In
assessing the Company’s performance against goals for 2008, the Compensation
Committee considered that our company performed essentially at
target. Moreover, it noted that our actual financial performance in
2008 was significantly better than 2007 (which was significantly better than
2006). In assessing our financial performance against our peer group
the Compensation Committee noted that we performed in the top quartile for
2008.
As a
result of the Pearl Meyer bonus assessment, our financial results for 2008 and
our performance against our peer group, our Board of Directors, upon
recommendation of the Compensation Committee, approved total 2008 incentive
bonus payments in the amounts of $230,000 for Mr. Ferry, $100,000 for Ms.
Deptula-Hicks, $100,000 for Mr. Barnes, $88,000 for Ms. Stevens and $82,000 for
Mr. Go.
Forms
of Compensation Paid to Executive Officers During 2008
In making
decisions regarding forms and amounts of compensation, the Compensation
Committee considers compensation paid to executive officers at similar levels
and with similar experience and responsibility at public companies in our
industry and in our geographic region that are deemed to be comparable in terms
of revenue, market capitalization, complexity and growth patterns. In
2008 the twenty-two companies listed above comprised this peer
group.
During
the fiscal year ended December 31, 2008 we provided our executive officers with
the following forms of compensation:
|
·
|
Annual
Incentive Bonus Compensation
|
|
·
|
Severance
and Change of Control Benefits; and
|
|
·
|
Retirement
and other Employee Benefits.
|
Base
Salary
Base salary represents amounts paid
during the fiscal year to our Named Executive Officers as direct guaranteed
compensation under their employment agreements for their services to
us. Base salaries are an important element of compensation and are
used to provide a fixed amount of compensation for the executive’s regular work.
The base salaries of executive officers are usually reviewed on an annual basis,
as well as at the time of a promotion or other change in
responsibilities. Generally our goal is to pay our executive officers
at or above the mid point of pay levels for similar positions at public
companies in our industry and in our geographic region that are deemed to be
comparable in terms of revenue, market capitalization, complexity and growth
patterns.
The base
salary of each of our Named Executive Officers was fixed pursuant to the terms
of their respective employment agreements with us which allow for increases as
determined by the Compensation Committee and Board of
Directors. Moreover, when a contract is considered for renewal,
either at or prior to the expiration of its stated term, base salary of the
applicable executive may be increased upon a review of the executive’s
abilities, experience and performance. While increases in salary are generally
based on an evaluation of the individual’s performance and level of pay compared
to comparable companies pay levels for similar positions, the recommendations to
the Board of Directors by the Compensation Committee with respect to base salary
are based primarily on informal judgments reasonably believed to be in our best
interests. Base salaries are used to reward individual performance of each Named
Executive Officer on a day-to-day basis during the year, and to encourage them
to perform at their highest levels. We also use our base salary as an incentive
to attract top quality executives and other management employees from other
companies. Moreover, base salary (and increases to base salary) are intended to
recognize the overall experience, position within our company and expected
contributions of each Named Executive Officer to us and our
goals. Increases in base salaries are based upon individual
performance. Base salary increases can also occur upon the promotion of an
executive.
In June
2008 our Board of Directors, upon the recommendation and approval of the
Compensation Committee of our Board, approved new employment agreements with our
Named Executive Officers which provided for the following base salaries,
effective June 1, 2008: Kenneth Ferry, our President and Chief Executive Officer
- $355,000; Darlene Deptula-Hicks, our Executive Vice President of Finance and
Chief Financial Officer - $235,000; Jeffrey Barnes, our Senior Vice President of
Sales - $215,000; Stacey Stevens, our Senior Vice President of Marketing and
Strategy - $200,000, and Jonathan Go, our Senior Vice President of Research and
Development - $205,000.
On
June
25,
2008, we entered into new employment
agreements, dated as of June 1, 2008, with our five current Named Executive
Officers. Each employment agreement replaces and supersedes the previous
employment agreement entered into from
May 2006 through October 2006
between
us and the named
executive.
We do not have employment agreements with any other
employees.
In
initially determining base salary in 2006 for the Named Executive Officers the
Compensation Committee utilized information obtained from an executive search
firm and elsewhere, utilizing a number of criteria, including executives’
qualifications, experience, responsibility and comparison to other companies of
similar size in the healthcare industry. With respect to the new
employment agreements entered into effective June 1, 2008, the Compensation
Committee also considered the advice received from and study performed by Pearl
Meyer in May 2008, which included an executive compensation competitive
assessment and long term incentive strategy and where they assessed the
competitiveness of our executive compensation program utilizing the peer group
of twenty-two companies listed above under “Compensation Program Benchmarking”.
The material provisions of these employment agreements are discussed in the
narrative following the Summary Compensation Table.
Auto
Allowance
In June 2008, and as part of their
employment agreements, we agreed to pay to our Named Executive Officers an
executive automobile allowance in the amount of $2,200 per month for Mr. Ferry
and $1,500 per month for each of Ms. Deptula-Hicks, Mr. Barnes, Ms. Stevens and
Mr. Go. The executives are responsible for paying all the
expenses of maintaining, insuring and operating their
automobiles. The purpose of providing the allowance is to defray the
Named Executive Officer’s cost of owning and operating an automobile often used
for business purposes; while preventing us from having to own and maintain a
fleet of automobiles and is a taxable benefit for the Named Executive
Officer.
Annual
Incentive Bonus Compensation
Cash
Incentive Bonus
In addition to base salary, the
employment agreements with each of our Named Executive Officers provides each of
them with a contractual right to receive an annual cash incentive bonus payment,
based upon their achieving goals and objectives mutually agreed by the Board of
Directors and the executive. The purpose of such potential additional
cash incentive bonus payments is to provide a direct financial incentive to the
Named Executive Officers to achieve the goals and objectives of our company. As
described in more detail below and under the “Narrative Disclosure to Summary
Compensation Table - Employment Contracts for our Named Executive Officers”
,
the amount of the incentive
bonus payments that each of our Named Executive Officers was eligible to receive
under, and subject to the terms of, their respective employment agreements with
us, during the year ended December 31, 2008 was set in their
employment agreements in June 2008 by our Board of Directors, upon the
recommendation and approval of the Compensation Committee, at 40% (55% for Mr.
Ferry) of their respective base salaries.
The
amount of the potential incentive cash bonus payments for 2008 was to be based
upon our achieving, for the fiscal year ended December 31, 2008, targeted levels
of (i) revenue and (ii) pre-tax earnings (less SFAS 123R stock option
expense). Mr. Ferry, Ms. Deptula-Hicks and Mr. Go were to be measured
100% on pre-tax earnings (less SFAS 123R stock option expense) and Mr. Barnes
and Ms. Stevens were to be measured 25% and 75% respectively, on revenue and
pre-tax earnings (less Statement of Financial Accounting Standards No. 123R
(“SFAS 123R”) stock option expense). The Named Executive Officers
were eligible to receive bonus payments equal to 70% of the maximum
potential amount of their incentive bonus if we achieved 90% of the respective
Target Amounts, with the amount of their incentive bonus increasing by three
percentage points for each one percentage point increase in the respective
Target Amounts achieved by us. While for the nine months ending September 30,
2008, our financial results would have resulted in our performing at (i) 102%
and (ii) 135% respectively, of the two Target Amounts, due primarily to the
deterioration in the general economic conditions in the markets we serve in the
fourth quarter of 2008, our 2008 financial performance resulted in our achieving
approximately (i) 93% and (ii) 90% of the two Target Amounts, respectively,
resulting in our Named Executive Officers earning a portion of the maximum
potential incentive bonus to which they were entitled under the terms of their
respective employment agreements .
In
addition to payments for achieving the Target Amounts, our Named Executive
Officers were eligible to receive
such other cash bonuses and such other
compensation as awarded to the executive by the Board.
The Compensation
Committee and Board also retain the discretion to increase or reduce any
incentive bonus or other payment that otherwise might be payable to any
individual Named Executive Officer based on individual contribution and our
actual performance.
In
determining to recommend that the Board approve the grant of total cash
incentive bonuses to our Named Executive Officers for 2008 that exceeded the
amount related to the achievement of the Target Amounts discussed above, the
Compensation Committee, consulted with Pearl Meyer, assessed our actual
performance against our previously determined goals, our performance in 2008
compared to the prior year, which was significantly better than 2007 (which as
significantly better than 2006) and also assessed our performance against our
peer group in which we performed in the top quartile for 2008. As a
result of this analysis, in addition to the cash incentive payments relating to
the Target Amounts, the Compensation Committee and the Board approved the
payment of cash incentive bonuses to the Named Executive Officers for 2008 in
the amounts set forth under the bonus column in the Summary Compensation Table
below. As a percentage of their base salaries, for 2008 the total
amount of cash bonus payments (reflected as non-equity incentive plan
compensation and bonuses under the Summary Compensation table
below) for 2008 equaled 65% for Mr. Ferry, 43% for Ms. Deptula-Hicks,
47% for Mr. Barnes, 44% for Ms. Stevens and 40% for Mr. Go.
Equity Incentives
The Named Executive Officers
’
and our other employees are eligible to
receive equi
ty incentive
awards under our equity incentive plans. On occasion, we grant
options outside of a formal stockholder approved plan to new employees,
including new executive officers, as an inducement to their employment with
us. The primary goal of the u
s
e of equity incentives is to create
long-term value for stockholders by providing the Named Executive Officers with
an additional incentive to work towards maximizing stockholder value. The
Compensation Committee views equity incentive awards as one of th
e
more important components of our
long-term, performance-based compensation philosophy. The grant of equity
incentive awards to executive officers encourages equity ownership in iCAD and
closely aligns the Named Executive Officers
’
interests to the intere
s
ts of all the
stockholders.
Equity
awards may take the form of stock options, restricted stock, unrestricted stock,
stock units including restricted stock units, performance awards and other
stock-based awards. There is no formula used to determine the
type or amount of equity incentive awards granted in any given
year. The mix of cash and equity-based awards, as well as the types
and amounts of equity-based awards, granted to our Named Executive Officers has
varied and may vary in the future from year to year. Consideration may be given
to various factors, such as the relative merits of cash and equity as a device
for retaining and motivating the Named Executive Officers, the practices of
other companies, our performance, individual performance, an individual’s pay
relative to others, contractual commitments pursuant to employment or other
agreements, and the value of already-outstanding grants of equity in determining
the size and type of future equity-based awards that may be granted in the
future to each Named Executive Officer.
These awards are generally provided
through initial grants at or near the date of hire, through subsequent annual
grants and in connection to extensions of existing employment agreements or
entry into new employment agreemen
ts. Equity incentive awards granted to
the Named Executive Officers
’
and other employees in the form of
stock options have exercise prices not less than the fair market value of the
stock on the date of the grant or award. Equity incentive awards vest
and
become exercisable at such time as
determined by the Compensation Committee or Board of Directors. The initial
grant is designed for the level of the job that the executive holds and is
designed to motivate the executive to make the kind of decisions and
i
mplement strategies and programs that
will contribute to an increase in our stock price over time. Periodic additional
equity incentive awards within the comparable range for the job are expected to
be granted to reflect the executives
’
ongoing contributi
o
ns to us, to create an incentive to
remain in our employ and to provide a long-term incentive to achieve or exceed
our financial goals. During 2008 awards of
C
ommon
S
tock were made to our Named Executive
Officers pursuant to their execution of new employm
ent agreements noted under- Executive
Compensation Tables-
Narrative Disclosure to Summary Compensation Table -
Employment Contracts for our Named Executive Officers
”
.
Severance
and Change of Control Benefits
We have
entered into employment agreements with each of the Named Executive Officers.
Each of these agreements provides for certain payments and other benefits if the
executive’s employment terminates under certain circumstances, including, in the
event of a “change in control”. See “Executive Compensation Tables - Narrative
Disclosure to Summary Compensation Table – Employment Contracts for our Named
Executive Officers” and “Severance and Change of Control Benefits” appearing
after the Option Exercises and Stock-Vested table for a description of the
severance and change in control benefits.
Retirement
and Other Employee Benefits
We provide various employee benefit
programs to all employees, including medical, dental, life insurance, short and
long term disability and a 401k plan with an employer matching
contribution. Executives are eligible to participate in all our
employee benefit programs, in each case on the same basis as other
employees. In addition, we paid a $2,140 life insurance premium on
behalf of Mr. Ferry during 2008.
Executive
Compensation Tables
The
following table provides information on the compensation provided by us during
fiscal years 2008, 2007 and 2006 to (i) those persons who served in the capacity
as our Chief Executive Officer, (ii) those persons who served in the
capacity as our Chief Financial Officer, and (iii) the three highest paid
executive officers other than persons who served in the capacities as our Chief
Executive Officer or Chief Financial Officer, who served in such capacity during
2008 and at the end of 2008 whose total compensation exceeded
$100,000.
SUMMARY COMPENSATION TABLE
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|
Salary
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|
|
Bonus (1)
|
|
|
Stock
Awards
(2)
|
|
|
Option
Awards
(3)
|
|
|
Non-Equity
Incentive Plan
Compensation
(4)
|
|
|
All Other
Compensation
(5)
|
|
|
Total
|
|
Name and Principal Position
|
|
Year
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Kenneth Ferry
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
President,
Chief Executive Officer
|
|
2008
|
|
|
341,892
|
|
|
|
93,325
|
|
|
|
360,661
|
|
|
|
149,826
|
|
|
|
136,675
|
|
|
|
24,663
|
|
|
|
1,107,042
|
|
|
|
2007
|
|
|
314,038
|
|
|
|
268,125
|
|
|
|
118,651
|
|
|
|
191,501
|
|
|
|
-
|
|
|
|
20,140
|
|
|
|
912,455
|
|
|
|
2006
|
|
|
190,385
|
|
|
|
210,000
|
|
|
|
-
|
|
|
|
422,728
|
|
|
|
-
|
|
|
|
13,563
|
|
|
|
836,676
|
|
Darlene
Deptula-Hicks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
Vice President of Finance, Chief Financial Officer
|
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2008
|
|
|
228,481
|
|
|
|
34,200
|
|
|
|
102,832
|
|
|
|
80,764
|
|
|
|
65,800
|
|
|
|
15,231
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|
|
|
527,308
|
|
|
|
2007
|
|
|
213,423
|
|
|
|
132,000
|
|
|
|
29,663
|
|
|
|
136,710
|
|
|
|
-
|
|
|
|
12,000
|
|
|
|
523,796
|
|
|
|
2006
|
|
|
58,423
|
|
|
|
55,000
|
|
|
|
-
|
|
|
|
100,438
|
|
|
|
-
|
|
|
|
3,462
|
|
|
|
217,323
|
|
Jeffrey
Barnes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Senior
Vice President of Sales
|
|
2008
|
|
|
208,481
|
|
|
|
37,865
|
|
|
|
102,832
|
|
|
|
70,021
|
|
|
|
62,135
|
|
|
|
15,231
|
|
|
|
496,565
|
|
|
|
2007
|
|
|
193,423
|
|
|
|
120,000
|
|
|
|
29,663
|
|
|
|
66,211
|
|
|
|
-
|
|
|
|
12,000
|
|
|
|
421,297
|
|
|
|
2006
|
|
|
113,846
|
|
|
|
110,000
|
|
|
|
-
|
|
|
|
119,298
|
|
|
|
-
|
|
|
|
7,385
|
|
|
|
350,529
|
|
Stacey
Stevens
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior
Vice President of Marketing and Strategy
|
|
2008
|
|
|
191,269
|
|
|
|
30,200
|
|
|
|
100,299
|
|
|
|
69,664
|
|
|
|
57,800
|
|
|
|
15,231
|
|
|
|
464,463
|
|
|
|
2007
|
|
|
171,231
|
|
|
|
108,000
|
|
|
|
29,663
|
|
|
|
61,992
|
|
|
|
-
|
|
|
|
12,000
|
|
|
|
382,886
|
|
|
|
2006
|
|
|
90,462
|
|
|
|
90,000
|
|
|
|
-
|
|
|
|
97,225
|
|
|
|
-
|
|
|
|
5,379
|
|
|
|
283,066
|
|
Jonathan
Go
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior
Vice President of Research and Development
|
|
2008
|
|
|
200,692
|
|
|
|
24,600
|
|
|
|
62,816
|
|
|
|
78,506
|
|
|
|
57,400
|
|
|
|
15,231
|
|
|
|
439,245
|
|
|
|
2007
|
|
|
190,615
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|
|
|
117,000
|
|
|
|
14,831
|
|
|
|
117,019
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|
|
|
-
|
|
|
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12,000
|
|
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451,465
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2006
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|
32,019
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|
|
|
35,000
|
|
|
|
-
|
|
|
|
68,186
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|
-
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|
|
2,077
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|
137,282
|
|
(1)
Represents bonuses earned for 2008, 2007 and 2006 and paid in 2009, 2008 and
2007, respectively, that were awarded to the Named Executive Officers in lieu
of or in addition to any incentive bonus to which they were otherwise
entitled to under the terms of their respective employment
agreements.
