LabOne, Inc.
10101 Renner Boulevard
Lenexa, Kansas 66219
(913) 888-1770
----------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 18, 2000
----------------------------------------
The annual meeting of the shareholders of LabOne, Inc. (LabOne), a Missouri
corporation, will be held at the offices of LabOne, 10101 Renner Boulevard,
Lenexa, Kansas, on Thursday, May 18, 2000, at 3:00 p.m., local time, to
consider and vote upon:
1. A proposal to elect four class A directors to serve until the 2003
annual meeting of shareholders, as set forth in the accompanying
proxy statement.
2. A proposal to ratify the appointment of KPMG LLP as independent
certified public accountants of LabOne and its subsidiaries for
2000.
3. Such other business as may properly come before the meeting and any
adjournment thereof.
Shareholders of record at the close of business on March 10, 2000, are
entitled to notice of and to vote at the meeting and any adjournment thereof.
YOUR VOTE IS IMPORTANT. PLEASE SIGN, DATE AND RETURN THE ACCOMPANYING PROXY
CARD 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 shareholders are cordially invited to attend the meeting.
By Order of the Board of Directors
GREGG R. SADLER
Secretary
Shawnee Mission, Kansas
Dated: April 17, 2000
LabOne, Inc.
10101 Renner Boulevard
Lenexa, Kansas 66219
(913) 888-1770
----------------------------------------
PROXY STATEMENT
INTRODUCTION
This proxy statement is furnished to the shareholders of LabOne, Inc.
(LabOne), a Missouri corporation, in connection with the solicitation of
proxies by the board of directors of LabOne for use at the annual meeting of
shareholders to be held on Thursday, May 18, 2000, at 3:00 p.m., local time,
at the offices of LabOne, 10101 Renner Boulevard, Lenexa, Kansas, and any
adjournment thereof (the annual meeting). This proxy statement, the notice
and the accompanying form of proxy were first mailed to the shareholders on or
about April 17, 2000.
A copy of LabOne's annual report for the fiscal year ended December 31, 1999,
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
Shareholders of record at the close of business on March 10, 2000, are
entitled to notice of and to vote at the meeting. There were 10,782,962
shares of common stock outstanding at the close of business on that date.
Shareholders are entitled to vote cumulatively for the election of class A
directors. This means that each shareholder is entitled to cast as many votes
as shall equal the number of shares held times the number of class A directors
to be elected. Such votes may all be cast for a single class A director or
may be distributed among the class A directors to be elected as the
shareholder wishes. Shareholders are entitled to one vote per share on all
other matters.
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 the
manner specified by the shareholder. If no instructions are specified,
authority will be granted to vote such shares FOR (1) the election as class A
directors of each nominee named herein and FOR (2) the ratification of the
appointment of LabOne's certified independent public accountants for 2000.
Unless otherwise indicated on the proxy, discretionary authority will be
granted to the persons named in the proxy to vote the shares represented by
the proxy (a) cumulatively for the election of class A directors and (b) with
respect to procedural matters and matters that properly come before the
meeting for which LabOne did not receive notice a reasonable time before the
date this proxy statement was mailed.
A shareholder 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, 10101 Renner Boulevard, Lenexa, Kansas 66219.
PAGE 2
PROPOSAL 1
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ELECTION OF DIRECTORS
Information Concerning Nominees for Election as Class A Directors
The shareholders will be asked to elect the four nominees listed below as
class A directors, to hold office for three-year terms until the 2003 annual
meeting of shareholders and until their successors are elected and qualified.
The board of directors presently consists of 11 directors divided into three
classes, classes A and C consisting of four directors each and class B
consisting of three directors. One class of directors is elected each year to
hold office for a three-year term and until the successors of such class are
duly elected and qualified. Each of the nominees listed below is currently
serving as a class A director. The terms of office of the current class A
directors will expire upon the election of their successors at the annual
meeting.
It is expected that each of the following 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.
Name Age Principal Occupation
- ---- --- --------------------
Richard A. Rifkind, M.D. 69 Dr. Rifkind was appointed a class A director
of LabOne upon the merger of LabOne, Inc., a
Delaware corporation, into LabOne in August
1999 (the merger). Dr. Rifkind served as a
director of the Delaware corporation from
1987 to the time of the merger. Dr. Rifkind
is Chairman Emeritus of the Sloan-Kettering
Institute, New York, New York, a medical
research institution. He was Chairman of the
Sloan-Kettering Institute during the past
five years.
James R. Seward 47 Mr. Seward was appointed a class A director
of LabOne at the time of the merger. Mr.
Seward was a director of the Delaware
corporation from 1987 to the time of the
merger. Mr. Seward has been self-employed as
an investment adviser and consultant since
August 1998. From December 1996 to August
1998, he served as President, Chief Executive
Officer and a director of SLH Corporation,
Shawnee Mission, Kansas, an asset management
company. SLH Corporation was a wholly-owned
subsidiary of LabOne prior to its spin-off in
March 1997. He was Executive Vice President
of LabOne from 1993 - 1997 and served as its
Chief Financial Officer from 1990 - 1997.
