SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
DIANON Systems, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
DIANON Systems, Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] $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:
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pursuant to Exchange Act Rule 0-11:
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[ ] 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:
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4) Date Filed:
<PAGE>
DIANON SYSTEMS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 30, 1997
The Annual Meeting of the shareholders of DIANON Systems, Inc. (the
"Company") will be held at the Company's corporate headquarters at 200 Watson
Boulevard, Stratford, Connecticut, on Thursday, October 30, 1997, at 10:00 A.M.,
for the following purposes:
(1) To elect directors for the ensuing year;
(2) To ratify the appointment of Arthur Andersen, LLP as the
independent public accountants of the Company for the
calendar year ended December 31, 1997; and
(3) To transact such other business as may properly come before
the meeting or any adjournment or adjournments thereof.
Only shareholders of record at the close of business on September 19,
1997 will be entitled to vote at the Annual Meeting. A list of shareholders
eligible to vote at the Annual Meeting will be available for inspection at the
Annual Meeting and during business hours from October 20, 1997 to the date of
the Annual Meeting at the Company's corporate headquarters.
Whether you expect to attend the Annual Meeting or not, your proxy
vote is important. To assure your representation at the meeting, please sign and
date the enclosed proxy card and return it promptly in the enclosed envelope,
which requires no additional postage if mailed in the United States or Canada.
By Order of the Board of Directors
David R. Schreiber
Corporate Secretary
200 Watson Boulevard
Stratford, Connecticut 06497
September 30, 1997
IT IS IMPORTANT THAT THE ENCLOSED PROXY CARD BE COMPLETED
AND RETURNED PROMPTLY
<PAGE>
DIANON SYSTEMS, INC.
PROXY STATEMENT
September 30, 1997
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of DIANON Systems, Inc. ("DIANON" or the
"Company") for use at the Annual Meeting of its shareholders to be held at the
Company's corporate headquarters at 200 Watson Boulevard, Stratford, Connecticut
on Thursday, October 30, 1997, at 10:00 A.M.
Shares cannot be voted at the Annual Meeting unless the owner thereof
is present in person or by proxy. All properly executed and unrevoked proxies in
the accompanying form that are received in time for the Annual Meeting will be
voted at the Annual Meeting or any adjournment thereof in accordance with any
specification thereon, or if no specification is made, will be voted "FOR" the
election of the named director nominees and approval of the other proposal set
forth in the Notice of Annual Meeting of Shareholders of the Company. The Board
of Directors of the Company knows of no other matters which may be brought
before the Annual Meeting. However, if any other matters are properly presented
for action, it is the intention of the named proxies to vote on them according
to their best judgment. Any person giving a proxy may revoke it by written
notice to the Company at any time prior to exercise of the proxy. In addition,
although mere attendance at the Annual Meeting will not revoke the proxy, a
person present at the Annual Meeting may withdraw his or her proxy and vote in
person. Rights of appraisal or similar rights of dissenters are not available to
shareholders of the Company with respect to any matter to be acted upon at the
Annual Meeting.
The Annual Report of the Company (which does not form a part of these
proxy solicitation materials), including the financial statements of the
Company, is enclosed herewith.
The mailing address of the principal executive office of the Company
is 200 Watson Boulevard, Stratford, Connecticut 06497. This Proxy Statement and
the accompanying form of proxy are expected to be mailed to the shareholders of
the Company on or about September 30, 1997.
VOTING SECURITIES
The Company has only one class of voting securities outstanding, its
Common Stock, par value $0.01 per share (the "Common Stock"). On September 19,
1997, 6,463,313 shares of Common Stock were outstanding. At the Annual Meeting,
each shareholder of record at the close of business on September 19, 1997, will
be entitled to one vote for each share of Common Stock owned on that date as to
each matter presented at the Annual Meeting.
ELECTION OF DIRECTORS
Unless otherwise directed, the persons named in the accompanying form
of proxy intend to vote at the Annual Meeting "FOR" the election of the nominees
named below as directors of the Company to serve until the next Annual Meeting
and until their successors are duly elected and qualified. THE BOARD OF
DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE ELECTION OF SUCH NOMINEES.
If any nominee is unable to stand for election when the election
takes place, the shares represented by valid proxies will be voted in favor of
the remaining nominees and for such person, if any, as shall be designated by
the present Board of Directors to replace such nominee. The Board of Directors
does not presently anticipate that any nominee will be unable to stand for
election.
<PAGE>
The following information with respect to the principal occupation or
employment, other affiliations and business experience of each nominee during
the last five years has been furnished to the Company by such nominee. Except as
indicated, each of the nominees has had the same principal occupation for the
last five years.
INFORMATION CONCERNING DIRECTORS AND NOMINEES
Set forth below is certain information concerning each nominee for director of
DIANON Systems, Inc. All of the nominees are currently directors of the Company.
Kevin C. Johnson, age 42, a Director since May 1996, is President and
Chief Executive Officer of the Company. Mr. Johnson joined Dianon as President
in May 1996, and was appointed to the additional position of Chief Executive
Officer in February 1997. Formerly, Mr. Johnson was with Corning Inc., a
manufacturer of specialty materials and a provider of laboratory services, for
eighteen years, serving most recently as Vice President and General Manager of
Corning Clinical Laboratories' Eastern region in Teterboro, New Jersey.
John P. Davis, age 55, a Director since 1984, is President and Chief
Executive Officer of Calypte Biomedical Corp., a diagnostic products company.
From 1984 to January 1995, Mr. Davis was an officer of the Company. Mr. Davis
joined the Company in January 1984 as President and Chief Operating Officer, and
subsequently became co-Chief Executive Officer in 1992 and Chief Executive
Officer in 1994. In January 1995, Mr. Davis resigned as Chief Executive Officer
of the Company and became Vice Chairman of the Board. As of February 1997, Mr.
Davis was elected non-executive Chairman of the Board. Mr. Davis also serves as
a Director of PepGen Corporation and as a Director of Cyto Logix, Inc.
James B. Amberson, age 46, a Director since January 1995, is Senior
Vice President and Chief Medical Officer of the Company. Dr. Amberson joined
DIANON in 1989 as Director, Cytometry Business Unit, and has served as Vice
President of Pathology Services, Vice President of Medical Affairs and Senior
Vice President and General Manager of the Anatomic Pathology Unit before his
present position. Prior to joining the Company, Dr. Amberson was Assistant
Professor of Pathology, Cornell University Medical College for six years. Dr.
Amberson holds an MD from Johns Hopkins University and an MBA from Columbia
University School of Business.
