SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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iCAD, Inc.
(Name of Registrant as Specified In Its Charter)
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PRELIMINARY COPY
iCAD, Inc.
4 Townsend West, Suite 17
Nashua, New Hampshire 03063
July _, 2003
Dear Fellow Stockholders:
You are cordially invited to attend the Annual Meeting of
Stockholders which will be held on Wednesday, August 27, 2003, at 10:00 A.M.
(local time), at ________________, Nashua, NH 03063.
The Notice of Annual Meeting and Proxy Statement, which follow,
describe the business to be conducted at the meeting.
Whether or not you plan to attend the meeting in person, it is
important that your shares be represented and voted. After reading the enclosed
Notice of Annual Meeting and Proxy Statement, please complete, sign, date and
return your proxy card in the envelope provided. If the address on the
accompanying material is incorrect, please advise our Transfer Agent,
Continental Stock Transfer & Trust Company, in writing, at 17 Battery Place, New
York, New York 10004.
Your vote is very important, and we will appreciate a prompt return
of your signed proxy card. We hope to see you at the meeting.
Cordially,
Robert Howard
Chairman of the Board
iCAD, Inc.
4 Townsend West, Suite 17
Nashua, New Hampshire 03063
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 27, 2003
To the Stockholders of ICAD, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
iCAD, Inc. (the "Company") will be held on Wednesday, August 27, 2003, at 10
A.M. at __________________, Nashua, NH 03063 for the following purposes:
1. To elect two Class I directors to hold office until the Annual
Meeting of Stockholders to be held in 2006 and until their
respective successors have been duly elected and qualified;
2. To approve an amendment to the terms of the Company's letter of
credit agreement with Mr. Robert Howard, Chairman of the Board and a
director of the Company;
3. To ratify the appointment of BDO Seidman, LLP as the Company's
independent accountants for the fiscal year ending December 31,
2003; and
4. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on July 7, 2003 are
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof.
By Order of the Board of Directors,
W. Scott Parr
President and Chief Executive Officer
July _, 2003
IF YOU DO NOT EXPECT TO BE PRESENT AT THE MEETING:
PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE
PROVIDED FOR THAT PURPOSE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO EXERCISE, AND IF YOU ARE
PRESENT AT THE MEETING YOU MAY, IF YOU WISH, REVOKE YOUR PROXY AT THAT TIME AND
EXERCISE THE RIGHT TO VOTE YOUR SHARES PERSONALLY.
PLEASE NOTE THAT ATTENDANCE AT THE MEETING WILL BE LIMITED TO STOCKHOLDERS OF
ICAD 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 STOCK TO GAIN ADMISSION TO THE MEETING.
PRELIMINARY COPY
PROXY STATEMENT
iCAD, Inc.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 27, 2003
This proxy statement is furnished in connection with the
solicitation of proxies by the Board of Directors of iCAD, Inc. (the "Company")
for use at the Annual Meeting of Stockholders (the "Annual Meeting") to be held
on August 27, 2003, including any adjournment or adjournments thereof, for the
purposes set forth in the accompanying Notice of Meeting.
Management intends to mail this proxy statement and the accompanying
form of proxy to stockholders on or about July 24, 2003.
Proxies in the accompanying form, duly executed and returned to the
management of the Company and not revoked, will be voted at the Annual Meeting.
Any proxy given pursuant to such solicitation may be revoked by the stockholder
at any time prior to the voting of the proxy by a subsequently dated proxy, by
written notification to the Secretary of the Company, or by personally
withdrawing the proxy at the meeting and voting in person.
The address and telephone number of the principal executive offices
of the Company are:
4 Townsend West, Suite 17
Nashua, New Hampshire 03063
Telephone No.: (603) 882-5200
OUTSTANDING STOCK AND VOTING RIGHTS
Only holders of the Company's common stock, par value $.01 per
share, (the "Common Stock") and holders of the Company's Series A Preferred
Stock at the close of business on July 7, 2003, (the "Record Date") are entitled
to receive notice of and to vote at the Annual Meeting. As of the Record Date,
the Company had (26,419,448) shares of Common stock outstanding. Each share of
Common Stock is entitled to one vote on all matters. In addition, holders of the
Company's Series A Preferred Stock vote together with holders of the Common
Stock as a single class on all actions to be voted on by the stockholders. Each
share of Series A Preferred stock entitles the holder to 100 votes per share.
Based upon 7,150 shares of Series A Preferred Stock outstanding on the Record
Date, the holders of the Series A Preferred Stock are entitled to an aggregate
of 715,000 votes. 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 and Series A Preferred Stock voting
together as one class that are present in person or represented by proxy at the
Annual Meeting, provided a quorum is present. Therefore, the two nominees
receiving the greatest number of votes cast at the meeting will be elected as
directors of the Company. All other matters at the Annual Meeting, including
approval of amendments to the letter of credit with Mr. Robert Howard and
ratification of the appointment of BDO Seidman, LLP as the Company's independent
auditors for its fiscal year ending December 31, 2003, will be decided by the
affirmative vote of the holders of a majority of the votes represented by the
shares of Common Stock and Series A Preferred Stock cast with respect thereto,
provided a quorum is present. A quorum is present if, as of the Record Date, at
least a majority of the aggregate votes represented by holders of the shares of
Common Stock and Series A Preferred Stock outstanding as of the Record Date are
present in person or represented by proxy at the Annual Meeting.
