SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14
U. S. Laboratories Inc.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(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:
<PAGE>
U. S. Laboratories Inc.
7895 Convoy Court
Suite 18
San Diego, California 92111
Dear Fellow Stockholder:
You will notice that the enclosed proxy statement has been written in a
somewhat different style from other proxy statements to which you may be
accustomed. Recently, the Securities and Exchange Commission adopted new rules
that require certain information to be presented in a style the SEC calls plain
English, which is designed to make the information easier to read and more
quickly and easily understood.
These new SEC rules do not require proxy statements to be written in
plain English. We have decided, however, to write our proxy statement in the
plain English style because we feel that the idea behind plain English is a good
one. We want our stockholders to have access to information about us and our
future in a direct and understandable way. For these reasons, we are also
writing our annual report to stockholders in the same style. We feel the more
you understand our company, the more you will want to participate in our
exciting future!
Please read the enclosed proxy statement. We welcome your comments on our
efforts.
Sincerely,
U. S. Laboratories Inc.
Dickerson Wright
Chief Executive Officer
San Diego, California
May 26, 1999
<PAGE>
U. S. Laboratories Inc.
7895 Convoy Court
Suite 18
San Diego, California 92111
Notice of 1999 Annual Meeting of Stockholders
to be held June 19, 1999
Dear Fellow Stockholder:
We invite you to attend our 1999 annual meeting of stockholders on
Saturday, June 19, 1999 at 10:30 a.m. at the Mandalay Bay Resort, located at
3950 Las Vegas Boulevard South, Las Vegas, Nevada. Everyone who held shares of
our common stock on May 3, 1999 will be entitled to vote at the annual meeting
on the following matters:
1. the election of all our directors;
2. a proposed amendment to our 1998 stock option plan; and
3. any other business that may properly come before the annual
meeting.
We have enclosed a proxy card and our 1998 annual report along with this
proxy statement. Your vote is important, no matter how many shares you own. Even
if you plan to attend the annual meeting, please complete, date, and sign the
proxy card and mail it as soon as you can in the envelope provided. If you
attend the annual meeting, you may revoke your proxy and vote your shares in
person.
Thank you for your continued support. We look forward to seeing you at
the annual meeting.
Sincerely,
U. S. Laboratories Inc.
James Wait
Vice President, Chief Financial Officer
and Secretary
San Diego, California
May 26, 1999
<PAGE>
Frequently Asked Questions
Q: Why did I receive this proxy statement?
Our board has sent you this proxy statement to ask for your vote, as a
stockholder, on certain matters to be voted on at our upcoming annual
stockholders' meeting.
Q: What am I voting on?
You will vote on the re-election of our directors and proposed amendments
to our stock option plan.
Q: Do I need to attend the annual meeting in order to vote?
No. You can vote either in person at the annual meeting or by completing
and mailing the enclosed proxy card.
Q: Who is entitled to vote?
You are entitled to vote if you owned shares as of the close of business
on May 3, 1999, which is called the record date. You will be entitled to
one vote per share for each share of our common stock you owned on the
record date.
Q: What percentage of U. S. Labs' votes do directors and officers own?
Approximately 69% of our shares, as of the record date, are controlled by
our directors and officers.
Q: Who are the largest stockholders?
Dickerson Wright and Gary Elzweig are our largest stockholders.
Q: Who will count the votes?
Our transfer agent and registrar will count the votes by proxy, and the
votes by ballot will be counted by James Wait, who will act as inspector
of elections at the annual meeting.
Q: How many shares of U. S. Lab's stock are entitled to vote?
A total of 3,200,000 shares of common stock will be entitled to vote at
the annual meeting.
Q: What constitutes a quorum?
A quorum refers to the number of shares that must be in attendance at a
meeting to lawfully conduct business. A majority of the shares of U.S.
Labs' common stock entitled to be cast will represent a quorum. As a
result, shares representing at least 1,600,001 votes must be present at
the annual meeting before we can take the actions called for at the
meeting. A quorum is assured because our officers and directors own more
than 1,600,001 shares.
Q: What happens if I sign and return my proxy card but do not mark my vote?
If you return a signed proxy card without indicating whether you wish to
vote for or against the proposals, Dickerson Wright and James Wait, as
proxies, will vote your shares to elect the Board's nominees for
directors and to approve the proposed amendment to the plan.
1
<PAGE>
Election of Directors
Director Nominees
At the annual meeting, our stockholders will elect all the current
directors to hold office until our annual meeting held in 2000. Dickerson Wright
and James Wait, as proxies, intend to vote for the election of all of our
board's nominees. If one of our nominees becomes unable to serve as a director
before the annual meeting, they will also vote for the replacement recommended
by the board.
Under Delaware law, stockholders elect directors by a plurality of the
votes cast. This means that the nominees receiving the largest number of votes,
even if less than a majority, will be elected as directors. Any shares that do
not vote, whether by abstention, broker non-vote or otherwise, will not affect
the election of directors.
Our board of directors recommends a vote for all the current directors.
Directors and Executive Officers
Our directors and executive officers and their ages and positions held
with us are as follows:
<TABLE>
<CAPTION>
Name Age Positions
- ---- --- ---------
<S> <C> <C>
Dickerson Wright........................... 52 Chief Executive Officer, President, and Chairman
of the Board of Directors
Gary H. Elzweig............................ 43 Executive Vice President and Director
Donald C. Alford........................... 55 Executive Vice President and Director
Mark Baron................................. 43 Executive Vice President and Director
Martin B. Lowenthal........................ 42 Executive Vice President and Director
James Wait................................. 45 Chief Financial Officer, Secretary, and Director
Thomas H. Chapman.......................... 68 Director
James L. McCumber.......................... 51 Director and Member of Audit Committee
Robert E. Petersen ........................ 52 Director and Member of Audit and
Compensation Committees
Noel Schwartz.............................. 71 Director and Member of Compensation Committee
Irvin Fuchs................................ 72 Director
Each of our directors is elected at the annual meeting of stockholders
and serves until the next annual meeting and until his successor is elected and
qualified, or until his earlier death, resignation, or removal. The underwriters
have the right to observe board meetings for a period of five years following
the offering. We intend to maintain at least two independent directors on our
board.
</TABLE>
2
<PAGE>
Dickerson Wright, P.E., is our founder and has served as our chairman of
the board of directors and president since our incorporation in October 1993.
Mr. Wright is a registered professional engineer with a history of building and
managing engineering service companies and over 25 years experience in the
independent testing and inspection industry. Prior to founding our company, he
was the co-owner and executive vice president of American Engineering
Laboratories and a senior executive with Professional Service Industries. Mr.
Wright also served as president and chief executive officer of Western State
Testing, as national group vice president of United States Testing Company, and
as executive vice president of Professional Service Industries during this
period of time.
Gary H. Elzweig, P.E., is a co-founder of Professional Engineering and
has served as president of Professional Engineering since its incorporation in
March 1987. Mr. Elzweig has served as our executive vice president and director
since May 1998. He is a registered professional engineer with over 20 years of
experience in engineering, design, and testing. Mr. Elzweig earned his
Bachelor's Degree from Columbia University, School of Engineers in 1977. Mr.
Elzweig also serves as Chairman of Broward County's Board of Rules and Appeals
Foundations Subcommittee, and Building Envelope Subcommittee.
