8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)

October 31, 2006

Ventana Medical Systems, Inc.

(Exact name of registrant as specified in its charter)

Delaware	000-20931	94-2976937
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1910 E. Innovation Park Drive

Tucson, AZ 85755

(Address of principal executive offices, including zip code)

(520) 887-2155

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement.

On October 31, 2006, our Board of Directors, upon the recommendation of the Board’s Compensation Committee, adopted a new compensation plan for our outside directors.

The plan sets each outside director’s annual compensation at $100,000. Each director may elect to receive up to 100% of his annual compensation in cash if he satisfies certain stock ownership requirements. Otherwise, the form of payment of an outside director’s annual compensation will be a stock option reflecting the conversion to cash compensation. This option will be granted upon a director’s reelection at the annual meeting of stockholders each year.

The number of shares underlying the option shall be equal to the result obtained by dividing (i) 2 times the amount of cash compensation to be converted into an option by (ii) the average closing price of our stock during the period from the prior year’s annual meeting through the last trading day before the current annual meeting. The exercise price of the option will be the closing price on the day of the annual meeting, and the option will vest in 12 equal monthly installments starting the first day of the month after the annual meeting when the award was made.

This description of the plan is qualified in its entirety by the actual terms of the Plan of Compensation for Outside Directors. A copy of this Plan is attached hereto as Exhibit 10.10 and is hereby incorporated by reference.

In addition to the outside director compensation outlined above, our Board of Directors has decided to pay the chairman of our Audit Committee an annual retainer of $10,000 and the chairman of our Compensation Committee an annual retainer of $5,000. Both annual retainers may be converted into option grants as further detailed in the attached Exhibit 10.10.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.	Description
10.10	Plan of Compensation for Outside Directors (as adopted on October 31, 2006).

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

VENTANA MEDICAL SYSTEMS, INC.
By:	/s/ Nicholas Malden
	Nicholas Malden
	Senior Vice President, Chief Financial Officer and Secretary

Date: November 3, 2006

EX-10.10

Exhibit 10.10

Plan of Compensation for Outside Directors

(Adopted on October 31, 2006)

Annual Compensation

Annual compensation	$100,000
	This amount will be reviewed and updated annually based on informal surveys of outside director compensation.
Conversion to option	Subject to the election by an eligible director to receive up to 50% of his annual compensation in cash (see “Minimum Ownership Requirements—Eligibility for cash payment,” below), the normal form of payment of a director’s annual compensation will be a stock option reflecting a conversion of the cash compensation. This option will be granted at the annual meeting of stockholders each year.
Number of shares	The option will be for a number of shares equal to the quotient obtained by dividing (i) 2 times the amount of cash compensation to be converted into an option by (ii) the average closing price of Ventana stock during the period from the prior year’s annual meeting through the last trading day before the current annual meeting.
Exercise price	The exercise price of the option will be the closing price on the day of the annual meeting.
Vesting	The option will vest in 12 equal monthly installments starting the first day of the month after the annual meeting when the award was made.
Cash payment	Any portion of a director’s annual compensation that he elects to receive in cash will be paid in 12 equal monthly installments on the same days that the option vests.
Minimum Ownership Requirements
Minimum ownership	All directors will be required to hold a minimum position in Ventana stock as follows –
	•      $50,000 after 1 year of tenure

	•       $150,000 after 2 years of tenure •      $300,000 after 3 years of tenure •      $400,000 after 4 years of tenure •      $500,000 after 5 years of tenure
Measurement	A director’s ownership position will be measured by the value of the Ventana stock that he directly or indirectly owns and the in-the-money value of the Ventana stock options that he holds.
Eligibility for cash payment	A director who satisfies the minimum ownership requirement may elect to receive up to 50% of his annual compensation in cash. A director who does not satisfy the minimum ownership requirement must receive his annual compensation in the normal form of payment as a stock option.
Restriction on sale of stock	A director who does not satisfy the applicable minimum ownership requirement may not sell any Ventana stock, with one exception: the director may engage in a “cashless” exercise of an option and sell a number of shares sufficient to pay the exercise price of the option shares and the related taxes.
Meeting and Other Fees
Meeting fees	Directors will not be paid separate fees for attending meetings of the Board of Directors or its committees.
Chairman and Vice Chairman	Additional fees may be paid to the Chairman of the Board and/or the Vice Chairman of the Board on an annual basis at the discretion of the Compensation Committee of the Board.
	Any such fees paid will be paid by adding them to and treating them as a part of the Chairman’s or Vice Chairman’s annual compensation as a director, with the effect of making 50% of the fee eligible to be received in cash (if the Chairman and/or Vice Chairman satisfy the applicable minimum ownership requirement) and converting the balance of the fee (or the entire fee, if the Chairman and/or Vice Chairman does not satisfy the minimum ownership requirement) into an option.

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Audit Committee	The chairman of the Audit Committee will be paid a fee of $10,000 per year for his service as chairman.
	This fee will be paid by adding it to and treating it as a part of the chairman’s annual compensation as a director, with the effect of making 50% of the fee eligible to be received in cash (if the chairman satisfies the applicable minimum ownership requirement) and converting the balance of the fee (or the entire fee, if the chairman does not satisfy the minimum ownership requirement) into an option.
	This fee will be reviewed and updated annually based on informal surveys of outside director compensation.
Compensation Committee	The chairman of the Compensation Committee will be paid a fee of $5,000 per year for his service as chairman.
	This fee will be paid by adding it to and treating it as a part of the chairman’s annual compensation as a director, with the effect of making 50% of the fee eligible to be received in cash (if the chairman satisfies the applicable minimum ownership requirement) and converting the balance of the fee (or the entire fee, if the chairman does not satisfy the minimum ownership requirement) into an option.
	This fee will be reviewed and updated annually based on informal surveys of outside director compensation.
Option Grants to New Director
Joining grant	A new director will receive two stock options upon joining the Board.
	The first option, for joining the Board, will be for a number of shares equal to the quotient obtained by dividing (i) 4 times the amount of the directors’ current cash compensation ($100,000) by (ii) the average closing price of Ventana stock during the 12-month period ending on the last trading day before the director’s election to the Board. The exercise price of

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	the option will be the closing price on the day of the director’s election.
	Forty percent (40%) of the option shares will cliff vest 2 years after the new director’s election to the Board and the balance will vest at the rate of 1.67% per month thereafter until fully vested.
Annual grant	The new director will also receive an option reflecting his annual compensation as a director.
	The option will be for a number of shares equal to a pro rata portion of the quotient obtained by dividing (i) 2 times the amount of the directors’ current cash compensation ($100,000) by (ii) the average closing price of Ventana stock during the 12-month period ending on the last trading day immediately before the director’s election to the Board. The exercise price of the option will be the closing price on the day of the director’s election, and the option will vest on the day of the next annual meeting of stockholders.
	The pro rata portion means a fraction, the numerator of which is the number of months until the next annual meeting of stockholders and the denominator of which is 12.
Implementation
Procedures	Subject to the approval of the Compensation Committee, Ventana will establish appropriate procedures to implement these compensation terms.
Effective dates	This plan shall take effect immediately. The first annual grant under this plan will be made at the 2007 annual meeting of stockholders.

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