Votes will be counted and certified by one or more Inspectors of
Election who are expected to be employees of Continental Stock Transfer & Trust
Company, the transfer agent for the Common Stock. In accordance with Delaware
law, abstentions and "broker non-votes" (i.e., proxies from brokers or nominees
indicating that such persons have not received instructions from the beneficial
owner or other person entitled to vote shares as to a matter with respect to
which the brokers or nominees do not have discretionary power to vote) will be
treated as present for purposes of determining the presence of a quorum. For
purposes of determining approval of a matter presented at the meeting,
abstentions will be deemed present and entitled to vote and will, therefore,
have the same legal effect as a vote "against" a matter presented at the
meeting. Broker non-votes will be deemed not entitled to vote on the subject
matter as to which the non-vote is indicated and will, therefore, have no legal
effect on the vote on that particular matter.
Proxies will be voted in accordance with the instructions thereon.
Unless otherwise stated, all shares represented by a proxy will be voted as
instructed. Proxies may be revoked as noted above.
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides that the
Company's Board of Directors is divided into three classes (Class I, Class II
and Class III). At each Annual Meeting of Stockholders, directors constituting
one class are elected for a three-year term. At this year's Annual Meeting, two
(2) Class I directors will be elected to hold office for a term expiring at the
Annual Meeting of Stockholders to be held in 2006. Each director will be elected
to serve during his elected term until a successor is elected and qualified or
until the director's earlier resignation or removal.
At the Annual Meeting, proxies granted by stockholders will be voted
individually for the election, as Class I directors of the Company, of the
persons listed below, unless a proxy specifies that it is not to be voted in
favor of a nominee for director. In the event any of the nominees listed below
is unable to serve, it is intended that the proxy will be voted for such other
nominees as are designated by the Board of Directors. Each of the persons named
2
below, who are presently members of the Company's Board of Directors, has
indicated to the Board of Directors of the Company that he will be available to
serve.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDER VOTE FOR THE ELECTIONS OF THE
NOMINEES SPECIFIED BELOW.
The following table sets forth the name, age and principal
occupation of the nominees for election at this Annual Meeting and the length of
continuous service as a director of the Company.
CLASS I DIRECTORS
(to be elected)
(New Term to Expire in 2006)
Principal Occupation
Name of Nominee Age or Employment Director Since
--------------- --- ------------- --------------
Brett Smith 33 Chairman and Chief Executive Officer of ei3 2000
Corporation
Kevin Woods 37 Vice President of Research and Development of 2002
the Company
Brett Smith has been the Chairman and CEO of ei3 Corporation, a
provider of technology services to manufacturing companies utilizing advanced
frame relay and internet technologies. Prior to joining ei3 Mr. Smith was a
member of the restructuring team for Delta V Technologies, a subsidiary of
Presstek, Inc. ("Presstek"), a public company which has developed proprietary
imaging and consumables technologies for the printing and graphic arts
industries, where he served as Director of Business Development from 1996 to
1999. From 1995 to 1996 Mr. Smith worked for the Asia Times newspaper start-up
team in Hong Kong. He began his career as an analyst, from 1992 to 1994, at
Susquehanna Investment Group. Mr. Smith received a Bachelor of Science from
Emory University. Mr. Smith is the son of Mrs. Kit Howard, the wife of the
Company's Chairman
Kevin Woods has been the Vice President of Research and Development
for the Company since June 2002. From 1997 until the Company's acquisition of
Intelligent Systems Software, Inc. (ISSI) in June 2002, Dr. Woods served as
Director and Vice President of Research and Development and was one of ISSI's
founders. Prior to joining ISSI, Dr. Woods held a competitively awarded,
post-doctoral research position funded by the U.S. Army Medical Research and
Material Command's Breast Cancer Research Program. He has researched the
automated analysis of digital mammogram images and was awarded research grants
totaling over $1,400,000 for this purpose. Dr. Woods received his doctoral
degree in Computer Science and Engineering from the University of South Florida
in 1991. Dr. Woods also received a Master of Science and Bachelor of Science in
Computer Engineering from the University of South Florida in 1989
3
The following table sets forth similar information with respect to
incumbent directors in Class II and Class III of the Board of Directors who are
not nominees for election at this Annual Meeting:
CLASS II DIRECTORS
(Term Expires in 2004)
Principal Occupation
Name of Nominee Age or Employment Director Since
--------------- --- ------------- --------------
James Harlan 51 Executive Vice President and CFO of HNG 2000
Storage Company
Maha Sallam 36 Executive Vice President of the Company 2002
Elliot Sussman 51 President and CEO of Lehigh Valley Hospital 2002
and Health Network
James Harlan has been the Executive Vice President and Chief
Financial Officer of HNG Storage Company, a natural gas storage, development and
operations company since 1998. From 1991 to 1997 Mr. Harlan served as General
Manager and Chief Financial Officer of Pacific Resources Group, and with various
manufacturing and distribution businesses in Asia in planning and finance
development work. He also served as operations research and planning analyst for
the White House Office of Energy Policy and Planning from 1977 to 1978, the
Department of Energy from 1978 to 1981, and U.S. Synthetic Fuels Corporation
from 1981 to 1984. He has a PhD in Public Policy with an operations research
dissertation from Harvard University and a BS in Chemical Engineering from
Washington University.