Donald C. Alford has served as our executive vice president and director
since May 1998. Mr. Alford was an owner of Wyman Enterprises, Inc. and served as
its vice president and chief financial officer from April 1996 until its
acquisition by U.S. Labs. Mr. Alford continued to work for U.S. Labs as an
officer of Wyman Testing after the acquisition of Wyman Enterprises, Inc. Mr.
Alford was co-founder of Cornerstone Development, a real estate company that
developed approximately 20 major projects in the San Diego area from 1983 to
1991. From October 1991 to June 1994, Mr. Alford served as president of Procom
Supply Corporation, a wholesale distributor of telephone equipment. Mr. Alford
also served as managing partner of S.A. Assets, LLC, a real estate development
company, from July 1994 to September 1996.
Mark Baron has been president and director of San Diego Testing since May
1998 and has served as our executive vice president and director since May 1998.
Mr. Baron also was employed in the position of manager of business development
with Professional Service Industries from November 1989 to October 1996. He has
over 20 years experience in the construction industry. Mr. Baron is a certified
OSHPD Class A Construction Inspector.
Martin B. Lowenthal is president and a director of U.S. Engineering and
has served as our executive vice president and director since May 30, 1998. Mr.
Lowenthal has served as president and director of U.S. Engineering since
November 1994 and as secretary of U.S. Engineering since its incorporation in
October 1993. Mr. Lowenthal has 16 years of management experience in the
engineering and testing industry. He has overseen engineering and testing
operations in six states, including New Jersey, New York, Delaware,
Pennsylvania, Maryland, and Virginia.
James Wait has served as our chief financial officer, vice president -
finance and treasurer and director since May 1998. Prior to joining us, Mr. Wait
served as president of Tayside Development, a real estate consulting firm, from
January 1993 to December 1996. Mr. Wait also served as treasurer of Horizon
Communities, Inc., a real estate development company, from December 1996 to
October 1997 and as treasurer of The Encinas Group, a real estate development
company, from November 1997 to April 1998. Prior to 1993, Mr. Wait acted as the
chief financial officer and treasurer for 16 years for R.B. McComic, Inc. and
The Gentry Company. Mr. Wait is a certified public accountant, licensed in the
state of California since 1981.
3
<PAGE>
Thomas H. Chapman, R.C.E., has served as a director of San Diego Testing
since March 1997 and has served as one of our directors since May 1998. Mr.
Chapman previously served as president of San Diego Testing from March 1997 to
May 1998 and has been employed by San Diego Testing since May 1997. Mr. Chapman
originally joined the predecessor to San Diego Testing in 1968 and eventually
left San Diego Testing in 1989 when he went to work for Law Engineering. He
served as the office manager for Law Engineering until he rejoined San Diego
Testing in 1997. He is currently a vice president of San Diego Testing. Mr.
Chapman has been involved in several notable projects in San Diego, including
the San Diego Convention Center, the Hyatt Regency Hotel, the City Front
Terrace, and One Harbor Drive. Mr. Chapman earned his degree in Civil
Engineering from San Diego State University and is a California Registered Civil
Engineer.
James L. McCumber is the chairman, chief executive officer, and founder
of McCumber Golf, an internationally recognized firm noted for the design and
construction of landmark golf courses. McCumber Golf was founded in 1971. Mr.
McCumber has been one of our directors since May 1998. Additionally, he serves
as a committee man for the United States Golf Association.
Robert E. Petersen has served as one of our directors since May 1998. Mr.
Petersen has served as president of Asset Management Group, a retail and
industrial property management firm, since October 1983. Mr. Petersen has also
served as senior vice president and chief financial officer of Collins
Development Co. and vice president of La Jolla Development Co., both of which of
are real estate development companies, since October 1983.
Noel Schwartz has been one of our directors since July 1998. Mr. Schwartz
has served in the engineering and research industry since 1952. Between 1952 and
his retirement in 1988, Mr. Schwartz held positions with United States Testing
Company such as consumer research division manager, director of research, vice
president of operations-laboratory group, senior vice president-laboratory
services division and finally, president-laboratory services division. During
his tenure at United States Testing Company, a publicly traded corporation, he
was a member of the board of directors.
Irvin Fuchs is a retired registered professional engineer. Mr. Fuchs has
been one of our directors since July 1998. Mr. Fuchs has served in the
engineering and research industry since the early 1950's. Before his retirement
in 1992, Mr. Fuchs held several positions with United States Testing Company,
including division manager-engineering services, division manager-commercial
engineering and testing, senior vice president-engineering services group, and
president-engineering services group. During his tenure at United States Testing
Company, a publicly traded corporation, he was a member of the board of
directors.
Current Board Composition, Meetings, and Committees
Our board met twice in 1998. All the directors attended the meetings. Our
compensation and audit committees were not formed until 1999. Currently, we have
a standing compensation committee currently composed of Messrs. Wright,
Petersen, and Schwartz. The compensation committee reviews and acts on matters
relating to compensation levels and benefit plans for our executive officers and
key employees, including salary and stock options. The committee is also
responsible for granting stock awards, stock options, stock appreciation rights,
and other awards to be made under our existing incentive compensation plans. We
also have a standing audit committee composed of Messrs. Wright, McCumber, and
Petersen. The audit committee assists in selecting our independent auditors and
in designating services to be performed by, and maintaining effective
communication with, those auditors.
4
<PAGE>
Director Compensation
We reimburse our directors for all reasonable and necessary travel and
other incidental expenses incurred in connection with their attendance at
meetings of the board. Beginning in December 1998, we began compensating
non-employee directors $500 for each board meeting attended. In 1998, under our
1998 stock option plan, each non-employee director received an option to
purchase 5,000 shares of common stock at an exercise price of $6.00 per share.
Directors who are members of our subsidiaries' boards received an additional
grant of an identical option to purchase 5,000 shares for each board membership.
In the future, a director who is first elected to the board may receive an
option to purchase shares of common stock for the first year of the director's
board term. The board has not yet determined the number of option shares that
each director will receive for each additional year the director remains on the
board. These options will have an exercise price equal to 100% of the fair
market value of the common stock on the grant date.
Employment Agreements
We have entered into employment agreements with Messrs. Wright, Elzweig,
Alford, Baron, Lowenthal, and Wait. Each of these agreements has a term of three
years, and provides that we may terminate any of the agreements with or without
cause. These employment agreements also provide for 12 months of severance pay
at the rate of 50% of the applicable executive's compensation in the event the
executive is terminated other than for cause prior to the end of the three-year
term.
Mr. Wright's employment agreement provides salary in the amount of
$175,000 per year. We are also obligated to pay Mr. Wright a bonus of 7% of our
pre-tax profit if in 1998 our pre-tax profit was at least $1,200,000. Mr. Wright
was not given this bonus, but was granted a one-time discretionary bonus in 1999
of $81,550. Mr. Elzweig's employment agreement provides salary in the amount of
$125,000 per year. We are also obligated to pay Mr. Elzweig a bonus of 3% of the
pre-tax profit for U.S. Labs if in 1998 Professional Engineers had at least
pre-tax profits of $450,000. Mr. Elzweig was not given this bonus, but was
granted a one-time discretionary bonus of $34,950.
Executive Compensation
The following table sets forth certain information concerning
compensation paid or accrued for the fiscal year ended December 31, 1998 by us
to or for the benefit of our chief executive officer and our only other
executive officer whose total annual compensation for 1998 exceeded $100,000.
