===========================================================================
SCHEDULE 14A INFORMATION
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 [X]of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
of the Commission
[ ][_] Definitive Additional Materials
Only (as permitted)
by Rule 14a-6(c)(2))
[ ][_] Soliciting Material Pursuant to Rule 14a-11(c)Section 240.14a-11(c) or Rule 14a-12Section 240.14a-12
Laboratory Corporation of America Holdings
- --------------------------------------------------------------------------------
(Name of Registrant as Specified inIn Its Charter)
_____________________________________________________________- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X][x] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ][_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ][_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:
_______________________________________________________________
===========================================================================
August 17, 1995-------------------------------------------------------------------------
Notes:
[LABORATORY CORPORATION OF AMERICA LETTERHEAD APPEARS HERE]
October 25, 1996
Dear Stockholder:
You are cordially invited to attend the 19951996 Annual Meeting of Stockholders
of Laboratory Corporation of America Holdings. The meeting will be held at The St. Regis, 2 East 55th Street,the
Holiday Inn, 4810 New York, N.Y.,Page Road, Research Triangle Park, N.C. 27709, on
Wednesday, SeptemberNovember 20, 19951996 at 9:00 a.m., New York CityEastern Standard time.
The business of the meeting will be to elect directors to the Company's Board
of Directors, to consider and vote on the approval of each of
the Company's 19951997
Employee Stock Purchase Plan for Non-Employee Directors, the Company's
Performance Unit Plan and the Company's Annual Bonus plan and to ratify the appointment of independent
auditors for the Company's fiscal year ending December 31, 1995.1996. Information on
these matters can be found in the accompanying proxy statement.
Whether or not you plan to attend the meeting in person, your shares should
be represented and voted at the meeting. Accordingly, after reading the
enclosed proxy statement, kindly mark the proxy card to indicate your vote,
date and sign the proxy card, and return it in the enclosed postage-paid
envelope as soon as conveniently possible. If you desire to vote in accordance
with management's recommendations, you need not mark your votes on the proxy
card but need to sign, date and return it in the enclosed postage-paid envelope
in order to record your vote. If you later decide to attend the meeting and
wish to vote your shares personally, you may revoke your proxy at any time
before it is exercised.
Sincerely,
/s/ James B. Powell
M.D.
JamesJAMES B. Powell,POWELL, M.D.
President and Chief Executive Officer
LOGO LABCORP
Laboratory Corporation of America
LABORATORY CORPORATION OF AMERICA HOLDINGS
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of Laboratory Corporation of America Holdings:
Notice is hereby given that the 19951996 Annual Meeting (the "Annual Meeting")
of the stockholders of Laboratory Corporation of America Holdings (the
"Company") will be held at The St. Regis, 2 East 55th Street,the Holiday Inn, 4810 New York,
N.Y.,Page Road, Research
Triangle Park, N.C. 27709, on Wednesday, SeptemberNovember 20, 1995,1996, at 9:00 a.m.,
New York CityEastern Standard time, for the following purposes:
1. To elect all of the members of the Company's board of directors to
serve until the Company's next annual meeting and until such directors'
successors are elected and shall have qualified.
2. To consider and vote upon a proposal to approve and adopt the
Laboratory Corporation of America Holdings 19951997 Employee Stock Plan for Non-Employee
Directors.Purchase
Plan.
3. To consider and vote upon a proposal to approve and adopt the
Laboratory Corporation of America Holdings Performance Unit Plan.
4. To consider and vote upon a proposal to approve and adopt the
Laboratory Corporation of America Holdings Annual Bonus Incentive Plan.
5. To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for the fiscal year ending December 31, 1995.
6.1996.
4. To transact such other business as may properly come before the Annual
Meeting or at any adjournments thereof.
A proxy statement describing the matters to be considered at the Annual
Meeting is attached to this notice. Only stockholders of record at the close
of business on July 24, 1995October 18, 1996 are entitled to notice of, and to vote at, the
Annual Meeting and at any adjournments thereof.
By Order of the Board of DirectorsBY ORDER OF THE BOARD OF DIRECTORS
/s/ Bradford T. Smith
BradfordBRADFORD T. SmithSMITH
Secretary
August 17, 1995October 25, 1996
PLEASE COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE. THIS WILL INSURE THAT YOUR SHARES ARE
VOTED IN ACCORDANCE WITH YOUR WISHES.
LABORATORY CORPORATION OF AMERICA HOLDINGS
358 SOUTH MAIN STREET
BURLINGTON, NORTH CAROLINA 27215
_____________________________________________----------------
PROXY STATEMENT
_____________________________________________
This Proxy Statement is being furnished in connection with the solicitation
by the Board of Directors of Laboratory Corporation of America Holdings, a
Delaware corporation (the "Company"), of proxies to be voted at the 19951996
annual meeting of stockholders to be held on Wednesday, SeptemberNovember 20, 19951996 at 9:00
a.m., New York CityEastern Standard time, at The St. Regis, 2 East 55th Street,the Holiday Inn, 4810 New York, N.Y.Page Road, Research
Triangle Park, N.C. 27709 and at any adjournments thereof (the "Annual
Meeting"). The Notice of Annual Meeting, this Proxy Statement and the
accompanying proxy card are first being mailed to stockholders on or about
August 17, 1995,October 25, 1996, to all stockholders entitled to vote at the Annual Meeting.
At the Annual Meeting, the Company's stockholders will be asked (i) to elect
the following persons as directors of the Company to serve until the Company's
next annual meeting and until such directors' successors are elected and shall
have qualified: James R. Maher, Thomas P. Mac Mahon, James B. Powell, M.D., Jean-Luc
Belingard, Linda Gosden Robinson,Wendy E. Lane, Robert E. Mittelstaedt, Jr., David B. Skinner, M.D.
and Andrew G. Wallace, M.D., (ii) to consider and vote upon a proposal to
approve and adopt the Laboratory Corporation of America Holdings 19951997 Employee
Stock Plan for Non-Employee Directors (the "Non-Employee Director Stock Plan"),
(iii) to consider and vote upon a proposal to approve and adopt the Laboratory
Corporation of America Holdings Performance UnitPurchase Plan (the "Performance Unit
Plan""Plan"), (iv) to consider and vote upon a proposal to approve and adopt the
Laboratory Corporation of America Holdings Annual Bonus Incentive Plan (the
"Annual Plan"), (v)(iii) to ratify the appointment of KPMG
Peat Marwick LLP as the Company's independent auditors for the fiscal year
ending on December 31, 1995,1996, and (vi) to take such other action as may
properly come before the Annual Meeting or any adjournments thereof.
GENERAL INFORMATION
Solicitation And Voting of Proxies; Revocation; Record DateSOLICITATION AND VOTING OF PROXIES; REVOCATION; RECORD DATE
All proxies duly executed and received by the Company will be voted on all
matters presented at the Annual Meeting in accordance with the instructions
given therein by the person executing such proxy or, in the absence of such
instructions, will be voted in favor of the election to the Company's Board of
Directors of the seven nominees for director identified in this Proxy
Statement, the approval and adoption of each of the Non-Employee
Director1997 Employee Stock Plan, the Performance Unit Plan and the AnnualPurchase Plan
and the ratification of the appointment of KPMG Peat Marwick LLP as the
Company's independent auditors for 1995.1996. Any stockholder may revoke his proxy
at any time prior to the Annual Meeting before it is voted by written notice
to such effect delivered to the Company at 358 South Main Street, Burlington,
North Carolina 27215, Attention: Bradford T. Smith, Secretary, by delivery
prior to the Annual Meeting of a subsequently dated proxy or by attending the
Annual Meeting and voting in person.
Solicitation of proxies may be made by mail and may also be made by personal
interview, telephone and facsimile transmission, and by directors, officers
and regular employees of the Company without special compensation therefor.
The expenses of the preparation of proxy materials and the solicitation of
proxies for the Annual Meeting will be paid by the Company. The Company
expects to reimburse banks, brokers and other persons for their reasonable
out-of-pocket expensesexpense in handling proxy materials for beneficial owners, which expenses are expected to amount in aggregate to approximately
$40,000. The Company has retained D.F. King & Co., Inc. to assist in the
solicitation of proxies at an estimated cost of approximately $9,000.owners.
Only holders of record of the common stock, par value $0.01 per share, of
the Company ("Common(the "Common Stock") at the close of business on July 24, 1995October 18, 1996
(the "Record Date") will be entitled to notice of and to vote at the Annual
Meeting. At the Closeclose of Businessbusiness on the Record Date, there were issued and
outstanding 122,908,701122,927,797 shares of Common Stock, (not including treasury shares,
of which there were none, and not including shares held by
certain stockholders who, in connection with the Merger, which is described
below, submitted demands for appraisal, of which there were 2,160)2,160 (the
"Appraisal Shares"). Except for the Appraisal Shares, each of whichthe shares
issued and outstanding on the Record Date is entitled to one vote.
A quorum for the Annual Meeting consists of a majority of the total number
of shares of Common Stock outstanding on the Record Date. Directors of the
Company will be elected by a plurality vote of the shares of
Common Stock represented at the Annual Meeting and entitled to vote.
Accordingly, abstentions and broker non-votes will not affect the outcome of
the election. The affirmative vote of a majority of the shares of Common Stock
represented at the Annual Meeting and entitled to vote is required for
approval and adoption of each of the Non-Employee Director1997 Employee Stock Plan, the Performance Unit
Plan and the AnnualPurchase Plan and for the
ratification of the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for the fiscal year ending December 31, 1995.1996. On any such
item, an abstention will have the same effect as a negative vote but, because
shares held by brokers will not be considered entitled to vote on matters as
to which the brokers withhold authority, a broker non-vote will have no effect
on the vote. As of August 7,
1995October 18, 1996, the directors and executive officers of
the Company beneficially owned an aggregate of 732,254234,997 shares of Common Stock,
representing under 1% of the total number of shares of Common Stock
outstanding.
Merger with Roche Biomedical Laboratories, Inc.BENEFICIAL OWNERSHIP
On April 28, 1995 (the "Effective Date"), Roche Biomedical Laboratories,
Inc. ("RBL"), then a wholly-ownedwholly owned subsidiary of HLR Holdings Inc., a Delaware
corporation ("HLR"),
merged with and into the Company (the "Merger") pursuant to an Agreement and
Plan of Merger (the "Merger Agreement") dated as of December 13, 1994, among
the Company, RBL, HLR and Hoffmann-La Roche Inc., a New Jersey corporation
("Hoffmann-La Roche"). HLR is a wholly-ownedwholly owned subsidiary of Hoffmann-La Roche,
which is in turn a wholly-ownedwholly owned subsidiary of Roche Holdings, Inc., a Delaware
corporation ("Holdings"), which is in turn an indirect wholly-ownedwholly owned subsidiary
of Roche Holding Ltd, a Swiss Corporation ("Roche Holding"). HLR and its
affiliates (other than the Company and its subsidiaries) are collectively
referred to herein as "Roche." In the Merger, HLR was issued 49,002,53849,008,538 shares
of Common Stock, and Holdings was issued 12,320,718 shares of Common Stock,
representing in the aggregate approximately 49.9% of the outstanding shares of
Common Stock as of the Record Date, in exchange for all of the outstanding
shares of common stock of RBL and $135,651,100 in cash. The Merger Agreement
was included as an exhibit to the annual report on Form 10-K of the Company
for the year ended December 31, 1994 (the "1994 10-K") filed with the
Securities and Exchange Commission (the "Commission").
In connection with the Merger, the Company distributed a dividend consisting
of an aggregate of approximately 13,826,308 warrants to stockholders of record
of shares of Common Stock as of April 21, 1995, each such warrant (a "Warrant"
and, together with the Roche Warrants, as defined below, the "Warrants")
representing the right to purchase one newly issued share of Common Stock for
$22.00 (subject to adjustments) on April 28, 2000. In addition, pursuant to
the Merger Agreement, on April 28, 1995, Hoffmann-La Roche purchased 8,325,000
Warrants (the "Roche Warrants") from the Company for an aggregate purchase
price of $51,048,900.
In connection with the Merger, the Company, HLR, Hoffmann-La Roche and
Holdings entered into a stockholder agreement dated as of April 28, 1995 (the
"Stockholder Agreement"). The Stockholder Agreement contains certain
provisions relating to (i) the governance of the Company following the Merger,
including but not limited to the composition of the Board of Directors, (ii)
the issuance, sale and transfer of the Company's Equity Securities (as defined
in the Stockholder Agreement) by the Company and Roche, (iii) the acquisition
of additional Equity Securities of the Company by Roche and (iv) the
registration rights granted by the Company to Roche with respect to the
Company's Equity Securities. A copy of the Stockholder Agreement was included
as an exhibit to the current report on Form 8-K of the Company filed with the
Commission on May 12, 1995 in connection with the consummation of the Merger.
Roche has informed the Company that it will vote for the election of each of
the nominees to the Board of Directors identified herein, the approval and
adoption of each of the Non-Employee Director1997 Employee Stock Plan, the Performance
Unit Plan and the AnnualPurchase Plan and the ratification of the
appointment of KPMG Peat Marwick LLP as the Company's independent auditors for
1995.
The Board of Directors of the Company recommends that stockholders vote1996.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" the election of each of the nominees for director of the Company (as
specified below)THE ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR OF THE COMPANY (AS
SPECIFIED BELOW), the approval and adoption of each of the Non-Employee
Director Plan, the Performance Unit Plan and the Annual Plan, and the
ratification of the appointment ofTHE APPROVAL AND ADOPTION OF THE 1997 EMPLOYEE STOCK
PURCHASE PLAN AND THE RATIFICATION OF THE APPOINTMENT OF KPMG Peat MarwickPEAT MARWICK LLP
as the Company's
independent auditors for 1995.AS THE COMPANY'S INDEPENDENT AUDITORS FOR 1996.
2
ITEM 1: ELECTION OF DIRECTORS
All the Company's directors will be elected at the Annual Meeting to serve
until the next succeeding annual meeting of the Company and until their
successors are elected and shall have qualified. James R. Maher, a Director
since 1992 and Linda Gosden Robinson, a Director since 1990, will retire from
the Board of Directors at the Annual Meeting. Wendy E. Lane and Robert E.
Mittelstaedt, Jr. have been nominated by the Company's Nominating Committee to
replace Mr. Maher and Ms. Robinson. All the nominees listed below are
currently serving as members of the Board of Directors, with the exception of
Ms. Lane and exceptMr. Mittelstaedt. Except as herein stated, the proxies solicited
hereby will be voted FOR the election of such nominees unless the completed
proxy card directs otherwise.
The governance provisions of the Stockholder Agreement provide, among other
things, that immediately after April 28, 1995, and for a period of one
year thereafter (the "Initial Period"), the Board of Directors of the Company
is to be comprised of seven members, consisting of Mr. Maher, three designees
of HLR (each, an "HLR Director") and three Independent Directors (as defined
therein). The HLR Directors currently are Mr. Belingard, Mr. Mac Mahon and
Dr. Powell. The persons nominated to serve as the Independent Directors for
the Initial Period, who are Ms. Robinson, Dr. Skinner and Dr. Wallace, were
required pursuant to the Stockholder Agreement to be mutually acceptable to a
majority of the members of the Company's Board of Directors in office
immediately prior to April 28, 1995 and to HLR. Pursuant to the Stockholder
Agreement, following the Initial Period, the Board of Directors of the Company will (subject to specified
exceptions) be comprised of seven members, consisting of three HLR Directors
and four Independent Directors nominated by the Nominating Committee of the
Board of Directors. The persons nominated to serve as HLR Directors are Mr.
Mac Mahon, Dr. Powell and Mr. Belingard. The persons nominated to serve as
Independent Directors are Ms. Lane, Mr. Mittelstaedt, Dr. Skinner and
Dr. Wallace.
The Stockholder Agreement also providesprovided that Mr. Maher willwould serve as
Chairman of the Board and Mr. Mac Mahon willwould serve as Vice Chairman of the
Board of the Company for a period of one year after April 28, 1995 ("the
Initial Period.Period"). Following the Initial Period, Mr. Maher will resign hisresigned as Chairman
of the Board, and committee positions, Mr. Mac Mahon will
becomebecame Chairman of the Board and the position of
Vice Chairman will bewas eliminated. The Stockholder Agreement also provides that,
among other things, certain actions by the Company will require approval by a
majority of the entire Board of Directors of the Company, which majority must
include at least a majority of the HLR Directors and at least one Independent
Director (a "Special Majority Vote"). Included in these items is any change in
the size or composition of the Board of Directors or any committee thereof and
the establishment of a new committee of the Board of Directors.
The Board of Directors has been informed that all of the nominees listed
below are willing to serve as directors, but if any of them should decline or
be unable to act as a director, the individuals named in the proxies may vote
for a substitute designated by the Board of Directors. The Company has no
reason to believe that any nominee will be unable or unwilling to serve.
Nominees For Election As DirectorsNOMINEES FOR ELECTION AS DIRECTORS
The name, age, principal occupation for the last five years, selected
biographical information and period of service as a director of the Company of
each nominee are set forth below.
All of the nominees currently serve as
directors of the Company.
James R. Maher (45)THOMAS P. MAC MAHON (49) has served as Chairman of the Board of Directors of
the Companyand Director
since the Merger in April 1995 and as a director of the Company
since December 1992. He was President and Chief Executive Officer of the
Company from December 1992 until the Merger in April 1995. Since July 1995,
Mr. Maher has been President and Chief Executive Officer of MAFCO Consolidated
Group Inc., an affiliate of National Health Care Group, Inc., a Delaware
Corporation ("NHCG"), which is the holder of approximately 11.8% of the
outstanding shares of Common Stock.28, 1996. Prior to joining the Company, Mr. Maher
was Vice Chairman of The First Boston Corporation from 1990 to 1992such date and Managing Director of The First Boston Corporation from 1982 to 1992. Mr.
Maher also is a director of First Brands Corporation, Danbury, Connecticut.
Thomas P. Mac Mahon (48) hassince April 28, 1995 he served as
Vice Chairman and a director of
the Company since the Merger in April 1995.Director. Mr. Mac Mahon has been Senior Vice President of
Hoffmann-La Roche Inc. since 1993 and President of Roche Diagnostics Group and
a directorDirector and member of the Executive Committee of Hoffmann-La Roche since
1988. Mr. Mac Mahon is also a directorDirector of HLR. As Senior Vice President of
Hoffmann-La Roche Inc. and President of Roche Diagnostics Group, Mr. Mac Mahon
is responsible for the management of all United States operations of the
diagnostic business of Hoffmann-La Roche. Mr. Mac Mahon is also currently a
member of the Worldwide Diagnostics Executive Committee of Roche Holding.
JamesHoldings.
JAMES B. Powell,POWELL, M.D. (56)(58) has served as President and Chief Executive
Officer and as a directorDirector of the Company since the Merger in April 1995.Merger. Previously, heDr.
Powell was President of RBL from 1982 until the Merger in April 1995.
Dr. PowellMerger. He is a medical doctor
and became board certified in anatomic and clinical pathology in 1969. Subject to stockholder approvalDr. Powell is
a member of the nominees
for election as directorsmanagement committee of the Company, the Board of Directors intends to
elect Dr. Powell to serve as President and Chief Executive Officer of the
Company effective as of the date of the Annual Meeting.
Jean-Luc Belingard (46)Company.
JEAN-LUC BELINGARD (48) has served as a directorDirector of the Company since the
Merger in April 1995.Merger. Mr. Belingard is Director General of the Diagnostics Division and
member of the Executive Committee of F. Hoffmann-La Roche
3
Ltd ("F. Hoffmann-La Roche"), Basel, Switzerland, a subsidiary of Roche
Holding. He joined F. Hoffmann-LaHoffmann- La Roche in 1982, and held various positions
prior to being named to his current positions in 1990. His current
responsibilities include the management of the worldwide diagnostic business
of Roche. Mr. Belingard is also a director of Perkin-Elmer Corporation,
Norwalk, Connecticut and a Foreign Trade Advisor to the French Government.
Linda Gosden Robinson (42)WENDY E. LANE (45) has servedbeen Chairman of Lane Holdings, Inc., a private
investment firm, since 1992. Prior to forming Lane Holdings, Inc., Ms. Lane
was a Principal and Managing Director of Donaldson, Lufkin & Jenrette, an
investment banking firm, serving in these and other positions from 1980 to
1992. Ms. Lane also serves as a director of Watts Industries, Inc.
ROBERT E. MITTELSTAEDT, JR. (53) is Vice Dean of The Wharton School of the
CompanyUniversity of Pennsylvania, Director of the Aresty Institute of Executive
Education. Mr. Mittelstaedt has held these and other positions with the
Wharton school since 1990. Ms. Robinson has been1973, with the exception of the period from 1985 to 1989
when he founded, served as President and Chief Executive Officer, of Robinson
Lake Sawyer Miller since 1986 and was Senior Vice President, Corporate
Affairs, of Warner Cable Communications,sold
Intellego, Inc. from 1983 to 1986. She, a company engaged in practice management, systems development
and service bureau billing operations in the medical industry. Mr Millelstaedt
is also a director of Revlon Group Incorporated ("Revlon Group"), an affiliate of NHCG,A.G. Simpson Automotive Systems, Inc and of Bozell, Jacobs, Kenyon & Eckhardt,IS&S Inc.
and the Coro Foundation and is
a trustee of New York University Medical Center.
DavidDAVID B. Skinner,SKINNER, M.D. (60)(61) has served as a directorDirector of the Company since
the Merger in April 1995.Merger. Dr. Skinner has been President and Chief Executive Officer of New
York Hospital and Professor of Surgery at Cornell Medical School since 1987.