Maha Sallam has been the Executive Vice President for the Company
since June 2002. From 1997 until the Company's acquisition of ISSI in June 2002,
Dr. Sallam served as Director and Vice President of Regulatory Affairs and
Clinical Testing and Secretary of ISSI. She was one of ISSI's founders and has
over eleven years of industry and research experience in image analysis
including a doctoral dissertation, conference presentations and several
publications on the automated analysis of digital mammograms. Dr. Sallam
received her doctorate degree in Computer Science and Engineering from the
University of South Florida in May 1997. She also earned a Master of Science
from the University of South Florida in 1991 and a Bachelor of Science in
Computer Engineering from the University of South Florida in 1990.
Dr. Elliot Sussman is currently President and CEO of Lehigh Valley
Hospital and Health Network, a position he has held since 1993. Dr. Sussman is
the Leonard Parker Pool Professor of Health Systems Management, Professor of
Medicine, and Professor of Health Evaluation Sciences at Pennsylvania State
University's College of Medicine. Dr. Sussman served as a Fellow in General
Medicine and a Robert Wood Johnson Clinical Scholar at the
4
University of Pennsylvania, and trained as a resident at the Hospital of the
University of Pennsylvania. Dr. Sussman holds a Masters in Business
Administration from the Wharton School, University of Pennsylvania, a Medical
Degree from Harvard University and a Bachelor of Arts Degree from Yale
University.
CLASS III DIRECTORS
(Term Expires in 2005)
Principal Occupation
Name of Nominee Age or Employment Director Since
--------------- --- ------------- --------------
Robert Howard 80 Chairman of the Board of Directors of the 1984
Company
W. Scott Parr 52 President and Chief Executive Officer of the 1998
Company
Robert Howard, the founder and Chairman of the Board of Directors of
the Company, was the inventor of the first impact dot matrix printer. Mr. Howard
was Chief Executive Officer of the Company from its establishment in 1984 until
December of 1993. He was the founder, and from 1969 to April 1980 he served as
President and Chairman of the Board, of Centronics Data Computer Corp.
("Centronics"), a manufacturer of a variety of computer printers. He resigned
from Centronics' board of directors in 1983. From April 1980 until 1983, Mr.
Howard was principally engaged in the management of his investments. Commencing
in mid-1982, Mr. Howard, doing business as R.H. Research, developed the ink jet
technology upon which the Company was initially based. Mr. Howard contributed
this technology, without compensation, to the Company. Mr. Howard was Chairman
of the Board of Presstek, from June 1988 to September 1998 and served as
Chairman Emeritus of the Presstek Board from September 1998 to December 2000.
Since May of 2002, Mr. Howard has been Chairman of the Board of Ionatron, Inc.,
a privately held company in Tucson, Arizona.
W. Scott Parr joined the Company in January 1998, as President and
Chief Executive Officer. He was appointed to the Company's Board of Directors in
February 1998. In connection with the merger of ISSI, W. Kip Speyer, the
President and Chief Executive Officer of ISSI assumed the position of Chief
Executive Officer of the Company and Mr. Parr continued in the position of
President of the Company. Upon Mr. Speyer's resignation in September 2002, Mr.
Parr was re-appointed as Chief Executive Officer of the Company. From 1997 until
joining iCAD, Mr. Parr served as Divisional Director and a member of the Board
of Directors of SABi International Ventures, Inc., where he was responsible for
restructuring and upgrading certain US companies owned by foreign and venture
investors. From 1995 to 1997, Mr. Parr was Chief Executive Officer, General
Counsel and Director of Allied Logic Corporation, a start-up venture
specializing in proprietary molding and manufacturing technologies. From 1990 to
1995 Mr. Parr was General Counsel and a Director of LaserMaster Technologies,
Inc.
5
Board Of Directors and Committee Meetings
During the fiscal year ended December 31, 2002 ("Fiscal 2002"), the
Board of Directors held two meetings. In addition, the Board took action by
unanimous written consent in lieu of meetings.
The Company has an audit committee of the Board of Directors ("Audit
Committee") consisting of Messrs. Harlan, Smith and Sussman. Each member of the
Audit Committee is an "independent director" under the rules of the National
Association of Securities Dealers, Inc. The Audit Committee, among other things,
selects the firm to be appointed, subject to stockholder ratification, as
independent accountants to audit the Company's financial statements, reviews
significant accounting and reporting issues and developments, reviews and
discusses the scope and results of each audit with the independent accountants,
reviews with management and the independent accountants the Company's interim
and year-end operating results and considers the adequacy of the internal
accounting controls and audit procedures of the Company. The Audit Committee may
also conduct inquiries into the Company's operations, including, without
limitation, inquiries to ensure compliance with applicable laws, securities
rules and regulations and accounting standards. The Audit Committee held two
meetings during the fiscal year ended December 31, 2002.
The Company does not have a nominating or compensation committee of
the Board of Directors.
Compensation Committee Interlocks and Insider Participation
There is no Compensation Committee or other committee of the
Company's Board of Directors performing similar functions. The person who
performed the equivalent function in 2002 was Robert Howard, Chairman of the
Board under the direction of the Board of Directors. W. Scott Parr, Chief
Executive Officer and a director, participated in discussions with Mr. Howard
during the past completed fiscal year in his capacity as an executive officer in
connection with executive officer compensation. During 2002 none of the
executive officers of the Company served on the Board of Directors or
Compensation Committee of any other entity.