Mr. Seward is also a director of Response
Oncology, Inc., Syntroleum Corporation and
Concorde Career Colleges.
PAGE 3
Janet M. Stallmeyer, R.N. 51 Ms. Stallmeyer was appointed a class A
director of LabOne at the time of the merger.
Ms. Stallmeyer has been Sr. Vice President of
Coventry Health Care and President, Chief
Executive Officer of Coventry Healthcare of
Kansas, a health maintenance organization,
since November 1998. She was Executive
Director of Principal Health Care of Kansas
City, Inc. (known as Coventry Healthcare of
Kansas since January 2000) from January 1995
to November 1998.
R. Dennis Wright, J.D. 57 Mr. Wright was appointed a class A director
of LabOne at the time of the merger. Mr.
Wright was a director of the Delaware
corporation from 1987 to the time of the
merger. Mr. Wright has been a partner in the
law firm of Morrison & Hecker L.L.P., Kansas
City, Missouri, since September 1998. Mr.
Wright was a member of Hillix, Brewer,
Hoffhaus, Whittaker & Wright, L.L.C. and
Chairman of its Executive Committee prior to
its merger with Morrison & Hecker L.L.P. in
September 1998. Morrison & Hecker L.L.P. is
general counsel to LabOne.
Meetings of the Board of Directors and Committees
There were four meetings of the board of directors during 1999. The board of
directors has an audit committee, a compensation committee and an executive
committee. During 1999, the audit committee met three times and the
compensation committee and the executive committee each met four times. All
directors attended 75 percent or more of the total number of all meetings of
the board and of committees of which they were members during 1999.
The audit committee consists of Chester B. Vanatta, chairman, and Peter D.
Brown, James R. Seward, W. D. Grant, John E. Walker and R. Dennis Wright. The
audit committee recommends to the board of directors the engagement and
discharge of the independent auditors of LabOne's financial statements;
reviews the independent auditors' independence and terms of engagement;
reviews the results of all audits and management's responses thereto; reviews
the financial statements and any disputes with management arising over their
preparation; considers with the independent and internal auditors the adequacy
of LabOne's internal controls; serves as a channel of communication between
the independent auditors and the board of directors; and supervises special
investigations deemed necessary by the committee.
The compensation committee consists of Richard S. Schweiker, chairman, Joseph
H. Brewer and Richard A. Rifkind. The compensation committee reviews and
makes recommendations to the board of directors with respect to: the salary
structure and any discretionary annual bonuses for officers; the compensation
of non-officer directors; appropriate amendments to LabOne's long-term
incentive plans, performance goals, aggregate amounts of incentive bonuses and
payments to participants under LabOne's annual incentive plan; contributions
or amendments to LabOne's profit-sharing 401(K) plan; amendments to all other
employee benefit plans of LabOne; and any significant employee supplementary
pension or termination arrangements.
PAGE 4
The executive committee consists of W. Thomas Grant II, chairman, W.D. Grant
and James R. Seward. The executive committee exercises all the powers and
authority of the board of directors when the board is not meeting; develops,
recommends and reviews policy guidelines for all LabOne investments and
borrowings; recommends and reviews the performance of outside investment
management firms performing services for LabOne; 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.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
directors, executive officers and beneficial owners of more than ten percent
of the common stock of LabOne to file reports of beneficial ownership and
changes in beneficial ownership with the Securities and Exchange Commission
and to provide copies to LabOne. Based solely upon a review of the copies of
such reports provided to LabOne and written representations from directors and
executive officers, LabOne believes that such persons have complied with all
applicable Section 16(a) filing requirements for 1999, except with respect to
a Form 4 reporting the purchase of 1,000 shares of common stock by Chester B.
Vanatta, a Class B director of LabOne, which was filed 75 days late.
Required Vote
Nominees for class A director will be elected by the affirmative vote of a
plurality of shares of common stock present and entitled to vote, in person or
by proxy, at the annual meeting. The four nominees receiving the greatest
number of votes will be elected as class A directors. Abstentions and broker
non-votes will not affect the outcome of the election of class A directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS GRANT AUTHORITY TO
VOTE THEIR SHARES "FOR" THE ELECTION OF EACH OF THE FOUR NOMINEES FOR CLASS A
DIRECTOR.