(2) The
amounts included in the “Stock Awards” column represent the compensation cost
recognized by us in 2008 and 2007 related to restricted stock awards to the
Named Executive Officers, computed in accordance with Statement of Financial
Accounting Standards No. 123R. For a discussion of valuation assumptions, see
Note 5 to our consolidated financial statements in our 2008 Form
10-K.
(3) The
amounts included in the “Option Awards” column represent the compensation cost
recognized by us in 2008, 2007 and 2006 related to stock option awards to the
Named Executive Officers, computed in accordance with Statement of Financial
Accounting Standards No. 123R. For a discussion of valuation assumptions, see
Note 5 to our consolidated financial statements in our 2008 Form
10-K.
(4)
Represents performance-based cash incentive bonuses paid in 2009 that were
earned in 2008 under the Named Executive Officers respective employment
agreements.
(5) The
amounts shown in the “All Other Compensation” column for Mr. Ferry
consists of an automobile allowance of $22,523, $18,000 and $11,423
for 2008, 2007 and 2006, respectively, and $2,140 of life insurance premiums
paid by us each year. For the other Named Executive Officers the amounts
represent payments of an automobile allowance.
Narrative Disclosure to Summary
Compensation Table
Employment
Contracts for our Named Executive Officers
In June
2008 we entered into the following employment agreements with our Named
Executive Officers and their compensation is determined, in part, based upon
these employment agreements. A description of provisions of these agreements
providing for certain post-termination payments upon termination of their
employment are described following the “Option Exercises and Stock Vested” table
under the caption “Severance and Change of Control Benefits-
Termination for Cause or without Cause,
or due to a Change in Control”
.
Mr. Kenneth Ferry, our President and
Chief Executive Officer
. We entered into an employment
agreement with Mr. Ferry in April 2006 that provided for his employment as our
Chief Executive Officer and President for a term commencing in May 2006 and
expiring on December 31, 2008, which provided for yearly increases as determined
by our Board of Directors. In May 2007 our Board of Directors, upon
the recommendation and approval of the Compensation Committee of our Board,
approved the base salary increase for Mr. Ferry to $325,000, effective June 1,
2007.
On
June
25,
2008, we entered into a new employment
agreement, as of June 1, 2008, with Mr. Ferry. This agreement
replaces and supersedes the previous employment agreement entered into between
us and Mr. Ferry. Mr. Ferry’s employment agreement provides for his
employment as our Chief Executive Officer and President for an initial term
through December 31, 2012, subject to automatic one-year renewals after the
expiration of the initial term under certain conditions, at an annual base
salary of $355,000. Mr. Ferry is also entitled to customary benefits,
including participation in employee benefit plans, and reasonable travel and
entertainment expenses as well as a monthly automobile allowance. The
agreement also provides for his eligibility to receive, during each employment
year during the term of the agreement, a target annual incentive bonus of 55% of
his base salary if we achieve goals and objectives determined by the
Board. Mr. Ferry will also be eligible to receive such other cash
bonuses and such other compensation as may from time to time be awarded to him
by the Board.
In addition, pursuant to his agreement,
Mr. Ferry was granted a restricted stock award of 100,000 shares of our
C
ommon
S
tock. The restricted stock
award vests as to (i) 33,334 shares on May 31, 2009, (ii) an additional 33,333
shares on May 31, 2010 and (iii) an additional 33,333 shares on May 31,
2011.
Mr.
Ferry’s base salary increase and bonus target for 2008 was established based on
input the Compensation Committee received from Pearl Meyer, in their review of
our executive compensation programs. We believe that the compensation
package provided to Mr. Ferry was comparable to that of chief executive officers
for companies of similar size, complexity and growth patterns in the healthcare
sector.
Ms. Darlene Deptula-Hicks, our
Executive Vice President of Finance and Chief Financial
Officer
. We entered into an employment agreement with Ms.
Deptula-Hicks in September 2006 that provided for her employment as our
Executive Vice President of Finance and Chief Financial Officer for a term
commencing on September 11, 2006 and expiring on December 31, 2008, which
provided for yearly increases as determined by our Board of
Directors. In May 2007 our Board of Directors, upon the
recommendation and approval of the Compensation Committee of our Board, approved
the base salary increase for Ms. Deptula-Hicks to $220,000, effective June 1,
2007.
On
June
25,
2008, we entered into a new employment
agreement, as of June 1, 2008, with Ms. Deptula-Hicks. This agreement replaces
and supersedes the previous employment agreement entered into between us and Ms.
Deptula-Hicks. Ms. Deptula-Hicks’s employment agreement provides for
her employment as our
Executive Vice President of Finance and Chief
Financial Officer
for an initial
term through December 31, 2011, subject to automatic one-year renewals after the
expiration of the initial term under certain conditions, at an annual base
salary of $235,000. Ms. Deptula-Hicks is also entitled to customary
benefits, including participation in employee benefit plans, and reasonable
travel and entertainment expenses as well as a monthly automobile
allowance. The agreement also provides for her eligibility to
receive, during each employment year during the term of the agreement, a target
annual incentive bonus of 40% of her base salary if we achieve goals and
objectives determined by the Board. Ms. Deptula-Hicks will also be
eligible to receive such other cash bonuses and such other compensation as may
from time to time be awarded to her by the Board.
In addition, pursuant to her employment
agreement, Ms. Deptula-Hicks was granted a restricted stock award of 37,500
shares of Common Stock. The restricted stock award vests as to 12,500
shares on each of May 31, 2009, 2010 and 2011.
Ms.
Deptula-Hicks’s base salary increase and bonus target for 2008 was established
based on input the Compensation Committee received from Pearl Meyer, in their
review of our executive compensation programs. We believe that the
compensation package provided to Ms. Deptula-Hicks was comparable to that of
chief financial officers for companies of similar size, complexity and growth
patterns in the healthcare sector.
Mr. Jeffrey Barnes, our Senior Vice
President of Sales
. We entered into an employment agreement
with Mr. Barnes in April 2006 that provided for his employment as our Senior
Vice President of Sales for a term commencing on May 15, 2006 and expiring
on December 31, 2008, which provided for yearly increases as determined by
our Board of Directors. In May 2007 our Board of Directors,
upon the recommendation and approval of the Compensation Committee of our Board,
approved the base salary increase for Mr. Barnes to $200,000, effective June 1,
2007.
On
June
25,
2008, we entered into a new employment
agreement, as of June 1, 2008, with Mr. Barnes. This agreement replaces and
supersedes the previous employment agreement entered into between us and Mr.
Barnes. Mr. Barnes’s employment agreement provides for his employment as our
Senior Vice President of Sales
for an initial term through December
31, 2011, subject to automatic one-year renewals after the expiration of the
initial term under certain conditions, at an annual base salary of
$215,000. Mr. Barnes is also entitled to customary benefits,
including participation in employee benefit plans, and reasonable travel and
entertainment expenses as well as a monthly automobile allowance. The
agreement also provides for his eligibility to receive, during each employment
year during the term of the agreement, a target annual incentive bonus of 40% of
his base salary if we achieve goals and objectives determined by the
Board. Mr. Barnes will also be eligible to receive such other cash
bonuses and such other compensation as may from time to time be awarded to him
by the Board.
In addition, pursuant to his agreement,
Mr. Barnes was granted a restricted stock award of 37,500 shares of Common
Stock. The restricted stock award vests as to 12,500 shares of Common
Stock on each of May 31, 2009, 2010 and 2011.
Mr.
Barnes’s base salary increase and bonus target for 2008 was established based on
input the Compensation Committee received from Pearl Meyer, in their
review of our executive compensation programs. We believe that the
compensation package provided to Mr. Barnes was comparable to that of Senior
Vice President of Sales for companies of similar size, complexity and growth
patterns in the healthcare sector.
Ms. Stacey Stevens, our Senior Vice
President of Marketing and Strate
gy. We entered into an
employment agreement with Ms. Stevens in May 2006 that provided for her
employment as our Vice President of Marketing and Strategy for a term commencing
on June 1, 2006 and expiring on December 31, 2008, which provided for
yearly increases as determined by our Board of Directors. In
May 2007 our Board of Directors, upon the recommendation and approval of the
Compensation Committee of our Board, approved the base salary increase for Ms.
Stevens to $180,000, effective June 1, 2007.
On
June
25,
2008, we entered into a new employment
agreement, as of June 1, 2008, with Ms. Stevens. This agreement replaces and
supersedes the previous employment agreement entered into between us and Ms.
Stevens. Ms. Stevens’s employment agreement provides for her employment as our
Vice President of Marketing and Strategy
for an initial term through December
31, 2011, subject to automatic one-year renewals after the expiration of the
initial term under certain conditions, at an annual base salary of
$200,000. Ms. Stevens is also entitled to customary benefits,
including participation in employee benefit plans, and reasonable travel and
entertainment expenses as well as a monthly automobile allowance. The agreement
also provides for her eligibility to receive, during each employment year during
the term of the agreement, a target annual incentive bonus of 40% of her base
salary if we achieve goals and objectives determined by the
Board. Ms. Stevens will also be eligible to receive such other cash
bonuses and such other compensation as may from time to time be awarded to her
by the Board.
In addition, pursuant to her employment
agreement, Ms. Stevens was granted a restricted stock award of 35,000 shares of
Common Stock. The restricted stock award vests as to (i) 11,667
shares on May 31, 2009, (ii) an additional 11,667 shares on May 31, 2010 and
(ii) an additional 11,666 shares on May 31, 2011.
Ms.
Stevens’ base salary increase and bonus target for 2008 was established based on
input the Compensation Committee received from Pearl Meyer, in their review of
our executive compensation programs. We believe that the compensation
package provided to Ms. Stevens was comparable to that of Senior Vice President
of Marketing and Strategy for companies of similar size, complexity and growth
patterns in the healthcare sector.
Mr. Jonathan Go, our Senior Vice
President of Research and Development
. We entered into an
employment agreement with Mr. Go in October 2006 that provided for his
employment as our Senior Vice President of Research and Development for a term
commencing on October 23, 2006 and expiring on December 31, 2008, which
provided for yearly increases as determined by our Board of Directors. In May
2007 our Board of Directors, upon the recommendation and approval of the
Compensation Committee of our Board, approved the base salary increase for Mr.
Go to $195,000, effective June 1, 2007.
On
June
25,
2008, we entered into a new employment
agreement, as of June 1, 2008, with Mr. Go. This agreement replaces and
supersedes the previous employment agreement entered into between us
and Mr. Go. Mr. Go’s employment
agreement provides for his employment as our
Senior Vice President of
Research and Development
for an
initial term through December 31, 2011, subject to automatic one-year renewals
after the expiration of the initial term under certain conditions, at an annual
base salary of $205,000. Mr. Go is also entitled to customary
benefits, including participation in employee benefit plans, and reasonable
travel and entertainment expenses as well as a monthly automobile allowance. The
agreement also provides for his eligibility to receive, during each employment
year during the term of the agreement, a target annual incentive bonus of 40% of
his base salary if we achieve goals and objectives determined by the
Board. Mr. Go will also be eligible to receive such other cash
bonuses and such other compensation as may from time to time be awarded to him
by the Board.
In addition, pursuant to his agreement,
Mr. Go was granted a restricted stock award of 30,000 shares of Common
Stock. The restricted stock award vests as to 10,000 shares on each
of May 31, 2009, 2010 and 2011.
Mr. Go’s
base salary increase and bonus target for 2008 was established based on input
the Compensation Committee received from Pearl Meyer, in their review of our
executive compensation programs. We believe that the compensation
package provided to Mr. Go was comparable to that of Senior Vice President of
Research and Development for companies of similar size, complexity and growth
patterns in the healthcare sector.
The
following table sets forth information regarding grants of plan-based awards for
each of the Named Executive Officers during the year ended December 31,
2008.
GRANTS OF PLAN-BASED AWARDS
|
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|
|
|
|
|
|
Estimated Possible Payouts Under Non-Equity
Incentive Plan Awards (1)
|
|
|
All Other
Stock
Awards:
Number of
Shares of
|
|
|
Grant date
fair value of
Stock
|
|
Name
|
|
Grant Date
|
|
Threshold
($)
|
|
|
Target
($)
|
|
|
Maximum
($)
|
|
|
Stock (2)
(#)
|
|
|
Awards
($)
|
|
Kenneth
Ferry
|
|
|
|
|
136,675
|
|
|
|
195,250
|
|
|
|
390,500
|
|
|
|
|
|
|
|
|
|
6/25/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
|
|
584,000
|
|
Darlene
Deptula-Hicks
|
|
|
|
|
65,800
|
|
|
|
94,000
|
|
|
|
188,000
|
|
|
|
|
|
|
|
|
|
|
|
6/25/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
|
|
|
219,000
|
|
Jeffrey
Barnes
|
|
|
|
|
60,200
|
|
|
|
86,000
|
|
|
|
172,000
|
|
|
|
|
|
|
|
|
|
|
|
6/25/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
|
|
|
219,000
|
|
Stacey
Stevens
|
|
|
|
|
56,000
|
|
|
|
80,000
|
|
|
|
160,000
|
|
|
|
|
|
|
|
|
|
|
|
6/25/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,000
|
|
|
|
204,400
|
|
Jonathan
Go
|
|
|
|
|
57,400
|
|
|
|
82,000
|
|
|
|
164,000
|
|
|
|
|
|
|
|
|
|
|
|
6/25/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
175,200
|
|
(1)
|
The Estimated Possible
Payouts under Non-Equity Incentive Plan Awards column represents the
eligibility of the Named Executive Officers listed in the table to receive
an annual cash incentive bonus in each calendar year pursuant to their
respective employment agreements if we achieve goals and objectives
established by the Board or Compensation Committee (“Target Amounts”).