E. Timothy Geary, age 46, a Director since June 1997, is Chairman,
President and Chief Executive Officer of National Surgery Centers, Inc. of
Chicago, Illinois, the leading independent owner and operator of ambulatory
surgery centers in the country. Prior to founding National Surgery Centers in
1987, Mr. Geary served as a Vice President with Medical Care International. Mr.
Geary is a member of the Board of Directors of the Federated Ambulatory Surgery
Association. Mr. Geary holds an MBA and BA from the University of Chicago.
G. S. Beckwith Gilbert, age 55, a Director since October 1995, is
President, Chief Executive Officer and a Director of Field Point Capital
Management Company in Greenwich, Connecticut, a merchant banking firm. Mr.
Gilbert is also a partner of Wolsey & Co., a merchant banking firm. In addition,
Mr. Gilbert is Chairman of the Board and a Director of Megadata Corporation as
well as a Director of Davidson Hubeny Brands, Inc. and TMS Technologies, Inc.
Mr. Gilbert is a graduate of Princeton University and holds an MBA from New York
University. In February 1997, the Board elected Mr. Gilbert as Chairman of the
Executive Committee.
Jeffrey L. Sklar, age 49, a Director since 1994, is Professor of
Pathology, Harvard Medical School, and Director, Divisions of Diagnostic
Molecular Biology and of Molecular Oncology, Department of Pathology, Brigham
and Women's Hospital. Dr. Sklar has served on numerous editorial boards and has
consulted widely to the biotechnology industry. In addition, Dr. Sklar serves on
the Scientific Advisory Committee for Clinical Science, The Fred Hutchinson
Cancer Center, Seattle, Washington; the Scientific Advisory Committee, New
England Primate Research Center, Harvard University; the External Review
Committee, Dana-Farber Cancer Institute, Boston, and the Pathology B Study
Section, National Institutes of Health. Dr. Sklar holds an MD and Ph.D. from
Yale University and an MA (honorary) from Harvard University.
Richard A. Sandberg and Walter O. Fredericks, who are presently
serving as Directors, will not be standing for reelection.
<PAGE>
COMMITTEES OF THE BOARD
The Company's Board of Directors presently has standing Audit,
Compensation, and Executive Committees, the current membership and principal
responsibilities of which are described below. The Board of Directors does not
have a Nominating Committee.
Audit Committee
Members: Mr. Davis, Mr. Gilbert and Mr. Fredericks
The Audit Committee's functions include reviewing with the
independent public accountants the plan for and results of their audit, the
adequacy of the Company's systems of internal accounting controls and any
material breakdown in such controls. In addition, the Audit Committee reviews
the independence of the independent public accountants and their fees for
services rendered to the Company.
Compensation Committee
Members: Mr. Davis, Mr. Gilbert and Dr. Sklar
The Compensation Committee's functions include setting compensation
of the directors and the executive officers. In addition, the Compensation
Committee has the authority to grant certain awards under the 1991 and 1996
Stock Incentive Plans.
Executive Committee
Members: Mr. Gilbert, Mr. Davis and Mr. Johnson
The Executive Committee was established in February 1997 with its
primary function of assisting management in formulating the Company's long-term
strategy. Mr. Gilbert was elected Chairman of the Executive Committee.
ATTENDANCE AT BOARD AND COMMITTEE MEETINGS
During the 1996 fiscal year the Board of Directors held six regular
meetings and four special meetings. In addition, the Audit Committee met twice
and the Compensation Committee met three times. During such fiscal year each
director attended at least 75% of the aggregate of (i) the regular and special
meetings of the Board and (ii) the meetings of the committees of the Board on
which such director served.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company are paid $1,500 for
each meeting of the Board of Directors attended in person and $500 for each
meeting attended by telephone. In addition, committee members are paid $500 for
each committee meeting attended which does not occur on the same day as a Board
meeting. Directors are also reimbursed for expenses to attend meetings of the
Board and its committees. In addition, the Company has made payments to Brigham
& Women's Hospital, Inc., for which Dr. Sklar is director, Division of
Diagnostic Molecular Biology, Department of Pathology. See "Compensation
Committee Interlocks and Insider Participation."
Pursuant to the Company's 1996 Stock Incentive Plan, Directors who
are not employees of the Company receive (i) automatic initial and quarterly
grants of stock options with tandem limited stock appreciation rights beginning
July 1995, (ii) automatic quarterly grants of shares of Common Stock beginning
January 1997 and (iii) additional stock options or other awards to the extent
granted by the Board of Directors in its discretion.
Each initial and quarterly stock option which is automatically
granted under such plan is exercisable for that number of shares obtained by
<PAGE>
dividing $5,000 by the closing price of the Common Stock on the date of grant
and is exercisable at that price. Each such option has a 10-year term and vests
with respect to 10% of the underlying shares on the date which is three months
after the date of grant, and an additional 10% at the end of each three-month
period thereafter. Each such option can be exercised for five years following a
director's termination of service to the extent it had vested prior to
termination. Each automatic quarterly stock grant is for the number of shares
obtained by dividing $2,000 by the closing price of the Common Stock on the date
of grant, and is fully vested at grant.
In November 1996, pursuant to authorization by the Board of
Directors, the Company granted to Dr. Sklar an option to purchase 10,000 shares
of Common Stock at an exercise price of $6.375 to compensate him for his
services as a Director. Such option vests 40% on grant, and an additional 20% on
each of August 4, 1997, August 4, 1998 and August 4, 1999. Such grant is a
replacement of an option to purchase 10,000 shares of Common Stock authorized by
the Board in 1994, but not accepted by Dr. Sklar at that time due to the
conditions of his employment by Brigham & Women's Hospital, Inc. In October
1996, pursuant to authorization by the Board of Directors, the Company granted
an option to purchase 10,000 shares of Common Stock at an exercise price of
$7.125 per share to Mr. de Bruin in replacement of options issued in June 1993
which had the same exercise price, were due to expire in June 2000 and were 60%
vested as of October 1996 with the remaining options vesting 20% on each of June
4, 1997 and June 4, 1998. These replacement options vested 100% in October 1996
and expire ten years from the date of grant.
Messrs. Sandberg and Johnson and Dr. Amberson, who are employees of
the Company, receive no additional compensation for their services as Directors
of the Company.
VOTING FOR DIRECTORS
Abstentions are included in the determination of the existence of a
quorum. Directors are elected by a plurality of the votes of the shares present
in person or represented by proxy at the meeting and entitled to vote on the
election of directors. An automated system administered by the Company's
transfer agent tabulates the votes. Abstentions are not counted for purposes of
election of directors.
EXECUTIVE OFFICERS
For information with respect to Mr. Johnson and Dr. Amberson, who are
also Directors, see "Election of Directors - Information Concerning Directors
and Nominees."
