Schedule 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant |X|
Filed by a party other than the registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement |_| Confidential, For Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Section 240.14a-12
iCAD, Inc.
-------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
-------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
-------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
-------------------------------------------------------------------------------
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule
0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
-------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------------
|_| Fee paid previously with preliminary materials.
-------------------------------------------------------------------------------
|_| Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
-------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------------
iCAD, Inc.
4 Townsend West, Suite 17
Nashua, New Hampshire 03063
August 28, 2003
Dear Fellow Stockholders:
You are cordially invited to attend the Annual Meeting of
Stockholders which will be held on Tuesday, September 23, 2003, at 10:00 A.M.
(local time), at the Company's office, 4 Townsend West, Suite 17, 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 SEPTEMBER 23, 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 Tuesday, September 23, 2003, at
10:00 A.M. (local time), at the Company's office at 4 Townsend West, Suite 17,
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 August 1, 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
August 28, 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, 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 SEPTEMBER 23, 2003
This proxy statement is furnished in connection with the
solicitation of proxies by the Board of Directors of iCAD, Inc. (the "Company"
or "iCAD") for use at the Annual Meeting of Stockholders (the "Annual Meeting")
to be held on September 23, 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 August 28, 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 August 1, 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 26,945,948 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
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.
2
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 since 1999. 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
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.
4
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 2002 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 Fiscal 2002 (the "Named Persons"). Included in this list
are only those executive officers and key employees whose total annual salary
and bonus exceeded $100,000 during Fiscal 2002.
SUMMARY COMPENSATION TABLE
Securities
Underlying
Name and Principal Position Year Salary($) 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 Fiscal 2002.
Individual Grants Potential Realizable
Number of Percent of Value at Assumed Annual
Securities Total Options Rates of Stock Price
underlying Granted to Exercise of Appreciation for Option
Options Employees in Base Price Term (3)
Name Granted(1) Fiscal Year(2) ($/Sh) Expiration Date 5%($) 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.
Employment Agreements
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.
10
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 $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 W. 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
[GRAPHIC OMITTED]
12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
$100.00 $ 18.18 $ 35.46 $ 46.37 $ 21.09 $ 36.51
100.00 212.71 394.50 238.02 188.82 130.54
100.00 352.13 747.47 426.15 293.57 194.53
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 5,259,863 (3) 19.4%
145 East 57th Street
New York, New York 10022
Maha Sallam Common 2,346,000 (4) 8.7%
4902 Eisenhower Blvd.
Tampa, FL 33634
Donald Chapman Common 1,950,706 (5) 7.0%
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) 6.6%
10361 Parkstone Way
Boca Raton, FL 33498
Kevin Woods Common 1,557,275 (7) 5.7%
4902 Eisenhower Blvd.
Tampa, FL 33634
W. Scott Parr Common 657,647 (8) 2.4%
Preferred Series A 550 7.7%
Preferred Series B 50 3.6%
Edgar Ball Preferred Series B 200 14.3%
PO Box 560726
Rockledge, FL 32956
Blank Rome LLP Common 500,000 1.8%
405 Lexington Avenu2
New York, NY 10174
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 129,000 (9) *
Brett Smith Common 43,255 (10) *
Preferred Series B 20 1.4%
Dr. Elliot Sussman Common 18,000 (11) *
Richard Lehman Common 70,752 (12) *
William Langille Common 90,889 (13) *
All current executive officers and Common 10,131,085 (3), (4), & 35.8%
directors as a group (8 persons) (7) through (11)
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 and $75,000 shares at $2.76 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 and 25,000 shares at $1.55 per share.
10) Includes options to purchase 25,000 of the Company's Common Stock at $3.00
per share and 6,667 at $1.55 per share. Also, includes 10,000 shares of
Common Stock issuable upon conversion of 20 shares of Series B Convertible
Preferred Stock.
14
11) Includes options to purchase 15,000 shares of the Company's Common Stock at
$1.55 per share.
12) 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 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.
13) 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 2003 the Company borrowed $1,230,000. As of the Record
Date $1,430,000 was owed by the Company and the Company had $1,570,000 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.
15
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.
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 $3,000,000 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 and increase
the line of credit to $4,000,000, 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 an increase in the line of
credit to $4,000,000 and the other amendments to the line of credit agreement
with Mr. Howard described above 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 increase and continue the line of credit, as
amended by the proposed amendment, which amendment is a condition to increasing
and extending the line of credit for at least one year 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 April 30, 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 April 30, 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 July 14,
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 AUGUST 1, 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,
August 28, 2003
19
iCAD, Inc.
4 Townsend West, Suite 17
Nashua, New Hampshire 03063
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD SEPTEMBER 23, 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 Tuesday, September 23, 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.