SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
LABONE, INC.
(Name of Registrant as Specified In Its Charter)
Gregg R. Sadler - Secretary
10310 W. 84th Terrace
Lenexa, Kansas 66214
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6 (i)(2).
[ ] $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 14-a(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:*
4) Proposed maximum aggregate value of transaction:
*Set forth the amount on which the filing fee is calculated and state how it
was determined.
[ ] 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:
LabOne, Inc.
10310 W. 84th Terrace
Lenexa, Kansas 66214
(913) 888-8397
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 11, 1995
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The annual meeting of the stockholders of LabOne, Inc. (LabOne), a
Delaware corporation, will be held at the offices of LabOne, 10310 W. 84th
Terrace, Lenexa, Kansas, on Thursday, May 11, 1995, at 3:00 P.M., Central
Daylight Time, for the following purposes:
1. To elect 13 directors as set forth in the accompanying Proxy
Statement.
2. To approve an increase in the maximum number of shares which may
be issued under the corporation's Long-Term Incentive Plan.
3. To ratify the appointment of KPMG Peat Marwick LLP as independent
certified public accountants of the corporation and its
subsidiaries for the present fiscal year.
4. To transact such other business as may properly come before the
meeting and any adjournment thereof.
Stockholders of record at the close of business on March 13, 1995, are
entitled to vote at the meeting.
YOUR VOTE IS IMPORTANT. PLEASE DATE, SIGN AND RETURN THE ACCOMPANYING PROXY
PROMPTLY IN THE ENCLOSED ENVELOPE, WHETHER OR NOT YOU INTEND TO BE PRESENT AT
THE MEETING. Sending in your Proxy now will not interfere with your rights to
attend the meeting or to vote your shares personally at the meeting if you
wish to do so.
All stockholders are cordially invited to attend the meeting.
By Order of the Board of Directors
GREGG R. SADLER
Secretary
Dated: April 5, 1995
LabOne, Inc.
10310 W. 84th Terrace
Lenexa, Kansas 66214
(913) 888-8397
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PROXY STATEMENT
INTRODUCTION
This Proxy Statement is furnished to the stockholders of LabOne, Inc.
(LabOne), a Delaware corporation, in connection with solicitation of proxies
by the Board of Directors of LabOne for use at the Annual Meeting of
Stockholders to be held on Thursday, May 11, 1995, at 3:00 P.M., Central
Daylight Time, at the offices of LabOne, 10310 W. 84th Terrace, Lenexa,
Kansas, and at any adjournment thereof (the Annual Meeting). This Proxy
Statement, the Notice and the accompanying form of Proxy were first mailed
to the stockholders of LabOne on or about April 5, 1995.
A copy of LabOne's annual report for the fiscal year ended December 31,
1994, is enclosed herewith. Such report is not incorporated in the Proxy
Statement and is not to be deemed a part of the proxy soliciting material.
VOTING
Stockholders of record at the close of business on March 13, 1995, are
entitled to notice of and to vote at the meeting. There were 13,043,872
shares of common stock outstanding at the close of business on that date.
Stockholders are entitled to one vote per share on all matters submitted at
the Annual Meeting.
When a Proxy in the accompanying form is properly executed and returned,
the shares represented by the Proxy will be voted at the Annual Meeting in
accordance with the instructions thereon. If no instructions are specified,
such shares will be voted for (1) the nominees for directors named herein,
(2) the increase in the maximum number of shares which may be issued under
the corporation's Long-Term Incentive Plan, and (3) the ratification of the
selection of the independent public accountants. Abstentions and broker
nonvotes are counted for purposes of determining whether there is a quorum for
the transaction of business at the meeting. In tabulating the votes cast on
proposals presented to stockholders, abstentions are counted and broker
nonvotes are not counted for purposes of determining whether a proposal has
been approved.
A stockholder may revoke his or her Proxy at any time before it is voted
by giving to the Secretary of LabOne written notice of revocation bearing a
later date than the Proxy, by submitting a later-dated Proxy, or by revoking
the Proxy and voting in person at the Annual Meeting. Attendance at the
Annual Meeting will not in and of itself constitute a revocation of a Proxy.
Any written notice revoking a Proxy should be sent to Mr. Gregg R. Sadler,
Secretary, LabOne, 10310 W. 84th Terrace, Lenexa, Kansas 66214.
-1-
PROPOSAL 1
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ELECTION OF DIRECTORS
INFORMATION CONCERNING NOMINEES
FOR ELECTION AS DIRECTORS
The Board of Directors is currently composed of 14 Directors, whose terms
of office will expire upon the election of their successors at the Annual
Meeting. Effective with the election of Directors at the Annual Meeting, the
size of the Board will be reduced to 13 members.
The stockholders will be asked to elect 13 directors at the Annual
Meeting. Each of the persons listed below will be nominated to hold office
for a one-year term and until his successor is elected and qualified, or until
his earlier death, resignation or removal. It is expected that each of such
nominees will be available for election, but in the event that any of them
should become unavailable, the persons named in the accompanying Proxy will
vote for a substitute nominee or nominees designated by the Board of
Directors. The terms of office of the present Directors will expire upon the
election of their successors at the Annual Meeting.
Principal Occupation,
Five-Year Employment
History and Other A Director
Name (Age) Directorships (1) of LabOne Since
- ------------- ----------------------------------- ---------------
Giorgio Balzer (55) Chairman of the Board of Directors 1990
and Chief Executive Officer of
Business Men's Assurance Company
of America (BMA), Kansas City,
Missouri, an insurance company.
Mr. Balzer is also the Chairman of
the Board of Directors and Chief
Executive Officer of the U.S.
Branch of Generali-Assicurazioni
Generali, S.p.A., Rome, Italy,
("Generali"), an international
insurance company. He is also a
director of Commerce Bancshares,
Inc. and Jones & Babson.(2)
Joseph H. Brewer, President of and physician at Plaza 1988
M.D. (43) Internal Medicine-Infectious Disease,
P.C., Kansas City, Missouri,
physicians.
William D. Grant Chairman Emeritus of the Board of 1989
(78) Directors of Seafield Capital
Corporation (Seafield), formerly
BMA Corporation, Kansas City,
Missouri, a holding company which
owns 82% of the outstanding stock of
LabOne. He is also a director of
Boatmen's First National Bank of
Kansas City, N.A.(3)
-2-
W. Thomas Grant II Chairman of the Board of Directors and 1983
(44) Chief Executive Officer of Seafield.
He is also a director of Commerce
Bancshares, Inc., Kansas City Power
& Light Company and Response
Technologies, Inc.(4)
Bert H. Hood Chairman of the Board of Directors, 1993
(49) President and Chief Executive Officer
of LabOne.(5)
P. Anthony Jacobs President, Chief Operating Officer 1987
(53) and a director of Seafield. He is
also a director of Trenwick Group,
Inc. and Response Technologies, Inc.(6)
Neal L. Patterson Chairman, Chief Executive Officer 1987
(45) and a director of Cerner Corporation,
Kansas City, Missouri, a developer
of computer software and hardware
systems designed specifically for
hospitals and medical laboratories.
Richard A. Rifkind, Chairman of the Sloan-Kettering 1987
M.D. (64) Institute, New York, New York, a
medical research institution.
Gregg R. Sadler, Executive Vice President-Adminis- 1985
FSA (44) tration and Secretary of LabOne
and President-Home Office
Reference Laboratory Division of
LabOne.(7)
Richard S. Schweiker Retired. He was President of the 1995
(68) American Council of Life Insurance,
Washington, D.C., a life insurance
trade association, through December,
1994. He is a director of Tenet
Healthcare Corporation and Univax
Biologics, Inc.(8)
James R. Seward Executive Vice President, Chief 1995
(42) Financial Officer and a director of
Seafield. He is also a director of
Response Technologies, Inc.(9)
John E. Walker Managing Director-Reinsurance of 1984
(56) BMA.(10)
R. Dennis Wright, Member of Hillix, Brewer, Hoffhaus, 1987
Esq. (52) Whittaker & Wright, L.L.C., Kansas City,
Missouri and its Executive Committee.(11)
- ---------------------
-3-
(1) Unless otherwise indicated, each Director has had the same
principal occupation during the last five years.
(2) Mr. Balzer was appointed Chairman of the Board and Chief Executive
Officer of BMA in 1990 and Chairman of the Board and Chief Executive
Officer of Generali in 1993. Prior to 1993 he served as President of
Generali.
(3) Mr. W. D. Grant was appointed Chairman Emeritus of Seafield in 1993.
Prior thereto he served as Chairman of the Board of Seafield. He is
the father of W. Thomas Grant II.
(4) Mr. W. Thomas Grant II was appointed Chairman of the Board of Seafield
in 1993. Prior thereto he was President of Seafield and Chairman of
the Board of LabOne. He is the son of W. D. Grant.
(5) Mr. Hood was appointed Chairman of the Board, President and Chief
Executive Officer of LabOne in 1993. Mr. Hood was an independent
consultant to major clinical testing laboratories from 1992 to 1993.
From 1990 to 1992, Mr. Hood was President and Chief Executive Officer
of Unilab Corporation d/b/a MetWest, Inc., a collection of five
formerly separate clinical testing laboratories in the western United
States which are partially owned by Corning Lab Services, Inc.
(6) Mr. Jacobs was appointed President of Seafield in 1993 and Chief
Operating Officer in 1990. Prior to 1993 he served as Executive
Vice President of Seafield.
(7) Mr. Sadler was appointed President-Home Office Reference Laboratory
Division of LabOne in August 1994. He was appointed Executive Vice
President-Administration of LabOne in 1993. Prior thereto he was
Executive Vice-President of LabOne. He has served as Secretary of
LabOne since 1988.
(8) Mr. Schweiker was appointed a Director of LabOne in February 1995.
(9) Mr. Seward was appointed a Director of LabOne in November 1994. He
was appointed Executive Vice President of Seafield in 1993 and has
served as Chief Financial Officer of Seafield since 1990.
(10) Mr. Walker also served as Vice Chairman of the Board of Directors
of LabOne prior to 1994.
(11) Hillix, Brewer, Hoffhaus, Whittaker & Wright, L.L.C., provides legal
services to LabOne, for which it was paid $396,435 in fees during 1994.
-4-
Meetings of the Board of Directors and Committees
There were four meetings of the Board of Directors during 1994. The
Board of Directors has an Audit Committee, a Compensation Committee and an
Executive Committee. During 1994, the Audit Committee and the Compensation
Committee each met three times. All Directors attended 75 percent or more of
the total number of all meetings of the Board and of Committees of which they
are members during 1994, with the exceptions that Mr. Balzer was unable to
attend the February 11 meetings of the Board and Audit Committee and Mr.
Rifkind was unable to attend the February 11 meetings of the Board, Audit
Committee and Compensation Committee.
The Audit Committee consists of Mr. Wright, Chairman, and Messrs.