According to the terms of their employment agreements these Named
Executive Officers are eligible to receive, for each employment year,
during the term of their employment agreement, 40% (55% for Mr. Ferry) of
their respective base salaries, which are reflected above under the Target
column. The amounts under the Threshold column assumes that if
the Target Amounts are not met the Named Executive Officers are still
eligible to receive a bonus payments equal to 70% of the amount of their
incentive bonus if we achieved 90% of the respective Target Amounts, but
does not reflect the fact that the amount of their incentive bonus would
then increase by three percentage points for each one percentage point
increase in the respective Target Amounts achieved by us. The amounts
under the Maximum column assumes that for future years the Committee
and/or the Board will increase the amount of the incentive bonuses by up
to an additional 100% if we achieve greater than 100% of the Target
Amounts with a maximum payout of 200%. Based upon the
percentage of the Target Amounts achieved in 2008 the Named Executive
Officers earned a portion of the potential incentive bonus to which they
were entitled under their respective employment agreements
.
See the Summary Compensation
Table for the amounts of these non-equity incentive bonus payments. The
amounts earned for 2008 were paid in March 2009.
See the discussion above under
Annual Incentive Bonus Compensation-Cash Incentive
Bonus. Additional terms of these employment agreements are
discussed in the narrative following the Summary Compensation
Table.
|
(2)
|
On
June 25, 2008, we granted these shares of Common Stock to the Named
Executive Officers under our 2007 Stock Incentive Plan in connection with
the entry of new employment agreements with each of the Named Executive
Officers. Each of these stock awards vest in three equal annual
installments with the first installment vesting on May 31,
2009.
|
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
The
following table sets forth information regarding stock options and restricted
stock held by each of the Named Executive Officers at December 31,
2008.
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
Number of
Shares or
Units of Stock
That Have Not
Vested
(#)
|
|
|
Market
Value
of
Shares or
Units of
Stock
That
Have
Not
Vested
($)
|
|
Kenneth
Ferry
|
|
|
750,000
|
(1)
|
|
|
-
|
|
|
|
1.59
|
|
3/15/2011
|
|
|
|
|
|
|
|
|
|
66,666
|
(2)
|
|
|
133,334
|
(2)
|
|
|
3.89
|
|
7/18/2012
|
|
|
133,334
|
(3)
|
|
|
150,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
(4)
|
|
|
226,000
|
|
Darlene
Deptula-Hicks
|
|
|
275,000
|
(1)
|
|
|
-
|
|
|
|
1.80
|
|
9/11/2011
|
|
|
|
|
|
|
|
|
|
|
|
33,333
|
(2)
|
|
|
66,667
|
(2)
|
|
|
3.89
|
|
7/18/2012
|
|
|
33,334
|
(3)
|
|
|
37,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
(4)
|
|
|
84,750
|
|
Jeffrey
Barnes
|
|
|
225,000
|
(1)
|
|
|
-
|
|
|
|
1.59
|
|
3/15/2011
|
|
|
|
|
|
|
|
|
|
|
|
33,333
|
(2)
|
|
|
66,667
|
(2)
|
|
|
3.89
|
|
7/18/2012
|
|
|
33,334
|
(3)
|
|
|
37,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
(4)
|
|
|
84,750
|
|
Stacey
Stevens
|
|
|
135,000
|
(1)
|
|
|
-
|
|
|
|
1.98
|
|
6/1/2011
|
|
|
|
|
|
|
|
|
|
|
|
33,333
|
(2)
|
|
|
66,667
|
(2)
|
|
|
3.89
|
|
7/18/2012
|
|
|
33,334
|
(3)
|
|
|
37,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,000
|
(4)
|
|
|
79,100
|
|
Jonathan
Go
|
|
|
160,000
|
(1)
|
|
|
40,000
|
(1)
|
|
|
2.27
|
|
10/23/2011
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
(2)
|
|
|
50,000
|
(2)
|
|
|
3.89
|
|
7/18/2012
|
|
|
16,667
|
(3)
|
|
|
18,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
(4)
|
|
|
67,800
|
|
|
(1)
|
The
foregoing options vest in five installments at various times between May
15, 2006 and October 23, 2009. The first installment vest on
the grant date of the option, the second installment vest
between 6 to 7 months following the grant date and the
remaining three installments vest annually on or about the grant date of
each option. Vesting of the options accelerates as to the
shares to which the options become exercisable at the latest date (to the
extent any such shares remain unvested at the time), upon the closing sale
price of our common stock for a period of twenty (20) consecutive
trading days exceeding (i) 200% of the exercise price of the per
share of the options; (ii) 300% of the exercise price per share of
the options or (iv) 400% of the exercise price per share of the
options.
|
|
(2)
|
Each
of these options vest in three equal annual installments with the first
installment vesting on July 18,
2008.
|
|
(3)
|
Each
of these restricted stock awards vest in three equal annual installments
with the first installment vesting on July 18,
2008.
|
|
(4)
|
Each
of these restricted stock awards vest in three equal annual installments
with the first installment vesting on May 31,
2009.
|
OPTION
EXERCISES AND STOCK VESTED
The
following table sets forth information regarding stock option exercises and
restricted stock vested by each of the Named Executive Officers during the year
ended December 31, 2008.
|
|
Option
Awards
|
|
|
Stock
Awards
|
|
|
|
|
|
|
|
|
Name
|
|
Number
of shares
acquired
on
exercise
#
|
|
|
Value
realized
on
exercise
$
|
|
|
Number
of shares
acquired
on
vesting
#
|
|
|
Value
realized
on
vesting
$
|
|
Kenneth
Ferry
|
|
|
50,000
|
|
|
|
137,574
|
|
|
|
66,666
|
|
|
|
189,331
|
|
Darlene
Deptula-Hicks
|
|
|
-
|
|
|
|
-
|
|
|
|
16,666
|
|
|
|
47,331
|
|
Jeffrey
Barnes
|
|
|
-
|
|
|
|
-
|
|
|
|
16,666
|
|
|
|
47,331
|
|
Stacey
Stevens
|
|
|
15,000
|
|
|
|
32,851
|
|
|
|
16,666
|
|
|
|
47,331
|
|
Jonathan
Go
|
|
|
-
|
|
|
|
-
|
|
|
|
8,333
|
|
|
|
23,666
|
|
Severance
and Change of Control Benefits
As noted in the Compensation Discussion
and Analysis under the subheading “Employment Contracts”, in 2008 we entered
into substantially similar employment agreements with each of our Named
Executive Officers. These agreements provide for certain payments and
other benefits if a Named Executive Officer’s employment with us is terminated
under circumstances specified in his or her respective agreement, including a
“change in control” of our company. A Named Executive Officer’s rights upon the
termination of his or her employment will depend upon the circumstances of the
termination.
Under the
employment agreements, a Change in Control would include any of the following
events:
·
any
“person” as defined in Sections 13(d) and 14(d) of the Exchange Act (other than
(i) the executive, us or our subsidiaries or affiliates or, (ii) any fiduciary
holding securities under an employee benefit plan of iCAD or its subsidiaries)
becomes the “beneficial owner” of 50% or more of our voting outstanding
securities;
·
our
stockholders approve the sale of our company through a merger or a sale of our
assets or otherwise; or
·
a
majority of our directors are replaced in certain circumstances during any
period of twelve (12) consecutive months (but only with respect to Mr. Ferry’s
agreement).
Termination
by Reason of Death or Disability
The executive’s employment under the
employment agreements may be terminated without breach in the event of death or
disability. In the event of the termination of the executive’s
employment by reason of death or disability, we will pay the executive’s base
salary through the date of termination, at the rate then in effect, and all
expenses and accrued benefits arising prior to termination which are payable to
the executive pursuant to his or her employment agreement through the date of
termination.
Termination
for Cause or without Cause.
If a Named Executive Officer’s
employment is terminated for “cause”, we will pay the executive his or her base
salary through the date of termination at the rate then in effect, and all
expenses and accrued benefits arising prior to such termination which are
payable to the executive pursuant to his or her employment
agreement through the date of termination.
If a Named Executive Officer’s
employment is terminated “without cause” prior to the expiration of his or her
employment agreement, we will pay to the executive all expenses and accrued
benefits arising prior to the date of termination and we will continue to pay
the executives base salary as then in effect for the greater of (i) the
remainder of the term of the employment agreement or (ii) a period of one year
from the date of termination. No later than 15 calendar days from the
date that we file our Form 10-K, we are also required to pay a pro
rata portion of the incentive bonus, if any, earned for that employment year
through the date of termination in the discretion of the Board of
Directors. Additionally, the executive will be entitled to continue
to participate in all employee benefit plans that we provide generally to our
senior executives.
The
following table quantifies the estimated maximum amount of payments and benefits
under our employment agreements to which the Named Executive Officers would be
entitled if they were terminated without cause on December 31,
2008.
Name
|
|
Estimated Net
Present Value
of Remaining
Salary
Payments
($)
|
|
|
Estimated Net
Present Value
of Prorata
Bonus
($)
|
|
|
Estimated Net
Present Value of
Continuing
Health Benefits
($)
|
|
|
Total
Termination
Benefits
($)
|
|
Kenneth
Ferry
|
|
|
351,887
|
|
|
|
229,234
|
|
|
|
14,932
|
|
|
|
596,053
|
|
Darlene
Deptula-Hicks
|
|
|
232,939
|
|
|
|
99,667
|
|
|
|
14,932
|
|
|
|
347,538
|
|
Jeffrey
Barnes
|
|
|
213,115
|
|
|
|
99,667
|
|
|
|
14,932
|
|
|
|
327,714
|
|
Stacey
Stevens
|
|
|
198,246
|
|
|
|
87,707
|
|
|
|
-
|
|
|
|
285,953
|
|
Jonathan
Go
|
|
|
203,202
|
|
|
|
81,727
|
|
|
|
14,932
|
|
|
|
299,861
|
|
Termination
due to a Change in Control
In the
event a Named Executive Officers’ employment is terminated within six months
(for Mr. Ferry, Ms. Deptula-Hicks and Mr. Go) or three months (for Mr. Barnes
and Ms. Stevens) following a change in control by us without cause (for all
Named Executive Officers) or by the executive for good reason (for Mr. Ferry,
Ms, Deptula-Hicks and Mr. Go), then we will pay to the executive as severance
pay and as liquidated damages an amount equal to (i) (a) his or her base salary
as then in effect for the greater of (x) the remainder of the original term of
the employment agreement or (y) for Mr. Ferry a period of two years from the
date of termination and for all other executives a period of one year from the
date of termination plus (b) an amount equal to the incentive bonus which would
otherwise been payable for the employment year in which the date of termination
occurs; however, if any such severance payment, either alone or
together with other payments or benefits, either cash or non-cash, that the
Named Executive Officer has the right to receive from us, including, but not
limited to, accelerated vesting or payment of any deferred compensation,
options, stock appreciation rights or any benefits payable to the executive
under any plan for the benefit of employees, which would constitute an “excess
parachute payment” (as defined in Section 280G of the Internal Revenue Code of
1986 (the “Code”)), then such severance payment or other benefit will be reduced
to the largest amount that will not result in receipt by the executive of a
parachute payment. The base salary payments are payable at our
discretion either (1) in equal installments over the 24 month period following
the date of termination or (2) a lump sum cash payment equal to the present
value of the payment otherwise due.
If within
six months (for Mr. Ferry, Ms. Deptula-Hicks, Mr. Go and Mr. Barnes) or three
months (for Ms. Stevens) after the occurrence of a change in control, we
terminate the executive’s employment without cause (for all Named Executive
Officers) or the executive terminates his or her employment for good reason (for
Mr. Ferry, Ms. Deptula-Hicks and Mr. Go), then despite the vesting and
exercisability schedule contained in any stock option agreement between us and
the executive, all unvested stock options will immediately vest and become
exercisable and will remain exercisable for not less than 180 days.
The
receipt of the payments and benefits to the Named Executive Officers under their
employment agreements are generally conditioned upon their complying with
customary non-solicitation, non-competition, confidentiality, non-interference
and non-disparagement provisions. By the terms of such agreements, the
executives acknowledge that a breach of some or all of the covenants described
in their employment will entitle us to injunctive relief restraining the
commission or continuance of any such breach, in addition to any other available
remedies.
The
following table provides the term of such covenants following the termination of
employment as it relates to each Named Executive Officer:
Covenant
|
|
Kenneth Ferry
|
|
Darlene
Deptula-Hicks
|
|
Jeffrey Barnes
|
|
Stacey Stevens
|
|
Jonathan Go
|
Confidentiality
|
|
Infinite duration for
trade secrets and
five years otherwise
|
|
Infinite duration
for trade secrets
and five years
otherwise
|
|
Infinite duration
for trade secrets
and five years
otherwise
|
|
Infinite duration
for trade secrets
and five years
otherwise
|
|
Infinite duration
for trade secrets
and five years
otherwise
|
|
|
|
|
|
|
|
|
|
|
|
Non-solicitation
|
|
Two
Years
|
|
Two
Years
|
|
Two
Years
|
|
Two
Years
|
|
Two
Years
|
|
|
|
|
|
|
|
|
|
|
|
Non-competition
|
|
Two
Years
|
|
Two
Years
|
|
Two
Years
|
|
Two
Years
|
|
Two
Years
|
|
|
|
|
|
|
|
|
|
|
|
Non-interference
|
|
Two
Years
|
|
Two
Years
|
|
Two
Years
|
|
Two
Years
|
|
Two
Years
|
|
|
|
|
|
|
|
|
|
|
|
Non-disparagement
|
|
Infinite
duration
|
|
Infinite
duration
|
|
Infinite
duration
|
|
Infinite
duration
|
|
Infinite
duration
|
The
following table quantifies the estimated maximum amount of payments and benefits
under our employment agreements and agreements relating to awards granted under
our equity incentive and stock option plans to which the Named Executive
Officers would be entitled upon termination of employment if we terminated their
employment without cause within three or six months following a “change in
control” of us that (by assumption) occurred on December 31, 2008.
Name
|
|
Present
Value
of Salary
&
Bonus
Payment
($)
|
|
|
Value
of
Accelerated
Vesting
of
Equity
Awards
(
1
)
($)
|
|
|
Estimated
Net
Present
Value of
Continuing
Health
Benefits
($)
|
|
|
Total
Termination
Benefits
($)
|
|
Kenneth
Ferry
|
|
|
927,322
|
|
|
|
84,782
|
|
|
|
29,623
|
|
|
|
1,041,727
|
|
Darlene
Deptula-Hicks
|
|
|
332,606
|
|
|
|
31,793
|
|
|
|
14,932
|
|
|
|
379,331
|
|
Jeffrey
Barnes
|
|
|
312,782
|
|
|
|
31,793
|
|
|
|
14,932
|
|
|
|
359,507
|
|
Stacey
Stevens
|
|
|
285,953
|
|
|
|
30,704
|
|
|
|
-
|
|
|
|
316,657
|
|
Jonathan
Go
|
|
|
284,929
|
|
|
|
24,081
|
|
|
|
14,932
|
|
|
|
323,942
|
|
(1)
|
This
amount represents the unrealized value of the unvested portion of the
respective Named Executive Officer’s stock options based upon a closing
price of $1.13 of our Common Stock on December 31, 2008 and calculated in
accordance with Section 280G of the Code and related
regulations.
|
Retirement
and Other Employee Benefits
We
provide various employee benefit programs to all employees, including medical,
dental, life insurance, short and long term disability and a 401k plan which in
early 2007 we added an employer matching contribution. Executives are
eligible to participate in all our employee benefit programs, in each case on
the same basis as other employees. In addition, in 2008 we paid a
$2,140 life insurance premium on behalf of Mr. Ferry.