James T. Barry, age 36, has served as Vice President, Marketing and
Technology since December 1996. Mr. Barry joined the Company in July 1989 as
Corporate Recruiter and subsequently served as Director of Managed Care. Before
joining the Company, Mr. Barry was a major in the U.S. Marine Corps. Mr. Barry
holds a BA from Rhode Island College.
Steven T. Clayton, age 31, has served as Vice President, Information
Services since he joined the Company in December 1996. Prior to joining the
Company, Mr. Clayton was with Corning Clinical Laboratories for nine years
serving most recently as the Midwest Regional Director of Information Systems.
Mr. Clayton holds an ASM from Thomas Edison State College.
David R. Schreiber, age 37, has served as Senior Vice President,
Finance, Chief Financial Officer and Corporate Secretary since November 1996
when he joined the Company. Formerly, Mr. Schreiber was with Corning Clinical
Laboratories, a provider of laboratory services, for 10 years, serving most
recently as Vice President and General Manager of the laboratory's Midwest
region. Mr. Schreiber holds an MBA from Northern Illinois University.
Martin J. Stefanelli, age 36, has served as Vice President,
Laboratory Operations since May 1997. Mr. Stefanelli joined the Company in
January 1990 as a Sales Representative and subsequently served as Logistics
Manager, Marketing Manager and Director of Operations, Anatomic Pathology.
Before joining the Company, Mr. Stefanelli was a captain in the U.S. Army. Mr.
Stefanelli holds a BS from the United States Military Academy.
<PAGE>
Vernon L. Wells, age 39, joined the Company in September 1997 as Vice
President, Sales. Formerly, Mr. Wells was with Quest Diagnostics Inc., a
provider of laboratory services, for 13 years, serving most recently as a Vice
President of Sales and Marketing. Mr. Wells holds a BS from the University of
Southern California.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors of DIANON
Systems, Inc. (the "Committee") sets forth its report on executive compensation
below. This Committee report documents the components of the Company's executive
officer compensation programs and describes the basis on which 1996 compensation
determinations were made by the Committee with respect to the executive officers
of the Company, including the executive officers that are named in the
compensation tables below.
COMPENSATION PROGRAM COMPONENTS
The Committee is responsible for setting and monitoring the
effectiveness of the compensation provided to the Company's Directors and
executive officers. In its decision-making, the Committee is guided by a
compensation philosophy designed to reward employees for the achievement of
business goals and the maximization of shareholder returns. Specific levels of
pay and incentive opportunity are determined by the competitive market for
executive talent and, where appropriate, the need to invest in the future growth
of the business. The compensation program, which provides incentives for
executive officers to achieve the short-term and long-term goals of the Company,
comprises three components: base salary, incentive compensation and stock option
awards.
BASE SALARY - Base pay levels are largely determined through
comparisons with service companies of similar size. Since the
Company's current strategy places greater reliance on outstanding
professional and management skills than on proprietary technology,
the Company believes that base salaries at the high end of the
competitor range may be required in certain circumstances to maintain
the Company's strategic position. Actual salaries are based on
individual performance contributions within a tiered salary range for
each position that is established through job evaluation and
competitive comparisons.
MANAGEMENT INCENTIVE PLAN - The Company's Management Incentive Plan
provides cash bonus incentives ("Incentive Payments") for all
management employees. The bonus payment under this plan is based on a
fixed percentage of an employee's annual salary, which increases with
the grade of an employee's position from 10% to a maximum of 40%.
This percentage of salary is then adjusted to reflect the degree to
which Company and individual performance goals are achieved
(respectively, the "Company Achievement Percentage" and the
"Individual Achievement Percentage") by multiplying the employee's
fixed bonus percentage by the Company Achievement Percentage and by
the Individual Achievement Percentage. The maximum bonus attainable
is limited to the prescribed salary percentage, unless certain
special Company sales and income goals are met. Achieving these
special "stretch" goals entitles participants to additional
compensation equal to 50% of the amount otherwise payable under the
Management Incentive Plan ("Extra Incentive Payout"). Actual awards
are subject to decrease or increase at the discretion of the
Committee.
The Company's goals and the Company Achievement Percentage for 1996
were based on sales growth and targeted earnings per share levels.
The principal factor in measuring performance against Company goals
is actual sales growth compared to planned sales growth. Failing to
achieve targeted earnings per share goals can limit Incentive
Payments but exceeding earnings per share goals cannot increase
Incentive Payments if sales growth is not also achieved. Targeted
sales growth was met for 1996, however, the Company Achievement
Percentage was approximately 68% (rather than equal to or greater
than 100%) because actual earnings per share levels (on which such
percentage is based) were less than targeted earnings per share
levels. Special Company goals entitling participants to Extra
Incentive Payouts were not reached. The individual goals for
<PAGE>
executive officers were established by the CEO and each executive
officer. At the end of the year, each officer's performance was
reviewed and assigned an Individual Achievement Percentage. Taken
together, these Company and Individual Achievement Percentages
generated 1996 bonuses representing approximately 11% to 29% of
annual base salary for such officers.
STOCK OPTION PROGRAM - The Committee strongly believes that by
providing executives an opportunity to own shares of Company stock,
the best interests of shareholders and executives will be closely
aligned. Therefore, all executives are eligible to receive stock
options from time to time giving them the right to purchase shares of
Common Stock of the Company at a specific price in the future. The
number of stock options granted to executive officers is determined
at the discretion of the Committee based on the accomplishments of
such executives, their length of service with the Company, the number
of prior awards received by such officer, the relative value as well
as the exercise price of such awards, and competitive practices.
During 1996 the Committee also offered short-term stock options to
all employees of the Company, in proportion to their respective
salaries, pursuant to the Company's Employee Stock Purchase Plan
which was approved by the Company's shareholders at the 1995 Annual
Meeting.
DISCUSSION OF 1996 COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
The Committee meets with the Chief Executive Officer to evaluate his
performance. Mr. Sandberg served as CEO until May 1996, and continued to serve
as Chairman of the Board for the remainder of the year. For 1996 Mr. Sandberg's
incentive compensation was based on the Company Achievement Percentage and the
Committee's evaluation regarding his overall performance based on both
quantitative and qualitative objectives and expectations, which were set by the
Board at the start of the year. The Committee awarded Mr. Sandberg incentive
compensation in 1996 which represented approximately 9% of his annual base
salary for the year. In addition, during 1996 Mr. Sandberg received no grants of
stock options other than a grant of short-term stock options pursuant to the
Company's Employee Stock Purchase Plan. After extensive review of certain
operating, strategic and financial performance measures, it was the decision of
the Compensation Committee and the Board of Directors to transfer general
management and operating responsibilities to Kevin C. Johnson, hired as
President in May 1996.