Balzer, W. D. Grant, Patterson, Rifkind and Walker. The Audit Committee
reviews LabOne's financial statements with the independent auditors,
determines the effectiveness of the audit effort through meetings with
the independent auditors and officers of LabOne, inquires into the
effectiveness of LabOne's internal controls through discussions with
the independent auditors, reports to the Board on its activities and
recommendations, and recommends to the Board the appointment of independent
auditors for the ensuing year.
The Compensation Committee consists of Mr. W. Thomas Grant II, Chairman,
and Messrs. Brewer, Jacobs and Schweiker. The purpose of the Compensation
Committee is to oversee LabOne's compensation structure, incentive plans and
other employee benefits. The Compensation Committee reviews and recommends
adjustments to the officers' salary structure. It approves cash awards to
nonofficer employees and recommends to the Board amounts to be set aside and
cash awards to be paid to officers under LabOne's cash bonus plan. The
Committee recommends to the Board compensation for nonofficer directors,
monitors the administration of employee benefit plans and reviews significant
employee supplementary pension or termination arrangements.
The Executive Committee consists of Mr. W. Thomas Grant II, Chairman,
and Messrs. Hood, Jacobs, Patterson, Seward and Sadler. The purpose of the
Executive Committee is to act on behalf of the Board of Directors and to
serve in an advisory capacity to management. The Executive Committee also
develops, recommends and reviews policy guidelines for all investments and
borrowings of LabOne and recommends outside investment management firms to
provide services to LabOne. The Executive Committee exercises all the
powers and authority of the Board in interim periods between meetings of
the Board, except as limited by Delaware law, and reports all of its actions
to the Board.
LabOne does not have a standing nominating committee of the Board
of Directors or a committee performing a similar function.
-5-
Executive Officers
<TABLE>
The executive officers of LabOne are as follows:
An
Five-Year Executive
Employment of LabOne
Name (Age) Position History Since
<S> <C> <C> <C>
Bert H. Hood Chairman of the (1) 1993
(49) Board of Directors,
President and Chief
Executive Officer
Carl W. Ludvigsen, Executive Vice President- Dr. Ludvigsen was appointed Executive 1989
Jr., M.D., Ph.D., Operations and Chief Vice President-Operations in December
J.D., FCAP, FCLM Operating Officer 1993. He was Executive Vice President
(42) from August 1993 to December 1993.
Prior thereto he was Senior Vice
President and Chief Pathologist.
Roger K. Betts Executive Vice President- Mr. Betts was appointed Executive Vice 1983
(52) Sales-Home Office President-Sales-Home Office Reference
Reference Laboratory Laboratory Division in August 1994. He
Division was Senior Vice President-Sales of the
Division from 1993 to 1994. Prior
thereto he was Senior Vice President-
Technical Sales & Support.
Bill D. Roberts, Executive Vice President- Dr. Roberts was appointed Executive 1987
Ph.D.(43) Technology Development Vice President-Technology Development
in December 1993. Prior thereto he
was Executive Vice President-
Operations.
Daniel J. Roberts Executive Vice President- Mr. Roberts was appointed Executive 1993
(46) Sales & Marketing Vice President-Sales & Marketing
in December 1993. He was Vice
President-Business Development
Sales and Marketing from August
1993 to December 1993. He was
Vice President-Sales of the South-
west Region of MetWest, a division
of Unilab Corporation from 1991
to 1993. From 1990 to 1991 he was
Vice President-Sales & Marketing of the
Northern California Region of MetWest.
Gregg R. Sadler, Executive Vice President- (2) 1988
FSA (44) Administration and
Secretary
Robert D. Thompson Executive Vice President- Mr. Thompson was appointed Executive 1993
(33) Finance, Chief Financial Vice President-Finance, Chief Financial
Officer and Treasurer Officer and Treasurer in December 1993.
He was Vice President-Business
Development Planning from August 1993 to
December 1993. He was an independent
financial consultant from 1992 to 1993.
From 1991 to 1992 he was Chief Financial
Officer of MetWest, a division of Unilab
Prior to 1991 he acted as an account
manager for Strategic Planning
Associates, a Washington, D.C.
management consulting firm.
-6-
Robert F. Thompson President-Head Office Mr. Thompson has served as President 1985
(59) Reference Laboratory of Head Office Reference Laboratory
Limited Limited, LabOne's wholly-owned
Canadian subsidiary, since 1988.
Kurt E. Gruenbacher, Corporate Controller Mr. Gruenbacher was appointed Corpor- 1994
CPA, CMA (35) ate Controller in May 1994. From 1993
to 1994 he was Director, Financial
Analysis and Budgets. Prior thereto
he was Manager, Financial Analysis and
Budgets.
</TABLE>
- --------------------------
(1) See footnote (5) on page 4 hereof for Mr. Hood's five-year employment
history.
(2) See footnote (7) on page 4 hereof for Mr. Sadler's five-year
employment history.
PROPOSAL 2
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INCREASE IN MAXIMUM NUMBER OF SHARES
WHICH MAY BE ISSUED UNDER LONG-TERM INCENTIVE PLAN
The Board of Directors has adopted, subject to approval by the
stockholders at the Annual Meeting, an amendment to the corporation's
Long-Term Incentive Plan ("Plan") to increase the maximum number of shares
which may be issued under the Plan from 1,800,000 shares to 2,150,000
shares.
The Plan was originally adopted in 1987 and increases in the number
of shares which may be issued under the Plan were approved by stockholders
in 1991 and 1994. Under the Plan, options for 738,600 shares are currently
held by all executive officers as a group, options for 231,488 shares are
held by all Directors who are not executive officers as a group, and
options for 461,111 shares are held by all employees who are not executive
officers as a group. 83,161 shares currently remain available for option
grants under the Plan, which expires in 1997.
The Board of Directors believes that it would be desirable to increase
the maximum number of shares which may be issued under the Plan by 350,000
shares to create an additional reserve of shares available for future
grants under the Plan to new executive employees and to achieve equity
among current optionees. The identity of future optionees and the amounts
of future option grants are not presently determinable. All of the
remaining provisions of the current Plan will remain in full force and
effect without modification. The principal features of the Plan are
summarized below.
The increase in the maximum number of shares which may be issued under
the Plan will be approved upon receiving the affirmative vote of a majority
of the outstanding shares of common stock.
-7-
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL
OF THE INCREASE IN THE MAXIMUM NUMBER OF SHARES WHICH MAY BE ISSUED UNDER THE
LONG-TERM INCENTIVE PLAN.
Long-Term Incentive Plan
The purpose of the Plan is to further the earnings of LabOne and its
subsidiaries (hereinafter sometimes collectively referred to as the
"Company") by assisting the Company in attracting, retaining and
motivating management employees and Directors of high caliber and
potential. The Plan provides for the award of long-term incentives
to those officers, other key executives and Directors who make
substantial contributions to the Company by their loyalty, industry
and invention.
Administration
The Plan is to be administered by a committee (the Committee)
consisting of three or more persons selected by the Board of Directors.
Each Committee member shall be an outside director of the Company and
a "disinterested person" within the meaning of federal securities
regulations.
The Committee has full and final authority to interpret the Plan
and to decide all questions of fact arising in its application. Subject
to the provisions of the Plan, the Committee's powers include, but are
not limited to, determining the employees and Directors to receive awards
under the Plan, determining the type, amount and sizes of each such award,
determining the time when each such award shall be granted, and
determining the provisions of each agreement evidencing an award.
Stock Subject to the Plan
The Committee may grant awards under the Plan with respect to not
more than a total of 1,800,000 shares of common stock of LabOne (Shares),
subject to adjustment as provided in the Plan. Except as otherwise
provided in the Plan, Shares subject to an option or right which is
surrendered, expires or is terminated unexercised and Shares granted
pursuant to restricted stock awards which are forfeited shall again
become available for the granting of awards under the Plan.
Eligibility to Receive Awards
Persons eligible to receive awards under the Plan are limited to
those officers, other key executive employees and Directors of the Company
who are in positions in which their decisions, actions and counsel have
a significant impact upon the profitability and success of the Company.
Each person elected to serve as an outside Director of the Company
automatically receives a one-time grant of a Non-Qualified Stock Option
to purchase 22,000 Shares at an option price equal to 100% of the fair
market value of the Shares on the date the option is granted. Outside
Directors are not eligible to receive any additional awards under the
Plan. As of March 13, 1995, 9 executive officers, 11 Directors (excluding
executive officers) and 70 employees (excluding executive officers) of
LabOne were participants in the Plan.
-8-
Form of Awards
Under the Plan, awards may be made from time to time by the Committee
in the form of stock options to purchase Shares, stock appreciation
rights, performance units, restricted stock, or any combination of the
above. Stock options may be options which are intended to qualify as
Incentive Stock Options within the meaning of Section 422(b) of the
Internal Revenue Code of 1986, as amended (Incentive Stock Options),
or options which are not intended to so qualify (Non-Qualified Stock
Options).
Stock Options
No cash consideration will be received by the Company for the granting
of any option. All options granted under the Plan to date have been at
option prices equal to the fair market value of the Shares on the dates
of option grants, although the Plan gives the Committee the discretion to
grant Non-Qualified Stock Options at option prices less than fair market
value on the dates of grants. The closing price of LabOne stock on March
13, 1995 on the National Association of Securities Dealers' Automated
Quotations System, as reported by the Wall Street Journal, was $13.00
per share.
Under the Plan, the written agreement evidencing stock options shall:
(i) identify the options represented thereby as Incentive Stock Options
or Non-Qualified Stock Options and specify the number of Shares subject
to the options, (ii) set forth the option exercise price per Share, (iii)
designate the periods of time within which the option may be exercised,
in whole or in part, provided that no Incentive Stock Option shall be
exercisable after ten years and no Non-Qualified Stock Option shall be
exercisable after ten years and one day from the date of grant thereof,
and (iv) provide that the purchase price of Shares shall be payable in
full at the time of exercise in cash, Shares at fair market value or a
combination thereof, as the Committee may determine. Optionees have the
right, subject to certain conditions, to elect to pay all or a part of the
purchase price by requesting the Company to reduce the number of Shares
otherwise issuable upon exercise by a number of Shares having a fair market
value equal to the purchase price. The Committee may provide in the option
agreement circumstances under which the option will become immediately
exercisable, in whole or in part, and the Committee may accelerate the
exercisability of any option in whole or in part at any time.
In the case of an Incentive Stock Option, each option agreement
shall contain such additional provisions as the Committee determines are
necessary to qualify such option as an Incentive Stock Option, including
without limitation: (i) the purchase price of stock subject to an
Incentive Stock Option shall not be less than 100% of the fair market
value of such stock on the date of grant, and (ii) the aggregate fair
market value (determined as of the date of grant) of the stock with
respect to which Incentive Stock options are exercisable for the first
time by an optionee in any calendar year (under all plans of the Company
and its parent and subsidiary corporations) shall not exceed $100,000.