Compensation
Committee Report
The
Compensation Committee has reviewed and discussed with management the preceding
Compensation Discussion and Analysis contained in this proxy statement. Based on
the review and discussion, the Compensation Committee has recommended to our
Board of Directors that the preceding Compensation Discussion and Analysis be
included in this proxy statement.
By the Compensation
Committee:
Elliot
Sussman, M.D. (Chairperson) and Rachel Brem, M.D
Item
12
.
|
Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder
Matters
.
|
The
following table sets forth certain information regarding our Common Stock owned
on May 1, 2009 by (i) each person who is known to us to own beneficially more
than 5% of the outstanding shares of our Common Stock (ii) each of our Named
Executive Officers, (iii) each of our directors and (iv) all current executive
officers and directors as a group. Unless otherwise indicated below,
the address of each beneficial owner is c/o iCAD, Inc. 98 Spit Brook Road, Suite
100, Nashua, New Hampshire 03062.
BENEFICIAL
OWNERSHIP TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of Shares
|
|
|
|
|
Title
|
|
Name
of
|
|
Beneficially
|
|
|
Percentage
|
|
of Class
|
|
Beneficial Owner
|
|
Owned (1) (2)
|
|
|
of Class
|
|
Common
|
|
Robert
Howard
|
|
|
5,809,453
|
(3)
|
|
|
12.8
|
%
|
Common
|
|
Maha
Sallam
|
|
|
1,527,540
|
(4)
|
|
|
3.4
|
%
|
Common
|
|
Dr.
Lawrence Howard
|
|
|
1,657,603
|
(5)
|
|
|
3.6
|
%
|
Common
|
|
Kenneth
Ferry
|
|
|
1,237,999
|
(6)
|
|
|
2.7
|
%
|
Common
|
|
Dr.
Rachel Brem
|
|
|
173,639
|
(7)
|
|
|
|
*
|
Common
|
|
Anthony
Ecock
|
|
|
40,000
|
(8)
|
|
|
|
*
|
Common
|
|
Steven
Rappaport
|
|
|
325,459
|
(9)
|
|
|
|
*
|
Common
|
|
Dr.
Elliot Sussman
|
|
|
260,489
|
(10)
|
|
|
|
*
|
Common
|
|
Jeffrey
Barnes
|
|
|
328,384
|
(11)
|
|
|
|
*
|
Common
|
|
Darlene
Deptula-Hicks
|
|
|
345,591
|
(12)
|
|
|
|
*
|
Common
|
|
Jonathan
Go
|
|
|
213,333
|
(13)
|
|
|
|
*
|
Common
|
|
Stacey
Stevens
|
|
|
240,718
|
(14)
|
|
|
|
*
|
Common
|
|
All
current executive officers and
|
|
6,350,755
|
(4) through (14)
|
|
|
13.2
|
%
|
|
|
directors
as a group (11 persons)
|
|
|
|
|
|
|
|
|
*
Less than one percent
1)
|
A
person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from May 1, 2009, upon (i) the
exercise of options; (ii) vesting of restricted stock; (iii) warrants or
rights; (iv) through the conversion of a security; (v) pursuant to the
power to revoke a trust, discretionary account or similar arrangement; or
(vi) 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 May 1, 2009, have been
exercised.
|
2)
|
Unless
otherwise noted, we believe 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 15,000 shares of Common Stock at $2.82 per share,
3,750 shares at $3.50 per share, 3,750 shares at $3.90 per
share, 3,750 shares at $2.91 per share and 1,263 shares at $2.00 per
shares and 20,000 shares beneficially owned by Mr. Howard’s
wife. The address of Mr. Howard is 145 East 57
th
Street, 4
th
Floor, New York, NY 10022.
|
4)
|
Includes
options to purchase 56,250 shares of Common Stock at $0.80 per share,
100,000 shares at $3.49 per share and 2,500 shares at $2.02 per share and
also includes 183,625 shares beneficially owned by Dr. Sallam’s
husband.
|
5)
|
Includes
options to purchase 25,000 shares of Common Stock at $2.82 per share,
3,750 shares at $3.50 per share, 3,750 shares at $3.90 per share, 3,750
shares at $2.91 per share, 3,750 shares at $2.00 per share, 3,750 shares
at $2.73 per share, 3,750 shares at $2.90 per share, 3,750 shares at $2.78
per share, 3,750 shares at $1.39 per share and 3,750 shares at $1.01 per
share. Also includes 79,500 shares beneficially owned by Dr.
Howard’s children.
|
6)
|
Includes
options to purchase 750,000 shares of Common Stock at $1.59 per share and
66,666 shares at $3.89 per share. Also includes 66,667 shares
of restricted stock that vest in May
2009.
|
7)
|
Consists
of options to purchase 45,000 shares of Common Stock at $3.35 per share,
25,000 shares at $2.82 per share, 9,111 shares at $3.50 per share, 7,854
shares at $3.90 per share, 8,860 shares at $2.91 per share, 12,040 shares
at $2.00 per share, 9,813 shares at $2.73 per share, 11,297 shares at
$2.90 per share, 9,220 shares at $2.78 per share, 14,990 shares at $1.39
per share and 20,454 shares at $1.01 per
share.
|
8)
|
Consists
of options to purchase 25,000 shares of Common Stock at $3.33 per share,
3,750 shares at $2.90 per share, 3,750 shares at $2.78 per share, 3,750
shares at $1.39 per share and 3,750 shares at $1.01 per
share.
|
9)
|
Includes
options to purchase 25,000 shares of Common Stock at $3.18 per share,
3,750 shares at $3.50 per share, 3,750 shares at $3.90 per share, 3,750
shares at $2.91 per share, 3,750 shares at $2.00 per share, 12,214 shares
at $2.73 per share, 13,065 shares at $2.90 per share, 11,582 shares at
$2.78 per share, 20,865 shares at $1.39 per share and 25,674 shares at
$1.01 per share.
|
10)
|
Includes
options to purchase 15,000 shares of Common Stock at $1.55 per share,
15,000 shares at $2.82 per share, 10,068 shares at $3.50 per share, 7,683
shares at $3.90 per share, 9,325 shares at $2.91 per share, 13,422 shares
at $2.00 per share, 10,571 shares at $2.73 per share, 12,004 shares at
$2.90 per share, 10,463 shares at $2.78 per share, 18,566 shares at $1.39
per share and 23,934 shares at $1.01 per
share.
|
11)
|
Includes
options to purchase 225,000 shares of Common Stock at $1.59 per share and
33,333 shares at $3.89 per share. Also includes 25,000 shares
of restricted stock that vest in May
2009.
|
12)
|
Includes
options to purchase 275,000 shares of Common Stock at $1.80 per share and
33,333 shares at $3.89 per share. Also includes 25,000 shares
of restricted stock that vest in May
2009.
|
13)
|
Includes
options to purchase 160,000 shares of Common Stock at $2.27 per shares and
25,000 shares at $3.89 per share. Also includes 20,000 shares
of restricted stock that vest in May
2009.
|
14)
|
Includes
options to purchase 135,000 shares of Common Stock at $1.98 per share and
33,333 shares at $3.89 per share. Also includes 23,334 shares
of restricted stock that vest in May
2009.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Review,
Approval or Ratification of Transactions with related persons
Our Audit
Committee is responsible for reviewing and approving or ratifying
related-persons transactions. A related person is any executive officer,
director, nominee for director or more than 5% stockholder of iCAD, including
any of their immediate family members, and any entity owned or controlled by
such persons. In addition, pursuant to our Code of Business Conduct and Ethics,
all of our employees and directors who have become aware of a conflict or
potential conflict of interest, are required to notify our Chief Executive
Officer. There are no written procedures governing any review of
related person transactions.
Certain
Transactions
The
Company had previously entered into a Revolving Loan and Security Agreement and
related Convertible Revolving Credit Promissory Note dated October 26, 1987, as
amended, (the “Prior Loan Agreement”) with Mr. Robert Howard, the former
Chairman of the Board of Directors and a current principal stockholder of the
Company, under which Mr. Howard had agreed to advance funds, or to provide
guarantees of advances made by third parties in an amount up to
$5,000,000. As a condition to, and simultaneously with, the
execution of a Loan and Security Agreement, with RBS
Citizens, N.A., on June 30, 2008, the unpaid principal amount and accrued
interest of the Prior Loan Agreement, was extinguished as
follows: (1) a total of $2,000,000 principal amount under the Prior
Loan Agreement, together with $351,917 of accrued and unpaid interest on such
principal amount, was converted by Mr. Howard into 1,622,012 shares of Common
Stock per the original terms of the Prior Loan Agreement and (2) the remaining
principal balance under the Prior Loan Agreement of $258,906, together with
accrued and unpaid interest of $55,598 on such principal amount, was paid in
cash to Mr. Howard. The outstanding indebtedness under the Prior Loan
Agreement has therefore, been fully converted and satisfied and the Prior Loan
Agreement was terminated as of June 30, 2008.
On June
19, 2006, the Company and Dr. Lawrence Howard, who subsequently became a
director and is currently the Chairman of the Board of Directors of the Company,
entered into a Note Purchase Agreement with respect to the purchase by Dr.
Howard from the Company of an aggregate of $200,000 principal amount of a 7%
Convertible Note of the Company due June 19, 2008 (the “Howard Note”) at a
purchase price of $200,000. Interest on the Howard Note was payable
on the due date. On June 19, 2008, the $200,000 principal amount
under the Howard Note, together with $28,000 of accrued and unpaid interest on
such principal amount, was converted by Dr. Howard into 152,000 shares of Common
Stock at $1.50 per share conversion price as set forth in the Howard
Note. The Howard Note has, therefore, been fully converted and
satisfied and was terminated as of June 19, 2008.
On June
20, 2006, the Company and Mr. Kenneth Ferry, the Company’s Chief Executive
Officer, entered into a Note Purchase Agreement with respect to the purchase by
Mr. Ferry from the Company of an aggregate of $300,000 principal amount of a 7%
Convertible Note of the Company due June 20, 2008 (the “Ferry Note”) at a
purchase price of $300,000. Interest on the Ferry Note was payable on
the due date. On June 20, 2008, the $300,000 principal amount under
the Ferry Note, together with $42,000 of accrued and unpaid interest on such
principal amount, was converted by Mr. Ferry into 228,000 shares of Common Stock
at $1.50 per share conversion price as set forth in the Ferry
Note. The Ferry Note has, therefore, been fully converted and
satisfied and was terminated as of June 20, 2008.
On
September 12, 14 and 19, 2006 the Company entered into Note Purchase Agreements
with respect to the purchase from the Company of a total of $2,300,000 principal
amount of its 7.25% Convertible Promissory Notes (the “Notes”) by directors,
former directors, officers and employees of the Company, including the
following: Mr. Robert Howard (as to $1,350,000), former Chairman of the Board
and director of the Company, another former director of the Company (as to
$300,000), and Dr. Elliot Sussman (as to $100,000), a director of the Company,
Mr. Steven Rappaport (as to $300,000) who subsequently became and is currently a
director of the Company and Dr. Lawrence Howard (as to $100,000) who
subsequently became a director and is currently Chairman of the Board and a
director of the Company, and $50,000 by each of the following executive officers
and/or employees of the Company: Mr. Jeffrey Barnes, Ms. Stacey Stevens and Ms.
Annette Heroux. The Notes were due two years from the date of issue.
On September 12, 14 and 19, 2008, the total principal amount of $2,300,000 under
the Notes, together with $333,500 of accrued and unpaid interest on such
principal amount, were converted into 1,549,117 shares of Common Stock at $1.70
per share conversion price as set forth in the Notes. The Notes have,
therefore, been fully converted and satisfied and were terminated as of
September 12, 14 and 19, 2008, respectively.
AUDIT
COMMITTEE REPORT
The Audit
Committee met with management and representatives of BDO Seidman, LLP to review
preparations for the audit including review of control procedures required
pursuant to implementation of Section 404 of the Sarbanes-Oxley Act of 2002, and
the procedures and timing of the audit of our financial
statements. Following completion of the audit of the financial
statements, the Audit Committee met with representatives of BDO Seidman, LLP and
management to review the audit findings. The Audit Committee also discussed with
representatives of BDO Seidman, LLP the matters required to be discussed by
Statement on Auditing Standards 61, as amended, “Communication with Audit
Committees”, as adopted by the Public Accounting Oversight Board.
The Audit
Committee received the written disclosures and the confirming letter from BDO
Seidman, LLP required by applicable requirements of the Public Accounting
Oversight Board regarding the independent accountant’s communications with the
Audit Committee concerning independence and discussed with BDO Seidman its
independence from the Company.
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 our Annual Report on Form 10-K for the year ended December 31,
2008.
The
Audit Committee -
Steven
Rappaport (Chairperson), Anthony Ecock, Elliot Sussman, M.D.
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
BDO
Seidman, LLP has audited and reported upon the financial statements and internal
controls over financial reporting of iCAD for the fiscal years
ended December 31, 2008 and 2007. BDO Seidman, LLP
has been selected by the Audit Committee of the Board of Directors to examine
and report upon our financial statements for the fiscal year
ending December 31, 2009. 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.
Audit Fees.
The
aggregate fees billed by BDO Seidman, LLP for professional services rendered for
the audit of the Company's annual financial statements and audit of internal
controls over financial reporting for the years ended December 31, 2008 and
2007, the review of the financial statements included in the Company's Forms
10-Q and consents issued in connection with the Company’s filings on Form S-3
and S-8 for 2008 and 2007 totaled $370,000 and $351,200,
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, 2008 and 2007,
and are not disclosed in the paragraph captions “Audit Fees” above, were
$0.
Tax and all other Fees
. No tax
fees or other fees were paid to BDO Seidman, LLP for the years ended December
31, 2008 and 2007.
Pre-Approval
Policies and Procedures
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 2008. 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.
PROPOSAL
II
APPROVAL
OF AN AMENDMENT TO THE COMPANY’S 2007
STOCK
INCENTIVE PLAN
Subject
to stockholder approval at the Annual Meeting the Board has approved an
amendment to the iCAD, Inc. 2007 Stock Incentive Plan (the “Stock Incentive
Plan” or “2007 Plan”) to increase the number of shares of Common Stock
authorized for issuance under the 2007 Plan by 3,000,000 shares from 2,250,000
shares to 5,250,000 shares. The reason for seeking stockholder
approval of Proposal II is to satisfy certain requirements of (i) the Code,
related to Incentive Stock Options, as defined below, and performance-based
compensation under Code Section 162(m) and (ii) applicable NASDAQ Marketplace
Rules.
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 and stock awards under its existing stock option
and stock incentive plans, including the 2007 Plan, has proven to be a valuable
tool in attracting, retaining and motivating key employees and
consultants. Accordingly, the Board believes that its ability to
continue to grant awards under the 2007 Plan (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 Common Stock available for future grants of options or stock-based
awards under the 2007 Plan and the Company’s other existing stock option and
stock incentive plans. As of the Record Date
68,014 shares of Common Stock were
available for issuance under all of the Company’s stock options and incentive
plans, including under the 2007 Plan. The last sale price of the
Common Stock on May 1, 2009 was $1.23.