This report has been provided by the Compensation Committee of the
Board of Directors:
John P. Davis
G. S. Beckwith Gilbert
Jeffrey L. Sklar, MD, Ph.D.
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth information with respect to the
following named executive officers: (i) the person who served as Chief Executive
Officer ("CEO") during 1996, (ii) the four executive officers other than the CEO
serving at December 31, 1996 whose total salary and bonus for 1996 exceeded
$100,000, and (iii) two additional executive officers who terminated employment
with the Company during 1996.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
--------------------------------- ------------
Other Securities
Name and Annual Underlying All Other
Principal Position Year Salary Bonus Compensation Options(1) Compensation
------------------ ---- ------ ----- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Richard A. Sandberg (2) 1996 $212,500 $ 20,000 $ -- -- $ 3,681(3)
Chairman of the Board and 1995 212,500 36,975 -- -- 3,681
Chief Executive Officer 1994 203,280 47,902 -- 20,000 3,681
Kevin C. Johnson (4) 1996 174,520 50,000(5) -- 200,000 1,507(6)
President and Director
David R. Schreiber (7) 1996 29,231 80,000(8) -- 50,000 1,742(9)
Sr. Vice President Finance,
Chief Financial Officer and
Corporate Secretary
James B. Amberson, MD 1996 200,013 47,869 -- 15,000 2,530(10)
Sr. Vice President and 1995 185,465 36,997 -- 25,000 2,104
Chief Medical Officer and 1994 173,764 39,230 -- 31,500 12,889
Director
Albert A. Luderer, Ph.D. (11) 1996 171,191 29,206 -- -- 9,199(13)
Vice President, Technology 1995 163,369 41,758 4,190(12) 10,000 8,530
1994 155,048 27,110 2,214(12) 26,000 22,639
Carl R. Iberger (14) 1996 88,587 13,212 -- -- 71,318(15)
Vice President, Finance and 1995 108,952 27,788 -- -- 3,144
Administration and 1994 103,981 17,847 -- 26,800 3,465
Corporate Secretary
Daniel J. Cronin (16) 1996 89,048 13,564 -- -- 6,368(17)
Vice President, Management 1995 91,038 18,995 -- 4,000 3,092
Information Systems 1994 79,615 15,904 -- 15,800 726
<PAGE>
<FN>
(1) Does not include options granted under the Company's Employee Stock
Purchase Plan, which were made available to all employees of the Company,
in proportion to their respective salaries, on a nondiscriminatory basis.
(2) Mr. Sandberg ceased serving as Chief Executive Officer of the Company in
May 1996, while continuing to serve as an employee holding the title
Chairman of the Board. As of February 1997, Mr. Sandberg resigned as
Chairman of the Board. He continues to be employed as a consultant to the
Company, and will serve as a Director until the upcoming Annual Meeting.
(3) The $3,681 indicated for Mr. Sandberg represents contributions paid by the
Company pursuant to the Company's 401(K) Retirement Plan and premiums paid
by the Company for term life insurance, which for 1996 amounted to $1,500
and $2,181, respectively.
(4) Mr. Johnson joined the Company as President in May 1996 and was appointed
to the position of Chief Executive Officer in February 1997.
(5) The $50,000 indicated for Mr. Johnson represents a sign-on bonus he
received when he joined the Company in May 1996.
(6) The $1,507 indicated for Mr. Johnson represents premiums paid by the
Company for term life insurance.
(7) Mr. Schreiber joined the Company as Senior Vice President, Finance, Chief
Financial Officer and Corporate Secretary in November 1996.
(8) The $80,000 indicated for Mr. Schreiber represents a sign-on bonus he
received when he joined the Company in November 1996.
(9) The $1,742 indicated for Mr. Schreiber represents relocation costs paid in
1996.
(10) The $2,530 indicated for Dr. Amberson represents contributions paid by the
Company pursuant to the Company's 401(K) Retirement Plan and premiums paid
by the Company for term life insurance, which for 1996 amounted to $1,500
and $1,030, respectively.
(11) Dr. Luderer resigned as Vice President, Technology in January 1997.
(12) The amounts indicated for 1995 and 1994 for Dr. Luderer are relocation tax
gross-ups.
(13) The $9,199 indicated for Dr. Luderer includes deferred compensation under
the Company's vacation banking policy accrued for during 1996,
contributions paid by the Company pursuant to its 401(K) Retirement Plan,
and premiums paid by the Company for term life insurance, which for 1996
amounted to $6,681, $1,300 and $1,218, respectively.
(14) Mr. Iberger resigned as Vice President, Finance and Administration and as
Corporate Secretary in September 1996.
(15) The $71,318 indicated for Mr. Iberger represents severance pay,
contributions paid by the Company pursuant to the Company's 401(K)
Retirement Plan and premiums paid by the Company for term life insurance,
which for 1996 amounted to $69,339, $1,500 and $479, respectively.
(16) Mr. Cronin resigned as Vice President, Management Information Systems in
December 1996.
(17) The $6,368 indicated for Mr. Cronin represents severance pay, contributions
paid by the Company pursuant to the Company's 401(K) Retirement Plan and
premiums paid by the Company for term life insurance, which for 1996
amounted to $5,452, $520 and $396, respectively.
</FN>
</TABLE>
<PAGE>
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Company entered into an employment agreement with Mr. Johnson on
May 2, 1996. The agreement provides for Mr. Johnson to serve as President of the
Company at an initial base salary of $275,000 per annum, the grant of options to
purchase 200,000 shares of Common Stock with a 10-year term and an exercise
price of $5.69, stock grants of 15,000 shares of Common Stock on each of January
2, 1997 and January 2, 1998 provided Mr. Johnson continues to be employed with
the Company on such dates, a signing bonus of $50,000 and a loan of $150,000.
The loan carries an interest rate of 5.9%, payable annually, and is repayable
upon termination of Mr. Johnson's employment with the Company. If Mr. Johnson
continues to be employed with the Company, the loan principal will be forgiven
at the rate of $2,500 per completed month of employment from January 31, 1998
through December 31, 2002. This agreement provides that in the event of a
termination of Mr. Johnson's employment other than for "Cause," as defined in
the agreement, he is entitled to receive one year's salary and other benefits.
Subject to the foregoing, this agreement is subject to termination at will by
either party.
The Company entered into an employment agreement with David R.