He was the Chairman of the Department of Surgery and Professor of Surgery at
the University of Chicago Hospitals and Clinics from 1972 to 1987.
AndrewANDREW G. Wallace,WALLACE, M.D. (60)(61) has served as a directorDirector of the Company since
the Merger in April 1995.Merger. Dr. Wallace has served as both the Dean of Dartmouth Medical
School and Vice President for Health Affairs at Dartmouth College since 1987.1990.
He was the Vice Chancellor for Health Affairs at Duke University and the Chief
Executive Officer of Duke Hospital from 1981 to 1987.
The Board of Directors of the Company recommends that stockholders vote1990.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" the election of each of the nominees for director listed above.
Committees of the Board of Directors and MeetingsTHE ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR LISTED ABOVE.
BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors has an Audit Committee, an Employee Benefits
Committee, an Ethics and Quality Assurance Committee and a Nominating
Committee. During 1994 and priorPrior to the Merger in April 1995, the Board of Directors also had
an Executive Committee.
The Audit Committee, currently consisting of Dr. Skinner and Dr. Wallace,
makes recommendations, among other things, makes recommendations to the Board regarding the
engagement of the Company's independent auditors, reviews the plan, scope and
results of the audit, reviews with the auditors and management the Company's
policies and procedures with respect to internal accounting and financial
controls and reviews changes in accounting policy and the scope of the non-auditnon-
audit services which may be performed by the Company's independent auditors.
Pursuant to the Stockholder Agreement, the Audit Committee is comprised
entirely of Independent Directors. During 1994 and priorPrior to the Merger in April 1995, the
Audit Committee consisted of Dr. Saul J. Farber, Anne Dibble Jordan and Dr.
Paul A. Marks.
The Ethics and Quality Assurance Committee, currently consisting of Mr.
Maher, Dr. Powell, Dr. Wallace and Dr. Skinner, is responsible for ensuring
that the Company adopts and implements procedures that require the Company's
employees to act in accordance with high ethical standards and to deliver high
quality services. During 1994 and priorPrior to the Merger, in April 1995, the Ethics and Quality Assurance
Committee consisted of Howard Gittis, Dr. Farber and Ms. Jordan.
The Employee Benefits Committee, currently consisting of Mr. Belingard, Ms.
Robinson and Dr. Skinner, makes recommendations to the Board regarding
compensation and benefit policies and practices and incentive
4
arrangements for executive officers and key managerial employees of the
Company. The Employee BenefitBenefits Committee also considers and grants awards
under the Company's incentive plans, subject to a Special Majority Vote of the
Board as described above. Pursuant to the Stockholder Agreement, the Employee
Benefits Committee is comprised of a majority of Independent Directors. During 1994 and priorPrior
to the Merger, in April 1995, the Employee Benefits Committee consisted of Dr. Farber, Mr.
Gittis, David J. Mahoney, Ms. Robinson and Dr. Samuel O. Thier.
The Nominating Committee, currently consisting of Mr. Mac Mahon, Dr. Wallace
and Ms. Robinson, is responsible for recommending the nomination of directors.
Pursuant to the Stockholder Agreement, the Nominating Committee is comprised
of one HLR Director and two Independent Directors and acts by a majority vote
of the entire committee. During 1994 and priorPrior to the Merger in April 1995, the Nominating
Committee consisted of Ronald O. Perelman, Ms. Jordan, Ms. Robinson and Dr.
Thier.
During 1994 and priorPrior to the Merger, in April 1995, the Board had an the
Executive Committee, consisting of
Messrs.Ronald O. Perelman, Mr. Gittis and Mr. Maher, which was empowered to exercise
all the powers and authority of the Board except as otherwise provided under
applicable Delaware corporation law. The Executive Committee was dissolved
immediately following the Merger.
During 1994,1995, the Board of Directors held elevenseven meetings and the former
Executive Committee acted fourteenfive times
by unanimous written consent of all members thereof, each in accordance with
the Company's By-laws and applicable Delaware corporation law. The Employee
Benefits Committee held two meetings; the Audit Committee held threetwo meetings;
and the Ethics and Quality Assurance Committee held one meeting in 1994.1995. The
Nominating Committee did not meet in 1994.1995. During 1994,1995, none of the then incumbent directors
attended fewer than 75% of the meetings of the Board and the committees of
which he or she was a member other than Mr. Mahoney and Dr. Thier, who served as directors of the
Company during 1994 and until their resignation on April 28, 1995, the date of
the Merger.
Compensation ofmember.
COMPENSATION OF DIRECTORS
Directors
Effective on April 28, 1995, directors who are currently not receiving compensation as officers or
employees of the Company are paid an annual retainer of $30,000, payable in
monthly installments, and a fee of $1,000 for each meeting of the Board of
Directors or of any Committee thereof they attend and receive reimbursement of
expenses they incur for attending any meeting. Subject to approval and adoption of the Non-Employee
Director Stock Plan (the "Director Stock Plan") approved by the stockholders
of the Company, 50% of such annual retainer shall be payable in cash and 50%
shall be payable in Common Stock of the Company. Prior to
April 28,In 1995, and duringeach Non-Employee
Director, as defined, received 1,023 shares of Common Stock under the year ended December 31, 1994, directors were
paid an annual retainer of $25,000, payable in monthly installments, and a fee
of $1,000 for each meeting of the Board of Directors or any committee thereof
attended.Director
Stock Plan.
5
EXECUTIVE OFFICERS
The following table sets forth as of the date hereof the executive officers
of the Company.
Name Age Office
------------------------------------ ----- -----------------------------------------------------------NAME AGE OFFICE
---- --- ------
James B. Powell, M.D. 56M.D.......... 58 President and Chief Executive Officer
Wesley R. Elingburg........... 40 Executive Vice President, Chief Financial
Officer and Treasurer
Larry L. Leonard.............. 55 Executive Vice President, Southwest and West
Divisions
Bradford T. Smith............. 43 Executive Vice President, General Counsel,
Corporate Compliance Officer and Secretary
Stevan R. Stark............... 49 Executive Vice President, Alliances and Sales
Coordination
Ronald B. Sturgill............ 60 Executive Vice President, Human Resources and
South Atlantic Division
David C. Flaugh 48Weavil............... 45 Executive Vice President and Chief Operating
Officer
Timothy J. Brodnik 47 Executive Vice President, Sales and Marketing
Haywood D. Cochrane, Jr. 46 ExecutiveWilliam M. Meilahn............ 55 Senior Vice President and Chief Financial Officer
Larry L. Leonard 54 Executive Vice President
John F. Markus 44 Executive Vice President, Corporate Compliance
Bradford T. Smith 42 Executive Vice President, General Counsel and Secretary
Ronald B. Sturgill 58 Executive Vice President, Information
Systems/Operations
David C. Weavil 43 Executive Vice President and Chief Administrative Officer
Robert E. Whalen 53 Executive Vice President, Human Resources
Wesley R. Elingburg 39 Senior Vice President, Finance
JamesJAMES B. Powell,POWELL, M.D. has served as President and Chief Executive Officer
and as a directorDirector of the Company since the Merger in April 1995.Merger. Previously, Dr. Powell was
President of RBL from 1982 until the Merger in
April 1995.Merger. He is a medical doctor and became board
certified in anatomic and clinical pathology in 1969. Dr. Powell is a member
of the Management
Committeemanagement committee of the Company.
David C. Flaugh has been Chief Operating Officer since 1993. He joined
the Company in 1970. From July 1994 until April 1995 he was also Senior
Executive Vice President, acting Chief Financial Officer and Treasurer of the
Company. Mr. Flaugh was Vice President-Managing Director, Chief Financial
Officer and Treasurer of the Company from 1991 to 1993 and Vice
President-Finance from 1988 to 1991. Mr. Flaugh is a member of the Management
Committee of the Company.
Timothy J. BrodnikWESLEY R. ELINGBURG has served as Executive Vice President, SalesChief Financial
Officer and MarketingTreasurer since October 1996. Prior to this date and since the
Merger, Mr. Elingburg was Senior Vice President, Finance, with responsibility
for the day to day supervision of the finance function of the Company,
including treasury functions. Previously, Mr. Elingburg served as Senior Vice
President-Finance and Treasurer of RBL from 1988 through April 1995 and
Assistant Vice President of Hoffmann-La Roche from 1989 until the Merger in
April 1995. He joined the Company in 1971. He
was appointed Executive Vice President of the Company in 1993 and was Senior
Vice President from 1991 to 1993 and Vice President-Division Manager from 1979
until 1991. Mr. Brodnik oversees the Company's sales operations including
managed care, business ventures/alliances, clinical trials and new business
development, and also oversees the Company's laboratories in Florida,
Tennessee, North Carolina and South Carolina. Mr. BrodnikElingburg is a member of the Management Committeemanagement committee of the
Company.
Haywood D. Cochrane, Jr. has served as Executive Vice President and
Chief Financial Officer since the Merger in April 1995 and has been an
executive of the Company since June 1994 following the acquisition by the
Company of Allied Clinical Laboratories, Inc. ("Allied"). Mr. Cochrane was
President, Chief Executive Officer and a director of Allied from its formation
in 1989 until its acquisition by the Company in 1994. Mr. Cochrane also
serves as a director of First Union National Bank of Tennessee and JDN Realty
Corp., Atlanta, Georgia. Mr. Cochrane is a member of the Management Committee
of the Company.
LarryLARRY L. LeonardLEONARD has served as Executive Vice President of the Company since
1993. He joined the Company in 1978. Dr. Leonard, who holds a Ph.DPh.D. degree in
microbiology, was named Senior Vice President of the Company in 1991 and
previously was Vice President-Division Manager. Dr. Leonard oversees major
regional laboratories in Arizona, Texas, Colorado, California, Nevada,
Washington and Colorado.
John F. Markus has served as Executive Vice President, Corporate
Compliance since the Merger in April 1995. From 1990, when he joined the
Company, he has been responsible for quality, operations review,
pathology/cytology, compliance and the Company's phlebotomy program. He
served as Executive Vice President and Director of Compliance from 1993 and
was Vice President-Managing Director from 1990 to 1993. Previously, Mr.
Markus was an attorney in the law firm of Akin, Gump, Strauss, Hauer and Feld
in Washington, D.C. for more than five years and was a partner in such firm
in 1989. Mr. MarkusUtah. Dr. Leonard is a member of the Management Committeemanagement committee of
the Company.
BradfordBRADFORD T. SmithSMITH has served as Executive Vice President, General Counsel
and Secretary since the MergerMerger. He was appointed Corporate Compliance Officer
in April 1995.August 1996. Previously, Mr. Smith served as Assistant General Counsel of
HLR, Division Counsel of RBL and Assistant Secretary and member of RBL's
Senior Management Committee from 1988 until April 1995. Mr. Smith served as
Assistant Secretary of HLR from 1989 until the Merger in April 1995 and as an Assistant Vice
President of HLR during 1992 and 1993. Mr. Smith is a member of the Management Committeemanagement
committee of the Company.
RonaldSTEVAN R. STARK was appointed Executive Vice President, Alliances and Sales
Coordination in October 1996 and was Senior Vice President, New York Division,
Cranford Region and Alliance/Hospital Division since the Merger in April 1995.
Mr. Stark oversees the Company's sales operations including business
alliances, managed care and new business development. Previously, Mr. Stark
was a Vice President and Division Manager from 1991 to 1995 and a Division
Manager from 1986 to 1991. He joined the Company in 1983. Mr. Stark is a
member of the management committee of the Company.
6
RONALD B. SturgillSTURGILL has served as Executive Vice President, Information
Systems/OperationsHuman Resources
since October 1996. Mr. Sturgill oversees human resources and major regional
laboratories in North and South Carolina. Prior to that date and since the
Merger, in April 1995. Previously,Mr. Sturgill served as Senior Vice President, South Atlantic Division.
Mr. Sturgill served as Senior Vice President, Administration of RBL. From 1986 toRBL from 1987
he
served as Senior Vice President, North-Central Regional Operations of RBL.
Mr. Sturgill served as RBL's Vice President of Laboratories and Human
Resources from 1982 until 1986. Mr. Sturgill's responsibilities as Senior
Vice President, Administration of RBLthe Merger where his duties included the supervision of Information
Systems, Human Resources, Sales Support and Training. DavidMr. Sturgill is a member
of the management committee of the Company.
DAVID C. WeavilWEAVIL has served as Executive Vice President and Chief
Administrative Officer since the Merger and
was appointed Chief Operating Officer in AprilSeptember 1995. Previously, Mr.
Weavil served as Senior Vice President and Chief Operating Officer of RBL
beginning in 1989. From 1988 through 1989, Mr. Weavil was Regional Senior Vice
President-Mid-Atlantic of RBL. Prior to that, he served as Senior Vice
President and Chief Financial Officer of RBL from 1982. Mr. Weavil is a member
of the Management Committeemanagement committee of the Company.
Robert E. Whalen has served as Executive Vice President, Human Resources
since the Merger in April 1995. He joined the Company in 1976. He was named
Executive Vice President of the Company in 1993 and was Senior Vice President
from 1991 to 1993 and Vice President-Administration from 1985 to 1993. From
1979 to 1985, he was Vice President-Division Manager of the Company. Mr.
Whalen oversees human resources, information systems, client service and major
regional laboratories in California, Washington, Nevada and Utah. Mr. Whalen
is a member of the Management Committee of the Company.
Wesley R. ElingburgWILLIAM M. MEILAHN has served as Senior Vice President Financeand Chief Information
Officer since the Merger in AprilDecember 1995. Mr. Elingburg is responsible for the day-to-day
supervision of the finance function of the Company, including treasury
functions, and reports to the Chief Financial Officer. Previously, Mr. Elingburg served as Senior Vice President-Finance and Treasurer of RBL from
1988 through April 1995 and AssistantMeilahn was Executive Vice
President, MIS and a director of Hoffmann-La RocheEduserv Technologies, Inc. from 1989 until the Merger1993 through
1996, and was a Vice President in April 1995.various capacities for Automatic Data
Processing, Inc. from 1983 through 1993. Mr. ElingburgMeilahn is a member of the
Management Committeemanagement committee of the Company.
7
EXECUTIVE COMPENSATION AND BENEFIT PLANS
Executive CompensationEXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company to
its then Chief Executive Officer and each of the Company's then four most
highly compensated executive officers for services during the year ended December 31, 1994:
Summary Compensation Table1995
to certain executive officers is set forth below. The executive officers named
are the two who served as chief executive officer during the year, the four
other most highly compensated executive officers serving at year end, and an
officer who would have been one of such four had he not resigned before year
end.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
---------------
Annual Compensation Awards
---------------------------- ---------------
All Other
Salary Bonus Options/ Compensation
Name and Principal Position YearLONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------ ------------
SECURITIES
UNDERLYING ALL OTHER
SALARY(1) BONUS(2) OPTIONS(3)/ COMPENSATION(4)
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(2) SARs (#) SARS(#) ($)(3)
- --------------------------- ---- ------ ------ ------------------- --------- ------------ ---------------
James R. Maher, Former 1994 $1,000,001B. Powell, M.D.,.. 1995 $ 450,000 350,000 $20,066$ 367,500 100,000 $ --
President and Chief 1994 -- -- -- --
Executive Officer(5) 1993 -- -- -- --
Timothy J. Brodnik,.....
Former Executive Vice 1995 325,000 162,500 64,130 861,965
President, Sales and 1994 325,000 246,250 150,000 8,853
Marketing(6) 1993 325,000 262,500 50,000 11,334
Haywood D. Cochrane,
Jr.....................
Former Executive Vice
President, Chief 1995 500,000 150,000 50,000 2,531,658
Financial Officer and 1994 263,014 225,000 331,250 870
Treasurer(7) 1993 -- -- -- --
John F. Markus,.........
Former Executive Vice 1995 325,000 162,500 50,273 651,447
President, Corporate 1994 325,000 236,250 115,000 7,052
Compliance(6) 1993 325,000 252,500 50,000 9,586
Robert E. Whalen,.......
Former Executive Vice
President and Chief 1995 325,000 162,500 70,273 864,812
Administrative 1994 325,000 246,250 150,000 11,700
Officer(6) 1993 323,751 262,500 50,000 14,120
James R. Maher,.........
Former President and 1995 333,334 1,000,000 -- 5,362,662
Chief Executive 1994 1,000,001 450,000 350,000 20,066
Officer(8) 1993 1,000,000 500,000 --- 29,136
Officer(4) 1992 34,616 1,662,500 300,000 -
David C. Flaugh,........
Former Executive Vice 1995 312,491 187,500 95,273 2,181,779
President and Chief 1994 499,991 375,000 200,000 14,154
Vice President, Chief 1993 507,683 400,000 125,000 13,865
Operating Officer(5) 1992 267,117 265,000 - 9,287
Timothy J. Brodnik, Executive 1994 325,000 246,250 150,000 8,853
Vice President, Sales andOfficer(9) 1993 325,000 262,500 50,000 11,334
Marketing 1992 238,046 243,800 - 10,007
W. David Slaunwhite, Ph.D., 1994 325,000 266,250 75,000 8,850
former Executive Vice 1993 324,615 282,500 50,000 11,397
President(6) 1992 267,117 265,000 - 94,644
Bernard E. Statland, M.D., 1994 457,500 236,250 25,000 14,759
Ph.D., Chief Executive 1993 457,500 252,500 50,000 17,219
Officer, National Reference 1992 386,243 365,000 - 15,482
Laboratory, and former
Executive Vice President507,683 400,000 125,000 13,865
-------------- --------
(1) Includes salary paid or accrued for each indicated year.
(2) Includes bonus accrued or paid for each indicated year and other payments,
excluding severance, made pursuant to employment agreements.
The 1992 amount(3) In connection with the Merger in 1995, certain employee stock options were
canceled and reissued ("Roll-Over Options") according to a formula set
forth in the Merger Agreement. Roll-Over Options canceled and reissued in
1995 were 16,500 at $20.25 and 20,273 at $16.481, respectively, for Mr.
Maher represents the value, on the date of grant, of 100,000 shares
of the Company's Common Stock granted in 1992.
(3)Whalen, 11,500 at $20.25 and 14,130 at $16.481, respectively, for Mr.
Brodnik, 16,500 at $20.25 and 20,273 at $16.481, respectively, for Mr.
Markus, and 16,500 at $20.25 and 20,273 at $16.481, respectively, for Mr.
Flaugh.
(4) Reflects the following: (i) relocation expensespayment of cash and the fair value of shares
of Common Stock of the Company issued for NHL employee stock options
canceled in 1993connection with the Merger at the election of each individual
in 1995 of $2,348,162 for Mr. Maher, of
$14,001$2,494,627 for Mr. Cochrane, $853,112
for Mr. Whalen, $853,112 for Mr. Brodnik, $640,258 for Mr. Markus, and
in 1992$1,236,026 for Dr. Slaunwhite of $84,365;Mr. Flaugh; (ii) life insurance
8
premiums of $15,566 in 1994 and $8,060 in 1993 for Mr. Maher, $30,569 in
1995 and $870 in 1994 for Mr. Cochrane, $7,200 in 1995 and 1994 and $7,044
in 1993 for Mr. Whalen, $4,353 in 1995 and 1994 and $4,259 in 1993 for Mr.
Brodnik, $2,552 in 1995 and 1994, and $2,511 in 1993 for Mr. Markus and
$9,790 in 1995, $9,654 in 1994 and $6,790 in 1993 and $3,414 in 1992 for Mr. Flaugh, $4,353 in 1994,
$4,259 in 1993 and $3,141 in 1992 for Mr. Brodnik, $4,350 in 1994,
$4,322 in 1993 and $3,413 in 1992 for Dr. Slaunwhite and $10,259 in
1994, $10,144 in 1993 and $8,616 in 1992 for Dr. Statland;Flaugh; (iii)
401(a) and (k) contributions in 19941995 of $4,500 and in 1993 of $7,075 for each of such individualsindividual named in
the table, except Dr. Powell, contributions of $4,500 in 1994 and $7,075 in
1992 of $5,873 for Mr.
Flaugh and $6,8661993 for each of Mr. Maher, Mr. Whalen, Mr. Brodnik, Mr. Markus and Mr.
Flaugh; (iv) relocation expenses in 1993 for Mr. Maher of $14,001, in 1995
of $1,962 for Mr. Cochrane and $4,137 for Mr. Markus.
(5) Dr. SlaunwhitePowell was appointed President and Chief Executive Officer effective
with the Merger. Dr. Statland.
(4)Powell's salary from the date of the Merger is
included herein.
(6) Messrs. Brodnik, Markus and Whalen resigned their respective positions
effective August 12, 1996. See "Compensation Plan and Arrangements" below.
(7) Mr. Cochrane's employment with the Company commenced on June 23, 1994 in
connection with the acquisition of Allied. Mr. Cochrane resigned effective
October 24, 1996 but will continue to provide advisory services to the
Company on an as needed basis pending the completion of certain projects.
(8) Mr. Maher resigned his position as President and Chief Executive Officer
and his employment agreement was terminated with effect as of April 28,
1995. (5) DuringIn connection with the year ended December 31, 1994,termination of Mr. Maher's employment
agreement, a termination payment of $3,000,000 was paid to him and is
included under the caption "All Other Compensation."
(9) Mr. Flaugh servedresigned his position as Chief
Operating Officer, Senior Executive Vice President and Acting Chief
FinancialOperating Officer and Treasurer.