5
<PAGE>
Until July 1998, Mr. Elzweig was not our employee, but provided
management services to us as an independent contractor. Of the $171,567
reflected in the table below, Mr. Elzweig received 5% of the net sales of
Professional Engineering, or $92,052, in exchange for these management services.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Long-Term
Compensation Compensation
--------------------- ---------------------------
Securities
Underlying Options and
Name and Principal Position Salary Warrants
- ------------------------------------ --------------------- ---------------------------
<S> <C> <C>
Dickerson Wright
Chief Executive Officer......... $175,000 170,000
Gary H. Elzweig
Executive Vice President........ $171,567 65,000
</TABLE>
Stock Option Plan. On May 30, 1998, our board of directors adopted the
U.S. Laboratories Inc. 1998 Stock Option Plan, under which the board or the
compensation committee may issue incentive stock options and non-qualified stock
options to purchase an aggregate of 500,000 shares of common stock. Currently,
we have 395,000 stock options outstanding under the plan. Additionally, we have
indicated to certain employees that we will grant 62,500 stock options to them.
Options may be issued under the plan to our employees, officers, directors,
advisors, or consultants. We will only grant stock options with an exercise
price at least equal to the fair market value of the common stock on the date of
grant. The compensation committee administers the plan.
On November 9, 1998, our board of directors authorized the issuance,
under the terms of the plan, of:
o incentive stock options to purchase an aggregate of 145,000 shares
of common stock for an exercise price of $6.60 to Dickerson Wright
and Gary Elzweig;
o incentive stock options to purchase an aggregate of 205,000 shares
of common stock for an exercise price of $6.00 to certain of our
officers and employees; and
o non-qualified stock options to purchase an aggregate of 45,000
shares of common stock for an exercise price of $6.00 to certain
of our non-employee directors and certain other non-employees who
have provided services to us.
All of these stock options are subject to vesting schedules described in
stock option agreements between us and the recipients of the stock options.
These option grants replaced the previous grants made on May 30, 1998, which
were cancelled.
Warrants. On November 9, 1998, our board authorized the issuance to
certain of our officers and employees warrants to purchase an aggregate of
150,000 shares of common stock for an exercise price of $6.00 per share. These
grants replaced the previous grants made on May 30, 1998, which were cancelled.
The repricing of the above options and warrants was undertaken to
facilitate our initial public offering. All outstanding options and warrants
were repriced in the same manner.
6
<PAGE>
The following table provides the specified information concerning grants
of options and warrants to purchase our common stock made during the year ended
December 31, 1998 to persons named in the Summary Compensation Table. The
options and warrants that were scheduled to expire on May 30, 2003 were
cancelled on November 9, 1998 in connection with the recapitalization of U. S.
Labs in preparation for our initial public offering.
<TABLE>
<CAPTION>
Options/SAR Grants in Last Fiscal Year
Percent Total
Number of Securities Options/SARs Granted
Underlying to Employees in Exercise or Base Expiration
Name Options/SARs Granted Fiscal Year Price ($/Sh) Date
- ------------------ ---------------------- ----------------------- ------------------ -------------
<S> <C> <C> <C> <C>
Dickerson Wright 170,000 31.2% $5.00 - $5.50 5/30/03
170,000 31.2% $6.00 - $6.60 11/9/03
Gary H. Elzweig 65,000 11.9% $5.00 - $5.50 5/30/03
65,000 11.9% $6.00 - $6.60 11/9/03
</TABLE>
The following table provides information concerning exercises of options
and warrants to purchase our common stock in the fiscal year ended December 31,
1998, and unexercised options and warrants held at fiscal year end by the
persons named in the Summary Compensation Table. The value of the unexercised
options and warrants that are in the money was calculated by determining the
difference between the initial public offering price of $6.00 per unit and the
exercise price of the options and warrants.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year
And Fiscal Year End Option Values
Number of
Shares Number of Securities Underlying Value of Unexercised
Acquired on Value Unexercised Options and Warrants In-the-Money Options and
Name Exercise Realized at December 31, 1998 Warrants at December 31, 1998
---------------------- ------------- ------------ ----------------------------------- ----------------------------------
Exercisable Unexercisable Exercisable Unexercisable
-------------- ------------------ -------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Dickerson Wright 0 $0 75,151 98,849 $0 $0
Gary H. Elzweig 0 $0 45,151 19,849 $0 $0
</TABLE>
7
<PAGE>
Proposal to Amend our Stock Option Plan
General
Our board has unanimously adopted, subject to approval by the
stockholders at the meeting, an amendment to the plan that will increase from
500,000 to 810,000 the maximum number of shares issuable under the plan and will
add language to comply with California law.
Our board and our stockholders approved the plan on May 30, 1998. The
plan will remain in effect, subject to our board's right to terminate the plan
at any time, until all shares subject to the plan are purchased or acquired, but
no award may be granted under the plan on or after May 30, 2008.
Purpose
The amendment's purpose is to make additional shares available for
issuance under the plan in order to enhance our ability to continue to attract
and retain key employees who will make substantial contributions to our
long-term business growth. Our board believes that approval of the proposed
amendment will promote continuity of management and increase incentive and
personal interest in the U. S. Labs' welfare by those who are primarily
responsible for shaping and carrying out its long-range plans. Additionally, in
order to comply with California law, we are amending the plan so that the number
of shares subject to outstanding options under the plan may not exceed 30% of
the total number of shares of our outstanding stock on the date of an option
award. This limitation includes any of our other stock option plans or similar
plans.
Administration
The plan is administered by a committee of the board consisting of not
less than two directors who qualify as non-employee and outside directors.
Committee members are selected by and serve at our board's discretion. Any
awards made to directors who are members of the committee must be approved by
our board. If the committee is not in existence, our board will administer the
plan. Subject to certain limitations, our board may delegate the committee's
administrative authority under the plan to another board committee or one or
more of our senior officers.
The committee has the authority to establish rules for the administration
of the plan; to determine the officers and consultants to whom awards will be
granted; to determine the types of awards to be granted and the number of shares
covered by such awards; and to set the terms and conditions of such awards. The
terms of awards may differ from participant to participant. The committee may
consider the recommendations of the chief executive officer with regard to
awards to be granted under the plan.
The committee also has the authority and discretion to interpret the Plan
and to establish, amend and rescind any rules and regulations relating to the
Plan. The committee's interpretations and any decision it makes is final. No
person who has served on the committee, or on the board, may be liable for any
action or determination made in good faith with respect to the plan.
Eligibility
Our officers and directors, as well as certain of our consultants, may
receive awards under the plan. Participants may be selected from among those
officers, directors, and consultants
8
<PAGE>
recommended for participation by the chief executive officer, and who, in the
opinion of the committee are in a position to contribute materially to our
growth, development, and financial success.
Shares Subject to the Plan
Up to 500,000 shares of common stock are available for awards under the
plan, subject to adjustment in the event of any stock dividend or split,
recapitalization, reclassification, or other similar corporate change which
affects the total number of shares outstanding. If our stockholders approve the
proposal to amend the plan, then up to 810,000 shares will be available under
the plan. If any shares of common stock subject to awards granted under the Plan
are forfeited or if an award otherwise terminates, expires or is cancelled prior
to the delivery of all of the shares issuable thereunder, these shares are
available for the granting of new awards under the plan. Also, if shares are
used to pay the exercise price of an award or any related withholding taxes,
only the net number of shares actually issued under the award will be counted
against the maximum number of shares available under the plan.