Compliance with Section 16(a) of Securities Exchange Act of 1934
Section 16(a) of Securities Exchange Act of 1934 requires the
Company officers and directors, and persons who beneficially own more than 10
percent of a registered class of the Company equity securities, to file reports
of ownership and changes in ownership with the SEC. Officers, directors and
greater than 10 percent owners are required by certain SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on the Company's review of the copies of such forms
received by it, the Company believes that during Fiscal 2003 there was
compliance with the filing requirements applicable to its officers, directors
and 10% stockholders.
6
EXECUTIVE OFFICERS
The executive officers of the Company are Messrs. Parr and Ms.
Sallam and Ms. Heroux, the Company's Vice President of Finance and Chief
Financial Officer.
Annette Heroux, 46, joined the Company in October 1987 as Accounting
Manager and was named Controller in October 1998 and Vice President of Finance,
Chief Financial Officer in July 1999. Prior to joining the Company, Ms Heroux
worked from 1980 to 1987 for Laurier, Inc., a semiconductor equipment
manufacturer, in various financial and managerial capacities.
Key Employees
Name Age Position
---- --- --------
Richard Lehman 65 Vice President of Hardware Engineering
William Langille 51 Vice President of Operations
Ernest Henrichon 61 Vice President of Software Engineering
Richard F. Lehman joined the Company in July 1990, as Director of
Scanner Engineering. In December 1993, he was named Vice President of Scanner
Engineering and in October 1996, he was named Vice President of Engineering.
Prior to joining the Company, Mr. Lehman was employed by Xerox Corporation for
23 years where he served in various engineering and managerial capacities.
William A. Langille joined the Company in March 2001 as Vice
President of Operations and has also served as President of the Company's Howtek
Devices Corporation subsidiary since July 2002. Prior to joining the Company,
Mr. Langille worked from 1999 to 2001 for Inspex, a manufacturer of test
equipment for the semiconductor industry. From 1973 to 1997, Mr. Langille worked
for Nashua Corporation, a fortune 500 multinational manufacturer and distributor
of computer products and office supplies, in various manufacturing and
managerial capacities.
Ernest Henrichon joined the Company in February 2003, as Vice
President of Software Engineering. From 1998 to 2002, Dr. Henrichon was Vice
President of Engineering at Newpoint Technologies, Inc., a provider of real-time
network management software and systems integration services to the satellite
and broadcast industries. He was Vice President of Engineering at Imaging
Technology Inc. from 1990 to 1997, where he had responsibility for the
development of software and hardware components used in OEM image processing
applications.
7
EXECUTIVE COMPENSATION
The following table provides information on the compensation
provided by the Company during fiscal years 2002, 2001 and 2000 to the persons
serving as the Company's Chief Executive Officer during fiscal 2002, the
Company's most highly compensated executive officers and certain key employees
serving at the end of the 2002 fiscal year ("the Named Persons"). Included in
this list are only those executive officers and key employees whose total annual
salary and bonus exceeded $100,000 during the 2002 fiscal year.
SUMMARY COMPENSATION TABLE
Name and Principal Position Year Salary($) Securities
--------------------------- ---- --------- Underlying
Option(#)
---------
W. Kip Speyer (1)
Chief Executive Officer................................ 2002 116,874 625,000(2)
W. Scott Parr
President, Chief Executive Officer, Director........... 2002 173,762 125,000
2001 145,669 4,000
2000 138,357 -0-
Richard F. Lehman
Vice President of Hardware Engineering................ 2002 126,178 15,372
2001 114,135 4,000
2000 116,986 5,000
William A. Langille
Vice President of Operations........................... 2002 117,479 54,500
2001 71,786 83,000
(1) Mr. Speyer served as Chief Executive Officer of iCAD from June 2002 until
his resignation in September 2002.
(2) Includes 75,000 options issued by the Company in the merger with ISSI in
June 2002, in exchange for ISSI options held by Mr. Speyer.
8
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding stock
options granted by the Company to the Named Persons in 2002.
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation for Option
Individual Grants Term (3)
Number of Percent of
Securities Total Options
underlying Granted to Exercise of
Options Employees in Base Price Expiration
Name Granted(1) Fiscal Year(2) ($/Sh) Date 5%($) 10%($)
W. Kip Speyer 75,000(4) .80 05/29/2011 37,734 95,625
550,000 25% 3.49 06/28/2012 1,207,163 3,059,189
W. Scott Parr 25,000 1.75 01/16/2012 27,514 69,726
100,000 5% 2.69 11/29/2012 169,173 428,717
Richard F. Lehman 15,372 1.55 11/04/2012 14,984 37,973
1%
William A. Langille 20,000 1.75 01/16/2012 22,011 55,781
34,500 2% 1.55 11/04/2012 33,630 85,225
(1) All of the foregoing options vest in installments at various times between
January 16, 2002 and June 28, 2005.
(2) The total number of options granted in fiscal 2002 includes 500,000
options of the Company issued in exchange for ISSI options in connection
with the merger in June 2002.
(3) The potential realizable value columns of the table illustrate values that
might be realized upon exercise of the options immediately prior to their
expiration, assuming the Company's Common Stock appreciates at the
compounded rates specified over the term of the options. These numbers do
not take into account provisions of options providing for termination of
the option following termination of employment or non transferability of
the options and do not make any provision for taxes associated with
exercise. Because actual gains will depend upon, among other things,
future performance of the Common Stock, there can be no assurance that the
amounts reflected in this table will be achieved.
(4) Represents options of the Company issued in exchange for ISSI options in
connection with the merger in June 2002.
9
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information regarding the exercise of stock
options during the Company's last completed fiscal year by each of the Named
Persons and the fiscal year-end value of unexercised options.