(6) Thehis employment of Dr. Slaunwhiteagreement was terminated with effect
as of April
28,September 19, 1995. Stock Option TransactionsMr. Flaugh had an employment agreement which
required payment, in 1994monthly installments, of his annual salary and bonus
through December 31, 1996. Payments totaling $937,500 will be made to Mr.
Flaugh through such date. This amount is included under the caption "All
Other Compensation."
STOCK OPTION TRANSACTIONS IN 1995
During 1994,1995, the following grants, excluding options which were rolled over
in connection with the Merger, were made under the 1988 Stock Option
Plan and the 1994 Stock Option Plan for
the executive officers named in the Summary Compensation Table:
OPTION/SAR GRANTS IN 1995
Option/SAR Grants in 1994
Grant
Date
Individual Grants Value
---------------------------------------------------------- -----
Percentage
of Total
Number of Sec- Options/SARs Exercise Grant
urities Underlying Granted to or Base Date
Options/SARs Employees Price Expiration Present
Name Granted(1) in 1994GRANT DATE
INDIVIDUAL GRANTS VALUE
--------------------------------------------- ------------
PERCENTAGE
NUMBER OF OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE GRANT
UNDERLYING GRANTED TO OR BASE DATE
OPTIONS/SARS EMPLOYEES PRICE EXPIRATION PRESENT
NAME GRANTED(1) IN 1995 ($/Sh) Date Value $(2)(3)SH) DATE VALUE ($)(2)
---- ------------------------------ ------------ -------- ---------- -------------------------
James B. Powell, M.D.... 100,000 7% $13.00 5/08/05 $854,100
Timothy J. Brodnik...... 50,000 4 $13.00 5/08/05 $427,050
Haywood D. Cochrane,
Jr..................... 50,000 4 $13.00 5/08/05 $427,050
John F. Markus.......... 30,000 2 $13.00 5/08/05- $256,230
9/20/05
Robert E. Whalen........ 50,000 4 $13.00 5/08/05 $427,050
James R. Maher 150,000 7.2% $13.875 2/10/04 $1,223,000
200,000 9.8 11.75 7/12/04 1,440,000Maher.......... -- -- $ -- -- $ --
David C. Flaugh 100,000Flaugh(3)...... 75,000 5 13.875 2/10/04 815,000
100,000 5 11.75 7/12/04 720,000
Timothy J. Brodnik 75,000 3.5 13.875 2/10/04 611,000
75,000 3.5 11.75 7/12/04 540,000
W. David Slaunwhite,
Ph.D. 75,000 4 13.875 2/10/04 611,000
Bernard E. Statland,
M.D., Ph.D. 25,000 1 13.875 2/10/04 204,000$13.00 5/08/05 $ --
--------------- --------
(1) No tandem SARs were granted in 1994.1995. For each grant of non-qualified
options made in 1994,1995, the exercise price is equivalent to the fair market
price per share on the date of grant (as provided in the 1994 Stock Option
Plan). The options vested with respect to one third of the shares covered
therebyhereby on the date of grant and an additional one third will vest on each
of the first and second anniversaries of such date, subject to their
earlier expiration or termination.
9
(2) For options granted with an exercise price of $13.875, valuation isValuation based upon the Black-Scholes option pricing model assuming a
volatility of .3510.4243 (based on the weekly closing stock prices from JanuaryMay 1,
19931995 to January 7, 1994)March 8, 1996); a risk free interest rate of 6.0%6.86% (the asking
yield on the 10-year U.S. Treasury Strip maturing February 2004)May 2005); and a
dividend yield of 0.0%. The valuation assumptions have made no adjustments
for non-transferability.
(3) ForAs provided in the 1994 Stock Option Plan, all unexercised options granted with an exercise priceowned
by Mr. Flaugh were canceled on December 19, 1995, 90 days after the
effective date of $11.75, valuation is based
on the Black-Scholes option pricing model assuming a volatility of .327
(based on the weekly closing stock prices from July 9, 1993 to July 8,
1994); a risk free interest rate of 7.6% (the asking yield on the
10-year U.S. Treasury Strip maturing August 2004); and a dividend yield
of 0.0%. The valuation assumptions have made no adjustments for
non-transferability.his resignation.
The following chart shows, for 1994,1995, the number of stock options exercised
and the 19941995 year-end value of the options held by the executive officers
named in the Summary Compensation Table:
Aggregated Option/AGGREGATED OPTION/SAR Exercises in 1994
and Year-End 1994 Option/EXERCISES IN 1995
AND YEAR-END 1995 OPTION/SAR ValuesVALUES
Number of Securities
Shares Underlying Unexercised Value of Unexercised In-the-Money Options/SARs
Acquired on Options/SARs at Year-End at Year-EndNUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS AT
AT YEAR-END YEAR-END ($)(1)
Name Exercise------------- ---------------
SHARES
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) Exercisable/Unexercisable Exercisable/UnexercisableREALIZED($) UNEXERCISABLE UNEXERCISABLE
---- ------------ ------------------------- --------------------------------------------------------- ------------- ---------------
James B. Powell, M.D.... 0 $ 0 33,333 $ 0
66,667 0
Haywood D. Cochrane,
Jr..................... 0 0 16,667 0
33,333 0
Robert E. Whalen........ 0 0 36,940 0
33,333 0
Timothy J. Brodnik...... 0 0 28,167 0
33,333 0
John F. Markus.......... 0 0 30,273 0
20,000 0
James R. MaherMaher.......... 0 416,667/ $100,000/
233,333 200,0000 0 0
David C. FlaughFlaugh......... 0 166,500/ 50,000/
175,100 100,000
Timothy J. Brodnik 0 94,833/ 37,500/
116,667 75,000
W.David Slaunwhite, 0 74,833/ 0
Ph.D. 66,667 0
Bernard E. Statland, 0 58,167/ 0
M.D., Ph.D. 33,333 0
-------------------- --------
(1) Calculated using the actual December 31, 199429, 1995 closing price per common share of
Common Stock
on the New York Stock ExchangeNYSE Composite Tape of $13.25.
Pursuant to the Merger Agreement, effective as of April 28, 1995, the
options described above were either canceled and terminated in connection with
the Merger in exchange for a cash payment and shares of Common Stock or were
converted into adjusted options (immediately exercisable) to purchase Common
Stock of the Company pursuant to a conversion formula set forth in the Merger
Agreement.
Retirement Benefits and Savings Plan$9.375
10
RETIREMENT BENEFITS AND SAVINGS PLAN
The following table sets forth the estimated annual retirement benefits
payable at age 65 to persons retiring with the indicated average direct
compensation and years of credited service, on a straight life annuity basis
after Social Security offset, under the Company's Employees' Retirement Plan
or RBL's Employee Retirement Plan which was assumed by the Company in
connection with the Merger, as supplemented by the Company's Pension
Equalization Plan and RBL's Supplemental Employee Retirement Plan.
Pension Plan Table
Five year
average
Compensation(1) 10 Years(2) 15 Years(2) 20 Years(2) 25 Years(2) 30 Years(2)
--------------- ----------- ----------- ----------- ----------- -----------
$ 50,000 $ 6,898 $10,346 $ 13,795 $ 17,244 $ 20,693
100,000 16,242 24,364 32,485 40,606 48,727
150,000 25,602 38,404 51,204 64,006 76,807
200,000 34,962 52,444 69,924 87,406 104,887
250,000 44,322 66,484 88,644 110,806 132,967
300,000 53,682 80,524 107,364 134,206 161,047
------------PENSION PLAN TABLE
JAMES B. POWELL, M.D.
FIVE-YEAR
AVERAGE
COMPENSATION(1) 10 YEARS(2) 15 YEARS(2) 20 YEARS(2) 25 YEARS(2) 30 YEARS(2)
--------------- ----------- ----------- ----------- ----------- -----------
$ 50,000 $ 7,917 $11,676 $15,434 $19,193 $19,193
100,000 17,522 26,064 34,645 43,206 43,206
150,000 27,522 41,084 54,645 68,206 68,206
PENSION PLAN TABLE
HAYWOOD D. COCHRANE, JR., TIMOTHY J. BRODNIK, JOHN F. MARKUS
FIVE-YEAR
AVERAGE
COMPENSATION(1) 10 YEARS(2) 15 YEARS(2) 20 YEARS(2) 25 YEARS(2) 30 YEARS(2)
--------------- ----------- ----------- ----------- ----------- -----------
$ 50,000 $1,413 $ 2,510 $ 3,882 $ 5,528 $ 7,174
100,000 2,626 5,021 7,764 11,056 14,348
150,000 4,239 7,531 11,646 16,584 21,522
200,000 5,652 10,041 15,528 22,112 28,695
250,000 7,065 12,551 19,409 27,639 35,869
300,000 8,477 15,061 23,291 33,167 43,043
PENSION PLAN TABLE
ROBERT E. WHALEN
FIVE-YEAR
AVERAGE
COMPENSATION(1) 10 YEARS(2) 15 YEARS(2) 20 YEARS(2) 25 YEARS(2) 30 YEARS(2)
--------------- ----------- ----------- ----------- ----------- -----------
$ 50,000 $ 6,790 $10,184 $ 13,579 $ 16,974 $ 20,369
100,000 16,130 24,195 32,268 40,325 48,390
150,000 25,490 38,235 50,980 63,725 76,470
200,000 34,850 52,275 69,700 87,125 104,550
250,000 44,210 66,315 88,420 110,525 132,630
300,000 53,570 80,355 107,140 133,925 160,710
- --------
(1) Highest consecutive five yearfive-year average base compensation during final ten
years. Compensation considered for this five year average is reflected in
the Summary Compensation Table under the heading "Salary."salary." Under the
Equalization Plan, a maximum of $300,000 final average compensation is
considered for benefit calculation. Under the Supplemental Plan, a maximum
of $150,000 final average compensation is considered for benefit
calculation. No bonuses are considered.
(2) Under the plans, the normal form of benefit for an unmarried participant
is a life annuity with a guaranteed minimum payment of ten years. Payments
in other optional forms, including the 50% joint and survivor normal form
for married participants, are actuarially equivalent to the normal form
for an unmarried participant. The above table istables are determined with regard
to a life only form of payment; thus, payment using a ten
yearten-year guarantee
would produce a lower annual benefit.
11
The Retirement Plan, which is intended to qualify under Section 401 of the
Internal Revenue Code of 1986, as amended (the "Code"), is a defined benefit
pension plan designed to provide an employee having 30 years of credited
service with an annuity equal to 52% of final average compensation less 50% of
estimated individual Social Security benefits. Credited service is defined
generally as all periods of employment with the Company, a participating
subsidiary or with Revlon Holdings Inc. ("Revlon") formerly
known as Revlon Inc., prior to 1992, or RBL after attainment of age 21 and
completion of one year of service. Final average compensation is defined as
average annual base salary during the five consecutive calendar years in which
base salary was highest out of the last ten years prior to normal retirement
age or earlier termination. The Employment Retirement Income Security Act of
1974, as amended, ("ERISA"), places certain maximum limitations upon the annual benefit
payable under all qualified plans of an employer to any one individual. Such
limitation for defined benefit pension plans was $118,800$120,000 for 19941995 (except to
the extent a larger benefit had accrued as of December 31, 1982) and $120,000
for 1995,1996, and
will be subject to cost of living adjustments for future years. In addition,
the CodeTax Reform Act of 1986 limits the amount of compensation that can be
considered in determining the level of benefits under qualified plans. The
applicable limit is adjusted annually; for 1994 the limit was $150,000. For 1995 the
limitand 1996 will remain at $150,000. The Company
believes that, with respect to certain employees, annual retirement benefits
computed in accordance with the Retirement Plan's benefit formula may be
greater than such qualified plan limitation. The Company's non-qualified,
unfunded, Equalization Plan isand Supplemental Plans are designed to provide for the
payment of the difference, if any, between the amount of such maximum
limitation and the annual benefit that would be payable under the Retirement
PlanPlans but for such limitation.
As of December 31, 1994,1995, credited years of service under the retirement
plans for the following individuals wereare for Dr. Powell--13 years, Mr.
Maher-1 year,Cochrane--none, Mr. Flaugh-22Whalen--18 years, Dr. Slaunwhite--12 years, Dr. Statland--3Mr. Brodnik--23 years and Mr. Brodnik--21Markus--4
years.
Compensation Plans and Arrangements
Prior to the Merger, the Company had an employment agreement with James
R. Maher which provided for his employment as Chief Executive Officer of the
Company through December 31, 1995 at an annual salary of $1,000,000 with an
annual bonus of $500,000 and an additional discretionary bonus to be awarded
at the discretion ofCOMPENSATION PLANS AND ARRANGEMENTS
On April 17, 1996, the Board of Directors. Effective April 28, 1995, Mr.
Maher resigned his position asDirectors approved the Master Executive
Severance Plan (the "Severance Plan"), which provides severance to certain key
employees. The Severance Plan, which became effective August 1, 1996, provides
for severance payments of two times annual salary and targeted bonus then in
effect for the President and Chief Executive Officer and the employment agreement betweenExecutive Vice
Presidents of the Company and Mr. Maher was terminated, and,
pursuant to the agreement, Mr. Maher received the amounts due to him but
unpaid asseverance payments of one times annual salary
and annualtargeted bonus andthen in effect for Senior Vice Presidents upon the
occurrence of a qualifying termination. Qualifying termination paymentis generally
defined as involuntary termination without cause or voluntary termination with
good reason, as defined. Good reason ("Good Reason") is defined as a reduction
in base salary or targeted bonus as a percentage of $3,000,000 (less applicable taxes).salary, relocation to an
office location more than seventy-five (75) miles from the employee's current
office without consent of the employee or a material reduction in job
responsibilities or transfer to another job without the consent of the
employee. Good Reason shall not include a reduction in base salary or targeted
bonus where such reduction is pursuant to a Company-wide reduction of base
salaries and/or targeted bonuses. In addition, Mr. Maher also receivedthe Severance Plan may not be
amended or terminated within thirty-six (36) months of a special bonus of $1,000,000change in connection with the consummationcontrol, as
defined. A copy of the Merger.
Pursuant to a letter agreement, the Company has retained Mr. MaherSeverance Plan was included as an independent contractor to provide certain consulting servicesexhibit to the
Company
for a one year period beginning from April 28, 1995. Mr. Maher is paid an
annual retainer of $160,000 under this agreement.
The Company has an amended employment agreement with Mr. Flaugh which
provides for his employment as Executive Vice President and Chief Operating
Officercurrent report on Form 8-K of the Company through December 31, 1996 at an annual salary of
$500,000filed with an annual bonus of 50% of the annual salary then in effect and
an additional discretionary bonus as may be awarded at the discretion of the
Board of Directors. Pursuant to his employment agreement, Mr. Flaugh received
a $150,000 lump sum payment in December 1994. The employment agreement also
provides that the duties assigned to Mr. Flaugh will be performed primarily at
the offices of the Company in San Diego County, California. If the employment
agreement is terminated by Mr. Flaugh for certain specified reasons ("Good
Reason") including (i) the assignment of duties materially inconsistent with
Mr. Flaugh's status as Executive Vice President and Chief Operating Officer,
(ii) a reduction by the Company in the annual salary or annual bonus or a
failure by the Company to pay any such amount when due or (iii) a material
breach of any of the terms of the employment agreement by the Company, then
the Company will be required to pay, in monthly installments, (i) the annual
salary Mr. Flaugh would have otherwise received during the remainder of the
employment period and (ii) for a period of one year following the date of the
expiration of the employment term, in consideration of the performance of
specified noncompetition obligations, an amount equal to one-half the annual
salary at the rate in effect on the date of expiration of the employment term.Commission October
24, 1996.
The Company has acknowledged that the change to Mr. Flaugh's position
following the Merger constitutes an event of Good Reason. However, Mr.
Flaugh has agreed not to terminate his employment prior to December 31,
1995 due to his new position. In the event Mr. Flaugh does not terminate
his employment on December 31, 1995, he shall be deemed to have accepted
his new position and shall no longer be entitled to terminate his
employment for Good Reason based upon his new position as of the Merger.
The Company has anhad amended employment agreementagreements with Mr.Robert E. Whalen and
Timothy J. Brodnik, which providesprovided for himeach of them to be employed as an
Executive Vice President through December 31, 1996 at an annual salary of
$325,000 with an annual bonus equal to 50% of the annual salary then in effect
and an additional discretionary bonus as may be awarded at the discretion of
the Board of Directors. Pursuant
to his employment agreement, Mr. Brodnik received a $100,000 lump sum payment
in December 1994. The employment agreementagreements also providesprovided that the
duties assigned to Mr. Whalen and Mr. Brodnik willwould be performed primarily at
the offices of the Company in San Diego, California and Fairfax County,
Virginia.Virginia, respectively. If the respective employment agreement iswas terminated
by Mr. Whalen or Mr. Brodnik for certain specified reasons, including, (i) the
assignment of duties materially inconsistent with the status of the office of
Executive Vice President of the Company or resulting in an adverse alteration
in the nature of the responsibilities associated therewith, (ii) a reduction
by the Company in the annual salary or annual bonus or a failure by the
Company to pay any such amount when due or (iii) a material breach of any of
the terms of the employment agreement by the Company, then the Company willwould
be required to pay, in monthly installments, (i) the annual salary and annual
bonus Mr. Whalen and Mr. Brodnik would have otherwise received during the
remainder of their respective
12
employment periods and (ii) for a period of one year following the respective
dates of expiration of their respective employment terms, in consideration of
the performance of specified non-competition obligations, an amount equal to
one-half the annual salary at the rate in effect on the date of expiration of
their respective employment terms. Messrs. Brodnik and Whalen resigned their
positions with the Company effective August 12, 1996. Pursuant to the terms
and conditions of the Severance Plan discussed above, Messrs. Brodnik and
Whalen will receive two times their annual salary and bonus in two payments
each of $487,500. The first payment was made at the time of resignation and
the second payment is due within 30 days following the one-year anniversary of
their resignation. Messrs. Brodnik and Whalen agreed to the performance of
specified non-competition and non-solicitation obligations and a release of
their rights under their employment agreements discussed above and other
Company obligations.
The Company had an amended employment agreement with John F. Markus which
provided for him to be employed as an Executive Vice President through
December 31, 1996 at an annual salary of $325,000 with an annual bonus equal
to 50% of the annual salary then in effect and an additional discretionary
bonus as may be awarded at the discretion of the Board of Directors. If the
employment agreement was terminated by Mr. Markus for certain specified
reasons, including, (i) the assignment of duties materially inconsistent with
the status of the office of Executive Vice President of the Company or
resulting in an adverse alteration in the nature of the responsibilities
associated therewith, (ii) a reduction by the Company in the annual salary or
annual bonus or a failure by the Company to pay any such amount when due or
(iii) a material breach of any of the terms of the employment agreement by the
Company, then the Company would be required to pay, in monthly installments,
(i) the annual salary and annual bonus Mr. Markus would have otherwise
received during the remainder of his employment period and (ii) for a period
of one year following the date of expiration of his employment term, in
consideration of the performance of specified noncompetitionnon-competition obligations, an
amount equal to one-half the annual salary at the rate in effect on the date
of expiration of his employment term. Mr. Markus resigned his position with
the Company effective August 12, 1996. Pursuant to the terms and conditions of
the Severance Plan discussed above, Mr. Markus will receive two times his
annual salary and bonus in two payments of $487,500. The first payment was
made at the time of resignation and the second payment is due within 30 days
following the one-year anniversary of his resignation. Mr. Markus has agreed
to the performance of specified non-competition and non-solicitation
obligations and a release of his rights under his employment agreement
discussed above and other Company obligations.
The Company hashad an amended employment agreement with Dr. StatlandDavid C. Flaugh which
providesprovided for his employment as Executive Vice President and Chief Operating
Officer of the Company and
Chief Executive Officer of National Reference Laboratory through December 31, 19951996 at an annual salary of
$325,000$500,000 with an annual bonus of equal to 50% of the annual salary then in effect and
an additional discretionary bonus as mayto be awarded at the discretion of the Board
of Directors. Pursuant to hisThe employment agreement Dr. Statland received a $90,000 lump sum paymentalso provided that the duties assigned
to Mr. Flaugh would be performed primarily at the offices of the Company in
December 1994.San Diego County, California. If the employment agreement iswas terminated by
Dr. Statland
followingMr. Flaugh for certain specified reasons ("Good Reason") including (i) the
assignment of duties materially inconsistent with Mr. Flaugh's status as
Executive Vice President and Chief Operating Officer, (ii) a reduction by the
Company in the annual salary or annual bonus or a failure by the Company to
pay any such amount when due or (iii) a material breach of any of the terms of
the employment agreement by the Company, then the Company willwould be required to
pay, in monthly installments, (i) the annual salary Dr. StatlandMr. Flaugh would have
otherwise received during the remainder of the employment period and (ii) for
a period of one year following the date of the expiration of the employment
term, in consideration of the performance of specified noncompetition
obligations, an amount equal to one-half the annual salary at the rate in
effect on the date of expiration of the employment term. While Dr. Statland's employment
agreement remains in effect, Dr. Statland is no longer serving as Executive
Vice President of the Company.
During 1994 and until April 28, 1995, theThe Company had
acknowledged that the change to Mr. Flaugh's position following the Merger
constituted an amended
employment agreementevent of Dr. Slaunwhite. The agreement provided forGood Reason. Mr. Flaugh had agreed not to terminate
his employment as Executive Vice President throughprior to December 31, 1996 at an annual
salary of $325,000 with an annual bonus equal1995 due to 50% of the annual salary then
in effect and an additional discretionary bonus as may be awarded at the
discretion of the Board of Directors. Pursuanthis new position. However, on
September 19, 1995, Mr. Flaugh decided to terminate his employment agreement
Dr. Slaunwhite received a lump sum payment of $120,000 in December 1994.