Stock Options
A stock option allows a participant to purchase shares of common stock at
a fixed price at some future date. Two types of options may be granted under the
plan: incentive stock options and nonqualified stock options. These options are
subject to different terms and conditions and will have different tax
consequences for the participant, as described in more detail below.
Incentive stock options are subject to certain requirements imposed by
the Internal Revenue Code. These requirements are as follows:
o Only our employees are eligible to receive incentive stock options.
o The exercise price of an incentive stock option must be at least 100% of
the fair market value of a share of stock on the grant date.
o The term of an incentive stock option may not be more than 10 years from
the grant date. o The aggregate fair market value of shares of stock
subject to incentive stock options that can be exercised for the first
time by a participant in any calendar year may not exceed $100,000.
o Incentive stock options may not be exercised after twelve months
following the participant's termination of employment on account of death
or permanent and total disability, and may not be exercised after three
months following the participant's termination of employment for any
other reason.
o An incentive stock option granted to a 10% or more owner of our company
must have an exercise price of at least 110% of the fair market value of
a share of stock on the grant date and must have an expiration date not
more than five years from the grant date.
o Stock received upon exercise of an incentive stock option must be held by
a participant for two years from the grant date and one year from the
exercise date in order to be eligible for favorable capital gains
treatment.
The committee may modify the above within the limits imposed by the Code
in a participant's option agreement. For example, the committee may decide that
a particular incentive stock option will be exercisable by a participant for
only 30 days after termination of employment and will have a term of only eight
years. In addition, the committee, in its discretion, may add any other terms
and conditions to an incentive stock option. If any incentive stock option fails
to qualify as an incentive stock option, it will be considered a nonqualified
stock option to the extent of such failure.
9
<PAGE>
The committee determines the terms and conditions of a nonqualified stock
option.
Options may be exercised by payment in full of the exercise price, either
(i) in cash; (ii) by tendering shares of common stock having a fair market value
on the date of exercise equal to the total exercise price; or (iii) by a
combination of (i) and (ii). The committee may also allow a participant to pay
the exercise price by authorizing a third party to sell shares of common stock
acquired upon exercise of the option and remit to U. S. Labs a sufficient
portion of the sale proceeds to pay the exercise price. Once the exercise price
is paid in full, U. S. Labs will deliver to the participant stock certificates
for the number of shares purchased.
Except as otherwise determined by the committee, options generally will
be subject to the following termination provisions:
(1) in the case of death, options may be exercised until 12 months
after the date of death;
(2) in the case of termination for reasons other than death or
cause, options may be exercised until 3 months after the date of
termination; and
(3) in the case of termination for cause, options will be
forfeited.
Notwithstanding the foregoing, in all cases an option will not be exercisable
after its expiration date.
If any stock dividend or split, recapitalization, reclassification or
other similar corporate change affects the total number of shares outstanding,
the committee will adjust the number of options or the stated exercise price, or
both, under each outstanding award.
Options may not be sold or otherwise transferred other than by will or
pursuant to the laws of descent and distribution, and all options granted to a
participant under the plan are exercisable during the participant's lifetime
only by the participant.
If our company is acquired, we may cancel each outstanding option in
exchange for a cash payment to the optionee equal to the difference between the
estimated price per share of common stock to be paid in the transaction and the
option exercise price. Unless otherwise determined by the committee, if our
company is the surviving corporation of a merger or consolidation, substitute
options will be granted so as to preserve the economic benefits to the
optionees. Generally, if our company is not the surviving corporation in a
merger or consolidation or there is a dissolution or liquidation of our company,
the committee may grant new options or deem the old options immediately
exercisable.
Amendment and Termination
Our board may amend or terminate the plan at any time, subject to
stockholder approval if required by or deemed by the board to be advisable under
applicable law, regulation, or exchange listing requirements. But, the plan may
not be terminated or amended if it may materially adversely affect the rights of
any participant or beneficiary under any award made under the plan prior to the
date the amendment is adopted by the board. All unexpired awards will continue
after termination of the plan, except as they may lapse or terminate by their
own terms and condition.
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Withholding
Our company has the right to reduce the number of shares or amount of
cash payable under an award, after giving a participant reasonable advance
notice, by the amount necessary to satisfy all applicable taxes required by law
to be withheld with respect to such amount. Our company may defer making payment
of an award if a tax is pending, unless and until indemnified to its
satisfaction. The committee may permit withholding obligations arising with
respect to awards under the plan to be settled with shares of common stock,
including shares of common stock that are part of, or are received upon exercise
of, the award that gives rise to the withholding requirement.
Federal Income Tax Considerations
The following is a summary of significant Federal income tax consequences
associated with awards granted under the plan. The discussion is not a complete
description of all of the Federal income tax aspects of the plan, and some of
the provisions contained in the Code have only been summarized. No discussion of
state, local or foreign income tax has been included.
The grant of a stock option, whether a nonqualified or incentive stock
option, under the plan will create no income tax consequences to the employee or
our company.
An employee who is granted a nonqualified stock option will generally
recognize ordinary income at the time of exercise in an amount equal to the
excess of the fair market value of the common stock received upon exercise over
the exercise price. Our company will be entitled to a corresponding deduction. A
subsequent disposition of the common stock will give rise to capital gain or
loss to the extent the amount realized from the sale differs from the tax basis,
i.e., the fair market value of the common stock on the date of exercise. This
capital gain or loss will be a short-term or long-term capital gain or loss
depending on how long the common stock has been held from the date of exercise.
In general, if an employee holds the shares of common stock acquired
under the exercise of an incentive stock option for at least two years from the
date of grant and one year from the date of exercise, the employee will
recognize no income or gain as a result of exercise. Any gain or loss realized
by the employee on the disposition of the common stock after these holding
periods will be treated as a long-term capital gain or loss. No deduction will
be allowed to our company. If, however, the employee disposes of the common
stock before both of these holding period requirements are satisfied, the
employee will recognize ordinary income at the time of the disposition equal to
the lesser of (i) the gain realized on the disposition or (ii) the difference
between the exercise price and the fair market value of the shares of common
stock on the date of exercise. Our company will then be entitled to a deduction
in the same amount and at the same time as ordinary income is recognized by the
employee. Any additional gain realized by the employee over the fair market
value at the time of exercise will be treated as a capital gain. This capital
gain will be a short-term or long-term capital gain depending on how long the
common stock has been held from the date of exercise.
Except as discussed below, the exercise of an option by using previously
owned stock will not affect the tax consequences on exercise or result in any
tax on any appreciation in the value of the stock surrendered.
Upon exercise of a nonqualified stock option using previously acquired
shares of stock, the number of shares of newly acquired stock equal in number to
the old shares will have a basis equal to the basis of those old shares. The
participant will also carry over the holding period of the old shares for
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this limited number of new shares of stock. The participant's basis in the
excess shares of newly acquired stock will be their fair market value on the
date taxation is imposed and the holding period for these excess shares will
begin on this date. If a participant exercises a nonqualified stock option by
delivery of old shares that were previously acquired under an incentive stock
option, this delivery will not be a disqualifying disposition even though the
shares so surrendered are not held for the applicable holding periods. However,
the number of new shares issued equal to the number of old shares delivered will
be treated as stock acquired pursuant to the exercise of an incentive stock
option and will be subject to the rules regarding disqualifying dispositions.
Any shares acquired in excess of the old shares delivered will be treated as
stock acquired pursuant to the exercise of a nonqualified stock option.