Schreiber on September 30, 1996 as the Chief Financial Officer and Senior Vice
President, Finance. The agreement provides for an initial base salary of
$190,000 per annum, the grant of options to purchase 50,000 shares of Common
Stock with a 10-year term and an exercise price of $6.625, a signing bonus of
$80,000 and a stock grant of 7,500 shares of Common Stock on April 1, 1997. This
agreement provides that in the event of a termination of Mr. Schreiber's
employment other than for "Cause," as defined in the agreement, he is entitled
to receive one year's salary (and certain other benefits) if such termination
occurs within the first year of employment or six months after the Company is
acquired by another business entity, or six month's salary (and certain other
benefits) if such termination occurs after such period. Subject to the
foregoing, this agreement is subject to termination at will by either party.
Richard A. Sandberg resigned as Chairman of the Board and as an
officer of the Company effective February 27, 1997. In connection with his
resignation, the Company and Mr. Sandberg entered into an agreement, dated
February 27, 1997 and amended on April 30, 1997, pursuant to which the Company
agreed to employ Mr. Sandberg, and Mr. Sandberg agreed to be employed, as a
consultant to the President until February 28, 1998 or his earlier death,
disability, resignation, or termination for "Cause," as defined in the
agreement. Such agreement provides for Mr. Sandberg to receive annual base
compensation of $232,000 plus all benefits provided to management employees of
the Company other than participation in management incentive programs. In
addition such agreement provides that all options to purchase Common Stock held
by Mr. Sandberg as of February 27, 1997 became fully vested on such date to the
extent not previously vested. Mr. Sandberg also had, pursuant to this agreement,
the right to sell each such option to the Company at any time on or before May
28, 1997 for cash at a price equal to (i) the number of shares of Common Stock
covered by such option being sold multiplied by (ii) the amount by which $10.875
exceeds the exercise price of such option (which right was not exercised by Mr.
Sandberg during such period). If such agreement is not otherwise renewed by
mutual agreement of the Company and Mr. Sandberg, it terminates by its terms on
February 28, 1998, in which event for six months after such termination, Mr.
Sandberg will be entitled to severance pay of $19,333 per month plus medical
insurance premiums and car allowance. Under these circumstances, Mr. Sandberg's
stock options to purchase 20,000 shares of Common Stock will terminate in May
1998 and options to purchase 156,000 shares will terminate in February 2000. Mr.
Sandberg has agreed that he will not compete with the Company within the United
States for a period of two years after the termination of his employment as a
consultant pursuant to this agreement. The Company also loaned Mr. Sandberg
$300,000 which loan is repayable in full in two years and bears interest,
payable annually, at the rate of 9.5% per annum.
The Company entered into agreements with Richard A. Sandberg and Dr.
James B. Amberson (the "Employees") on September 1, 1996, which provide that in
the event of a "Change in Control" of the Company, as defined in the agreements,
if the Employee's employment is terminated other than for "Cause," as defined in
the agreements, he is entitled to receive one year's salary and bonus and all
his stock options will vest completely. Mr. Amberson's agreement expires in
September 2001 and is subject to successive automatic one-year renewals
thereafter (unless certain notice is given). Mr. Sandberg's agreement was
superseded by his February 27, 1997 agreement.
The Company also entered into an employment agreement with Dr. James
B. Amberson on September 1, 1996. Pursuant to such agreement, Dr. Amberson is
<PAGE>
entitled to a salary as determined by the Company and other benefits of the
Company. This agreement provides that in the event of a termination of Dr.
Amberson's employment for other than "Stated Cause" (as defined in the
agreement), he is entitled to receive six month's salary and other benefits.
Subject to the foregoing, this agreement is subject to termination at will by
either party.
The Company entered into an employment agreement with Steven T.
Clayton on November 18, 1996 as Vice President, Information Services of the
Company. The agreement provides for an initial base salary of $120,000 per
annum, a signing bonus of $14,000 and the grant of options to purchase 15,000
shares of Common Stock with a 10-year term and an exercise price of $7.875.
During the third quarter of 1996, the Company recorded a charge of
$133,933 for severance benefits relating to Messrs. Iberger and Cronin, two
officers of the Company who resigned their full-time employment and officer
positions in September 1996 and December 1996, respectively. Mr. Iberger
received a lump sum payment of $60,000 and severance payments totaling
approximately $27,000 for the nine-month period after his termination. The
Company paid Mr. Cronin severance payments of $7,270 per month for the
four-month period after his termination and for the following two months because
he had not obtained other employment.
PERFORMANCE GRAPH
The Securities and Exchange Commission requires that the Company
include in this Proxy Statement a line-graph presentation comparing cumulative
shareholder return on an indexed basis with a broad equity market index and
either a published industry index or an index of peer companies selected by the
Company. The graph below compares the cumulative total return during such period
on $100 invested as of December 31, 1991 in the Common Stock of the Company, the
H&Q Health Care Sub-Sector excluding the Biotechnology Sector of the Hambrecht &
Quist Technology and Growth Indices and the NASDAQ National Market Index,
assuming the reinvestment of all dividends:
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
[Graph depicting the following information is shown here.]
<TABLE>
<CAPTION>
H&Q Health Care
DIANON NASDAQ National Excluding Biotechnology
DATES SYSTEMS MARKET - U.S. SUB-SECTOR
- ----- ------- ------------- ----------
<S> <C> <C> <C>
Dec-91 100.00 100.00 100.00
Dec-92 80.00 116.38 84.30
Dec-93 43.64 133.60 60.38
Dec-94 29.09 130.60 64.15
Dec-95 30.91 184.69 106.81
Dec-96 62.73 227.13 118.59
</TABLE>
<PAGE>
CHANGE OF CONTROL PROVISIONS
As a general matter, under the Company's 1996 Stock Incentive Plan,
upon the occurrence of a Change of Control (as defined below), (1) all
outstanding stock options, SARs, and limited SARs, including those held by
Outside Directors (as defined in such plan), will become fully exercisable and
vested, (2) all other awards under the Plan will become fully vested, and (3) to
the extent the cash payment of any award is based on the fair market value of
stock, such fair market value will be the Change of Control Price (as defined
below).
A "Change of Control" is deemed to occur on the date (1) any person
or group acquires beneficial ownership of securities representing 25% or more of
the Company's total voting power (with certain exceptions), (2) individuals who
constitute the "Current Directors" (as defined in the Plan) fail to constitute
at least two-thirds of the Board of Directors, (3) the shareholders approve a
merger or consolidation unless following such transaction (a) the beneficial
owners of the Company's Common Stock before the transaction own securities
representing more than 50% of the total voting power of the company resulting
from the transaction, and (b) at least a majority of members of the board of
directors of the company resulting from the transaction were members of the
Company's Board of Directors at the time such Board approved the transaction, or
(4) the shareholders of the Company approve a sale of substantially all of its
assets.
The "Change of Control Price" is the highest price per share of
Common Stock paid in any open market transaction, or paid or offered to be paid
in any transaction related to a Change of Control, during the 90-day period
ending with the Change of Control, except that for an SAR granted in tandem with
an ISO, such price is the highest price paid on the date the SAR is exercised.