Effective as of the Merger on April 28, 1995, Dr. Slaunwhite's employment
agreement was terminated, and pursuant to its terms,therefore the Company is required to pay in monthly installments, (i) the
annual salaryamounts as described above.
13
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
On the basis of reports and annual bonus Dr.
Slaunwhite would have otherwise received duringrepresentations submitted by the remainder of his
employment perioddirectors and
(ii) for a period of one year following the date of
expirationofficers of the employment term,Company, all Forms 3, 4, and 5 showing ownership of and
changes of ownership in considerationthe Company's equity securities during 1995 were
timely filed with the Securities and Exchange Commission as required by
Sections 16(a) of the performanceSecurities and Exchange Act of specified noncompetition obligations, an amount equal to one-half the annual
salary at the rate in effect1934, except that Dr.
Skinner sold 720 shares of Common Stock on the date of expiration of the employment term.
Employee Benefits Committee Interlocks and Insider ParticipationDecember 22, 1995, which should
have been reported on Form 4 but which instead was reported on Form 5 for
year-end 1995.
EMPLOYEE BENEFITS COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Employee Benefits Committee duringprior to the year ended
December 31, 1994Merger on April
28, 1995 were Saul J. Farber, M.D., Howard Gittis, David J. Mahoney, Ms.
Robinson and Samuel O. Thier, M.D. Subsequent to the Merger, the members of
the Employee Benefits Committee are Mr. Belingard, Ms. Robinson, and Dr.
Farber, Dr. Thier, Messrs. Gittis and Mahoney and
Ms. Robinson.Skinner. No member of the Employee Benefits Committee during the year
wasis an officer or
employee of the Company.
Certain Director Relationships. Robinson LakeLerer Sawyer Miller, the corporate
communications firm of which Ms. Robinson is President and Chief Executive
Officer, performs corporate communications services for NHCG and its
affiliates, which during 1994 and until the Merger in 1995 included the Company. The
amount of compensation paid to Robinson LakeLerer Sawyer Miller for services to the Company in
19941995 was $233,670. It is anticipated that Robinson
Lake Sawyer Miller will continue to provide such services to the Company in
1995. On September 17, 1993, the Company purchased 66% of the Common Stock of
a newly-formed corporation, Health Partners, Inc. ("Health Partners"). Ms.
Robinson purchased 2% of the common stock of Health Partners in 1993. In
1994, the Company sold its interest in Health Partners for an amount equal to
the original cost. Ms. Robinson is the wife of the principal of J.D. Robinson
Inc., which performs consulting services for NHCG and its affiliates and
receives $250,000 per annum from NHCG and its affiliates for such services.
The principal of J.D. Robinson Inc. also serves as a director of a subsidiary
of MacAndrews & Forbes Holdings, Inc. ("M&F Holdings"), the indirect parent
company of NHCG.
Ms. Jordan, who was a director of the Company during 1994 and until the
Merger on April 28, 1995, is the wife of a director of an affiliate of NHCG
who is a partner in a law firm that has on a regular basis in the past
provided services to NHCG and its affiliates, including, in the past, the
Company. No services have been performed by such firm in 1995 or were
performed by such firm in 1994 for the Company.
Dr. Farber, who was a director of the Company during 1994 and until the
Merger on April 28, 1995, served on the Company's Scientific Advisory Board
through June 30, 1994 and was paid $7,500 for such services.
Employee Benefits Committee Report on Executive Compensation$151,207.
EMPLOYEE BENEFITS COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Employee Benefits Committee of the Board of Directors (for the purposes
of this section, the "Committee") makes recommendations to the Board of
Directors regarding compensation and benefit policies and practices and
incentive arrangements for executive officers and key managerial employees of
the Company. The Committee also considers and grants awards under the
Company's incentive plans, subject to a Special Majority Vote of the Board as
described above under "Item 1: Election of Directors."
FollowingThe Committee is comprised of a majority of Independent Directors. During
1995, the Merger,Committee met two times to review and evaluate executive
compensation and benefit programs, including information provided to the
Company'sCompany by independent compensation and benefit consultants.
Executive Officer Compensation Policies. The Committee's executive
compensation policies have undergone a change. In additionare designed to (a) attract and retain the best
individuals critical to the continuation of existing incentive bonus policiessuccess of the Company, which
coverb) motivate and reward
such individuals based on corporate business unit and individual performance,
duringand (c) align executives' and stockholders' interests through equity-based
incentives.
Compensation for executives is based on the following principles: variable
compensation should comprise a significant part of an executive's
compensation, with the percentage at-risk increasing at increased levels of
responsibility; employee stock ownership aligns the interest of employees and
stockholders; compensation must be competitive with that offered by companies
that compete with the Company for executive talent; and differences in
executive compensation within the Company should reflect differing levels of
responsibility and/or performance.
In addition, the Committee adopted policies in 1995 subjectrelating to stockholder approval (which approvalthe
integration of the compensation programs of the two companies in the Merger.
The Committee determined that salaries would not be reduced as a result of the
Merger. The Committee also decided that rather than renewing existing
employment contracts, it would continue RBL's policy of motivating and
retaining key employees with awards of incentive compensation and the adoption
of a severance program. (See "--Compensation Plans and Arrangements" above for
a description of the severance program.) Moreover, consummation of the Merger
and achievement of planned Merger synergies were designated as important bases
for incentive awards.
A key determinant of overall levels of compensation is being sought herein), the Employee Benefitspay practices of
ten public companies in the medical supply and medical service industry with
revenue comparable to the Company's (the "peer group").
14
The peer group was chosen by the Company's independent compensation and
benefit consultants and includes some of the members of the 1995 Peer Group
used for stock price comparisons (see "--Common Stock Performance" below).
There are three components to the Company's executive compensation program:
base salary, annual incentive compensation and long-term incentive
compensation. The more senior the position, the greater the portion of
compensation that varies with performance.
Base salaries are set by the Committee and are designed to be competitive
with the Boardpeer group companies described above. Generally, the Committee
targets salary levels in the second and third quartile of Directors have approved the Non-Employee Directorpeer group,
adjusted to reflect the individual's job experience and responsibility.
Changes in base salaries are based on the peer group's practices, the
Company's performance, the individual's performance and increases in cost of
living indexes. The corporate performance measures used in determining
adjustments to executive officers' base salaries are the same performance
measures used to determine annual and long-term incentive compensation
discussed below. Base salaries are reviewed and adjusted annually.
Under the Company's Annual Bonus Incentive Plan, adopted by the stockholders
in 1995, annual incentive compensation is paid in the form of a cash bonus and
is generally based on the attainment of specified corporate performance
measures, which are established by the Committee at the beginning of the year.
The measures used are EBITDA, return of capital, return on equity, earnings
per share and net income. No benefits were received under the plan for 1995 as
it was not adopted until September. For 1995, discretionary annual bonuses
were based primarily on an executive's role in closing the Merger and
successfully integrating the two companies. In addition, under existing
employment agreements with certain executive officers, the Company paid
certain officers annual bonuses equal to a fixed percentage of their base
salary. Principles of internal equity, therefore, also affected the annual
incentive bonus compensation paid to other executive officers.
Long-term incentive compensation is paid in part in the form of stock
options granted under the 1994 Stock Option Plan. The Committee believes that
grants of stock options align stockholder value and executive officer
interests. Stock options are granted in amounts that are directly related to
the level of responsibility of the grantees as compared with their peer group
counterparts. The number of options granted is established after determining
the projected value of such options as derived from the Black-Scholes option
pricing model. The size of previous grants and the number of shares held by an
executive are not considered in determining annual award levels.
As provided in the 1994 Stock Option Plan, stock options are granted with an
exercise price equal to the fair market value per share on the date of grant.
One-third of the options granted vest on the date of grant, with the remainder
vesting in annual equal increments through the second anniversary of the date
of grant. No stock option awards are made in the absence of satisfactory
performance which is evaluated by the Committee based on the executive's
individual contribution to the long-term health and growth of the Company.
Options for executive officers in 1995 were granted in May, shortly after the
Merger.
Long-term incentive compensation will also be paid in cash under the
Company's Performance Unit Plan, and the Annual Plan, which are described below. In accordance with
rules establishedwas adopted by the Commission, however,stockholders in
1995. The Performance Unit Plan is designed to motivate senior executives to
achieve the Company is requiredplanned synergies of the Merger over a period from May 1, 1995 to
provide certain data and information with respect toApril 30, 1997. No amounts are payable under the compensation provided
toplan until the Company'send of the
performance period.
Chief Executive Officer Compensation. James B. Powell, M.D. was appointed
President and Chief Executive Officer effective with the four other most highly
compensated executive officers forMerger on April 28,
1995. For the last completed fiscal year. The
Committee, as itremainder of the year, he was constitutedpaid $350,000 in 1994, preparedbase salary,
$367,500 in annual incentive compensation and 100,000 stock options (then
valued at $854,100 under the following report for
inclusionBlack-Scholes option pricing model) in long-term
incentive compensation. Dr. Powell's base salary, annual incentive
compensation and long-term incentive compensation were determined in the 1994 10-K. In accordance with rules established bysame
manner as described above for other executive officers. Dr. Powell's total
compensation was in the Commission, the report is also required to be included herein. The textsecond quartile of the report appears exactly as it did in the 1994 10-K. A descriptiontotal compensation of the Company's compensation and benefit policies and practices for the 1995 fiscal
year will appear in the proxy statement for the next succeeding annual meeting
of stockholders of the Company.
Compensation Policies. The Company's compensation arrangements for
senior executives are significantly affected by the Company's long history as
a private company until the 1988 initial public offering, after which an
Employee Benefits Committee was established. The overall compensation program
for officers historically emphasized a strong base salary position in relation
to competitive practice and a competitive annual bonus opportunity dependent
upon the operating income performance of the corporation. In contrast to the
Company's highly competitive cash compensation policy, the Company did not
offer long-term incentive opportunities as an executive compensation element
until 1989 when the first stock option awards were made. The Committee
understands that the combination of strongly competitive cash compensation and
modest use of long-term incentives is typical of private companies with
professional management leadership; and this historical approach continued to
influence the Company's programs as a public company from 1989 into 1992.
Late in 1992, with the appointment ofpeer
group CEOs.
15
James R. Maher served as President and Chief Executive Officer through the
Company's compensation philosophy changed to make a
greater portion of executive compensation dependent on the Company's long-term
stock performance.
Beginning in late 1992 and in 1993 and 1994, the Company's compensation
philosophy reflected a greater emphasis on grants of stock options. In 1994,
the Committee granted options in varying amounts to 159 senior and mid-level
managers. The option awards at all levels of management were partclosing of the Committee's desireMerger on April 28, 1995. Prior to make a growing and more significant portion of senior
executive compensation directly dependent on the Company's long-term share
price appreciation. The number of options granted in 1994 to each ofMerger, the four
senior executives named in the cash compensation table was determined
considering the Company's relatively low historical option grants, the
Committee's desire to make a greater proportion of the senior executives'
compensation equity-based,Company had
an analysis of the potential value of the options
over the term of the option and a review of option grants at the peer
companies listed in the stock performance graph.
In 1992, after consultationsemployment agreement with Mr. Maher, the Committee decided to
raise the senior executive base salary levels and to restructure the annual
bonus opportunitywhich provided for his employment as the combination of a cash year-end retention bonus equal
to 50% of base salary and a performance bonus opportunity. The general effect
of these salary and bonus actions was to set the overall cash compensation
opportunity for senior executives at or below 1992 levels, while strengthening
the retentive elements of the compensation package. When these arrangements
were established it was anticipated that the performance bonus would be based
on achieving operating income growth and the contribution of each senior
executive as evaluated by the Chief Executive Officer and approved by the
Committee.
The Committee believes that each of the four most highly compensated
senior executives of the Company have demonstrated superior performance in
1994 during a period of general uncertainty in the medical services
marketplace. Notwithstanding such performance, however, given industry
conditions and the effects of the changes in the industry on the Company's
results, the Committee believed, as it did at the end of 1993, that it would
not be appropriate to award any discretionary bonus or to increase any
compensation levels for senior executives at this time. Each of such
executives also agreed in 1994 to a reduction in the year-end retention bonus
in an amount equal to five percent of their base salary.
Compensation of Chief Executive Officer. The compensation arrangement
with the Company's
President and Chief Executive Officer was entered into inthrough December 1992. At that time, the Committee considered the salary and
incentive pay levels31, 1995 at public companies whose financial characteristics and
market capitalization were similar to those of the Company and whose workforce
skills requirements and customer bases were similar. The Committee also
considered the Company's circumstances and special leadership challenges in
the aftermath of the settlement with the Federal government.(1) In the
Committee's judgment, these circumstances required stable new direction at the
chief executive officer level to help ensure sustained quality of the
Company's services and continued employee commitment to the Company's
objectives.
-----------
(1) The settlement is described in the 1994 10-K.
Based on these considerations and the Company's strategic direction for
executive compensation, it was determined to provide a cash compensation
arrangement for the Chief Executive consisting of an annual
salary of $1
million, a year-end retention$1,000,000 with an annual bonus of $500,000 for each year of the contract
term and an annualadditional
discretionary performance bonus opportunity. The Committee
also determined that it was important to structurebe awarded by the Chief Executive
Officer's total compensation package to reflect the policyBoard of creating strong
financial incentives for executive officers to achieve a high level of
long-term shareholder return. Accordingly, theDirectors. Effective April
28, 1995, Mr. Maher resigned his position as President and Chief Executive
Officer was
awarded 100,000 shares ofand the Company's Common Stockemployment agreement between the Company and granted options to
purchase 300,000 shares at the then fair market value of the shares, which
options vest during the term of the three-year contract. The Committee views
the Common Stock and stock option awards as the primary means by which the
Chief Executive Officer would be rewarded for the Company's business success
and believes it is important for the Chief Executive Officer to maintain and
increase his equity interest in the Company. Accordingly in 1994, Mr. Maher was
granted optionsterminated. Pursuant to purchase an additional 350,000 shares. Thethe agreement, Mr. Maher received the amounts due to
him but unpaid as annual discretionarysalary and annual bonus opportunity was adopted asand a termination payment of
$3,000,000 less applicable taxes. In addition, Mr. Maher also received a
special recognition vehicle
appropriate for yearsbonus of $1,000,000 in whichconnection with the consummation of the Merger.
Pursuant to a letter agreement, the Company achieves superior performance as
measured against industry results for growth in operating income and revenues.
The Committee decided that with respect to 1994,retained Mr. Maher likeas an
independent contractor to provide certain consulting services to the other
senior executives, would receive no discretionary cash bonus in excess of his
year-end retention bonus.Company
for a one-year period beginning April 28, 1995. Mr. Maher like the other senior executives, also
agreed in 1994 to a reduction in the year-end retention bonus inwas paid an amount
equal to five percentannual
retainer of his base salary.$160,000 under this agreement. This agreement was not renewed.
Limit on Deductibility of Compensation. The Omnibus Budget Reconciliation
Act of 1993 ("OBRA") limits the tax deductibility of "non-performance based"
compensation paid to the chief executive officer and eachor any of the other four
highest paid employees of public companies to $1 million$1,000,000 for fiscal years
beginning on or after January 1, 1994. Certain types of compensation, however, including
qualifying performance-based compensation and compensation
arrangements entered into prior to February 17, 1993 are excluded from the
limitation. The Company's general policy is to preserve the tax deductibility
of compensation paid to its executive officers. OBRA recognizes stock option
plans as performance-based if such plans meet certain requirements. The
Company's 1994 Stock Option Plan is structured to meet the requirements of
OBRA. In future years, the Compensation Committee will consider taking such steps as it
deems necessary to qualify compensation so as not to be subject to the limit
on deductibility.
THE EMPLOYEE BENEFITS COMMITTEE
Saul J. Farber, M.D.
Howard Gittis
David J. MahoneyThe Employee Benefits Committee
Jean-Luc Belingard
Linda Gosden Robinson
Samuel O. Thier,Andrew G. Wallace, M.D.
Common Stock Performance16
COMMON STOCK PERFORMANCE
The Commission requires a five-year comparison of stock performance for the
Company with stock performance of appropriate similar companies. The Common
Stock is traded on the New York Stock Exchange, Inc. (the "NYSE"). Set forth
below is a line graph comparing the yearly percentage change in the cumulative
total stockholder return on the Common Stock and the cumulative total return
on the Standard & Poor's Composite-500 Stock Index and the weighted average
cumulative total return (based on stock market capitalization) on the stock of
each of the members of a peer group of companies. TheIn 1995, as a result of the
Merger, the Company selected a new peer group (the "1995 Peer Group"). The
1995 Peer Group includes seven publicly traded medical service and medical
supply companies with sales ranging from approximately $1.1 billion to $3.9
billion. Direct competitors of the Company are either substantially smaller
than the Company or are subsidiaries of much larger diversified corporations
and are therefore not believed to be appropriate peer companies. The 1995 Peer
Group includes: Allergen, Inc., C.R. Bard Inc., Magellan Health Services Inc.,
Fisher Scientific International Inc., Thermo Electron Corporation, Bausch &
Lomb Inc., and FHP International Corporation. In 1994, the peer group (the
"1994 Peer Group") of companies includesincluded sixteen companies selected by the
Company. One of these is a medical service laboratory like the Company: Unilab
Corporation. Other direct competitors of the Company are subsidiaries of much
larger diversified corporations, which were not believed to be appropriate
peer companies. The remaining fifteen companies in the 1994 Peer Group are all
publicly traded medical service and medical supply companies with sales
ranging from approximately $500 million to $2.5 billion: Continental Medical
Systems, Inc., Universal Health Services, Inc., Charter Medical Corporation,Magellan Health Services Inc.,
Allergan, Inc., C. R.C.R. Bard, Inc., Pall Corporation, Thermo Electron
Corporation, United States Surgical Corporation, Bausch & Lomb Incorporated,
Millipore Corporation, Amsco International, Inc., Beckman Instruments, Inc.,
FHP International Corporation and Fisher Scientific International Inc.
(Nichols
Institute, which had been included in the Company's peer group in the proxy
statement provided to stockholders in connection with the 1994 annual meeting
(the "1994 Proxy Statement") is no longer a public company and is therefore
not included in the peer group. Also, Columbia Hospital Corporation, which
had been included in the Company's peer group in the 1994 Proxy Statement,
merged with HospitalCOMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
[CHART APPEARS HERE]
Laboratory Corporation of America Holdings
Total shareholder return
12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
-------- -------- -------- -------- -------- --------
Company 100 269 167 136 127 90
S & P 500 100 130 140 154 156 215
1995 Peer Group 100 182 168 148 143 192
1994 Peer Group 100 194 176 140 143 --
* Reflects the return on $100 invested in 1994 and is no longer withinDecember 31, 1990 including the
sales range as defined above.)
[GRAPHICS -- SEE APPENDIX A FOR EXPLANATION]reinvestment of dividends
17
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND MANAGEMENT
The following table sets forth as of August 7, 1995,October 18, 1996, the total number of
shares of Common Stock beneficially owned, and the percent so owned, by each
director of the Company, by each person known to the Company to be the
beneficial owner of more than 5% of the outstanding Common Stock, by the
officers named in the summary compensation table set forth above and by all
current directors and executive officers as a group. The number of shares
owned are those "beneficially owned," as determined under the rules of the
Commission, and such information is not necessarily indicative of beneficial
ownership for any other purpose. Under such rules, beneficial ownership
includes any shares as to which a person has sole or shared voting power or
investment power and any shares of Common Stock which the person has the right
to acquire within 60 days through the exercise of any option, warrant or
right, through conversion of any security, or pursuant to the automatic
termination of power of attorney or revocation of trust, discretionary account
or similar arrangement.
Amount and Nature
of Beneficial Percent of
Beneficial Owner Ownership Class
---------------- ----------------- ----------
Roche Holdings, Inc.......................... 61,329,256(1) 49.9%
15 East North Street
Dover, DE 19901
Ronald O. Perelman........................... 14,527,244(2) 11.8
35 East 62nd Street
New York, NY 10021
James R. Maher............................... 202,210(3)
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER OWNERSHIP CLASS
---------------- ----------------- ----------
Roche Holdings, Inc.............................. 61,329,256(1) 49.9%
15 East North Street
Dover, DE 19901
Ronald O. Perelman............................... 14,527,244(2) 11.8%
35 East 62nd Street
New York, NY 10021
Thomas P. Mac Mahon.............................. 2,820 *
James B. Powell, M.D............................. 66,667(3) *
Jean-Luc Belingard............................... 2,820 *
David B. Skinner, M.D............................ 2,820 *
Andrew G. Wallace, M.D........................... 2,820 *
Timothy J. Brodnik............................... 47,464(3) *
Haywood D. Cochrane, Jr.......................... 141,069(3) *
James R. Maher................................... 205,030 *
John F. Markus................................... 66,256(3) *
Robert E. Whalen................................. 53,607(3) *
David C. Flaugh.................................. -- *
All current directors and executive officers as a
group (17 persons).............................. 234,997(3) *
David C. Flaugh.............................. 103,325(3)(4) *
Timothy J. Brodnik........................... 69,105(3)(5) *
William D. Slaunwhite, Ph.D.................. 22,376(3)(6) *
Bernard E. Statland, M.D., Ph.D.............. 30,522(3) *
Linda Gosden Robinson........................ 0 *
James B. Powell, M.D........................ 33,334 *
Thomas P. Mac Mahon......................... 0 *
Jean-Luc Belingard.......................... 0 *
David Bernt Skinner, M.D..................... 720 *
Andrew G. Wallace, M.D....................... 0 *
All directors and executive
officers as a group (17 persons)........... 732,254(3)(7) *
-------------
- --------
* Less than 1%
(1) As reported on the Schedule 13D filed with the Commission on May 8, 1995,
on behalf of Roche Holdings, Inc., 49,008,538 of these shares are directly
held by HLR, and 12,320,718 of these shares are directly held by Holdings.Roche
Holdings, Inc. Both HLR and Roche Holdings, Inc. are indirect wholly-ownedwholly owned
subsidiaries of Roche Holding. Dr. h.c. Paul Sacher, an individual and
citizen of Switzerland has, pursuant to an agreement, the power to vote a
majority of the voting securitiesshares of Roche Holding.