Upon exercise of an incentive stock option with old shares, the
participant will take a carryover basis and a carryover holding period in the
shares of newly acquired stock equal in number to the old shares. The basis in
the shares of the newly acquired stock in excess of the number of old shares
will be zero, and the holding period of such excess shares begins at the time of
exercise. If any shares of stock acquired upon exercise of an incentive stock
option by using old shares are disposed of in a disqualifying disposition, the
zero basis shares will be deemed to have been disposed of first and the amount
paid for these shares by the participant will be deemed to be zero. If a
participant exercises an incentive stock option by delivery of old shares
acquired under another incentive stock option, or certain other types of
employee plans, and if the applicable holding periods for the old shares have
not expired, the delivery of the old shares will be a disqualifying disposition
of the old shares. The result will be recognition of ordinary income by the
participant in an amount equal to the difference between the exercise price
attributable to the old shares and their fair market value at the time the
previous option was exercised. If the previous incentive stock option was
exercised by payment of the exercise price in cash, the number of new shares
equal to the number of old shares will have a basis equal to the fair market
value of such old shares at the time the previous option was exercised, and such
new shares will have a carryover holding period. If the previous incentive stock
option was exercised by payment of the exercise price with old shares, a number
of new shares equal to the number of old shares that were deemed to have a zero
basis under the rules discussed above will have a basis equal to the amount of
ordinary income recognized by the participant and a holding period which
includes the holding period of such old shares. The number of additional new
shares equal to the difference between the number of such old shares with a zero
basis and the total number of old shares surrendered will be deemed to have a
carryover basis and holding period. In either case, the basis of the remainder
of the newly acquired shares (i.e. the number of new shares received in excess
of the number surrendered) will be zero and their holding period will begin at
the time of exercise.
Note that in certain circumstances, changes in the terms of an incentive
stock option in order to grant additional benefits to a participant could result
in disqualification of the option for incentive stock option tax treatment and
make the nonqualified stock option rules applicable.
At the time of exercise of an incentive stock option, the excess of the
fair market value of stock received over the option price will be treated as an
adjustment under the alternative minimum tax. This treatment will not apply if
the participant disqualifies the incentive stock option by selling the stock in
the same calendar year in which the participant recognizes income for purposes
of the alternative minimum tax. Imposition of the alternative minimum tax in
addition to the regular tax will occur to the extent such alternative tax
exceeds the individual's regular tax. The calculation of the alternative minimum
tax, if any, is complicated and each participant should discuss it with his or
her personal tax advisor.
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Vote Required
Assuming a quorum is present, the affirmative vote of a majority of the
votes represented and voted at the meeting is required to approve the proposed
amendments to the plan. Any shares not voted at the meeting whether by broker
non-votes or otherwise will have no impact on the vote. If you abstain from
voting, however, this will be treated as votes against the proposal.
Our board recommends a vote "FOR" the proposed amendments to the plan.
The shares represented by the proxies received will be voted FOR approval of the
proposed amendments, unless the proxy indicates a vote against approval or an
abstention from voting.
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Principal Stockholders
The following table sets forth certain information regarding beneficial
ownership of our common stock as of May 3, 1999 by:
o each person who is known to own beneficially more than 5% of the
outstanding shares of our common stock;
o each of our directors;
o our only executive officer other than Mr. Wright whose 1998
compensation exceeded $100,000; and
o all our directors and executive officers as a group.
The persons listed below have sole voting and investment power with
respect to all shares of common stock shown as being beneficially owned by them,
subject to community property laws, where applicable. The number of shares
column in the table includes shares issuable upon exercise of options and
warrants exercisable within 60 days of May 3, 1999. The number of options and
warrants exercisable within 60 days of May 3, 1999 are listed in the shares
issuable upon exercise of options or warrants column. The address of all
stockholders is care of U.S. Laboratories Inc., 7895 Convoy Court, Suite 18, San
Diego, California 92111.
<TABLE>
<CAPTION>
Shares Issuable Upon
Number of Percentage Exercise of
Name of Beneficial Owner Shares of Shares Options or Warrants
- ------------------------ ------ --------- -------------------
<S> <C> <C> <C>
Dickerson Wright........................ 1,803,489 55.0% 75,151
Gary H. Elzweig......................... 365,638 11.3% 45,151
Martin B. Lowenthal..................... 82,192 2.5% 26,666
Donald C. Alford........................ 80,144 2.5% 26,666
Mark Baron.............................. 60,318 1.9% 26,666
Thomas H. Chapman....................... 45,727 1.4% 21,666
James Wait.............................. 26,666 * 26,666
James L. McCumber....................... 5,000 * 5,000
Robert E. Petersen...................... 5,000 * 5,000
Noel Schwartz........................... 7,000 * 6,000
Irvin Fuchs............................. 7,000 * 6,000
All current directors and officers as a
group (11 persons)...................... 2,448,174 76.5% 270,632
- ---------------------
* Represents less than 1%
</TABLE>
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Related Transactions
All ongoing present and future transactions with our affiliates have
been, and will continue to be, on terms no less favorable to us than could have
been obtained from unaffiliated parties, and will be approved by a majority of
no less than two of our independent directors. These independent directors will
not have an interest in those transactions and will have access, at our expense,
to our counsel, or independent legal counsel.
At December 31, 1998, we owed Dickerson Wright, the Chief Executive
Officer and majority stockholder, $81,461. This amount is non-interest bearing
and is payable upon demand. Mr. Wright loaned this amount to us through the use
of his personal line of credit that was personally guaranteed by Mr. Wright and
his spouse. In May 1998, we repaid a portion of that line of credit by borrowing
under a new $1,700,000 line of credit that is also personally guaranteed by Mr.
Wright and his spouse.
In October 1998, the $1,700,00 line of credit was refinanced into a
$1,200,000 note payable and a $500,000 line of credit, both of which are
guaranteed by Mr. Wright and his spouse. In July 1998, we also entered into a
$500,000 line of credit that is personally guaranteed by Mr. Wright and his
spouse. We used this $500,000 line of credit to repay in full to the bank the
$480,000 loan made to us through the use of Mr. Wright's personal line of
credit.
As part of the consideration for the acquisition of Wyman Enterprises,
Inc.'s assets, we issued a non-interest-bearing note payable to Donald C. Alford
in the principal amount of $150,000. The note payments are due in four equal
annual installments of $37,500. The first installment was paid in March 1999.
During the years ended December 31, 1997 and 1996 and the nine months
ended September 30, 1998 and 1997, we paid $181,067, $169,594, $92,052, and
$137,063, respectively, in management fees to Gary Elzweig. The management fees
were based on 5% of net sales of a subsidiary.
On January 1, 1998, we issued (a) 315,488 shares of our common stock to
Gary H. Elzweig in exchange for 100 shares of the common stock of Professional
Engineering; (b) 55,526 shares of our common stock to Martin B. Lowenthal in
exchange for 18.5 shares of the common stock of U. S. Engineering; (c) 33,652
shares of our common stock to Mark Baron in exchange for 1.67 shares of the
common stock of San Diego Testing; and (d) 24,061 shares of our common stock to
Thomas H. Chapman in exchange for 5.67 shares of the common stock of San Diego
Testing.
On January 1, 1998, we issued 10,937 shares of our common stock to
Christopher O'Malley, Vice President of U. S. Engineering under the terms of a
restricted stock agreement containing restrictions on the disposition of the
common stock. The common stock was issued in exchange for a capital contribution
made by Mr. O'Malley to U. S. Engineering.