-9-
Termination of Employment
With respect to stock options, if an optionee ceases to be an
employee or Director of the Company for any cause other than retirement,
death or disability, as defined in the Plan, the optionee may exercise
the option during its term within three months after termination to the
extent that the option was exercisable at the time of termination, or
within such other period specified by the Committee. If an optionee
retires, dies or becomes disabled prior to the expiration and full exercise
of the employee's option, the optionee or his or her beneficiary may
exercise the option during its term within a period of (i) one year
after termination of employment due to retirement, death or disability,
or (ii) one year after death if death occurs either within one year
after termination of employment due to retirement or disability or within
three months after termination of employment for other reasons, to the
extent that the option was exercisable at the time of death or termination,
or within such other period specified by the Committee.
Non-Assignability
No award under the Plan shall be assignable or transferable by
the recipient except by will or by the laws of descent and distribution,
and the award may be exercised during the life of the recipient only by
him or her.
Withholding
Prior to the issuance or transfer of Shares under the Plan, the
recipient shall remit to the Company an amount sufficient to satisfy
any federal, state or local withholding tax requirements. The recipient
may satisfy the withholding requirement in whole or in part by electing,
prior to the date that the withholding amount is determined, to have the
Company withhold Shares equal in value to the withholding amount,
subject to applicable securities law and other legal requirements.
Whenever payments to a grantee under the Plan are to be made in cash,
such payments shall be net of the amount necessary to satisfy withholding
tax requirements.
Adjustments
In the event of any change in the outstanding common stock of
LabOne, by reason of a stock dividend or distribution, recapitalization,
merger, consolidation, reorganization, split-up, combination, exchange
of Shares or the like, the Board of Directors, in its discretion, may
adjust proportionately the number of Shares which may be issued under
the Plan, the number of Shares subject to outstanding awards, and the
option exercise price of each outstanding option. The Board of
Directors may also make such other changes in outstanding options as
it deems equitable in its absolute discretion to prevent dilution or
enlargement of the rights of grantees, provided that any fractional
Shares resulting from such adjustments shall be eliminated.
-10-
Amendment of Plan
The Board of Directors may terminate, amend, modify or suspend
the Plan at any time, except that the Board of Directors may not,
without the authorization of the holders of a majority of LabOne's
outstanding Shares, increase the maximum number of Shares which may
be issued under the Plan (other than adjustments pursuant to the Plan),
extend the last date on which awards may be granted under the Plan,
extend the date on which the Plan expires, change the class of persons
eligible to receive awards, or change the minimum option price.
No termination, modification, amendment or suspension of the Plan
shall adversely affect the rights of any grantee or beneficiary under
an award previously granted, unless the grantee or beneficiary shall
consent; but it shall be conclusively presumed that any adjustment
pursuant to the Plan does not adversely affect any such right.
Effective Date and Duration of Plan
Unless sooner terminated in accordance with the Plan, the Plan
will remain in effect until all awards under the Plan have been
satisfied by the issuance of Shares or the payment of cash or have
expired or otherwise terminated, but no award shall be granted after
July 21, 1997.
Federal Tax Consequences
The following description of tax consequences is based upon
present federal income tax laws and is subject to change as the
laws change.
With respect to Non-Qualified Stock Options, the exercise of
the option will result in the recognition of ordinary income by the
optionee in an amount equal to the difference between the option price
and the fair market value of the Shares acquired upon the exercise of
the option. LabOne will be entitled to a deduction equal to the amount
of income recognized by the optionee. Upon the later sale of any
Shares acquired upon the exercise of a Non-Qualified Stock option,
any amount realized by the optionee in excess of the amount recognized
by the optionee as ordinary income ordinarily will be treated as long
or short-term capital gain to the optionee, depending upon the holding
period of the Shares.
With respect to Incentive Stock Options, no income will be realized
by an optionee upon the optionee's purchase of Shares pursuant to the
exercise of the option. In order to receive this tax benefit, the
optionee must make no disposition of the Shares so purchased before
Shares have been held for at least one year after the date of exercise
and at least two years after the date of grant. Assuming compliance
with this and other applicable tax provisions, an optionee ordinarily
will recognize long-term capital gain or loss when the optionee disposes
of his or her shares, measured by the difference between the option
price and the amount realized for the Shares at the time of disposition.
-11-
If the optionee disposes of Shares purchased upon the exercise of the
option before the expiration of the above-noted periods, any amount
realized from such disqualifying disposition will be taxable as
ordinary income in the year of disposition to the extent of the
lesser of the amount realized by the optionee in excess of the
option price, or the spread between the option price and the fair
market value of the Shares at the time the option is exercised.
Any amount realized in excess of the fair market value of the Shares
on the date of exercise ordinarily will be treated as long or short-
term capital gain, depending upon the holding period of the Shares.
No deduction will be allowed to LabOne at the time of the grant or
exercise of an Incentive Stock Option. At the time of a disqualifying
disposition by an optionee, LabOne will be entitled to a deduction
for the amount taxable to the optionee as ordinary income. An
individual's taxable income for alternative minimum tax purposes
includes the excess of the fair market value of the shares acquired
pursuant to an Incentive Stock Option on the date of exercise over
the exercise price. Thus, exercise of an Incentive Stock Option may
subject an optionee to the alternative minimum tax in the tax year
which includes the date of exercise.
PROPOSAL 3
----------
SELECTION OF AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP to examine
the accounts of LabOne and its subsidiaries for the fiscal year ending
December 31, 1995.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS.
Representatives of KPMG Peat Marwick LLP are expected to be present
at the Annual Meeting to make any statement they may desire and to
respond to appropriate questions concerning the audit report.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table provides certain summary information concerning
compensation paid or accrued by LabOne to or on behalf of its chief
executive officer and four most highly compensated executive officers
as of December 31, 1994, for services rendered in all capacities to
LabOne and its subsidiaries for each of the last three completed fiscal
years.
-12-
* * Long-Term *
* Annual Compensation * Compensation* All
Name and Fiscal* ------------------- * ------------* Other
Principal Position Year * *Stock Option *Compensation
------------------ ------* * Shares * ($) (1)
* Salary ($) Bonus ($)* Granted (#)*
* ---------- ---------* -----------*------------
Bert H. Hood 1994 200,641 0 0 26,351
Chairman of the 1993 83,333 100,000 200,000 76,849(2)
Board of Direc- 1992 0 0 0 0
tors, President
and Chief
Executive Officer
Carl W. Ludvigsen, 1994 214,686 0 0 20,216
Jr. 1993 197,333 30,143 45,000 27,778
Executive Vice 1992 185,208 44,417 0 27,268
President-Operations
and Chief Operations
Officer
Robert F. Thompson 1994 139,661 0 0 20,216
President-Head 1993 124,800 28,686 8,000 23,033
Office Reference 1992 127,467 58,981 0 23,626
Laboratory Limited
Kenneth A. Stelzer 1994 127,693 0 0 207,336(3)
Vice Chairman of 1993 163,754 66,603 10,000 27,778
the Board of 1992 156,171 123,573 0 27,207
Directors of
LabOne and Presi-
dent-Home Office
Reference Labora-
tory Division
through August 1994
Gregg R. Sadler 1994 126,404 0 0 20,161
Executive Vice 1993 128,800 23,164 6,000 22,326
President-Admin- 1992 123,925 46,863 0 22,995
istration and
Secretary, of
LabOne and Presi-
dent-Home Office
Reference Labora-
tory Division
Robert D. Thompson 1994 125,401 0 0 12,714
Executive Vice 1993 45,059 30,263 80,000 0
President-Finance, 1992 0 0 0 0
Chief Financial
Officer and
Treasurer
Daniel J. Roberts 1994 125,401 0 0 12,714
Executive Vice 1993 45,059 30,263 80,000 2,866(4)
President-Sales & 1992 0 0 0 0
Marketing
-13-
(1) The amounts shown in this column consist of contributions by LabOne
to the accounts of the named executive officers under LabOne's defined
contribution pension plan and 50% matching contributions by LabOne to
the accounts of such persons under LabOne's profit-sharing 401(k)
plan.
(2) A $60,000 signing bonus was paid to Mr. Hood upon the execution of
his Employment Agreement with LabOne in August 1993 and $16,849 in
relocation expenses were paid in connection with Mr. Hood's move
to Lenexa, Kansas.
(3) Includes all payments made or accrued during 1994 under a Severance
Agreement entered into in August 1994 terminating an Employment
Agreement between Mr. Stelzer and LabOne. Under the Severance
Agreement, Mr. Stelzer resigned as Vice Chairman of the Board of
Directors of LabOne and as President-Home Office Reference
Laboratory Division, agreed to perform such consulting and other
services as may reasonably be requested by LabOne for a period of
two years after his resignations and agreed not to compete with
LabOne during such period, for which LabOne agreed to pay to Mr.
Stelzer $15,000 on the signing of the Agreement, $6,000 per month
for 24 months, $68,088 on January 3, 1995 for the cancellation of
certain stock options held by Mr. Stelzer, $27,084 on March 1, 1995
for the cancellation of certain stock options held by Mr. Stelzer,
$40,366 on September 25, 1996, to assign to Mr. Stelzer title to a
company automobile valued at $25,120, and to pay approximately
$26,000 for Mr. Stelzer's outplacement services and certain country
club dues.
(4) Payment of relocation expenses in connection with Mr. Robert's move
to Lenexa, Kansas.
Option Grants, Aggregate Option Exercises and December 31, 1994 Option Value
Table
No options were granted to the named executive officers during 1994.
The following table provides certain information concerning the exercise
of stock options during 1994 by each of the named executive officers and the
number and value of unexercised options held by such persons at December 31,
1994.
<TABLE>
<CAPTION> Number of Unexercised Value of Unexercised
Options at In-the-Money Options
December 31, 1994(#) at December 31, 1994($)
Shares
Acquired on Value Options Options Options Options
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- -------------- ----------- -------- --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Bert H. Hood 0 0 150,000 50,000 225,000 75,000
Carl W. Ludvigsen, Jr. 0 0 43,645 25,355 133,168 70,079
Robert F. Thompson 0 0 41,988 26,012 215,587 105,843
Kenneth A. Stelzer 72,971 667,863 0 0 0 0
Gregg R. Sadler 0 0 45,943 30,057 227,594 128,800
Robert D. Thompson 0 0 53,334 26,666 80,001 39,999
Daniel J. Roberts 0 0 53,334 26,666 80,001 39,999
</TABLE>
-14-
Compensation of Directors
Directors who are not employees of LabOne or Seafield Capital
Corporation receive an annual retainer fee of $5,000 in cash and a grant
of a number of shares of common stock of LabOne having a value equal to
$10,000, plus $500 for each Board and Committee meeting attended and
reimbursement for reasonable expenses in attending meetings.