Each of the Company's Employee Stock Purchase Plan and the 1991 Stock
Incentive Plan contain change of control provisions generally comparable to the
change of control provisions contained in the Company's 1996 Stock Incentive
Plan, as described above, except that options granted under the Employee Stock
Purchase Plan will become exercisable (if not already exercisable) as of the
first business day that is at least 30 days after the "Change of Control" rather
than immediately.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file with
the Securities and Exchange Commission initial reports of ownership and reports
of changes in ownership of Common Stock and other equity securities of the
Company. Officers, directors and greater than ten percent shareholders are
required to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and representations that no other reports
were required during the fiscal year ended December 31, 1996, all Section 16(a)
reporting requirements applicable to its officers, directors and greater than
ten percent beneficial shareholders were complied with except for the following:
Messrs. Johnson, Schreiber, Clayton, Verfurth and Barry each were late in filing
their initial Form 3 when becoming subject to the Section 16 reporting
requirements; Drs. Amberson and Sklar each filed a late report with respect to
one transaction; and Mr. Gilbert filed a late report with respect to five
automatic outside director option grants under the Company's 1996 Stock
Incentive Plan that became effective upon shareholder approval of such plan at
the Company's Annual Meeting of Shareholders on October 24, 1996.
<PAGE>
STOCK OPTIONS
The following table shows, as to the named executive officers of the
Company, information about option grants in the last fiscal year. As of
September 19, 1997, the Company has not granted any Stock Appreciation Rights to
the named executive officers.
<TABLE>
<CAPTION>
OPTIONS GRANTS IN LAST FISCAL YEAR
Individual Grants
- -------------------------------------------------------------------------------
Potential Realizable
Number of % of Total Value at Assumed
Securities Options Annual Rates of Stock
Underlying Granted to Exercise or Price Appreciation
Options Employees Base Price Expiration for Option Term
Name Granted(#)(1) in 1996(1) ($/Share) Date 5%($) 10%($)
---- ------------- ---------- --------- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Richard A. Sandberg -- -- $ -- -- $ -- $ --
Kevin C. Johnson 200,000 (2) 43% 5.6900 05/02/06 715,682 1,813,679
David R. Schreiber 50,000 (3) 11% 6.6250 10/01/06 208,321 527,927
James B. Amberson, MD 15,000 (4) 3% 6.3750 11/04/06 60,138 152,402
Albert A. Luderer, Ph.D -- -- -- -- -- --
Carl R. Iberger -- -- -- -- -- --
Daniel J. Cronin -- -- -- -- -- --
<FN>
(1) Does not include options granted under the Company's Employee Stock
Purchase Plan, which were made available to all employees of the Company on
a non-discriminatory basis.
(2) In May 1996, the Company granted Mr. Johnson options to purchase 200,000
shares of Common Stock at $5.69 per share pursuant to his employment
agreement. These options vest 40% in May 1998 and 20% during each year
thereafter. Upon termination of employment, all unvested options are
canceled and all vested options expire 90 days after termination of
employment.
(3) In October 1996, the Company granted Mr. Schreiber options to purchase
50,000 shares of Common Stock at $6.625 per share pursuant to his
employment agreement. These options vest 40% in October 1998 and 20% during
each year thereafter. Upon termination of employment, all unvested options
are canceled and all vested options expire 90 days after termination of
employment.
(4) In November 1996, the Company granted certain employees and officers
options to purchase 203,000 shares of Common Stock at $6.375 per share.
Half of each employee's options vest 40% in November 1998 and 20% during
each year thereafter and the remaining half vest 40% in November 1999 and
20% during each year thereafter. Upon termination, all unvested options are
canceled and all vested options expire 90 days after termination of
employment.
</FN>
</TABLE>
<PAGE>
The following table shows aggregate option exercises in the last
fiscal year and fiscal year-end option values for the named executive officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Value
Realized Value of Unexercised
(Market Number of In-the-Money Options
Price at Securities Underlying at FY-End (based on
Exercise Unexercised FY-End Price of
Shares less Options at FY-End(#) $8.625/share)($)(1)
Acquired on Exercise ----------------------------- -----------------------------
Name Exercise(#) Price)($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- --------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Richard A. Sandberg (2) -- $ -- 149,024 26,976 $101,160 $ 58,140
Kevin C. Johnson -- -- -- 200,000 -- 587,500
David R. Schreiber -- -- -- 50,000 -- 100,000
James B. Amberson, MD -- -- 19,340 52,160 78,617 167,555
Albert A. Luderer, Ph.D 12,800 41,632 -- -- -- --
Carl R. Iberger -- -- 15,440 -- 62,764 --
Daniel J. Cronin 7,920 26,326 -- -- -- --
<FN>
(1) Computed based upon difference between aggregate fair market value and
aggregate exercise price.
(2) Mr. Sandberg resigned as Chairman of the Board and as an officer of the
Company effective February 27, 1997. In connection with his resignation,
the Company and Mr. Sandberg entered into an agreement that provided that
all options to purchase Common Stock held by Mr. Sandberg as of February
27, 1997 became fully vested on such date to the extent not previously
vested (which resulted in options to purchase 26,976 shares of Common Stock
becoming fully vested on such date). See "Executive Compensation -
Employment and Severance Agreements."
</FN>
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Dr. Sklar served as a member of the Compensation Committee of the
Company's Board of Directors during the last completed fiscal year and is
continuing to serve as such in the 1997 fiscal year. In 1995 the Company entered
into a three-year research and development agreement with Brigham & Women's
Hospital, Inc., for which Dr. Sklar is director, Division of Diagnostic
Molecular Biology, Department of Pathology. The agreement requires the Company
to make quarterly payments of $30,000 totaling $360,000 in exchange for an
option to obtain rights in certain existing inventions as well as inventions
developed during the course of research conducted by Dr. Sklar in the areas of
cancer detection and diagnosis. The Company paid $120,000 and $60,000 in 1996
and 1995, respectively. As of December 31, 1996, the Company terminated this
agreement effective June 30, 1997 and thereafter paid $60,000 in 1997 for
consulting services by Dr. Sklar. In addition, the Company has made payments to
Brigham & Women's Hospital, Inc. of $30,000 in each of 1996 and 1995 for
consulting services by Dr. Sklar.
<PAGE>
OWNERSHIP OF VOTING STOCK BY MANAGEMENT
The following table gives information concerning the beneficial
ownership of Common Stock as of September 19, 1997 by each of the Company's
directors and each of the named executive officers, and all directors and
executive officers as a group.