On April 1, 1998, we issued 50,478 shares of our common stock to Donald
C. Alford in exchange for 25 shares of the common stock of Wyman Enterprises,
Inc.
Section 16(a) Beneficial Ownership Reporting Compliance
Under Section 16(a) of the Securities Exchange Act of 1934, our
directors, executive officers, and any persons holding more than 10% of our
common stock are required to report their initial ownership and any subsequent
changes in that ownership to the SEC. Specific due dates for these reports
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have been established and we are required to identify those persons who failed
to timely file these reports in 1998. Because we were not publicly held in 1998,
there were no requirements to file reports with the SEC under these rules.
Availability of Form 10-KSB and Annual Report to Stockholders
SEC rules require us to provide an annual report to stockholders who
receive this proxy statement. We will also provide copies of the annual report
to brokers, dealers, banks, voting trustees, and their nominees for the benefit
of their beneficial owners of record. Additional copies of the annual report,
along with copies of our special financial report on Form 10-KSB for the fiscal
year ended December 31, 1998 (not including documents incorporated by
reference), are available without charge to stockholders upon written request to
Secretary, U. S. Laboratories Inc., 7895 Convoy Court, Suite 18, San Diego,
California 92111.
Other Matters
We expect that the election of directors and the proposed amendments to
the plan will be the only matters presented for stockholder consideration at the
annual meeting. Other matters may properly come before the annual meeting, and
the proxies named in the accompanying proxy will vote on them in accordance with
their best judgment.
We will bear the cost of soliciting proxies. We expect to solicit proxies
mainly by mail. Some of our employees may also solicit proxies personally and by
telephone. We do not anticipate that we will retain anyone to solicit proxies or
that we will pay compensation to anyone for that purpose. We will, however,
reimburse brokers and other nominees for their reasonable expenses in
communicating with the persons for whom they hold common stock.
Our board amended our company's bylaws to allow our board to set the date
of annual meetings of stockholders by resolution.
Our board has selected Singer Lewak Greenbaum & Goldstein LLP to continue
as our independent accountants for the current year.
If you wish to include a proposal in our proxy statement for the 2000
annual meeting, SEC Rule 14a-8 requires that you forward the proposal to our
secretary by February 19, 2000. If you submit a proposal other than pursuant to
SEC Rule 14a-8 less than 45 days in advance of the 2000 meeting, your proposal
will be considered untimely and we will not be required to present your proposal
at the 2000 annual meeting. If our board chooses to present your proposal
despite its untimeliness, the people named in the proxies solicited by our board
for the 2000 annual meeting will have the right to exercise discretionary voting
power with respect to your proposal.
U. S. Laboratories Inc.
James Wait
Vice President, Chief Financial Officer
and Secretary
San Diego, California
May 26, 1999
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U.S. LABORATORIES INC.
1998 STOCK OPTION PLAN
1. Purpose
The purpose of the U.S. Laboratories Inc. 1998 Stock Plan (the "Plan") is
to promote the best interests of U.S. Laboratories Inc., a Delaware corporation
(the "Company"), its subsidiaries and its shareholders by providing for the
acquisition of an equity interest in the Company by officers, directors,
employees, and consultants and advisors who perform valuable services for the
Company or its subsidiaries and to enable the Company and its subsidiaries to
attract and retain the services of such individuals upon whose judgment,
interest, skills, and special effort the successful conduct of its operation is
largely dependent.
2. Effective Date
The Plan shall be effective as of May 30, 1998, subject to approval by
the shareholders of the Company within twelve (12) months after the date of
adoption of the Plan by the Board of Directors of the Company (the "Board").
3. Administration
The Plan shall be administered and interpreted by the Compensation
Committee of the Board, consisting of not less than two members of the Board
(the "Committee"). If at any time the Committee shall not be in existence, the
Board shall administer the Plan and all references to the Committee herein shall
include the Board. The Board may, in its discretion, delegate to another
committee of the Board or to one or more senior officers of the Company any or
all of the authority and responsibility of the Committee.
Subject to the provisions of the Plan and applicable law, the Committee
shall have complete power and authority to (i) interpret and administer the Plan
and any instrument or agreement relating to, or made under, the Plan; (ii) make
factual determinations; (iii) establish, amend, suspend, or waive such rules and
regulations and appoint such agents as it shall deem appropriate for the proper
administration of the Plan; (iv) select those individuals who shall receive
awards under the Plan; (v) determine the terms, conditions, restrictions and
other provisions of awards; and (vi) make any other determination and take any
other action that the Committee deems necessary or desirable for the
administration of the Plan. The Committee's decisions and determinations under
the Plan need not be uniform and may be made selectively among participants,
whether or not they are similarly situated. A majority of the members of the
Committee shall constitute a quorum and all determinations of the Committee
shall be made by a majority of its members. Any determination of the Committee
under the Plan may be made without notice or meeting of the Committee by a
writing signed by a majority of the Committee members.
4. Eligibility and Participation
Participants in the Plan shall be selected by the Committee from among
those officers, employees and directors of the Company and its subsidiaries, and
from among those advisors and consultants providing valuable services to the
Company and its subsidiaries, as the Committee may designate from time to time.
The Committee shall consider such factors as it deems appropriate in selecting
participants and in determining the type and amount of their respective awards.
The
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Committee's designation of a participant in any year shall not require the
Committee to designate such person to receive an award in any other year.
5. Stock Subject to Plan
5.1. Number. Subject to adjustment as provided in Section 5.3, the total
number of shares of common stock, $.01 par value, of the Company ("Stock"),
which may be issued under the Plan shall be 810,000. The shares to be delivered
under the Plan may consist, in whole or in part, of authorized but unissued
Stock or treasury Stock. At no time during the term of the Plan shall the total
number of shares of Stock subject to outstanding options under the Plan, any
other stock option plan or any stock purchase plan, stock bonus or similar plan
of the Company in the aggregate exceed 30% of the total number of shares of
Stock of the Company outstanding on the date of the award of any option under
the Plan.
5.2. Unused Stock; Unexercised Rights. If, after the effective date of the
Plan, any shares of Stock subject to an award granted under the Plan are
forfeited or if an award otherwise terminates, expires or is canceled prior to
the delivery of all of the shares of Stock or of other consideration issuable or
payable pursuant to such award, then the number of shares of Stock counted
against the number of shares available under the Plan in connection with the
grant of such award, shall again be available for the granting of additional
awards under the Plan to the extent determined to be appropriate by the
Committee.
5.3. Adjustment in Capitalization. In the event that the Committee shall
determine that any dividend or other distribution (whether in the form of cash,
Stock, other securities or other property), recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of Stock or other securities of the Company,
issuance of warrants or other rights to purchase Stock or other securities of
the Company, or other similar corporate transaction or event affects the Stock
such that an adjustment is determined by the Committee to be appropriate in
order to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan, then the Committee may, in such
manner as it may deem equitable, adjust any or all of: (i) the number and type
of shares of Stock subject to the Plan and which thereafter may be made the
subject of awards under the Plan; (ii) the number and type of shares of Stock
subject to outstanding awards; and (iii) the grant, purchase or exercise price
with respect to any award, or, if deemed appropriate, make provision for a cash
payment to the holder of an outstanding award; provided, however, in each case,
that with respect to awards of incentive stock options no such adjustment shall
be authorized to the extent that such authority would cause such options to
cease to be treated as incentive stock options; and provided further, however,
that the number of shares of Stock subject to any award payable or denominated
in Stock shall always be a whole number.