(2) As reported onin the Form 4Schedule 13G/A filed with the Commission on May 10, 1995February
13, 1996, on behalf of Mr. Perelman,Mafco Holdings Inc. ("Mafco"), all such shares are owned
by National Health Care Group, Inc. ("NHCG"), an indirect wholly owned
subsidiary of Common Stock are beneficiallyMafco. All of the capital stock of Mafco is owned by Mr.
Perelman through NHCG, an indirect wholly-owned subsidiary
of M&F Holdings, all of the outstanding shares of which are owned by Mr.Ronald O. Perelman.
(3) Beneficial ownership by executive officers of the Company includes shares of Common Stockcommon
stock which such executive officers have the right to acquire upon the exercise of
options which either are vested or which may vest within 60 days. The
number of shares of Common Stockcommon stock included in the table as beneficially
owned by individuals listed thereon, and which are subject to such options is as follows: Dr. Powell--66,667;
Mr. Flaugh - 47,376;
Dr. Slaunwhite - 22,376; Dr. Statland - 22,376;Cochrane--33,334; Mr. Brodnik - 32,364;
Dr. Powell - 33,334;Whalen--53,607, Mr. Brodnik--47,464; Mr.
Markus--36,940; all directors and executive officers as a group (not
including Dr. Slaunwhite, whose employment was terminated effective
April 28, 1995,Messrs. Brodnik, Cochrane, Flaugh, Markus and Dr. Statland,Whalen who is stillare no
longer employed by the Company
but no longer serves as an executive officer) - 256,658.
(4) Includes 55,949 shares, the voting and dispositive powers of which Mr.
Flaugh shares with his wife.
(5) Includes 36,842 shares, the voting and dispositive powers of which Mr.
Brodnik shares with his wife.
(6) The employment of Dr. Slaunwhite was terminated effective April 28, 1995.
(7) This total includes only current directors and executive officers and,
therefore, does not include the beneficial ownership of Dr. Slaunwhite,
whose employment was terminated effective April 28, 1995 and of Dr.
Statland, who is still employed at the Company but no longer serves as
an executive officer.Company)--216,068.
18
ITEM 2: LABORATORY CORPORATION OF AMERICA HOLDINGS 19951997 EMPLOYEE STOCK
PURCHASE PLAN FOR NON-EMPLOYEE DIRECTORS
The Board of Directors has adopted and recommends thatapproval by the stockholders
approveshareholders of the Non-Employee Director1997
Employee Stock Purchase Plan a form(the "Plan"). The text of whichthe Plan is includedset forth
as Annex I ofExhibit A to this Proxy Statement. The summaryStatement, and this description herein of the
principal features thereof is
qualified by reference to such form.thereto. The
purpose of the Non-Employee Director Stock Plan is designed to promote the interests of
the Company and its stockholders by increasing the proprietary and vestedgive all eligible
employees an increased personal interest of non-employee directors in the growthsuccess and performanceprogress of the
Company by granting such directors sharesencouraging their ownership of Common Stock as part of their
annual retainer fee.
The Non-Employee Director Stock Plan provides for the automatic payment
of 50% of the annual retainer fee (currently $30,000) for directors of the
Company who are not employees of the Company ("Eligible Directors") in the
number of shares of Common Stock that results from dividing 50% of the
retainer by the fair market value of such shares on the date or dates such
retainer is to be paid.Company. The
maximum number of shares of the Company's Common Stock available undersubject to the Non-Employee Director Stock Plan
will be 25,000, subject
to adjustment as described below. The3,500,000 shares, with proportionate adjustments of Common Stock to be delivered
under the Non-Employee Director Stock Plan will be made available from the
authorized but unissued shares of Common Stock or from treasury shares and
prior to delivery will be registered by the Company with the Commission on
Form S-8 and upon registration will be freely tradable, subject to applicable
restrictions under Section 16 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
The Non-Employee Director Stock Plan will be administered by the Board
of Directors. Subject to the provisions of the Non-Employee Director Stock
Plan, the Board shall be authorized to interpret the Non-Employee Director
Stock Plan, to establish, amend, and rescind any rules and regulations
relating to it and to make all other determinations necessary or advisable for
its administration; provided, however, that the Board shall have no discretion
with respect to the selection of directors to receive shares of Common Stock
or the timing or pricing of grants of shares of Common Stock. The
determinations of the Boardsuch amount in the
administrationcase of stock dividends, stock splits or other stock changes.
The Plan provides for the Non-Employee Director
Stock Plan, as described herein, shall be final and conclusive. The Secretarygranting of options to all eligible employees of
the Company shall be authorizedand its subsidiaries, both officers and non-officers, entitling
them to implement the Non-Employee Director
Stock Plan in accordance with its terms and to take such actions of a
ministerial nature as shall be necessary to effectuate the intent and purposes
thereof.
In the event of a stock split, stock dividend, subdivision or
combinationpurchase shares of the shares of Common Stock of the Company at a discounted
price. All employees of the Company or other changeits subsidiaries will be eligible to
participate in corporate
structure affecting the sharesPlan, except part-time and temporary employees and
employees owning 5% or more of Common Stock, the total voting power or value of all classes
of stock of the Company. Under the Plan, only those directors and nominees for
director who are full-time employees of the Company or a subsidiary will be
eligible to receive options.
For each six-month period (an "Offering Period") commencing January 1 or
July 1 (the "Offering Date") during the term of the Plan, each eligible
employee will receive an option to purchase up to the largest whole number of
shares obtained by dividing (i) between one and ten percent (as specified by
the employee) of such employee's compensation for the Offering Period by (ii)
the Option Price (as defined below). At the end of an Offering Period, on
either June 30 or December 31 (the "Exercise Date"), the amount deducted from
each eligible employee's compensation during the Offering Period will be used
to purchase shares of the Company's Common Stock authorized byfor the Non-Employee Director Stock Plan shallbenefit of that
employee. The price at which the shares will be increased or
decreased proportionately, as the case may be.
No award maypurchased (the "Option Price")
will be granted under the Non-Employee Director Stock Plan after
the third anniversary85% of the datefair market value of the Annual Meeting.
The Non-Employee Director Stock Plan may be amended by the Board acting
by Special Majority Vote, as it shall deem advisable or to conform to any
change in any law or regulation applicable thereto; provided, that the Board
may not, except in the limited circumstances described above, without the
authorization and approval of shareholders in any respect make any amendment
that would require stockholder approval under Rule 16b-3 under the Exchange
Act or state law. The provisions governing eligibility and the grant of
shares may not be amended more often than once every six months, other than
to comport with changes in the ERISA or the rules under either such statute.
On August 11, 1995, the closing price pera share of Common Stock on the
New York Stock Exchange Composite Tape was $13.25.
Set forth belowOffering Date or the Exercise Date, whichever is a summarylower. Generally, fair market
value will be the average of the awardshigh and low sales prices of the Common Stock
on that date.
Prior to the Exercise Date, the amounts deducted from an employee's salary
may be madeused by the Company for general corporate purposes but will be recorded
as being in separate accounts ("Purchase Accounts") for each employee.
Participating employees can avoid purchasing Common Stock on an Exercise Date
and the funds designated for their Purchase Accounts will be paid to them if
they so elect by written notice to the Company on or before the Exercise Date.
Other than terminating their participation, employees may not change the level
of their participation with respect to 1995 pursuant to the Non-Employee Director Stock Plan:
New Plan Benefits
Laboratory Corporationan Offering Period during such Offering
Period. The aggregate fair market value of America
Non-Employee Director Stock Plan
Name and Position Dollar Value ($) Number of Units
----------------- ---------------- ---------------
Non-Executive 95,000 not yet determinable
Director Group
The Non-Employee Director Stock Plan is not subject to any provision of
ERISA and is not qualified under Section 401(a) of the Code.
The Board of Directors of the Company recommends that stockholders vote
"FOR" approval and adoption of the Non-Employee Director Stock Plan.
ITEM 3: LABORATORY CORPORATION OF AMERICA HOLDINGS
PERFORMANCE UNIT PLAN
The Board of Directors has adopted and recommends that the stockholders
approve the Performance Unit Plan, a form of which is included as Annex II
of this Proxy Statement. The summary description herein of the principal
features of the Performance Unit Plan is qualified by reference to such
form. If approved by stockholders, the Performance Unit Plan will provide
incentives for senior executives and other key employees based upon the
achievement of synergies in connection with the Merger over the period
beginning May 1, 1995 and ending April 30, 1997.
The Performance Unit Plan must be administered by a committee (for the
purposes of this section, the "Committee") of two or more "outside" directors
(as defined therein) designated by the Board of Directors to the extent
necessary to comply with Section 162(m) of the Code ("Section 162(m)"). Upon
approval of the Performance Unit Plan and until otherwise designated by the
Board of Directors, the Employee Benefits Committee will be this Committee.
The Committee will have full authority to interpret the Performance Unit Plan
and to adopt such rules and regulations deemed necessary by the Committee to
effect the purposes of the Performance Unit Plan. The Committee, however, may
not exercise any such authority if such action would have the effect of
increasing the amount of an award under the Performance Unit Plan to any
officer defined as a "covered employee" (each a "Covered Employee") under
Section 162(m), if such action would be impermissible under Section 162(m).
The Covered Employees generally include executive officers listed in the
compensation tables of the Company's proxy statement for the annual meeting
following the year in which such compensation is paid.
Performance unit awards will be granted in the form of 4,000 performance
units and paid in the form of cash based upon the achievement of certain
levels of synergies. The employees eligible to receive grants of performance
units ("participants") are Dr. Powell and Messrs. Flaugh, Cochrane, Weavil,
Brodnik and Whalen.
For purposes of the Performance Unit Plan, "synergies" are defined as
the net savings or reductions in costs and expenses of the Company which are
attributable to or result directly and exclusively from the Merger, as
demonstrated or shown by the Company's internal accounting and financial
records.
The performance units are nontransferable and nonassignable. Subject
to the discretion of the Committee to reduce such amount, the amount
payable with respect to any performance unit granted to any Covered
Employee shall not exceed $600,000. Payments to a Covered Employee are
contingent upon the Committee's certifying the achievement of levels of
synergies for the applicable performance period. Where special factors are
present, the Committee, at its sole discretion, may adjust the synergies
used to determine payments under the Performance Unit Plan, except that
such adjustments shall be disregarded for purposes of calculating the
amount that may be paid to a Covered Employee under the Performance Unit
Plan to the extent required by Section 162(m). The Committee may reduce or
eliminate an award amount to a Covered Employee. In the event of a "change
in control" (as defined in the Performance Unit Plan), all performance
units shall become payable in full.
Acting by a Special Majority Vote, the Board of Directors may terminate
or amend, in whole or in part, the Performance Unit Plan. Upon such whole or
partial termination of the Performance Unit Plan the Committee may, in its
sole discretion, direct the payment to participants of any awards not already
paid out prior to the respective dates upon which payments would otherwise be
made, in a lump sum or installments. The Board of Directors may delegate to
the Committee any or all of its authority relating to amending or terminating
the Performance Unit Plan. However, any amendment to the Performance Unit
Plan that would affect any Covered Employee must be subject to approval by the
Company's stockholders if required by Section 162(m).
Both the benefits to be received with respect to 1995 performance under
the Performance Unit Plan and the benefits that would have been received with
respect to 1994 performance had the Performance Unit Plan been in effect for
such year are not determinable. However, the targeted amounts that could be
received by or allocated to each of the following persons or groups 1995 of
without giving effect to the discretionary authority of the Committee to
reduce such amounts, are shown below in the New Plan Benefits table.
New Plan Benefits
Laboratory Corporation of America Holdings
Performance Unit Plan
Dollar Value ($) Number of
Name and Position of Payments Units
----------------- ---------------- ---------
David C. Flaugh, 600,000 4,000
Chief Operating Officer
Timothy J. Brodnik, 600,000 4,000
Executive Vice President
Marketing and Sales
Executive Officer Group 3,600,000 24,000
Non-Executive Director Group 0 0
Non-Executive Officer Employee
Group 0 0
Amounts shown would have been subject to reduction in the sole discretion of
the Committee and would have been paid at the end of the eight fiscal quarter
performance period and upon such additional conditions as the Committee
established.
Discussion of Federal Income Tax Consequences
OBRA added Section 162(m) to the Code. Section 162(m) limits the
corporate income tax deduction for publicly held companies to $1,000,000 in
any tax year for compensation paid to each of the Chief Executive Officer and
the four highest paid executive officers apart from the Chief Executive
Officer. This rule applies to all deductible compensation, including the
deduction arising from the payment of annual bonuses. Various forms of
compensation are exempted from this deduction limitation, including payments
that are (i) subject to the attainment of pre-established objective
performance goals, (ii) established and administered by outside directors, and
(iii) approved by the stockholders. The Board of Directors believes, but can
give no assurance, that payments made under the Performance Unit Plan will
qualify for exemption from the operation of Section 162(m) and, therefore,
will qualify as deductible compensation by the Company.
The Board of Directors of the Company recommends that the stockholders
vote "FOR" approval and adoption of the Performance Unit Plan.
ITEM 4: LABORATORY CORPORATION OF AMERICA HOLDINGS
ANNUAL BONUS INCENTIVE PLAN
The Board of Directors has adopted and recommends that the
stockholders approve the Annual Plan, a form of which is included as Annex
III of this Proxy Statement. The summary description herein of the
principal features thereof is qualified by reference to such form. If
approved by stockholders, the Annual Plan will provide incentives for
senior executives and other key employees whose performance in fulfilling
the responsibilities of their positions can have a major impact on the
profitability and future growthshares of the Company and its
subsidiaries.
The Annual Plan must be administered by a committee (for the purposes of
this section, the "Committee") of two or more "outside" directors designated
by the Board of Directorssubsidiaries which an employee has an option to the extent necessary to comply with Section
162(m). Upon approval of the Annual Plan, the Employee Benefits Committee
will be the Committee. The Committee will have full authority to interpret
the Annual Plan and to adopt such rules and regulations deemed necessary by
the Committee to effect the purposes of the Annual Plan. The Committee,
however,purchase under employee stock
option plans may not exerciseexceed $25,000 in any such authority if such action would have the
effect of increasing the amount of an award under the Annual Plan to any
officer defined as a "covered employee" (each a "Covered Employee") under
Section 162(m), if such action would be impermissible under Section 162(m).
The Covered Employees generally include executive officers listed in the
compensation tables of the Company's proxy statement for the annual meeting
following the year in which such compensation is paid. The Committee has the
sole discretion to select officers or other employees of the Company or the
Company's subsidiaries who will be eligible to earn awards under the Annual
Plan for that awardcalendar year.
The Committee also hasPlan provides that if an employee's employment terminates for any reason
other than death, then such employee's options terminate immediately and all
funds deducted from the authority to determineemployee's compensation during the amount of such awards and any conditions under which they may be earned.
Target awards, expressed as a percentage of base salary, will be based
upon the achievement of specified levels of EBITDA (as defined in the Annual
Plan), return of capital, return on equity, earnings per share and/or net
income determined at the corporate, regional and/or subregional levels andcurrent Offering
Period will be paid into the form of cash. Such awards are nontransferable and
nonassignable other thanemployee. Options will not be transferable except
by will or by the laws of descent and distribution, or
pursuant toand will be exercisable,
during the employee's lifetime, only by such employee.
The Plan provides that options will become immediately exercisable in full
upon the occurrence of certain events involving a qualified domestic relations order prior to the payment of an
award. Subject to the discretionchange in control of the
Committee to reduce such amount,Company. Such events include: the amount payable with respect to any award to any Covered Employee shall not
exceed $1,000,000. Payments to a Covered Employee are contingent upon the
Committee's certifying the achievement of performance measures for the
applicable performance period. Where special factors are present, the
Committee, at its sole discretion, may adjust the performance measures used to
determine payments under the Annual Plan, except that such adjustments shall
be disregarded for purposes of calculating the amount that may be paid to a
Covered Employee under the Annual Plan to the extent required by Section
162(m). The Committee may reduce or eliminate an award amount to a Covered
Employee. In the eventadoption of a "change in control" (as defined in the
Performance Unit Plan), all performance units shall become payable in full.
Under the Annual Plan, and as designated by the Committee, any employeeplan of merger or similar
transaction involving the Company or the Company's subsidiaries may participate in the Plan and
receive award(s) thereunder. This includes the Chief Executive Officer and
all of the other executive officers and approximately 700 other employees.
Acting by a Special Majority Vote, the Board of Directors may terminate
or amend, in whole or in part, the Annual Plan. Upon such whole or partial
termination of the Annual Plan the Committee may, in its sole discretion,
direct the payment to participants of any awards not already paid out prior to
the respective dates upon which payments would otherwise be made, in a lump
sum or installments. The Board of Directors may delegate to the Committee any
or all of its authority relating to amending or terminating the Annual Plan.
However, any amendment to the Annual Plan that would affect any Covered
Employee must be approved by the Company's stockholders if required by Section
162(m).
No benefits will be received for 1995 performance under the Annual Plan,
and the benefits that would
have been received for 1995 performance had the
Annual Plan been in effect for such year are not determinable.
Discussion of Federal Income Tax Consequences
See "Discussion of Federal Income Tax Consequences" under "Item 3:
Laboratory Corporation of America Holdings Performance Unit Plan" above for a
discussionreceive less than 50% of the applicabilityvoting stock of Section 162(m) to the Annual Plan. The
Board of Directors believes, but can give no assurance, that payments made
undersurviving corporation; the
Annual Plan will qualify for exemption from the operation of Section
162(m) and, therefore, will qualify as deductible compensationapproval by the Company.
The Board of Directors of the sale or transfer by the Company recommends that the stockholders
vote FOR approval and adoptionof a
majority of the Annualstock of a significant subsidiary of the Company or
substantially all of the Company's or such a subsidiary's assets; certain
acquisitions of more than 20% of the Common Stock by any person or group other
than a person or group who beneficially owned, as of the Offering Date, more
than 5% of the Common Stock unless prior approval of the Board of Directors is
received; certain significant changes in the membership of the Board of
Directors; or any other transaction that would constitute a change in control
required to be reported by the Company in a proxy statement. In addition, upon
the approval of the dissolution or
19
liquidation of the Company, all options shall become exercisable in full. Upon
the occurrence of the dissolution or liquidation of the Company, or upon the
consummation of a merger or consolidation in which the Company's stockholders
do not receive at least 50% of the voting stock of the resulting corporation,
all options not exercised shall terminate, but the participating employees
will have the option of purchasing the shares or being paid the amount
designated in their Purchase Accounts prior to such occurrence.
The Board of Directors has set the date for the initial grant of options
under the Plan as January 1, 1997. The Plan will terminate December 31, 2006
and will be administered by the Employee Benefits Committee of the Board of
Directors of the Company. The Committee will be able to prescribe rules and
regulations for such administration and to decide questions with respect to
the interpretation or application of the Plan. In addition, the Committee will
have the authority to alter, amend, suspend or discontinue the Plan at any
time without notice, except that no such action may adversely affect the
rights of any participating employee. In addition, the Committee may not
increase the number of shares of Common Stock issuable under the Plan, change
the formula determining the price at which options may be exercised or
increase the maximum number of shares an eligible employee may purchase under
the Plan. Furthermore, the Plan is designed to meet the requirements of
Rule 16b-3 under the Exchange Act with respect to participation by insiders of
the Company, and, in accordance therewith, certain amendments may require the
approval of the Company's stockholders.
Options will be granted on the condition that a registration statement under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Common Stock to be issued subject to such option has become effective and
a copy of the prospectus has been delivered to each participant.
Options under the Plan will be statutory stock options of the kind
recognized by Section 423 of the Internal Revenue Code of 1986, as amended
(the "Code"). For federal income tax purposes, neither the grant nor the
exercise of the options will be a taxable event to the participants. The
disposition, however, of the shares acquired through the exercise of the
options will be a taxable event. The tax consequences of such a disposition
will depend upon the respective holding periods of the options and options
shares. The statutory holding period for the Plan is the later of two years
after the Offering Date or one year from the date of transfer of the stock to
the employee.
If a disposition of the shares is made after the end of the holding period,
a portion of the gain, if any, will be taxed as ordinary income, which portion
will be determined by subtracting the option price from the lesser of (a) the
fair market value of the shares on the date the option was granted or (b) the
fair market value of the shares on the disposition date. The remaining portion
of the gain, if any, will be taxed as capital gain for federal income tax
purposes. When the holding period described above is met, the Company is not
allowed to deduct any amount for federal income tax purposes with respect to
the issuance or exercise of the options or the sale of the underlying shares.