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at FY-End(#) FY-End($)(1)
Shares Acquired Exercisable/ Exercisable/
Name on Exercise (#) Value Realized Unexercisable Unexercisable
W. Kip Speyer (2) 0 0 625,000 / -0- 128,250 / -0-
W. Scott Parr (2) 0 0 510,050 / 21,468 584,512 / 36,496
Richard F. Lehman (2) 0 0 64,628 / 15,372 73,793 / 14,757
William A. Langille (2) 0 0 73,000 / 74,500 89,880 / 95,250
----------
(1) Based upon the closing price of the Common Stock on December 31, 2002, of
$2.51 per share.
(2) Options granted pursuant to the Company's merger and 1993 and 2001 Stock
Option Plans.
The Company does not have any employment agreements with its executive officers
or key employees.
In September 2002, the Company entered into a Separation Agreement
with each of W. Kip Speyer, the former Chief Executive Officer of iCAD and
Gregory J. Stepic, the former Vice President of Finance of iCAD. The Separation
Agreements acknowledged the resignations of each of Messrs. Speyer and Stepic
and provided for severance payments to Messrs. Speyer and Stepic of $500,000 and
$148,000, respectively, in lieu of any severance payments to which they may have
been entitled to under their employment agreements. The severance payments, less
any required withholding by the Company, are payable to Mr. Speyer in equal
installments over a 30 month period and to Mr. Stepic in equal installments over
a 12 month period, in each case subject to the right to accelerate payments upon
the sale of the outstanding stock of the Company or upon a sale by the Company
of substantially all of its assets. Under the Separation Agreements, each of
Messrs. Speyer and Stepic was entitled to retain his outstanding options of the
Company which remain exercisable in accordance with their respective terms.
Also, pursuant to the Separation Agreements Messrs. Speyer and Stepic each
agreed to remain bound by the confidentiality and non-competition provisions of
their employment agreements for the periods set for in the employment
agreements.
Compensation of Directors
The Company does not pay cash compensation to members of its board
of directors for their services as board members. The Company does reimburse
members of the board for out-of-pocket expenses incurred for attendance at board
and board committee meetings.
During fiscal 2002 the Company granted the following ten year
options to its board members: an aggregate of 125,000 options exercisable at
prices ranging from $1.75 to
10
$2.69 per share to W. Scott Parr, which options were immediately exercisable;
75,000 options exercisable at $1.55 per share to James Harlan, which options
vest annually in three equal installments beginning on September 30, 2003;
100,000 options exercisable at $3.49 per share to Maha Sallam, which options
were immediately exercisable; 20,000 options exercisable at $1.55 per share to
Brett Smith, which options vest annually in three equal installments beginning
on September 30, 2003; 45,000 options exercisable at $1.55 per share to Dr.
Elliot Sussman, which options vest annually in three equal installments
beginning on September 30, 2003; and 155,000 options exercisable at $3.49 per
share to Kevin Woods, which options were immediately exercisable.
Report on Executive Compensation
There is no Compensation Committee of the Board of Directors or
other committee of the Board of Directors performing an equivalent function. As
noted above, executive compensation in 2002 was determined by the Company's
Chairman of the Board, Robert Howard, in consultation with Scott Parr, the
Company's Chief Executive Officer. There is no formal compensation policy for
either the Chief Executive Officer or the other executive officers of the
Company. Executive Compensation is based generally on performance and the
Company's resources, but not on specific objective criteria.
Stock Options. Stock option awards are intended to attract, retain
and motivate personnel by affording them an opportunity to receive additional
compensation based upon the performance of the Company's Common Stock. The size
and grant of actual awards is determined by the Board on an individual basis,
taking into account the individual's role in the Company and standard principals
of reward, retention and recognition to which option grants are geared. The
Board's determination as to the size of actual awards to individual executives
is subjective, after taking into account the relative responsibilities and
contributions of the individual employee.
By the Board of Directors:
Robert Howard, W. Scott Parr; James Harlan; Maha Sallam; Brett Smith, Elliot
Sussman and Kevin Woods.
11
Stock Performance Graph
The following chart sets forth a line graph comparing the performance of
the Company's common stock, over the past five years. This graph assumes the
investment of $100 on December 31, 1997, in the Company's common stock, and
compares the performance with the Nasdaq Composite Index and the Nasdaq Computer
Manufacturer Index. Measurement points are at December 31 for each respective
year.
Those companies which compete with the Company in its principal market,
image scanning, are either small subsidiaries or divisions of large United
States corporations or are foreign companies which are either not quoted on a
stock exchange or for which data is difficult to obtain. For this reason a more
generic index of Nasdaq technology stocks has been adopted. The Company pays no
dividends on its common stock. The Nasdaq Composite Index and the Nasdaq
Computer Manufacturer Index reflect a cumulative total return based upon the
reinvestment of dividends of the stocks included in those indices. The
historical information set forth below is not necessarily indicative of future
performance.
Comparative 5-year Cumulative Total Return Among iCAD, Nasdaq Composite
Index and the Nasdaq Computer Manufacturer Index
[The following was represented by a line chart in the printed material.]