6. Term of the Plan
No award shall be made under the Plan after May 30, 2008. However, unless
otherwise expressly provided in the Plan or in an applicable award agreement,
any award theretofore granted may extend beyond such date and, to the extent set
forth in the Plan, the authority of the Committee to amend, alter, adjust,
suspend, discontinue or terminate any such award, or to waive any conditions or
restrictions with respect to any such award, and the authority of the Board to
amend the Plan, shall extend beyond such date.
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7. Stock Options
7.1. Grant of Options. Options may be granted to participants at any time
and from time to time as shall be determined by the Committee. The Committee
shall have complete discretion in determining the number, terms and conditions
of options granted to a participant. The Committee also shall determine whether
an option is to be an incentive stock option within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), or a nonqualified
stock option. If an option fails at any time to meet the requirements for an
incentive stock option under Section 422 of the Code, such option shall be
treated as a nonqualified stock option. Only individuals who are employees of
the Company or one of its subsidiaries at the time of grant may receive grants
of incentive stock options.
7.2. Exercise Price. The exercise price of each option granted under the
Plan shall be established by the Committee or shall be determined by a method
established by the Committee at the time the option is granted; except that,
unless otherwise determined by the Committee, the exercise price shall not be
less than one hundred percent (100%) of the fair market value of a share of
Stock as of the Pricing Date, as determined under Section 7.5 (the "Fair Market
Value"). For purposes of the preceding sentence, the "Pricing Date" shall be the
date on which the option is granted, except that the Committee may provide that:
(i) the Pricing Date is the date on which the recipient is hired or promoted (or
similar event) if the grant of the option occurs not more than 90 days after the
date of such hiring, promotion or other event; and (ii) if an option is granted
in tandem with, or in substitution for, an outstanding award, the Pricing Date
is the date of grant of such outstanding award. In the case of the grant of an
incentive stock option, the exercise price shall equal one hundred percent
(100%) of the Fair Market Value of a share of Stock on the date of grant;
provided, however, that if an incentive stock option is granted to any employee
who, at the time of grant, owns shares of Company stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company (a "10% Stockholder"), the exercise price per share shall not be less
than 110% of the Fair Market Value of a share of Stock on the date of grant.
7.3. Term and Exercise of Options. Incentive stock options will be
exercisable over not more than ten (10) years after the date of grant (or five
(5) years in the case of a 10% Stockholder) and shall terminate not later than
three (3) months after termination of employment for any reason other than death
or disability, as determined by the Committee, except as otherwise provided by
the Committee. If the participant should die while employed or within three (3)
months after termination of employment, then the right of the participant's
successor in interest to exercise an incentive stock option shall terminate not
later than twelve (12) months after the date of death, except as otherwise
provided by the Committee. In all other respects, the terms of any incentive
stock option granted under the Plan shall comply with the provisions of Section
422 of the Code (or any successor provision thereto) and any regulations
promulgated thereunder. Nonqualified stock options will be exercisable as
determined by the Committee and shall terminate at such time as the Committee
shall determine and specify in the option agreement. Incentive stock options and
nonqualified stock options shall be subject to such vesting schedules (if any)
as determined by the Committee and as specified in the option agreement.
7.4. Option Agreement. Each option shall be evidenced by an option agreement
that shall specify the type of option granted, the date of grant, the exercise
price, the duration of the option, the vesting schedule (if any) for the option,
the number of shares of Stock to which the option pertains and such other
conditions and provisions as the Committee shall determine.
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7.5. Fair Market Value. The Fair Market Value of a share of Stock shall be
as reasonably determined by the Committee pursuant to such methods or procedures
as shall be established from time to time by the Committee.
7.6. Payment. Subject to the following provisions of this Section 7.6, the
full exercise price for shares of Stock purchased upon the exercise of any
option shall be paid at the time of such exercise (except that, in the case of
an exercise arrangement approved by the Committee and described in clause (b) of
this Section 7.6, payment may be made as soon as practicable after the
exercise). The Committee shall determine the methods and the forms for payment
of the exercise price of options, including (a) by effective receipt of cash or,
to the extent permitted by the Committee, other mature shares of the Company (as
defined by U.S. Generally Accepted Accounting Principles) having a then Fair
Market Value equal to the exercise price of such shares, or any combination
thereof; or (b) by authorizing a third party to sell shares of Stock (or a
sufficient portion of the shares) acquired upon exercise of the option and remit
to the Company a sufficient portion of the sale proceeds to pay the entire
exercise price and any tax withholding resulting from such exercise. Shares of
Stock tendered shall be duly endorsed in blank or accompanied by stock powers
duly endorsed in blank. Upon receipt of the payment of the entire exercise price
for the shares so purchased, certificates for such shares will be delivered to
the participant.
7.7. Limits on Incentive Stock Options. Each incentive stock option shall
provide that to the extent the aggregate fair market value of the Stock on the
date of grant with respect to which incentive stock options are exercisable by a
participant for the first time during any calendar year under the Plan or any
other plan of the Company exceeds $100,000, then such option as to the excess
shall be treated as a nonqualified stock option.
8. Other Awards
8.1. Other Stock-Based Awards. Other awards, valued in whole or in part by
reference to, or otherwise based on, shares of Stock, may be granted either
alone or in addition to or in conjunction with any option under the Plan in such
amounts and having such terms and conditions as the Committee may determine.
8.2. Other Benefits. The Committee may provide types of benefits under the
Plan in addition to those specifically listed if the Committee believes that
such benefits would further the purposes for which the Plan was established.
9. Transferability
Each award granted under the Plan shall be exercised only by the
participant during his lifetime and shall not be transferable other than by will
or the laws of descent and distribution, except that a participant may, to the
extent allowed by the Committee and in a manner specified by the Committee, (a)
designate in writing a beneficiary to exercise the award after the participant's
death; or (b) transfer an award. An incentive stock option shall not, in any
case, be transferable other than by will or the laws of descent and
distribution.
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10. Rights of Employees
Nothing in the Plan shall interfere with or limit in any way the right of
the Company and its subsidiaries to terminate any participant's employment at
any time nor confer upon any participant any right to continue in the employ of
the Company or its subsidiaries.
11. Change of Control
In order to preserve a participant's rights under an award in the event
of any sale of assets, merger, consolidation, combination or other corporate
reorganization, restructuring or change of control of the Company ("Change of
Control"), the Committee in its discretion may, at the time an award is made or
at anytime thereafter, take one or more of the following actions: (i) provide
for the acceleration of any time period relating to the exercise or realization
of the award; (ii) provide for the purchase of the award upon the participant's
request for an amount of cash or other property that could have been received
upon the exercise or realization of the award had the award been currently
exercisable or payable; (iii) adjust the terms of the award in the manner
determined by the Committee to reflect the Change of Control; (iv) cause the
award to be assumed, or new right substituted therefor, by another entity; or
(v) make such other provision as the Committee may consider equitable and in the
best interests of the Company.
Notwithstanding anything contained in this Section 11, the Committee may,
in its sole and absolute discretion, amend, modify or rescind the provisions of
this Section 11 if it determines that the operation of this Section 11 may
prevent a transaction in which the Company or any affiliate is a party from
being accounted for on a pooling-of-interests basis, or prevent the Change of
Control from receiving desired tax treatment, including without limitation
requiring that each participant shall receive a replacement or substitute award
issued by the surviving or acquiring corporation.