If the
amendment to the Stock Incentive Plan is approved by the stockholders,
additional options or other stock-based awards may be granted under the Stock
Incentive Plan. If the amendment is approved, the additional shares of Common
Stock may be used in connection with the quarterly grants of options to those
persons who are Non-Employee Directors, initial option grants to any new
director, and any options that may be issued to a Non-Employee Director who
elects to receive options in lieu of cash Board Meeting or Board Committee fees,
all as provided for under the Non-Employee Director Compensation Program adopted
by the Board for 2009. The Administrator of the 2007 Plan has not made any other
determinations with respect to the grant of any options, restricted stock awards
or other stock-based awards covering the additional shares of Common Stock
authorized by the amendment to any director, executive officer or other employee
of the Company or any other eligible person, although it may do so in the
future. Because grants of awards under the Plan may be made to employees,
Non-Employee Directors, independent agents, consultants and others as determined
by the Administrator of the 2007 Plan, there is no way to
predict how many participants will ultimately receive awards in the
future under the 2007 Plan. As of the Record Date there were 116 employees of
the Company.
The
following summary of the 2007 Plan does not purport to be complete, and is
subject to and qualified in its entirety by reference to the full text of the
2007 Plan as proposed to be amended at the Annual Meeting, set forth as Appendix
A to this Proxy Statement. Capitalized terms used in the summary but not defined
in it will have the meanings assigned to them in the 2007 Plan.
Awards.
The 2007
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 2007 Plan, (i) the 2007 Plan currently provides for a total of 2,250,000
shares of Common Stock to be available for distribution pursuant to the 2007
Plan, provided, however, that if this proposal is approved the maximum number of
shares that may be issued under the 2007 Plan will increase to 5,250,000, and
subject to the provisions of the immediately preceding paragraph, the maximum
number of shares of Common Stock with respect to which Options, Deferred Stock,
Restricted Stock or Other Stock-Based Awards may be granted or measured to any
participant under the 2007 Plan during any calendar year or part thereof shall
not exceed 800,000 shares. The maximum number of shares of Common Stock with
respect to which Incentive Stock Options may be granted under the 2007 Plan
shall continue to be 2,250,000 shares. If any outstanding Award is canceled,
forfeited, delivered to the Company as payment for the exercise price or
surrendered to the Company for tax withholding purposes, shares of Common Stock
allocable to such Award may again be available for Awards under the 2007 Plan.
The exercise price of any granted stock option or other-stock based award may
not be reduced (including as a result of the substitution of a new option or
other stock-based award for a previously granted option or other stock-based
award) under the 2007 Plan without stockholder approval except for any
reductions required as a result of a merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, extraordinary distribution with
respect to the Company’s Common Stock or other change in corporate structure
affecting the Common Stock, and such adjustment is made in order to prevent
dilution or enlargement of rights of the holder of the stock option or other
stock-based award.
Administration.
The
2007 Plan provides that it 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 2007 Plan also provides that
each member of the Committee shall, to the extent practicable, be “non-employee
directors” for the purpose of Rule 16b-3 under the Exchange Act (“Rule 16b-3”)
and, if practicable, shall also qualify as “outside directors” for the purpose
of the performance-based compensation exception under Code Section 162(m) except
to the extent that the Board determines that such compliance is not necessary or
that it is not desirable or that it is not practicable. The Board or the
Committee, as the case may be, determines, 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 also determines 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 Board or
Committee may delegate some of the functions referred to above to the Company’s
Chief Executive Officer or Chief Financial Officer.
Eligibility
and Participation.
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 to the management, growth and/or profitability of
the business of the Company or any Parent or Subsidiary are eligible to be
granted Options or other Awards under the 2007 Plan. In addition,
Non-Qualified Stock Options and other Awards may be granted under the 2007 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 2007 Plan is determined by the Board
or the Committee, as the case may be
.
A
participant’s right, if any, to continue to serve the Company as a director,
executive officer, other key employee, or otherwise, will not be enlarged or
otherwise affected by his or her designation as a participant under the 2007
Plan. Participants may receive one or more Awards under the 2007
Plan.
Forms
of Awards
Stock
Options
.
The 2007 Plan
provides for the grant of Incentive Stock Options and Non-Qualified Stock
Options. The Board or the Committee, as the case may be, determines
those persons to whom Stock Options may be granted.
Incentive
Stock Options granted pursuant to the 2007 Plan are nontransferable by the
optionee during his lifetime. Options granted pursuant to the 2007 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 2007
Plan, may be exercised within three (3) months following termination of
employment (one year in the event of death, retirement at normal retirement age
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
2007 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 2007
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 2007 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 2007 Plan with more stringent provisions than those
specified in the 2007 Plan.
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 2007 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 2007 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 2007
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 2007 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.
Performance-Based
Awards and Performance Goals
. Certain Awards made under the
2007 Plan may be granted so that they qualify as “performance-based
compensation” (as this term is used in Code Section 162(m) and the regulations
thereunder) and are exempt from the deduction limitation imposed by Code Section
162(m) (these Awards are referred to as “Performance-Based
Awards”). Under Code Section 162(m), the Company’s tax deduction may
be limited to the extent total compensation paid to the Chief Executive Officer,
or any of the four most highly compensated executive officers (other than the
Chief Executive Officer) exceeds $1 million in any one tax year. Among other
criteria, Awards only qualify as Performance-Based Awards if at the time of
grant the Committee is administrating the 2007 Plan and the Committee is
comprised solely of two or more “outside directors” (as this term is used in
Code Section 162(m) and the regulations thereunder). In addition, the
Company must obtain stockholder approval of material terms of performance goals
for such “performance-based compensation.”
The
following performance goals set forth in the 2007 Plan were previously approved
by stockholders of the Company at the time of the adoption of the 2007 Plan by
the stockholders of the Company in 2007 and all such performance goals continue
to apply: net sales; pretax income before allocation of corporate
overhead and bonus; pre-tax income before FAS 123R expense; budget; earnings per
share; net income; division, group or corporate financial goals; return on
stockholders’ equity; return on assets; return on net assets; return on
investment capital; gross margin return on investment; gross margin dollars or
percent; payroll as a percentage of sales; inventory turnover;
employee turnover; sales, general and administrative expense; attainment of
strategic and operational initiatives; appreciation in and/or maintenance of the
price of Common Stock or any other publicly-traded securities of the Company, if
any; market share; gross profits; earnings before interest and taxes; earnings
before interest, taxes, depreciation and amortization; economic value-added
models; comparisons with various stock market indices; and/or reductions in
costs. The foregoing criteria shall have any reasonable definitions
that the Committee may specify, which may include or exclude any or all of the
following items as the Committee may specify: extraordinary, unusual or
non-recurring items; effects of accounting changes; effects of financing
activities; expenses for restructuring or productivity initiatives; other
non-operating items; spending for acquisitions; effects of divestitures; and
effects of litigation activities and settlements. Any such
performance criterion or combination of such criteria may apply to the
participant’s Award opportunity in its entirety or to any designated portion or
portions of the Award opportunity, as the Committee may
specify.
All Stock
Options and certain Stock Awards, Performance Awards, and Other Awards granted
under the 2007 Plan, and the compensation attributable to such Awards, are
intended to (i) qualify as Performance-Based Awards or (ii) be otherwise exempt
from the deduction limitation imposed by Code Section 162(m).
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.
Effect of a
Change of Control
. Upon a “Change of Control” (as defined in the 2007
Plan) unless a majority of the Board determines otherwise prior to such Change
of Control, generally, all outstanding Stock Options which have been outstanding
for at least one year shall become exercisable in full, whether or not
exercisable at the time and any such option shall remain exercisable in full
until it expires pursuant to its terms and all restrictions and deferral
limitations contained in any Restricted Stock Award, Deferred Stock Award and
Other Stock-Based Award granted under the 2007 Plan shall lapse.
Termination of
Employment
. The 2007 Plan provides for certain periods after termination
of employment during which a participant may exercise a Stock Option if
employment is terminated due to death or disability or normal retirement, as
defined in the 2007 Plan. A participant whose employment is terminated for any
reason, including, without limitation, retirement, death or disability,
forfeits all unvested, unexercisable and unearned Awards granted to the
participant. Except as set forth above the Board or Committee, as the
case may be, shall determine the post employment rights of a participant with
respect to an Award that was vested or earned prior to
termination. The 2007 Plan’s provisions relating to termination of
employment may be modified in the discretion of the Board or
Committee.
Term and
Amendment.
No award under the 2007 Plan will be granted after
July 10, 2017. The Board may at any time, and from time to time,
amend any of the provisions of the 2007 Plan, and may at any time suspend or
terminate the 2007 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 2007 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 certain provisions of the 2007 Plan, 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 Participant without the Participant's
consent, except for such amendments which are made to cause the 2007 Plan to
qualify for the exemption provided by Rule 16b-3. Moreover, the exercise price
of any granted stock option or other stock-based award may not be reduced
(including as a result of the substitution of a new option or other stock-based
award for a previously granted option or other stock-based award) under the 2007
Plan without stockholder approval except for any reductions required as a result
of a merger, reorganization, consolidation, recapitalization, stock dividend,
stock split, extraordinary distribution with respect to the Common Stock or
other change in corporate structure affecting the Common Stock, and such
adjustment is made in order to prevent dilution or enlargement of rights of the
holder of the stock option or other stock-based award.
Summary
of U.S. Federal Income Tax Consequences
The
following information is not intended to be a complete discussion of the federal
income tax consequences of participation in the 2007 Plan and is qualified in
its entirety by references to the Code and the regulations adopted under the
Code. The provisions of the Code described in this section include
current tax law only and do not reflect any proposals to revise current tax
law. The federal income tax consequences applicable to officers,
directors, and other persons who are subject to potential liability under
Section 16(b) of the Exchange Act may be different than the federal income tax
consequences applicable to persons who are not subject to Section
16(b). The federal income tax consequences applicable to all persons,
whether or not subject to Section 16(b), are described below.
Incentive Stock
Options
. Generally, under the Code, an optionee will not
realize taxable income by reason of the grant or exercise of an Incentive Stock
Option granted pursuant to the 2007 Plan (see, however, discussion of
alternative minimum tax below). If an optionee exercises an Incentive
Stock Option and does not dispose of the shares until the later of (i) two years
from the date the option was granted and (ii) one year from the date of
exercise, the entire gain, if any, realized upon disposition of such shares will
be taxable to the optionee as long-term capital gain, and the Company will not
be entitled to any deduction. If an optionee disposes of the shares
within the period of two years from the date of grant or one year from the date
of exercise (referred to as a “disqualifying disposition”), the optionee
generally will realize ordinary income in the year of disposition and the
Company will receive a corresponding deduction (subject to the limitations
contained in Code Section 162(m)) in an amount equal to the excess of (i) the
lesser of (a) the amount, if any, realized on the disposition and (b) the fair
market value of the shares on the date the option was exercised over (ii) the
option price. Any additional gain realized on the disposition will be
short-term or long-term capital gain and any loss will be long-term or
short-term capital loss. The optionee will be considered to have
disposed of a share if he or she sells, exchanges, makes a gift of or transfers
legal title to the share (except transfers, among others, by pledge, on death or
to a spouse). If the disposition is by sale or exchange, the
optionee’s tax basis will equal the amount paid for the shares plus any ordinary
income realized as a result of the disqualifying disposition.
The
exercise of an Incentive Stock Option may subject the optionee to the so-called
“alternative minimum tax” (referred to as “AMT”). The amount by which
the fair market value of the shares purchased at the time of the exercise
exceeds the option exercise price is an adjustment for purposes of computing the
AMT. In the event of a disqualifying disposition of the shares in the
same taxable year as exercise of the Incentive Stock Option, no adjustment is
then required for purposes of the AMT, but regular income tax, as described
above, may result from such disqualifying disposition.
An
optionee who surrenders shares as payment of the exercise price of his or her
Incentive Stock Option generally will not recognize gain or loss on his or her
surrender of such shares. The surrender of shares previously acquired
upon exercise of an Incentive Stock Option in payment of the exercise price of
another Incentive Stock Option, is, however, a “disposition” of such
stock. If the Incentive Stock Option holding period requirements
described above have not been satisfied with respect to such stock, such
disposition will be a disqualifying disposition that may cause the optionee to
recognize ordinary income as discussed above.
Under the
Code, all of the shares received by an optionee upon exercise of an Incentive
Stock Option by surrendering shares will be subject to the Incentive Stock
Option holding period requirements. Of those shares, a number of shares
(referred to as the “Exchange Shares”) equal to the number of shares surrendered
by the optionee will have the same tax basis for capital gains purposes
(increased by any ordinary income recognized as a result of a disqualifying
disposition of the surrendered shares if they were Incentive Stock Option
shares) and the same capital gains holding period as the shares
surrendered.
For
purposes of determining ordinary income upon a subsequent disqualifying
disposition of the Exchange Shares, the amount paid for such shares will be
deemed to be the fair market value of the shares surrendered. The
balance of the shares received by the optionee will have a tax basis (and a
deemed purchase price) of zero and a capital gains holding period beginning on
the date of exercise. The Incentive Stock Option holding period for
all shares will be the same as if the option had been exercised for
cash.
Non-Qualified
Stock Options
. Generally, there will be no federal income tax
consequences to either the optionee or the Company on the grant of Non-Qualified
Stock Options pursuant to the Stock Incentive Plan. On the exercise
of a Non-Qualified Stock Option, the optionee has taxable ordinary income equal
to the excess of the fair market value of the shares acquired on the exercise
date over the option price of the shares. The Company will be
entitled to a federal income tax deduction (subject to the limitations contained
in Code Section 162(m)) in an amount equal to such excess, provided that the
Company complies with applicable reporting rules.
Upon the
sale of stock acquired by exercise of a Non-Qualified Stock Option, optionees
will realize long-term or short-term capital gain or loss depending upon their
holding period for such stock. For individuals, capital losses are
deductible only to the extent of capital gains for the year plus
$3,000. An optionee who surrenders shares in payment of the exercise
price of a Non-Qualified Stock Option will not recognize gain or loss with
respect to the shares so delivered unless such shares were acquired pursuant to
the exercise of an Incentive Stock Option and the delivery of such shares is a
disqualifying disposition. See “Incentive Stock Options.” The optionee will
recognize ordinary income on the exercise of the Non-Qualified Stock Option as
described above. Of the shares received in such an exchange, that
number of shares equal to the number of shares surrendered have the same tax
basis and capital gains holding period as the shares surrendered. The
balance of shares received will have a tax basis equal to their fair market
value on the date of exercise and the capital gains holding period will begin on
the date of exercise.