NASDAQ
Computer
YEAR NASDAQ Manufacturer
ENDED iCAD, Inc. Index Index
---------- -------------------- ------------------ -------------------
12/31/1997 $100.00 $100.00 $100.00
12/31/1998 $18.18 $212.71 $352.13
12/31/1999 $35.46 $394.50 $747.47
12/31/2000 $46.37 $238.02 $426.15
12/31/2001 $21.09 $188.82 $293.57
12/31/2002 $36.51 $130.54 $194.53
12
VOTING SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
Common Stock, Series A and Series B Convertible Preferred Stock of the Company
owned on the Record Date, by (i) each person who is known to the Company to own
beneficially more than 5% of the outstanding shares of the Company's Common
Stock (ii) each executive officer and key employee named in the Summary
Compensation Table, (iii) each director of the Company, and (iv) all current
executive officers and directors as a group. The table also provides information
regarding beneficial owners of more than 5% of the outstanding shares of the
Company's Series A and Series B Convertible Preferred Stock. Unless otherwise
indicated below, the address of each beneficial owner is c/o iCAD, Inc. 4
Townsend West, Suit 17, Nashua, New Hamsphire 03063.
Number of Shares
Name and Address of Title Beneficially Percentage
Beneficial Owner of Class Owned (1) (2) of Class
---------------- -------- -------------- --------
Robert Howard Common 5,184,863 (3) 19.6%
145 East 57th Street
New York, New York 10022
Maha Sallam Common 2,346,000 (4) 8.8%
4902 Eisenhower Blvd.
Tampa, FL 33634
Donald Chapman Common 1,950,706 (5) 7.2%
8650 South Ocean Drive Preferred Series A 4,600 64.3%
Jenson Beach, FL 34957 Preferred Series B 680 48.6%
W. Kip Speyer Common 1,818,000 (6) 6.7%
10361 Parkstone Way
Boca Raton, FL 33498
Kevin Woods Common 1,557,275 (7) 5.8%
4902 Eisenhower Blvd.
Tampa, FL 33634
W. Scott Parr Common 657,647 (8) 2.4%
4 Townsend West, Suite 17 Preferred Series A 550 7.7%
Nashua, NH 03063 Preferred Series B 50 3.6%
Edgar Ball Preferred Series B 200 14.3%
PO Box 560726
Rockledge, FL 32956
Dr. Lawrence Howard Preferred Series A 1,000 14.0%
660 Madison Avenue
New York, NY 10021
John McCormick Preferred Series A 1,000 14.0%
11340 SW Aventine Circus
Portland, OR 97219
Dr. Herschel Sklaroff Preferred Series B 100 7.1%
1185 Park Avenue
New York, NY 10128
John Westerfield Preferred Series B 100 7.1%
4522 SW Bimini Circle N.
Palm City, FL 34990
James Harlan Common 104,000 (9) *
Brett Smith Common 36,588 (10) *
Preferred Series B 20 1.4%
Dr. Elliot Sussman Common 3,000 *
Richard Lehman Common 70,752 (11) *
William Langille Common 90,889 (12) *
All current executive officers and Common 10,009,418 (3), (4) & 36.2%
directors as a group (8 persons) (7) through (10)
Preferred Series A 550 7.7%
Preferred Series B 70 5.0%
----------
* Less than one percent
13
1) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the Record Date, upon the
exercise of options, warrants or rights; through the conversion of a
security; pursuant to the power to revoke a trust, discretionary account
or similar arrangement; or pursuant to the automatic termination of a
trust, discretionary account or similar arrangement. Each beneficial
owner's percentage ownership is determined by assuming that the options or
other rights to acquire beneficial ownership as described above, that are
held by such person (but not those held by any other person) and which are
exercisable within 60 days from the Record Date, have been exercised.
2) Unless otherwise noted, the Company believes that the persons referred to
in the table have sole voting and investment power with respect to all
shares reflected as beneficially owned by them.
3) Includes options to purchase 10,000 shares of the Company's Common Stock
at $1.72 per share. Also, includes 40,000 shares beneficially owned by Mr.
Howard's wife.
4) Includes 183,625 shares owned by Dr. Sallam's husband. Also includes
options to purchase 56,250 shares of the Company's Common Stock at $0.80
per share and 100,000 shares at $3.49 per share.
5) Includes 28,000 shares owned by Mr. Chapman's wife, 460,000 shares of
Common Stock issuable upon conversion of 4,600 shares of Series A
Convertible Preferred Stock and 340,000 shares of Common Stock issuable
upon conversion of 680 shares of Series B Convertible Preferred Stock
owned by Mr. Chapman.
6) Includes options to purchase 75,000 shares of the Company's Common Stock
at $0.80 per share and 550,000 shares at $3.49 per share.
7) Includes options to purchase 56,250 shares of the Company's Common Stock
at $0.80 per share and 155,000 shares at $3.49 per share.
8) Includes 11,000 shares owned by Mr. Parr's wife. Also includes options to
purchase 275,268 shares of the Company's Common Stock at $1.13 per share,
125,000 shares at $0.81 per share, 2,250 shares at $1.00 per share, 4,000
shares at $0.95 per share, 25,000 shares at $1.75 per share and 100,000
shares at $2.69 per share, 55,000 shares of Common Stock issuable upon
conversion of 550 shares of Series A Convertible Preferred Stock and
25,000 shares of Common Stock issuable upon conversion of 50 shares of
Series B Convertible Preferred Stock owned by Mr. Parr.
9) Includes options to purchase 25,000 shares of the Company's Common Stock
at $1.75 per share.
10) Includes options to purchase 25,000 of the Company's Common Stock at $3.00
per share. Also, includes 10,000 shares of Common Stock issuable upon
conversion of 20 shares of Series B Convertible Preferred Stock.