12. Amendment, Modification and Termination of Plan
12.1. Amendments and Termination. The Board may, at any time, amend, alter,
suspend, discontinue or terminate the Plan; provided, however, that stockholder
approval of any amendment of the Plan shall be obtained if otherwise required by
(a) the Code or any rules promulgated thereunder (in order to allow for
incentive stock options to be granted under the Plan), or (b) the listing
requirements of the principal securities exchange or market on which the Stock
is then traded (in order to maintain the listing or quotation of the Stock
thereon). To the extent permitted by applicable law, and subject to such
stockholder approval as may otherwise be required, the Committee may also amend
the Plan, provided that any such amendments shall be reported to the Board.
Termination of the Plan shall not affect the rights of participants with respect
to awards previously granted to them, and all unexpired awards shall continue in
force and effect after termination of the Plan except as they may lapse or be
terminated by their own terms and conditions. The Committee, subject to the same
stockholder approval requirements set forth above, may amend an award agreement
at any time; provided that no amendment may, in the absence of written consent
to the change by the affected participant (or, if the participant is not then
living, the affected beneficiary), adversely affect the rights of any
participant or beneficiary under any award granted under the Plan prior to the
date such amendment is adopted.
12.2. Waiver of Conditions. The Committee may, in whole or in part, waive
any conditions or other restrictions with respect to any award granted under the
Plan.
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13. Taxes
No later than the date as of which an amount first becomes includable in
the gross income of a participant for federal income tax purposes with respect
to any award under the Plan, the participant shall pay to the Company, or make
arrangements satisfactory to the Company regarding the payment of, any federal,
state, local or foreign taxes of any kind required by law to be withheld with
respect to such amount. If approved by the Committee, withholding obligations
arising with respect to awards granted to participants under the Plan may be
settled with shares of Stock previously owned by the participant; provided,
however, that the participant may not settle such obligations with Stock that is
received upon exercise of the option that gives rise to the withholding
requirement. The obligations of the Company under the Plan shall be conditioned
on such payment or arrangements, and the Company and any subsidiary shall, to
the extent permitted by law, have the right to deduct any such taxes from any
payment otherwise due to the participant. The Committee may establish such
procedures as it deems appropriate for the settling of withholding obligations
with shares of Stock.
14. Miscellaneous
14.1. Stock Transfer Restrictions. (a) Shares of Stock purchased under the
Plan may not be sold or otherwise disposed of except (i) pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "Act"), or in a transaction which, in the opinion of counsel for the
Company, is exempt from registration under the Act; and (ii) in compliance with
state securities laws. Further, as a condition to issuance of any shares of
Stock under the Plan, the participant or his heirs, legatees or legal
representatives, as the case may be, may be required to execute and deliver to
the Company a restrictive stock transfer agreement in such form, and subject to
such terms and provisions, as shall be reasonably determined or approved by the
Committee, which agreement, among other things, may impose certain restrictions
on the sale or other disposition of any shares of Stock acquired under the Plan.
The Committee may waive the foregoing restrictions, in whole or in part, in any
particular case or cases or may terminate such restrictions whenever the
Committee determines that such restrictions afford no substantial benefit to the
Company.
(b) All certificates for shares delivered under the Plan pursuant to any
award or the exercise thereof shall be subject to such stock transfer orders and
other restrictions as the Committee may deem advisable under the Plan or any
applicable restrictive stock transfer agreement and any applicable federal or
state securities laws, and the Committee may cause a legend or legends to be put
on any such certificates to make appropriate references to such restrictions.
14.2. Other Provisions. The grant of any award under the Plan may also be
subject to other provisions (whether or not applicable to the benefit awarded to
any other participant) as the Committee determines appropriate, including,
without limitation, provisions for (a) the participant's agreement to abide by
any restrictions as specified in the participant's award agreement; (b) one or
more means to enable participants to defer recognition of taxable income
relating to awards or cash payments derived therefrom; (c) the purchase of Stock
under options in installments; or (d) the financing of the purchase of Stock
under the options in the form of a promissory note issued to the Company by a
participant on such terms and conditions as the Committee determines.
14.3. Award Agreement. No person shall have any rights under any award
granted under the Plan unless and until the Company and the participant to whom
the award was granted shall have executed an award agreement in such form as
shall have been approved by the Committee.
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14.4. No Fractional Shares. No fractional shares or other securities shall
be issued or delivered pursuant to the Plan, and the Committee shall determine
(except as otherwise provided in the Plan) whether cash, other securities or
other property shall be paid or transferred in lieu of any fractional shares or
other securities, or whether such fractional shares or other securities or any
rights thereto shall be canceled, terminated or otherwise eliminated.
15. Legal Construction
15.1. Requirements of Law. The granting of awards under the Plan and the
issuance of shares of Stock in connection with an award, shall be subject to all
applicable laws, rules and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required. To
the extent required by applicable law, the Company will provide to participants,
within a reasonable period of time after the end of each fiscal year of the
Company, a copy of the financial statements of the Company for the year, in such
form as shall be determined by the Board.
15.2. Governing Law. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of
California.
15.3. Severability. If any provision of the Plan or any award agreement or
any award is or becomes or is deemed to be invalid, illegal or unenforceable in
any jurisdiction, or as to any person or option, or would disqualify the Plan,
any award agreement or any award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be so construed or deemed amended without, in
the determination of the Committee, materially altering the intent of the Plan,
any award agreement or the award, such provision shall be stricken as to such
jurisdiction, person or award, and the remainder of the Plan, any such award
agreement and any such award shall remain in full force and effect.
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U. S Laboratories Inc. 1999 Annual Meeting of Shareholders - June 19, 1999
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Dickerson Wright and James Wait, and each or
either of them as proxies, each with the power to appoint his substitute, and
hereby authorizes each or either of them to represent and to vote, as designated
below, all the shares of common stock of U. S. Laboratories Inc. held of record
by the undersigned on May 3, 1999 at the 1999 annual meeting of shareholders
scheduled to be held on June 19, 1999 and any adjournment thereof. The
undersigned hereby acknowledges receipt of the notice of annual meeting and
accompanying proxy statement relating to our Company's 1999 annual meeting of
shareholders and our company's 1998 annual report.
This proxy, when properly executed, will be voted in the manner directed by
you. If you make no direction, this proxy will be voted FOR the specified
director nominees and FOR the proposed amendment to our company's 1998 Stock
Option Plan, and on such other business as may properly come before the meeting
in accordance with the best judgment of the proxies.
1. ELECTION OF DIRECTORS: 1. 4. Mark Baron 8. Thomas H. Chapman
Dickerson Wright 5. Irvin Fuchs 9. James L. McCumber
2. Gary Elzweig 6. James Wait 10. Robert E. Petersen
3. Donald C. Alford 7. Noel Schwartz 11. Martin B. Lowenthal
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY
listed to the left to vote for all nominees
(except as specified listed to the left
below).
(Instructions: To withhold authority to vote for any indicated nominee, write
the number(s) of the nominee(s) in the box provided to the right.)
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Continued from other side of card
2. Approval of the amendment to the 1998 Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, upon such other business as may properly come before the
meeting and at any adjournment thereof.
Date No. of Shares
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Signature(s) in Box. Please sign exactly as
your name appears hereon. When shares are
held by joint tenants, both should sign.
When signing as attorney, executor,
administrator, trustee or guardian, please
give your full title as such. If a
corporation, please sign in full corporate
name by the president or other authorized
officer. If a partnership, please sign in
partnership name by authorized person.