MANAGEMENT OF LABONE
Directors and Executive Officers
The directors and executive officers of LabOne are as follows:
Name Age Position
- ---- --- --------
W. Thomas Grant II 49 Chairman of the Board of Directors,
President, Chief Executive Officer and
Class C Director
Gregg R. Sadler, FSA 49 Executive Vice President -
Administration, President - Insurance
Laboratory Division and Secretary
John W. McCarty 44 Executive Vice President and Chief
Financial Officer
Roger K. Betts 57 Executive Vice President - Sales,
Insurance Laboratory Division
PAGE 5
Thomas J. Hespe 43 Executive Vice President - Sales and
Marketing, President - Clinical Sales
and Marketing
Michael A. Peat, Ph.D. 52 Executive Vice President - Toxicology
and President - Substance Abuse Testing
Division
Thomas H. Bienvenu II 50 Executive Vice President - Information
Systems and Technology
Judith A. VonFeldt 53 Executive Vice President - Human
Resources
Kurt E. Gruenbacher, 40 Vice President - Finance, Chief
CPA, CMA, CFM Accounting Officer, Treasurer and
Assistant Secretary
Joseph H. Brewer, M.D. 48 Class B Director
Peter C. Brown 41 Class C Director
William D. Grant 83 Class B Director
Richard A. Rifkind, M.D. 69 Class A Director
Richard S. Schweiker 73 Class C Director
James R. Seward 47 Class A Director
Janet M. Stallmeyer, R.N. 51 Class A Director
Chester B. Vanatta 64 Class B Director
John E. Walker 61 Class C Director
R. Dennis Wright, J.D. 57 Class A Director
Mr. W.T. Grant II was appointed Chairman of the Board of Directors, President,
Chief Executive Officer and a class C director of LabOne upon the merger of
LabOne, Inc., a Delaware corporation (the Delaware corporation) into LabOne in
August 1999 (the merger). Mr. Grant served as a director of the Delaware
corporation from 1993 to the time of the merger. He served as Chairman of the
Board of Directors, President and Chief Executive Officer of the Delaware
corporation from October 1995 to the time of the merger. He served as
Chairman of the Board of LabOne from May 1993 to September 1997. Mr. Grant is
also a director of Commerce Bancshares, Inc., Kansas City Power & Light
Company, Response Oncology, Inc. and AMC Entertainment, Inc. He is the son of
W. D. Grant.
Mr. Sadler was appointed Executive Vice President - Administration, President
- - Insurance Laboratory Division and Secretary of LabOne at the time of the
merger. He served as a director of the Delaware corporation from 1985 to the
time of the merger. He served as Executive Vice President - Administration of
the Delaware corporation from 1993 to the time of the merger and as
President - Laboratory Division from 1994 to the time of the merger. He
served as Secretary of the Delaware corporation from 1988 to the time of the
merger.
PAGE 6
Mr. McCarty became Executive Vice President and Chief Financial Officer of
LabOne, effective April 1, 2000. From January 1999 through December 1999, Mr.
McCarty served as Senior Vice President and Chief Financial Officer of eai
Healthcare Staffing Solutions, Inc., Phoenix, Arizona, a healthcare staffing
company which was sold to Rehab Care Group, Inc. From November 1997 to
November 1998, he was Senior Vice President and Chief Financial Officer of
United Dental Care, a dental health maintenance organization which was
acquired for $182 million. From May 1996 to October 1997, he was Executive
Vice President and Chief Financial Officer of NovaMed Eyecare Management, an
ophthalmology and surgery center management company. Prior to May 1996, he
was Assistant Vice President of corporate finance and Vice President of
Columbia Capital Corporation for Columbia/HCA Healthcare Corporation, where he
was responsible for over $7 billion in financing.
Mr. Betts was appointed Executive Vice President - Sales - Insurance
Laboratory Division of LabOne at the time of the merger. Mr. Betts served in
such capacity for the Delaware corporation from 1994 to the time of the
merger. From 1993 to 1994, he served as Senior Vice President - Sales of the
Insurance Laboratory Division of the Delaware corporation.
Mr. Hespe was appointed Executive Vice President - Sales and Marketing and
President - Clinical Sales and Marketing of LabOne at the time of the merger.
Mr. Hespe served in the same capacities and as a director for the Delaware
corporation from 1995 to the time of the merger.
Dr. Peat was appointed President - Substance Abuse Testing Division and
Executive Vice President - Toxicology of LabOne at the time of the merger.
Dr. Peat served in such capacities for the Delaware corporation from May 1996
to the time of the merger. He served as Senior Vice President - Toxicology of
the Delaware corporation from 1994 to 1996.
Mr. Bienvenu was appointed Executive Vice President - Information Systems and
Technology of LabOne at the time of the merger. Mr. Bienvenu served in such
capacities for the Delaware corporation from May 1997 to the time of the
merger. He served as Senior Vice President - Information Systems and
Technology of the Delaware corporation from 1994 to 1997. He served as Vice
President - Marketing Information Technology of the Delaware corporation from
October 1994 to December 1994. Prior to October 1994 he served as Director of
Marketing Information Technology of the Delaware corporation.
Ms. VonFeldt was appointed Executive Vice President - Human Resources of
LabOne at the time of merger. Ms. VonFeldt served in such capacity for the
Delaware corporation from August 1998 to the time of the merger. She served
as Senior Vice President - Human Resources of the Delaware corporation from
May 1997 to August 1998 and as Vice President - Human Resources from September
1993 to May 1997.
Mr. Gruenbacher was appointed Vice President - Finance, Chief Accounting
Officer, Treasurer and Assistant Secretary of LabOne at the time of the
merger. Mr. Gruenbacher served as Assistant Secretary of the Delaware
corporation from May 1999 to the time of the merger and as Treasurer from
November 1997 to the time of the merger. He served as Vice President -
Finance and Chief Accounting Officer of the Delaware corporation from May 1995
to the time of the merger, as Corporate Controller from 1994 to 1995, and as
Director - Financial Analysis and Budget from 1993 to 1994.