Stock
Awards
. The taxability of a Stock Award to a participant is
dependent upon the extent to which the award is restricted on the date of
grant. If a Stock Award is either transferable or not subject to a
substantial risk of forfeiture, a participant will recognize taxable ordinary
income on the date of grant. If a Stock Award is both
non-transferable and subject to a substantial risk of forfeiture on the date of
grant, then unless an election is made as described below, a participant will
not recognize taxable ordinary income on the date of grant, but will at such
time or times as the Stock Award becomes either transferable or not subject to a
substantial risk of forfeiture in an amount equal to the fair market value of
such shares at that time. Within thirty days of receipt of a Stock
Award that is not transferable and subject to a substantial risk of forfeiture,
a participant may file an election with the Internal Revenue Service to include
as taxable ordinary income in the year of receipt an amount equal to the fair
market value of the shares subject to the award at the time of
receipt. In such event, any subsequent appreciation in the value of
such shares will not be taxable as compensation to a participant upon the
vesting of shares subject to the award. However, if shares subject to
the award are forfeited subsequent to such election, a participant will not be
entitled to a tax deduction. For purposes of determining the amount
of taxable gain or loss upon a subsequent disposition of shares issued pursuant
to such an award, the amount recognized as ordinary income to a participant will
be treated as the cost basis for such shares. Shares which are held
for more than one year after vesting (or in the event of an election as
described above, the date of receipt) generally will qualify for long-term
capital gain treatment. The Company will be entitled to a deduction
(subject to the limitations contained in Code Section 162(m)) in such amount and
at such time as ordinary income becomes taxable to the participant.
Performance
Awards
. The tax consequences of a performance award depend
upon the nature of the underlying award and if and when the performance goals
are achieved. If a performance award consists of a promise to deliver
Common Stock at a future date based upon the satisfaction of certain targets,
such awards will be subject to federal income taxation as ordinary income based
upon the fair market value of the Common Stock on the date such performance
awards are earned by a participant by satisfying the performance targets,
provided such awards are not then subject to a substantial risk of
forfeiture.
Company
Deduction.
Generally, whenever a participant realizes ordinary
income under the Stock Incentive Plan, a corresponding deduction is available to
the Company provided the Company complies with certain reporting
requirements. Under Code Section 162(m), however, the Company will be
denied a deduction for a taxable year for certain compensation exceeding
$1,000,000 paid to the individual who is, as of the end of the taxable year, the
Company’s Chief Executive Officer or one of the three highest compensated
officers for the taxable year whose total compensation is required to be
reported to shareholders under the Securities Exchange Act of 1934 by reason of
such individuals being among the three highest compensated officers (other then
the Chief Executive Officer or the Chief Financial Officer, excluding (among
other things) certain performance-based compensation.
Awards
Under the 2007 Plan
The
following table sets forth certain information regarding equity awards that were
granted under the 2007 Plan (other than awards that have since been cancelled).
Additional information concerning restricted stock granted in 2008 to the Named
Executive Officers (which awards are also reflected in the restricted stock
column in the following table) is set forth in the table under “Executive
Compensation – Executive Compensation Tables-Grants of Plan Based Awards”
above.
|
|
Name
and Principal Position
|
|
Amount
of
Options
|
|
|
Amount
of
restricted
stock
|
|
Kenneth
Ferry
|
|
President,
Chief Executive Officer
|
|
|
200,000
|
|
|
|
400,000
|
|
Darlene
Deptula-Hicks
|
|
Executive
Vice President of Finance, Chief Financial Officer
|
|
|
100,000
|
|
|
|
120,592
|
|
Jeffrey
Barnes
|
|
Senior
Vice President of Sales
|
|
|
100,000
|
|
|
|
119,709
|
|
Stacey
Stevens
|
|
Senior
Vice President of Marketing and Strategy
|
|
|
100,000
|
|
|
|
114,709
|
|
Jonathan
Go
|
|
Senior
Vice President of Research and Development
|
|
|
75,000
|
|
|
|
85,000
|
|
Lawrence
Howard
|
|
Director
|
|
|
30,000
|
|
|
|
-
|
|
Rachel
Brem
|
|
Director
|
|
|
94,528
|
|
|
|
-
|
|
Anthony
Ecock
|
|
Director
|
|
|
40,000
|
|
|
|
-
|
|
Steven
Rappaport
|
|
Director
|
|
|
94,650
|
|
|
|
-
|
|
Maha
Sallam
|
|
Director
|
|
|
7,500
|
|
|
|
2,500
|
|
Elliot
Sussman
|
|
Director
|
|
|
105,968
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
Officers as a Group (5 persons)
|
|
|
575,000
|
|
|
|
840,010
|
|
Non-executive
Directors as a Group (5 persons)
|
|
|
365,146
|
(1)
|
|
|
-
|
|
Non-executive
Employees as a Group (65 persons)
|
|
|
328,000
|
(2)
|
|
|
75,188
|
|
(1) Does
not include 61,811 shares previously granted to former non-executive Directors
of the Company.
(2) Includes
7,500 stock options and 2,500 restricted stock awards granted to Ms. Sallam in
her capacity as a non-executive employee, which are not reflected in the
Non-executive Directors as a Group column.
Equity
Compensation Plans
The
following table provides certain information with respect to all of our equity
compensation plans in effect as of December 31, 2008.
Plan Category:
|
|
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
|
|
|
Weighted-average
exercise price of
outstanding
options, warrants
and rights
|
|
|
Number of securities
remaining available for
issuance under equity
compensation plans
(excluding securities
reflected in column (a))
|
|
Equity
compensation plans approved by security holders:
|
|
|
3,573,726
|
|
|
$
|
2.91
|
|
|
|
195,185
|
|
Equity
compensation plans not approved by security holders (1):
|
|
|
2,521,111
|
|
|
$
|
3.14
|
|
|
|
-0-
|
|
Total
|
|
|
6,094,837
|
|
|
$
|
3.00
|
|
|
|
195,185
|
|
(1)
|
Represents
the aggregate number of shares of Common Stock issuable upon exercise of
individual arrangements with warrant and non-plan option
holders. These warrants and options are five years in duration,
expire at various dates between December 15, 2009 and November 3, 2011,
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. See Note 5 of Notes
to our consolidated financial statements in our 2008 Form 10-K for a
description of our Stock Option and Stock Incentive Plans and certain
information regarding the terms of the non-plan
options.
|
STOCKHOLDER
PROPOSALS FOR 2010 ANNUAL MEETING
Stockholders
who wish to present proposals appropriate for consideration at our annual
meeting of stockholders to be held in the year 2010 must submit a notice
containing the proposal in proper form consistent with our By-Laws,
addressed to the attention of our Corporate Secretary at our address set forth
on the first page of this proxy statement and in accordance with applicable
regulations under Rule 14a-8 of the Exchange Act, not later than January 4, 2010
in order for the proposition to be considered for inclusion in our proxy
statement and form of proxy relating to such annual meeting. Under our By-Laws,
to be in proper form, each such notice must set forth as to each matter the
stockholder proposes to bring before the meeting: (i) a description of each
item of business proposed to be brought before the meeting and the reasons for
conducting such business at the meeting; (ii) the name and record address
of the stockholder proposing to bring such item of business before the meeting;
(iii) the class or series and number of shares of our stock which are held
of record or owned beneficially and represented by proxy by such stockholder as
of the record date for the meeting (if such date then shall have been made
publicly available) and as of the date of such notice; (iv) a description of all
arrangements or understandings between such stockholder and any other person or
persons (including their names) in connection with the proposal of such business
by such stockholder and any material interest of such stockholder in such
business; (v) a representation that such stockholder intends to appear in
person or by proxy at the meeting to bring such business before the meeting, and
(vi) all other information which would be required to be included in a
proxy statement filed with the SEC if, with respect to any such item of
business, such stockholder were a participant in a solicitation subject to
Section 14 of the Exchange Act .
If a
stockholder submits a proposal after the January 4, 2010 deadline required under
Rule 14a-8 of the Exchange Act but still wishes to present the proposal at our
annual meeting of stockholders (but not in our proxy statement) for the fiscal
year ending December 31, 2009 to be held in 2010, the proposal, which must be
presented in a manner consistent with our By-Laws and applicable law, must be
submitted to our Corporate Secretary in proper form at the address
set forth above so that it is received by our Corporate Secretary not
less than 50 nor more than 75 days prior to the meeting unless less than 65 days
notice or prior public disclosure of the date of the meeting is given or made to
stockholders, in which case, no less than the close of business on the tenth day
following the date on which the notice of the date of the meeting was mailed or
other public disclosure of the date of the meeting was made.
We 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 our Board of
Directors and received in respect of this Annual Meeting will be voted in the
discretion of our management on such other matter which may properly come before
the Annual Meeting.
WHERE
YOU CAN FIND MORE INFORMATION
Our
proxy statement and 2008 annual report to stockholders is being made available
to our stockholders via the Internet. If you would like to receive printed copy
of our proxy statement and annual report, you should follow the instructions for
requesting such information in the Notice you receive.
We file
reports and other information with the SEC. Copies of these documents may be
obtained at the SEC’s public reference room in Washington, D.C. Our SEC filings
are also available on the SEC’s web site at
http://www.sec.gov. Stockholders may also request copies of our
Annual Report on Form 10-K for the year ended December 31, 2008 and any
amendments thereto, except for exhibits to the report, without charge, by
submitting a written request to the Company’s Corporate Secretary at 98 Spit
Brook Road, Suite 100, Nashua, NH 03062 .
OTHER
INFORMATION
The
entire cost of soliciting proxies, including the costs of preparing, assembling,
printing, posting and mailing the Notice and, as applicable, this proxy
statement, the proxy and any additional soliciting material furnished to
stockholders, will be borne by the Company. In addition, arrangements will be
made with brokerage houses and other custodians, nominees and fiduciaries to
send the Notice and any proxies and proxy materials to the beneficial owners of
Common Stock, and we may reimburse such persons for their expenses.
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,
|
Kenneth
Ferry,
|
President
and Chief Executive
|
Officer
|
May 4,
2009
EXHIBIT
A
i
CAD, Inc.
AUDIT
COMMITTEE CHARTER
Purpose
There
shall be a committee of the Board of Directors of iCAD, Inc. (the "Company") to
be known as the audit committee. The audit committee’s purpose is
to:
(A)
oversee the accounting and financial reporting processes of the Company and the
audits of the financial statements of the Company; and
(B)
prepare an audit committee report as required by the Securities and Exchange
Commission’s (“SEC”) rules to be included in the Company’s annual proxy
statement, or, if the Company does not file a proxy statement, in the Company’s
annual report filed on Form 10-K with the SEC.
Composition
The audit
committee shall have at least three (3) members, each of whom must meet the
following conditions: (i) be independent as defined under Marketplace Rule
4200(a)(15) of the Nasdaq Stock Market, or any successor rule, (except as set
forth in Rule 4350 (d)(2)(B) or any successor rule); (ii) meet the criteria for
independence set forth in Rule 10A-3(b)(1) under the Securities Exchange Act of
1934, or any successor rule (subject to the exemptions provided in Rule 10A-3(c)
or any successor rule); (iii) not have participated in the preparation of the
financial statements of the Company or any current subsidiary of the Company at
any time during the past three years; and (iv) be able to read and understand
fundamental financial statements, including the Company’s balance sheet, income
statement, and cash flow statement. Additionally, at least one member
of the audit committee must have past employment experience in finance or
accounting, requisite professional certification in accounting, or any other
comparable experience or background which results in the individual’s financial
sophistication, including being or having been a chief executive officer, chief
financial officer or other senior officer with financial oversight
responsibilities.
The Board
of Directors of the Company shall elect or appoint a chairperson of the audit
committee (or, if it does not do so, the audit committee members shall elect a
chairperson by vote of a majority of the full committee); the chairperson will
have authority to act on behalf of the audit committee between meetings as will
any member of the audit committee to whom any duty or responsibility is
delegated by the Chairman or by a majority of the members of the
committee. An audit committee member may be removed by the Board of
Directors at any time in its discretion, whereupon the resulting vacancy may be
filled by the Board of Directors upon recommendation of the Nominating and
Corporate Governance Committee.
Specific Responsibilities
and Authority
The
specific responsibilities and authority of the audit committee shall be as
follows:
(A) be
directly responsible for the appointment, compensation, retention and oversight
of the work of any registered public accounting firm engaged (including
resolution of disagreements between management and the auditor regarding
financial reporting) for the purpose of preparing or issuing an audit report or
performing other audit, review or attest services for the Company, and each such
registered public accounting firm must report directly to the audit
committee.
(B)
establish procedures for (i) the receipt, retention and treatment of complaints
received by the Company regarding accounting, internal accounting controls or
auditing matters, and (ii) the confidential, anonymous submissions by Company
employees of concerns regarding questionable accounting or auditing
matters;
(C) have
the authority to engage independent counsel and other advisers, as it determines
necessary to carry out its duties;
(D)
receive appropriate funding from the Company, as determined by the audit
committee in its capacity as a committee of the Board of Directors, for payment
of: (i) compensation to any registered public accounting firm engaged for the
purpose of preparing or issuing an audit report or performing other audit,
review or attest services for the Company; (ii) compensation to any advisers
employed by the audit committee; and (iii) ordinary administrative expenses
of the audit committee that are necessary or appropriate in carrying
out its duties;
(E)
ensure its receipt from the Company’s outside auditors of a formal written
statement delineating all relationships between the auditor and the Company,
consistent with the rules of the Public Company Accounting Oversight Board, and
actively engaging in a dialogue with the auditor with respect to any disclosed
relationships or services that may impact the objectivity and independence of
the auditor and for taking, or recommending that the full Board of Directors
take, appropriate action to oversee the independence of the outside
auditor;
(F)
review and reassess the adequacy of the audit committee’s charter
annually;
(G)
comply with all pre-approval requirements of Section 10A(i) of the Securities
Exchange Act of 1934 and all SEC rules relating to the administration by the
audit committee of the auditor engagement to the extent necessary to maintain
the independence of the auditor as set forth in 17 CFR Part
210.2-01(c)(7);
(H) if no
other committee of the Board has been delegated with the responsibility for
reviewing any transaction between the Company and any related person that are
required to be disclosed pursuant to SEC Regulation S-K, item 404 and any
successor rule (“Item 404”) and reviewing other related person transactions for
potential conflicts of interest, the audit committee shall conduct such review.
The terms “related person” and “transaction” shall have the meanings given to
such terms in Item 404, as may be amended from time to time;
and
(I) make
such other recommendations to the Board of Directors on such matters, within the
scope of its function, as may come to its attention and which in its discretion
warrant consideration by the Board.
Meetings
The audit
committee shall meet at least two times per year, or more frequently as
circumstances require. One or more meetings may be conducted in whole
or in part by telephone conference call or similar means if it is impracticable
to obtain the personal presence of each audit committee member. The
Company shall make available to the audit committee, at its meetings and
otherwise, such individuals and entities as may be designated from time to time
by the audit committee, such as members of management including (but not limited
to) the internal audit and accounting staff, the independent auditors, inside
and outside counsel, and other individuals or entities (whether or not employed
by the Company and including any corporate governance employees and individuals
or entities performing internal audit or other services as independent
contractors).
Delegation
Any
duties and responsibilities of the audit committee, including, but not limited
to, the authority to pre-approve all audit and permitted non-audit services, may
be delegated to one or more members of the audit committee or a subcommittee of
the audit committee.