Richard S. Schweiker, who was appointed a Director of LabOne on
February 1, 1995, has agreed to attend national meetings of insurance
underwriters on LabOne's behalf and to make selected contacts in
furtherance of LabOne's business, for which services LabOne will pay
Mr. Schweiker additional fees of $30,000 annually.
Employment Agreements
LabOne has an Employment Agreement with Bert H. Hood, Chairman of
the Board of Directors, President and Chief Executive Officer, providing
for the employment of Mr. Hood for a three-year term ending in 1996 and
renewable annually thereafter for successive one-year terms unless LabOne
elects not to extend the Agreement. Mr. Hood's compensation under the
Agreement consisted of a signing bonus of $60,000, an annual base salary
of not less than $200,000, an annual incentive bonus to be established by
the Compensation Committee of the Board of Directors after consultation
with Mr. Hood, the purchase by LabOne of Mr. Hood's Texas residence for
a purchase price net to Mr. Hood equal to the average of the fair market
values of the residence established by two independent appraisers, the
granting of a nonqualified stock option to Mr. Hood for 200,000 shares
of LabOne common stock, and participation in LabOne's other fringe benefit
programs for executives. In the event that LabOne terminates Mr. Hood's
employment without cause (as defined in the Agreement), LabOne will pay
to Mr. Hood a lump sum severance payment equal to his base salary due
for the balance of the term of the Agreement, plus one year's annual base
salary. If a change of control of LabOne (as defined in the Agreement)
occurs at any time during which Mr. Hood is in LabOne's full-time
employment, and within one year after such a change in control Mr. Hood's
employment is terminated for any reason other than permanent disability,
death or normal retirement, LabOne will pay Mr. Hood as termination
compensation a lump sum amount equal to three times his average annual
compensation for the most recent five taxable years (subject to certain
limitations prescribed in the Internal Revenue Code) and any remaining
term of the Agreement shall be cancelled. Under the Agreement, Mr. Hood
agrees not to compete with LabOne for a period of two years after the
termination of his employment with LabOne.
LabOne loaned $150,000 to Mr. Hood on September 7, 1994. Mr.
Hood delivered to LabOne his unsecured promissory note evidencing the
indebtedness, payable on the earlier of September 7, 1995 or the date
of the termination of his employment under the Employment Agreement
described above. Interest is payable on the note at 7.75% per annum,
payable quarterly. The sums due on the note may at the option of LabOne
be set off against any sums due Mr. Hood under his Employment Agreement
or otherwise. The outstanding principal balance on the note as of March
13, 1995 was $150,000 and accrued interest has been paid.
-15-
LabOne also has Employment Agreements with Carl W. Ludvigsen, Jr.,
Robert F. Thompson, Gregg R. Sadler, Robert D. Thompson and Daniel J.
Roberts, providing for their employment for two-year terms ending in
1995 (1996 for Robert F. Thompson) and renewable annually thereafter for
successive one-year terms unless LabOne elects not to extend the Agreements.
The Agreements provide for compensation consisting of annual base salaries
of $214,000 to Mr. Ludvigsen, $120,000 to Mr. Robert F. Thompson, $126,000
to Mr. Sadler, $125,000 to Mr. Robert D. Thompson and $125,000 to Mr.
Roberts, and annual incentive bonuses established by the Compensation
Committee of the Board of Directors and participation in LabOne's other
fringe benefit programs for executives. Mr. Ludvigsen also received under
his Agreement a stock option for 40,000 shares of LabOne common stock.
In the event that LabOne terminates any of such executive officers without
cause (as defined in the Agreements), LabOne will pay to the terminated
executive officer a lump sum severance payment equal to his base salary
for the balance of the term of the Agreement, plus 50% of one year's
annual base salary. If a change of control of LabOne (as defined in
the Agreements) occurs at any time during which the executive officer is
in LabOne's full-time employment, and within one year after such a change
in control the executive officer's employment is terminated for any reason
other than permanent disability, death or normal retirement, LabOne will
pay the officer as termination compensation a lump sum amount equal to
three times the officer's average annual compensation for the most recent
five taxable years (subject to certain limitations prescribed in the
Internal Revenue Code) and any remaining term of the Agreement shall be
cancelled. Under each Agreement, the executive officer agrees not to
compete with LabOne for a period of two years after the termination of
his employment with LabOne.
The stock options granted under the corporation's Long-Term
Incentive Plan to Mr. Hood and the other executive officers named
in the Summary Compensation Table on page 13 hereof provide that
the options held by each of such executive officers shall become
fully exercisable if a change of control of LabOne (as defined in
the stock option agreements) shall occur, or upon termination of the
officer's employment by LabOne without cause (as defined).
Board Compensation Committee Report on Executive Compensation
LabOne's executive compensation program is administered by the
Compensation Committee, a Committee of the Board of Directors composed
of the nonemployee Directors listed at the end of this report. As
noted earlier in this Proxy Statement, all issues pertaining to
executive compensation are reviewed by the Compensation Committee and
recommendations are submitted by the Committee to the full Board of
Directors for approval.
-16-
Compensation Philosophy
The philosophy governing executive compensation is based on a
belief that management and stockholders have a common goal -- increasing
the value of LabOne. The business strategy for achieving this goal is
expressed in LabOne's mission statement:
"LabOne is dedicated to maximizing the return on investment for
our stockholders . . . to providing the lowest-cost, highest-
quality laboratory testing services for our clients . . . to
providing a working environment that emphasizes accountability
for results and rewards employees based on their contribution
to the Company's success."
Three principal elements of executive compensation -- base salary,
annual incentive plan, and stock options -- are used to motivate and
reward the accomplishment of annual corporate objectives, reinforce a
strong orientation toward operating excellence, provide variability in
individual awards based on contributions to business results, and
maintain a competitive compensation package to attract, retain and
motivate individuals of the highest professional quality.
Base Salary
Salary ranges were developed based on a survey initially conducted
in 1986 by an independent consultant and updated in 1989. Base salaries
are targeted at the 60th to 65th percentile of pay for comparable
positions in "All Industrial Base Salaries" surveyed by the consultant.
In determining base salary levels, the Committee considers individual
performance evaluations for each executive officer. Measurements
related to LabOne's performance are not a significant factor in base
salary decisions since they are the sole factors in determining
incentive awards and the value of stock options.
Annual Incentive Plan
The Annual Incentive Plan was revised in 1994 to meet the objective
of motivating and rewarding the accomplishment of strong operating
results. An after-tax return on equity minimum is established at the
beginning of the fiscal year by the Compensation Committee, which
minimum is then expressed as a net income threshold. No incentive
payments are made if the minimum net income threshold is not met.
This net income threshold emphasizes the areas on which management
can have the greatest impact: revenue and expenses. The incentive
pool is established as an increasing percentage of the net income
earned by LabOne, inc. over the minimum threshold. Approximately 90%
of the incentive pool is distributed in cash ratably to designated
officers and managers at year end based on a weighting of positions
and base salaries. The remaining 10% is distributed to outstanding
performers within the eligible group based on the recommendation of
the CEO to the Compensation Committee. No bonuses were paid under the
Plan for 1994.
-17-
Stock Options
The Compensation Committee, as well as the Board of Directors,
believes that significant stock ownership through stock options by key
employees and directors is a major incentive in aligning the interests
of employees and stockholders, because value is only provided if the
stock price increases and because stock options have an effective long-
term reward and retention function.
The stockholders approved the Long-Term Incentive Plan in 1987
and increases in the number of shares which may be issued under the
Plan were approved by stockholders in 1991 and 1994. Under the Plan,
ten-year Non-Qualified stock options are granted to executive officers
and other key employees when they are hired or promoted into eligible
positions. These grants are made on a one-time basis with vesting to
occur over periods from three months to five years. In addition to
executive officers and employees, each nonemployee Director of the
Company has also received a ten-year Non-Qualified stock option grant
to vest over four years.
LabOne also has a Stock Plan for Nonemployee Directors under which
nonemployee directors receive annual retainer fees of $5,000 in cash and
a grant of a number of shares of LabOne stock having a value equal to
$10,000. The purpose of the plan is to provide nonemployee directors
with an additional proprietary interest in LabOne's success and progress.
Chief Executive Officer's Compensation
Mr. Hood's compensation as Chief Executive Officer was determined by
negotiation of an employment agreement at the time of his employment in
August 1993. See "Executive Compensation-Employment Agreements" for a
description of the agreement. A significant portion of Mr. Hood's
compensation under the employment agreement is represented by stock
options which tie his level of compensation to LabOne's future stock
performance, as Mr. Hood's expertise was procured in order to lead the
corporation's expansion efforts into clinical diagnostic testing, which
are designed to enhance LabOne's future earnings potential. No annual
incentive bonus was paid to Mr. Hood for 1994.
Deductibility Cap on Compensation Exceeding $1,000,000
The Committee does not believe that proposed Internal Revenue Service
regulations regarding non-deductibility of annual compensation in excess
of $1,000,000 will have any material impact upon LabOne given the current
salary and bonus levels of officers of the corporation, and given the
proposed treatment in the regulations of compensation under the corporation's
Long-Term Incentive Plan. However, the Committee will continue to consider
the effect of the new regulations upon LabOne's executive compensation
policies.
Submitted by the Compensation Committee
W. T. Grant II, Chairman
Joseph H. Brewer
P. Anthony Jacobs
Richard S. Schweiker
-18-
Comparison of Five Year Cumulative Total Returns Among
LabOne, NASDAQ Composite Index and Russell 2000 Index
THE GRAPHICAL FORM OF THE "PERFORMANCE CHART" IS REPRESENTED BY THE TABLE
BELOW. THE DATA POINTS IN THE TABLE ACCURATELY PRESENT THE INFORMATION FROM
THE PERFORMANCE CHART.
1989 1990 1991 1992 1993 1994
-----------------------------------------------------
LabOne, Inc. 100.00 54.93 87.18 82.41 116.25 101.15
Nasdaq US CRSP Index 100.00 84.92 136.28 158.58 180.93 176.91
Russell 2000 Index 100.00 80.49 117.56 139.21 165.52 162.51
The table assumes the investment at the close of business on December
31, 1989 of $100 in LabOne's common stock and in the portfolio represented
in each index, and assumes that all dividends were reinvested.
The Russell 2000 Index is an index of companies with market
capitalizations similar to LabOne. It has been selected because LabOne
cannot reasonably identify a peer group of companies for comparison.
LabOne believes that an index of companies with similar capitalizations
provides a good basis for comparing total stockholder returns.
-19-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table shows as of March 13, 1995, the total number of
shares of common stock of LabOne beneficially owned by persons known to
be beneficial owners of more than 5% of the outstanding stock.