Dr. Brewer was appointed a class B director of LabOne at the time of the
merger. Dr. Brewer served as a director of the Delaware corporation from 1998
PAGE 7
to the time of the merger. During the past five years he has been an
Infectious Disease Specialist at St. Luke's Hospital, Kansas City, Missouri
and an Assistant Clinical Professor of Medicine at the University of Missouri
- - Kansas City.
Mr. Brown was appointed a class C director of LabOne at the time of the
merger. Mr. Brown has served as Chairman of the Board and Chief Executive
Officer of AMC Entertainment, Inc. (AMCE) since July 1999 and as President of
AMCE since January 1997. He served as Co-Chairman of the Board of AMCE from
May 1998 to July 1999, as Executive Vice President from August 1994 to January
1997 and as Chief Financial Officer from November 1991 to January 2000. He
has served on the board of directors of AMCE since November 1992. AMCE is
headquartered in Kansas City, Missouri and is principally engaged in the
motion picture exhibition business. Mr. Brown also serves as Chairman of the
Board of Trustees of Entertainment Properties Trust, Kansas City, Missouri, a
real estate investment trust.
Mr. W.D. Grant was appointed a class B director of LabOne at the time of the
merger. Mr. Grant served as a director of the Delaware corporation from 1989
to the time of the merger. Mr. Grant is retired. From August 1990 to
December 1997 he served as a consultant to LabOne. He served as Chairman of
the Board of LabOne prior to May 1993. He is the father of W. Thomas Grant
II.
Biographical information concerning Dr. Rifkind is included under "Information
Concerning Nominees for Election as Class A directors" on pages 3-4.
Mr. Schweiker was appointed a class C director of LabOne at the time of the
merger. Mr. Schweiker served as a director of the Delaware corporation from
1995 to the time of the merger. He has been retired for the past five years.
Prior to his retirement, he served as President of the American Council of
Life Insurance, Washington, D.C., a life insurance trade association. Mr.
Schweiker is also a director of Tenet Healthcare Corporation
Biographical information concerning Mr. Seward is contained under "Information
Concerning Nominees for Election as Class A directors" on pages 3-4.
Biographical information concerning Ms. Stallmeyer is contained under
"Information Concerning Nominees for Election as Class A directors" on
page 3-4.
Mr. Vanatta was appointed a class B director of LabOne at the time of the
merger. Mr. Vanatta is a business consultant. From 1985 until May 1990, he
was an Executive in Residence and the Paul J. Adam Distinguished Lecturer for
the School of Business at the University of Kansas. He was formerly Vice
Chairman of Arthur Young & Company (now Ernst & Young), certified public
accountants. Mr. Vanatta is a director of Atlantis Plastics, Inc.
Mr. Walker was appointed a class C director of LabOne at the time of the
merger. Mr. Walker was a director of the Delaware corporation from 1984 to
the time of the merger. He retired as Managing Director - Reinsurance of
Business Men's Assurance Company of America in 1996. He served as Vice
Chairman of the Board of Directors of the Delaware corporation prior to 1994.
Mr. Walker is a director of FBL Financial Group, Inc.
Biographical information concerning Mr. Wright is included under "Information
Concerning Nominees for Election as Class A directors" on pages 3-4.
PAGE 8
PROPOSAL 2
----------
SELECTION OF AUDITORS
The board of directors has selected KPMG LLP to examine the accounts of LabOne
and its subsidiaries for the fiscal year ending December 31, 2000.
Representatives of KPMG 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.
Approval of the ratification of the appointment of the independent certified
public accountants requires the affirmative vote of a majority of the shares
of common stock present and entitled to vote, in person or by proxy, at the
annual meeting. Therefore, abstentions on this matter have the effect of
negative votes. Broker non-votes will not affect the outcome of the vote on
this matter.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS.
PAGE 9
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table provides certain summary information concerning
compensation paid or accrued by LabOne to or on behalf of (i) the person who
served as its chief executive officer during 1999 and (ii) the four most
highly compensated executive officers other than the chief executive officer
serving as of December 31, 1999, for services rendered in all capacities to
LabOne and its subsidiaries for each of the last three completed fiscal years.