If a disposition of the shares is made before the end of the holding period,
the amount of the gain which will be taxed as ordinary income will be
determined by subtracting the option price from the fair market value of the
shares on the date on which the option was exercised. The amount treated as
ordinary income would be added to the employee's basis in calculating whether
any capital gain or loss is to be recognized on the disposition. In the year
of such early disposition, the Company will generally be entitled to a
business deduction for federal income tax purposes in an amount equal to the
ordinary income.
The Plan is not qualified under the provisions of Section 401(a) of the Code
and is not subject to any of the provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
The number of shares of the Company's Common Stock that will be purchased
under the Plan by its employees if it is approved cannot be estimated by the
Company, nor can the Company determine the number of shares that would have
been purchased by the employees if the Plan had been in effect for fiscal year
1995.
20
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" APPROVAL OF THE 1997 EMPLOYEE STOCK PURCHASE PLAN.
ITEM 3: RATIFICATION OF INDEPENDENT AUDITORS
Upon recommendation of the Audit Committee, the Board of Directors has
appointed KPMG Peat Marwick LLP to audit the accounts of the Company for the
fiscal year ending December 31, 1995.1996. KPMG Peat Marwick LLP has audited the
consolidated financial statements of the Company for more than the past five
years. KPMG Peat Marwick LLP representatives will be present at the Annual
Meeting with the opportunity to make a statement if they desire to do so and
will be available to respond to appropriate questions.
Stockholder ratification of the appointment of KPMG Peat Marwick LLP as the
Company's independent auditors is not required by the Company's bylaws or
otherwise. The Board of Directors has elected to seek such ratification as a
matter of good corporate practice. Should the stockholders fail to ratify the
appointment of KPMG Peat Marwick LLP as the Company's independent auditors for
the year ending December 31, 19951996 the Board of Directors will consider whether
to retain that firm for such year.
The Board of Directors of the Company recommends that stockholders voteTHE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" the ratification of the appointment ofTHE RATIFICATION OF THE APPOINTMENT OF KPMG Peat MarwickPEAT MARWICK LLP as the
Company's independent auditors for 1995.AS THE
COMPANY'S INDEPENDENT AUDITORS FOR 1996.
21
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Merger Agreement and The Stockholder AgreementTHE MERGER AGREEMENT AND THE STOCKHOLDER AGREEMENT
Certain provisions of the Merger Agreement and the Stockholder Agreement
which describe certain relationships and transactions between the Company and
Roche are described above under "General Information" and "Item 1: Election of
Directors."
The Sharing and Call Option AgreementTHE SHARING AND CALL OPTION AGREEMENT
In connection with the Merger Agreement, HLR, Mafco Holdings, Inc.
("Mafco"), a Delaware corporation ("Mafco") and indirect wholly-ownedwholly owned subsidiary of M&F
Holdings, NHCG,National Health Care Group, Inc. ("NHCG"), and the Company entered
into the Sharing and Call Option Agreement dated as of December 13, 1994 (the
"Sharing and Call Option Agreement"). The Sharing and Call Option Agreement
provides, among other things, that at any time after the third anniversary of
the Merger, HLR or one of its affiliates (such party, a "Purchaser") (other
than the Company) may exercise the right, which right may only be exercised
once, to purchase all, but not less than all, the shares of Common Stock then
owned by NHCG, Mafco or any of their controlled affiliates. The Sharing and
Call Option Agreement provides that a member of
the Investor GroupPurchaser, will, if it elects to
exercise this purchase right, pay a price per share for the shares to be
purchased equal to 102% of the average closing price per share of such
security as reported on the principal national securities exchange on which
such shares are listed, or if not so listed, as reported on the National
Association of Securities Dealers, Inc. Automated Quotation System - NationalSystem--National
Market System, for the 30 trading days before the date of such exercise.
In addition, in accordance with the Sharing and Call Option Agreement, the
Company has filed with the Commission a registration statement on Form S-3
(the "Registration Statement") which has been declared effective by the
Commission and includes a resale prospectus that permits NHCG (or any of its
pledgees) to sell shares of Common Stock and Warrants received by NHCG in the
Merger without restriction. The Company has agreed to use its best efforts to
prepare and file with the Commission such post-effective amendments to the
Registration Statement or other filings as may be necessary to keep such
Registration Statement continuously effective for a period ending on the third
anniversary of the date of the Sharing and Call Option Agreement and during
such period to use its best efforts to cause the resale prospectus to be
supplemented by any required prospectus supplement. The Company has also
agreed to pay all of the Registration Expenses (as defined therein) arising
from exercise of the registration rights set forth in the Sharing and Call
Option Agreement. A copy of the Sharing and Call Option Agreement was filed
with the Commission by the Company as an exhibit to the 1994 10-K.
Registration Rights AgreementREGISTRATION RIGHTS AGREEMENT
In addition to those registration rights granted to NHCG under the Sharing
and Call Option Agreement, the Company and NHCG also are parties to a
registration rights agreement dated as of April 30, 1991 (the "Registration
Rights Agreement") pursuant to which the Company is obligated, upon the
request of NHCG, to file registration statements ("Demand Registration
Statements") from time to time with the Commission covering the sale of any
shares of Common Stock owned by NHCG upon the completion of certain public
offerings by the Company of shares of Common Stock in 1991. Such Demand
Registration Statements may also cover the resale from time to time of any
shares of Common Stock that NHCG may purchase in the open market at a time
when it is deemed to be an affiliate (as such term is defined under Rule 144
under the Securities Act of 1933, as amended), and certain securities issued
in connection with a combination of shares, recapitalization,
reclassification, merger or consolidation, or other pro rata distribution.
NHCG will also have the right to include such Common Stock and other
securities in any registration statement filed by the Company for the
underwritten public offering of shares of Common Stock (whether or not for the
Company's account), subject to certain reductions in the amount of such Common
Stock and securities if the managing underwriters of such offering determine
that the inclusion thereof would materially interfere with the offering. The
Company agreed not to effect any public or private sale, distribution or
purchase of any of its securities which are the same as or similar to the
securities covered by any Demand Registration Statement during the 15-day
period prior to, and during
22
the 45-day period beginning on, the closing date of each underwritten offering
under such registration statement and NHCG agreed to a similar restriction
with respect to underwritten offerings by the Company. NHCG's rights under the
Registration Rights Agreement are transferable as provided therein.
Until the third anniversary of the Sharing and Call Option Agreement, when
the Company's obligation to keep the Registration Statement effective expires,
the registration rights granted to NHCG pursuant to the Registration Rights
Agreement are substantially duplicative of those granted pursuant to the
Sharing and Call Option Agreement. After such date and only to the extent that
NHCG still holds shares of Common Stock or Warrants that it held as of or
received in the Merger, NHCG will continue to be entitled to the registration
rights described in the preceding paragraph, unless the Registration Rights
Agreement has been otherwise amended or terminated.
Tax Allocation ArrangementTAX ALLOCATION ARRANGEMENT
Until May 7, 1991, the Company was included in the consolidated federal
income tax returns, and in certain state income tax returns, of Mafco, M&F
Holdings, Revlon Group Incorporated ("Revlon Group") and Revlon.Revlon Holdings Inc.
("Revlon"). As a result of the reduction of M&F Holdings' indirect ownership
interest in the Company on May 7, 1991, the Company is no longer a member of
the Mafco consolidated tax group. For periods subsequent to May 7, 1991, the
Company files its own separate federal, state and local income tax returns.
Nevertheless, the Company will remain obligated to pay to M&F Holdings (or
other members of the consolidated group of which M&F Holdings is a member) any
income taxes the Company would have had to pay (in excess of those which it
has already paid) if it had filed separate income tax returns for taxable
periods beginning on or after January 1, 1985 (but computed without regard to
(i) the effect of timing differences (i.e., the liability or benefit that
otherwise could be deferred will be, instead, includible in the determination
of current taxable income) and (ii) any gain recognized on the sale of any
asset not in the ordinary course of business). In addition, despite the
reduction of M&F Holdings' indirect ownership of the Company, the Company will
continue to be subject under existing federal regulations to several liability
for the consolidated federal income taxes for any consolidated return year in
which it was a member of any consolidated group of which Mafco, M&F Holdings,
Revlon Group or Revlon was the common parent. However, Mafco, M&F Holdings,
Revlon Group and Revlon have agreed to indemnify the Company for any federal
income tax liability (or any similar state or local income tax liability) of
Mafco, M&F Holdings, Revlon Group, Revlon or any of their subsidiaries (other
than that which is attributable to the Company or any of its subsidiaries)
that the Company would be required to pay.
Certain Other Transactions with RocheCERTAIN OTHER TRANSACTIONS WITH ROCHE
The Company has certain on-going arrangements with Roche for the purchase by
the Company of certain products and the licensing by the Company from Roche of
certain diagnosticsdiagnostic technologies, with an annual aggregate value of approximately $9$9.1
million (based on 1994 information).in 1995. The Company provides certain diagnostic testing and support
services to Roche in connection with Roche's clinical pharmaceutical trials,
with an annual aggregate value of approximately $6$2.3 million (based on 1994 information).in 1995. In addition, in
connection with the Merger, the Company and Roche have entered into a
transition services agreement for the provision by Roche to the Company of
certain payroll and other corporate services for a limited transition period
following the Merger. These services are charged to the Company based on the
time involved and the Roche personnel providing the service. Each of these
arrangements was entered into in the ordinary course of business, on an arm's-lengtharm's-
length basis and on terms which the Company believes are no less favorable to
it than those obtainable from unaffiliated third parties. Consulting AgreementThe Company paid
Roche a total of $214,597 in 1995 for these services.
CONSULTING AGREEMENT
Pursuant to a letter agreement, the Company has retained Mr. Maher as an
independent contractor to provide certain consulting services to the Company
for a one yearone-year period beginning from April 28, 1995. Mr. Maher iswas paid an
annuala
retainer of $160,000 under this agreement. This agreement was not renewed.
23
STOCKHOLDER PROPOSALS
Under the rules and regulations of the Commission as currently in effect,
any holder of at least $1,000 in market value of Common Stock who desires to
have a proposal presented in the Company's proxy material for use in
connection with the annual meeting of Stockholdersstockholders to be held in 19961997 must
transmit that proposal (along with his name, address, the number of shares of
Common Stock that he holds of record or beneficially, the dates upon which the
securities were acquired and documentary support for a claim of beneficial
ownership) in writing as set forth below. Proposals of stockholders intended
to be presented at the next annual meeting must be received by Bradford T.
Smith, Secretary, Laboratory Corporation of America Holdings, 358 South Main
Street, Burlington, North Carolina 27215, no later than April 24, 1996.January 3, 1997. This
date was chosen based on a planned meeting date in early June 1997.
Holders of Common Stock who want to have proposals submitted for
consideration at future meetings of the stockholders should consult the
applicable rules and regulations of the Commission with respect to such
proposals, including the permissible number and length of proposals and other
matters governed by such rules and regulations.
ADDITIONAL INFORMATION
The Company will make available a copy of the 1994 FormTHE COMPANY WILL MAKE AVAILABLE A COPY OF THE 1995 FORM 10-K and any
quarterly reports on FormAND ANY
QUARTERLY REPORTS ON FORM 10-Q filed thereafter, without charge, upon written
request to the Secretary, Laboratory Corporation of America Holdings,FILED THEREAFTER, WITHOUT CHARGE, UPON WRITTEN
REQUEST TO THE SECRETARY, LABORATORY CORPORATION OF AMERICA HOLDINGS, 358
South Main Street, Burlington, NCSOUTH MAIN STREET, BURLINGTON, NORTH CAROLINA 27215. Each such request must set forth a
good faith representation that, as of the Record Date (July 24, 1995)EACH SUCH REQUEST MUST
SET FORTH A GOOD FAITH REPRESENTATION THAT, AS OF THE RECORD DATE (OCTOBER 18,
1996), the
person making the request was a beneficial owner of Common Stock entitled to
vote.THE PERSON MAKING THE REQUEST WAS A BENEFICIAL OWNER OF COMMON STOCK
ENTITLED TO VOTE.
In order to ensure timely delivery of such document prior to the annual
meeting, any request should be received by the Company promptly.
OTHER BUSINESS
The Company knows of no other matters which may come before the Annual
Meeting. However, if any such matters properly come before the Annual Meeting,
the individuals named in the proxies will vote on such matters in accordance
with their best judgment.
August 17, 1995
By Order of the Board of DirectorsBY ORDER OF THE BOARD OF DIRECTORS
/s/ Bradford T. Smith
BradfordBRADFORD T. SmithSMITH
Secretary
AnnexOctober 25, 1996
24
ANNEX I
LABORATORY CORPORATION OF AMERICA HOLDINGS
19951997 EMPLOYEE STOCK PURCHASE PLAN
FOR NON-EMPLOYEE DIRECTORS
1. Purpose
The purpose of theARTICLE I. PURPOSES:
This Laboratory Corporation of America Holdings 19951997 Employee Stock Purchase
Plan for Non-Employee Directors (the(hereinafter called the "Plan") is intended to promote the interestsbe an employment incentive
and to encourage stock ownership by all eligible employees, including
officers, of Laboratory Corporation of America Holdings (the "Company"(hereinafter called
the "Corporation") and its stockholders by increasingsubsidiary corporations (the "Subsidiaries"), as
that term is defined in (S)424(f) of the Internal Revenue Code of 1986, as now
in force or hereafter amended (the "Code"), in order to increase their
proprietary and vested interest of non-employee
directors in the growthCorporation's success and performanceto encourage them to
remain in the employ of the Company by granting such
directors sharesCorporation or a Subsidiary. It is further
intended that options issued pursuant to this Plan (hereinafter called
"Options") shall constitute options issued pursuant to an "employee stock
purchase plan" within the meaning of common stock, par value $.01 per share (the "Shares"),(S)423 of the Company.
2. Definitions
As used herein,Code and that the following termsPlan
shall havesatisfy the following
meanings:
"Common Stock Unit" shall mean the bookkeeping entry representing the
equivalentrequirements of one Share.
"Exchange Act" shall meanRule 16b-3 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act").
ARTICLE II. ADMINISTRATION:
The Plan shall be operated by the Employee Benefits Committee of the Board
of Directors of the Corporation (the "Committee"), who may appoint a third-
party administrator to maintain the Plan (the "Administrator"). No member of
the Board of Directors who is not otherwise employed by the Corporation shall
be eligible to receive an Option. The Committee shall at all times be composed
of "disinterested persons" within the meaning of Rule 16b-3 of the Exchange
Act. Subject to the provisions of the Plan, the Committee may, from time to
time, prescribe rules and regulations for the administration of the Plan and
may decide questions which may arise with respect to the interpretation or
application of said Plan.
ARTICLE III. ELIGIBILITY:
Each employee who has been employed by the Corporation or a Subsidiary for
at least six (6) months (including officers) as of the first day of any
Offering Period (an "Offering Date"), shall have an Option under this Plan to
purchase the Corporation's authorized but unissued par value $.01 Common Stock
(herein called "Common Stock") during an Offering Period, except that there
shall be excluded: (i) employees whose customary employment is under twenty
(20) hours per week; (ii) employees whose customary employment is for not more
than five (5) months in any calendar year; and (iii) any employee who, if
having received an Option hereunder, would own, immediately after the Option
was granted, stock possessing five percent (5%) or more of the total combined
voting power or value of any classes of stock of the Corporation, or of any of
its Subsidiaries. For purposes of determining stock ownership of an employee
under (iii) hereof, the rules of (S)424(d) of the Code and (S)1.423-2(d) of
the Treasury Regulations thereunder shall apply, and Common Stock which the
employee may purchase under any outstanding options shall be treated as owned
by the employee.
If an Optionee goes on a leave of absence, such Optionee shall have the
right to elect (a) to withdraw the balance in such Optionee's Purchase
Account, (b) to discontinue contributions to the Plan but remain a participant
in the Plan until the next following Exercise Date, or (c) remain a
participant in the Plan during such leave of absence until the next following
Exercise Date, authorizing the deductions made pursuant to Article V(c) hereof
to be made from payments made by the Corporation to the Optionee during such
leave of absence and undertaking to make such cash payments to the Plan at the
end of each payroll period to the extent that amounts payable by the
Corporation to such Optionee are insufficient to meet such Optionee's
authorized deductions to the Optionee's Purchase Account. However, the
Corporation shall not advance funds to an Optionee if the Optionee's
deductions and cash payments during the Optionee's leave of absence are
insufficient to fund the Optionee's Purchase Account. An Optionee who has been
on leave of absence for more than 30 days and who thereafter ceases to be an
employee of the Corporation for the purpose of the Plan shall not be entitled
I-1
to participate in the Plan and such Optionee shall be deemed to have withdrawn
from the Plan, and all funds then on deposit in the Optionee's Purchase
Account will be paid to the Optionee under Article V(g) hereof.
ARTICLE IV. STOCK:
The stock subject to the Options to be issued hereunder shall be Common
Stock. The maximum number of such shares to be issued upon the exercise of the
Options hereby granted shall be an aggregate of three million five hundred
thousand (3,500,000) shares of Common Stock (the "Available Shares").
For each Offering Period hereunder, an eligible employee (hereinafter called
"Optionee") shall have an option to purchase up to the largest number of whole
and fractional shares available at the Option Price (as described in Article
V(a)) obtained by having deducted from such Optionee's Compensation for each
payroll period during an Offering Period an amount not less than one percent
(1%) or more than ten percent (10%) of such Optionee's Compensation for the
payroll period. The term "Compensation" as used herein includes regular base
pay (including any shift differentials) at the rate in effect on the Offering
Date, but excludes any bonus, overtime payment, sales commission, contribution
to any Code (S)125 or 401(k) plan or other form of extra compensation.
If in any Offering Period the total number of shares of Common Stock for
which Options are exercised exceeds the number of Available Shares remaining
under the Plan, the Administrator shall make a pro rata allocation of the
Available Shares in as nearly a uniform manner as shall be practicable and as
it shall deem to be equitable, and the rules promulgated thereunder.
"Fair Market Value" per Sharebalance of payroll deductions credited
to the Purchase Account of each Optionee shall be returned to each Optionee as
promptly as possible.
Except as expressly provided otherwise in Article III hereof, payment for
Common Stock purchased under the Option shall be made only by payroll
deductions over a designated Offering Period.
Notwithstanding the foregoing provisions of this Plan, no Option shall
permit an Optionee to purchase in any single calendar year a number of shares
which, together with all other shares in the Corporation and any Subsidiaries
which such Optionee may be entitled to purchase in such year pursuant to
options issued under any employee stock purchase plan, has an aggregate fair
market value (determined in each case as of the date such options are granted)
in excess of $25,000. This limitation applies only to options granted under
"employee stock purchase plans" as defined by (S)423 of the Code, and does not
limit the amount of stock which an Optionee may purchase under any other stock
option or bonus plans then in effect.
ARTICLE V. TERMS AND CONDITIONS OF OPTIONS:
Options granted hereunder shall be evidenced by a notice to each Optionee
from the Administrator, which notice shall: (i) be in such form as the
Committee shall determine; (ii) incorporate, by reference, the terms and
provisions of this Plan; (iii) be issued to each Optionee on or about the
first Offering Date following the date an employee becomes an Optionee; and
(iv) continue in effect for subsequent Offering Periods unless revoked by the
Optionee.
Subject always to the requirement that, except as otherwise specified in
Article IV hereof, all Optionees shall have the same rights and privileges,
such Options shall be subject to the following terms and conditions:
(a) Option Price: The price of shares purchased during each Offering
Period hereunder (an "Option Price") shall be an amount equal to the lesser
of (i) eighty-five (85%) percent of the fair market value of a share of
Common Stock on the Offering Date or (ii) eighty-five (85%) percent of the
fair market value of a share of Common Stock on the Exercise Date. For so
long as shares of the Common Stock of the Corporation are listed on the New
York Stock Exchange ("NYSE"), "fair market value" as of a given date shall
mean, (i)for purposes of this Plan, the closingmean between the high and low sales
price per
Shareprices of the Common Stock on a national securities exchange forthat date, said mean to be based on the last date preceding the
Retainer Payment Date on which there was a sale
of such Sharesa minimum of 100 shares of said stock; or if less
I-2
than 100 shares of said stock are sold on such exchange, (ii)date or if the Sharesno sales prices
are then traded on an over-the-counterquoted, "fair market value" shall mean the average of the closing bid
and asked prices for the Shares inCommon Stock on the NYSE.
(b) Offering Periods: Each Option shall extend for a period of six (6)
months commencing on an Offering Date of January 1 or July 1 and concluding
with the "Exercise Date" of June 30 or December 31 which is six (6) months
thereafter, the said period being hereinafter called an "Offering Period."
(c) Purchase Account: Each Optionee shall notify the Corporation, on such
over-the-counter marketforms as shall be provided by the Corporation, within seven (7) days
following actual receipt by the Optionee of such forms, of the percentage
of Compensation which the Optionee wishes to have withheld from the
Optionee's Compensation by the Exercise Date for the last date precedingOffering Period.
Except as provided in subsection (g) of this Article V, each Optionee shall
authorize the Retainer PaymentCorporation and its Subsidiaries to withhold from the Optionee's
after-tax compensation, beginning as soon as practicable following the making
of the election described above and continuing throughout the duration of the
Offering Period. Such withheld amounts may be used by the Corporation for
general corporate purposes, but the Corporation or, if designated by the
Committee, the Administrator, shall maintain a record of each Optionee's funds
as a "Purchase Account." Such funds so accumulated within said Purchase
Account may be returned to an Optionee or applied toward the Purchase Price of
Common Stock only pursuant to the provisions contained in this Plan.