Percentage of
Shares of LabOne Outstanding Shares
Beneficially Owned of LabOne Beneficially
Beneficial Owner March 13, 1995(1) Owned March 13, 1995
---------------- ----------------- --------------------
Seafield Capital Corporation, 10,712,200 82.1%
2600 Grand, Suite 500,
Kansas City, Missouri 64141
(1) Seafield has sole voting and investment power with respect to the
shares listed.
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows as of March 13, 1995, for each Director, each
of the executive officers named in the Summary Compensation Table on page 13
hereof, and all Directors and executive officers of LabOne as a group, the
total number of shares of common stock of LabOne and of Seafield beneficially
owned by such persons.
Percentage of Percentage of
Outstanding Outstanding
Shares of Shares Shares of Shares of
LabOne Bene- of LabOne Seafield Seafield
ficially Beneficially Beneficially Beneficially
Beneficial Owner Owned(1)(2) Owned(5) Owned(1)(6) Owned(13)
- ---------------- --------- ----------- ----------- ----------
Giorgio Balzer 23,757 * 0 *
Joseph H. Brewer, M.D. 24,427 * 0 *
William D. Grant 34,189 * 1,296,270(7) 19.2%
W. Thomas Grant II 29,231 * 277,649(8) 4.1%
Michael E. Herman 6,217(3) * 28,159(9) *
Bert H. Hood 200,206(4) 1.5% 0 *
P. Anthony Jacobs 21,843 * 139,777(10) 2.1%
Carl W. Ludvigsen, 52,530(4) * 0 *
Jr., M.D.
Neal L. Patterson 23,427 * 0 *
Richard A. Rifkind, 23,760 * 0 *
M.D.
Daniel J. Roberts 53,472(4) * 0 *
Gregg R. Sadler, 65,768(4) * 266 *
FSA
Richard S. Schweiker 0 * 0 *
James R. Seward 3,000 * 82,021(11) 1.2%
Kenneth A. Stelzer 2,734(4) * 0 *
Robert D. Thompson 53,472(4) * 0 *
-20-
Robert F. Thompson 59,586(4) * 0 *
John E. Walker 24,805 * 7,099(12) *
R. Dennis Wright, 22,360 * 0 *
Esq.
All directors and 798,925(2)(4) 5.8% 1,830,975(6) 27.2%
executive officers
of LabOne as a group
(22 persons)
(1) Unless otherwise indicated, each person has sole voting and
investment power with respect to the shares listed.
(2) Includes the following numbers of shares which such persons have
the right to acquire within 60 days pursuant to options granted
under the LabOne Long-Term Incentive Plan: Giorgio Balzer,
21,940 shares; Joseph H. Brewer, 21,610 shares; William D.
Grant, 20,372 shares; W. Thomas Grant II, 27,431 shares;
Michael E. Herman, 4,400 shares; Bert H. Hood, 200,000 shares;
P. Anthony Jacobs, 20,343 shares; Carl W. Ludvigsen, 51,646
shares; Neal L. Patterson, 21,610 shares; Richard A. Rifkind,
20,343 shares; Daniel J. Roberts, 53,334 shares; Gregg R.
Sadler, 61,143 shares; Robert D. Thompson, 53,334 shares; Robert
F. Thompson, 55,588 shares; John E. Walker, 21,988 shares;
R. Dennis Wright, 20,343 shares; and all directors and
executive officers as a group, 738,808 shares.
(3) Includes 1,817 shares owned by the Herman Family Trading Company
of which Michael E. Herman is a general partner and 73% owner.
(4) Includes the following numbers of shares held in individually
directed accounts of such persons under LabOne's 401(k) profit-
sharing plan, as to which such persons have sole investment power
only: Bert H. Hood, 206 shares; Carl W. Ludvigsen, 884 shares;
Daniel J. Roberts, 138 shares; Gregg R. Sadler, 3,125 shares;
Kenneth A. Stelzer, 1,234 shares; Robert D. Thompson, 138 shares;
Robert F. Thompson, 2,998 shares; and all directors and executive
officers as a group, 16,447 shares.
(5) For purposes of determining this percentage, the outstanding
shares of LabOne include shares which such persons have the
right to acquire within 60 days pursuant to options granted
under LabOne's Long-Term Incentive Plan.
-21-
(6) Includes the following numbers of shares which such persons
have the right to acquire within 60 days pursuant to options
granted under Seafield's 1984, 1989 and 1991 Stock Option and
Incentive Plans: W. D. Grant, 5,000 shares; W. Thomas Grant II,
146,492 shares; Michael E. Herman, 15,000 shares; P. Anthony
Jacobs, 105,500 shares; James R. Seward, 46,667 shares; and
all directors and executive officers of LabOne as a group,
318,659 shares.
(7) Includes 237,960 shares held by a family trust for which
William D. Grant serves as a co-trustee with United Missouri
Bank of KC, N.A., and in that capacity shares voting and
investment power; 39,517 shares held by a family foundation
of which William D. Grant shares voting and investment power
with United Missouri Bank of Kansas City, N.A.; and 26,850
shares owned by the wife of William D. Grant, as to which he
disclaims beneficial ownership.
(8) Includes 29,296 shares held by W. Thomas Grant II as custodian
for his children, 45,000 shares held in a family trust for which
W. Thomas Grant II serves as a co-trustee with Laura Gamble and
in that capacity shares voting and investment power, 11,298
shares owned by the wife of W. Thomas Grant II, as to which
he disclaims beneficial ownership, and 982 shares held in Mr.
Grant's account under the Seafield Capital Corporation 401(k)
Plan and Trust, as to which Mr. Grant shares investment power,
but has no voting power.
(9) Includes 400 shares owned by Michael E. Herman's wife, as to
which he disclaims beneficial ownership; and 11,556 shares
owned by the Herman Family Trading Company of which Mr. Herman
is a general partner and 73% owner.
(10) Includes 1,000 shares owned by the wife and 200 shares owned
by the son of P. Anthony Jacobs, as to which he disclaims
beneficial ownership, and 1,190 shares held in Mr. Jacobs'
account under the Seafield Capital Corporation 401(k) Plan
and Trust, as to which Mr. Jacobs shares investment power,
but has no voting power.
(11) Includes 1,500 shares held in a family trust of which Mr.
Seward serves as a co-trustee with his mother, and in that
capacity shares voting and investment power, 632 shares held
in Mr. Seward's account under the Seafield Capital Corporation
40l(k) Plan and Trust, and 8,751 shares held by Mr. Seward
as a Committee member of the Seafield Capital Corporation
401(k) Plan and Trust, as to which he shares voting and
investment power.
-22-
(12) Includes 5,278 shares held by the wife of John E. Walker, as
to which he disclaims beneficial ownership.
(13) For purposes of determining this percentage, the outstanding
shares of Seafield include shares which such persons have the
right to acquire within 60 days pursuant to options granted
under Seafield's 1984, 1989 and 1991 Stock Option and Incentive
Plans.
* Less than 1% of outstanding shares
RELATIONSHIP WITH SEAFIELD
As of March 13, 1995, Seafield beneficially owned 10,712,200 shares,
or 82.1%, of the outstanding common stock of LabOne. Seafield, by virtue
of its ownership of a majority of LabOne's common stock, has control of
LabOne and is able to elect all of the members of LabOne's Board of
Directors. Seafield has permitted LabOne to operate independently of
Seafield in the past and intends to do so in the future. The officers
of LabOne have direct responsibility for LabOne's management and operations,
and during 1994 none of the officers of LabOne were employed in any
capacity by Seafield or any of its subsidiaries.
In February 1995 LabOne was advised by Seafield that Seafield had
retained Alex. Brown & Sons Incorporated as financial advisor to assist
Seafield in considering strategic alternatives to maximize Seafield
shareholder value. LabOne was informed that one alternative Seafield
expects to pursue is a cash-option merger of Seafield into LabOne, in
which Seafield shareholders would have the option of receiving cash as
well as shares of LabOne. The merger would most likely be preceded by
Seafield's distribution to its shareholders or other disposition by
Seafield of its stock in Response Technologies, Inc. (ASE-RTK) and other
Seafield assets. LabOne has appointed a special committee of independent
directors to consider any merger or other proposal that may be presented
to it by Seafield. LabOne has been advised by Seafield that if a
definitive merger agreement is reached, it is anticipated that such a
merger would not occur until the early part of 1996 because of the time
required to complete anticipated Seafield asset sales as well as
shareholder and other approvals.
During 1994, Seafield charged LabOne for certain services,
including advice and assistance provided by senior Seafield officers,
pursuant to a Services Agreement (the Services Agreement). For the year
ended December 31, 1994, the total charges to LabOne by Seafield for
these services were $113,575. LabOne has its own personnel responsible
for operations, marketing, data processing, finance, accounting and other
support functions, and, except as provided for in the Services Agreement,
does not rely on Seafield for such services. Under the Services Agreement,
LabOne retains the services of certain of Seafield's senior management to
provide policy advice to LabOne and to attend on behalf of LabOne various
-23-
marketing and client development functions in order to promote LabOne's
laboratory and testing services. In consideration for these services,
LabOne pays Seafield a percentage of LabOne's annual sales equal to 0.20%
of sales up to $50 million, plus 0.125% of sales of $50 million up to
$100 million, plus 0.0625% of sales of $100 million or more. LabOne
also reimburses Seafield for all direct travel expenses reasonably
incurred by its employees in providing these services.
Seafield also makes certain administrative services available to
LabOne, including financial and investment advice, and the advice and
assistance of Seafield's corporate secretary and public relations staffs.
LabOne is under no obligation to rely on Seafield for these services and
is free to obtain the services from any other source. To the extent that
LabOne utilizes these services, LabOne reimburses Seafield for costs
incurred in providing these services.
Seafield and LabOne are also parties to a Transition Agreement
(Transition Agreement) pursuant to which they have agreed to an
allocation of certain corporate opportunities and to mutual
indemnification for certain liabilities and expenses. Under the
Transition Agreement, so long as Seafield, directly or indirectly,
owns at least 20% of the outstanding voting shares of LabOne, Seafield
agrees to refer to LabOne any product, service, idea or other corporate
opportunity that is within the scope of LabOne's business. For
purposes of this Agreement, LabOne's business is defined as providing
laboratory testing services for the insurance and health care industry
and the development and implementation of data processing and
communications facilities for receiving test-related instructions
from clients, for conducting laboratory operations and for the collection,
use, storage, retrieval and transmission of test results data by both
LabOne and its clients.
In the event that a majority of the independent, disinterested
Directors of LabOne informs Seafield that LabOne does not intend to
pursue, or LabOne within a reasonable time fails to pursue, the
consideration and development of any product, service, idea or other
business opportunity referred to it by Seafield, Seafield is entitled
under the Transition Agreement to consider and develop the product,
service, idea or business opportunity for its own benefit. Under the
Agreement, LabOne also agrees to indemnify and hold harmless Seafield,
and any controlling person of Seafield, with respect to certain civil
liabilities, including any and all claims, losses, damages, liabilities,
costs and expenses that arise from or are based on operations of LabOne.