11) Includes 1,000 shares owned by Mr. Lehman's wife. Also includes options to
purchase 26,500 of the Company's Common Stock at $1.72 per share, 16,376
shares at $1.13 per share, 7,752
14
shares at $1.00 per share, 5,000 shares at $0.81 per share, 5,000 shares
at $1.75 per share, 4,000 shares at $0.95 per share and 5,124 shares at
$1.55 per share.
12) Includes options to purchase 30,000 shares of the Company's Common Stock
at $1.75 per share, 43,000 shares at $0.95 per share and 11,500 shares at
$1.55 per share.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has a Revolving Loan and Security Agreement (the "Loan
Agreement") with Mr. Robert Howard, Chairman of the Board of Directors of the
Company, under which Mr. Howard has agreed to advance funds, or to provide
guarantees of advances made by third parties in an amount up to $3,000,000. The
Loan Agreement expires January 4, 2004, subject to extension by the parties.
Outstanding advances are collateralized by substantially all of the assets of
the Company and bear interest at prime interest rate plus 2%. Mr. Howard is
entitled to convert outstanding advances made by him under the Loan Agreement
into shares of the Company's common stock at any time based on the outstanding
closing market price of the Company's common stock at the lesser of the market
price at the time each advance is made or at the time of conversion. A proposal
to amend the terms of the Loan Agreement is being submitted to the stockholders
at this Annual Meeting. See "Proposal I."
In March 2002, Mr. Howard converted $500,000 of advances made under
the Loan Agreement into 215,517 shares of restricted common stock of the
Company.
During the second quarter of 2002 the Company borrowed $250,000 and
in November 2002 the Company repaid Mr. Howard $50,000 pursuant to the Loan
Agreement. In the second quarter of 2003 the Company borrowed $630,000. As of
the Record Date $830,000 was owed by the Company and the Company had $2,170,000
available for future borrowings under the Loan Agreement.
In connection with the merger of the Company and ISSI in June 2002,
the Company issued 2,000,000 shares of common stock to an entity owned by Mr.
Robert Howard in exchange for 1,600,000 shares of ISSI common stock owned by the
entity.
The Company had Secured Demand Notes and Security Agreements (the
"Notes") owed to Mr. Robert Howard. The principal of these Notes was due and
payable in full, together with interest accrued and any penalties provided for,
on demand. Under the terms of the Notes the Company agreed to pay interest at
the lower rate of (a) 12% per annum, compounded monthly or (b) the maximum rate
permitted by applicable law. Payment of the Notes was secured by a security
interest in certain assets of the Company. In March 2002 the Company repaid the
principal balance due in the amount of $500,000 and the Notes were discharged.
The facility formerly housing the Company's principal executive
offices and research and development laboratory was leased by the Company from
Mr. Robert Howard. Rental expense for the year ended December 31, 2002 was
$78,500. The Company relocated in January 2003 to a facility leased from an
unafilliated party.
15
AUDIT COMMITTEE REPORT
In October 2002, the Chairman of the Audit Committee met with
management and representatives of BDO Seidman, LLP to review and discuss the
audit and the procedures and timing of the audit. In November 2002 the Audit
Committee met to review and discuss the audit and the procedures and timing of
the audit. In February 2003, the Audit Committee met with management and
representatives of BDO Seidman, LLP to review and discuss the audited financial
statements. The Audit Committee also conducted discussions with the Company's
independent auditors, BDO Seidman, LLP, regarding the matters required by the
Statement on Auditing Standards No. 61. As required by Independence Standards
Board Standard No. 1, "Independence Discussion with Audit Committees," the Audit
Committee has discussed with and received the required written disclosures and
confirming letter from BDO Seidman, LLP regarding its independence and has
discussed with BDO Seidman, LLP its independence. Based upon the review and
discussions referred to above, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2002.
The Audit Committee -
James Harlan (Chairperson), Brett Smith, Elliot Sussman
16
PROPOSAL I
AMENDMENT TO LINE OF CREDIT
The Company currently has a line of credit agreement with Robert
Howard, Chairman of the Board of the Company, which provides, among other
things, that advances under the line of credit agreement are convertible into
Common Stock of iCAD based on a conversion price defined as the lesser of the
market price of Common Stock at the time of conversion or the market price of
the Common Stock at the time the advance is made. The line of credit bears
interest at a rate equal to 2% above prime interest rate, currently 6.25%. In
order to induce Mr. Howard to continue the line of credit, the Board of
Directors proposes to amend iCAD's line of credit agreement with Mr. Howard to
provide that advances under the line of credit agreement will bear interest at a
rate equal to 2% above the prime interest rate with a minimum of 8%.
The Board of Directors has approved the amendment to the line of
credit agreement with Mr. Howard and submits the amendment to the stockholders
for adoption. The Board of Directors believes that it is in the best interest of
the Company and its stockholders to continue the line of credit, as amended by
the proposed amendment, which amendment is a condition to extending the line of
credit beyond its current term.
If the amendment is adopted by the requisite number of votes, the
amendment will become effective upon stockholder approval.
Recommendation
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE AMENDMENT TO
THE LINE OF CREDIT.