<TABLE>
Long-Term
Annual Compensation Compensation
------------------- ------------
<S> <C> <C> <C> <C> <C>
Stock Option All Other
Fiscal Shares Compensation
Name, Principal Position Year Salary ($) Bonus ($) Granted (#) ($) (1)
- ------------------------ ----- --------- --------- ------------ ------------
W. Thomas Grant II, Chairman 1999 159,000 0 0 20,710
of the Board of Directors, 1998 164,769 107,261 0 21,670
President and Chief Executive 1997 86,019 131,173 75,000 9,922
Officer
Robert D. Thompson, 1999 209,900 0 0 16,422
Executive Vice President, 1998 217,627 157,261 0 16,696
Chief Operating Officer and 1997 209,900 131,173 0 16,856
Chief Financial Officer
Michael A. Peat, Executive 1999 162,400 0 0 21,034
Vice President- Toxicology 1998 162,935 107,261 0 22,144
and President - Substance 1997 156,900 131,173 0 21,865
Abuse Testing Division
Gregg R. Sadler, Executive 1999 159,900 0 0 20,710
Vice President - Administration, 1998 165,704 107,261 0 21,670
President - Insurance Laboratory 1997 156,900 131,173 0 21,865
Division and Secretary
Thomas J. Hespe, Executive 1999 159,900 0 0 20,488
Vice President - Sales and 1998 165,704 107,261 0 21,371
Marketing 1997 159,900 131,173 0 21,470
</TABLE>
PAGE 9
(1) The amounts shown in this column for 1999 consist of:
contributions by LabOne to the accounts of the named executive
officers under LabOne's defined contribution pension plan in the
amounts of $16,182 each;
50% matching contributions by LabOne to the accounts of such
persons excluding Mr. Thompson) under LabOne's profit-sharing
401(K) plan in the amounts of $4,000 each; and
insurance premium payments by LabOne with respect to group term
life insurance for the benefit of such persons in the amounts of
$528 for Mr. Grant, $240 for Mr. Thompson, $852 for Dr. Peat,
$528 for Mr. Sadler and $306 for Mr. Hespe.
PAGE 10
Aggregate Option Exercises and December 31, 1999 Option Value Table
The following table provides certain information concerning the exercise of
stock options during 1999 by each of the named executive officers and the
number and value of unexercised options held by such persons on December 31,
1999.
<TABLE>
Number of Shares Underlying Value of Unexercised
Unexercised Options on In-the-Money Options
December 31, 1999 (#) on December 31, 1999 ($)
---------------------- -------------------------
Shares
Acquired on Value Options Options Options Options
Name Exercise(#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
W. T. Grant II 0 0 57,431 45,000 $0 $0
R. D. Thompson 0 0 136,000 14,000 $0 $0
M. A. Peat 0 0 56,000 24,000 $0 $0
G. R. Sadler 0 0 95,200 4,800 $0 $0
T. J. Hespe 0 0 80,000 20,000 $0 $0
</TABLE>
Compensation of Directors
Directors who are not employees of LabOne receive an annual retainer fee of
$5,000 in cash and a grant of a number of shares of common stock 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, a director of LabOne, attends national meetings of
insurance underwriters on LabOne's behalf and makes selected contacts in
furtherance of LabOne's business, for which services LabOne pays Mr. Schweiker
additional fees of $30,000 annually.
James R. Seward, a director of LabOne, entered into a consulting agreement
with LabOne following the January 6, 2000 resignation of Robert D. Thompson as
Executive Vice President, Chief Operating Officer and Chief Financial Officer
of LabOne. Mr. Seward agreed during the period from January 6 through April
5, 2000, to (a) assist LabOne in securing a new Chief Financial Officer, (b)
perform the services generally performed by the Chief Financial Officer, and
(c) assist LabOne in conducting investor relations and performing financial
analysis of any potential business acquisitions. In consideration for Mr.
Seward's performance of such services, LabOne granted Mr. Seward a
non-qualified stock option for 25,000 shares of common stock, at an option
price of $6.125 per share, which option became 100% vested on April 6, 2000.
In September 1997, P. Anthony Jacobs, Steven K. Fitzwater, John H. Robinson,
Jr. and Lan C. Bentsen, who were then directors of Lab Holdings, Inc. (now
LabOne), each received a one-time grant of an option to purchase 22,500 shares
of common stock (as adjusted) for an option price of $17.68 per share (as
adjusted) under the Lab Holdings, Inc. 1997 directors' stock option plan.
These options were to expire 10 years from the date of grant, were to vest at
a rate of 7,500 shares per year commencing on the first anniversary of the
date of grant, were to become 100% vested in the event of a merger, and were
exercisable by the optionees within 90 days following their termination as
directors in connection with a merger. In August 1998 the compensation
committee of the board of directors of Lab Holdings, Inc. (now LabOne) amended
PAGE 11
these stock options to provide that upon termination of the optionees as
directors in connection with a merger, the period during which the options
could be exercised would be extended to the end of the term of the options in
September 2007. The period of exercisability of these options was so extended
upon the termination of the optionees as directors in connection with the
merger of the Delaware corporation into LabOne.
In August 1998 Messrs. Jacobs and Fitzwater also received employment
agreements from Lab Holdings, Inc. (now LabOne) providing them base
compensation of $100,000 each and severance pay of two years' base salary in
the event of the termination of their employment in connection with a merger.
Under the agreements, severance payments of $200,000 each became payable to
Messrs. Jacobs and Fitzwater upon the merger of the Delaware corporation into
LabOne.
Employment Agreements
LabOne has employment agreements with W. Thomas Grant II, Michael A. Peat,
Gregg R. Sadler and Thomas J. Hespe. Mr. Grant's agreement provides for his
employment for a two-year term from February 2000 to February 2002 and is
renewable annually thereafter for successive one-year terms unless LabOne
elects not to extend the agreement. Mr. Sadler's Agreement is renewable
annually for successive one-year terms unless LabOne elects not to extend it.