(d) Dates on Which Option Shall be Exercised: Except as provided in
subsections (f), (g) and (h) of this Article V, each Option which is
exercised shall be exercised as of each Exercise Date.
(e) Exercise of Option: Unless an Optionee withdraws from the Plan as
provided in subsection (f) of this Article V, each Optionee's Option shall
be exercised automatically on the Exercise Date on which there was suchof each Offering Period,
and the maximum number of full and fractional shares of Common Stock will
be purchased for each Optionee with the entire proceeds of each Optionee's
Purchase Account. As promptly as practical after the Exercise Date of each
Offering Period, the Corporation shall arrange the delivery to the
Administrator of a salecertificate representing the shares of Common Stock
purchased upon the exercise of such SharesOption, and the Administrator shall
deliver (or cause to deliver) such certificate to each Optionee.
(f) Termination of Option: An Optionee may at any time on or before an
Exercise Date terminate the Option in its entirety by written notice of
such markettermination delivered in the manner set forth in Article XI hereof.
Such termination shall become effective upon receipt of such notice by the
Corporation or (iii) ifAdministrator. As soon as practical following such notice,
all funds then in the Shares are not then listed on a national securities exchange or traded in an
over-the-counter market, such value asOptionee's Purchase Account shall be paid to the
Board may determine.
"Retainer" shall meanOptionee and the retainer payable to an Eligible Director (as
defined in Section 4) for any calendar month before any reductionOptionee's Purchase Account closed, and all rights and
privileges of the Optionee granted pursuant to this Plan which Retainer may notand the Option
granted hereunder shall be changed more often than once every six
months.
"Retainer Payment Date" shall mean the 25th day of the month preceding
the month for which the retainer is due or, if such date is not a business
day,terminated until the next succeeding business day.
3. Administration
Theavailable Option Date
at which such Optionee again elects to participate in the Plan shall be administeredpursuant to
this Article V.
(g) Termination of Employment: In the event that an Optionee's employment
by the Company's BoardCorporation or a Subsidiary is terminated, all rights and privileges
of Directors
(the "Board"). Subject to the provisions of the Plan, the Board shall be
authorized to interpret the Plan, to establish, amend and rescind any rules
and regulations relatingOptionee granted pursuant to the Plan and of the Option granted
hereunder shall terminate, and all funds then on deposit on the Optionee's
Purchase Account shall be paid to the Optionee (or to such Optionee's
personal representative or beneficiary, in the case of such Optionee's
death) and the Optionee's Purchase Account closed.
(h) Adjustment of Options; Exercisability Upon Certain Events: In the
event of reorganization, recapitalization, stock split, stock dividend,
combination of shares, merger, consolidation, offering of rights or any
other change in the structure of shares of Common Stock of the Corporation,
the total amount of shares on which options may be granted under the Plan
and options rights (both as to the number of shares and the option price)
shall be appropriately adjusted for any increase or decrease in the number
of outstanding shares of Common Stock.
In the event of (i) the adoption of a plan of merger, consolidation, share
exchange or similar transaction of the Corporation with any other corporation
as a result of which the holders of the Common Stock of the Corporation in the
aggregate would receive less than 50% of the voting capital stock of the
surviving or resulting
I-3
corporation; (ii) the approval by the Board of Directors of an agreement
providing for the sale or transfer (other than as security for obligations of
the Corporation) by the Corporation of a majority of the stock of a
significant subsidiary of the Corporation or substantially all of the assets
of the Corporation or of a significant subsidiary of the Corporation; (iii)
the acquisition of more than 20% of the Corporation's voting capital stock by
any person within the meaning of Section 13(d)(3) of the Exchange Act, other
than a person, or group including a person, who beneficially owned, as of the
most recent Offering Date, more than 5% of the Corporation's securities, in
the absence of a prior expression of approval of the Board of Directors of the
Corporation; (iv) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board of Directors of the
Corporation cease for any reason to constitute at least a majority thereof
unless the election, or the nomination for election by the Corporation's
shareholders, of each new director was approved by the vote of at least two-
thirds of the directors then still in office who were directors at the
beginning of the period; or (v) any other change in control of the Corporation
of a nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A under the Exchange Act, then any Option granted
hereunder during the then-current Option Period shall become immediately
exercisable as to the Optionee and shall remain exercisable until the Exercise
Date of the then-current Option Period, subject to all of the terms hereof not
inconsistent with subsection (i) of this Article V.
Anything contained herein to the contrary notwithstanding, upon the
dissolution or liquidation of the Corporation or the consummation of a merger
or consolidation in which the shareholders of the Corporation receive less
than 50% of the voting capital stock of the surviving or resulting
corporation, each Option granted under the Plan shall terminate, but the
Optionee shall have the right, following the adoption of a plan of dissolution
or liquidation or a plan of merger or consolidation and in any event prior to
such dissolution, liquidation, merger or consolidation, to exercise his Option
to purchase Common Stock on the Exercise Date of the then-current Option
Period, subject to all of the other terms hereof not inconsistent with this
Article V.
The grant of an Option pursuant to this Plan shall not affect in any way the
right or power of the Corporation to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure, or to merge
or consolidate, or to dissolve, liquidate or sell, or transfer all other determinations
necessary or advisable for the administrationany part
of the Plan; provided, however,business or assets.
(i) Assignability: No Option granted hereunder may be pledged nor shall
any Option be assignable or transferable except by will or by the laws of
descent and distribution and shall be exercisable, during the lifetime of
Optionee, only by said Optionee.
(j) Designation of Beneficiary: Each Optionee may file a written
designation of beneficiary who is to receive any stock or cash in the event
that such Optionee dies after the Boardend of an Offering Period but before the
issuance of the shares or during an Offering Period but before the
respective Exercise Date.
(k) Rights as a Shareholder: No Optionee shall have no discretionany rights as a
shareholder with respect to shares purchased pursuant to the selection of
directors to receive Shares, the number of SharesOptions to be
received,granted hereunder until full payment has been made for such shares and a
stock certificate for such shares has been actually issued to said
Optionee. No adjustment will be made for dividends or other rights for
which the timingrecord date is prior to the date of grants of Sharessuch issuance. Stock to be
delivered to an Optionee under the Plan all of which shallwill be determinedregistered in accordance with the provisions of this Plan. The determinationsname of
the Board
in the administration of the Plan, as described herein, shall be final and
conclusive. The Secretary of the Company shall be authorized to implement the
Plan in accordance with its terms and to take such actions of a ministerial
nature as shall be necessary to effectuate the intent and purposes thereof.
The validity, construction and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in accordance with the
laws of the State of Delaware.
4. Eligibility
The class of individuals eligible to receive grants of optionsOptionee.
(l) Registration: Each Option under the Plan shall be directorsgranted on the
condition that a registration statement under the Securities Act of 1933,
as amended (the "Securities Act"), with respect to the Common Stock subject
to such Option has become effective and a copy of the Company whoProspectus has been
delivered to the Optionee.
ARTICLE VI. TERM OF PLAN:
The term of said Plan shall be for a period of ten (10) years commencing on
January 1, 1997, and ending on December 31, 2006, unless terminated earlier by
the exhaustion of the Available Shares or pursuant to Article VIII.
I-4
ARTICLE VII. CONDITIONS UPON ISSUANCE OF SHARES OF COMMON STOCK:
Shares of Common Stock shall not be issued with respect to an Option unless
the exercise of such Option and the issuance and deliverance of such shares
pursuant thereto shall comply with all applicable provisions of law, domestic
or foreign, including without limitation, the Exchange Act, the Securities Act
(and the rules and regulations promulgated thereunder), and the requirement of
any stock exchange upon which the shares of Common Stock may then be listed,
and shall further be subject to the approval of counsel for the Corporation
with respect to such compliance.
As a condition to the exercise of an Option, the Corporation may require the
person exercising such Option to represent that, at the time of any such
exercise, the shares are being purchased only for an investment and without
any present intention to sell or distribute such shares if, in the opinion of
counsel for the Corporation, such representation is required by any of the
aforementioned applicable provisions of law.
ARTICLE VIII. AMENDMENT AND TERMINATION BY THE COMMITTEE:
The Committee may, from time to time, alter, amend, suspend or discontinue
the Plan at any time without notice, including the right to revoke future
Offering Periods, provided that no Optionee's existing rights in the then-
current Offering Period are adversely affected thereby; provided further, upon
any such amendment or modification, all Optionees shall continue to have the
same rights and privileges as other Optionees (except as otherwise provided
for in Article IV hereof); and provided further, that no such amendment of the
Plan shall, except as provided in subsection (h) of Article V hereof: (a)
increase above three million five hundred thousand (3,500,000) the Available
Shares which may be offered under the Plan; (b) change the formula by which
the price for which the Common Stock shall be sold is determined; or (c)
increase the maximum number of shares which any Optionee may purchase. The
Board of Directors shall submit any amendments to the shareholders of the
Corporation for approval to the extent necessary to maintain compliance with
the requirements of Rule 16b-3 of the Exchange Act.
ARTICLE IX. APPLICATION OF FUNDS:
The proceeds received by the Corporation from the sale of its Common Stock
pursuant to Options granted under this Plan, except as otherwise provided
herein, will be used for general corporate purposes.
ARTICLE X. OBLIGATION TO PURCHASE SHARES:
The granting of an Option pursuant to this Plan shall impose no obligation
upon the Optionee to purchase any shares covered by such Option until the
Exercise Date for each Offering Period.
ARTICLE XI. NOTICES:
Any notice which the Corporation or Optionee may be required or permitted to
give to each other shall be in writing and shall be deemed given when
delivered personally or deposited in the U.S. Mail, first class postage
prepaid, addressed as follows: Chief Financial Officer, Laboratory Corporation
of America Holdings, 358 South Main Street, Burlington, North Carolina 27215,
with a copy to General Counsel, Laboratory Corporation of America Holdings,
358 South Main Street, Burlington, North Carolina 27215, and at such other
address, including that of the Administrator, as the Corporation, by notice to
the Optionee, may designate in writing from time to time; and to the Optionee,
at the address shown on the records of the Corporation, or at such other
address as the Optionee, by notice to the Corporation or the Administrator,
may designate in writing from time to time.
ARTICLE XII. CLOSING OF PURCHASE ACCOUNT:
In the event that under any provision hereof an Optionee's Purchase Account
is to be closed and any balance not employeesapplied to the purchase of Common Stock,
payment to such Optionee shall be made within thirty (30) days following the
date that the right to such payment accrues.
I-5
ARTICLE XIII. THE RIGHT OF THE COMPANY TO TERMINATE EMPLOYMENT:
Nothing contained in the Plan or in any Option granted pursuant to the Plan
shall confer upon any Optionee any right to be continued in the employment of
the Company or one of its affiliates ("Eligible Directors"). Any holder of Shares
granted hereunderSubsidiaries, or shall hereinafter be referred to as a "Participant."
5. Shares Subject tointerfere in any way with the
Plan
Subject to adjustment as provided in Section 7, an aggregate of
25,000 Shares shall be available for grant under the Plan. The Shares issued
upon the exercise of options may be made available from authorized but
unissued Shares or treasury Shares.
6. Grant of Shares
(a) Except as set forth in subsection (b) below, on and after the
Effective Date (as defined in Section 12), 50%right of the RetainerCompany or any of each
Participant payable shall automatically be paid in the form of that number of
Shares that results from dividing (i) 50% of the Retainer by (ii) the Fair
Market Value on the Retainer Payment Date. Cash shall be paid to a
Participant in lieu of a fractional Share.
(b) Notwithstanding subsection (a) above, with respect to any
Retainer Payment Date that occurs prior to the Effective Date, payment of 50%
of the Retainer of each Participant shall be in the form of that number of
Common Stock Units that results from dividing (i) 50% of the Retainer by (ii)
the Fair Market Value on such Retainer Payment Date. Each such Common Stock
Unit shall be paid by delivery of one Share to such Participant promptly
following the Effective Date; provided that in the event the Plan is not
approved by shareholders at the Company's 1995 Annual Shareholders Meeting,
each such Common Stock Unit shall be paid in cash in an amount equal to the
Fair Market Value on the day of the 1995 Annual Shareholders Meeting. Cash
shall be paid to a Participant in lieu of a fractional Share.
7. Listing and Registration.
Each Share shall be subject to the requirement that if at any time
the Board shall determine, in its discretion, that the listing, registration
or qualification of such Share upon any securities exchange or under any state
or federal law, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition of, or in connection with, the
granting of such Share, no such Share may be disposed of unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any condition not acceptable to the Board.
8. Adjustment of and Changes in Shares
In the event of a stock split, stock dividend, subdivision or
combination of the Shares or other change in corporate structure affecting
the Shares, the number of Shares authorized by the Plan shall be increased
or decreased proportionately,Subsidiaries, as the case may be, and the number of Shares
subject to
terminate his or her employment at any outstanding grant shall be increased or decreased
proportionately, as the case may be.
9. No Rights of Shareholders
Neither a Participant nor a Participant's legal representative
shall be, or havetime for any reason.
ARTICLE XIV. GOVERNING LAW:
The law of the rights and privilegesState of a shareholderDelaware will govern all matters relating to this
Plan except to the extent it is superseded by the laws of the Company in respectUnited States of
any Shares unless and until certificates for such Shares
shall have been issued.
10. Plan Amendments
The Plan may be amended by the Board, as it shall deem advisable or
to conform to any change in any law or regulation applicable thereto;
provided, that the Board may not, without the authorization and approval of
shareholders of the Company, make any amendment that would require shareholder
approval under Rule 16b-3 of the Exchange Act or state law. The provisions of
Sections 4 and/or 6 may not be amended more often than once every six months,
other than to comport with changes in the Internal Revenue Code of 1986, as
amended, the Employee Retirement Income Security Act, or the rules under
either such statute.
12. Effective Date and Duration of PlanAmerica.
ARTICLE XV. EFFECTIVENESS OF THE PLAN:
The Plan shall become effective as of May 25, 1995 (the "Effective
Date"), subject to the approval of shareholders at the Company's 1995 Annual
Shareholders Meeting.only if:
(a) The Plan shall terminatehave been adopted by the day followingBoard of Directors of the
third
Annual Shareholders MeetingCorporation; and
(b) The Plan shall have been approved within twelve (12) months after the
Plan is adopted under subsection (a) by the affirmative vote of the holders
of at which Directors are elected succeedingleast a majority of shares of Common Stock present, or represented,
and entitled to vote at the Annual Shareholders Meetingshareholders' meeting at which the Plan was approved by shareholders,
unless the Plan is
extended or terminated at an earlier date by shareholders
or is terminated by exhaustion of the Shares available for issuance hereunder.
Annex IIconsidered.
I-6
STOCKHOLDERS'S PROXY SOLICITED BY THE BOARD OF DIRECTORS OF
LABORATORY CORPORATION OF AMERICA HOLDINGS
PERFORMANCE UNIT PLAN
SECTIONTo: Laboratory Corporation of America Holdings
I appoint Bradford T. Smith and Wesley R. Elingburg individually and
together, as my proxies, with power of substitution, to vote all of my
LABORATORY CORPORATION OF AMERICA HOLDINGS common stock at the Annual Meeting of
stockholders of LABORATORY CORPORATION OF AMERICA HOLDINGS to be held at The
Holiday Inn, 4810 New Page Road, Research Triangle Park, N.C. 27709 on
Wednesday, November 20, 1996, at 9:00 a.m., Eastern Standard time, and at any
adjournment or postponement of the meeting.
MY PROXIES WILL VOTE THE SHARES REPRESENTED BY THIS PROXY AS DIRECTED ON
THE OTHER SIDE OF THIS CARD, BUT IN THE ABSENCE OF ANY INSTRUCTIONS FROM ME, MY
PROXIES WILL VOTE "FOR" THE ELECTION OF ALL THE NOMINEES LISTED UNDER ITEM 1 AND
"FOR" ITEM 2 AND ITEM 3. MY PROXIES MAY VOTE ACCORDING TO THEIR DISCRETION ON
ANY OTHER MATTER WHICH MAY PROPERLY COME BEFORE THE MEETING. I MAY REVOKE THIS
PROXY PRIOR TO ITS EXERCISE.
PLEASE SIGN AND DATE THE OTHER SIDE OF THE CARD.
(Please fill in the appropriate boxes on the other side.)
[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" ALL THE NOMINEES LISTED
UNDER ITEM NO. 1 AND "FOR" ITEM NO. 2 AND ITEM NO. 3.
1. Purpose. The purposeElection of all the members of the Company's Board of Directors.
[_] FOR all nominees
[_] WITHHOLD AUTHORITY FOR ALL NOMINEES
NOMINEES:
Thomas P. MacMahon, James B. Power, M.D., Jean-Luc Belingard, Wendy E.
Lane, Robert E. Mittelstaedt, Jr., David B. Skinner, M.D. and Andrew G.
Wallace, M.D.
2. Approval and adoption of the Laboratory Corporation of America Holdings Performance Unit Plan (the "Plan") is to provide incentives
for senior executives and other key employees1997
Employee Stock Purchase Plan.
[_] FOR
[_] AGAINST
[_] ABSTAIN
3. Ratification of the appointment of KPMG Peat Marwick LLP as Laboratory
Corporation of America Holdings ("Holdings")Holdings' independent auditors for 1996.
[_] FOR
[_] AGAINST
[_] ABSTAIN
Signature(s)_________ Date:___________ Signature(s)__________ Date:__________
NOTE:
Please sign exactly as name(s) appear(s) above. If acting as an executor,
administrator, trustee, guardian, etc. you should so indicate in signing. If the
stockholder is a corporation, please sign the full corporate name, by duly
authorized officer. If shares ar held jointly, each stockholder should sign.
Date and its subsidiaries (together with Holdings,promptly return the "Company") based upon the achievement of planned synergies over a
Performance Period (as defined below).
SECTION 2. Definitions. For the purposes of the Plan, the
following terms shall have the meanings indicated:
"Board of Directors" shall mean the Board of Directors of Holdings.
"Committee" shall mean the Committee designated pursuant to Section
3. Until otherwise determined by the Board of Directors, the Employee
Benefits Committee designated by the Board of Directors shall be the Committee
under the Plan.
"Change in Control" shall occur if any "person" as such term is
used in Sections 13(d) and 14(d) of the Exchange Act (other than HLR Holdings
Inc., Roche Holdings, Inc., F. Hoffmann-La Roche Ltd or their respective
affiliates) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of Holdings
representing more than 50% of the combined voting power of Holding's then
outstanding securities entitled to votecard in the election of directors.
"Covered Officer" shall mean at any date, (i) any individual who,
with respect to the previous taxable year of Holdings, was a "covered
employee" of Holdings within the meaning of Section 162(m); provided that the
term "Covered Officer" shall not include any such individual who is designated
by the Committee, in its discretion, at the time of any grant of a Performance
Unit or at any subsequent time, as reasonably expected not to be such a
"covered employee" with respect to the current taxable year of Holdings and
(ii) any individual who is designated by the Committee, in its discretion, at
the time of any grant of a Performance Unit or at any subsequent time, as
reasonably expected to be such a "covered employee" with respect to the
current taxable year of Holdings or with respect to the taxable year of
Holdings in which any applicable Performance Unit payment will be paid.
"Disability" shall mean a Participant's becoming physically or
mentally incapacitated and therefore unable for a period of six consecutive
months or for an aggregate of twelve months in any 24 consecutive month period
to perform his/her duties.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Eight Quarter Synergies" shall mean the annualized rate of
Synergies achieved by the end of the Performance Period, as adjusted pursuant
to Section 6(a).
"Final Performance Unit Value" shall mean the value of a
Performance Unit calculated using Performance Scale A or B (as applicable),
with linear interpolation used to determine Final Performance Unit Values
associated with Eight Quarter Synergies between the levels identified in the
applicable Performance Scale.
"Participant" shall mean each of James Powell, David Flaugh,
Haywood Cochrane, David Weavil, Timothy Brodnik and Robert Whalen and any
other senior executive or key employee selected by the Committee.
"Performance Period" shall mean the period beginning May 1, 1995
and ending April 30, 1997.
"Performance Scale A" shall apply if the annualized rate of
Synergies achieved by the end of the fourth fiscal quarter of the Performance
Period equals or exceeds $52 million and shall be:
Eight Quarter Final Performance
Synergies Unit Value (per Unit)
------------- ---------------------
$120,000,000 $150
90,000,000 100
80,000,000 75
<80,000,000 50
"Performance Scale B" shall apply if Performance Scale A does not apply
and shall be:
Eight Quarter Final Performance
Synergies Unit Value (per Unit)
------------- ---------------------
$120,000,000 $135
90,000,000 90
80,000,000 50
<80,000,000 0
"Performance Unit" shall mean an award granted to a Participant as
described in Section 4.
"QDRO" shall mean a domestic relations order acceptable to the
Committee in its sole discretion.
"Retirement" shall mean retirement as defined in any retirement
plan of the Company.
"Section 162(m)" shall mean Section 162(m) of the Internal Revenue
Code of 1986, as amended, and the rules and other authorities thereunder
promulgated by the Internal Revenue Service of the Department of the Treasury.
"Synergies" shall mean net savings or reductions in costs and
expenses of the Company which are attributable to or result directly and
exclusively from the merger of National Health Laboratories Holdings Inc. and
Roche Biomedical Laboratories, Inc. (the "Merger"), as demonstrated or shown
by the Company's internal accounting and financial records. For purposes of
computing Synergies, activities acquired by the Company subsequent to the
Merger shall be not be taken into account. Notwithstanding anything in the
Plan to the contrary, no saving or reduction shall be deemed a Synergy if its
effect would be to compromise the quality of service provided by the Company
or if it is accomplished in a manner which violates any policy of the Company,
including without limitation, any legal or ethical compliance policy.