RATIFICATION OF THE
APPOINTMENT OF INDEPENDENT AUDITORS
BDO Seidman, LLP has audited and reported upon the financial
statements of the Company for the fiscal year ended December 31, 2002. The Audit
Committee of the Board of Directors has re-appointed BDO Seidman, LLP as the
Company's independent accountants for the Company's fiscal year ending December
31, 2003. Although stockholder approval of the appointment of BDO Seidman, LLP
is not required by law, the Audit Committee and the Board of Directors believe
that it is advisable to give stockholders an opportunity to ratify this
appointment. Furthermore, although the appointment of BDO Seidman, LLP is being
submitted for stockholder ratification, the Audit Committee reserves the right,
even after ratification by stockholders, to change the appointment of BDO
Seidman, LLP as auditors, at any time during the 2003 fiscal year, if it deems
such change to be in the best interests of the Company. A representative of BDO
Seidman, LLP is expected to be present at the Annual Meeting with the
opportunity to make a statement if he or she desires to do so and is expected to
be available to respond to appropriate questions.
17
In addition to retaining BDO Seidman, LLP to audit the Company's
financial statements, the Company engages BDO Seidman, LLP from time to time to
perform other services. The following sets forth the aggregate fees billed by
BDO Seidman, LLP to the Company in connection with services rendered during the
fiscal years ended December 31, 2001 and 2002.
Fee Type Fiscal 2001 Fiscal 2002
-------- ----------- -----------
Audit Fees $60,000 $61,956
Audit Related Fees (1) -0- $50,550
(1) Includes fees relating to the merger of the Company and ISSI.
The Audit Committee has considered whether the provision of BDO's
services covered in the preceding paragraph is compatible with maintaining BDO
Seidman, LLP's independence and has determined that it is.
Recommendation
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF BDO SEIDMAN, LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING DECEMBER 31, 2003.
STOCKHOLDER PROPOSALS FOR 2004 ANNUAL MEETING
Stockholders who wish to present proposals appropriate for
consideration at the Company's annual meeting of stockholders to be held in the
year 2004 must submit the proposal in proper form to the Company at its address
set forth on the first page of this proxy statement and in accordance with
applicable regulations of the SEC not later than January __, 2004 in order for
the proposition to be considered for inclusion in the Company's proxy statement
and form of proxy relating to such annual meeting. Any such proposals, as well
as any questions related thereto, should be directed to the Secretary of the
Company.
After the January __, 2004 deadline, a stockholder may present a
proposal at the Company's annual meeting to be held in 2004 if it is submitted
to the Company's Secretary at the address set forth above no later than April
__, 2004. If timely submitted, in proper form, the stockholder may present the
proposal at the annual meeting to be held in 2004, but the Company is not
obligated to include the matter in its proxy statement.
18
OTHER INFORMATION
Proxies for the Annual Meeting will be solicited by mail and through
brokerage institutions and all expenses involved, including printing and
postage, will be paid by the Company.
A COPY OF THE COMPANY'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2002 ON FORM 10-K IS BEING FURNISHED HEREWITH TO EACH STOCKHOLDER
OF RECORD AS OF THE CLOSE OF BUSINESS ON JULY 7, 2003. ADDITIONAL COPIES OF SUCH
ANNUAL REPORT WILL BE PROVIDED FOR A NOMINAL CHARGE UPON WRITTEN REQUEST TO:
ICAD , INC.
4 TOWNSEND WEST, SUITE 17
NASHUA, NEW HAMPSHIRE 03063
ATTENTION: ANNETTE HEROUX
The Board of Directors is aware of no other matters, except for
those incident to the conduct of the Annual Meeting, that are to be presented to
stockholders for formal action at the Annual Meeting. If, however, any other
matters properly come before the Annual Meeting or any adjournments thereof, it
is the intention of the persons named in the proxy to vote the proxy in
accordance with their judgment.
By order of the Board of Directors,
Robert Howard,
Chairman of the Board,
July __, 2003
19
PRELIMINARY COPY
iCAD, Inc.
4 Townsend West, Suite 17
Nashua, New Hampshire 03063
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD AUGUST 27, 2003.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints W. SCOTT PARR and ANNETTE HEROUX, and each
of them, Proxies, with full power of substitution in each of them, in the name,
place and stead of the undersigned, to vote at the Annual Meeting of
Stockholders of iCAD, Inc. (the "Company") on Wednesday, August 27, 2003, at
10:00 AM or at any adjournment or adjournments thereof, according to the number
of votes that the undersigned would be entitled to vote if personally present,
upon the following matters:
1. ELECTION OF CLASS I DIRECTORS:
|_| FOR all nominees listed below |_| WITHHOLD AUTHORITY
(except as marked to the contrary to vote for all nominees
below). listed below.
Brett Smith and Kevin Woods
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space below.)
(Continued and to be signed on reverse side)
2. Amendment to Loan Agreement with Robert Howard.
|_| FOR |_| AGAINST |_| ABSTAIN
3. Ratification of the appointment of BDO Seidman, LLP as the Company's
independent auditors for the fiscal year ending December 31, 2003.
|_| FOR |_| AGAINST |_| ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN ABOVE. IF NO
INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR THOSE NOMINEES AND THE
PROPOSALS LISTED ABOVE.
DATED: ________________________________, 2003
Please sign exactly as name
appears hereon. When shares are
held by joint tenants, both should
sign. When signing as attorney,
executor, administrator, trustee
or guardian, please give full
title as such. If a corporation,
please sign in full corporate name
by President or other authorized
officer. If a partnership, please
sign in partnership name by
authorized person.
__________________________________
Signature
__________________________________
Signature if held jointly
Please mark, sign, date and return this proxy card promptly using the
enclosed envelope.