Dr. Peat's and Mr. Hespe's agreements are terminable on 30 days' notice. The
annual base salaries provided under the agreements are $249,000 to Mr. Grant,
$156,900 to Dr. Peat, $175,000 to Mr. Sadler and $200,000 to Mr. Hespe. In
the event that LabOne terminates Mr. Grant without cause (as defined in the
agreement), LabOne will pay Mr. Grant a lump sum severance payment equal to
his base salary for the balance of the term of his agreement, plus one year's
annual base salary. If LabOne terminates Mr. Sadler without cause (as
defined), LabOne will pay Mr. Sadler a lump sum severance payment equal to his
base salary for the balance of the term of his agreement, plus 50% of one
year's annual base salary. If LabOne terminates Dr. Peat or Mr. Hespe without
cause, LabOne will pay them a severance payment equal to one year's base
salary. If a change of control of LabOne (as defined in the agreements)
occurs when any of such officers is in LabOne's full-time employment, and
within one year after such a change in control the 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 officer's agreement
will be cancelled. Under each agreement, the officer agrees not to compete
with LabOne for a period of two years after the termination of his employment.
Compensation Committee Interlocks and Insider Participation
The compensation committee of the board of directors consists of Richard S.
Schweiker, Chairman, Joseph H. Brewer and Richard A. Rifkind. All of the
members of the committee are non-employee directors of LabOne, have not been
employees or officers of LabOne or any of its subsidiaries and have had no
relationships or transactions with LabOne other than those described in this
proxy statement.
W. Thomas Grant II, Chairman of the Board of Directors, President and Chief
Executive Officer of LabOne, serves as a member of the compensation committee
of the board of directors of AMC Entertainment, Inc. (AMCE). Peter C. Brown,
PAGE 12
Chairman of the Board, President and Chief Executive Officer of AMCE, is a
class C director of LabOne.Board Compensation Committee Report on Executive
Compensation
Board Compensation Committee Report on Executive Compensation
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.
Compensation Philosophy
The philosophy governing executive compensation is based on a belief that
management and shareholders have a common goal of 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 shareholders . . . 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 LabOne'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 for 1999 were developed based on a survey initially conducted in
1986 by an independent consultant and updated in 1989. Base salaries were
targeted at the 60th to 65th percentile of pay for comparable positions in
"All Industrial Base Salaries" surveyed by the consultant. Salary ranges have
been adjusted annually since 1989 to reflect inflationary increases shown in
industry surveys. Salary ranges have also been adjusted to reflect changes in
job responsibilities. In determining base salary levels, the committee
considers both the salary ranges and individual performance evaluations for
each executive officer. Base salary decisions are not based upon any specific
financial performance measure or criterion with respect to LabOne.
Annual Incentive Plan
The annual incentive plan is designed to motivate and reward the
accomplishment of targeted operating results. Prior to the beginning of each
fiscal year, the committee establishes an operating earnings goal under the
plan based upon the committee's judgment of reasonable operating earnings
growth over the previous fiscal year. No incentive bonuses are payable under
the plan if the minimum operating earnings threshold is not met. The size of
the incentive pool increases pursuant to a formula established by the
committee as operating earnings increase over the minimum threshold. The
incentive pool is distributed in cash to designated officers and managers at
year end according to a pre-established weighting. The weighting is based
upon senior management's subjective evaluations of each individual's potential
contribution to LabOne's financial and strategic goals for the year, and is
reviewed and approved by the committee. No bonuses were paid under the plan
for 1999.
PAGE 13
LabOne also pays discretionary annual bonuses to executive officers and key
employees of LabOne and its subsidiaries on an irregular basis upon the
recommendation of the committee. In making determinations as to recommended
bonuses, the committee considers the financial condition and the operating
results over the last fiscal year, the level of salary, bonus, fringe and
other benefits currently provided to the executive and the individual
performance of the executive. The committee's recommendations are based upon
its subjective review of these factors and are not based upon any specific
criteria or financial performance measure. No discretionary bonuses were paid
for 1999.
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
shareholders, because value is only provided if the stock price increases and
because stock options have an effective long-term reward and retention
function.
LabOne administers the 1987 long-term incentive plan and the 1997 long-term
incentive plan. Under the plans, ten-year nonqualified stock options are
granted to executive officers and other key employees when they are hired or
promoted into eligible positions, with vesting generally occurring over five
years. In addition to executive officers and employees, each of the present
nonemployee directors of the LabOne has received a ten-year nonqualified stock
option grant to vest over five years. Three former directors of LabOne also
received ten-year nonqualified stock options under the Lab Holdings, Inc. 1997
directors' stock option plan, which became fully vested and exercisable during
the ten-year terms of the options upon the merger of the Delaware corporation
into LabOne. See "Compensation of Directors" on page 11 hereof.
LabOne also has a stock plan for nonemployee directors under which each
nonemployee director receives an annual retainer fee of $5,000 in cash and a
grant of a number of shares of common 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
In 1999 W. Thomas Grant II, Chairman of the Board of Directors, President and
Chief Executive Officer of LabOne, received a salary of $150,000 per annum and
a car allowance of $9,000 per annum. Mr. Grant's salary was established at a
level below that of LabOne's other senior management at Mr. Grant's request.