SECTION 3. Administration. (a) Subject to the authority and
powers of the Board of Directors in relation to the Plan as hereinafter
provided, the Plan shall be administered by a Committee designated by the
Board of Directors which, to the extent necessary to satisfy Section 162(m)
shall consist of two or more members of the Board of Directors each of whom is
an "outside director" within the meaning of Section 162(m). The Committee
shall have full authority to interpret the Plan and from time to time to adopt
such rules and regulations for carrying out the Plan as it may deem
appropriate; provided, however, that the Committee may not exercise any
authority otherwise granted to it hereunder if such action would have the
effect of increasing the amount of any payment with respect to a Performance
Unit which has been earned hereunder by any Covered Officer.
(b) All determinations by the Committee shall be made by the
affirmative vote of a majority of its members, but any determination reduced
to writing and signed by a majority of the members shall be fully as effective
as if it had been made by a majority vote at a meeting duly called and held.
All decisions by the Committee pursuant to the provisions of the Plan and all
orders or resolutions of the Board of Directors pursuant thereto shall be
final, conclusive and binding on all persons, including the Participants, the
Company and shareholders.
SECTION 4. Grant of and Payment With Respect to Performance Units.
(a) Each Participant shall be granted 4,000 Performance Units. Subject to the
provisions of the Plan, the Committee may determine the timing of and the
conditions under which payments with respect to such Performance Units may be
paid.
(b) An amount equal to 4,000 (the number of Performance Units
granted to a Participant) multiplied by the Final Performance Unit Value shall
be paid in cash to Participants following the end of the Performance Period.
(c) Unless otherwise determined by the Committee, no portion of any
payment with respect to a Performance Unit may be earned unless the
Participant is employed by the Company at the end of the Performance Period.
In the event the employment of a Participant is terminated by reason of death,
Disability or Retirement during the Performance Period, provided such
Participant shall have been actively employed by the Company for at least
twelve months during the Performance Period, such Participant shall receive a
prorated payout of the Performance Units, payable at the time such payment
would have been made in the absence of a termination of employment. Payments
to Participants with less than twelve months of active employment during the
Performance Period shall be made at the sole discretion of the Committee.
(d) Subject to Section 5, in the event of a Change in Control of
Holdings, all Performance Units shall be payable in full using a Final
Performance Unit Value per Unit calculated using Performance Scale A and the
annualized rate of Synergies achieved by the end of the fiscal quarter
immediately preceding the Change in Control.
(e) Subject to Section 5, the Committee retains the right, in its
sole discretion, to declare any Performance Units payable in full using a
Final Performance Unit Value per Unit calculated using Performance Scale A and
the annualized rate of Synergies achieved by the end of the immediately
preceding fiscal quarter.
(f) Each Performance Unit granted shall be evidenced by an award
agreement.
SECTION 5. Special Provisions Relating to Covered Officers. (a)
The maximum payment with respect to Performance Units for each Covered Officer
is $600,000.
(b) No Covered Officer shall be entitled to any payment with
respect to a Performance Unit unless the members of the Committee shall have
certified that the relevant Synergies have been achieved.
(c) The Committee shall have the authority in its discretion to
reduce a payment with respect to a Performance Unit otherwise earned by any
Covered Officer under the terms of the Plan; however, to the extent necessary
to satisfy the requirements of Section 162(m), the Committee shall have no
discretion under this Plan to increase the amount of any payment earned in
accordance with the provisions of the Plan or to take any action in
administering the Plan that would have such effect.
SECTION 6. General Provisions. (a) If the Synergies shall have
been affected by special factors (including material changes in accounting
policies or practices, material acquisitions or dispositions of property, or
other unusual items) which in the Committee's judgment should or should not be
taken into account, in whole or in part, in the equitable administration of
the Plan, the Committee may, for any purpose of the Plan, adjust the Synergies
and make payments accordingly under the Plan.
(b) Notwithstanding the provisions of subparagraph (a) above, any
adjustments made in accordance with or for the purposes of subparagraph (a)
shall be disregarded if and to the extent that such adjustments would not
satisfy the requirements of Section 162(m).
(c) No Performance Unit granted under the Plan may be assigned or
transferred otherwise than by will or by the laws of descent and distribution,
or pursuant to a QDRO.
(d) All payments made pursuant to the Plan shall be subject to
withholding in respect of income and other taxes required by law to be
withheld, in accordance with procedures to be established by the Committee.
(e) The selection of an individual as a Participant shall not give
such Participant any right to be retained in the employ of the Company, and
the right of the Company to dismiss or discharge any such Participant, or to
terminate any arrangement pursuant to which any such Participant provides
services to the Company, is specifically reserved. The benefits provided for
Participants under the Plan shall be in addition to, and shall in no way
preclude, other forms of compensation to or in respect of such Participants.
(f) The Board of Directors and the Committee shall be entitled to
rely on the advice of counsel and other experts, including the independent
public accountants for the Company. No member of the Board of Directors or of
the Committee or any officers of the Company shall be liable for any act or
failure to act under the Plan, except in circumstances involving bad faith on
the part of such member or officer.
(g) Nothing contained in the Plan shall prevent the Company or any
affiliate of the Company from adopting or continuing in effect other
compensation arrangements, which arrangements may be either generally
applicable or applicable only in specific cases.
SECTION 7. Amendment and Termination of the Plan; Compliance With
Section 162(m). The Board of Directors may at any time terminate, in whole or
in part, or from time to time amend the Plan. In the event of such
termination, in whole or in part, of the Plan, the Committee may in its sole
discretion direct the payment to Participants with respect to any Performance
Units not theretofore paid out prior to the respective dates upon which
payments would otherwise be made hereunder to such Participants, in a lump sum
or installments as the Committee shall prescribe with respect to each such
Participant. The Board may at any time and from time to time delegate to the
Committee any or all of its authority under this Section 7. Any amendment to
the Plan that would affect any Covered Officer shall be approved by Holding's
shareholders in accordance with Section 162(m) to the extent required by
Section 162(m).
Annex III
LABORATORY CORPORATION OF AMERICA HOLDINGS
ANNUAL BONUS INCENTIVE PLAN
SECTION 1. Purpose. The purpose of the Laboratory Corporation of
America Annual Bonus Incentive Plan (the "Plan") is to promote the
profitability of Laboratory Corporation of America Holdings ("Holdings") and
its subsidiaries (together with Holdings, the "Company") by providing senior
executives and other key employees with cash awards based on the achievement
of annual short-term goals.
SECTION 2. Definitions. For the purposes of the Plan, the
following terms shall have the meanings indicated:
"Award" shall mean the grant of an award by the Committee to a
Participant.
"Award Year" shall mean any fiscal year with respect to the
Company's performance in which an Award is granted.
"Base Salary" shall mean as to any Award Year a Participant's
annual salary rate.
"Board of Directors" shall mean the Board of Directors of Holdings.
"Change in Control" shall occur if any "person" as such term is
used in Sections 13(d) and 14(d) of the Exchange Act (other than HLR Holdings
Inc., Roche Holdings, Inc., F. Hoffmann-La Roche Ltd or their respective
affiliates) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of Holdings
representing more than 50% of the combined voting power of Holding's then
outstanding securities entitled to vote in the election of directors.
"Committee" shall mean the Committee designated pursuant to Section
3. Until otherwise determined by the Board of Directors, the Employee
Benefits Committee designated by the Board of Directors shall be the Committee
under the Plan.
"Common Equity" shall mean the common stockholders' equity
appearing on the Company's audited consolidated balance sheets as of the end
of the fiscal year prior to the beginning of the Award Year in question.
"Covered Officer" shall mean at any date, (i) any individual who,
with respect to the previous taxable year of Holdings, was a "covered
employee" of Holdings within the meaning of Section 162(m); provided that the
term "Covered Officer" shall not include any such individual who is designated
by the Committee, in its discretion, at the time of any grant of an Award or
at any subsequent time, as reasonably expected not to be such a "covered
employee" with respect to the current taxable year of Holdings and (ii) any
individual who is designated by the Committee, in its discretion, at the time
of any grant of an Award or at any subsequent time, as reasonably expected to
be such a "covered employee" with respect to the current taxable year of
Holdings or with respect to the taxable year of Holdings in which any
applicable Award payment will be paid.
"Disability" shall mean a Participant's becoming physically or
mentally incapacitated and therefore unable for a period of six consecutive
months or for an aggregate of twelve months in any 24 consecutive month period
to perform his/her duties.
"Earnings Per Share" shall mean Holdings' earnings per share of
common stock as determined for purposes of the Company's audited consolidated
statement of operations for the Award Year.
"EBITDA" shall mean earnings before interest expense, income tax,
depreciation and amortization as determined in accordance with generally
accepted accounting principles.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Long Term Debt" shall mean the sum of total preferred stock plus
total long-term debt of the Company, as determined for purposes of the
Company's audited consolidated balance sheets for the Award Year in question.
"Net Income" shall mean the consolidated net income of the Company
as determined for purposes of the Company's audited consolidated statement of
operations for the Award Year; provided Net Income shall be increased or
reduced by the after-tax earnings impact of each of the following items if
they occur during an Award Year:
(i) the cumulative effect of changes in accounting principles for
the Award Year required by the Financial Accounting Standards Board, the
Securities and Exchange Commission or any other governing body that sets
accounting standards, as determined for purposes of the Company's audited
consolidated statements of operations or the notes thereto;
(ii) the cumulative effect of changes in the tax law occurring
during the Award Year as determined for purposes of the Company's audited
consolidated statements of operations or the notes thereto;
(iii) extraordinary items, as defined under generally accepted
accounting principles, during the Award Year as determined for purposes
of the Company's audited consolidated statements of operations;
(iv) gain or loss from discontinued operations; and
(v) nonrecurring items, as defined under generally accepted
accounting principles, during the Award Year as determined for purposes
of the Company's audited consolidated statements of operations or the
notes thereto.
"Participant" shall mean a senior executive or other key employee
of the Company selected by the Committee in accordance with Section 4 or
Section 6 who receives an Award.
"Performance Goals" shall mean the levels of Performance Measures
required to be achieved by a Participant in order to earn an Award.
Notwithstanding anything in the Plan to the contrary, no Performance Goal
shall be deemed achieved if its effect would be to compromise the quality of
service provided by the Company or if it is accomplished in a manner which
violates any policy of the Company, including without limitation, any legal or
ethical compliance policy.
"Performance Measures" shall mean EBITDA, ROC, ROE, Net Income,
EPS, individual performance, which may be determined on a corporate, regional
or subregional basis, as applicable, or any combination of the foregoing.
"Retirement" shall mean retirement as defined in any retirement
plan of the Company.
"ROC" shall mean the percentage equivalent to a fraction resulting
from dividing (i) Net Income by (ii) the sum of Common Equity plus Long Term
Debt.
"ROE" shall mean the percentage equivalent to the fraction
resulting from dividing (i) Net Income by (ii) Common Equity.
"Section 162(m)" shall mean Section 162(m) of the Internal Revenue
Code of 1986 and the rules and other authorities thereunder promulgated by the
Internal Revenue Service of the Department of the Treasury.
"Target Award" shall mean the amount, expressed as a percentage of
Base Salary, which will be earned by a Participant if target Performance Goals
are achieved.
SECTION 3. Administration. (a) Subject to the authority and
powers of the Board of Directors in relation to the Plan as hereinafter
provided, the Plan shall be administered by a Committee designated by the
Board of Directors which, to the extent necessary to satisfy Section 162(m)
shall consist of two or more members of the Board of Directors each of whom is
an "outside director" within the meaning of Section 162(m). The Committee
shall have full authority to interpret the Plan and from time to time to adopt
such rules and regulations for carrying out the Plan as it may deem best;
provided, however, that the Committee may not exercise any authority otherwise
granted to it hereunder if such action would have the effect of increasing the
amount of an Award which has been earned hereunder by any Covered Officer.
(b) All determinations by the Committee shall be made by the
affirmative vote of a majority of its members, but any determination reduced
to writing and signed by a majority of the members shall be fully as effective
as if it had been made by a majority vote at a meeting duly called and held.
All decisions by the Committee pursuant to the provisions of the Plan and all
orders or resolutions of the Board of Directors pursuant thereto shall be
final, conclusive and binding on all persons, including the Participants, the
Company and shareholders.
SECTION 4. Eligibility for and Payment of Awards. (a) Subject to
the provisions of the Plan, in each Award Year the Committee may select
officers or employees (including officers or employees who are also directors)
of the Company who will be eligible to earn Awards under the Plan with respect
to such Award Year, and determine the amount of such Participant's Target
Awards and the conditions under which such Target Awards may be earned.
(b) Awards that are earned with respect to any Award Year shall be
paid in cash to Participants in such amounts and at such times as are
determined by the Committee.
(c) Except as otherwise determined by the Committee, no portion of
any Target Award may be earned unless a Participant is employed by the Company
at the time of payment. In the event the employment of a Participant is
terminated by reason of death, Disability or Retirement prior to the payment
of any Award, provided such Participant shall have been actively employed by
the Company for at least six months during the Award Year, the Committee may
provide that such Participant shall receive a prorated payout of the Award,
payable at the time such payment would have been made in the absence of a
termination of employment. Payments to Participants with less than six months
of active employment during the Award Year shall be made at the sole
discretion of the Committee.
(d) Subject to Section 6, in the event of a Change in Control of
Holdings, Target Awards shall be payable in full.
SECTION 5. Awards. (a) Subject to Section 6, the Target Award and
the applicable Performance Measures and Performance Goals for each Participant
and their relative weightings shall be established by the Committee or its
delegate before the beginning of the Award Year with respect to which the
Award under the Plan is to be earned or as soon as practicable thereafter.
Subject to Section 6, the individual performance portion of an Award may be
increased or decreased on a Participant-by-Participant basis based on the
achievement of other financial or non-financial goals as evaluated by the
Committee (with the advice of the Chief Executive Officer) in its sole
discretion.
(b) Subject to Section 6, notwithstanding the foregoing, the
Committee shall have the discretion to cancel, withhold, defer or reduce any
Award earned, and no participant shall have any contractual right under the
Plan to the award of any amount hereunder.
SECTION 6. Special Provisions Relating to Covered Officers. (a)
The Target Award and the Performance Measures and Performance Goals for each
Covered Officer and their relative weightings shall be established by the
Committee at such time as may be required by Section 162(m).
(b) The maximum Award opportunity for each Covered Officer in any
Award Year is $1,000,000.
(c) No Covered Officer shall receive any payment with respect to
an Award unless the members of the Committee shall have certified that the
Performance Goals have been achieved.
(d) The Committee shall have the authority in its discretion to
reduce an Award otherwise earned by any Covered Officer under the terms of the
Plan; however, the Committee shall have no discretion under this Plan to
increase the amount of any Award earned in accordance with the provisions of
the Plan or to take any action in administering the Plan that would have such
effect.
SECTION 7. General Provisions. (a) If Performance Goals for any
year shall have been affected by special factors (including material changes
in accounting policies or practices, material acquisitions or dispositions of
property, or other unusual items) which in the Committee's judgment should or
should not be taken into account, in whole or in part, in the equitable
administration of the Plan, the Committee may, for any purpose of the Plan,
adjust the Performance Goals and make payments accordingly under the Plan.
(b) Notwithstanding the provisions of subparagraph (a) above, any
adjustments made in accordance with or for the purposes of subparagraph (a)
shall be disregarded if and to the extent that such adjustments would not
satisfy the requirements of Section 162(m).
(c) No portion of any Award under the Plan may be assigned or
transferred prior to the payment thereof.
(d) All payments made pursuant to the Plan shall be subject to
withholding in respect of income and other taxes required by law to be
withheld, in accordance with procedures to be established by the Committee.
(e) The selection of an individual for participation in the Plan
shall not give such Participant any right to be retained in the employ of the
Company, and the right of the Company to dismiss or discharge any such
Participant, or to terminate any arrangement pursuant to which any such
Participant provides services to the Company, is specifically reserved. The
benefits provided for Participants under the Plan shall be in addition to, and
shall in no way preclude, other forms of compensation to or in respect of such
Participants.
(f) The Board of Directors and the Committee shall be entitled to
rely on the advice of counsel and other experts, including the independent
public accountants for the Company. No member of the Board of Directors or of
the Committee or any officers of the Company shall be liable for any act or
failure to act under the Plan, except in circumstances involving bad faith on
the part of such member or officer.
(g) Nothing contained in the Plan shall prevent the Company or any
affiliate of the Company from adopting or continuing in effect other
compensation arrangements, which arrangements may be either generally
applicable or applicable only in specific cases.
SECTION 8. Amendment and Termination of the Plan; Compliance With
Section 162(m). The Board of Directors may at any time terminate, in whole or
in part, or from time to time amend the Plan. In the event of such
termination, in whole or in part, of the Plan, the Committee may in its sole
discretion direct the payment to Participants of any Awards not theretofore
paid out prior to the respective dates upon which payments would otherwise be
made hereunder to such Participants, in a lump sum or installments as the
Committee shall prescribe with respect to each such Participant. The Board
may at any time and from time to time delegate to the Committee any or all of
its authority under this Section 8. Any amendment to the Plan that would
affect any Covered Officer shall be approved by Holding's shareholders if
required by and in accordance with Section 162(m).
STOCKHOLDER'S PROXY SOLICITED BY THE BOARD OF DIRECTORS OF
LABORATORY CORPORATION OF AMERICA HOLDINGS
To: Laboratory Corporation of America Holdings
I appoint Bradford T. Smith and Haywood D. Cochrane, individually and
together, as my proxies, with power of substitution, to vote all of my
LABORATORY CORPORATION OF AMERICA HOLDINGS common stock at the Annual Meeting
of stockholders of LABORATORY CORPORATION OF AMERICA HOLDINGS to be held at
The St. Regis, 2 East 55th Street, New York, N.Y., on Wednesday, September 20,
1995, at 9:00 a.m., New York City time, and at any adjournment or postponement
of the meeting.
My proxies will vote the shares represented by this proxy as directed on
the other side of this card, but in the absence of any instructions from me,
my proxies will vote "FOR" the election of all the nominees listed under Item
1 and "FOR" Item 2, Item 3, Item 4 and Item 5. My proxies may vote according
to their discretion on any other matter which may properly come before the
meeting. I may revoke this proxy prior to its exercise.
Please sign and date the other side of this card.
(Please fill in the appropriate boxes on the other side.)
(Continued from the other side)
LABORATORY CORPORATION OF AMERICA HOLDINGS
PLEASE MARK YOUR CHOICES LIKE THIS [X] IN BLUE OR BLACK INK
The Board of Directors recommends that you vote "FOR" all the
nominees listed under Item No. 1 and "FOR" Item No. 2, Item No. 3, Item No. 4
and Item No. 5.
Item No. 1. Election of all the members of the Company's Board of Directors.
FOR all nominees [ ] WITHHOLD AUTHORITY [ ]
for all nominees
Nominees: James R. Maher, James B. Powell, M.D., Jean-Luc Belingard, Thomas
P. Mac Mahon, Linda G. Robinson, David B. Skinner, M.D. and Andrew G. Wallace,
M.D.
For, except vote withheld for the following nominee(s):
Item No. 2. Approval and adoption of the Laboratory Corporation of America
Holdings 1995 Stock Plan for Non-Employee Directors.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Item No. 3. Approval and adoption of the Laboratory Corporation of America
Holdings Performance Unit Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Item No. 4. Approval and adoption of the Laboratory Corporation of America
Holdings Annual Bonus Incentive Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Item No. 5. Ratification of the appointment of KPMG Peat Marwick LLP as
Laboratory Corporation of America Holding's independent auditors for 1995.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Signature(s): _____________________________ Date: ___________, 1995
Signature(s): _____________________________ Date: ___________, 1995
Please sign exactly as name(s) appear(s) above. If acting as an executor,
administrator, trustee, guardian, etc., you should so indicate in signing. If
the stockholder is a corporation, please sign the full corporate name, by a
duly authorized officer. If shares are held jointly, each stockholder named
should sign. Date and promptly return this card in the envelope provided.
[APPENDIX A]
EXPLANATION OF GRAPHICS
The graphics consist of a line graph which compares the yearly percentage
change in the cumulative total stockholder return on the Common Stock with
the cumulative total return on the Standard & Poor's Composite-500 Stock
Index and the weighted average cumulative total return (based on stock
market capitalization) on the stock of each of the members of a peer group
of companies named in the text of the paragraph proceeding. The graph
illustrates the return on $100 invested on December 31, 1989, including
dividend reinvestment. The longitude of the graph is $0 to $300 in
increments of $50. The latitude is 12/31/91 through 12/31/94 in increments
of 1 year. A diamond is used to illustrate Laboratory Corporation of
America Holdings ("diamond"), a square is used to illustrate the peer group
("square") and a triangle is used to illustrate the Standard & Poor's
Composite-500 Stock Index ("triangle"). At 12/31/89 all are at $100, at
12/31/90 the triangle is at $97, the diamond is at $99, and the square is
at $115, at 12/31/91 the triangle is at $126, the square at $209, the
diamond at $266, at 12/31/92 the triangle is at $135, the diamond is at
$166 and the square is at $191, at 12/31/93 the diamond is at $135, the
triangle is at $149 and the square is at $155, at 12/31/94 the diamond is
at $126, the triangle is at $150, and the square is at $158.
envelope provided.