<TABLE>
<CAPTION>
Total Shares
Beneficially Direct Right to Percent of
Beneficial Owners Owned(1)(2) Ownership Acquire(3) Class(4)
- ----------------- ----------- --------- ---------- --------
<S> <C> <C> <C> <C>
Richard A. Sandberg 203,556 12,257 185,520 3%
Kevin C. Johnson 30,666 15,170 -- -- (5)
David R. Schreiber 7,500 7,500 -- -- (5)
James B. Amberson, MD 71,353 15,652 40,035 1%
Albert A. Luderer -- -- -- -- (5)
Carl R. Iberger 21,710 17,390 4,320 -- (5)
Daniel J. Cronin -- -- -- -- (5)
John P. Davis 237,136 116,896 120,240 4%
Walter O. Fredericks 8,732 676 8,056 -- (5)
Jeffrey L. Sklar 10,832 676 10,156 -- (5)
G. S. Beckwith Gilbert 1,803,999 1,800,676 3,323 28% (6)
E. Timothy Geary 375 213 162 -- (5)
All current directors and
executive officers as 2,349,566 1,969,716 374,241 34%
a group (13 persons)
- ---------------
<FN>
(1) The information as to beneficial ownership is based on statements furnished
to the Company by its executive officers and directors. Each executive
officer and director has sole voting and sole investment power with respect
to his respective shares listed above, except that the shares reported for
Mr. Gilbert include 121,951 shares which are held by a trust of which Mr.
Gilbert is a trustee, as to which Mr. Gilbert shares voting and investment
powers. Amounts shown for Messrs. Sandberg and Johnson and Dr. Amberson
include 15,666 shares held in the Company's 401(K) Retirement Plan, as to
which such officers share voting power as trustees of such plan and each
individual plan participant has investment power, subject to the terms of
such plan, of the shares in his account; such amount includes 9,887 and 170
shares in Messrs. Sandberg and Johnson's accounts, respectively.
(2) Includes shares listed under the captions "Direct Ownership" and "Right to
Acquire," as well as shares held in the Company's 401(K) Retirement Plan
which are beneficially owned by the named individuals as trustees of such
plan but as to which such trustees have no economic interest.
(3) Individuals have the right to acquire these shares within 60 days of
September 19, 1997 by the exercise of stock options or through purchases
under the Company's Employee Stock Purchase Plan.
(4) For the purposes of this table, "Percent of Class" held by each individual
has been calculated based on a total class equal to the sum of (i)
6,463,313 shares of Common Stock issued and outstanding on September 19,
1997 plus (ii) for such individual the number of shares of Common Stock
subject to stock options or warrants presently exercisable, or exercisable
within 60 days after September 19, 1997, held by that individual, and which
percent is rounded to the nearest whole number.
(5) Owns less than 1% of the outstanding Common Stock.
(6) As of September 19, 1997, Mr. Gilbert cannot vote, without restriction, any
Common Stock or other voting securities of the Company beneficially owned
by him representing greater than 20% of the total voting power of the
Company's voting securities outstanding from time to time, or 1,292,663
votes as of September 19, 1997. As of September 19, 1997, any votes in
excess of 1,292,663 represented by Common Stock or other voting securities
of the Company beneficially owned by Mr. Gilbert as of such date are
required to be voted in proportion to the votes cast by all other
shareholders of the Company.
</FN>
</TABLE>
<PAGE>
OWNERSHIP OF VOTING STOCK BY CERTAIN BENEFICIAL OWNERS
The following table sets forth information with respect to the only
persons who, to the best knowledge of the Company's management as derived from
schedules 13D and 13G, beneficially owned more than five percent of the Common
Stock as of September 19, 1997 (unless otherwise indicated below, each person
included in the table has sole voting and investment power with respect to all
shares included therein):
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of of Beneficial Percent
Title of Class Beneficial Owner Ownership of Class(1)
- -------------- ---------------- --------- -----------
<S> <C> <C> <C>
Common Stock G. S. Beckwith Gilbert et al 1,803,999(2)(3) 28% (3)
104 Field Point Road
Greenwich, CT 06830
Common Stock Oracle Management Partners, Inc. 461,328 7%
and Affiliates
712 E 5th Avenue - 45th Floor
New York, NY 10019
Common Stock John M. Bryan et al 356,412 6%
Bryan and Edwards
600 Montgomery Street - 35th Floor
San Francisco, CA 94111
Common Stock Westfield Capital Management 377,400 6%
One Financial Center
Boston, MA 02111
<FN>
(1) For the purposes of this table, "Percent of Class" held by each person has
been calculated based on a total class equal to the sum of (i) 6,463,313
shares of Common Stock issued and outstanding on September 19, 1997 plus
(ii) for such person the number of shares of Common Stock subject to stock
options or warrants presently exercisable, or exercisable within 60 days
after September 19, 1997, held by that person, and which percent is rounded
to the nearest whole number.
(2) Mr. Gilbert has shared voting and investment power with respect to 121,951
shares included in the table above.
(3) As of September 19, 1997, Mr. Gilbert cannot vote, without restriction, any
Common Stock or other voting securities of the Company beneficially owned
by him representing greater than 20% of the total voting power of the
Company's voting securities outstanding from time to time, or 1,292,663
votes as of September 19, 1997. As of September 19, 1997, any votes in
excess of 1,292,663 represented by Common Stock or other voting securities
of the Company beneficially owned by Mr. Gilbert as of such date are
required to be voted in proportion to the votes cast by all other
shareholders of the Company.
</FN>
</TABLE>
<PAGE>
CERTAIN TRANSACTIONS AND RELATIONSHIPS
OTHER TRANSACTIONS AND INDEBTEDNESS OF MANAGEMENT
See "Executive Compensation - Compensation Committee Interlocks and
Insider Participation."
On October 5, 1995, the Company completed a $5,612,000 private
placement with Mr. Gilbert for one million shares of Common Stock and a two-year
warrant for 800,000 shares exercisable at $6.00 per share of Common Stock
(except as otherwise described below). The Company received cash of $5,316,000
and a two-year promissory note for $296,000 bearing 7% interest. Some or all of
the warrants could be exercised at a price of $5.00 at any time on or before
October 4, 1996 (which date was extended as described below). Upon such exercise
the Company would be required to extinguish as an adjustment to the purchase
price paid for such warrants, for each such warrant for which such exercise was
made, $0.37 of the principal amount of the note upon payment of the interest due
on such extinguished amount for the outstanding period. If the warrants for
800,000 shares were all exercised on or before October 4, 1996 (which date was
extended as described below), the two year promissory note for $296,000 would be
fully extinguished. On August 20, 1996, the Company's Board of Directors
approved an amendment to the terms of the warrants to extend the date through
which the warrants could be exercised at $5.00 per share from October 4, 1996 to
October 31, 1996. The amendment was approved in connection with the scheduling
of the Company's Annual Meeting for October 24, 1996 to enable voting at such
meeting on the Company's agreement to enable Mr. Gilbert to vote shares of the
Company's Common Stock owned by him and certain affiliates representing up to
20% of the total voting power of the Company's voting securities outstanding
from time to time to be completed prior to the expiration of the $5.00 per share
exercise price. The Company's agreement was approved at the Company's Annual
Meeting on October 24, 1996. On October 29, 1996, Mr. Gilbert exercised warrants
for all 800,000 shares and in exchange for the payment of approximately $4.0
million in cash representing the aggregate exercise price of such warrants and
interest on the principal amount of the two-year promissory note for the
outstanding period, the Company issued to him 800,000 shares of Common Stock and
fully extinguished and canceled the promissory note.