Mr. Grant also participated in the annual incentive plan. Based on 1999 plan
results, Mr. Grant received no incentive bonus for 1999.
Deductibility Cap on Compensation Exceeding $1,000,000
The committee has considered the potential impact of section 162(m) of the
Internal Revenue Code regarding non-deductibility of annual compensation in
excess of $1,000,000. The committee does not believe that section 162(m)
will have any material impact upon LabOne, given the current salary and bonus
levels of officers of LabOne and the treatment in the regulations of
compensation under LabOne's long-term incentive plans. The committee believes
that many of the options currently outstanding are exempt from the
deductibility limit under the transition provisions set forth in the
regulations under section 162(m). It is the committee's current intention
PAGE 14
that options granted under the 1997 long-term incentive plan will qualify as
performance-based compensation and be exempt from the deductibility limits of
section 162(m). The committee will continue to evaluate the advisability of
qualifying executive compensation for deductibility under section 162(m).
Submitted by the Compensation
Committee
Richard S. Schweiker, Chairman
Joseph H. Brewer
Richard A. Rifkind
PAGE 15
Comparison of Five Year Cumulative Total Return
Among LabOne, Nasdaq Composite Index and Peer Group
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.
1994 1995 1996 1997 1998 1999
-----------------------------------------------------
LabOne, Inc. 100.00 102.61 120.93 75.65 60.30 25.67
Peer Group 100.00 76.42 30.41 30.23 30.46 55.26
Nasdaq US CRSP Index 100.00 141.33 173.89 213.07 300.25 542.43
The table assumes the investment at the close of business on December 31,
1994, of $100 in LabOne common stock and in the portfolio represented in each
index, and assumes that all dividends were reinvested.
The NASDAQ Composite is a NASDAQ Stock Market index consisting of U.S.
companies that is provided by the Center for Research in Security Prices of
the University of Chicago. LabOne has selected an index of six testing
laboratories as its peer group: Bio-Reference Labs, Laboratory Corporation of
America, Pharmchem, Psychemedics, Unilab and Quest Diagnostics. LabOne
believes that the peer group index provides an appropriate comparison.
PAGE 16
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table shows as of December 31, 1999, the total number of shares
of common stock beneficially owned by persons known to be beneficial owners of
more than 5% of the outstanding stock.
Percentage of
Shares of LabOne Outstanding
Beneficially Owned Shares of LabOne
Beneficial Owner December 31, 1999 (1) Beneficially Owned
---------------- -------------------- ------------------
American Century Investment 920,750 (2) (3) 8.5%
Management, Inc. (ACIM) American
Century Capital Portfolios, Inc.
(ACCP)
4500 Main Street
P.O. Box 418210
Kansas City, Missouri 64141-9210
Wallace R. Weitz & Company 1,548,881 (2) 14.4%
1125 South 103rd Street,
Suite 600
Omaha, Nebraska
68124-6008
The Southern Fiduciary 571,638 5.3%
Group, Inc.
2325 Crestmoor Road, Suite 202
Nashville, Tennessee
William D. Grant 1,779,181 (4) 16.5%
One Ward Parkway, Suite 130
Kansas City, Missouri 64112
1. Unless otherwise indicated, each person has sole voting and investment
power with respect to the shares listed.
2. As reported in a Schedule 13G filed by the beneficial owner as of
December 31, 999.
3. Includes 776,600 shares, or 7.2% of the outstanding stock, owned by ACCP, a
registered investment company for which ACIM acts as investment adviser, as
to which shares of stock ACIM and ACCP share voting and investment power.
4. As of March 10, 2000.
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows as of March 10, 2000, for each director, each of the
executive officers named in the summary compensation table on page 10 hereof,
and all directors and executive officers of LabOne as a group, the total
number of shares of common stock beneficially owned by such persons.
PAGE 17
Percentage of
Outstanding Shares
Shares of LabOne of LabOne
Beneficial Owner Beneficially Owned Beneficially Owned
(1) (2) (3)
Peter C. Brown 0 *
Joseph H. Brewer, M.D. 28,018 *
William D. Grant 1,779,181 (4) 16.5%
W. Thomas Grant II 216,547 (5), (6) 2.0%
Thomas J. Hespe 81,245 (6) *
Michael A. Peat, Ph.D. 60,028 (6) *
Richard A. Rifkind, M.D. 27,921 *
Gregg R. Sadler 109,263 (6) 1.0%
Richard S. Schweiker 20,801 *
James R. Seward 62,979 *
Janet M. Stallmeyer 50 *
Robert D. Thompson 142,128 (6) 1.3%
Chester B. Vanatta 1,000 *
John E. Walker 37,166 (7) *
R. Dennis Wright, Esq. 25,201 *
All directors and executive 2,753,192 25.5%
officers of LabOne as a
group (19 persons)
*Less than 1% of outstanding shares
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 after March 10, 2000, pursuant to options granted
under the LabOne long-term incentive plans: Joseph H. Brewer, 22,000 shares;
William D. Grant, 22,000 shares; W. Thomas Grant II, 72,431 shares; Thomas J.