Limitations
The audit
committee is responsible for the duties and responsibilities set forth in this
charter, but its role is oversight and therefore it is not responsible for
either the preparation of the Company’s financial statements or the auditing of
the Company’s financial statements. The members of the audit
committee are not employees of the Company and may not be accountants or
auditors by profession or experts in accounting or
auditing. Management of the Company has the responsibility for
preparing the financial statements and implementing internal controls over
financial reporting and the independent auditors have the responsibility for
auditing the financial statements and monitoring the effectiveness of the
internal controls, subject, in each case, to the oversight of the audit
committee described in this charter. The review of the financial
statements by the audit committee is not of the same character or quality as the
audit performed by the independent auditors. The oversight exercised
by the audit committee is not a guarantee that the financial statements will be
free from mistake or fraud. In carrying out its responsibilities, the
audit committee believes its policies and procedures should remain flexible in
order to best react to a changing environment.
EXHIBIT
B
iCAD,
INC.
COMPENSATION
COMMITTEE CHARTER
Purpose
The
Compensation Committee of iCAD, Inc. (the “
Corporation
”)
is appointed by the Board of Directors to assist the Board in carrying out the
Board’s responsibilities relating to compensation of the Corporation’s directors
and officers. The Compensation Committee has overall responsibility
for evaluating and approving the director and officer compensation plans,
policies and programs of the Corporation.
The
Compensation Committee is also responsible for producing an annual report on
executive compensation for inclusion in the Corporation’s proxy statement, in
accordance with applicable rules and regulations.
Composition
The
Compensation Committee shall consist of no fewer than two
members. Each member of the Compensation Committee must (i) be an
independent director of the Corporation satisfying the independence requirements
of the NASDAQ Stock Market and other applicable regulatory requirements; (ii)
qualify as an “outside director” under Section 162(m) of the Internal Revenue
Code, as amended; and (iii) meet the requirements of a “non-employee director”
for purposes of Section 16 of the Securities Exchange Act of 1934, as
amended.
The Board
of Directors, upon recommendation of the Nominating and Corporate Governance
Committee, shall appoint the members of the Compensation
Committee. Subject to earlier removal by the Board of Directors, each
member shall serve until he or she is no longer a director of the Corporation,
and until his or her successor shall have been duly elected and
qualified. A Compensation Committee member may be removed by Board of
Directors at any time in its discretion, whereupon the resulting vacancy may be
filled by the Board of Directors upon recommendation of the Nominating and
Corporate Governance Committee. The Compensation Committee members
shall elect a chairperson by a vote of a majority of the full Compensation
Committee, or, if the members have failed to do so, then the Board of Directors
shall designate a chairperson.
The
Compensation Committee may form and delegate authority to subcommittees of this
Compensation Committee when appropriate.
Structure
and Meetings
The
Compensation Committee shall meet not less than annually. The
chairperson of the Compensation Committee shall preside at each meeting of the
Compensation Committee, except that in the absence of the chairperson at any
particular meeting, then the Compensation Committee member designated by the
chairperson shall preside at such meeting. The chairperson shall,
after consultation with the other members of the Compensation Committee, (i)
determine the dates, times and places for meetings of the Compensation
Committee, and (ii) set the agenda for each meeting. A majority of
the total number of Compensation Committee members then in office shall
constitute a quorum for the transaction of committee business and all matters to
be decided by the Compensation Committee shall be decided by the affirmative
vote of a majority of the members present in person or by proxy at a duly called
meeting of the Compensation Committee.
Duties
and Responsibilities
The
Compensation Committee shall have the following power, authority and direct
responsibilities:
|
·
|
Based
upon corporate goals and objectives approved by the full Board of
Directors, review and approve annually corporate goals and objectives
relevant to the compensation of the Corporation’s Chief Executive Officer
(“CEO”), annually evaluate the CEO’s performance in light of those goals
and objectives, and, consistent with the requirements of any employment
agreement, recommend the CEO’s compensation levels based on this
evaluation. The CEO shall not be permitted to be present during
voting or deliberations relating to CEO
compensation.
|
|
·
|
Make
recommendations to the Board with respect to director and non-CEO officer
compensation, incentive compensation plans and equity-based
plans. The CEO may be present during voting or deliberations
relating to non-CEO compensation.
|
|
·
|
Produce
a Compensation Committee Report as required by the SEC to be included in
the Corporation’s annual proxy statement or annual report on Form 10-K
filed with the SEC. In this regard, the Compensation
Committee shall review and discuss with the Corporation’s management the
Compensation Discussion and Analysis (“CD&A”) required by the
Securities and Exchange Commission Regulation S-K, Item
402. Based on such review and discussion, the Compensation
Committee shall determine whether to recommend to the Board of Directors
that the CD&A be included in the Corporation’s annual report or proxy
statement for the annual meeting of
stockholders.
|
|
·
|
The
Compensation Committee shall annually review and recommend to the Board
the following items with respect to the CEO and the executive officers of
the Corporation (as defined by Section 16 and Rule 16a-1(f) of the
Securities Exchange Act of 1934): (a) the annual base salary
level, (b) the annual incentive opportunity level, (c) the long-term
incentive opportunity level, (d) employment agreements, severance
agreements, and change in control agreements/provisions, in each case as,
when and if appropriate, and (e) any special or supplemental benefits, in
each case subject to the terms of any existing applicable employment
agreement terms.
|
|
·
|
The
Compensation Committee shall annually review and reassess the adequacy of
this Charter and recommend to the Board for approval any proposed changes
to this Charter.
|
|
·
|
The
Compensation Committee shall perform such other duties and
responsibilities as may be assigned to the Compensation Committee from
time to time by the Board of Directors, including without
limitation:
|
|
a.
|
The
implementation and administration of the Corporation’s incentive and
equity-based compensation plans to the extent permitted by such
plans;
|
|
b.
|
Review
and make recommendations to the Board of Directors on (i) the
competitiveness of the Corporation’s compensation and benefit plans for
directors and key management employees and the employee relations policies
and procedures applicable to key management employees; and (ii) such other
matters relating to the organization of the Corporation and the
compensation of executive officers and key management employees as the
Compensation Committee may in its own discretion deem
desirable.
|
Operating
Policies
1. The
Compensation Committee shall keep the minutes of all Compensation Committee
meetings (designating in its discretion an individual to record the minutes) and
approve the minutes by subsequent action. The Compensation Committee
shall circulate the approved minutes of the Compensation Committee meetings to
the full Board of Directors for review.
2. The
Compensation Committee shall determine its rules of procedure in accordance with
the Corporation’s principles of corporate governance and its
Bylaws.
3. At
each regular meeting of the Board of Directors held following a Compensation
Committee meeting, the Compensation Committee shall report to the Board of
Directors regarding the actions, activities and findings of the Compensation
Committee since the last Board of Directors meeting, as well as any
recommendations for action by the Board of Directors, when
appropriate.
4. In
discharging its responsibilities, the Compensation Committee shall have full
access to any relevant records of the Corporation and may also request that any
officer or employee of the Corporation or the Corporation’s outside counsel meet
with members of, or consultants to, the Compensation Committee. The
Committee may also retain, at the Company’s expense, such experts and other
professionals as it deems necessary in discharging its
responsibilities.
APPENDIX
A
iCAD, INC.
2007
Stock Incentive Plan
Section 1.
Purposes; Definitions.
The
purpose of the iCAD, Inc. 2007 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 stockholders 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 10
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)
|
“Covered
Employee” shall mean any employee of the Company or any of its
Subsidiaries who is deemed to be a “covered employee” within the meaning
of Section 162(m) of the
Code.
|
|
(h)
|
“Deferred
Restricted Stock Account” shall mean an account established under this
Plan on behalf of a Participant which shall be credited with Stock Units
(as defined in Section 6 below) as a result of such
Participant’s election to defer his/her Restricted Stock (and, if
applicable, dividend equivalents with respect to such shares of Restricted
Stock).
|
|
(i)
|
"Deferred
Stock" means Stock to be received, under an award made pursuant to Section
7 below, at the end of a specified deferral
period.
|
|
(j)
|
"Disability"
means disability as determined under procedures established by the Board
or the Committee for purposes of the
Plan.
|
|
(k)
|
"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.
|
|
(l)
|
"Exchange
Act" means the Securities Exchange Act of 1934, as amended, as in effect
from time to time.
|
|
(m)
|
"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 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 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 the Over The Counter Bulletin
Board, the mean between the closing bid sale price for the Stock on such
day as reported by 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.
|
|
(n)
|
“409A
Change” shall mean (i) the acquisition by any one person, or more than one
person acting as a group, of Stock that, together with Stock held by such
person or group, constitutes more than fifty percent (50%) of the total
fair market value or total voting power of the Stock; (ii) (a) the
acquisition by any one person, or more than one person acting as a group
(or the acquisition during the 12-month period ending on the date of the
most recent acquisition by such person or persons) of ownership of Stock
possessing fifty percent (50%) or more of the total voting power of the
Stock; or (b) a majority of members of the Board is replaced during any
12-month period by directors whose appointment or election is not endorsed
by a majority of the members of the Board prior to the date of the
appointment or election; or (iii) the acquisition by any one person or
more than one person acting as a group (or the acquisition during the
12-month period ending on the date of the most recent acquisition by such
person or persons) of assets from the Company resulting in a Change of
Control and, in any event, that have a total gross fair market
value equal to or more than forty percent (40%) of the total gross fair
market value of all of the assets of the Company immediately prior to such
acquisition or acquisitions. The foregoing definition of “409A
Change” shall be interpreted consistent with Code Section 409A and the
Treasury regulations issued
thereunder.
|
|
(o)
|
“409A
Deferred Stock Award” shall mean a Deferred Stock award that is
or has become subject to Section 409A of the
Code.
|
|
(p)
|
“Identification
Date” shall mean each December 31.
|
|
(q)
|
"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.
|
|
(r)
|
"Non-Qualified
Stock Option" means any Stock Option that is not an Incentive Stock
Option.
|
|
(s)
|
"Normal
Retirement" means retirement from active employment with the Company or
any Subsidiary on or after age 65.
|
|
(t)
|
"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.
|
|
(u)
|
“Participant”
shall mean any person who has received an award of an Option, Deferred
Stock, Restricted Stock or an Other-Stock Based-Award under the
Plan.
|
|
(v)
|
"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.
|
|
(w)
|
"Plan"
means this iCAD Inc. 2007 Stock Incentive Plan, as hereinafter amended
from time to time.
|
|
(x)
|
"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.
|
|
(y)
|
"Retirement"
means Normal Retirement or Early
Retirement.
|
|
(z)
|
"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.
|
|
(aa)
|
"Securities
Act" means the Securities Act of 1933, as amended, as in effect from time
to time.
|
|
(bb)
|
“Specified
Employee” means any Participant (As hereinafter defined) who is (i) an
officer of the Company and (ii) receives annual compensation from the
Company in excess of $130,000 (or such other amount as determined pursuant
to Code Section 416(i)(1)(A)(i)). The term Specified Employee
shall also include any other individual who satisfies the definition of
specified employee under Code Section 409A. A Participant is a
Specified Employee if he/she meets the foregoing requirements at any time
during the 12-month period ending on an Identification Date. If
a Participant is a Specified Employee as of an Identification Date, such
Participant is treated as a Specified Employee for the 12-month period
beginning on the first day of the fourth month following the
Identification Date.
|
|
(cc)
|
"Stock"
means the Common Stock of the Company, $.01 par value per
share.
|
|
(dd)
|
"Stock
Option" or "Option" means any option to purchase shares of Stock which is
granted pursuant to the Plan.
|
|
(ee)
|
"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.
|
|
(ff)
|
“Unforeseen
Emergency means a severe financial hardship to the
Participant resulting from an illness or accident of the
Participant, the Participant’s spouse or a dependent (as defined in
Section 152(a) of the Code) of the Participant, loss of the Participant’s
property due to casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the
Participant.
|
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 to the extent
practicable, 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. To extent practicable, the members of
the Committee shall each be an “outside director” within the meaning of Section
162(m) of the Code and the regulations thereunder.
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
substitute (A) new Stock Options for previously granted Stock Options,
including previously granted Stock Options having higher option exercise
or purchase prices and/or containing other less favorable terms, provided,
however, that no such substitution shall result in the reduction of the
exercise price of a previously granted Stock Option without stockholder
approval 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 provided, however, the exercise price of any new
Other Stock-Based Award may not be reduced without stockholder approval.
Notwithstanding the foregoing, no stockholder approval shall be required
to reduce the exercise price of a previously granted Stock Option or Other
Stock-Based Award as a result of a merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, extraordinary distribution
with respect to the Stock or other change in corporate structure affecting
the Stock, and such adjustment is made in order to prevent dilution or
enlargement of rights of the holder of the Stock Option or Other Stock-
Based Award as provided in Section 3
hereof.
|
Subject
to Section 11 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 provisions of the Plan and notwithstanding anything to the contrary
above, the Board or the Committee, as the case may be, may, in its sole
discretion, from time to time delegate to the Chief Executive Officer of the
Company (the "CEO") or the Chief Financial Officer of the Company (the “CFO”)
the authority, subject to such terms as the Board or the Committee, as the case
may be, shall determine, to determine and designate from time to time the
employees or other persons to whom awards under the Plan may be granted and to
perform other specified functions under the Plan; provided, however, that the
CEO or CFO, as the case may be, may not grant any award to, or
perform any function related to an award to, himself or herself, as the case may
be, or any individual (i) who is an executive officer of the Company or (ii)
then subject to Section 16 of the Exchange Act or (iii) who is or, in the
determination of the Board or the Committee, as the case may be, may become a
Covered Employee, and any such grant or function relating to such individuals
shall be performed solely by the Board or the Committee, as the case may be, to
ensure compliance with the applicable requirements of the Exchange Act and the
Code or (iv) where the grant or performance of such function by the CEO or CFO
will cause the Plan not to comply with any applicable regulation of any
securities exchange or automated quotation system where the Stock is listed for
trading.
Any such
delegation of authority by the Board or the Committee, as the case may be, shall
be by a resolution adopted by the Board or the Committee, as the case may be,
and shall specify all of the terms and conditions of the delegation. The
resolution of the Board or the Committee, as the case may be,
granting such authority may authorize the CEO or CFO to grant awards pursuant to
the Plan and may set forth the types of awards that may be granted; provided,
however, that the resolution shall (i) specify the maximum number of shares of
Stock that may be awarded to any individual Plan participant and to all
participants during a specified period of time and (ii) specify the exercise
price (or the method for determining the exercise price) of an award, the
vesting schedule, and any other terms, conditions, or restrictions that may be
imposed by the Board or the Committee, as the case may be, in its sole
discretion. The resolution of the Board or the Committee, as the case may be,
shall also require the CEO or CFO, as the case may be, to provide the Board or
the Committee, as the case may be, on at least a monthly basis, a report that
identifies the awards granted pursuant to the delegated authority and, with
respect to each award: the name of the participant, the date of grant of the
award, the number of shares of Stock subject to the award, the exercise period
and exercise price, if any and vesting provisions of such award. All awards
granted pursuant to delegated authority are subject to the resolutions of the
Board or the Committee, as the case may be, granting such
authority.
The Board
or the Committee, or the case may be, may also delegate to other
officers of the Company, pursuant to a written delegation, the authority to
perform specified functions under the Plan that are not inconsistent with Rule
16b-3 or other rules or regulations applicable to the Plan. Any actions taken by
any officers of the Company pursuant to such written delegation of authority
shall be deemed to have been taken by the Board or Committee, as the case may
be.
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 5,250,000 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
award for any reason (other than by issuance of such shares upon exercise of a
Stock Option), 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.