Similarly, Seafield agrees to indemnify and hold harmless LabOne and
any controlling person of LabOne (other than Seafield), with respect
to certain civil liabilities, including any and all claims, losses,
damages, liabilities, costs and expenses that arise from or are based
on the operations of Seafield (other than the business of LabOne).
-24-
STOCKHOLDER PROPOSALS
Any proper stockholder proposal intended to be presented for
action at the 1996 annual stockholders' meeting must be received by
LabOne by December 1, 1995, for inclusion in the proxy material
relating to such meeting.
GENERAL
The Board of Directors knows of no other matters which will be
presented for consideration at the Annual Meeting other than those
stated in the Notice of Annual Meeting which is part of this Proxy
Statement. If any other matters do properly come before the meeting,
it is intended that the persons named in the accompanying proxy will
vote thereon in accordance with their judgment.
In addition to the solicitation of proxies from stockholders
by mail, proxies may be solicited by LabOne's Directors, officers
and other employees, by personal interview, telephone or telegram.
Such persons will receive no additional compensation for such services.
LabOne requests that brokerage houses and other custodians, nominees
and fiduciaries forward the soliciting material to the beneficial
owners of the shares of LabOne common stock held of record by such
persons and will pay such brokers and other fiduciaries their
reasonable out-of-pocket expenses incurred in connection therewith.
All costs of solicitation, including the costs of preparing,
assembling and mailing this Proxy Statement and all papers which
now accompany or may hereafter supplement the same, will be borne
by LabOne.
By Order of the Board of Directors
GREGG R. SADLER
Secretary
April 5, 1995
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Appendix A
Form of Proxy
LabOne, Inc.
10310 W. 84th Terrace, Lenexa, Kansas 66214
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS MAY 11, 1995
The undersigned hereby appoints Bert H. Hood and Gregg R. Sadler, and each
of them, as proxies for the undersigned at the Annual Meeting of Stockholders
of LabOne, Inc. at 10310 W. 84th Terrace, Lenexa, Kansas, on May 11, 1995, at
3:00 p.m. C.D.T., and at any adjournment, to vote the shares of common stock
the undersigned would be entitled to vote, if personally present, upon the
election of Directors, the proposals stated below, and any other matter
brought before the meeting, all as set forth in the April 5, 1995, Proxy
Statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "GRANTED" FOR ELECTION OF DIRECTORS
AND "FOR" PROPOSALS 2 and 3.
1. Authority granted to or withheld from proxies to vote for the following
nominees as Directors, as set forth in the Proxy Statement -- Giorgio
Balzer, Joseph H. Brewer, M.D., William D. Grant, W. Thomas Grant II,
Bert H. Hood, P. Anthony Jacobs, Neal L. Patterson, Richard A. Rifkind,
M.D., Gregg R. Sadler, James R. Seward, Richard S. Schweiker, John E.
Walker and R. Dennis Wright (or a substitute nominee or nominees
designated by the Board of Directors if any of them becomes unavailable).
/ / Authority GRANTED to vote for all nominees
/ / Authority WITHHELD to vote for all nominees
(INSTRUCTIONS: To withhold authority to vote for any individual
nominee, line through that nominee's name in the paragraph above.)
2. Approval of the increase in the maximum number of shares issuable
under the Long-Term Incentive Plan.
/ / FOR / / AGAINST / / ABSTAIN
3. Ratification of the appointment of KPMG Peat Marwick LLP, as
independent certified public accountants.
/ / FOR / / AGAINST / / ABSTAIN
Unless otherwise marked, this Proxy will be deemed marked "GRANTED" on
Proposal 1 and marked "FOR" on Proposals 2 and 3 and voted accordingly.
This Proxy is solicited by the Board of Directors.
(Please sign, date and return this Proxy in the enclosed envelope.)
DATED: , 1995
-------- ----
--------------------
--------------------
(Note: Please sign exactly as name appears
hereon. Executors, administrators, trustees,
etc., should so indicate when signing, giving
full title as such. If a signer is a
corporation, execute in full corporate
name by authorized officer. If shares are
held in the name of two or more persons,
all should sign.)
APPENDIX TO LABONE, INC.
APRIL 5, 1994 PROXY STATEMENT (1)
HOME OFFICE REFERENCE LABORATORY, INC.
LONG-TERM INCENTIVE PLAN
1. Purpose.
The purpose of the Home Office Reference Laboratory, Inc.
Long-Term Incentive Plan (the Plan) is to further the earnings of
Home Office reference Laboratory, Inc. (HORL) and its
subsidiaries (collectively the Company) by assisting the Company
in attracting, retaining and motivating management employees and
directors of high caliber and potential. The Plan provides for
the award of long-term incentives to those officers, other key
executives and directors who make substantial contributions to
the Company by their loyalty, industry and invention.
2. Administration.
(a) Committee. The Plan shall be administered by a
committee (the Committee) consisting of three or more members of
the Board of Directors of HORL (the Board of Directors), each of
whom (i) shall be an Outside Director of HORL, (ii) shall be a
"disinterested person" within the meaning of Rule 16b-3(c)(2)(i)
under the Securities and Exchange Act of 1934, as amended from
time to time (the 1934 Act), or any successor rule of similar
import, and (c) shall be selected from time to time by the Board
of Directors. For purposes of the Plan, an "Outside Director"
means a member of the Board of Directors who is not an employee
of HORL or any parent corporation or subsidiary corporation of
HORL (which terms, as used hereinafter, shall have the meanings
ascribed thereto in Sections 424(e) and (f) of the Internal
Revenue Code of 1986, as amended from time to time (the Code), or
any amendment or substitute or successor thereto or regulation
thereunder).
(b) Authority. The Committee shall have full and
final authority in its discretion to interpret the provisions of
the Plan and to decide all questions of fact arising in its
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(1) This Appendix, which is filed pursuant to Instruction 3 of
Item 10(b) of Schedule 14A, was not provided to stockholders
as a part of the Proxy Statement. Pursuant to Instruction 5
of Item 10(b), the Commission is informed, as supplemental
information, that the 350,000 additional shares authorized
under the Long-Term Incentive Plan, if approved by
stockholders at the May 11, 1995 annual meeting of
stockholders, are expected to be registered during 1995
under a Form S-8 registration statement.
application. Subject to the provisions hereof, the Committee
shall have full and final authority in its discretion to
determine the employees and directors to whom awards shall be
made under the Plan; to determine the type of awards to be made
and the amount, size and terms and conditions of each such award;
to determine the time when awards shall be granted; to determine
the provisions of each agreement evidencing an award; and to make
all other determinations necessary or advisable for the
administration of the Plan; provided, however, that the Committee
shall have no authority or discretion with respect to awards to
Outside Directors subsequent to June 1, 1991, which awards shall
be made only as provided in paragraph 24 hereof.
3. Stock Subject to the Plan.
HORL may grant awards under the Plan with respect to not
more than a total of 1,800,000* shares of common stock of HORL
(Shares), subject, however, to adjustment as provided in
paragraph 18 below. Such Shares may be authorized and unissued
Shares or treasury Shares. Except as otherwise provided herein,
any Shares subject to an option or right which for any reason is
surrendered before exercise or expires or is terminated
unexercised as to such Shares shall again be available for the
granting of awards under the Plan. Similarly, if any Shares
granted pursuant to restricted stock awards are forfeited, such
forfeited Shares shall again be available for the granting of
awards under the Plan.
4. Eligibility to Receive Awards.
Persons eligible to receive awards under the Plan shall be
limited to those officers, other key executive employees and
directors of the Company who are in positions in which their
decisions, actions and counsel have a significant impact upon the
profitability and success of the Company. Each Outside Director
as of June 1, 1991 received prior grants of Nonqualified Stock
Options to purchase 22,000 Shares. Subsequent to June 1, 1991,
no Outside Director shall be eligible to receive any additional
award under the Plan, except as provided in paragraph 24 hereof.
5. Form of Awards.
Awards may be made from time to time by the Committee in the
form of stock options to purchase Shares, stock appreciation
rights, performance units, restricted stock, or any combination
of the above. Stock options may be options which are intended to
qualify as incentive stock options within the meaning of Section
422A(b) of the Code (Incentive Stock Options) or options which
are not intended to so qualify (Nonqualified Stock Options).
*Proposed to be amended to increase to "2,150,000" shares.
-2-
6. Stock Options.
Stock options for the purchase of Shares shall be evidenced
by written agreements in such form not inconsistent with the Plan
as the Committee shall approve from time to time; provided,
however, that the form of such agreements with respect to
Nonqualified Stock Options granted to Outside Directors
subsequent to June 1, 1991 shall be as specified in paragraph 24
hereof. Such agreements shall contain the terms and conditions
applicable to the options, including in substance the following
terms and conditions:
(a) Type of Option. Each option agreement shall
identify the options represented thereby as Incentive Stock
Options or Nonqualified Stock Options, as the case may be, and
shall set forth the number of Shares subject to the options.
(b) Option Price. The option exercise price to be
paid by the optionee to the Company for each Share purchased upon
the exercise of an option shall be determined by the Committee,
but shall in no event be less than the par value of a Share.
(c) Exercise Term. Each option agreement shall state
the period or periods of time within which the option may be
exercised, in whole or in part, as determined by the Committee
and subject to such terms and conditions as are prescribed for
such purpose by the Committee, provided that no Incentive Stock
Option shall be exercisable after ten years, and no Nonqualified
Stock Option shall be exercisable after ten years and one day,
from the date of grant thereof. The Committee, in its
discretion, may provide in the option agreement circumstances
under which the option shall become immediately exercisable, in
whole or in part, and, notwithstanding the foregoing, may
accelerate the exercisability of any option, in whole or in part,
at any time.
(d) Payment for Shares. The purchase price of the
Shares with respect to which an option is exercised shall be
payable in full at the time of exercise in cash, Shares at fair
market value, or a combination thereof, as the Committee may
determine and subject to such terms and conditions as may be
prescribed by the Committee for such purpose. All optionees
granted options at any time under the Plan, except Outside
Directors granted options pursuant to paragraph 24, shall have
the right, with the consent of, and subject to such terms and
conditions as may be established by, the Committee, to elect to
pay all or a part of such purchase price by requesting the
Company to reduce the number of Shares otherwise issuable to the
optionee upon the exercise of the option by a number of Shares
having a fair market value equal to such purchase price.