Hespe, 80,000 shares; Michael A. Peat, 57,000 shares; Richard A. Rifkind,
22,000 shares; Gregg R. Sadler, 100,000 shares; Richard S. Schweiker, 17,600
shares; James R. Seward, 52,600 shares; Robert D. Thompson, 140,000 shares;
John E. Walker, 22,000 shares; R. Dennis Wright, 22,000 shares; and all
directors and executive officers as a group, 769,631 shares.
3. For purposes of determining this percentage, the outstanding shares of
LabOne include shares which such persons have the right to acquire within 60
days after March 10, 2000, pursuant to options granted under the LabOne long-
term incentive plans.
4. Includes 538,886 shares held by four family trusts as to which W.D. Grant,
as co-trustee, shares voting and investment power with UMB Bank, N.A., 295,158
shares held by two family trusts as to which Mr. W.D. Grant has the right to
direct the voting and disposition of such shares and therefore shares voting
and investment powers with the trustee, UMB Bank, N.A., and 52,034 shares
owned by the wife of Mr. Grant, as to which he disclaims beneficial ownership.
5. Includes 35,923 shares held by W. Thomas Grant II as custodian for his
children, 67,500 shares held in a family trust for which Mr. Grant serves as
co-trustee and in that capacity shares voting and investment powers, and 2,473
shares owned by the wife of Mr. Grant, as to which he disclaims beneficial
ownership.
PAGE 18
6. Includes the following numbers of shares held in individually directed
accounts of the named persons under LabOne's profit-sharing 401(K) plan, as to
which each of such persons has sole investment power only: W. Thomas Grant II,
25,427 shares; Thomas J. Hespe, 1,245 shares; Michael A. Peat, 3,028 shares;
Gregg R. Sadler, 6,864 shares; Robert D. Thompson, 2,128 shares; and all
directors and executive officers as a group, 59,156 shares.
7. All of John E. Walker's shares are owned by a revocable trust for Mr.
Walker's wife, as to which he disclaims beneficial ownership.
SHAREHOLDER PROPOSALS
Shareholder nominations of candidates for election as directors or other
shareholder proposals may be brought before the 2000 annual meeting only by
shareholders entitled to vote at the meeting who give timely written notice
thereof in compliance with Article VI of LabOne's by-laws, which notice must
be delivered to the Secretary of LabOne not less than 10 days following the
mailing date of this proxy statement.
Shareholder nominations or other proposals may be brought before the 2001
annual meeting of shareholders only by shareholders entitled to vote at such
meeting who give timely written notice thereof in compliance with Article VI
of the by-laws, which notice must be delivered to the Secretary of LabOne on
the earlier of (a) 90 days prior to the date of such meeting or (b) if LabOne
does not provide at least 100 days' prior notice or public announcement of the
date of such meeting, the shareholder notice must be delivered to the
Secretary not more than ten days following the mailing date of the notice or
public announcement of the date of the meeting. To be considered for
inclusion in the proxy statement and proxy for the 2001 annual meeting of
shareholders, any shareholder proposal must be received at LabOne's corporate
office by February 9, 2001, in order to meet the notice requirement in (a)
above.
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 matter
does 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 shareholders by mail, proxies
may be solicited by 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 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 17, 2000
PAGE 19
Appendix A
Form of Proxy
LabOne, Inc.
10101 Renner Boulevard, Lenexa, Kansas 66219
The undersigned hereby appoints W. Thomas Grant II and Gregg R. Sadler,
and each of them, jointly and severally, as proxies, with full power of
substitution, for the undersigned at the annual meeting of shareholders of
LabOne, Inc. at 10101 Renner Boulevard, Lenexa, Kansas, on May 18, 2000, at
3:00 p.m. local time, and at any adjournment or postponement, to vote the
shares of common stock the undersigned would be entitled to vote, if
personally present, upon the election of Class A Directors, the proposal
stated on the reverse side of this proxy card, and any other matter brought
before the meeting, all as set forth in the proxy statement delivered with
respect to the annual meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ON PROPOSALS 1 AND 2.
1. The election of the following nominees
as Class A directors, as set forth in the
proxy statement (or a substitute nominee or Richard A. Rifkind, M.D.
nominees designated by the board of James R. Seward
directors if any of them becomes Janet Stallmeyer, R.N.
unavailable); R. Dennis Wright
/ / Authority granted to vote FOR all nominees
/ / Authority WITHHELD from voting on all nominees
(INSTRUCTIONS: To withhold authority to
vote for any individual nominee, line
through that nominee's name in the
list at right.)
2. Ratification of the appointment of KPMG LLP, as
independent certified public accountants.
/ / FOR / / AGAINST / / ABSTAIN
This proxy confers discretionary authority to vote upon certain matters, as
described in the accompanying proxy statement.
Unless otherwise marked, the proxy will be deemed marked "FOR" on Proposals 1
and 2.
This Proxy is solicited by the Board of Directors.
(Please sign, date and return this Proxy in the enclosed envelope.)
SIGNATURE DATE: , 2000
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SIGNATURE DATE: , 2000
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(SIGNATURE IF JOINTLY HELD)
(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.)
240772\1