Without limiting the foregoing, (i) any shares of Stock subject to an award that
remain unissued upon the cancellation, surrender, exchange or termination of
such award without having been exercised or settled, (ii) any shares of Stock
subject to an award that are retained by the Company as payment of the exercise
price or tax withholding obligations with respect to an award and
(iii) any shares of Stock equal to the number of previously owned shares of
Stock surrendered to the Company as payment of the exercise price of a Stock
Option or to satisfy tax withholding obligations with respect to an award, 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 number of
shares of Stock with respect to which Options, Deferred Stock, Restricted Stock
or Other Stock-Based Awards may be granted or measured to any Participant under
the Plan during any calendar year or part thereof shall not
exceed 800,000 shares. The maximum number of shares of Stock with
respect to which Incentive Stock Options may be granted under the Plan shall be
2,250,000 shares of Stock.
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 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.
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(b)
|
Terms
and Conditions. Stock Options granted under the Plan shall be
subject to the following terms and
conditions:
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|
(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%
Stockholder") 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.
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|
(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% Stockholder) after the date
on which the Option is granted.
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(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.
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(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 exercise price for the Stock Options
exercised, 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 of the exercise price and any tax required to be
withheld by the Company 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 stockholder 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 13(a) below.
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|
(v)
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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.
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(vi)
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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.
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|
(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.
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|
(viii)
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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.
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(ix)
|
Other
Termination
. Subject to the provisions of Section 13(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.
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|
(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.
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|
(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.
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|
(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.
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Section 6.
Restricted Stock.
|
(i)
|
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.
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|
(b)
|
Terms
and Conditions. Each Restricted Stock award shall be subject to
the following terms and
conditions:
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|
(i)
|
Restricted
Stock, when issued, shall either be issued in book-entry form or 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, any 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. Any such certificates shall be deposited by the 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.
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|
(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. Unless the Board or Committee determines
otherwise, 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.
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|
(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 forfeited to 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.
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|
(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.
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(c)
|
Restricted Stock
Deferrals
|
A
Participant who may be or has been awarded Restricted Stock by the Company may
make a deferral election under the Plan by completing and submitting to the
Company a written Stock Deferral Agreement provided by the Company during the
enrollment period. The Stock Deferral
Agreement must comply with the timing
conditions of Section (ii) below.
The Stock Deferral Agreement shall
indicate: (1) the number of shares of Restricted Stock a Participant elects to
defer, (2) the disposition of dividend equivalents, and (3) the Participant’s
election of a payment schedule for his or her Deferred Restricted Stock Account.
Notwithstanding any provision to the contrary in this Plan, a Participant’s
Deferred Restricted Stock Account is payable solely in shares of the Company’s
common stock (with any fractional share paid in cash). Dividend
equivalent payments shall be made with respect to Stock Units, as defined in
Section (iv) below, credited to a Participant’s Deferred Restricted
Stock Account in the amount that would have been paid (or reinvested) as a
dividend if each Stock Unit were a share of common stock of the
Company. Subject to the participant’s election in Section 6(c)(i)(2)
hereof, any such dividend equivalent shall be credited to the Participant’s
Deferred Restricted Stock Account. The number of Stock Units into
which the dividend equivalents are converted shall be calculated based on the
price per share of the Stock of the Company as of the date the dividend is
paid.
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(ii)
|
Timing of Stock
Deferral Agreement
|
A
deferral election relating to Restricted Stock will be invalid unless the
election satisfies one of the following conditions:
(1) The
election may be made at any time that is no later than December 31 of the year
prior to the year in which the Restricted Stock is granted or, with respect to
Restricted Stock that is subject to a vesting period of at least twelve (12)
months, the election made on or before the thirtieth (30
th
) day
after the Participant is granted the Restricted Stock and further provided that
the election is made at least twelve (12) months in advance of the earliest date
on which the vesting period could expire. Notwithstanding the
foregoing to the contrary, a Participant shall not be permitted to elect to
defer the receipt of Restricted Stock unless such election complies with Code
Section 409A and Treasury Regulations, IRS Rulings and IRS Notices issued
thereunder (a “Pre-Grant Stock Deferral Election”);
(2) The
election may be made later than the time or times set forth in (1) above,
provided the deferral election period shall occur during the period which is at
least twelve (12) months prior to the date on which the Restricted Stock becomes
vested (a “Post-Grant Stock Deferral Election”). Any Post-Grant Stock Deferral
Election must indicate a distribution date that is at least five (5) years later
than the vesting date of the related Restricted Stock; or
(3) In
the case of Restricted Stock that qualify as performance-based under Code
Section 409A, the election may be made no later than six (6) months prior to the
vesting date of the Restricted Stock (a “Performance-Based Stock Deferral
Election”).
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(iii)
|
Effect of Deferral
Election
|
Except as
provided in Section 6(c)(vi) regarding changing a payment schedule
election, deferral elections are irrevocable.
|
(iv)
|
Additional Effect of
Deferral Election on Restricted
Stock
|
When a
Participant makes a deferral election for Restricted Stock, such Participant
shall continue to hold (or otherwise be credited with ownership of) the shares
of Restricted Stock which are subject to the election, and remains able to
exercise all rights of ownership accorded to him or her as the owner of unvested
Restricted Stock with respect to such shares, as set forth in the Participant’s
underlying Restricted Stock award agreement, until the day immediately prior to
the “vesting date” of such deferred Restricted Stock shares. During such period,
any dividends declared with respect to such deferred Restricted Stock shares
shall be distributed in accordance with the provisions of the plan pursuant to
which the Restricted Stock is granted (e.g., paid in cash to the Participant or
reinvested in Stock), as provided in the Company’s Restricted Stock
agreement.
On the
day immediately prior to the “vesting date” of the deferred Restricted Stock
shares subject to the stock deferral election, such shares are deemed to be
surrendered to the Company by the Participant, and exchanged for stock units
(“Stock Units”) which are simultaneously “deferred” (and credited to the
Participant’s Deferred Restricted Stock Account pursuant to provisions of the
Plan).
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(v)
|
Effect of FICA/FUTA
Obligation
|
As of the
applicable vesting date, Restricted Stock is subject to taxation under the
Federal Insurance Contribution Act (“FICA”) and the Federal Unemployment Tax Act
(“FUTA”). The Company, without the Participant’s consent, may satisfy the
Company’s withholding obligation for FICA and FUTA taxes payable by the
Participant with respect to the Restricted Stock by withholding from the
deferral and thus reducing the deferral amount.
|
(vi)
|
Changing Payment
Schedule Election
|
With
respect to the portion of a Participant’s Account that is a Post-Grant Stock
Deferral Election, the Participant shall be permitted to change his or her
payment schedule election at any time, but only if: (1) such subsequent election
may not take effect until at least twelve (12) months after the date on which it
is made, (2) if such subsequent election relates to a payment not made on
account of the Participant’s death, disability or Unforeseeable Emergency, the
payment with respect to which such election is made must be deferred for a
period of not less than five (5) years from the date such payment would
otherwise have been made, and (3) any subsequent election related to a payment
described in Code Section 409A(2)(A)(iv) may not be made less than twelve (12)
months prior to the date of the first scheduled payment.
With
respect to the portion of a Participant’s Account that is a Pre-Grant Stock
Deferral Election or a Performance-Based Stock Deferral Election, the
Participant shall be permitted to change his or her payment schedule election at
any time by filing a new Stock Deferral Agreement, provided such election is
made in accordance with the paragraph above, or prior to the time at which the
election to defer the Restricted Stock must be made pursuant to a Pre-Grant
Stock Deferral Election (Section 6(c)(ii)(1)) or a Performance-Based Stock
Deferral Election (Section 6(c)(ii)(3)), as applicable.
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.
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|
(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)(viii) 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)(vii) 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.
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|
(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.
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|
(iii)
|
Subject
to the provisions of the Deferred Stock agreement referred to in Section
7(b)(viii) below and this Section 7 and Section 13(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)(vii) 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.
|
|
(v)
|
In
the event of an Unforeseen Emergency 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, at the request of the
Participant, 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)(viii) below with respect to any or
all of the Participant's Deferred
Stock.
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|
(vi)
|
In
the event of the Participant's Retirement, Disability or death, or in
cases of an Unforeseen Emergency, the Board or the Committee,
as the case may be, shall waive in whole or in part any or all of the
limitations imposed hereunder (if any) with respect to any or all of a
Deferred Stock award.
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|
(vii)
|
In
the event of the Participant's Retirement, Disability, death, or a 409A
Change, or in cases of an Unforeseen Emergency, the Board or
the Committee, as the case may be, shall waive the limitations imposed
hereunder (if any) with respect to a 409A Deferred Stock
Award.
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|
(viii)
|
A
Participant and/or the Board or the Committee, as the case may be, may
elect to 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"); provided however, that
(i) such subsequent election may not take effect until at least twelve
(12) months after the date on which it is made, (ii) if such subsequent
election relates to a payment not made on account of the Participant’s
death, disability or Unforeseen Emergency, the payment with respect to
which such election is made must be deferred for a period of not less than
five (5) years from the date such payment would otherwise have been made,
and (iii) any subsequent election related to a payment described in Code
Section 409A(2)(A)(iv) may not be made less than twelve (12) months prior
to the date of the first scheduled
payment.
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|
(ix)
|
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.
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|
(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.
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|
(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.
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(iii)
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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.
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(iv)
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In
the event of the Participant's Retirement, Disability or death, or in
cases of an Unforeseen Emergency, the Board or the Committee,
as the case may be, shall 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.
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(v)
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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.
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Section
9.
Performance-Based Awards
(a) In
General. All Options and certain Restricted Stock awards,
Deferred Stock awards, and Other Stock-Based Awards granted under the
Plan, and the compensation attributable to such awards, are intended to (i)
qualify as Performance-Based Awards (as defined in the next sentence) or (ii) be
otherwise exempt from the deduction limitation imposed by Section 162(m) of the
Code. Certain Awards granted under the Plan may be granted in a
manner such that Awards qualify as “performance-based compensation” (as such
term is used in Section 162(m) of the Code and the regulations thereunder) and
thus be exempt from the deduction limitation imposed by Section 162(m) of the
Code (“Performance-Based Awards”). Awards may only qualify as
Performance-Based Awards if they are granted by Committee at a time when the
Committee is comprised solely of two or more “outside directors” (as
such term is used in Section 162(m) of the Code and the regulations thereunder)
(“Qualifying Committee”).
(b) Options. Stock
Options granted under the Plan with an exercise price at or above the Fair
Market Value of Common Stock on the date of grant should qualify as
Performance-Based Awards.
(c) Other
Performance-Based Awards. Restricted Stock awards,
Deferred Stock awards, and Other Stock-Based Awards granted under the
Plan should qualify as Performance-Based Awards if, as determined by a
Qualifying Committee, in its discretion, either the granting of such award is
subject to the achievement of a performance target or targets based on one or
more of the performance measures specified in Section 9(d)
below. With respect to such awards intended to qualify as
Performance-Based Awards:
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(1)
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the
Qualifying Committee shall establish in writing (x) the objective
performance-based goals applicable to a given period and (y) the
individual employees or class of employees to which such performance-based
goals apply no later than 90 days after the commencement of such period
(but in no event after 25 percent of such period has
elapsed);
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(2)
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no
Performance-Based Awards shall be payable to or vest with respect to, as
the case may be, any Participant for a given period until the Qualifying
Committee certifies in writing that the objective performance goals (and
any other material terms) applicable to such period have been satisfied;
and
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(3)
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after
the establishment of a performance goal, the Qualifying Committee shall
not revise such performance goal or increase the amount of compensation
payable thereunder (as determined in accordance with Section 162(m) of the
Code) upon the attainment of such performance
goal.
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(d) Performance
Measures. The Qualifying Committee may use the following performance
measures (either individually or in any combination) to set performance targets
with respect to awards intended to qualify as Performance-Based
Awards: net sales; pretax income before allocation of corporate
overhead and bonus; budget; earnings per share; net income; division, group or
corporate financial goals; return on stockholders’ equity; return on assets;
return on net assets; return on investment capital; gross margin return on
investment; gross margin dollars or percent; payroll as a percentage
of sales; inventory shrink; employee turnover; sales, general and
administrative expense; attainment of strategic and operational initiatives;
appreciation in and/or maintenance of the price of Common Stock or any other
publicly-traded securities of the Company, if any; market share; gross profits;
earnings before interest and taxes; earnings before interest, taxes,
depreciation and amortization; economic value-added models; comparisons with
various stock market indices; and/or reductions in costs. The
foregoing criteria shall have any reasonable definitions that the Qualifying
Committee may specify, which may include or exclude any or all of the following
items as the Qualifying Committee may specify: extraordinary, unusual or
non-recurring items; effects of accounting changes; effects of financing
activities; expenses for restructuring or productivity initiatives; other
non-operating items; spending for acquisitions; effects of divestitures; and
effects of litigation activities and settlements. Any such
performance criterion or combination of such criteria may apply to the
Participant’s award opportunity in its entirety or to any designated portion or
portions of the award opportunity, as the Qualifying Committee may
specify.
Section
10.
Change of Control
Provisions.
(a) A
"Change of Control" shall be deemed to have occurred on the tenth day
after:
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(i)
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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
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(ii)
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the
consummation by any individual, firm, corporation or other entity or of
any group (as defined in Section 13(d)(3) of the Exchange Act) of a tender
or exchange offer subject to Section 14(d)(1) of the Exchange Act for more
than 50% of any class of the Company's capital stock
;
or
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(iii)
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the
stockholders of the Company approve (A) a definitive agreement for the
sale, exchange or other disposition of all or substantially all of the
assets of the Company, or (B) any plan or proposal for the liquidation or
dissolution of the Company; or
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(iv)
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the
Company consummates a merger or other business combination of the Company
with or into another corporation pursuant to which the stockholders of the
Company do not own, immediately after the transaction, more than 50% of
the voting power of the corporation that survives, 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.
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(b) In
the event of a "Change of Control" as defined in Section 10(a) above, awards
granted under the Plan will be subject to the following provisions, unless the
provisions of this Section 10 are suspended or terminated by an affirmative vote
of a majority of the Board prior to the occurrence of such a "Change of
Control":
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(i)
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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
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(ii)
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all
restrictions and deferral limitations contained in Restricted Stock
awards, Deferred Stock awards and Other Stock-Based Awards
granted under the Plan shall lapse and the shares of stock subject to such
awards shall be distributed to the Participant. Notwithstanding
the foregoing to the contrary, all restrictions and deferral limitations
with respect to a 409A Deferred Stock Award or with respect to
a Participant’s Deferred Restricted Stock Account shall not lapse under
this Section 10(b) unless the “Change of Control” qualifies as a 409A
Change.
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Section
11.
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
12.
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
13.
General Provisions.
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(a)
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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.
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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.
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(b)
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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.
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(c)
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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.
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(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.
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(e)
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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).
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(f)
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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).
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(g)
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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.
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(h)
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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.
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(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.
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(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.
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(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.
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(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.
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(m)
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Notwithstanding
anything in this Plan to the contrary, if the Participant is a Specified
Employee and payment of his/her Deferrred Restricted Stock Account or
Deferred Stock is being made on account of his/her separation from
service, such payment shall be made not earlier than the sixth month
anniversary of such Specified Employee’s separation from
service.
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Section
14.
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
15.
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.