(e) Rights Upon Termination of Employment. In the
event that an optionee ceases to be an employee or director of
the Company for any cause other than Retirement (as defined
-3-
below), death or Disability (as defined below), the optionee
shall have the right to exercise the option during its term
within a period of three months after such termination to the
extent that the option was exercisable at the time of
termination, or within such other period, and subject to such
terms and conditions, as may be specified by the Committee. (As
used herein, the term Retirement means retirement pursuant to the
pension plan maintained by HORL, as amended from time to time,
and the term Retires has the corresponding meaning. As used
herein, the term Disability means a condition that, in the
judgment of the Committee, has rendered a grantee completely and
presumably permanently unable to perform any and every duty of
his regular occupation, and the term Disabled has the
corresponding meaning.) In the event that an optionee Retires,
dies or becomes Disabled prior to the expiration of his option
and without having fully exercised his option, the optionee or
his Beneficiary (as defined below) shall have the right to
exercise the option during its term within a period of (i) one
year after termination of employment due to Retirement, death or
Disability, or (ii) one year after death if death occurs either
within one year after termination of employment due to Retirement
or Disability or within three months after termination of
employment for other reasons, to the extent that the option was
exercisable at the time of death or termination, or within such
other period, and subject to such terms and conditions, as may be
specified by the Committee. As used herein, the term Beneficiary
means the person or persons designated in writing by the grantee
as his Beneficiary with respect to an award under the Plan; or,
in the absence of an effective designation or if the designated
person or persons predecease the grantee, the grantee's
Beneficiary shall be the person or persons who acquire by bequest
or inheritance the grantee's rights in respect of an award. In
order to be effective, a grantee's designation of a Beneficiary
must be on file with the Committee before the grantee's death,
but any such designation may be revoked and a new designation
substituted therefor at any time before the grantee's death.
(f) Nontransferability. Each option agreement shall
provide that the option is not transferable other than by will or
by the laws of descent and distribution, and that during the
lifetime of the optionee the option is exercisable only by him.
(g) Incentive Stock Options. In the case of an
Incentive Stock Option, each option agreement shall contain such
other terms, conditions and provisions as the Committee
determines necessary or desirable in order to qualify such option
as an incentive stock option (within the meaning of Section
422A(b) of the Code) including in substance, without limitation,
the following:
(i) The purchase price of stock subject to an
Incentive Stock Option shall be not less than 100 percent of
the fair market value of such stock on the date the option
is granted, as determined by the Committee.
-4-
(ii) The aggregate fair market value (determined
as of the time the option is granted) of the stock with
respect to which Incentive Stock Options are exercisable for
the first time by any optionee in any calendar year (under
all plans of HORL and its parent and subsidiary
corporations) shall not exceed $100,000.
(iii) No Incentive Stock Option shall be granted
to any employee if at the time the option is granted the
individual owns stock possessing more than ten percent of
the total combined voting power of all classes of stock of
the Company or of a parent corporation or subsidiary
corporation of the Company, unless at the time such option
is granted the option price is at least 110 percent of the
fair market value (as determined by the Committee) of the
stock subject to the option and such option by its terms is
not exercisable after the expiration of five years from the
date of grant.
(iv) Directors who are not employees of the
Company shall not be eligible to receive Incentive Stock
Options.
7. Stock Appreciation Rights.
Stock appreciation rights (SARs) shall be evidenced by
written SAR agreements in such form not inconsistent with the
Plan as the Committee shall approve from time to time. Such SAR
agreements shall contain the terms and conditions applicable to
the SARs, including in substance the following terms and
conditions:
(a) Award. SARs may be granted in connection with a
previously or contemporaneously granted stock option, or
independently of a stock option. SARs shall entitle the grantee,
subject to such terms and conditions as may be determined by the
Committee, to receive upon exercise thereof all or a portion of
the excess of (i) the fair market value at the time of exercise,
as determined by the Committee, of a specified number of Shares
with respect to which the SAR is exercised, over (ii) a specified
price which shall not be less than 100 percent of the fair market
value of the Shares at the time the SAR is granted, or, if the
SAR is granted in connection with a previously issued stock
option, not less than 100 percent of the fair market value of the
Shares at the time such option was granted. Upon exercise of an
SAR, the number of Shares reserved for issuance hereunder shall
be reduced by the number of Shares covered by the SAR. Shares
covered by an SAR shall not be used more than once to calculate
the amount to be received pursuant to the exercise of the SAR.
(b) SARs Related to Stock Options. If an SAR is
granted in relation to a stock option, (i) the SAR shall be
exercisable only at such times, and by such persons, as the
related option is exercisable; (ii) the grantee's right to
-5-
exercise the related option shall be canceled if and to the
extent that the Shares subject to the option are used to
calculate the amount to be received upon the exercise of the
related SAR; (iii) the grantee's right to exercise the related
SAR shall be canceled if and to the extent that the Shares
subject to the SAR are purchased upon the exercise of the related
option; and (iv) the SAR shall not be transferable other than by
will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the grantee only by him.
(c) Term. Each SAR agreement shall state the period
or periods of time within which the SAR may be exercised, in
whole or in part, as determined by the Committee and subject to
such terms and conditions as are prescribed for such purpose by
the Committee, provided that no SAR shall be exercisable earlier
than six months after the date of grant or later than ten years
after the date of grant. The Committee may, in its discretion,
provide in the SAR agreement circumstances under which the SARs
shall become immediately exercisable, in whole or in part, and
may, notwithstanding the foregoing, accelerate the exercisability
of any SAR, in whole or in part, at any time.
(d) Termination of Employment. SARs shall be
exercisable only during the grantee's employment by the Company,
except that, in the discretion of the Committee, an SAR may be
made exercisable for up to three months after the grantee's
employment (or tenure as a director) is terminated for any reason
other than Retirement, death or Disability, and for up to one
year after the grantee's employment (or tenure as a director) is
terminated because of Retirement, death or Disability.
(e) Payment. Upon exercise of an SAR, payment shall
be made in cash, in Shares at fair market value on the date of
exercise, or. in a combination thereof, as the Committee may
determine.
(f) Other Terms. SARs shall be granted in such manner
and such form, and subject to such additional terms and
conditions, as the Committee in its sole discretion deems
necessary or desirable, including without limitation: (i) if
granted in connection with an Incentive Stock Option, in order to
satisfy any requirements set forth under Section 422A of the
Code; or, (ii) in order to avoid any insider-trading liability in
connection with an SAR under Section 16(b) of the 1934 Act.
8. Restricted Stock Awards.
Restricted stock awards under the Plan shall consist of
Shares free of any purchase price or for such purchase price as
may be established by the Committee, restricted against transfer,
subject to forfeiture, and subject to such other terms and
conditions (including attainment of performance objectives) as
may be determined by the Committee. Restricted stock shall be
evidenced by written restricted stock agreements in such form not
-6-
inconsistent with the Plan as the Committee shall approve from
time to time, which agreements shall contain the terms and
conditions applicable to such awards, including in substance the
following terms and conditions:
(a) Restriction Period. Restrictions shall be imposed
for such period or periods as may be determined by the Committee.
The Committee, in its discretion, may provide in the agreement
circumstances under which the restricted stock shall become
immediately transferable and nonforfeitable, or under which the
restricted stock shall be forfeited, and, notwithstanding the
foregoing, may accelerate the expiration of the restriction
period imposed on any Shares at any time.
(b) Restrictions Upon Transfer. Restricted stock and
the right to vote such Shares and to receive dividends thereon,
may not be sold, assigned, transferred, exchanged, pledged,
hypothecated, or otherwise encumbered, except as herein provided,
during the restriction period applicable to such Shares.
Notwithstanding the foregoing, and except as otherwise provided
in the Plan, the grantee shall have all of the other rights of a
stockholder, including, but not limited to, the right to receive
dividends and the right to vote such Shares.
(c) Certificates. A certificate or certificates
representing the number of restricted Shares granted shall be
registered in the name of the grantee. The Committee, in its
sole discretion, shall determine when the certificate or
certificates shall be delivered to the grantee (or, in the event
of the grantee's death, to his Beneficiary), may provide for the
holding of such certificate or certificates in escrow or in
custody by the Company or its designee pending their delivery to
the grantee or Beneficiary, and may provide for any appropriate
legend to be borne by the certificate or certificates.
(d) Lapse of Restrictions. The Agreement shall
specify the terms and conditions upon which any restrictions upon
restricted stock awarded under the Plan shall expire, lapse, or
be removed, as determined by the Committee. Upon the expiration,
lapse, or removal of such restrictions, Shares free of the
restrictive legend shall be issued to the grantee or his legal
representative.
9. Performance Units.
Performance unit awards under the Plan shall entitle
grantees to future payments based upon the achievement of
pre-established long-term performance objectives and shall be
evidenced by written performance unit agreements in such form not
inconsistent with this Plan as the Committee shall approve from
time to time. Such agreements shall contain the terms and
conditions applicable to the performance unit awards, including
in substance the following terms and conditions:
-7-
(a) Performance Period. The Committee shall establish
with respect to each unit award a performance period of not fewer
than two years.
(b) Unit Value. The Committee shall establish with
respect to each unit award value for each unit which shall not
thereafter change, or which may vary thereafter pursuant to
criteria specified by the Committee.
(c) Performance Targets. The Committee shall
establish with respect to each unit award maximum and minimum
performance targets to be achieved during the applicable
performance period. Achievement of maximum targets shall entitle
grantees to payment with respect to the full value of a unit
award. Grantees shall be entitled to payment with respect to a
portion of a unit award according to the level of achievement of
targets as specified by the Committee for performance which
achieves or exceeds the minimum target but fails to achieve the
maximum target.
(d) Performance Measures. Performance targets
established by the Committee shall relate to corporate, division,
or unit performance and may be established in terms of growth in
gross revenue, earnings per share, ratios of earnings to equity
or assets, or such other measures or standards as may be
determined by the Committee in its discretion. Multiple targets
may be used and may have the same or different weighting, and
they may relate to absolute performance or relative performance
measured against other companies or businesses.
(e) Adjustments. At any time prior to payment of a
unit award, the Committee may adjust previously established
performance targets or other terms and conditions, including the
Company's or other corporations' financial performance for Plan
purposes, to reflect major unforeseen events such as changes in
laws, regulations or accounting practices, mergers, acquisitions
or divestitures or other extraordinary, unusual or non-recurring
items or events.
(f) Payment of Unit Awards. Following the conclusion
of each performance period, the Committee shall determine the
extent to which performance targets have been attained and any
other terms and conditions satisfied for such period. The
Committee shall determine what, if any, payment is due on the
unit award and whether such payment shall be made in cash,
Shares, or a combination thereof. Payment shall be made in a
lump sum or installments, as determined by the Committee,
commencing as promptly as practicable following the end of the
performance period unless deferred subject to such terms and
conditions and in such form as may be prescribed by the
Committee.
(g) Termination of Employment. In the event that a
grantee ceases to be employed by the Company prior to the end of
-8-
the performance period by reason of death, Disability, or
Retirement with the consent of the Company, any unit award, to
the extent earned under the applicable performance targets, shall
be payable at the end of the performance period according to the
portion of the performance period during which the grantee was
employed by the Company, provided that the Committee shall have
the power to provide for an appropriate settlement of a unit
award before the end of the performance period. Upon any other
termination of employment, participation shall terminate
forthwith and all outstanding unit awards shall be canceled.