As part of the process to recruit a new executive, the Company lent
an affiliate of Mr. Sandberg $75,000 in March 1995 at 8% interest. Such loan was
repaid in full with interest in March 1996. For a description of a $300,000 loan
to Mr. Sandberg, see "Executive Compensation - Employment and Severance
Agreements."
For description of a loan from the Company to Mr. Johnson, see
"Executive Compensation - Employment and Severance Agreements."
In January 1997, the Company purchased 89,000 shares of Common Stock
from Richard A. Sandberg at a price of $8.50 per share.
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS' APPOINTMENT
Arthur Andersen, LLP has been the independent auditors of the
Company's accounts since 1983. Such firm has no financial interest, either
direct or indirect, in the Company. Selection of Arthur Andersen, LLP as the
auditors for the calendar year ending December 31, 1997, was made by the Board
of Directors subject to shareholder ratification. A representative of Arthur
Andersen, LLP is expected to attend the meeting and have an opportunity to make
a statement and/or respond to appropriate questions from shareholders.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN, LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR 1997. Approval of the ratification of the
independent public accountants' appointment requires that the number of votes
cast in favor of approval of the ratification of the independent public
accountants' appointment exceed the number of votes cast against such approval.
Abstentions will have no effect on the vote.
<PAGE>
SHAREHOLDER PROPOSALS
In accordance with regulations issued by the Securities and Exchange
Commission, shareholder proposals intended for presentation at the 1998 Annual
Meeting of Shareholders must be received by the Secretary of the Company no
later than June 1, 1998 if such proposals are to be considered for inclusion in
the Company's Proxy Statement related to the 1998 Annual Meeting.
COSTS OF SOLICITATION
The costs of soliciting proxies will be borne by the Company. The
Company will also reimburse brokerage firms and other custodians, nominees and
fiduciaries, if any, for reasonable out-of-pocket expenses incurred by them in
connection with forwarding solicitation materials to beneficial owners of Common
Stock held of record by such persons. Solicitation by the Company will be
primarily by mail.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
Upon the written request of a shareholder of the Company, addressed
to David R. Schreiber, Secretary of the Company, at 200 Watson Boulevard,
Stratford, Connecticut 06497, the Company will provide without charge to such
shareholder a copy of the Company's Annual Report on Form 10-K for its calendar
year ended December 31, 1996, including all statements and schedules (but
without exhibits), filed with the Securities and Exchange Commission.
------------------------
The information under the headings "Compensation Committee Report,"
"Compensation Program Components," "Discussion of 1996 Compensation for the
Chief Executive Officer" and "Performance Graph" above shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission or subject to Regulation 14A or 14C, other than as provided in Item
402 of Regulation S-K, or to the liabilities of Section 18 of the Securities
Exchange Act of 1934, as amended, and, unless specific reference is made therein
to such headings, shall not be incorporated by reference into any filing under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended.
<PAGE>
DIANON SYSTEMS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
THE UNDERSIGNED HEREBY APPOINTS D.R. SCHREIBER AND S.L. SWENSON, AND EACH OF
THEM, AS PROXIES, EACH WITH THE POWER TO APPOINT THEIR SUBSTITUTE, AND HEREBY
AUTHORIZES THEM TO REPRESENT AND TO VOTE AS DESIGNATED BELOW ALL THE SHARES OF
COMMON STOCK OF DIANON SYSTEMS, INC. (THE "COMPANY") HELD OF RECORD BY THE
UNDERSIGNED ON SEPTEMBER 19, 1997 AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE
HELD AT THE COMPANY'S CORPORATE HEADQUARTERS AT 200 WATSON BOULEVARD, STRATFORD,
CONNECTICUT, ON OCTOBER 30, 1997 AT 10:00 A.M., AND ANY ADJOURNMENT THEREOF.
PROPOSAL(S): MARK AN X IN THE APPROPRIATE BOX. PLEASE USE EITHER BLUE OR BLACK
INK.
MANAGEMENT/BOARD OF DIRECTORS OF THE REGISTRANT RECOMMENDS A VOTE FOR ALL THE
NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2.
1. ELECTION OF THE FOLLOWING NOMINEES FOR DIRECTOR: KEVIN C. JOHNSON, JOHN P.
DAVIS, JAMES B. AMBERSON, E. TIMOTHY GEARY, G. S. BECKWITH GILBERT, AND
JEFFREY L. SKLAR.
[ ] FOR ALL NOMINEES LISTED ABOVE [ ] WITHHOLD AUTHORITY
to vote for all nominees
listed above
TO WITHHOLD YOUR VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THE NAME(S) ON THE LINE
BELOW.
- --------------------------------------------------------------------------------
2. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN, LLP AS AUDITORS FOR
THE YEAR ENDING DECEMBER 31, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
- --------------------------------------------------------------------------------
[ ] CHECK IF YOU HAVE [ ] CHECK IF YOU [ ] CHECK IF YOU PLAN
MADE ADDITIONAL PLAN TO ATTEND TO ATTEND THE MEETING
COMMENTS THE MEETING AND VOTE YOUR SHARES
(Continued and to be SIGNED on Reverse Side)
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED OR IF NO CONTRARY
DIRECTION IS INDICATED WILL BE VOTED AS MANAGEMENT RECOMMENDS ON THESE AND ANY
OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT(S) OR
POSTPONEMENT(S) THEREOF. PLEASE SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE
ENVELOPE PROVIDED.
Signature of stockholder should correspond exactly with the
name shown on the proxy.
Corporate officers, powers of attorney, trustees, executors,
administrators, guardians, and others signing in a
representative capacity should each sign.
DATE
-------------------------------------------------------
-------------------------------------------------------
(SIGNATURE OF SHAREHOLDER)
-------------------------------------------------------
(SIGNATURE IF HELD JOINTLY)
If time warrants, improperly signed cards will be returned
for correction.