10. Loans and Supplemental Cash.
The Committee, in its sole discretion to further the purpose
of the Plan, may provide for supplemental cash payments or loans
to individuals in connection with all or any part of an award
under the Plan. Supplemental cash payments shall be subject to
such terms and conditions as shall be prescribed by the Committee
at the time of grant, provided that in no event shall the amount
of payment exceed:
(a) In the case of an option, the excess of the fair
market value of a Share on the date of exercise over the option
price multiplied by the number of Shares for which such option is
exercised, or
(b) In the case of an SAR, performance unit, or
restricted stock award, the value of the Shares and other
consideration issued in payment of such award.
Any loan shall be evidenced by a written loan agreement or other
instrument in such form and containing such terms and conditions
(including, without limitation, provisions for interest, payment
schedules, collateral, forgiveness or acceleration) as the
Committee may prescribe from time to time.
11. General Restrictions.
Each award under the Plan shall be subject to the
requirement that if any time the Company shall determine that (i)
the listing, registration or qualification of the Shares subject
or related thereto upon any securities exchange or under any
state or federal law, or (ii) the consent or approval of any
regulatory body, or (iii) an agreement by the recipient of an
award with respect to the disposition of Shares, or (iv) the
satisfaction of withholding tax or other withholding liabilities
is necessary or desirable as a condition of or in connection with
the granting of such award or the issuance or purchase of Shares
thereunder, such award shall not be consummated in whole or in
part unless such listing, registration, qualification, consent,
approval, agreement, or withholding shall have been effected or
obtained free of any conditions not acceptable to the Company.
Any such restriction affecting an award shall not extend the time
within which the award may be exercised; and neither the Company
-9-
nor its directors or officers nor the Committee shall have any
obligation or liability to the grantee or to a Beneficiary with
respect to any Shares with respect to which an award shall lapse
or with respect to which the grant, issuance or purchase of
Shares shall not be effected, because of any such restriction.
12. Single or Multiple Agreements.
Multiple awards, multiple forms of awards, or combinations
thereof may be evidenced by a single agreement or multiple
agreements, as determined by the Committee.
13. Rights of a Shareholder.
The recipient of any award under the Plan, unless otherwise
provided by the Plan, shall have no rights as a shareholder with
respect thereto unless and until certificates for Shares are
issued to him, and the issuance of Shares shall confer no
retroactive right to dividends.
14. Rights to Terminate Employment.
Nothing in the Plan or in any agreement entered into
pursuant to the Plan shall confer upon any person the right to
continue in the employment of the Company or affect any right
which the Company may have to terminate the employment of such
person.
15. Withholding.
(a) Prior to the issuance or transfer of Shares under
the Plan, the recipient shall remit to the Company an amount
sufficient to satisfy any Federal, state or local withholding tax
requirements. The recipient may satisfy the withholding
requirement in whole or in part by electing to have the Company
withhold Shares having a value equal to the amount required to be
withheld. The value of the Shares to be withheld shall be the
fair market value, as determined by the Committee, of the stock
on the date that the amount of tax to be withheld is determined
(the Tax Date). Such Election must be made prior to the Tax
Date, must comply with all applicable securities law and other
legal requirements, as interpreted by the Committee, and may not
be made unless approved by the Committee, in its discretion.
(b) Whenever payments to a grantee in respect of an
award under the Plan are to be made in cash, such payments shall
be net of the amount necessary to satisfy any Federal, state or
local withholding tax requirements.
16. Non-Assignability.
No award under the Plan shall be assignable or transferable
by the recipient thereof except by will or by the laws of descent
and distribution or by such other means as the Committee may
-10-
approve. During the life of the recipient, such award shall be
exercisable only by such person or by such person's guardian or
legal representative.
17. Non-Uniform Determinations.
The Committee's determinations under the Plan (including
without limitation determinations of the persons to receive
awards, the form, amount and timing of such awards, the terms and
provisions of such awards and the agreements evidencing same, and
the establishment of values and performance targets) need not be
uniform and may be made selectively among persons who receive, or
are eligible to receive, awards under the Plan, whether or not
such persons are similarly situated (except Options granted to
Outside Directors pursuant to paragraph 24 hereof).
18. Adjustments.
In the event of any change in the outstanding common stock
of the Company, by reason of a stock dividend or distribution,
recapitalization, merger, consolidation, reorganization, split-
up, combination, exchange of Shares or the like, the Board of
Directors, in its discretion, may adjust proportionately the
number of Shares which may be issued under the Plan, the number
of Shares subject to outstanding awards, and the option exercise
price of each outstanding option, and may make such other changes
in outstanding options, SARs, performance units and restricted
stock awards, as it deems equitable in its absolute discretion to
prevent dilution or enlargement of the rights of grantees;
provided, however, that the number and option exercise price with
respect to the Shares subject to outstanding options granted to
Outside Directors prior to June 1, 1991, and the number and
option exercise price with respect to the Shares subject to
future Options to be granted to Outside Directors pursuant to
paragraph 24, shall be subject to adjustment only as set forth in
paragraph 24. Fractional Shares resulting from any such
adjustments shall be eliminated.
19. Amendment.
The Board of Directors may terminate, amend, modify or
suspend the Plan at any time, except that the Board shall not,
without the authorization of the holders of a majority of
Company's outstanding Shares, increase the maximum number of
Shares which may be issued under the Plan (other than increases
pursuant to paragraph 18 hereof), extend the last date on which
awards may be granted under the Plan, extend the date on which
the Plan expires, change the class of persons eligible to receive
awards, or change the minimum option price. No termination,
modification, amendment or suspension of the Plan shall adversely
affect the rights of any grantee or Beneficiary under an award
previously granted, unless the grantee or Beneficiary shall
consent; but it shall be conclusively presumed that any
adjustment pursuant to paragraph 18 hereof does not adversely
-11-
affect any such right. In no event shall the provisions relating
to the timing, amount and exercise price of Options provided for
in paragraph 24 of the Plan be amended more than once every six
months, other than to comport with changes in the Code, Employee
Retirement Income Security Act of 1974, as amended, or the rules
thereunder.
20. Effect on Other Plans.
Participation in this Plan shall not affect a grantee's
eligibility to participate in any other benefit or incentive plan
of the Company. Any awards made pursuant to this Plan shall not
be used in determining the benefits provided under any other plan
of the Company unless specifically provided therein.
21. Effective Date and Duration of Plan.
The Plan shall become effective when adopted by the Board of
Directors, provided that the Plan is approved by the holders of a
majority of the outstanding Shares on the date of its adoption by
the Board or before the first anniversary of that date. Unless
it is sooner terminated in accordance with paragraph 19 hereof,
the Plan shall remain in effect until all awards under the Plan
have been satisfied by the issuance of Shares or the payment of
cash or have expired or otherwise terminated, but no award shall
be granted more than ten years after the earlier of the date the
Plan is adopted by the Board of Directors or is approved by the
Company's shareholders.
22. Unfunded Plan.
The Plan shall be unfunded, except to the extent otherwise
provided in accordance with Section 8 hereof. Neither the
Company nor any affiliate shall be required to segregate any
assets that may be represented by stock options, SARs, or
performance units, and neither the Company nor any affiliate
shall be deemed to be a trustee of any amounts to be paid under
any stock option, SAR or performance unit. Any liability of the
Company or any affiliate to pay any grantee or Beneficiary with
respect to an option, SAR or performance unit shall be based
solely upon any contractual obligations created pursuant to the
provisions of the Plan; no such obligations will be deemed to be
secured by a pledge or encumbrance on any property of the Company
or an affiliate.
23. Governing Law.
The Plan shall be construed and its provisions enforced and
administered in accordance with the laws of the State of Delaware
except to the extent that such laws may be superseded by any
Federal law.
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24. Outside Directors' Options.
(a) Grant of Nonqualified Stock Options. At each
annual meeting of stockholders of HORL commencing with the year
1993, each person who is for the first time elected to serve as
an Outside Director at such annual meeting of stockholders,
excluding any Outside Director elected at any prior annual
meeting of stockholders of HORL, shall automatically receive a
one-time grant of Nonqualified Stock Option to purchase 22,000
Shares (the Option), such grant to be effective as of the date of
such annual meeting of stockholders; provided, however, that any
Outside Director shall not be entitled to receive and shall not
be granted an Option if he does not continue to serve as an
Outside Director immediately following such annual meeting of
stockholders.
(b) Option Price. The Option exercise price to be
paid by each such Outside Director for each Share purchased upon
the exercise of the Option shall be one hundred percent (100%) of
the fair market value of the Shares on the date the Option is
granted. Fair market value for purposes of this paragraph 24
shall be deemed to be the average of the high and low sales
prices for the Shares on the National Association of Securities
Dealers Automated Quotations System as of the date the Option is
granted, or if no sales of Shares shall have been reported on
that date, as of the next preceding date on which a sale of
Shares was reported.
(c) Vesting Schedule. Each Option granted to an
Outside Director may be exercised with respect to twenty percent
(20%) of the Shares subject to the Option after one year from the
date of grant, an additional twenty percent (20%) of the Shares
subject to the Option after two years from the date of grant, an
additional twenty percent (20%) of the Shares subject to the
Option after three years from the date of grant, an additional
twenty percent (20%) of the Shares subject to the Option after
four years from the date of grant and an additional twenty
percent (20%) of the Shares subject to the Option after five
years from the date of grant.
(d) Other Terms and Conditions. Each Option granted
to an Outside Director shall be subject to all of the other terms
and conditions set forth in the form of Stock Option Agreement
adopted by the Committee and approved by the Board of Directors
on March 22, 1991; provided, however, that in the event of any
change in the Shares of the Company, by reason of a stock
dividend or distribution, recapitalization, merger,
consolidation, reorganization, split-up, combination, exchange of
Shares or the like, thereafter the number of Shares subject to
outstanding options granted to Outside Directors prior to June 1,
1991 and the number of Shares subject to future Options to be
granted to Outside Directors pursuant to the provisions of this
paragraph 24 shall be increased or decreased, as the case may be,
in direct proportion to the increase or decrease in the number of
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Shares by reason of such change (provided that fractional Shares
resulting from any such adjustment shall be eliminated), and the
exercise price per Share of any such outstanding option or Option
shall, in the case of an increase in the number of Shares, be
proportionately reduced, and in the case of a decrease in the
number of Shares, shall be proportionately increased; and
provided further, however, that each Outside Director granted an
Option at any time under the Plan shall have the right to elect
to pay all or a part of the purchase price of the Shares with
respect to which the Option is exercised by requesting the
Company to reduce the number of Shares otherwise issuable to the
Outside Director upon the exercise of the Option by a number of
Shares having a fair market value equal to such purchase price.
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